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

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

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

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

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

SYNOPSIS

The Marcelo Companies, composed of six independent enterprises and each represented by local
unions which were all affiliated with Philippine Social Security Labor Union (PSSLU), received letters
front their local unions and also from herein petitioner LAKAS (which claimed that a local union was
affiliated therewith) requesting for negotiation of new collective bargaining agreements. Confronted
with the problem of whom to recognize as the bargaining unit, Marcelo suggested to all to settle the
question by filing a petition for certification election before the Court of Industrial Relations. PSSLU
and LAKAS, interpreting the same as refusal to negotiate, filed notices of strike which were later
withdrawn. Eventually, bargaining negotiations were made but after LAKAS received a copy of
management’s draft of the bargaining agreement, LAKAS, without filing the required notice, declared
a strike completely paralizing Marcelo. A month later, after being informed that striking workers and
employees will return to work, Marcelo posted notices for them to return back to work and requested
them to fill up a form (Exh. 49) indicating therein the date of their availability for work for the
purpose of scheduling since some machine needed a team of workers to operate and the absence of
ones worker will be useless to start its operation, Several strikers filled up the required form but the
remaining others, led and supported by LAKAS, refused to do so on the ground that such constituted
"screening" and insisted that they be admitted back to work without complying with the same. For
Marcelo’s refusal to forego the requirement, LAKAS filed a complaint for unfair labor practice with the
Industrial Court. After the trial had commenced, three local unions, MUEVA, UNWU and MFWU,
prayed for the dismissal of the complaint filed in their behalf on the grounds that the same was filed
without their authority. and that the latter two had disaffiliated from LAKAS. Judgment was rendered
denying the motions for dismissal or withdrawal of the complaint on the ground that LAKAS filed the
same for and in behalf of the individual employees concerned as a class suit; declared the strike
illegal for lack of the requisite notice; and held that Marcelo was guilty of an unfair labor practice in
finding that the scheduling adopted was in effect a screening of those who were readmitted which
constituted discrimination. Both parties filed motions for reconsiderations. The same were denied,
hence, the present recourse.

The Supreme Court held that a labor organization cannot bring any action for and in behalf of a local
union which is not an affiliate thereof; and that the requirement of respondent companies in filing up
of Exh. 49 was an act of self preservation designed to effect cost-savings as well as ensure peace and
order within their premises and could not constitute an unfair labor practice.

The petition in L-38258 is dismissed and the petition in L-38260 is granted. The decision of the Court
of Industrial Relations is reversed and set aside and a new judgment is rendered holding that
respondent Marcelo companies are not guilty of unfair labor practice.

SYLLABUS
Labor II – 1
 1. LABOR AND SOCIAL LEGISLATIONS; LABOR CODE; LABOR RELATIONS; CERTIFICATION
ELECTION; INDISPENSABLE WHERE THE ISSUE OF LEGITIMATE REPRESENTATION IS VIED BY TWO
OR MORE LABOR ORGANIZATIONS; CASE AT BAR. — Indeed, what We said in Philippine Association
of Free Labor Unions (PAFLU) v. The Bureau of Labor Relations, 69 SCRA 132, applies as well to this
case. in a situation like this where the issue of legitimate representation in dispute is vied for not only
by one legitimate labor organization but two or more, there is every equitable ground warranting the
holding of a certification election. In this way, the issue as to who is really the true bargaining
representative of all the employees maybe firmly settled by the simple expedient of an election." The
cited ease gives the reason for the need of determining once and for all the true choice of
membership as to who should be their bargaining representative, which is that," (E)xperience
teaches us one of the root causes of labor or industrial disputes is the problem arising from a
questionable bargaining representative entering into CBA concerning terms and conditions of
employment." cralaw virtua1aw library

2. ID; ID; LABOR UNIONS; COLLECTIVE BARGAINING EMPLOYER’S RIGHT TO DEMAND OF THE
ASSERTED BARGAINING AGENT PROOF OF ITS REPRESENTATIONS OF ITS EMPLOYEES. —
Respecting the issue of representation and the right of the employer to demand reasonable proof of
majority representation on the part of the supposed or putative bargaining agent, the commentaries
in Rothenberg on Labor Relations, pp. 429- 431 are forceful and persuasive, thus : "It is essential to
the right of a putative bargaining agent to represent the employees that it be the delegate of a
majority of the employees and, conversely, an employer is under duty to bargain collectively only
when the bargaining agent is representative of the majority of the employees. A natural
consequences of these principles is that the employer has the right to demand of the asserted
bargaining agent proof of its representation of its employees. Having the right to demonstration of
this fact, it is not an ‘unfair labor practice’ for an employer to refuse to negotiate until the asserted
bargaining agent has presented reasonable proof of majority representation. It is necessary however
that such demand be made in good faith and not merely as a pretext or device for delay or evasion.
The employer’s right is however to reasonable proof. . . . Although an employer has the undoubted
right to bargain with a bargaining agent whose authority has been established, without the
requirement that the bargaining agent be officially certified by the National Labor Relations Board as
such, if the informally presented evidence leaves a real doubt as to the issue, the employer has a
right to demand a certification and to refuse to negotiate until such official certification is presented.

3. ID.; ID.; ID.; ID.; CONCERTED ACTIVITIES EXECUTED AND CARRIED INTO EFFECT AT THE
INSTIGATION AND MOTIVATION OF A LABOR ORGANIZATION NOT A BARGAINING AGENT
CONSTITUTE A VIOLATION OF EMPLOYER’S BASIC RIGHT TO BARGAIN COLLECTIVELY; CASE AT
BAR. — The clear facts of the case as hereinbefore restated indisputably show that a legitimate
representation issue confronted the respondent Marcelo Companies. In the face of these facts and in
conformity with the existing jurisprudence, We hold that there existed on duty to bargain collectively
with the complainant LAKAS on the part of said companies. And proceeding from this basis, it follows
that all acts instigated by complainant LAKAS such as the filing of the Notice of Strike on June 13,
1967 (although later withdrawn) and the two strikes of September 4, 1967 and November 7, 1967
were calculated, designed and intended to compel the respondent Marcelo Companies to recognize or
bargain with it notwithstanding that it was an uncertified union, or in the case of respondent Marcelo
Tire and Rubber Corporation, to bargain with it despite the fact that the MUEWA of Paulino Lazaro
was already certified as the sole bargaining agent in said respondent company. These concerted
activities executed and carried into effect at the instigation and motivation of LAKAS are all illegal
and violative of the employer’s basic right to bargain collectively only with the representative
supported by the majority of its employees in each of the bargaining units. This Court is not unaware
of the present predicament of the employees involved but much as We sympathize with those who
have been misled and so lost their jobs through hasty, ill-advised and precipitate moves, We rule
that the facts neither substantiate nor support the finding that the respondent Marcelo Companies
are guilty of unfair labor practice.
Labor II – 1
 4. ID.; ID.; ID.; UNFAIR LABOR PRACTICE; REQUIREMENT TO FILL UP A FORM FOR SCHEDULING,
NOT A REFUSAL TO REINSTATE OR RE-EMPLOY STRIKERS; CASE AT BAR. — It is the settled
jurisprudence that it is an unfair labor practice for an employer not to reinstate, or re-employment
to, members of union who abandon their strike and make unconditional offer to return to work.
Exhibit "B" presents an unconditional offer of the striking employees to return to work under the
same terms and conditions of employment before the strike. We find as a fact that the respondent
Marcelo Companies did not refuse to reinstate or re-employ the strikers, as a consequence of which
We overrule the finding of unfair labor practice against said companies based on the erroneous
conclusion of the respondent court. It is clear from the records that even before the unconditional
offer to return to work contained in Exhibit "B" was made, the respondent Marcelo Companies had
already posted notices for the strikers to return back to work. It is true that upon their return, the
striker were required to fill up a form (Exhibit "49") wherein they were to indicate the date of their
availability for work. But We are more impressed and are persuaded to accept as true the contention
of the respondent Marcelo Companies that the aforestated requirement was only for purposes of
proper scheduling of the start of work for each returning striker. It must be noted that as a
consequences of the two strikes which were both attended by widespread acts of violence and
vandalism, the businesses of the respondent companies were completely paralyzed. It would hardly
be justiciable to demand of the respondent companies to readmit all the returning workers in one big
force or as each demanded readmission. There were machines that were not in operating condition
because of long disuse during the strikes. Some of the machines needed more than one worker to
operate them so that in the absence of the needed team of workers, the start of work by one without
his teammates would necessarily be useless, and the company would be paying for his time spent
doing no work. Finally, We take judicial cognizance of the fact that companies whose businesses were
completely paralyzed by major strikes cannot resume operations at once and in the same state or
force as before the strikes. But what strikes Us most in lending credence to respondents’ allegation
that Exhibit "49" was not meant to screen the strikers, is the fact that all of the returning strikers
who filled up the form were scheduled for work and consequently started with their jobs. It is only
those strikers who refused or failed to fill-up the required form, like the herein complaining
employees, who were not scheduled for work and consequently have not been re-employed by the
respondent Marcelo Companies. Even if there was a sincere belief on their part that the requirement
of Exhibit "49" was a ruse at "screening" them is, this fear would have been dispelled upon notice of
the fact that each and all of their co-strikers who filled up the required form were in fact scheduled
for work and started to work. The stoppage of their work was not, therefore, the direct consequence
of the respondent companies’ complained act. Hence, their economic loss should not be shifted to the
employer. In the light of the above ruling and taking the facts and circumstances of the case before
Us in relation to the requirement by the respondent companies in the filling up of Exhibit "49", We
hold and rule that the requirement was an act of self- preservation, designed to effect cost-savings
as well as to insure peace and order within their premises. Accordingly, the petition in G.R. No. L-
38258 should be dismissed, it having failed to prove, substantiate and justify the unfair labor practice
charges against the respondent Marcelo Companies.

5. ID.; ID.; ID.; WORKER’S RIGHT TO SELF-ORGANIZATION; SUBJECT TO EMPLOYER’S FREEDOM TO

ENFORCE RULES AND ORDERS NECESSARY TO THE PROPER CONDUCT OF HIS BUSINESS. — It was
never the state policy nor Our judicial pronouncement that the employees’ rights to self-organization
and to engage in concerted activities for mutual aid and protection, are absolute or be upheld under
all circumstances. Thus, in the case of Royal Interocean Lines, Et. Al. v. CIR, We cited these
authorities giving adequate panoply to the rights of employer, to wit: "The protection of workers’
right to self-organization in no way interfere with employer’s freedom to enforce such rules and
orders as are necessary to proper conduct of his businesses, so long as employer’s supervision is not
for the purpose of intimidating or coercing his employees with respect to their self-organization and
representation. (National Relations Board v. Hudson Motor Car Co., C.C.A., 1942, 123 F 2d. 528). It
is the functions of the court to see that the rights of self-organization and collective bargaining
guaranteed by the Act are amply secured to the employee, but in its effort to prevent the prescribed
unfair labor practice, the court must be mindful of the welfare of the honest employer (Martel Mills
Labor II – 1
 Corp. v. M.L.R.L., C.C.A., 1940, 11471 F2d. 264)." cralaw virtua1aw library

6. REMEDIAL LAW; CIVIL ACTIONS; PROPER PARTY; A SUIT BROUGHT BY ANOTHER IN

REPRESENTATION OF A REAL PARTY IN INTEREST IS DEFECTIVE; CASE AT BAR. — Firstly, LAKAS
cannot bring any action for and in behalf of the employees who were members of MUEWA because,
as intimated earlier in this Decision, the said local union was never an affiliate of LAKAS. What
appears clearly from the records is that it was Augusto Carreon and his follow who joined LAKAS, but
then Augusto Carreon was not the recognized presidents of MUEWA and neither he nor his followers
can claims any legitimate representation of MUEWA. Apparently, it is this split faction of MUEWA.
headed by, Augusto Carreon who, is being sought to be represented by LAKAS. However, it cannot
do so because the members constituting this split faction of MUEWA were still members of MUEWA
which was on its own right a duly registered labor unions. Hence any suit to be brought for and in
behalf of them can be made only by MUEWA, and not LAKAS. It appearing then that Augusto Carreon
and his cohorts did not disaffiliate from MUEWA nor signed any individual affiliation with LAKAS,
LAKAS bears no legal interest in representing MUEWA or any of its members. In NARIC Workers’
Union vs CIR, We ruled that," (a) labor union would go beyond the limits of its legitimate purposes if
it is given the unrestrained liberty to prosecute any case even for employees who are not members
of any union at all. A suit brought by another in representation of a real party in interest is
defective." Under the uncontroverted facts obtaining herein, the aforestated ruling is applicable, the
only difference being that, here, a labor federation seeks to represent members of a registered local
union never affiliated with it and members of registered local unions which, in the course of the
proceedings before the industrial court, disaffiliated from it.

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

DECISION

GUERRERO, J.:

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

The antecedent facts as found by the respondent Court of Industrial Relations embodied in the
appealed Decision are correct, supported as they are by the evidence on record. Nevertheless, We
find it necessary to make a re-statement of the facts that are integrated and inter-related, drawn
from the voluminuous records of these cases which are herein jointly decided, since it would only be
from a statement of all the relevant facts of the cases made in all fullness, collectively and
comprehensively, can the intricate issues posed in these appeals be completely and judiciously
resolved.

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

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

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

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

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

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

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

Confronted with a problem of whom to recognize as the bargaining representative of all its
Labor II – 1
workers, the management of all the respondent Marcelo Companies understandably dealt
with the problem in this wise, viz: (1) it asked proof of authority to represent the MFWU
and the MACATIFU from J.C. Espinas & Associates: and (2) in a letter dated May 25, 1967,
it apprised PSSLU, Paulino Lazaro of MUEWA and complainant LAKAS of the fact of the
existing conflicting demands for recognition as the bargaining representative in the
appropriate units involved, consequently suggesting to all to settle the question by filing a
petition for certification election before the Court of Industrial Relations, with an
assurance that the management will abide by whatever orders the industrial court may
issue thereon.

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

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

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

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

Thereafter, or on July 20, 1967, letters of proposal for collective bargaining were sent by Prudencio
Jalandoni of LAKAS to all the respondent Marcelo companies. In answer thereto, management wrote
two (2) letters, both dated July 24, 1967, addressed to Jalandoni, expressing their conformity to sit
down in conference on the points to be negotiated as soon as LAKAS can present evidence of
authority to represent the employees of respondent corporations in said conference. The records
disclose that it was in the atmosphere of constant reservation on the part of management as to the
question of representation recognition that complainant LAKAS and management sat down for CBA
negotiations.

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

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

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

On September 13, 1967, the respondent Marcelo Companies obtained a writ of preliminary injunction
from the Court of First Instance of Rizal enjoining the strikers from preventing the ingress and egress
at the respondents’ premises. The following day, a "Return to Work Agreement" (Exhibit "A") was
executed by and among the management, represented by Jose P. Marcelo and Jose A. Delfin, and the
local unions, together with complainant LAKAS, represented by Prudencio Jalandoni for LAKAS, Jose
B. Roque for UNWU, Cornelio Dizon for MFWU and Augusto Carreon for MUEWA, the representations
of the latter two, however, being expressly subjected by management to non-recognition. Aside from
providing for the immediate lifting of the picket lines, the agreement, more pertinently provides, to
wit,

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

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

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

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

Unexpectedly and without filing a notice of strike, complainant LAKAS declared another strike against
Labor II – 1
the respondent Marcelo Companies on November 7, 1967, resulting in the complete paralyzation of
the business of said respondents. Because of this second strike, conciliation conferences were again
set by the Conciliation Service Division of the Department of Labor on November 8, November 23,
and December 4, 1967. On the last aforementioned date, however, neither complainant LAKAS nor
the local unions appeared.

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

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

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

These then constitute the factual background when the complainant LAKAS, represented by its
counsel, Atty. Benjamin C. Pineda, on December 26, 1967, filed before the respondent court a charge
for unfair labor practice against the respondent Marcelo Companies, alleging non-readmission of the
striking members of the three (3) affiliated local unions despite the unconditional offer to return to
work after the strike of November 7, 1967. Based on the allegations of the foregoing charge and
after a preliminary investigation conducted by the acting Prosecutor of said respondent court, the
acting Chief Prosecutor, Atty. Antonio Tria Tirona, filed on February 12, 1968 the instant complaint
under authority of Section 5(b) of Republic Act 875, otherwise known as the Industrial Peace Act.

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

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

"2. . . .

x          x           x

"3. That individual complainants listed in Annexes "A", "B", and "C" of this complaint are members of
the Marcelo United Employees and Workers Association, Marcelo Free Workers Union, and United Nail
Workers Union, respectively; that the members of the Marcelo United Employees and Workers Union
are workers of respondent Marcelo Tire and Rubber Corporation; that the members of the Marcelo
Free Workers Union compose the workers of the Marcelo Rubber and Latex Products, Polaris
Labor II – 1
Marketing Corporation, and the members of the United Nail Workers Union compose the workers of
the Marcelo Steel Corporation (Nail Plant);

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

"5. That after respondents knew of the affiliation of the aforementioned local unions with the LAKAS,
the said respondents, thru their officers and agents began harassing the union members,
discriminated against them by transferring some of its officers and members from one section to
another in such a way that their work was reduced to manual labor, and by suspending them without
justifiable cause, in spite of long years of service with said respondents;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"VII. That after September 14, 1967, all workers of the different respondent corporations returned to
work except the four mentioned in the preceding paragraph hereof who have pending criminal cases;
between September 14, 1967, and November 7, 1967 another strike was declared without justifiable
cause;
Labor II – 1
"VIII. That on November 28, 1967, respondent obtained an injunction from the Court of First
Instance of Rizal, Caloocan City Branch, against the illegal picketing of the local unions; in the first
week of December, 1967, the striking workers began returning to work; on December 13, 1967, a
letter was received from complainant advising respondents that its striking workers were calling off,
lifting the picket line and returning to work, that from the first week of December, 1967, respondents
invited the striking workers desiring to return to work to fill out an information sheet stating therein
their readiness to work and the exact dates they were available so that proper scheduling could be
done; a number of workers showed no interest in reporting to work; management posted in the
Checkpoint, Bulletin Boards, and the gates notices calling all workers to return to work but a number
of workers obviously were not interested in returning anymore;

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

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

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

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

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

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

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

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

"2. That it likewise appears in the above-entitled case that the services of the herein Petitioner was
sought by a certain Augusto Carreon together with his cohorts who are not members of the Marcelo
United Employees and Workers Association much less connected with the Marcelo Tire and Rubber
Corporation wherein the Marcelo United Employees and Workers Association has an existing
Collective Bargaining Agreement;

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

"4. . . .

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

"6. . . ., the Complaint filed by the Petitioner in the above-entitled case in behalf of the Marcelo
United and Employees and Workers Association should be considered as withdrawn;
Labor II – 1
x       x       x"

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

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

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

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

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

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

x       x       x"

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

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

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

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

"3. That precisely because of the acceptance back to work of these alleged officers and members of
the union-movants, and the refusal of respondents to accept back to work all the individual
complainants in this case mentioned in Annexes "A", "B" and "C" of the instant complaint, inspite of
the offer to return to work by the complainants herein made to the respondents without any

Labor II – 1
conditions at the time of the strike, as per complainants’ letter of December 13, 1967 (Exh. "B", for
the complainants), which fact precisely gave rise to the filing of this case.

x          x           x

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

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

"WHEREFORE, in view of all the foregoing, respondents should be, as they are hereby, declared guilty
of unfair labor practice only for the discrimination on terms or conditions of employment as
hereinbefore discussed in connection with the return of the strikers-complainants back to work after
the second strike, and, therefore, ordered to pay the individual complainants appearing in Annexes
"A", "B" and "C" of the Complaint, except Arlington Glodeviza, Jesus Lim, Wilfredo Jarquio, Leonardo
Sakdalan, Jose Roque, Alfredo Cabel, and those still working, were dismissed for cause. whose
contracts expired or who had resigned as above indicated, their back wages from December 18, 1967
but only up to June 29, 1970 when this case was submitted for decision, without reinstatement,
minus their earnings elsewhere for the same period.

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

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

SO ORDERED." cralaw virtua1aw library

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

"I. The trial court erred in not finding that complainant Lakas ng Manggagawang Makabayan (Lakas)
Labor II – 1
has no authority to file and/or to prosecute the Complaint against respondents in representation of
the local unions and/or individual complainants and/or members of local unions in their individual
capacities and in not dismissing the complaint on that ground upon motions of the local unions
concerned and/or their members.

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

On August 14, 1973, the individual complainants who had earlier disauthorized the counsel of record,
Atty. Benjamin Pineda, from further representing them and from amicably settling their claims, on
their own behalf filed their arguments in support of their Motion for Reconsideration, through a newly
retained counsel, Atty. Pablo B. Castillon. Assigned as errors are, to wit,

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

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

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

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

In L-38258, the petition filed by complainant Lakas ng Manggagawang Makabayan (LAKAS), the
following were assigned as reversible errors, to wit,

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

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

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

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

I. Respondent court erred in not finding that respondent Lakas ng Manggagawang Makabayan
Labor II – 1
(LAKAS) had no authority to file and/or to prosecute the complaint against the petitioners herein in
representation of the local unions and or individual complainants and/or members of local unions in
their individual capacities and in not dismissing the complaint in Case No. 4951-ULP of respondent
court on that ground upon motions of the local unions concerned and/or their officers and members.

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

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

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

From the aforecited assignments of errors respectively made in both petitions before Us, We find that
there are only two basic issues posed for Our resolution, viz: (1) whether or not the complaint filed
by LAKAS against the Marcelo Companies can be sustained, in view of the alleged fact that its
authority to file and prosecute the same has been squarely raised in issue at the first instance before
the respondent court; and (2) whether or not the Marcelo Companies are guilty of unfair labor
practice, for which they should be made liable for backwages and be obliged to reinstate the
employees appearing in Annexes "A", "B", and "C" of the complaint, taking into consideration the
prayer of LAKAS anent the correct payment of said backwages and the non-exclusion of some
employees from the benefits arising from the appealed Decision.

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

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

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

Contrary to the pretensions of complainant LAKAS, the respondent Marcelo Companies did not ignore
the demand for collective bargaining contained in its letter of June 20, 1967. Neither did the
companies refuse to bargain at all. What it did was to apprise LAKAS of the existing conflicting
demands for recognition as the bargaining representative in the appropriate units involved, and
suggested the settlement of the issue by means of the filing of a petition for certification election
before the Court of Industrial Relations. This was not only the legally approved procedure but was
Labor II – 1
dictated by the fact that there was indeed a legitimate representation issue. PSSLU, with whom the
existing CBAs were entered into, was demanding of respondent companies to collectively bargain
with it; so was Paulino Lazaro of MUEWA, J.C. Espinas & Associates for MACATIFU and the MFWU,
and the complainant LAKAS for MULU which we understand is the aggrupation of MACATIFU, MFWU
and UNWU. On top of all of these, Jose Roque of UNWU disauthorized the PSSLU from representing
his union; and similarly, Augusto Carreon of MACATIFU itself informed management as late as July
11, 1967 or after the demand of LAKAS that no group representing his Union "is not authorized and
should not be entertained." cralaw virtua1aw library

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

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

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

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

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

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

The clear facts of the case as hereinbefore restated indisputably show that a legitimate
representation issue confronted the respondent Marcelo Companies. In the face of these
facts and in conformity with the existing jurisprudence, We hold that there existed no duty
to bargain collectively with the complainant LAKAS on the part of said companies. And
proceeding from this basis, it follows that an acts instigated by complainant LAKAS such as the filing
of the Notice of Strike on June 13, 1967 (although later withdrawn) and the two strikes of September
4, 1967 and November 7, 1967 were calculated, designed and intended to compel the respondent
Marcelo Companies to recognize or bargain with it notwithstanding that it was an uncertified union,
or in the case of respondent Marcelo Tire and Rubber Corporation, to bargain with it despite the fact
that the MUEWA of Paulino Lazaro was already certified as the sole bargaining agent in said
respondent company. These concerted activities executed and carried into effect at the instigation
Labor II – 1
and motivation of LAKAS are illegal and violative of the employer’s basic right to bargain collectively
only with the representative supported by the majority of its employees in each of the bargaining
units. This Court is not unaware of the present predicament of the employees involved but much as
We sympathize with those who have been misled and so lost their jobs through hasty, ill-advised and
precipitate moves, We rule that the facts neither substantiate nor support the finding that the
respondent Marcelo Companies are guilty of unfair labor practice.

There are also other facts which this Court cannot ignore. The complaint of LAKAS charge that after
their first strike of September 4, 1967, management and the striking employees entered into a
Return-to-Work Agreement but that it was violated by the respondent companies who "refused to
admit the members of the three striking local unions . . . and gave preference to the casual
employees." (No. 8, Complaint). It is also alleged that the strike of November 7, 1967 was staged
"because of the refusal of the respondents to accept some union members . . . and refusal of
respondents to bargain in good faith with complainant" (No. 9, Complaint). We find however, that in
making these charges, complainant LAKAS lacked candor, truth and fidelity towards the courts. chanrobles virtual lawlibrary

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

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

Respondent court, upholding the contention of petitioner LAKAS that after the second strike, the
respondent Marcelo Companies, despite the strikers’ unconditional offer to return to work, refused to
readmit them without "screening" which LAKAS insists to be "discriminatory hiring of the striking
employees," declared that although the two strikes were illegal, being economic strikes held in
violation of the strike notice requirement, nevertheless held the Marcelo Companies guilty of unfair
labor practice in discriminating against the complaining employees by refusing to readmit them while
Labor II – 1
other strikers were admitted back to work. We do not agree.

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

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

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

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

"The protection of workers’ right to self-organization in no way interfere with employer’s freedom to
enforce such rules and orders as are necessary to proper conduct of his businesses, so long as
employer’s supervision is not for the purpose of intimidating or coercing his employees with respect
to their self-organization and representation. (National Relations Board v. Hudson Motor Car Co.,
C.C.A., 1942, 123 F 2d. 528)." cralaw virtua1aw library

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

Labor II – 1
In Pagkakaisang Itinataguyod ng mga Manggagawa sa Ang Tibay (PIMA), Eliseo Samson, Et. Al. v.
Ang Tibay, Inc., Et Al., L-22273, May 16, 1967, 20 SCRA 45, We held that the exaction, by the
employer, from the strikers returning to work, of a promise not to destroy company property and not
to commit acts of reprisal against union members who did not participate in the strike, cannot be
considered an unfair labor practice because it was not intended to discourage union membership. It
was an act of a self-preservation designed to insure peace and order in the employer’s premises. It
was also held therein that what the Industrial Peace Act regards as an unfair labor practice is the
discrimination committed by the employer in regard to tenure of employment for the purpose of
encouraging or discouraging union membership. chanrobles virtual lawlibrary

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

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

Firstly, LAKAS cannot bring any action for and in behalf of the employees who were members of
MUEWA because, as intimated earlier in this Decision, the said local union was never an affiliate of
LAKAS. What appears clearly from the records is that it was Augusto Carreon and his followers who
joined LAKAS, but then Augusto Carreon was not the recognized president of MUEWA and neither he
nor his followers can claim any legitimate representation of MUEWA. Apparently, it is this split faction
of MUEWA, headed by Augusto Carreon, who is being sought to be represented by LAKAS. However,
it cannot do so because the members constituting this split faction of MUEWA were still members of
MUEWA which was on its own right a duly registered labor union. Hence, any suit to be brought for
and in behalf of them can be made only by MUEWA, and not LAKAS. It appearing then that Augusto
Carreon and his cohorts did not disaffiliate from MUEWA nor signed any individual affiliation with
LAKAS, LAKAS bears no legal interest in representing MUEWA or any of its members. chanrobles lawlibrary : rednad

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

In NARIC Workers’ Union v. CIR, 5 We ruled that," (a) labor union would go beyond the limits of its
Labor II – 1
legitimate purposes if it is given the unrestrained liberty to prosecute any case even for employees
who are not members of any union at all. A suit brought by another in representation of a real party
in interest is defective." Under the uncontroverted facts obtaining herein, the aforestated ruling is
applicable, the only difference being that, here, a labor federation seeks to represent members of a
registered local union never affiliated with it and members of registered local unions which, in the
course of the proceedings before the industrial court, disaffiliated from it.

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

In fairness to the complaining employees, however, We treated their Motion for Reconsideration of
the Decision subject of appeal as curing the defect of the complaint as the said motion expressly
manifested their collective desire to pursue the complaint for and in their own behalves and
disauthorizing LAKAS’ counsel from further representing them. And We have also treated their
petition before Us in the same manner, disregarding the fact that LAKAS remained the petitioning
party, as it appears from the verification that the petition in L-38258 was for and in behalf of the
complaining employees. The merits of their petition, however, fall short of substantiating the charge
of unfair labor practice against the respondent Marcelo Companies. On the other hand, the appeal of
the Marcelo Companies in L-38260 must be upheld and sustained. chanrobles virtual lawlibrary

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

Labor II – 1
 2.) [G.R. No. L-20044. April 30, 1964.]

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

INDUSTRIAL RELATIONS, ET AL., Respondents.

Alejandro C. Villavieja for Petitioner.

Padilla Law Office for Respondents.

SYLLABUS

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

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

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

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

DECISION

BAUTISTA ANGELO, J.:

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

After respondents had filed their answer, wherein they denied the charges of unfair labor practice
filed against them, Judge Emiliano C. Tabigne, who was assigned to act on the complaint, received
the evidence, and on July 28, 1961, rendered decision exonerating respondents. He found that the
charges were not proven and dismissed the complaint.

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

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

Anent the first issue, the court a quo found that in the letter sent by the union to respondents
containing its demands marked in the case as Exhibit 1, there appears certain marks, opposite each
demand, such as a check for those demands to which Mrs. Felisa Herrera was agreeable, a cross
signifying the disapproval of Mrs. Herrera, and a circle regarding those demands which were left open
for discussion on some future occasion that the parties may deem convenient. Such markings were
made during the discussion of the demands in the meeting called by respondents on May 3, 1960 at
their restaurant in Quezon City. The court a quo concluded that the fact that respondent Herrera had
agreed to some of the demands shows that she did not refuse to bargain collectively with the
complaining union.

We can hardly dispute this finding, for it finds support in the evidence. The inference that
respondents did not refuse to bargain collectively with the complaining union because they accepted
some of the demands while they refused the others even leaving open other demands for future
discussion is correct, especially so when those demands were discussed at a meeting called by
respondents themselves precisely in view of the letter sent by the union on April 29, 1960. It is true
that under Section 14 of Republic Act 875 whenever a party serves a written notice upon the
employer making some demands the latter shall reply thereto not later than 10 days from receipt
thereof, but this condition is merely procedural, and as much its non- compliance cannot be deemed
to be an act of unfair labor practice. The fact is that respondents did not ignore the letter sent by the
union so much so that they called a meeting to discuss its demands, as already stated elsewhere.

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

Anent the second issue, the claim of the complaining union has also no basis. This is premised on a
document marked Exhibit C which contains certain alleged counter-proposals tendered to
complainant union the nature of which would apparently indicate that respondents made use of
coercion which interferes with the right of the employees to self-organization. On this document
certain notations were made by one Ernesto Tan which are indeed derogatory and which were
allegedly made by him upon instructions of respondent Felisa Herrera. Thus, the pertinent notation
on which the union relies is one which states that respondent Herrera would be willing to recognize
the union "if union would become company union", which would indeed show that Mrs. Herrera
interfered with the employees’ right to self-organization. But respondents denied that they ever
authorized Ernesto Tan to make such notation or to represent them in the negotiations, for he was
merely a bookkeeper whose duties were confined to the keeping and examination of their books of
accounts and sales invoices. It appears that he was not even invited to the meeting but merely
volunteered to be present and made those notations on his own account and initiative. The court a
Labor II – 1
quo gave credence to this stand of respondents, as can be seen in the following finding: "There is no
evidence to show that Ernesto Tan was authorized to represent management in the meeting held on
May 3, 1960, and that Ernesto Tan being a mere bookkeeper of respondents, he is not a part of
management although he is the nephew of Mrs. Herrera." We are not prepared to disturb this finding
of the court a quo.

Finally, it is alleged in connection with the third issue that respondent Herrera dismissed Martin
Briones without sufficient cause other than his being the organizer and adviser of the complaining
union. It however appears from the very testimony of Martin Briones that he is not the only one who
organized the complaining union but together with Galicano Apiz, Pablo Cabreros and Juan Morales,
with the particularity that, as Briones himself had intimated, Apiz, Cabreros and Morales were more
active than himself in organizing the union so much so that they were appointed officers of that
union. And yet Apiz, Cabreros and Morales were never touched and continued to be employed in
respondent’s restaurant. For this reason, the court a quo discredited the claim that Briones was
dismissed because of union activities but rather because of the threats he made on Mrs. Herrera, as
communicated to her by her sister Aureata. The following is the finding made by the court a quo on
this point: "If it is the union activities of complainant’s members that Mrs. Herrera did not like, Apiz,
Cabreros and Morales should have been dismissed by her also, because said persons were more
active than Briones in the organization of the union. Verily, it was not the union activities of Martin
Briones that prompted Mrs. Herrera to dismiss him, but her fear for the safety of her life on account
of the smoldering embers of hatred that the former had against the latter, the said persons being
always together in her car driven by Briones during business routine." This finding finds support in
the evidence.

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

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

Labor II – 1
 3.) [G.R. Nos. 58768-70. December 29, 1989.]

LIBERTY FLOUR MILLS EMPLOYEES, ANTONIO EVARISTO and POLICARPIO

BIASCAN, Petitioners, v. LIBERTY FLOUR MILLS, INC. PHILIPPINE ALLIANCE COUNCIL
(PLAC) and NATIONAL LABOR RELATIONS COMMISSION, (NLRC), Respondents.

Julius A. Magno, for Petitioners.

De Leon, Diokno & Associates for respondent Liberty Flour Mills, Inc.

SYLLABUS

1. LABOR LAW; VOLUNTARY ARBITRATOR; DECISION THEREOF MAY BE REVIEWED BY THE SUPREME
COURT BY WAY OF PETITIONS FOR CERTIORARI. — In sustaining Labor Arbiter Lomabao, the NLRC
agreed that the decision of Voluntary Arbiter Cabal was final and unappealable under Article 262-A of
the Labor Code and so could no longer be reviewed by it. True enough. However, it is equally true
that the same decision is not binding on this Court, as we held in Oceanic Bic Division (FFW) v.
Romero and reiterated in Mantrade/FMMC Division Employees and Workers Union v. Bacungan. The
rule as announced in these cases is reflected in the following statements: In spite of statutory
provisions making "final" the decision of certain administrative agencies, we have taken cognizance
of petitions questioning these decisions where want of jurisdiction, grave abuse of discretion,
violation of due process, denial of substantial justice, or erroneous interpretation of the law were
brought to our attention. . . . A voluntary arbitrator by the nature of her functions acts in a quasi-
judicial capacity. There is no reason why her decisions involving interpretation of law should be
beyond this Court’s review. Administrative officials are presumed to act in accordance with law and
yet we do not hesitate to pass upon their work where a question of law is involved or where a
showing of abuse of authority or discretion in their official acts is properly raised in petitions
for certiorari.

2. ID.; PRESIDENTIAL DECREE NO. 525; EMERGE ON ALLOWANCE; DEEMED ABSORBED BY THE
WAGE INCREASE UNDER THE COLLECTIVE BARGAINING AGREEMENT; CASE AT BAR. — The Court
holds that the emergency allowances are indeed absorbed by the wage increases required by P.D.
525 are indeed absorbed by the wage increases required under the Section 2 of the Collective
Bargaining Agreement. This is because Section 6 of the Interpretative Bulletin on LOI No. 174
specifically provides: Sec. 6. Allowances under LOI. — All allowances, bonuses, wage adjustments
and other benefits given by employers to their employees shall be treated by the Department of
Labor as in substantial compliance with the minimum standards set forth in LOI No. 174 if: (a) they
conform with at least the minimum allowances scales specified in the immediately preceding Section;
and (b) they are given in response to the appeal of the President in his speech on 4 January 1974, or
to countervail the quantum jump in the cost of living as a result of the energy crisis starting in
November 1973, or pursuant to Presidential Decree No. 390; Provided, That the payment is
retroactive to 18 February 1974 or earlier. The allowances and other benefits may be granted
unilaterally by the employer or through collective bargaining, and may be paid at the same time as
the regular wages of the employees. Allowances and other benefits which are not given in substantial
compliance with the LOI as interpreted herein shall not be treated by the Department of Labor as
emergency allowances in the contemplation of the LOI unless otherwise shown by sufficient proof.
Thus, without such proof, escalation clauses in collective bargaining agreements concluded before the
appeal of the President providing for automatic or periodic wage increases shall not be considered
allowances for purposes of the LOI.

3. ID.; ID.; SECTION 5 OF ITS IMPLEMENTING RULES INTERPRETED. — The petitioners contend that
the wage increases were the result of negotiation undertaken long before the promulgation of P.D.
No. 525 and so should not be considered part of the emergency allowance decreed. In support of this
Labor II – 1
contention, they cite Section 15 of the Rules implementing P.D. No. 525, providing as follows:
Nothing herein shall prevent the employer and his employees, from entering into any agreement with
terms more favorable to the employees than those provided herein, or be construed to sanction the
diminution of any benefits granted to the employees under existing laws, agreements, and voluntary
practice. Obviously, this section should not be read in isolation but must be related to the other
sections above-quoted, to give effect to the intent and spirit of the decree. The meaning of the
section simply is that any benefit over and above the prescribed allowances may still be agreed upon
by the employees and the employer or, if already granted, may no longer be withdrawn or
diminished.

4. ID.; LABOR RELATIONS; COLLECTIVE BARGAINING AGREEMENTS; ENFORCES REGARDLESS OF

ABSENCE OF CERTIFICATION BY THE BUREAU OF LABOR RELATIONS. — In its challenged decision,
the public respondent held that in demanding the dismissal of Evaristo and Biascan, PLAC had acted
prematurely because the 1974 CBA providing for union shop and pursuant to which the two
petitioners were dismissed had not yet been certified. The implication is that it was not yet in effect
and so could not be the basis of the action taken against the two petitioners. This conclusion is
erroneous. It disregards the ruling of this Court in Tanduay Distillery Labor Union v. NLRC, were we
held: The fact, therefore, that the Bureau of Labor Relations (BLR) failed to certify or act on TDLU’s
request for certification of the CBA in question is of no moment to the resolution of the issues
presented in this case. The BLR itself found in its order of July 8, 1982, that the" (un)certified CBA
was duly filed and submitted on October 29, 1980, to last until June 30, 1982 is certifiable for having
complied with all the requirements for certification." The CBA concluded in 1974 was certifiable and
was in fact certified on April 11, 1975. It bears stressing that Evaristo and Biascan were dismissed
only on May 20, 1975, more than a month after the said certification. The correct view is that
expressed by Commissioner Cecilio P. Seno in his concurring and dissenting opinion, viz.: . . .
Evidence on record show that after the cancellation of the registration certificate of the Federation of
Democratic Labor Unions, no other union contested the exclusive representation of the Philippine
Labor Alliance Council (PLAC), consequently, there was no more legal impediment that stood on the
way as to the validity and enforceability of the provisions of the collective bargaining agreement
entered into by and between respondent corporation and respondent union. The certification of the
collective bargaining agreement by the Bureau of Labor Relations is not required to put a stamp of
validity to such contract. Once it is duly entered into and signed by the parties, a collective
bargaining agreement becomes effective as between the parties regardless of whether or not the
same has been certified by the BLR.

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

DECISION

CRUZ, J.:

Labor II – 1
In this petition for certiorari, the resolution of the public respondent dated August 3, 1978, is faulted
for: (a) affirming the decision of the labor arbiter dismissing the employees’ claim for emergency
allowance for lack of jurisdiction; and (b) modifying the said decision by disallowing the award of
back wages to petitioners Policarpio Biascan and Antonio Evaristo. chanroblesvirtualawlibrary

The basic facts are as follows: chanrob1es virtual 1aw library

On February 6, 1974, respondent Philippine Labor Alliance Council (PLAC) and respondent Liberty
Flour Mills, Inc. entered into a three-year collective bargaining agreement effective January 1, 1974,
providing for a daily wage increase of P2.00 for 1974, P1.00 for 1975 and another P1.00 for 1976.
The agreement contained a compliance clause, which will be explained later in this opinion.
Additionally, the parties agreed to establish a union shop by imposing "membership in good standing
for the duration of the CBA as a condition for continued employment" of workers. 1

On October 18, 1974, PLAC filed a complaint against the respondent company for non-payment of
the emergency cost-of-living allowance under P.D. No. 525. 2 A similar complaint was filed on March
4, 1975, this time by the petitioners, who apparently were already veering away from PLAC. 3

On March 20, 1975, petitioners Evaristo and Biascan, after organizing a union called the Federation
of National Democratic Labor Unions, filed with the Bureau of Labor Relations a petition for
certification election among the rank-and-file employees of the respondent company. 4 PLAC then
expelled the two for disloyalty and demanded their dismissal by the respondent company, which
complied on May 20, 1975. 5

The objection of Evaristo and Biascan to their termination were certified for compulsory arbitration
and assigned to Labor Arbiter Apolinario N. Lomabao, Jr. Meanwhile, the claims for emergency
allowance were referred for voluntary arbitration to Edmundo Cabal, who eventually dismissed the
same on the ground that the allowances were already absorbed by the wage increases. This latter
case was ultimately also certified for compulsory arbitration and consolidated with the termination
case being heard by Lomabao. His decision was, on appeal, dealt with by the NLRC as above stated,
6 and the motion for reconsideration was denied on August 26, 1981. 7

At the outset, we note that the petitioners are taking an ambivalent position concerning the CBA
concluded in 1974. While claiming that this was entered into in bad faith and to forestall the payment
of the emergency allowances expected to be decreed, they nonetheless invoke the same agreement
to support their contention that their complaint for emergency allowances was invalidly referred to
voluntary arbitrator Cabal rather than Froilan M. Bacuñgan. chanrobles. com : virtual law library

We find there was no such violation as the choice of the voluntary arbitrator was not limited to
Bacuñgan although he was probably the first preference. Moreover, the petitioners are estopped from
raising this objection now because they did not seasonably interpose it and instead willingly
submitted to Cabal’s jurisdiction when he undertook to hear their complaint.

In sustaining Labor Arbiter Lomabao, the NLRC agreed that the decision of Voluntary Arbiter Cabal
was final and unappealable under Article 262-A of the Labor Code and so could no longer be reviewed
by it. True enough. However, it is equally true that the same decision is not binding on this Court, as
we held in Oceanic Bic Division (FFW) v. Romero 8 and reiterated in Mantrade/FMMC Division
Employees and Workers Union v. Bacuñgan. 9 The rule as announced in these cases is reflected in
the following statements: chanrob1es virtual 1aw library

In spite of statutory provisions making "final" the decision of certain administrative agencies, we
have taken cognizance of petitions questioning these decisions where want of jurisdiction, grave
abuse of discretion, violation of due process, denial of substantial justice, or erroneous interpretation
of the law were brought to our attention.

Labor II – 1
 x          x           x

A voluntary arbitrator by the nature of her functions acts in a quasi-judicial capacity. There is no
reason why her decisions involving interpretation of law should be beyond this Court’s review.
Administrative officials are presumed to act in accordance with law and yet we do not hesitate to
pass upon their work where a question of law is involved or where a showing of abuse of authority or
discretion in their official acts is properly raised in petitions for certiorari.

Accordingly, the validity of the voluntary arbiter’s finding that the emergency allowance sought by
the petitioners are already absorbed in the stipulated wage increases will now be examined by the
Court itself.

The position of the company is that the emergency allowance required by P.D. No. 525 is already
covered by the wage increases prescribed in the said CBA. Furthermore, pursuant to its Article VIII,
such allowances also include all other statutory minimum wage increases that might be decreed
during the lifetime of the said agreement. chanrobles lawlibrary : rednad

That agreement provided in Section 2 thereof as follows: chanrob1es virtual 1aw library

Section 2. The wage increase in the amounts and during the period above set forth shell, in the event
of any statutory increase of the minimum wage, either as allowance or as basic wage, during the life
of this Agreement, be considered compliance and payment of such required statutory increase as far
as it will go and under no circumstances will it he cumulative nor duplication to the differential
amount involved consequent to such statutory wage increase.

The Court holds that such allowances are indeed absorbed by the wage increases required under the
agreement. This is because Section 6 of the Interpretative Bulletin on LOI No. 174 specifically
provides: chanrob1es virtual 1aw library

Sec. 6. Allowances under LOI. — All allowances, bonuses, wage adjustments and other benefits given
by employers to their employees shall be treated by the Department of Labor as in substantial
compliance with the minimum standards set forth in LOI No. 174 if: chanrob1es virtual 1aw library

(a) they conform with at least the minimum allowances scales specified in the immediately preceding
Section; and

(b) they are given in response to the appeal of the President in his speech on 4 January 1974, or to
countervail the quantum jump in the cost of living as a result of the energy crisis starting in
November 1973, or pursuant to Presidential Decree No. 390; Provided, That the payment is
retroactive to 18 February 1974 or earlier.

The allowances and other benefits may be granted unilaterally by the employer or through collective
bargaining, and may be paid at the same time as the regular wages of the employees.

Allowances and other benefits which are not given in substantial compliance with the LOI as
interpreted herein shall not be treated by the Department of Labor as emergency allowances in the
contemplation of the LOI unless otherwise shown by sufficient proof. Thus, without such proof,
escalation clauses in collective bargaining agreements concluded before the appeal of the President
providing for automatic or periodic wage increases shall not be considered allowances for purposes of
the LOI. (Emphasis supplied.)

The "immediately preceding section" referred to above states: chanrob1es virtual 1aw library

SEC. 5. Determination of Amount of Allowances. — In determining the amount of allowances that

Labor II – 1
should be given by employers to meet the recommended minimum standards, the LOI has classified
employers into three general categories. As an implementation policy, the Department of Labor shall
consider as sufficient compliance with the scales of allowances recommended by the LOI if the
following monthly allowances are given by employers: chanrob1es virtual 1aw library

(a) P50.00 or higher where the authorized capital stock of the corporation, or the total assets in the
case of other undertakings, exceeds P1 million;

(b) P30.00 or higher where the authorized capital stock of the corporation, or the total assets in the
case of other undertakings, is not less than P100,000.00 but not more than P1 million; and

(c) P15.00 or higher where the authorized capital stock or total assets, as the case may be, is less
than P100,000.00.

It is not denied that the company falls under paragraph (a), as it has a capitalization of more than P1
million, 10 and so must pay a minimum allowance of P50.00 a month. This amount is clearly covered
by the increases prescribed in the CBA, which required a monthly increase (on the basis of 30 days)
of P60.00 for 1974, to be increased by P30.00 in 1975 (to P90.00) and another P30.00 in 1976 (to
P120.00). The first increase in 1974 was already above the minimum allowance of P50.00, which was
exceeded even more with the increases of P1.00 for each of the next two years. chanrobles virtual lawlibrary

Even if the basis used were 26 days a month (excluding Sundays), the conclusion would remain
unchanged as the raise in wage would be P52.00 for 1974, which amount was increased to P78.00 in
1975 and to P104.00 in 1976.

But the petitioners contend that the wage increases were the result of negotiation undertaken long
before the promulgation of P.D. No. 525 and so should not be considered part of the emergency
allowance decreed. In support of this contention, they cite Section 15 of the Rules implementing P.D.
No. 525, providing as follows:chanrob1es virtual 1aw library

Nothing herein shall prevent the employer and his employees, from entering into any agreement with
terms more favorable to the employees than those provided herein, or be construed to sanction the
diminution of any benefits granted to the employees under existing laws, agreements, and voluntary
practice.

Obviously, this section should not be read in isolation but must be related to the other sections
above-quoted, to give effect to the intent and spirit of the decree. The meaning of the section simply
is that any benefit over and above the prescribed allowances may still be agreed upon by the
employees and the employer or, if already granted, may no longer be withdrawn or diminished.

The petitioners also maintain that the above-quoted Section 2 of CBA is invalid because it constitutes
a waiver by the laborers of future benefits that may be granted them by law. They contend this
cannot be done because it is contrary to public policy.

While the principle is correct, the application is not, for there are no benefits being waived under the
provision. The benefits are already included in the wage increases. It is the law itself that considers
these increases, under the conditions prescribed in LOI No. 174, as equivalent to, or in lieu of, the
emergency allowance granted by P.D. No. 525.

In fact, the company agreed to grant the emergency allowance even before the obligation was
imposed by the government. What the petitioners claim they are being made to waive is the
additional P50.00 allowance but the truth is that they are not entitled to this because they are
already enjoying the stipulated increases. There is no waiver of these increases.

Moreover, Section 2 provides that the wage increase shall be considered payment of any statutory
Labor II – 1
increase of the minimum wage "as far as it will go," which means that any amount not covered by
such wage increase will have to be made good by the company. In short, the difference between the
stipulated wage increase and the statutory minimum wage will have to be paid by the company
notwithstanding and, indeed, pursuant to the said article. There is no waiver as to this.

Curiously, Article 2 was produced verbatim in the collective bargaining agreement concluded by the
petitioners with the company in 1977 after PLAC had been replaced by the new labor union formed
by petitioners Evaristo and Biascan. 11 It is difficult to understand the petitioners’ position when they
blow hot and cold like this.

Coming now to the second issue, we find that it must also be resolved against the petitioners.

Evaristo and Biascan claim they were illegally dismissed for organizing another labor union opposed
to PLAC, which they describe as a company union. Arguing that they were only exercising the right to
self organization as guaranteed by the Constitution, they insist they are entitled to the back wages
which the NLRC disallowed while affirming their reinstatement.

In its challenged decision, the public respondent held that in demanding the dismissal of Evaristo and
Biascan, PLAC had acted prematurely because the 1974 CBA providing for union shop and pursuant
to which the two petitioners were dismissed had not yet been certified. 12 The implication is that it
was not yet in effect and so could not be the basis of the action taken against the two petitioners.
This conclusion is erroneous, It disregards the ruling of this Court in Tanduay Distillery Labor Union v.
NLRC, 13 were we held: chanrob1es virtual 1aw library

The fact, therefore, that the Bureau of Labor Relations (BLR) failed to certify or act on TDLU’s request
for certification of the CBA in question is of no moment to the resolution of the issues presented in
this case. The BLR itself found in its order of July 8, 1982, that the" (un)certified CBA was duly filed
and submitted on October 29, 1980, to last until June 30, 1982 is certifiable for having complied with
all the requirements for certification." (Emphasis supplied.)

The CBA concluded in 1974 was certifiable and was in fact certified on April 11, 1975. It bears
stressing that Evaristo and Biascan were dismissed only on May 20, 1975, more than a month after
the said certification.

The correct view is that expressed by Commissioner Cecilio P. Seno in his concurring and dissenting
opinion, 14 viz.:chanrob1es virtual 1aw library

I cannot however subscribe to the majority view that the "dismissal of complainants Biascan and
Evaristo, . . . was, to say the least, a premature action on the part of the respondents because at the
time they were expelled by PLAC the contract containing the union security clause upon which the
action was based was yet to be certified and the representation status of the contracting union was
still in question.

Evidence on record show that after the cancellation of the registration certificate of the Federation of
Democratic Labor Unions, no other union contested the exclusive representation of the Philippine
Labor Alliance Council (PLAC), consequently, there was no more legal impediment that stood on the
way as to the validity and enforceability of the provisions of the collective bargaining agreement
entered into by and between respondent corporation and respondent union. The certification of the
collective bargaining agreement by the Bureau of Labor Relations is not required to put a stamp of
validity to such contract. Once it is duly entered into and signed by the parties, a collective
bargaining agreement becomes effective as between the parties regardless of whether or not the
same has been certified by the BLR.

To be fair, it must be mentioned that in the certification election held at the Liberty Flour Mills, Inc.
on December 27, 1976, the Ilaw at Buklod ng Manggagawa, with which the union organized by
Labor II – 1
Biascan and Evaristo was affiliated, won overwhelmingly with 441 votes as against the 5 votes cast
for PLAC. 15 However, this does not excuse the fact that the two disaffiliated from PLAC as early as
March 1975 and thus rendered themselves subject to dismissal under the union shop clause in the
CBA. chanrobles.com:cralaw:red

The petitioners say that the reinstatement issue of Evaristo and Biascan has become academic
because the former has been readmitted and the latter has chosen to await the resolution of this
case. However, they still insist on the payment of their back wages on the ground that their dismissal
was illegal. This claim must be denied for the reasons already given. The union shop clause was
validly enforced against them and justified the termination of their services.

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

The Court would have preferred to resolve this case in favor of the petitioners, but the law and the
facts are against them. For all the concern of the State, for the well-being of the worker, we must at
all times conform to the requirements of the law as long as such law has not been shown to be
violative of the Constitution. No such violation has been shown here.

WHEREFORE, the petition is DISMISSED, without any pronouncement as to costs. It is so ordered.

Labor II – 1
4.) G.R. No. 141471               September 18, 2000

COLEGIO DE SAN JUAN DE LETRAN, petitioner,

vs.
ASSOCIATION OF EMPLOYEES AND FACULTY OF LETRAN and ELEONOR AMBAS, respondents.

DECISION

KAPUNAN, J.:

This is a petition for review on certiorari seeking the reversal of the Decision of the Court of Appeals, promulgated
on 9 August 1999, dismissing the petition filed by Colegio de San Juan de Letran (hereinafter, "petitioner") and
affirming the Order of the Secretary of Labor, dated December 2, 1996, finding the petitioner guilty of unfair labor
practice on two (2) counts.

The facts, as found by the Secretary of Labor and affirmed by the Court of Appeals, are as follows:

"On December 1992, Salvador Abtria, then President of respondent union, Association of Employees and Faculty of
Letran, initiated the renegotiation of its Collective Bargaining Agreement with petitioner Colegio de San Juan de
Letran for the last two (2) years of the CBA's five (5) year lifetime from 1989-1994. On the same year, the union
elected a new set of officers wherein private respondent Eleanor Ambas emerged as the newly elected President
(Secretary of Labor and Employment's Order dated December 2, 1996, p. 12).

Ambas wanted to continue the renegotiation of the CBA but petitioner, through Fr. Edwin Lao, claimed that the CBA
was already prepared for signing by the parties. The parties submitted the disputed CBA to a referendum by the
union members, who eventually rejected the said CBA (Ibid, p. 2).

Petitioner accused the union officers of bargaining in bad faith before the National Labor Relations Commission
(NLRC). Labor Arbiter Edgardo M. Madriaga decided in favor of petitioner. However, the Labor Arbiter's decision
was reversed on appeal before the NLRC (Ibid, p. 2).

On January 1996, the union notified the National Conciliation and Mediation Board (NCMB) of its intention to strike
on the grounds (sic) of petitioner's: non-compliance with the NLRC (1) order to delete the name of Atty. Federico
Leynes as the union's legal counsel; and (2) refusal to bargain (Ibid, p. 1).

On January 18, 1996, the parties agreed to disregard the unsigned CBA and to start negotiation on a new five-year
CBA starting 1994-1999. On February 7, 1996, the union submitted its proposals to petitioner, which notified the
union six days later or on February 13, 1996 that the same had been submitted to its Board of Trustees. In the
meantime, Ambas was informed through a letter dated February 15, 1996 from her superior that her work schedule
was being changed from Monday to Friday to Tuesday to Saturday. Ambas protested and requested management
to submit the issue to a grievance machinery under the old CBA (Ibid, p. 2-3).

Due to petitioner's inaction, the union filed a notice of strike on March 13, 1996. The parties met on March 27, 1996
before the NCMB to discuss the ground rules for the negotiation. On March 29, 1996, the union received petitioner's
letter dismissing Ambas for alleged insubordination. Hence, the union amended its notice of strike to include Ambas'
dismissal. (Ibid, p. 2-3).

On April 20, 1996, both parties again discussed the ground rules for the CBA renegotiation. However, petitioner
stopped the negotiations after it purportedly received information that a new group of employees had filed a petition
for certification election (Ibid, p. 3).

On June 18, 1996, the union finally struck. On July 2, 1996, public respondent the Secretary of Labor and
Employment assumed jurisdiction and ordered all striking employees including the union president to return to work
and for petitioner to accept them back under the same terms and conditions before the actual strike. Petitioner

Labor II – 1
readmitted the striking members except Ambas. The parties then submitted their pleadings including their position
papers which were filed on July 17, 1996 ( Ibid, pp. 2-3).

On December 2, 1996, public respondent issued an order declaring petitioner guilty of unfair labor practice on two
counts and directing the reinstatement of private respondent Ambas with backwages. Petitioner filed a motion for
reconsideration which was denied in an Order dated May 29, 1997 (Petition, pp. 8-9)." 1

Having been denied its motion for reconsideration, petitioner sought a review of the order of the Secretary of Labor
and Employment before the Court of Appeals. The appellate court dismissed the petition and affirmed the findings of
the Secretary of Labor and Employment. The dispositive portion of the decision of the Court of Appeals sets forth:

WHEREFORE, foregoing premises considered, this Petition is DISMISSED, for being without merit in fact and in
law.

With cost to petitioner.

SO ORDERED. 2

Hence, petitioner comes to this Court for redress.

Petitioner ascribes the following errors to the Court of Appeals:

THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION
IN AFFIRMING THE RULING OF THE SECRETARY OF LABOR AND EMPLOYMENT WHICH DECLARES
PETITIONER LETRAN GUILTY OF REFUSAL TO BARGAIN (UNFAIR LABOR PRACTICE) FOR
SUSPENDING THE COLLECTIVE BARGAINING NEGOTIATIONS WITH RESPONDENT AEFL, DESPITE
THE FACT THAT THE SUSPENSION OF THE NEGOTIATIONS WAS BROUGHT ABOUT BY THE FILING
OF A PETITION FOR CERTIFICATION ELECTION BY A RIVAL UNION WHO CLAIMED TO COMMAND
THE MAJORITY OF THE EMPLOYEES WITHIN THE BARGAINING UNIT.

II

THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION
IN AFFIRMING THE RULING OF THE SECRETARY OF LABOR AND EMPLOYMENT WHICH DECLARES
PETITIONER LETRAN GUILTY OF UNFAIR LABOR PRACTICE FOR DISMISSING RESPONDENT
AMBAS, DESPITE THE FACT THAT HER DISMISSAL WAS CAUSED BY HER INSUBORDINATE
ATTITUDE, SPECIFICALLY, HER REFUSAL TO FOLLOW THE PRESCRIBED WORK SCHEDULE. 3

The twin questions of law before this Court are the following: (1) whether petitioner is guilty of unfair labor practice
by refusing to bargain with the union when it unilaterally suspended the ongoing negotiations for a new Collective
Bargaining Agreement (CBA) upon mere information that a petition for certification has been filed by another
legitimate labor organization? (2) whether the termination of the union president amounts to an interference of the
employees' right to self-organization?

The petition is without merit.

After a thorough review of the records of the case, this Court finds that petitioner has not shown any compelling
reason sufficient to overturn the ruling of the Court of Appeals affirming the findings of the Secretary of Labor and
Employment. It is axiomatic that the findings of fact of the Court of Appeals are conclusive and binding on the
Supreme Court and will not be reviewed or disturbed on appeal. In this case, the petitioner failed to show any
extraordinary circumstance justifying a departure from this established doctrine.

As regards the first issue, Article 252 of the Labor Code defines the meaning of the phrase "duty to bargain
collectively," as follows:
Labor II – 1
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 with respect to wages, hours of work and all other terms and conditions of employment including
proposals for adjusting any grievances or questions arising under such agreement and executing a contract
incorporating such agreements if requested by either party but such duty does not compel any party to agree to a
proposal or to make any concession.

Noteworthy in the above definition is the requirement on both parties of the performance of the mutual
obligation to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an
agreement. Undoubtedly, respondent Association of Employees and Faculty of Letran (AEFL) (hereinafter,
"union") lived up to this requisite when it presented its proposals for the CBA to petitioner on February 7,
1996. On the other hand, petitioner devised ways and means in order to prevent the negotiation.

Petitioner's utter lack of interest in bargaining with the union is obvious in its failure to make a timely reply to the
proposals presented by the latter. More than a month after the proposals were submitted by the union, petitioner still
had not made any counter-proposals. This inaction on the part of petitioner prompted the union to file its second
notice of strike on March 13, 1996. Petitioner could only offer a feeble explanation that the Board of Trustees had
not yet convened to discuss the matter as its excuse for failing to file its reply. This is a clear violation of Article 250
of the Labor Code governing the procedure in collective bargaining, to wit:

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. 4

xxx

As we have held in the case of Kiok Loy vs. NLRC, the company's refusal to make counter-proposal to the
5 

union's proposed CBA is an indication of its bad faith. Where the employer did not even bother to submit an
answer to the bargaining proposals of the union, there is a clear evasion of the duty to bargain
collectively. In the case at bar, petitioner's actuation show a lack of sincere desire to negotiate rendering it guilty of
6 

unfair labor practice.

Moreover, the series of events that transpired after the filing of the first notice of strike in January 1996 show
petitioner's resort to delaying tactics to ensure that negotiation would not push through. Thus, on February 15, 1996,
or barely a few days after the union proposals for the new CBA were submitted, the union president was informed
by her superior that her work schedule was being changed from Mondays to Fridays to Tuesdays to Saturdays. A
request from the union president that the issue be submitted to a grievance machinery was subsequently denied.
Thereafter, the petitioner and the union met on March 27, 1996 to discuss the ground rules for negotiation.
However, just two days later, or on March 29, 1996, petitioner dismissed the union president for alleged
insubordination. In its final attempt to thwart the bargaining process, petitioner suspended the negotiation on the
ground that it allegedly received information that a new group of employees called the Association of Concerned
Employees of Colegio (ACEC) had filed a petition for certification election. Clearly, petitioner tried to evade its duty
to bargain collectively.

Petitioner, however, argues that since it has already submitted the union's proposals to the Board of Trustees and
that a series of conferences had already been undertaken to discuss the ground rules for negotiation such should
already be considered as acts indicative of its intention to bargain. As pointed out earlier, the evidence on record
belie the assertions of petitioner.

Petitioner, likewise, claims that the suspension of negotiation was proper since by the filing of the petition for
certification election the issue on majority representation of the employees has arose. According to petitioner, the
authority of the union to negotiate on behalf of the employees was challenged when a rival union filed a petition for
certification election. Citing the case of Lakas Ng Manggagawang Makabayan v. Marcelo Enterprises, petitioner
7 

Labor II – 1
asserts that in view of the pendency of the petition for certification election, it had no duty to bargain collectively with
the union.

We disagree. In order to allow the employer to validly suspend the bargaining process there must be a valid petition
for certification election raising a legitimate representation issue. Hence, the mere filing of a petition for certification
election does not ipso facto justify the suspension of negotiation by the employer. The petition must first comply with
the provisions of the Labor Code and its Implementing Rules. Foremost is that a petition for certification election
must be filed during the sixty-day freedom period. The "Contract Bar Rule" under Section 3, Rule XI, Book V, of the
Omnibus Rules Implementing the Labor Code, provides that: " .… If a collective bargaining agreement has been
duly registered in accordance with Article 231 of the Code, a petition for certification election or a motion for
intervention can only be entertained within sixty (60) days prior to the expiry date of such agreement." The rule is
based on Article 232, in relation to Articles 253, 253-A and 256 of the Labor Code. No petition for certification
8 

election for any representation issue may be filed after the lapse of the sixty-day freedom period. The old CBA is
extended until a new one is signed. The rule is that despite the lapse of the formal effectivity of the CBA the law still
considers the same as continuing in force and effect until a new CBA shall have been validly executed. Hence, the9 

contract bar rule still applies. The purpose is to ensure stability in the relationship of the workers and the company
10 

by preventing frequent modifications of any CBA earlier entered into by them in good faith and for the stipulated
original period.11

In the case at bar, the lifetime of the previous CBA was from 1989-1994.  The petition for certification election by
1âwphi1

ACEC, allegedly a legitimate labor organization, was filed with the Department of Labor and Employment (DOLE)
only on May 26, 1996. Clearly, the petition was filed outside the sixty-day freedom period. Hence, the filing thereof
was barred by the existence of a valid and existing collective bargaining agreement. Consequently, there is no
legitimate representation issue and, as such, the filing of the petition for certification election did not constitute a bar
to the ongoing negotiation. Reliance, therefore, by petitioner of the ruling in Lakas Ng Manggagawang Makabayan
v. Marcelo Enterprises is misplaced since that case involved a legitimate representation issue which is not present
12 

in the case at bar.

Significantly, the same petition for certification election was dismissed by the Secretary of Labor on October 25,
1996.  The dismissal was upheld by this Court in a Resolution, dated April 21, 1997.
1âwphi1
13

In view of the above, there is no doubt that petitioner is guilty of unfair labor practice by its stern refusal to bargain in
good faith with respondent union.

Concerning the issue on the validity of the termination of the union president, we hold that the dismissal was
effected in violation of the employees' right to self-organization.

To justify the dismissal, petitioner asserts that the union president was terminated for cause, allegedly for
insubordination for her failure to comply with the new working schedule assigned to her, and pursuant to its
managerial prerogative to discipline and/or dismiss its employees. While we recognize the right of the employer to
terminate the services of an employee for a just or authorized cause, nevertheless, the dismissal of employees must
be made within the parameters of law and pursuant to the tenets of equity and fair play. The employer's right to
14 

terminate the services of an employee for just or authorized cause must be exercised in good faith. More 15 

importantly, it must not amount to interfering with, restraining or coercing employees in the exercise of their right to
self-organization because it would amount to, as in this case, unlawful labor practice under Article 248 of the Labor
Code.

The factual backdrop of the termination of Ms. Ambas leads us to no other conclusion that she was dismissed in
order to strip the union of a leader who would fight for the right of her co-workers at the bargaining table. Ms.
Ambas, at the time of her dismissal, had been working for the petitioner for ten (10) years already. In fact, she was a
recipient of a loyalty award. Moreover, for the past ten (10) years her working schedule was from Monday to Friday.
However, things began to change when she was elected as union president and when she started negotiating for a
new CBA. Thus, it was when she was the union president and during the period of tense and difficult negotiations
when her work schedule was altered from Mondays to Fridays to Tuesdays to Saturdays. When she did not budge,
although her schedule was changed, she was outrightly dismissed for alleged insubordination. We quote with
16 

approval the following findings of the Secretary of Labor on this matter, to wit:

Labor II – 1
"Assuming arguendo that Ms. Ambas was guilty, such disobedience was not, however, a valid ground to teminate
her employment. The disputed management action was directly connected with Ms. Ambas' determination to
change the complexion of the CBA. As a matter of fact, Ms. Ambas' unflinching position in faithfully and truthfully
carrying out her duties and responsibilities to her Union and its members in getting a fair share of the fruits of their
collective endeavors was the proximate cause for her dismissal, the charge of insubordination being merely a ploy
to give a color of legality to the contemplated management action to dismiss her. Thus, the dismissal of Ms. Ambas
was heavily tainted with and evidently done in bad faith. Manifestly, it was designed to interfere with the members'
right to self-organization.

Admittedly, management has the prerogative to discipline its employees for insubordination. But when the exercise
of such management right tends to interfere with the employees' right to self-organization, it amounts to union-
busting and is therefore a prohibited act. The dismissal of Ms. Ambas was clearly designed to frustrate the Union in
its desire to forge a new CBA with the College that is reflective of the true wishes and aspirations of the Union
members. Her dismissal was merely a subterfuge to get rid of her, which smacks of a pre-conceived plan to oust her
from the premises of the College. It has the effect of busting the Union, stripping it of its strong-willed leadership.
When management refused to treat the charge of insubordination as a grievance within the scope of the Grievance
Machinery, the action of the College in finally dismissing her from the service became arbitrary, capricious and
whimsical, and therefore violated Ms. Ambas' right to due process." 17

In this regard, we find no cogent reason to disturb the findings of the Court of Appeals affirming the findings of the
Secretary of Labor and Employment. The right to self-organization of employees must not be interfered with by the
employer on the pretext of exercising management prerogative of disciplining its employees. In this case, the totality
of conduct of the employer shows an evident attempt to restrain the employees from fully exercising their rights
under the law. This cannot be done under the Labor Code.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

Labor II – 1
 5.) [G.R. No. 111262. September 19, 1996.]

SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, represented by its President

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

DECISION

KAPUNAN, J.:

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

The facts are as follows: chanrob1es virtual 1aw library

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

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

ARTICLE XIV

DURATION OF AGREEMENT

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

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

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

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

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

After June 30, 1992, the CBA was renegotiated in accordance with the terms of the CBA and Article
253-A of the Labor Code. Negotiations started sometime in July, with the two parties submitting their
Labor II – 1
respective proposals and counter proposals.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Likewise, Efren Carreon, Acting President of the SMCEU-PTGWO, filed a petition for the
Labor II – 1
withdrawal/dismissal of the petition considering that the temporary restraining order jeopardized the
employees’ right to conclude a new CBA. At the same time, he challenged the legal personality of Mr.
Raymundo Hipolito, Jr. to represent the Union as its president when the later was already officially
dismissed from the company on October 4, 1994.

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

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

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

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

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

We agree with the Secretary of Labor.

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

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

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

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

Labor II – 1
THE CHAIRMAN (REP. VELASCO): . . . the CBA, insofar as the economic provisions are concerned . . .

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

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

THE CHAIRMAN (SEN. HERRERA): Present practice?

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

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

THE CHAIRMAN (REP. VELOSO): Yes.

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

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

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

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

x          x           x

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

HON. CHAIRMAN HERRERA: Five years.

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

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

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

HON. CHAIRMAN HERRERA: Yes.

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

HON. CHAIRMAN HERRERA: Not later than three years.

HON. ISIDRO: Assuming that they usually follow the period — three years nang three years, but
under this law with respect to representation — five years, ano? Now, after three years, nagkaroon
Labor II – 1
ng bagong terms, tapos na iyong term, renewed na iyong terms, ang karapatan noon sa
representation issue mayroon pang two years left.

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

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

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

HON. ISIDRO: Yes.

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

HON. ISIDRO: Yes.

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

HON. ISIDRO: Oo.

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

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

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

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

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

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

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

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

HON. CHAIRMAN VELOSO: Mon, for four years?

HON. ISIDRO: Ang tingin ko lang dito, iyong distinction between the terms and the representation
Labor II – 1
aspect — why do we have to distinguish between three and five? What’s wrong with having a uniform
expiration period?

HON. CHAIRMAN HERRERA: Five years.

HON. ISIDRO: Puro three years.

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

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

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

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

x          x           x

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

HON. CHAIRMAN HERRERA: representation status.

HON. CHAIRMAN VELOSO: Only on —

HON. CHAIRMAN HERRERA: the representations.

HON. CHAIRMAN VELOSO: But on the economic issues.

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

HON. CHAIRMAN VELOSO: At least on second year.

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

x          x           x

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

Obviously, the framers of the law wanted to maintain industrial peace and stability by having both
Labor II – 1
management and labor work harmoniously together without any disturbance. Thus, no outside union
can enter the establishment within five (5) years and challenge the status of the incumbent union as
the exclusive bargaining agent. Likewise, the terms and conditions of employment (economic and
non-economic) can not be questioned by the employers or employees during the period of effectivity
of the CBA. The CBA is a contract between the parties and the parties must respect the terms and
conditions of the agreement. 14 Notably, the framers of the law did not give a fixed terms as to the
effectivity of the terms and conditions of employment. It can be gleaned from their discussions that it
was left to the parties to fix the period.

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

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

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

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

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

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

There is a direct link between the voluntary recognition by the company of the continuing
representative status of the unions after the aforementioned spin-offs and the stand of the company
for a 3-year renegotiated cycle when the economic provisions of the existing CBAs expired, i.e., to
maintain stability and avoid confusion when the umbilical cord of the two divisions were severed from
their parent. These two cannot be considered independently of each other for they were intended to
reinforce one another. Precisely, the company conceded to face the same union notwithstanding the
spin-offs in order to preserve industrial peace during the infancy of the two corporations. If the union
Labor II – 1
would insist on a shorter renegotiated term, than all the advantages gained by both parties in this
regard, would have gone to naught. With this in mind, this office feels that it will betray its mandate
should we order the parties to execute a 2-year renegotiated term for then chaos and confusion,
rather than tranquility, would be the order of the day. Worse, there is a strong likelihood that such a
ruling might spawn discontent and possible mass actions against the company coming from the other
unions who had already agreed to a 3-year renegotiated terms. If this happens, the purpose of this
Office’s intervention into the parties’ controversy would have been defeated. 15

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

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

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

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

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

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

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

x          x           x

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

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

Labor II – 1
Undeniably, the transformation of the companies was a management prerogative and business
judgment which the courts can not look into unless it is contrary to law, public policy or morals.
Neither can we impute any bad faith on the part of SMC so as to justify the application of the
doctrine of piercing the corporate veil. 18 Ever mindful of the employees’ interests, management has
assured the concerned employees that they will be absorbed by the new corporations without loss of
tenure and retaining their present pay and benefits according to the existing CBAs. 19 They were
advised that upon the expiration of the CBAs, new agreements will be negotiated between the
management of the new corporations and the bargaining representatives of the employees
concerned. As a result of the spin-offs:chanrob1es virtual 1aw library

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

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

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

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

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

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

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

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

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

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

x          x           x

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

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

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

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

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

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

Labor II – 1
 6.) [G.R. No. 127598. January 27, 1999.]

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

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

DECISION

MARTINEZ, J.:

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

MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO. chanrobles law library

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

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

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

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

‘Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences between the
parties to bridge their differences and eventually hammer out a solution that is mutually acceptable.
He shall be assisted by the Legal Service.

SO ORDERED." cralaw virtua1aw library

Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary
Labor II – 1
resolved the labor dispute through an Order, 6 containing the following awards: jgc:chanrobles.com.ph

"ECONOMIC DEMANDS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Labor II – 1
Midyear Bonus — one month’s pay to be included in the CBA.

Anniversary Bonus — union’s demand is denied.

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

Retirement Benefits: chanrob1es virtual 1aw library

a. Full retirement-present policy is maintained;

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

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

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

e. HMP coverage for retiree’s dependents is denied

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

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

Optional retirement — union’s demand is denied; present policy is maintained; employee is eligible
for optional retirement if he has rendered at least 18 years of service.

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

Resignation benefits — union’s demand is denied.

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

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

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

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

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

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

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

Labor II – 1
Holdup Allowance — the union demand is denied; the present policy shall be maintained.

Meal and Lodging Allowance — shall be increased effective December 1, 1995 as follows: chanrob1es virtual 1aw library

Breakfast from P25.00 to P35.00

Lunch from P35.00 to P45.00

Dinner from P35.00 to P45.00

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

MERALCO franchise areas

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

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

Benefits for Collectors: chanrob1es virtual 1aw library

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

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

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

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

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

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

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

Political Demands: chanrob1es virtual 1aw library

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

b. Union recognition and security —

Labor II – 1
i. The union shall be recognized by the Company as sole and exclusive bargaining representative of
the rank-and-file employees included in the bargaining unit. The Company shall agree to meet only
with Union officers and its authorized representatives on all matters involving the Union and all
issues arising from the implementation and interpretation of the new CBA.

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

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

c. Transfer of assignment and job security —

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

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

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

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

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

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

f. Union Representation in Committees — the union is allowed to participate in policy formulation and
in the decision-making process on matters affecting their rights and welfare, particularly in the
Uniform Committee, the Safety Committee and other committees that may be formed in the future.

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

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

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

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

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

Labor II – 1
3. in ordering the ‘incorporation into the CBA of all existing employee benefits, on the one hand, and
those that MERALCO has unilaterally granted to its employees by virtue of voluntary company policy
or practice, on the other hand.’

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

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

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

MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the wage
increase, leaves, decentralized filing of paternity and maternity leaves, bonuses, retirement benefits,
optional retirement, medical, dental and hospitalization benefits, short swing and payroll treatment.
On its political demands, MEWA asked the Secretary to rule on its proposal to institute a Code of
Discipline for its members and the union’s representation in the administration of the Pension Fund.

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

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

Economic Demands

2) Wage Increase: chanrob1es virtual 1aw library

First year — P2,200.00 per month;

Second year — P2,200.00 per month.

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

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

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

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

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

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

One sack of rice per quarter of the year shall be given to those retiring between August 19, 1996 and
November 30, 1997.
Labor II – 1
On HMP Coverage for Retirees — The parties ‘maintain the status quo, that is, with the Company
complying with the present arrangement and the obligations to retirees as is.’

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

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

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

12) Shortswing — the original award is deleted.

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

Political Demands: chanrob1es virtual 1aw library

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

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

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

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

18) Check off of union dues

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

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

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

19) Union Representation in Committees — The union is granted representation in the Safety
Committee, the Uniform Committee and other committees of a similar nature and purpose involving
personnel welfare, rights and benefits as well as duties.
Labor II – 1
Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely abused his
discretion:chanrob1es virtual 1aw library

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

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

a. Two months Christmas bonus;

b. Rice Subsidy and retirement benefits for retirees;

c. Loan for the employees’ cooperative;

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

e. Signing bonus;

f. Integration of the Red Circle Rate Allowance

g. Sick leave reserve of 15 days

h. The 40-day union leave;

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

j. Benefits for collectors

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

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

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

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

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

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

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

The union disputes the allegation of MERALCO that the Secretary abused his discretion in issuing the
Labor II – 1
assailed orders arguing that he acted within the scope of the powers granted him by law and by the
Constitution. The union contends that any judicial review is limited to an examination of the
Secretary’s decision-making/discretion — exercising process to determine if this process was
attended by some capricious or whimsical act that constitutes "grave abuse" ; in the absence of such
abuse, his findings — considering that he has both jurisdiction and expertise to make them — are
valid.

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

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

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

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

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

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

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

The natural and ever present limitation on the Secretary’s acts is, of course, the Constitution. And we
recognize that indeed the constitutional provisions the union cited are State policies on labor and
social justice that can serve as standards in assessing the validity of a Secretary of Labor’s actions.
However, we note that these provisions do not provide clear, precise and objective standards of
conduct that lend themselves to easy application. We likewise recognize that the Constitution is not a
lopsided document that only recognizes the interests of the working man; it too protects the interests
Labor II – 1
of the property owner and employer as well. 14

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

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

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

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

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

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

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

MERALCO based its projection on the increase of the income for the first 6 months of 1996 over the
same period in 1995. The union, on the other hand, projected that the 1996 income would increase
Labor II – 1
by 29% to 35% because the "consumption of electric power is at its highest during the last two
quarters with the advent of the Yuletide season." The union likewise relied heavily on a newspaper
report citing an estimate by an all Asia capital financial analyst that the net operating income would
amount to 5.795 Billion. 21

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

Projected net operating

income for 1996 5,795,000,000

Principals and interests 1,426,571,703

Dividends at 1995 rate 1,636,949,000

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

Add: Tax credit equivalent to

35% of labor cost 231,804,940

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

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

x          x           x

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

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

We find after considering the records that the Secretary gravely abused his discretion in making this
wage award because he disregarded evidence on record. Where he considered MERALCO’s evidence
at all, he apparently misappreciated this evidence in favor of claims that do not have evidentiary
support. To our mind, the MERALCO projection had every reason to be reliable because it was based
on actual and undisputed figures for the first six months of 1996. 23 On the other hand, the union
projection was based on a speculation of Yuletide consumption that the union failed to substantiate.
In fact, as against the union’s unsubstantiated Yuletide consumption claim, MERALCO adduced
evidence in the form of historical consumption data showing that a lengthy consumption does not
tend to rise during the Christmas period. 24 Additionally, the All-Asia Capital Report was nothing
more than a newspaper report that did not show any specific breakdown or computations. While the
union claimed that its cited figure is based on MERALCO’s 10-year income stream, 25 no data or
computation of this 10-year stream appear in the record.

While the Secretary is not expected to accept the company-offered figures wholesale in determining
Labor II – 1
a wage award, we find it a grave abuse of discretion to completely disregard data that is based on
actual and undisputed record of financial performance in favor of the third-hand and unfounded
claims the Secretary eventually relied upon. At the very least, the Secretary should have properly
justified his disregard of the company figures. The Secretary should have also reasonably insured
that the figure that served as the starting point for his computation had some substantial basis.

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

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

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

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

AMOUNT OF CBA INCREASES DIFFERENCE

CBA

COVERAGE RANK-AND-FILE SUPERVISORY AMOUNT PERCENT

1980 230.00 342.50 112.50 48.91%

1981 210.00 322.50 112.50 53.57

Labor II – 1
1982 200.00 312.50 112.50 56.25

TOTAL 640.00 977.50 337.50 52.73

1983 320.00 432.50 112.50 35.16

1984 350.00 462.50 112.50 32.14

1985 370.00 482.50 112.50 30.41

TOTAL 1,040.00 1,377.50 337.50 32.45

1986 860.00 972.50 112.50 13.08

1987 640.00 752.50 112.50 17.58

1988 600.00 712.50 112.50 18.75

TOTAL 2,100.00 2,437.50 337.50 16.07

1989 1,100.00 1,212.50 112.50 10.23

1990 1,200.00 1,312.50 112.50 9.38

1991 1,300.00 1,412.50 112.50 8.65

TOTAL 3,600.00 3,937.50 337.50 9.38

1992 1,400.00 1,742.50 342.50 24.46

1993 1,350.00 1,682.50 332.50 24.63

1994 1,150.00 1,442.50 292.50 25.43

TOTAL 3,900.00 4,867.50 967.50 24.81

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

We now go to the economic issues.

1. CHRISTMAS BONUS

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

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

Labor II – 1
"We note that each of the grant mentioned in the commonly adopted table of grants has a special
description. Christmas bonuses were given in 1988 and 1989. However, the amounts of bonuses
given differed. In 1988, it was P1,500. In 1989, it was ½ month salary. The use of "Christmas bonus"
title stopped after 1989. In 1990, what was given was a "cash gift" of ½ month’s salary. The grants
thereafter bore different titles and were for varying amounts. Significantly, the Company explained
the reason for the 1995 bonuses and this explanation was not substantially contradicted by the
Union.

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

"x       x       x

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

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

We do not agree.

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

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

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

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

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

We can not, however, affirm the Secretary’s award of a two-month special Christmas bonus to the
employees since there was no recognized company practice of giving a two-month special grant. The
two-month special bonus was given only in 1995 in recognition of the employees’ prompt and
Labor II – 1
efficient response during the calamities. Instead, a one-month special bonus, We believe, is
sufficient, this being merely a generous act on the part of MERALCO.

2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES

It appears that the Secretary of Labor originally ordered the increase of the retirement pay, rice
subsidy and medical benefits of MERALCO retirees. This ruling was reconsidered based on the
position that retirees are no longer employees of the company and therefore are no longer bargaining
members who can benefit from a compulsory arbitration award. The Secretary, however, ruled that
all members of the bargaining unit who retire between August 19, 1996 and November 30, 1997
(i.e., the term of the disputed CBA under the Secretary’s disputed orders) are entitled to receive an
additional rice subsidy.

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

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

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

3. EMPLOYEES’ COOPERATIVE

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

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

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

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

Labor II – 1
". . . Additionally and more importantly, GHSIP and HMP, aside from being contributory plans, have
been the subject of previous rulings from this Office as bargainable matters. At this point, we cannot
do any less and must recognize that GHSIP and HMP are matters where the union can demand and
negotiate for improvements within the framework of the collective bargaining system." 35

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

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

5. SIGNING BONUS

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

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

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

6. RED-CIRCLE-RATE ALLOWANCE

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

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

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

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

Labor II – 1
7. SICK LEAVE RESERVE OF 15 DAYS

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

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

8. 40-DAY UNION LEAVE

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

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

9. HIGH VOLTAGE,/HIGH POLE/TOWING ALLOWANCE

MERALCO argues that there is no justification for the increase of these allowances. The personnel
concerned will not receive any additional risk during the life of the current CBA that would justify the
increase demanded by the union. In the absence of such risk, then these personnel deserve only the
same salary increase that all other members of the bargaining unit will get as a result of the disputed
CBA. MERALCO likewise assails the grant of the high voltage/high pole allowance to members of the
team who are not exposed to the high voltage/high pole risks. The risks that justify the higher salary
and the added allowance are personal to those who are exposed to those risks. They are not granted
to a team because some members of the team are not exposed to the given risks.

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

We do not, however, subscribe to the Secretary’s order granting these allowances to the members of
the team who are not exposed to the given risks. The reason is obvious- no risk, no pay. To award
them the said allowances would be manifestly unfair for the company and even to those who are
Labor II – 1
exposed to the risks, as well as to the other members of the bargaining unit who do not receive the
said allowances.

10. BENEFITS FOR COLLECTORS

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

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

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

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

We shall now resolve the non-economic issues.

1. SCOPE OF THE BARGAINING UNIT

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

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

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

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

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

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

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

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

2. ISSUE OF UNION SECURITY

Labor II – 1
The Secretary in his Order of August 19, 1996, 42 ruled that: jgc:chanrobles.com.ph

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

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

x          x           x

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

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

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

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

We agree with MERALCO’s contention.

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

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

Consequently, We rule that the maintenance of membership regime should govern at MERALCO in
accordance with the Secretary’s order of August 19, 1996 which neither party disputed.

3. THE CONTRACTING OUT ISSUE

This issue is limited to the validity of the requirement that the union be consulted before the
implementation of any contracting out that would last for 6 months or more. Proceeding from our
Labor II – 1
ruling in San Miguel Employees Union-PTGWO v. Bersamira, 43 (where we recognized that
contracting out of work is a proprietary right of the employer in the exercise of an inherent
management prerogative) the issue we see is whether the Secretary’s consultation requirement is
reasonable or unduly restrictive of the company’s management prerogative. We note that the
Secretary himself has considered that management should not be hampered in the operations of its
business when he said that: jgc:chanrobles.com.ph

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

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

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

4. UNION REPRESENTATION IN COMMITTEES

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

"We see no convincing reason to modify our original Order on union representation in committees. It
reiterates what the Article 211 (A)(g) of the Labor Code provides: "To ensure the participation of
workers in decision and policy-making processes affecting their rights, duties and welfare.’Denying
this opportunity to the Union is to lay the claim that only management has the monopoly of ideas
that may improve management strategies in enhancing the Company’s growth. What every company
should remember is that there might be one among the Union members who may offer productive
and viable ideas on expanding the Company’s business horizons. The Union’s participation in such
committees might just be the opportune time for dormant ideas to come forward. So, the Company
must welcome this development (see also PAL v. NLRC, Et Al., G.R. 85985, August 13, 1995). It
must be understood, however, that the committees referred to here are the Safety Committee, the
Uniform Committee and other committees of a similar nature and purpose involving personnel
welfare, rights and benefits as well as duties." cralaw virtua1aw library

We do not find merit in MERALCO’s contention that the above-quoted ruling of the Secretary is an
intrusion into the management prerogatives of MERALCO. It is worthwhile to note that all the Union
demands and what the Secretary’s order granted is that the Union be allowed to participate in policy
formulation and decision-making process on matters affecting the Union members’ rights, duties and
welfare as required in Article 211 (A) (g) of the Labor Code. And this can only be done when the
Union is allowed to have representatives in the Safety Committee, Uniform Committee and other
Labor II – 1
committees of a similar nature. Certainly, such participation by the Union in the said committees is
not in the nature of a co-management control of the business of MERALCO. What is granted by the
Secretary is participation and representation. Thus, there is no impairment of management
prerogatives.

5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA

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

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

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

We agree with MERALCO.

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

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

6. RETROACTIVITY OF THE CBA

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

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

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

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

". . . [A]ll other provisions of the Collective Bargaining Agreement shall be re-negotiated not later
than 3 years after its execution. Any agreement on such other provision of the Collective Bargaining
Agreement entered into within 6 months from the date of expiry of the term of such other provisions
Labor II – 1
as fixed in such Collective Bargaining Agreement shall retroact to the day immediately following such
date. If such agreement is entered into beyond 6 months, the parties shall agree on the duration of
the effectivity thereof. . . ."
cralaw virtua1aw library

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

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

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

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

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

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

Labor II – 1
 7.) G.R. No. 127598. February 22, 2000

MANILA ELECTRIC COMPANY, Petitioner, v. Hon. Secretary of Labor Leonardo Quisumbing

and Meralco Employees and Workers Association (MEWA), Respondents.

RESOLUTION

YNARES_SANTIAGO, J.:

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

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

The modifications of the public respondents resolutions include the following:

January 27, 1999 decision Secretarys resolution

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

Xmas bonus -modified to one month 2 months

Retirees -remanded to the Secretary granted

Loan to coops -denied granted

GHSIP, HMP

and Housing loans -granted up to P60,000.00 granted

Signing bonus -denied granted

Union leave -40 days (typo error) 30 days

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

not exposed to the risk

Collectors -no need for cash bond, no

need to reduce quota and MAPL

CBU -exclude confidential employees include

Union security -maintenance of membership closed shop

Contracting out -no need to consult union consult first

Labor II – 1
All benefits -existing terms and conditions all terms

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

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity)
filed a motion for intervention and a motion for reconsideration of the said Decision. A separate
intervention was likewise made by the supervisors union (FLAMES 2 ) of petitioner corporation alleging
that it has bona fide legal interest in the outcome of the case.3 The Court required the "proper
parties" to file a comment to the three motions for reconsideration but the Solicitor-General asked
that he be excused from filing the comment because the "petition filed in the instant case was
granted" by the Court.4 Consequently, petitioner filed its own consolidated comment. An "Appeal
Seeking Immediate Reconsideration" was also filed by the alleged newly elected president of the
Union.5 Other subsequent pleadings were filed by the parties and intervenors.

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

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

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

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

Nonetheless, by petitioners own allegations, its actual total net income for 1996 was P5.1 billion. 8 An
estimate by the All Asia financial analyst stated that petitioners net operating income for the same
year was about P5.7 billion, a figure which the Union relies on to support its claim. Assuming without
admitting the truth thereof, the figure is higher than the P4.171 billion allegedly suggested by
petitioner as its projected net operating income. The P5.7 billion which was the Secretarys basis for

Labor II – 1
granting the P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It
would be proper then to increase this Courts award of P1,900.00 to P2,000.00 for the two years of
the CBA award. For 1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was
reduced to P1,350.00, for 1993; further reduced to P1,150.00 for 1994. For supervisory employees,
the agreed wage increase for the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50,
respectively. Based on the foregoing figures, the P2,000.00 increase for the two-year period awarded
to the rank-and-file is much higher than the highest increase granted to supervisory employees. 9 As
mentioned in the January 27, 1999 Decision, the Court does "not seek to enumerate in this decision
the factors that should affect wage determination" because collective bargaining disputes particularly
those affecting the national interest and public service "requires due consideration and proper
balancing of the interests of the parties to the dispute and of those who might be affected by the
dispute."10 The Court takes judicial notice that the new amounts granted herein are significantly
higher than the weighted average salary currently enjoyed by other rank-and-file employees within
the community. It should be noted that the relations between labor and capital is impressed with
public interest which must yield to the common good. 11 Neither party should act oppressively against
the other or impair the interest or convenience of the public. 12 Besides, matters of salary increases
are part of management prerogative.13 cräläwvirtualibräry

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

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

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

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

Anent the alleged lack of basis for the retroactivity provisions awarded, we would stress that the
provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks of agreements by
and between the parties, and not arbitral awards . . .

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

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

"In St. Lukes Medical Center v. Torres, a deadlock also developed during the CBA negotiations
between management and the union. The Secretary of Labor assumed jurisdiction and ordered the
retroaction of the CBA to the date of expiration of the previous CBA. As in this case, it was alleged

Labor II – 1
that the Secretary of Labor gravely abused its discretion in making his award retroactive. In
dismissing this contention this Court held:

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

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

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

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

Labor II – 1
the obligation to render financial assistance to cooperatives and the Cooperative Code does not make
it an obligation of the employer or any private individual. 22
cräläwvirtualibräry

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

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

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

Labor II – 1
 8.) [G.R. No. 124224. March 17, 2000.]

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

DECISION

KAPUNAN, J.:

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

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

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

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

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

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

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

Thereafter, the records of the case were remanded to the arbitration branch of origin for the
execution of Labor Arbiter Abulwahid’s Order, dated March 31, 1987, granting monetary benefits
consisting of wage increases, housing allowances, bonuses, etc. to the regular rank-and-file
employees. Following a series of conferences to thresh out the details of computation, Labor Arbiter
Reynaldo S. Villena issued an Order, dated October 18, 1993, directing petitioner Company to pay
the 142 employees entitled to the aforesaid benefits the respective amounts due them under the
CBA. Petitioner Company complied; and, the corresponding quitclaims were executed. The case was
considered closed following NFL’s manifestation that it will no longer appeal the October 18, 1993
Order of Labor Arbiter Villena. 6

However, notwithstanding such manifestation, a "Petition for Relief" was filed in behalf of 186 of the
private respondents "Mariano J. Akilit and 350 others” on May 12, 1994. In their petition, they
Labor II – 1
claimed that they were wrongfully excluded from enjoying the benefits under the CBA since the
agreement with NFL and petitioner Company limited the CBA’s implementation to only the 142 rank-
and-file employees enumerated. They claimed that NFL’s misrepresentations had precluded them
from appealing their exclusion. 7

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

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

SO ORDERED. 9

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

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

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

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

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

SO ORDERED. 10

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

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN ALLOWING THE
"PETITION FOR RELIEF" TO PROSPER.

II

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT
Labor II – 1
PRIVATE RESPONDENTS MARIANO AKILIT AND 350 OTHERS ARE ENTITLED TO BENEFITS UNDER
THE COLLECTIVE BARGAINING AGREEMENT IN SPITE OF THE FACT THAT THEY WERE NOT
EMPLOYED BY THE PETITIONER MUCH LESS WERE THEY MEMBERS OF THE BARGAINING UNIT
DURING THE TERM OF THE CBA.

III

PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN MAKING FACTUAL

FINDINGS WITHOUT BASIS.

IV

THE DISPOSITIVE PORTIONS OF THE ASSAILED RESOLUTIONS ARE DEFECTIVE AND/OR REVEAL
THE GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT. 11

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

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

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

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

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

According to petitioner, the provision on wage increase in the 1981 to 1984 CBA between petitioner
Company and NFL provided for yearly wage increases. Logically, these provisions ended in the year
1984 — the last year that the economic provisions of the CBA were, pursuant to contract and law,
effective. Petitioner claims that there is no contractual basis for the grant of CBA benefits such as
wage increases in 1985 and subsequent years, since the CBA stipulates only the increases for the
years 1981 to 1984.

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

Finally, petitioner Company claims that it was never given the opportunity to submit a counter-
Labor II – 1
computation of the benefits supposedly due the private respondents. Instead, the NLRC allegedly
relied on the self-serving computations of private respondents.

Petitioner’s contentions are untenable.

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

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

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

ARTICLE 253. Duty to bargain collectively when there exists a collective bargaining agreement. —
When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its lifetime. However, either party
can serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its
expiration date. It shall be the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement during the 60-day period and/or
until a new agreement is reached by the parties.(Emphasis supplied.)

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

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

In a recent case, the Court had occasion to rule that Articles 253 and 253-A 17 mandate the parties
to keep the status quo and to continue in full force and effect the terms and conditions of the existing
agreement during the 60-day period prior to the expiration of the old CBA and/or until a new
Labor II – 1
agreement is reached by the parties. Consequently, the automatic renewal clause provided for by the
law, which is deemed incorporated in all CBA’s, provides the reason why the new CBA can only be
given a prospective effect. 18

In the case of Lopez Sugar Corporation v. Federation of Free Workers, Et Al., 19 this Court reiterated
the rule that although a CBA has expired, it continues to have legal effects as between the parties
until a new CBA has been entered into. It is the duty of both parties to the CBA to keep the status
quo, and to continue in full force and effect the terms and conditions of the existing agreement
during the 60-day period and/or until a new agreement is reached by the parties. 20

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

HON. CHAIRMAN HERRERA: chanrob1es virtual 1aw library

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

HON. CHAIRMAN VELOSO: chanrob1es virtual 1aw library

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

x          x           x

HON. CHAIRMAN VELOSO: chanrob1es virtual 1aw library

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

x       x       x. 21

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

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

We do not agree. In a long line of cases, this Court has held that when a collective bargaining
contract is entered into by the union representing the employees and the employer, even the non-
member employees are entitled to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute undue discrimination against
Labor II – 1
nonmembers. 22 It is even conceded, that a laborer can claim benefits from a CBA entered into
between the company and the union of which he is a member at the time of the conclusion of the
agreement, after he has resigned from said union. 23

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

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

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

Labor II – 1
 9.) [G.R. No. 124224. March 17, 2000.]

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

DECISION

KAPUNAN, J.:

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

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

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

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

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

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

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

Thereafter, the records of the case were remanded to the arbitration branch of origin for the
execution of Labor Arbiter Abulwahid’s Order, dated March 31, 1987, granting monetary benefits
consisting of wage increases, housing allowances, bonuses, etc. to the regular rank-and-file
employees. Following a series of conferences to thresh out the details of computation, Labor Arbiter
Reynaldo S. Villena issued an Order, dated October 18, 1993, directing petitioner Company to pay
the 142 employees entitled to the aforesaid benefits the respective amounts due them under the
CBA. Petitioner Company complied; and, the corresponding quitclaims were executed. The case was
considered closed following NFL’s manifestation that it will no longer appeal the October 18, 1993
Order of Labor Arbiter Villena. 6

However, notwithstanding such manifestation, a "Petition for Relief" was filed in behalf of 186 of the
private respondents "Mariano J. Akilit and 350 others” on May 12, 1994. In their petition, they
Labor II – 1
claimed that they were wrongfully excluded from enjoying the benefits under the CBA since the
agreement with NFL and petitioner Company limited the CBA’s implementation to only the 142 rank-
and-file employees enumerated. They claimed that NFL’s misrepresentations had precluded them
from appealing their exclusion. 7

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

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

SO ORDERED. 9

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

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

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

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

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

SO ORDERED. 10

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

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN ALLOWING THE
"PETITION FOR RELIEF" TO PROSPER.

II

THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT
Labor II – 1
PRIVATE RESPONDENTS MARIANO AKILIT AND 350 OTHERS ARE ENTITLED TO BENEFITS UNDER
THE COLLECTIVE BARGAINING AGREEMENT IN SPITE OF THE FACT THAT THEY WERE NOT
EMPLOYED BY THE PETITIONER MUCH LESS WERE THEY MEMBERS OF THE BARGAINING UNIT
DURING THE TERM OF THE CBA.

III

PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN MAKING FACTUAL

FINDINGS WITHOUT BASIS.

IV

THE DISPOSITIVE PORTIONS OF THE ASSAILED RESOLUTIONS ARE DEFECTIVE AND/OR REVEAL
THE GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT. 11

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

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

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

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

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

According to petitioner, the provision on wage increase in the 1981 to 1984 CBA between petitioner
Company and NFL provided for yearly wage increases. Logically, these provisions ended in the year
1984 — the last year that the economic provisions of the CBA were, pursuant to contract and law,
effective. Petitioner claims that there is no contractual basis for the grant of CBA benefits such as
wage increases in 1985 and subsequent years, since the CBA stipulates only the increases for the
years 1981 to 1984.

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

Finally, petitioner Company claims that it was never given the opportunity to submit a counter-
Labor II – 1
computation of the benefits supposedly due the private respondents. Instead, the NLRC allegedly
relied on the self-serving computations of private respondents.

Petitioner’s contentions are untenable.

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

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

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

ARTICLE 253. Duty to bargain collectively when there exists a collective bargaining agreement. —
When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its lifetime. However, either party
can serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its
expiration date. It shall be the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement during the 60-day period and/or
until a new agreement is reached by the parties.(Emphasis supplied.)

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

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

In a recent case, the Court had occasion to rule that Articles 253 and 253-A 17 mandate the parties
to keep the status quo and to continue in full force and effect the terms and conditions of the existing
agreement during the 60-day period prior to the expiration of the old CBA and/or until a new
Labor II – 1
agreement is reached by the parties. Consequently, the automatic renewal clause provided for by the
law, which is deemed incorporated in all CBA’s, provides the reason why the new CBA can only be
given a prospective effect. 18

In the case of Lopez Sugar Corporation v. Federation of Free Workers, Et Al., 19 this Court reiterated
the rule that although a CBA has expired, it continues to have legal effects as between the parties
until a new CBA has been entered into. It is the duty of both parties to the CBA to keep the status
quo, and to continue in full force and effect the terms and conditions of the existing agreement
during the 60-day period and/or until a new agreement is reached by the parties. 20

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

HON. CHAIRMAN HERRERA: chanrob1es virtual 1aw library

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

HON. CHAIRMAN VELOSO: chanrob1es virtual 1aw library

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

x          x           x

HON. CHAIRMAN VELOSO: chanrob1es virtual 1aw library

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

x       x       x. 21

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

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

We do not agree. In a long line of cases, this Court has held that when a collective bargaining
contract is entered into by the union representing the employees and the employer, even the non-
member employees are entitled to the benefits of the contract. To accord its benefits only to
members of the union without any valid reason would constitute undue discrimination against
Labor II – 1
nonmembers. 22 It is even conceded, that a laborer can claim benefits from a CBA entered into
between the company and the union of which he is a member at the time of the conclusion of the
agreement, after he has resigned from said union. 23

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

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

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

Labor II – 1
 10.) [G.R. No. 111809. May 5, 1997.]

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

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

Froilan M . Bacungan & Associates for Petitioner.

Seno, Mendoza and Associates Law Offices for Private Respondent.

SYLLABUS

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

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

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

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

FUTURE MANDATED INCREASES IS THE EXCEPTION RATHER THAN THE RULE; THE GENERAL RULE
IS THAT SUCH INCREASES ARE OVER AND ABOVE ANY INCREASES THAT MAY BE GRANTED BY LAW
OR WAGE ORDER. — With respect to the issue of the creditability of the fourth and fifth year wage
increases, the Court takes cognizance of the fact that the question was raised by the Company only
Labor II – 1
when the six-month period was almost over and all that was left to be done by the parties was to
sign their agreement. Before that, the Company did not qualify its position. It should have known
that crediting of wage increases in the CBA as compliance with future mandated increases is the
exception rather than the rule. For the general rule is that such increases are over and above any
increase that may be granted by law or wage order. As held in Meycauayan College v. Drilon:
Increments to the laborers’ financial gratification, be they in the form of salary increases or changes
in the salary scale are aimed at one thing — improvement of the economic predicament of the
laborers. As such they should be viewed in the light of the State’s avowed policy to protect labor.
Thus, having entered into an agreement with its employees, an employer may not be allowed to
renege on its obligation under a collective bargaining agreement should, at the same time, the law
grant the employees the same or better terms and conditions of employment. Employee benefits
derived from law are exclusive of benefits arrived at through negotiation and agreement unless
otherwise provided by the agreement itself or by law.

DECISION

MENDOZA, J.:

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

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

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

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

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

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

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

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

b. Vacation and Sick Leaves (Article VII, Section 1(c), CBA) — 1,100 hours of aggregate service
instead of the existing 1,500 hours within a year to be entitled to leave benefits but subject to
reversion to the previous CBA if majority of the gangs average eight (8) vessels a month;
Labor II – 1
c. Hospitalization (Article VIII, Section 1, CBA) — Maximum aggregate of 1,100 hours instead of the
1,500 hours and up to be entitled to the benefit of P2,500.00 with the lower brackets adjusted
accordingly but subject to reversion to the previous CBA if majority of the gangs average eight (8)
vessels a month;

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

e. Signing bonus; and

f. Seniority.

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

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

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

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

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

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

The petitioner contends that respondent erred in making the fourth year wage increase
retroactive to August 1, 1992. It denies the power of the Secretary of Labor to decree
retroaction of the wage increases, as the respondent herself had stated in her order
subject of this petition, that it had been more than six (6) months since the expiration of
the third anniversary of the CBA and, therefore, the automatic renewal clause of Art. 253-A
of the Labor Code had no application. Although petitioner originally opposed giving retroactive
effect to their agreement, it subsequently modified its stand and agreed that the fourth year wage
increase and the other provisions of the CBA be made retroactive to the date the Secretary of Labor
Labor II – 1
assumed jurisdiction of the dispute on March 10, 1993.

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

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

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

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

As already stated, on November 12, 1992, the Union sent the Company a notice of deadlock in view
of their inability to reconcile their positions on the main issues, 3 particularly on wages. The Union
filed a notice of strike. However, on December 18, 1992, in a conference called by the NCMB, the
Union and the Company agreed on a number of provisions of the CBA, including the provision on
wage increase, 4 leaving only the issue of retirement to be threshed out. In time, this, too, was
settled, so that in his record of the January 14, 1993 conference, the Med-Arbiter noted that "the
issues raised by the notice of strike had been settled and said notice is thus terminated." It would
therefore seem that at that point, there was already a meeting of the minds of the parties, which was
before the February 1993 end of the six-month period provided in Art. 253-A.

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

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

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

The Secretary of Labor found that "as early as January 14, 1993, well within the six (6) month period
provided by law, the Company and the Union have perfected their agreement." 7 The claim of
Labor II – 1
petitioner to the contrary notwithstanding, this is a finding of an administrative agency which, in the
absence of evidence to the contrary, must be affirmed.

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

The services being provided by the Company evidently reflect their indispensability to the normal
operations of the Davao City Pier where millions of crates and boxes of goods are loaded and
unloaded monthly. The current disruption, therefore, of the Company’s services, if allowed to
continue, will cause serious prejudice and damages to the agricultural exporters, the cargo handlers,
the vessel owners, the foreign buyers of agricultural products and the entire business sector in the
area. These considerations and the dispute’s implications on the national economy warrant the
intervention by this Office to exercise its power under Article 263(g) of the Labor Code, as amended.

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

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

This case is controlled by the ruling in that case.

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

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

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

Labor II – 1
WHEREFORE, the instant petition is hereby DISMISSED for lack of merit. cha

Labor II – 1
 11.) G.R. No. 113856. September 7, 1998

SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED WORKERS OF THE

PHILIPPINES (SMTFM-UWP), its officers and members, Petitioners, v. NATIONAL LABOR
RELATIONS COMMISSION, HON. JOSE G. DE VERA and TOP FORM MANUFACTURING PHIL.,
INC., Respondents.

DECISION

ROMERO, J.:

The issue in this petition for certiorari is whether or not an employer committed an unfair labor
practice by bargaining in bad faith and discriminating against its employees. The charge arose from
the employers refusal to grant across-the-board increases to its employees in implementing Wage
Orders Nos. 01 and 02 of the Regional Tripartite Wages and Productivity Board of the National Capital
Region (RTWPB-NCR). Such refusal was aggravated by the fact that prior to the issuance of said
wage orders, the employer allegedly promised at the collective bargaining conferences to implement
any government-mandated wage increases on an across-the-board basis.

Petitioner Samahang Manggagawa sa Top Form Manufacturing United Workers of the Philippines
(SMTFM) was the certified collective bargaining representative of all regular rank and file employees
of private respondent Top Form Manufacturing Philippines, Inc. At the collective bargaining
negotiation held at the Milky Way Restaurant in Makati, Metro Manila on February 27, 1990, the
parties agreed to discuss unresolved economic issues. According to the minutes of the meeting,
Article VII of the collective bargaining agreement was discussed. The following appear in said
Minutes:

ARTICLE VII. Wages

Section 1. Defer

Section 2. Status quo

Section 3. Union proposed that any future wage increase given by the government should be
implemented by the company across-the-board or non-conditional.

Management requested the union to retain this provision since their sincerity was already proven
when the P25.00 wage increase was granted across-the-board. The union acknowledges
managements sincerity but they are worried that in case there is a new set of management, they can
just show their CBA. The union decided to defer this provision. 1
cräläwvirtualibräry

In their joint affidavit dated January 30, 1992,2 union members Salve L. Barnes, Eulisa Mendoza,
Lourdes Barbero and Concesa Ibaez affirmed that at the subsequent collective bargaining
negotiations, the union insisted on the incorporation in the collective bargaining agreement (CBA) of
the union proposal on automatic across-the-board wage increase. They added that:

11. On the strength of the representation of the negotiating panel of the company and the above
undertaking/promise made by its negotiating panel, our union agreed to drop said proposal relying
on the undertakings made by the officials of the company who negotiated with us, namely, Mr.
William Reynolds, Mr. Samuel Wong and Mrs. Remedios Felizardo. Also, in the past years, the
company has granted to us government mandated wage increases on across-the-board basis.

Labor II – 1
On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an increase of P17.00 per
day in the salary of workers. This was followed by Wage Order No. 02 dated December 20, 1990
providing for a P12.00 daily increase in salary.

As expected, the union requested the implementation of said wage orders. However, they demanded
that the increase be on an across-the-board basis. Private respondent refused to accede to that
demand. Instead, it implemented a scheme of increases purportedly to avoid wage distortion. Thus,
private respondent granted the P17.00 increase under Wage Order No. 01 to workers/employees
receiving salary of P125.00 per day and below. The P12.00 increase mandated by Wage Order No. 02
was granted to those receiving the salary of P140.00 per day and below. For employees receiving
salary higher than P125.00 or P140.00 per day, private respondent granted an escalated increase
ranging from P6.99 to P14.30 and from P6.00 to P10.00, respectively. 3 cräläwvirtualibräry

On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter
demanding that it should fulfill its pledge of sincerity to the union by granting an across-the-board
wage increases (sic) to all employees under the wage orders. The union reiterated that it had agreed
to retain the old provision of CBA on the strength of private respondents promise and assurance of
an across-the-board salary increase should the government mandate salary increases. 4 Several
conferences between the parties notwithstanding, private respondent adamantly maintained its
position on the salary increases it had granted that were purportedly designed to avoid wage
distortion.

Consequently, the union filed a complaint with the NCR NLRC alleging that private respondents act of
reneging on its undertaking/promise clearly constitutes an act of unfair labor practice through
bargaining in bad faith. It charged private respondent with acts of unfair labor practices or violation
of Article 247 of the Labor Code, as amended, specifically bargaining in bad faith, and prayed that it
be awarded actual, moral and exemplary damages. 5 In its position paper, the union added that it was
charging private respondent with violation of Article 100 of the Labor Code. 6 cräläwvirtualibräry

Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01 and 02,
it had avoided the existence of a wage distortion that would arise from such implementation. It
emphasized that only after a reasonable length of time from the implementation of the wage orders
that the union surprisingly raised the question that the company should have implemented said wage
orders on an across-the-board basis. It asserted that there was no agreement to the effect that
future wage increases mandated by the government should be implemented on an across-the-board
basis. Otherwise, that agreement would have been incorporated and expressly stipulated in the CBA.
It quoted the provision of the CBA that reflects the parties intention to fully set forth therein all their
agreements that had been arrived at after negotiations that gave the parties unlimited right and
opportunity to make demands and proposals with respect to any subject or matter not removed by
law from the area of collective bargaining. The same CBA provided that during its effectivity, the
parties each voluntarily and unqualifiedly waives the right, and each agrees that the other shall not
be obligated, to bargain collectively, with respect to any subject or matter not specifically referred to
or covered by this Agreement, even though such subject or matter may not have been within the
knowledge or contemplation of either or both of the parties at the time they negotiated or signed this
Agreement.7 cräläwvirtualibräry

On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the complaint for
lack of merit.8 He considered two main issues in the case: (a) whether or not respondents are guilty
of unfair labor practice, and (b) whether or not the respondents are liable to implement Wage Orders
Nos. 01 and 02 on an across-the-board basis. Finding no basis to rule in the affirmative on both
issues, he explained as follows:

The charge of bargaining in bad faith that the complainant union attributes to the respondents is
bereft of any certitude inasmuch as based on the complainant unions own admission, the latter

Labor II – 1
vacillated on its own proposal to adopt an across-the-board stand or future wage increases. In fact,
the union acknowledges the managements sincerity when the latter allegedly implemented Republic
Act 6727 on an across-the-board basis. That such union proposal was not adopted in the existing
CBA was due to the fact that it was the union itself which decided for its deferment. It is, therefore,
misleading to claim that the management undertook/promised to implement future wage increases
on an across-the-board basis when as the evidence shows it was the union who asked for the
deferment of its own proposal to that effect.

The alleged discrimination in the implementation of the subject wage orders does not inspire belief at
all where the wage orders themselves do not allow the grant of wage increases on an across-the-
board basis. That there were employees who were granted the full extent of the increase authorized
and some others who received less and still others who did not receive any increase at all, would not
ripen into what the complainants termed as discrimination. That the implementation of the subject
wage orders resulted into an uneven implementation of wage increases is justified under the law to
prevent any wage distortion. What the respondents did under the circumstances in order to deter an
eventual wage distortion without any arbitral proceedings is certainly commendable.

The alleged violation of Article 100 of the Labor Code, as amended, as well as Article XVII, Section 7
of the existing CBA as herein earlier quoted is likewise found by this Branch to have no basis in fact
and in law. No benefits or privileges previously enjoyed by the employees were withdrawn as a result
of the implementation of the subject orders. Likewise, the alleged company practice of implementing
wage increases declared by the government on an across-the-board basis has not been duly
established by the complainants evidence. The complainants asserted that the company implemented
Republic Act No. 6727 which granted a wage increase of P25.00 effective July 1, 1989 on an across-
the-board basis. Granting that the same is true, such isolated single act that respondents adopted
would definitely not ripen into a company practice. It has been said that `a sparrow or two returning
to Capistrano does not a summer make.

Finally, on the second issue of whether or not the employees of the respondents are entitled to an
across-the-board wage increase pursuant to Wage Orders Nos. 01 and 02, in the face of the above
discussion as well as our finding that the respondents correctly applied the law on wage increases,
this Branch rules in the negative.

Likewise, for want of factual basis and under the circumstances where our findings above are adverse
to the complainants, their prayer for moral and exemplary damages and attorneys fees may not be
granted.

Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed Resolution of
April 29, 19939 dismissing the appeal for lack of merit. Still dissatisfied, petitioner sought
reconsideration which, however, was denied by the NLRC in the Resolution dated January 17, 1994.
Hence, the instant petition for certiorari contending that:

-A-

THE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING THE PRIVATE

RESPONDENTS GUILTY OF ACTS OF UNFAIR LABOR PRACTICES WHEN, OBVIOUSLY,
THE LATTER HAS BARGAINED IN BAD FAITH WITH THE UNION AND HAS VIOLATED
THE CBA WHICH IT EXECUTED WITH THE HEREIN PETITIONER UNION.

-B-

THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT DECLARING THE PRIVATE

RESPONDENTS GUILTY OF ACTS OF DISCRIMINATION IN THE IMPLEMENTATION OF
NCR WAGE ORDER NOS. 01 AND 02.
Labor II – 1
 -C-

THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING THE PRIVATE

RESPONDENTS GUILTY OF HAVING VIOLATED SECTION 4, ARTICLE XVII OF THE
EXISTING CBA.

-D-

THE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING THE PRIVATE

RESPONDENTS GUILTY OF HAVING VIOLATED ARTICLE 100 OF THE LABOR CODE OF
THE PHILIPPINES, AS AMENDED.

-E-

ASSUMING, WITHOUT ADMITTING THAT THE PUBLIC RESPONDENTS HAVE CORRECTLY

RULED THAT THE PRIVATE RESPONDENTS ARE GUILTY OF ACTS OF UNFAIR LABOR
PRACTICES, THEY COMMITTED SERIOUS ERROR IN NOT FINDING THAT THERE IS A
SIGNIFICANT DISTORTION IN THE WAGE STRUCTURE OF THE RESPONDENT COMPANY.

-F-

THE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE PETITIONERS HEREIN

ACTUAL, MORAL, AND EXEMPLARY DAMAGES AND ATTORNEYS FEES.

As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit: (a) whether or
not private respondent committed an unfair labor practice in its refusal to grant across-the-board
wage increases in implementing Wage Orders Nos. 01 and 02, and (b) whether or not there was a
significant wage distortion of the wage structure in private respondent as a result of the manner by
which said wage orders were implemented.

With respect to the first issue, petitioner union anchors its arguments on the alleged commitment of
private respondent to grant an automatic across-the-board wage increase in the event that a
statutory or legislated wage increase is promulgated. It cites as basis therefor, the aforequoted
portion of the Minutes of the collective bargaining negotiation on February 27, 1990 regarding wages,
arguing additionally that said Minutes forms part of the entire agreement between the parties.

The basic premise of this argument is definitely untenable. To start with, if there was indeed a
promise or undertaking on the part of private respondent to obligate itself to grant an automatic
across-the-board wage increase, petitioner union should have requested or demanded that such
promise or undertaking be incorporated in the CBA. After all, petitioner union has the means under
the law to compel private respondent to incorporate this specific economic proposal in the CBA. It
could have invoked Article 252 of the Labor Code defining duty to bargain, thus, the duty includes
executing a contract incorporating such agreements if requested by either party. Petitioner unions
assertion that it had insisted on the incorporation of the same proposal may have a factual basis
considering the allegations in the aforementioned joint affidavit of its members. However, Article 252
also states that the duty to bargain does not compel any party to agree to a proposal or make any
concession. Thus, petitioner union may not validly claim that the proposal embodied in the Minutes of
the negotiation forms part of the CBA that it finally entered into with private respondent.

The CBA is the law between the contracting parties 10 the collective bargaining representative and the
employer-company. Compliance with a CBA is mandated by the expressed policy to give protection to
labor.11 In the same vein, CBA provisions should be construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose which it is intended to
Labor II – 1
serve."12 This is founded on the dictum that a CBA is not an ordinary contract but one impressed with
public interest.13 It goes without saying, however, that only provisions embodied in the CBA should
be so interpreted and complied with. Where a proposal raised by a contracting party does not find
print in the CBA,14 it is not a part thereof and the proponent has no claim whatsoever to its
implementation.

Hence, petitioner unions contention that the Minutes of the collective bargaining negotiation meeting
forms part of the entire agreement is pointless. The Minutes reflects the proceedings and discussions
undertaken in the process of bargaining for worker benefits in the same way that the minutes of
court proceedings show what transpired therein. 15 At the negotiations, it is but natural for both
management and labor to adopt positions or make demands and offer proposals and counter-
proposals. However, nothing is considered final until the parties have reached an agreement. In fact,
one of managements usual negotiation strategies is to x x x agree tentatively as you go along with
the understanding that nothing is binding until the entire agreement is reached. 16 If indeed private
respondent promised to continue with the practice of granting across-the-board salary increases
ordered by the government, such promise could only be demandable in law if incorporated in the
CBA.

Moreover, by making such promise, private respondent may not be considered in bad faith or at the
very least, resorting to the scheme of feigning to undertake the negotiation proceedings through
empty promises. As earlier stated, petitioner union had, under the law, the right and the opportunity
to insist on the foreseeable  fulfillment of the private respondents promise by demanding its
incorporation in the CBA. Because the proposal was never embodied in the CBA, the promise has
remained just that, a promise, the implementation of which cannot be validly demanded under the
law.

Petitioners reliance on this Courts pronouncements 17 in Kiok Loy v. NLRC18 is, therefore, misplaced. In
that case, the employer refused to bargain with the collective bargaining representative, ignoring all
notices for negotiations and requests for counter proposals that the union had to resort to conciliation
proceedings. In that case, the Court opined that (a) Companys refusal to make counter-proposal, if
considered in relation to the entire bargaining process, may indicate bad faith and this is specially
true where the Unions request for a counter-proposal is left unanswered. Considering the facts of
that case, the Court concluded that the company was unwilling to negotiate and reach an agreement
with the Union.19cräläwvirtualibräry

In the case at bench, however, petitioner union does not deny that discussion on its proposal that all
government-mandated salary increases should be on an across-the-board basis was deferred,
purportedly because it relied upon the undertaking of the negotiating panel of private
respondent.20 Neither does petitioner union deny the fact that there is no provision of the 1990 CBA
containing a stipulation that the company will grant across-the-board to its employees the mandated
wage increase. They simply assert that private respondent committed acts of unfair labor practices
by virtue of its contractual commitment made during the collective bargaining process.21 The mere
fact, however, that the proposal in question was not included in the CBA indicates that no contractual
commitment thereon was ever made by private respondent as no agreement had been arrived at by
the parties. Thus:

Obviously the purpose of collective bargaining is the reaching of an agreement resulting in a contract
binding on the parties; but the failure to reach an agreement after negotiations continued for a
reasonable period does not establish a lack of good faith. The statutes invite and contemplate a
collective bargaining contract, but they do not compel one. The duty to bargain does not include the
obligation to reach an agreement. x x x.22cräläwvirtualibräry

With the execution of the CBA, bad faith bargaining can no longer be imputed upon any of the parties
thereto. All provisions in the CBA are supposed to have been jointly and voluntarily incorporated

Labor II – 1
therein by the parties. This is not a case where private respondent exhibited an indifferent attitude
towards collective bargaining because the negotiations were not the unilateral activity of petitioner
union. The CBA is proof enough that private respondent exerted reasonable effort at good faith
bargaining.23 cräläwvirtualibräry

Indeed, the adamant insistence on a bargaining position to the point where the negotiations reach an
impasse does not establish bad faith. Neither can bad faith be inferred from a partys insistence on
the inclusion of a particular substantive provision unless it concerns trivial matters or is obviously
intolerable.24 cräläwvirtualibräry

The question as to what are mandatory and what are merely permissive subjects of collective
bargaining is of significance on the right of a party to insist on his position to the point of stalemate.
A party may refuse to enter into a collective bargaining contract unless it includes a desired provision
as to a matter which is a mandatory subject of collective bargaining; but a refusal to contract unless
the agreement covers a matter which is not a mandatory subject is in substance a refusal to bargain
about matters which are mandatory subjects of collective bargaining; and it is no answer to the
charge of refusal to bargain in good faith that the insistence on the disputed clause was not the sole
cause of the failure to agree or that agreement was not reached with respect to other disputed
clauses."25cräläwvirtualibräry

On account of the importance of the economic issue proposed by petitioner union, it could have
refused to bargain and to enter into a CBA with private respondent. On the other hand, private
respondents firm stand against the proposal did not mean that it was bargaining in bad faith. It had
the right to insist on (its) position to the point of stalemate. On the part of petitioner union, the
importance of its proposal dawned on it only after the wage orders were issued after the CBA had
been entered into. Indeed, from the facts of this case, the charge of bad faith bargaining on the part
of private respondent was nothing but a belated reaction to the implementation of the wage orders
that private respondent made in accordance with law. In other words, petitioner union harbored the
notion that its members and the other employees could have had a better deal in terms of wage
increases had it relentlessly pursued the incorporation in the CBA of its proposal. The inevitable
conclusion is that private respondent did not commit the unfair labor practices of bargaining in bad
faith and discriminating against its employees for implementing the wage orders pursuant to law.

The Court likewise finds unmeritorious petitioner unions contention that by its failure to grant across-
the-board wage increases, private respondent violated the provisions of Section 5, Article VII of the
existing CBA26 as well as Article 100 of the Labor Code. The CBA provision states:

Section 5. The COMPANY agrees to comply with all the applicable provisions of the Labor Code of the
Philippines, as amended, and all other laws, decrees, orders, instructions, jurisprudence, rules and
regulations affecting labor.

Article 100 of the Labor Code on prohibition against elimination or diminution of benefits provides
that (n)othing in this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code.

We agree with the Labor Arbiter and the NLRC that no benefits or privileges previously enjoyed by
petitioner union and the other employees were withdrawn as a result of the manner by which private
respondent implemented the wage orders. Granted that private respondent had granted an across-
the-board increase pursuant to Republic Act No. 6727, that single instance may not be considered an
established company practice. Petitioner unions argument in this regard is actually tied up with its
claim that the implementation of Wage Orders Nos. 01 and 02 by private respondent resulted in
wage distortion.

Labor II – 1
The issue of whether or not a wage distortion exists is a question of fact 27 that is within the
jurisdiction of the quasi-judicial tribunals below. Factual findings of administrative agencies are
accorded respect and even finality in this Court if they are supported by substantial evidence. 28 Thus,
in Metropolitan Bank and Trust Company, Inc. v. NLRC,  the Court said:

The issue of whether or not a wage distortion exists as a consequence of the grant of a wage
increase to certain employees, we agree, is, by and large, a question of fact the determination of
which is the statutory function of the NLRC. Judicial review of labor cases, we may add, does not go
beyond the evaluation of the sufficiency of the evidence upon which the labor officials findings rest.
As such, the factual findings of the NLRC are generally accorded not only respect but also finality
provided that its decisions are supported by substantial evidence and devoid of any taint of
unfairness or arbitrariness. When, however, the members of the same labor tribunal are not in
accord on those aspects of a case, as in this case, this Court is well cautioned not to be as so
conscious in passing upon the sufficiency of the evidence, let alone the conclusions derived
therefrom.29 cräläwvirtualibräry

Unlike in above-cited case where the Decision of the NLRC was not unanimous, the NLRC Decision in
this case which was penned by the dissenter in that case, Presiding Commissioner Edna Bonto-Perez,
unanimously ruled that no wage distortions marred private respondents implementation of the wage
orders. The NLRC said:

On the issue of wage distortion, we are satisfied that there was a meaningful implementation of
Wage Orders Nos. 01 and 02. This debunks the claim that there was wage distortion as could be
shown by the itemized wages implementation quoted above. It should be noted that this itemization
has not been successfully traversed by the appellants. x x x. 30cräläwvirtualibräry

The NLRC then quoted the labor arbiters ruling on wage distortion.

We find no reason to depart from the conclusions of both the labor arbiter and the NLRC. It
is apropos to note, moreover, that petitioners contention on the issue of wage distortion and the
resulting allegation of discrimination against the private respondents employees are anchored on its
dubious position that private respondents promise to grant an across-the-board increase in
government-mandated salary benefits reflected in the Minutes of the negotiation is an enforceable
part of the CBA.

In the resolution of labor cases, this Court has always been guided by the State policy enshrined in
the Constitution that the rights of workers and the promotion of their welfare shall be
protected.31 The Court is likewise guided by the goal of attaining industrial peace by the proper
application of the law. It cannot favor one party, be it labor or management, in arriving at a just
solution to a controversy if the party has no valid support to its claims. It is not within this Courts
power to rule beyond the ambit of the law.

WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the questioned

Resolutions of the NLRC AFFIRMED. No costs.

Labor II – 1
 12.) 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, PALs financial situation went from bad to worse. Faced with bankruptcy, PAL adopted a
rehabilitation plan and downsized its labor force by more than one-third.

On July 22, 1998, PALEA went on strike to protest the retrenchment measures adopted by the airline,
which affected 1,899 union members. The strike ended four days later, when PAL and PALEA agreed
to a more systematic reduction in PALs work force and the payment of separation benefits to all
retrenched employees.

On August 28, 1998, then President Joseph E. Estrada issued Administrative Order No. 16 creating
an Inter-Agency Task Force (Task Force) to address the problems of the ailing flag carrier. The Task
Force was composed of the Departments of Finance, Labor and Employment, Foreign Affairs,
Transportation and Communication, and Tourism, together with the Securities and Exchange
Commission (SEC). Public respondent Edgardo Espiritu, then the Secretary of Finance, was
designated chairman of the Task Force. It was empowered to summon all parties concerned for
conciliation, mediation (for) the purpose of arriving at a total and complete solution of the problem.
[1 Conciliation meetings were then held between PAL management and the three unions representing
the airlines employees,[2 with the Task Force as mediator.

On September 4, 1998, PAL management submitted to the Task Force an offer by private respondent
Lucio Tan, Chairman and Chief Executive Officer of PAL, of a plan to transfer shares of stock to its
employees. The pertinent portion of said plan reads:

1. From the issued shares of stock within the group of Mr. Lucio Tans holdings, the ownership of
60,000 fully paid shares of stock of Philippine Airlines with a par value of PHP5.00/share will be
transferred in favor of each employee of Philippine Airlines in the active payroll as of September 15,
1998. Should any share-owning employee leave PAL, he/she has the option to keep the shares or
sells (sic) his/her shares to his/her union or other employees currently employed by PAL.

Labor II – 1
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 cräläwvirtualibräry

On September 10, 1998, the Board of Directors of PALEA voted to accept Tans offer and requested
the Task Forces assistance in implementing the same. Union members, however, rejected Tans offer.
Under intense pressure from PALEA members, the unions directors subsequently resolved to reject
Tans offer.

On September 17, 1998, PAL informed the Task Force that it was shutting down its operations
effective September 23, 1998, preparatory to liquidating its assets and paying off its creditors. The
airline claimed that given its labor problems, rehabilitation was no longer feasible, and hence, the
airline had no alternative but to close shop.

On September 18, 1998, PALEA sought the intervention of the Office of the President in immediately
convening the parties, the PAL management, PALEA, ALPAP, and FASAP, including the SEC under the
direction of the Inter-Agency Task Force, to prevent the imminent closure of PAL. [4 cräläwvirtualibräry

On September 19, 1998, PALEA informed the Department of Labor and Employment (DOLE) that it
had no objection to a referendum on the Tans offer. 2,799 out of 6,738 PALEA members cast their
votes in the referendum under DOLE supervision held on September 21-22, 1998. Of the votes cast,
1,055 voted in favor of Tans offer while 1,371 rejected it.

On September 23, 1998, PAL ceased its operations and sent notices of termination to its employees.

Two days later, the PALEA board wrote President Estrada anew, seeking his intervention. PALEA
offered a 10-year moratorium on strikes and similar actions and a waiver of some of the economic
benefits in the existing CBA.[5 Tan, however, rejected this counter-offer.

On September 27, 1998, the PALEA board again wrote the President proposing the following terms
and conditions, subject to ratification by the general membership:

1. Each PAL employee shall be granted 60,000 shares of stock with a par value of P5.00, from Mr.
Lucio Tans shareholdings, with three (3) seats in the PAL Board and an additional seat from
government shares as indicated by His Excellency;

2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in committees or

bodies which deal with matters affecting terms and conditions of employment;

3. To enhance and strengthen labor-management relations, the existing Labor-Management

Coordinating Council shall be reorganized and revitalized, with adequate representation from both
PAL management and PALEA;

4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the ratification by
the general membership, (to) the suspension of the PAL-PALEA CBA for a period of ten (10) years,
provided the following safeguards are in place:

a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the regular
rank-and-file ground employees of the Company;

Labor II – 1
 b. The union shop/maintenance of membership provision under the PAL-PALEA CBA shall be
respected.

c. No salary deduction, with full medical benefits.

5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by and
between PAL and PALEA, to those employees who may opt to retire or be separated from the
company.

6. PALEA members who have been retrenched but have not received separation benefits shall be
granted priority in the hiring/rehiring of employees.

7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code shall
apply.[6cräläwvirtualibräry

Among the signatories to the letter were herein petitioners Rivera, Ramiso, and Aranas, as officers
and/or members of the PALEA Board of Directors. PAL management accepted the PALEA proposal and
the necessary referendum was scheduled.

On October 2, 1998, 5,324 PALEA members cast their votes in a DOLE-supervised referendum. Of
the votes cast, 61% were in favor of accepting the PAL-PALEA agreement, while 34% rejected it.

On October 7, 1998, PAL resumed domestic operations. On the same date, seven officers and
members of PALEA filed this instant petition to annul the September 27, 1998 agreement entered
into between PAL and PALEA on the following grounds:

PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR

JURISDICTION IN ACTIVELY PURSUING THE CONCLUSION OF THE PAL-PALEA AGREEMENT AS THE
CONSTITUTIONAL RIGHTS TO SELF-ORGANIZATION AND COLLECTIVE BARGAINING, BEING
FOUNDED ON PUBLIC POLICY, MAY NOT BE WAIVED, NOR THE WAIVER, RATIFIED.

II

PUBLIC RESPONDENTS GRAVELY ABUSED THEIR DISCRETION AND EXCEEDED THEIR

JURISDICTION IN PRESIDING OVER THE CONCLUSION OF THE PAL-PALEA AGREEMENT UNDER
THREAT OF ABUSIVE EXERCISE OF PALS MANAGEMENT PREROGATIVE TO CLOSE BUSINESS USED
AS SUBTERFUGE FOR UNION-BUSTING.

The issues now for our resolution are:

(1) Is an original action for certiorari and prohibition the proper remedy to annul the PAL-PALEA
agreement of September 27, 1998;

(2) Is the PAL-PALEA agreement of September 27, 1998, stipulating the suspension of the PAL-PALEA
CBA unconstitutional and contrary to public policy?

Anent the first issue, petitioners aver that public respondents as functionaries of the Task Force,
gravely abused their discretion and exceeded their jurisdiction when they actively pursued and
presided over the PAL-PALEA agreement.

Labor II – 1
Respondents, in turn, argue that the public respondents merely served as conciliators or mediators,
consistent with the mandate of A.O. No. 16 and merely supervised the conduct of the October 3,
1998 referendum during which the PALEA members ratified the agreement. Thus, public respondents
did not perform any judicial and quasi-judicial act pertaining to jurisdiction. Furthermore,
respondents pray for the dismissal of the petition for violating the hierarchy of courts doctrine
enunciated in People v. Cuaresma[7and Enrile v. Salazar.[8 cräläwvirtualibräry

Petitioners allege grave abuse of discretion under Rule 65 of the 1997 Rules of Civil Procedure. The
essential requisites for a petition for certiorari under Rule 65 are: (1) the writ is directed against a
tribunal, a board, or an officer exercising judicial or quasi-judicial functions; (2) such tribunal, board,
or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting
to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy, and adequate
remedy in the ordinary course of law.[9 For writs of prohibition, the requisites are: (1) the impugned
act must be that of a tribunal, corporation, board, officer, or person, whether exercising judicial,
quasi-judicial or ministerial functions; and (2) there is no plain, speedy, and adequate remedy in the
ordinary course of law. [10 cräläwvirtualibräry

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 cräläwvirtualibräry

Nevertheless, considering the prayer of the parties principally we shall look into the substance of the
petition, in the higher interest of justice [13 and in view of the public interest involved, inasmuch as
what is at stake here is industrial peace in the nations premier airline and flag carrier, a national
concern.

On the second issue, petitioners contend that the controverted PAL-PALEA agreement is void because
it abrogated the right of workers to self-organization [14 and their right to collective bargaining.
[15 Petitioners claim that the agreement was not meant merely to suspend the existing PAL-PALEA
CBA, which expires on September 30, 2000, but also to foreclose any renegotiation or any possibility
to forge a new CBA for a decade or up to 2008. It violates the protection to labor policy [16 laid down
by the Constitution.

Article 253-A of the Labor Code reads:

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

that the parties may enter into shall, insofar as the representation aspect is concerned, be for a term
of five (5) years. No petition questioning the majority status of the incumbent bargaining agent shall

Labor II – 1
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 cräläwvirtualibräry

The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations
undertaken in the light of the severe financial situation faced by the employer, with the peculiar and
unique intention of not merely promoting industrial peace at PAL, but preventing the latters closure.
We find no conflict between said agreement and Article 253-A of the Labor Code. Article 253-A has a
two-fold purpose. One is to promote industrial stability and predictability. Inasmuch as the
agreement sought to promote industrial peace at PAL during its rehabilitation, said agreement
satisfies the first purpose of Article 253-A. The other is to assign specific timetables wherein
negotiations become a matter of right and requirement. Nothing in Article 253-A, prohibits the
parties from waiving or suspending the mandatory timetables and agreeing on the remedies to
enforce the same.

In the instant case, it was PALEA, as the exclusive bargaining agent of PALs ground employees, that
voluntarily entered into the CBA with PAL. It was also PALEA that voluntarily opted for the 10-year
suspension of the CBA. Either case was the unions exercise of its right to collective bargaining. The
right to free collective bargaining, after all, includes the right to suspend it.

The acts of public respondents in sanctioning the 10-year suspension of the PAL-PALEA CBA did not
contravene the protection to labor policy of the Constitution. The agreement afforded full protection
to labor; promoted the shared responsibility between workers and employers; and the
exercised voluntary modes in settling disputes, including conciliation to foster industrial peace." [21
cräläwvirtualibräry

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.

Labor II – 1
The questioned proviso of the agreement reads:

a. PAL shall continue recognizing PALEA as the duly certified-bargaining agent of the regular
rank-and-file ground employees of the Company;

Said proviso cannot be construed alone. In construing an instrument with several provisions, a

construction must be adopted as will give effect to all. Under Article 1374 of the Civil Code,
[22 contracts cannot be construed by parts, but clauses must be interpreted in relation to one another
to give effect to the whole. The legal effect of a contract is not determined alone by any particular
provision disconnected from all others, but from the whole read together. [23The aforesaid provision
must be read within the context of the next clause, which provides:

b. The union shop/maintenance of membership provision under the PAL-PALEA CBA shall be
respected.

The aforesaid provisions, taken together, clearly show the intent of the parties to maintain union
security during the period of the suspension of the CBA. Its objective is to assure the continued
existence of PALEA during the said period. We are unable to declare the objective of union security
an unfair labor practice. It is State policy to promote unionism to enable workers to negotiate with
management on an even playing field and with more persuasiveness than if they were to individually
and separately bargain with the employer. For this reason, the law has allowed stipulations for union
shop and closed shop as means of encouraging workers to join and support the union of their choice
in the protection of their rights and interests vis--vis the employer.[24
cräläwvirtualibräry

Petitioners contention that the agreement installs PALEA as a virtual company union is also
untenable. Under Article 248 (d) of the Labor Code, a company union exists when the employer acts
[t]o initiate, dominate, assist or otherwise interfere with the formation or administration of any labor
organization, including the giving of financial or other support to it or its organizers or supporters.
The case records are bare of any showing of such acts by PAL.

We also do not agree that the agreement violates the five-year representation limit mandated by
Article 253-A. Under said article, the representation limit for the exclusive bargaining agent applies
only when there is an extant CBA in full force and effect. In the instant case, the parties agreed to
suspend the CBA and put in abeyance the limit on the representation period.

In sum, we are of the view that the PAL-PALEA agreement dated September 27, 1998, is a valid
exercise of the freedom to contract. Under the principle of inviolability of contracts guaranteed by the
Constitution,[25 the contract must be upheld.

WHEREFORE, there being no grave abuse of discretion shown, the instant petition is

DISMISSED. No pronouncement as to costs.

Labor II – 1
13.) G.R. No. 155690               June 30, 2005

CAPITOL MEDICAL CENTER, INC., petitioner,

vs.
HON. CRESENCIANO B. TRAJANO, in his capacity as Secretary of the Department of Labor and
Employment, and CAPITOL MEDICAL CENTER EMPLOYEES ASSOCIATION-AFW, respondents.

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision1 dated September 20, 2001 and the Resolution2 dated October 18, 2002
rendered by the Court of Appeals in CA-G.R. SP No. 53479, entitled "Capitol Medical Center, Inc. vs. Hon.
Cresenciano B. Trajano, in his capacity as Secretary of the Department of Labor and Employment and Capitol
Medical Center Employees Association-AFW."

The factual antecedents as gleaned from the records are:

Capitol Medical Center, Inc., petitioner, is a hospital with address at Panay Avenue corner Scout Magbanua Street,
Quezon City. Upon the other hand, Capitol Medical Center Employees Association-Alliance of Filipino
Workers, respondent, is a duly registered labor union acting as the certified collective bargaining agent of the rank-
and-file employees of petitioner hospital.

On October 2, 1997, respondent union, through its president Jaime N. Ibabao, sent petitioner a letter requesting a
negotiation of their Collective Bargaining Agreement (CBA).

In its reply dated October 10, 1997, petitioner, challenging the union’s legitimacy, refused to bargain with
respondent. Subsequently or on October 15, 1997, petitioner filed with the Bureau of Labor Relations (BLR),
Department of Labor and Employment, a petition for cancellation of respondent’s certificate of registration, docketed
as NCR-OD-9710-006-IRD.3

For its part, on October 29, 1997, respondent filed with the National Conciliation and Mediation Board (NCMB),
National Capital Region, a notice of strike, docketed as NCMB-NCR-NS-10-453-97. Respondent alleged that
petitioner’s refusal to bargain constitutes unfair labor practice. Despite several conferences and efforts of the
designated conciliator-mediator, the parties failed to reach an amicable settlement.

On November 28, 1997, respondent staged a strike.

On December 4, 1997, former Labor Secretary Leonardo A. Quisumbing, now Associate Justice of this Court,
issued an Order assuming jurisdiction over the labor dispute and ordering all striking workers to return to work and
the management to resume normal operations, thus:

"WHEREFORE, this Office assumes jurisdiction over the labor disputes at Capitol Medical Center pursuant to Article
263 (g) of the Labor Code, as amended. Consequently, all striking workers are directed to return to work within
twenty-four (24) hours from the receipt of this Order and the management to resume normal operations and accept
back all striking workers under the same terms and conditions prevailing before the strike. Further, parties are
directed to cease and desist from committing any act that may exacerbate the situation.

Moreover, parties are hereby directed to submit within 10 days from receipt of this Order proposals and counter-
proposals leading to the conclusion of the collective bargaining agreement in compliance with aforementioned
Resolution of the Office as affirmed by the Supreme Court.

SO ORDERED."

Petitioner then filed a motion for reconsideration but was denied in an Order dated April 27, 1998.

Labor II – 1
On June 23, 1998, petitioner filed with this Court a petition for certiorari assailing the Labor Secretary’s Orders.
Pursuant to our ruling in St. Martin Funeral Home vs.The National Labor Relations Commission, et al.,4 we referred
the petition to the Court of Appeals for its appropriate action and disposition.

Meantime, on October 1, 1998, the Regional Director, in NCR-OD-9710-006-IRD, issued an Order denying the
petition for cancellation of respondent union’s certificate of registration. 5

On September 20, 2001, the Appellate Court rendered a Decision affirming the Orders of the Secretary of Labor.
The Court of Appeals held:

"Anent the first issue raised by the petitioner, We find the same untenable. The public respondent acted well within
his duty to order the petitioner hospital to bargain collectively, for it was the surest way to end the dispute. In LMG
Chemicals Corporation vs. Secretary of the Department of Labor and Employment, the Hon. Leonardo A.
Quisumbing and Chemical Worker’s Union (G.R. No. 127422, April 17, 2001), the Supreme Court made the
following pronouncement, to wit:

‘It is well settled in our jurisprudence that the authority of the Secretary of Labor to assume jurisdiction over a labor
dispute causing or likely to cause a strike or lockout in an industry indispensable to national interest includes and
extends to all questions and controversies arising therefrom. The power is plenary and discretionary in nature to
enable him to effectively and efficiently dispose of the primary dispute.

xxxxxx

Indeed, We find no grave abuse of discretion on the part of respondent Secretary of Labor whose power is plenary
and includes the resolution of all controversies arising from the labor dispute. In fact, he was merely following the
directive laid down by the Supreme Court (Decision dated February 4, 1997) in the case of Capitol Medical Center
Alliance of Concerned Employees-Unified Filipino Service Workers (CMC-ACE-UFSW) vs. Hon. Bienvenido E.
Laguesma, Undersecretary of the Department of Labor and Employment, Capitol Medical Center Employees
Association-Alliance of Filipino Workers and Capitol Medical Center Incorporated and Dra. Thelma Clemente,
President, ordering petitioner hospital to collectively bargain with the Capitol Medical Center Employees
Association-Alliance of Filipino Workers (private respondent herein) – the certified bargaining agent.

As earlier mentioned, the petition for cancellation was dismissed by the regional director in a decision dated
September 30, 1998. x x x.

xxxxxx

Said decision by the regional director was affirmed by the Director of the Bureau of Labor Relations in a resolution
dated December 29, 1998, dismissing the appeal of the petitioner hospital from the said DOLE-NCR’s decision.

Finally, the petition for certiorari (docketed as CA-G.R. SP No. 52736) entitled – Capitol Medical Center, Inc. vs.
Hon. Benedictor R. Bitonio, Jr., in his capacity as Director of the Bureau of Labor Relations, Department of Labor
and Employment; Hon. Maximo B. Lim in his capacity as Regional Director, National Capital Region, Department of
Labor and Employment and Capitol Medical Center Employees Association (CMCEA-AFW), was dismissed in a
decision dated January 11, 2001. The motion for reconsideration which was subsequently filed was denied on
March 23, 2001.

xxxxxx

In order to allow an employer to validly suspend the bargaining process, there must be a valid petition for
certification election. The mere filing of a petition does not ipso facto justify the suspension of negotiation by the
employer (Colegio de San Juan de Letran vs. Association of Employees and Faculty of Letran and Eleanor Ambas,
G.R. No. 141471, September 18, 2000). If pending a petition for certification, the collective bargaining is allowed by
the Supreme Court to proceed, with more reason should the collective bargaining (in this case) continue since the
High Court had recognized the respondent as the certified bargaining agent in spite of several petitions for
cancellation filed against it.
Labor II – 1
xxxxxx

Secondly, We are inclined to agree with the public respondent’s statement that ‘the primary assumption of
jurisdiction may be exercised by this Office even without the necessity of prior notice or hearing given to any of the
parties disputants.’ (page 56 of the Rollo).

xxxxxx

We are also not convinced by the arguments raised by the petitioner with respect to its third assigned error. This
Court fails to see any supervening event that would render the execution of the decision of public respondent
impossible. The petitioner asserts that the respondent union has lost its legitimacy, but at every turn it has been
ruled by the various labor administrative officials that the respondent union is legitimate. It has failed to convince the
labor administrative officials, We are likewise not persuaded. Unless and until the Certificate of Registration of the
union is cancelled, it (union) remains the certified bargaining agent and the Hospital has the duty to enter into a
collective bargaining agreement with it.

xxxxxx

WHEREFORE, premises considered, the instant petition is DENIED, hereby AFFIRMING the two assailed orders,
dated December 4, 1997 and April 27, 1998, of the public respondent in OS-AJ-0024-97 (NCMB-NCR-NS-10-453-
97).

SO ORDERED."

On October 18, 2002, the Court of Appeals issued a Resolution denying petitioner’s motion for reconsideration.

Hence, this petition for review on certiorari.

Petitioner contends that its petition for the cancellation of respondent union’s certificate of registration
involves a prejudicial question that should first be settled before the Secretary of Labor could order the
parties to bargain collectively.

We are not persuaded.

As aptly stated by the Solicitor General in his comment on the petition, the Secretary of Labor correctly ruled that the
pendency of a petition for cancellation of union registration does not preclude collective bargaining, thus:

"That there is a pending cancellation proceedings against the respondent Union is not a bar to set in motion the
mechanics of collective bargaining. If a certification election may still be ordered despite the pendency of a petition
to cancel the union’s registration certificate (National Union of Bank Employees vs. Minister of Labor, 110 SCRA
274), more so should the collective bargaining process continue despite its pendency. We must emphasize that the
majority status of the respondent Union is not affected by the pendency of the Petition for Cancellation pending
against it. Unless its certificate of registration and its status as the certified bargaining agent are revoked, the
Hospital is, by express provision of the law, duty bound to collectively bargain with the Union. Indeed, no less than
the Supreme Court already ordered the Hospital to collectively bargain with the Union when it affirmed the resolution
of this Office dated November 18, 1994 directing the management of the Hospital to negotiate a collective
bargaining agreement with the Union. That was the categorical directive of the High Court in its Resolution dated
February 4, 1997 in Capitol Medical Center Alliance of Concerned Employees-United Filipino Service Worker vs.
Hon. Bienvenido E. Laguesma, et al., G.R. No. L-118915."

Moreover, as mentioned earlier, during the pendency of this case before the Court of Appeals, the Regional
Director, in NCR-OD-9710-006-IRD, issued an Order on October 1, 1998 denying the petition for cancellation of
respondent’s certificate of registration. This Order became final and executory and recorded in the BLR’s Book of
Entries of Judgments on June 3, 1999.

Labor II – 1
Petitioner also maintains that the Secretary of Labor cannot exercise his powers under Article 263 (g) of the Labor
Code without observing the requirements of due process.

Article 263 (g) of the Labor Code, as amended, provides:

"ART. 263. Strikes, Picketing and Lockouts. –

xxxxxx

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry
indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the
dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified
in the assumption or certification order. If one has already taken place at the time of assumption or certification, all
striking or locked out employees shall immediately resume operations and readmit all workers under the same terms
and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission
may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such
orders as he may issue to enforce the same.

x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it
shall be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce
of medical and other health personnel, whose movement and services shall be unhampered and unrestricted, as
are necessary to insure the proper and adequate protection of the life and health of its patients, most especially
emergency cases, for the duration of the strike or lockout. In such cases, therefore, the Secretary of Labor and
Employment is mandated to immediately assume, within twenty-four (24) hours from knowledge of the
occurrence of such a strike or lockout, jurisdiction over the same or certify it to the Commission for
compulsory arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the Commission, under
pain of immediate disciplinary action, including dismissal or loss of employment status or payment by the locking-out
employer of backwages, damages and other affirmative relief, even criminal prosecution against either or both of
them.

The foregoing notwithstanding, the President of the Philippines shall not be precluded from determining the
industries that, in his opinion, are indispensable to the national interest, and from intervening at any time and
assuming jurisdiction over any such labor dispute in order to settle or terminate the same.

x x x x x x."

In Magnolia Poultry Employees Union vs. Sanchez,6 we held that the discretion to assume jurisdiction may be
exercised by the Secretary of Labor and Employment without the necessity of prior notice or hearing given to any of
the parties. The rationale for his primary assumption of jurisdiction can justifiably rest on his own consideration of
the exigency of the situation in relation to the national interests.

In sum, petitioner’s submissions are bereft of merit.

WHEREFORE, the petition is DENIED. The assailed Decision dated September 20, 2001 and the Resolution dated
October 18, 2002 of the Court of Appeals in CA-G.R. SP No. 53479 are AFFIRMED. Costs against petitioner.

Labor II – 1
 14.) [G.R. NO. 114974 : June 16, 2004]

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), Petitioner, v. The Honorable

MA. NIEVES R. CONFESOR, in her capacity as SECRETARY OF LABOR AND EMPLOYMENT;
and the STANDARD CHARTERED BANK, Respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for certiorari under Rule 65 of the Rules of Court filed by the Standard Chartered
Bank Employees Union, seeking the nullification of the October 29, 1993 Order 1 of then Secretary of
Labor and Employment Nieves R. Confesor and her resolutions dated December 16, 1993 and
February 10, 1994.

The Antecedents

Standard Chartered Bank (the Bank, for brevity) is a foreign banking corporation doing business in
the Philippines.The exclusive bargaining agent of the rank and file employees of the Bank is the
Standard Chartered Bank Employees Union (the Union, for brevity).

In August of 1990, the Bank and the Union signed a five-year collective bargaining agreement (CBA)
with a provision to renegotiate the terms thereof on the third year. Prior to the expiration of the
three-year period2 but within the sixty-day freedom period, the Union initiated the negotiations. On
February 18, 1993, the Union, through its President, Eddie L. Divinagracia, sent a letter 3 containing
its proposals4 covering political provisions5 and thirty-four (34) economic provisions.6 Included
therein was a list of the names of the members of the Unions negotiating panel. 7 cralawred

In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H. Harris, took
note of the Unions proposals.The Bank attached its counter-proposal to the non-economic provisions
proposed by the Union.8 The Bank posited that it would be in a better position to present its counter-
proposals on the economic items after the Union had presented its justifications for the economic
proposals.9 The Bank, likewise, listed the members of its negotiating panel. 10 The parties agreed to
set meetings to settle their differences on the proposed CBA.

Before the commencement of the negotiation, the Union, through Divinagracia, suggested to the
Banks Human Resource Manager and head of the negotiating panel, Cielito Diokno, that the bank
lawyers should be excluded from the negotiating team. The Bank acceded. 11 Meanwhile, Diokno
suggested to Divinagracia that Jose P. Umali, Jr., the President of the National Union of Bank
Employees (NUBE), the federation to which the Union was affiliated, be excluded from the Unions
negotiating panel.12 However, Umali was retained as a member thereof.

On March 12, 1993, the parties met and set the ground rules for the negotiation.Diokno suggested
that the negotiation be kept a family affair. The proposed non-economic provisions of the CBA were
discussed first.13 Even during the final reading of the non-economic provisions on May 4, 1993, there
were still provisions on which the Union and the Bank could not agree. Temporarily, the notation
DEFERRED was placed therein.Towards the end of the meeting, the Union manifested that the same
should be changed to DEADLOCKED to indicate that such items remained unresolved. Both parties
agreed to place the notation DEFERRED/DEADLOCKED. 14  cralawred

On May 18, 1993, the negotiation for economic provisions commenced. A presentation of the basis of
the Unions economic proposals was made.The next meeting, the Bank made a similar presentation.
Towards the end of the Banks presentation, Umali requested the Bank to validate the
Labor II – 1
Unions guestimates, especially the figures for the rank and file staff. 15 In the succeeding meetings,
Umali chided the Bank for the insufficiency of its counter-proposal on the provisions on salary
increase, group hospitalization, death assistance and dental benefits. He reminded the Bank, how the
Union got what it wanted in 1987, and stated that if need be, the Union would go through the same
route to get what it wanted.16 cralawred

Upon the Banks insistence, the parties agreed to tackle the economic package item by item.Upon the
Unions suggestion, the Bank indicated which provisions it would accept, reject, retain and agree to
discuss.17 The Bank suggested that the Union prioritize its economic proposals, considering that many
of such economic provisions remained unresolved.The Union, however, demanded that the Bank
make a revised itemized proposal.

In the succeeding meetings, the Union made the following proposals: chanroblesvirtua1awlibrary

Wage Increase:

1st Year Reduced from 45% to 40%

2nd Year -Retain at 20%

Total = 60%

Group Hospitalization Insurance:

Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness annually

Death Assistance:

For the employee -- Reduced from P50,000.00 to P45,000.00

For Immediate Family Member -- Reduced from P30,000.00 to P25,000.00

Dental and all others -- No change from the original demand. 18  cralawred

In the morning of the June 15, 1993 meeting, the Union suggested that if the Bank would not make
the necessary revisions on its counter-proposal, it would be best to seek a third party
assistance.19 After the break, the Bank presented its revised counter-proposal 20 as follows: chanroblesvirtua1awlibrary

Wage Increase : 1st Year from P1,000 to P1,050.00

2nd Year P800.00 no change

Group Hospitalization Insurance

From: P35,000.00 per illness

To: P35,000.00 per illness per year

Death Assistance For employee

From: P20,000.00

To: P25,000.00
Labor II – 1
Dental Retainer Original offer remains the same 21  cralawred

The Union, for its part, made the following counter-proposal: chanroblesvirtua1awlibrary

Wage Increase:1st Year - 40%

2nd Year - 19.5%

Group Hospitalization Insurance

From: P60,000.00 per year

To:P50,000.00 per year

Dental:

Temporary Filling/ P150.00

Tooth Extraction

Permanent Filling 200.00

Prophylaxis 250.00

Root Canal From P2,000 per tooth

To: 1,800.00 per tooth

Death Assistance:

For Employees: From P45,000.00 to P40,000.00

For Immediate Family Member: From P25,000.00 to P20,000.00.22  cralawred

The Unions original proposals, aside from the above-quoted, remained the same.

Another set of counter-offer followed: chanroblesvirtua1awlibrary

Management Union

Wage Increase

1st Year P1,050.00 40%

2nd Year -850.00 19.0%23  cralawred

Diokno stated that, in order for the Bank to make a better offer, the Union should clearly identify
what it wanted to be included in the total economic package.Umali replied that it was impossible to
do so because the Banks counter-proposal was unacceptable.He furthered asserted that it would
have been easier to bargain if the atmosphere was the same as before, where both panels trusted
each other.Diokno requested the Union panel to refrain from involving personalities and to instead
focus on the negotiations.24 He suggested that in order to break the impasse, the Union should
prioritize the items it wanted to iron out.Divinagracia stated that the Bank should make the first
Labor II – 1
move and make a list of items it wanted to beincluded in the economic package.Except for the
provisions on signing bonus and uniforms, the Union and the Bank failed to agree on the remaining
economic provisions of the CBA. The Union declared a deadlock 25 and filed a Notice of Strike before
the National Conciliation and Mediation Board (NCMB) on June 21, 1993, docketed as NCMB-NCR-NS-
06-380-93.26  cralawred

On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP) and Damages before
the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, docketed as
NLRC Case No. 00-06-04191-93 against the Union on June 28, 1993.The Bank alleged that the Union
violated its duty to bargain, as it did not bargain in good faith.It contended that the Union demanded
sky high economic demands, indicative of blue-sky bargaining.27 Further, the Union violated its no
strike- no lockout clause by filing a notice of strike before the NCMB.Considering that the filing of
notice of strike was an illegal act, the Union officers should be dismissed.Finally, the Bank alleged
that as a consequence of the illegal act, the Bank suffered nominal and actual damages and was
forced to litigate and hire the services of the lawyer. 28  cralawred

On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R. Confesor, pursuant to
Article 263(g) of the Labor Code, issued an Order assuming jurisdiction over the labor dispute at the
Bank.The complaint for ULP filed by the Bank before the NLRC was consolidated with the complaint
over which the SOLE assumed jurisdiction.After the parties submitted their respective position
papers, the SOLE issued an Order on October 29, 1993, the dispositive portion of which is herein
quoted: chanroblesvirtua1awlibrary

WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank Employees Union NUBE
are hereby ordered to execute a collective bargaining agreement incorporating the dispositions
contained herein.The CBA shall be retroactive to 01 April 1993 and shall remain effective for two
years thereafter, or until such time as a new CBA has superseded it.All provisions in the expired CBA
not expressly modified or not passed upon herein are deemed retained while all new provisions which
are being demanded by either party are deemed denied, but without prejudice to such agreements
as the parties may have arrived at in the meantime.

The Banks charge for unfair labor practice which it originally filed with the NLRC as NLRC-NCR Case
No. 00-06-04191-93 but which is deemed consolidated herein, is dismissed for lack of merit.On the
other hand, the Unions charge for unfair labor practice is similarly dismissed.

Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR Case No. 00-06-
04191-93 is pending for his guidance and appropriate action. 29  cralawred

The SOLEgave the following economic awards: chanroblesvirtua1awlibrary

1.Wage Increase: chanroblesvirtua1awlibrary

a) To be incorporated to present salary rates:

Fourth year : 7% of basic monthly salary

Fifth year: 5% of basic monthly salary based on the 4 th year adjusted salary

b) Additional fixed amount:

Fourth year :P600.00 per month

Fifth year:P400.00 per month

Labor II – 1
2.Group Insurance

a) Hospitalization : P45,000.00

b) Life: P130,000.00

c) Accident: P130,000.00

3.Medicine Allowance

Fourth year : P5,500.00

Fifth year: P6,000.00

4.Dental Benefits

Provision of dental retainer as proposed by the Bank, but without diminishing existing benefits

5.Optical Allowance

Fourth year:P2,000.00

Fifth year:P2,500.00

6.Death Assistance

a) Employee :P30,000.00

b) Immediate Family Member :P5,000.00

7.Emergency Leave Five (5) days for each contingency

8.Loans

a) Car Loan : P200,000.00

b) Housing Loan :It cannot be denied that the costs attendant to having ones own home have
tremendously gone up.The need, therefore, to improve on this benefit cannot be
overemphasized.Thus, the management is urged to increase the existing and allowable housing loan
that the Bank extends to its employees to an amount that will give meaning and substance to this
CBA benefit.30 cralawred

The SOLE dismissed the charges of ULP of both the Union and the Bank, explaining that both parties
failed to substantiate their claims.Citing National Labor Union v. Insular-Yebana Tobacco
Corporation,31 the SOLE stated that ULP charges would prosper only if shown to have directly
prejudiced the public interest.

Dissatisfied, the Union filed a motion for reconsideration with clarification, while the Bank filed a
motion for reconsideration.On December 16, 1993, the SOLE issued a Resolution denying the
motions.The Union filed a second motion for reconsideration, which was, likewise, denied on February
10, 1994.

Labor II – 1
On March 22, 1994, the Bank and the Union signed the CBA. 32 Immediately thereafter, the wage
increase was effected and the signing bonuses based on the increased wage were distributed to the
employees covered by the CBA.

The Present Petition

On April 28, 1994, the Union filed this petition for certiorari under Rule 65 of the Rules of Procedure
alleging as follows: chanroblesvirtua1awlibrary

A.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF JURISDICTION IN DISMISSING THE UNIONS CHARGE OF UNFAIR LABOR PRACTICE IN
VIEW OF THE CLEAR EVIDENCE OF RECORD AND ADMISSIONS PROVING THE UNFAIR LABOR
PRACTICES CHARGED.33  cralawred

B.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF JURISDICTION IN FAILING TO RULE ON OTHER UNFAIR LABOR PRACTICES
CHARGED.34  cralawred

C.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF JURISDICTION IN DISMISSING THE CHARGES OF UNFAIR LABOR PRACTICES ON THE
GROUND THAT NO PROOF OF INJURY TO THE PUBLIC INTEREST WAS PRESENTED. 35  cralawred

The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it found that the Bank did not commit unfair labor practice when it interfered with
the Unions choice of negotiator.It argued that, Dioknos suggestion that the negotiation be limited as
a family affair was tantamount to suggesting that Federation President Jose Umali, Jr. be excluded
from the Unions negotiating panel.It further argued that contrary to the ruling of the public
respondent, damage or injury to the public interest need not be present in order for unfair labor
practice to prosper.

The Union, likewise, pointed out that the public respondent failed to rule on the ULP charges arising
from the Banks surface bargaining.The Union contended that the Bank merely went through the
motions of collective bargaining without the intent to reach an agreement, and made bad faith
proposals when it announced that the parties should begin from a clean slate.It argued that the Bank
opened the political provisions up for grabs, which had the effect of diminishing or obliterating the
gains that the Union had made.

The Union also accused the Bank of refusing to disclose material and necessary data, even after a
request was made by the Union to validate its guestimates.

In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped,
considering that it signed the Collective Bargaining Agreement (CBA) on April 22, 1994.It asserted
that contrary to the Unions allegations, it was the Union that committed ULP when negotiator Jose
Umali, Jr. hurled invectives at the Banks head negotiator, Cielito Diokno, and demanded that she be
excluded from the Banks negotiating team.Moreover, the Union engaged in blue-sky bargaining and
isolated the no strike-no lockout clause of the existing CBA.

The Office of the Solicitor General, in representation of the public respondent, prayed that the
petition be dismissed.It asserted that the Union failed to prove its ULP charges and that the public
respondent did not commit any grave abuse of discretion in issuing the assailed order and
resolutions.

The Issues

Labor II – 1
The issues presented for resolution arethe following: (a) whether or not the Union was able to
substantiate its claim of unfair labor practice against the Bank arising from the latters alleged
interference with its choice of negotiator; surface bargaining; making bad faith non-economic
proposals; and refusal to furnish the Union with copies of the relevant data; (b) whether or not the
public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when she issued the assailed order and resolutions; and, (c) whether or not the petitioner is
estopped from filing the instant action.

The Courts Ruling

The petition is bereft of merit.

Interference under Article

248 (a) of the Labor Code

The petitioner asserts that the private respondent committed ULP, i.e., interference in the selection
of the Unions negotiating panel, when Cielito Diokno, the Banks Human Resource Manager,
suggested to the Unions President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the
NUBE, be excluded from the Unions negotiating panel.In support of its claim, Divinagracia executed
an affidavit, stating that prior to the commencement of the negotiation, Diokno approached him and
suggested the exclusion of Umali from the Unions negotiating panel, and that during the first
meeting, Diokno stated that the negotiation be kept a family affair.

Citing the cases of U.S. Postal Service36 and Harley Davidson Motor Co., Inc., AMF,37 the Union claims
that interference in the choice of the Unions bargaining panel is tantamount to ULP.

In the aforecited cases, the alleged ULP was based on the employers violation of Section 8(a) (1) and
(5) of the National Labor Relations Act (NLRA),38 which pertain to the interference, restraint or
coercion of the employer in the employees exercise of their rights to self-organization and to bargain
collectively through representatives of their own choosing; and the refusal of the employer to bargain
collectively with the employees representatives.In both cases, the National Labor Relations Board
held that upon the employers refusal to engage in negotiations with the Union for collective-
bargaining contract when the Union includes a person who is not an employee, or one who is a
member or an official of other labor organizations, such employer is engaged in unfair labor practice
under Section 8(a) (1) and (5) of the NLRA.

The Union further cited the case of Insular Life Assurance Co., Ltd. Employees Association NATU v.
Insular Life Assurance Co., Ltd.,39 wherein this Court said that the test of whether an employer has
interfered with and coerced employees in the exercise of their right to self-organization within the
meaning of subsection (a) (1) is whether the employer has engaged in conduct which it may
reasonably be said, tends to interfere with the free exercise of employees rights under Section 3 of
the Act.40 Further, it is not necessary that there be direct evidence that any employee was in fact
intimidated or coerced by statements of threats of the employer if there is a reasonable inference
that anti-union conduct of the employer does have an adverse effect on self-organization and
collective bargaining.41 
cralawred

Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF ASSOCIATION
AND PROTECTION OF THE RIGHT TO ORGANIZE to which the Philippines is a signatory, workers and
employers, without distinction whatsoever, shall have the right to establish and, subject only to the
rules of the organization concerned, to job organizations of their own choosing without previous
authorization.42 Workers and employers organizations shall have the right to draw up their
constitutions and rules, to elect their representatives in full freedom to organize their administration

Labor II – 1
and activities and to formulate their programs.43 Article 2 of ILO Convention No. 98 pertaining to the
Right to Organize and Collective Bargaining, provides: chanroblesvirtua1awlibrary

Article 2

1.Workers and employers organizations shall enjoy adequate protection against any acts or
interference by each other or each others agents or members in their establishment, functioning or
administration.

2.In particular, acts which are designed to promote the establishment of workers organizations under
the domination of employers or employers organizations or to support workers organizations by
financial or other means, with the object of placing such organizations under the control of employers
or employers organizations within the meaning of this Article.

The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article 243 thereof,
which provides: chanroblesvirtua1awlibrary

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 of collective
bargaining.Ambulant, intermittent and itinerant workers, self-employed people, rural workers and
those without any definite employers may form labor organizations for their mutual aid and
protection.

and Articles 248 and 249 respecting ULP of employers and labor organizations.

The said ILO Conventions were ratified on December 29, 1953. However, even as early as the 1935
Constitution,44 the State had already expressly bestowed protection to labor as part of the general
provisions. The 1973 Constitution, 45 on the other hand, declared it as a policy of the state to afford
protection to labor, specifying that the workers rights to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work would be assured. For its part, the 1987
Constitution, aside from making it a policy to protect the rights of workers and promote their
welfare,46 devotes an entire section, emphasizing its mandate to afford protection to labor, and
highlights the principle of shared responsibility between workers and employers to promote industrial
peace.47  cralawred

Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer interferes,
restrains or coerces employees in the exercise of their right to self-organization or the right to form
association.The right to self-organization necessarily includes the right to collective bargaining.

Parenthetically, if an employer interferes in the selection of its negotiators or coerces the Union to
exclude from its panel of negotiators a representative of the Union, and if it can be inferred that the
employer adopted the said act to yield adverse effects on the free exercise to right to self-
organization or on the right to collective bargaining of the employees, ULP under Article 248(a) in
connection with Article 243 of the Labor Code is committed.

In order to show that the employer committed ULP under the Labor Code, substantial evidence is
required to support the claim.Substantial evidence has been defined as such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. 48 In the case at bar, the Union
bases its claim of interference on the alleged suggestions of Diokno to exclude Umali from the Unions
negotiating panel.

Labor II – 1
The circumstances that occurred during the negotiation do not show that the suggestion made by
Diokno to Divinagracia is an anti-union conduct from which it can be inferred that the Bank
consciously adopted such act to yield adverse effects on the free exercise of the right to self-
organization and collective bargaining of the employees, especially considering that such was
undertaken previous to the commencement of the negotiation and simultaneously with Divinagracias
suggestion that the bank lawyers be excluded from its negotiating panel.

The records show that after the initiation of the collective bargaining process, with the inclusion of
Umali in the Unions negotiating panel, the negotiations pushed through. The complaint was made
only on August 16, 1993 after a deadlock was declared by the Union on June 15, 1993.

It is clear that such ULP charge was merely an afterthought.The accusation occurred after the
arguments and differences over the economic provisions became heated and the parties had become
frustrated.It happened after the parties started to involve personalities. As the public respondent
noted, passions may rise, and as a result, suggestions given under less adversarial situations may be
colored with unintended meanings.49 Such is what appears to have happened in this case.

The Duty to Bargain Collectively

If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the normal
relations and innocent communications, which are all part of the friendly relations between the Union
and Bank.

The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under
Article 248(g) when it engaged in surface bargaining. It alleged that the Bank just went
through the motions of bargaining without any intent of reaching an agreement, as evident in the
Banks counter-proposals. It explained that of the 34 economic provisions it made, the Bank only
made 6 economic counterproposals. Further, as borne by the minutes of the meetings, the Bank,
after indicating the economic provisions it had rejected, accepted, retained or were open for
discussion, refused to make a list of items it agreed to include in the economic package.

Surface bargaining is defined as going through the motions of negotiating without any legal intent to
reach an agreement.50 The resolution of surface bargaining allegations never presents an easy issue.
The determination of whether a party has engaged in unlawful surface bargaining is usually a difficult
one because it involves, at bottom, a question of the intent of the party in question, and usually such
intent can only be inferred from the totality of the challenged partys conduct both at and away from
the bargaining table.51 It involves the question of whether an employers conduct demonstrates an
unwillingness to bargain in good faith or is merely hard bargaining.52  cralawred

The minutes of meetings from March 12, 1993 to June 15, 1993 do not show that the Bank had any
intention of violating its duty to bargain with the Union. Records show that after the Union sent its
proposal to the Bank on February 17, 1993, the latter replied with a list of its counter-proposals on
February 24, 1993.Thereafter, meetings were set for the settlement of their differences.The minutes
of the meetings show that both the Bank and the Union exchanged economic and non-economic
proposals and counter-proposals.

The Union has not been able to show that the Bank had done acts, both at and away from the
bargaining table, which tend to show that it did not want to reach an agreement with the Union or to
settle the differences between it and the Union. Admittedly, the parties were not able to agree and
reached a deadlock. However, it is herein emphasized that the duty to bargain does not compel
either party to agree to a proposal or require the making of a concession. 53 Hence, the parties failure
to agree did not amount to ULP under Article 248(g) for violation of the duty to bargain.

Labor II – 1
We can hardly dispute this finding, for it finds support in the evidence.The inference that respondents
did not refuse to bargain collectively with the complaining union because they accepted some of the
demands while they refused the others even leaving open other demands for future discussion is
correct, especially so when those demands were discussed at a meeting called by respondents
themselves precisely in view of the letter sent by the union on April 29, 1960 54  cralawred

In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank made bad
faith provisions has no leg to stand on.The records show that the Banks counter-proposals on the
non-economic provisions or political provisions did not put up for grabs the entire work of the Union
and its predecessors.As can be gleaned from the Banks counter-proposal, there were many
provisions which it proposed to be retained.The revisions on the other provisions were made after the
parties had come to an agreement.Far from buttressing the Unions claim that the Bank made bad-
faith proposals on the non-economic provisions, all these, on the contrary, disprove such allegations.

We, likewise, find that the Union failed to substantiate its claim that the Bank refused to furnish the
information it needed.

While the refusal to furnish requested information is in itself an unfair labor practice, and also
supports the inference of surface bargaining, 55 in the case at bar, Umali, in a meeting dated May 18,
1993, requested the Bank to validate its guestimates on the data of the rank and file.However, Umali
failed to put his request in writing as provided for in Article 242(c) of the Labor Code:

Article 242.Rights of Legitimate Labor Organization

(c) To be furnished by the employer, upon written request, with the annual audited financial
statements, including the balance sheet and the profit and loss statement, within thirty (30) calendar
days from the date of receipt of the request, after the union has been duly recognized by the
employer or certified as the sole and exclusive bargaining representatives of the employees in the
bargaining unit, or within sixty (60) calendar days before the expiration of the existing collective
bargaining agreement, or during the collective negotiation; chanroblesvirtuallawlibrary

The Union, did not, as the Labor Code requires, send a written request for the issuance of a copy of
the data about the Banks rank and file employees.Moreover, as alleged by the Union, the fact that
the Bank made use of the aforesaid guestimates, amounts to a validation of the data it had used in
its presentation.

No Grave Abuse of Discretion

On the Part of the Public Respondent

The special civil action for certiorari may be availed of when the tribunal, board, or officer exercising
judicial or quasi-judicial functions has acted without or in excess of jurisdiction and there is no appeal
or any plain, speedy, and adequate remedy in the ordinary course of law for the purpose of annulling
the proceeding.56 Grave abuse of discretion implies such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility which must be so patent and gross as to
amount to an invasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at
all in contemplation of law.Mere abuse of discretion is not enough. 57  cralawred

While it is true that a showing of prejudice to public interest is not a requisite for ULP charges to
prosper, it cannot be said that the public respondent acted in capricious and whimsical exercise of
judgment, equivalent to lack of jurisdiction or excess thereof. Neither was it shown that the public
respondent exercised its power in an arbitrary and despotic manner by reason of passion or personal
hostility.
Labor II – 1
Estoppel not Applicable

In the Case at Bar

The respondent Bank argues that the petitioner is estopped from raising the issue of ULP when it
signed the new CBA.

Article 1431 of the Civil Code provides: chanroblesvirtua1awlibrary

Through estoppel an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon.

A person, who by his deed or conduct has induced another to act in a particular manner, is barred
from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or
injury to another.58 cralawred

In the case, however, the approval of the CBA and the release of signing bonus do not necessarily
mean that the Union waived its ULP claim against the Bank during the past negotiations.After all, the
conclusion of the CBA was included in the order of the SOLE, while the signing bonus was included in
the CBA itself.Moreover, the Union twice filed a motion for reconsideration respecting its ULP charges
against the Bank before the SOLE.

The Union Did Not Engage

In Blue-Sky Bargaining

We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky bargaining or
making exaggerated or unreasonable proposals.59 The Bank failed to show that the economic
demands made by the Union were exaggerated or unreasonable.The minutes of the meeting show
that the Union based its economic proposals on data of rank and file employees and the prevailing
economic benefits received by bank employees from other foreign banks doing business in the
Philippines and other branches of the Bank in the Asian region.

In sum, we find that the public respondent did not act with grave abuse of discretion amounting to
lack or excess of jurisdiction when it issued the questioned order and resolutions.While the approval
of the CBA and the release of the signing bonus did not estop the Union from pursuing its claims of
ULP against the Bank, we find that the latter did not engage in ULP.We, likewise, hold that the Union
is not guilty of ULP.

In light of the foregoing, the October 29, 1993 Order and December 16, 1993 and February 10,
1994 Resolutions of then Secretary of Labor Nieves R. Confesor are AFFIRMED.The Petition is hereby
DISMISSED.

Labor II – 1
 15.) [G.R. NO. 146728. February 11, 2004]

GENERAL MILLING CORPORATION, Petitioner, v.  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 decision 2 dated January 30, 1998 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-0112-94.

The antecedent facts are as follows: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

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 unions 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  ςrνll

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.

Labor II – 1
The union appealed to the NLRC.

On January 30, 1998, the NLRC set aside the labor arbiters 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 attorneys fees. 5  ςrνll

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 unions claim of discrimination, the NLRC found the claim unsupported by
substantial evidence.

On GMCs motion for reconsideration, the NLRC set aside its decision of January 30, 1998, through a
resolution dated October 6, 1998. It found GMCs doubts as to the status of the union justified and
the allegation of coercion exerted by GMC on the unions 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
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: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

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
attorneys fees which is hereby deleted, REINSTATED.6  ςrνll

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 Certiorarialleging 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

Labor II – 1
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  ςrνll

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.

On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No. 6715, states: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

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 unions 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: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

ART. 248. Unfair labor practices of employers . It shall be unlawful for an employer to commit
any of the following unfair labor practice: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

.. .

(g) To violate the duty to bargain collectively as prescribed by this Code; chanroblesvirtuallawlibrary

.. .

Article 252 of the Labor Code elucidates the meaning of the phrase duty to bargain collectively,
thus: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

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....

Labor II – 1
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.9 Good faith or bad faith is an inference to be drawn from the facts. 10 The effect of an
employers or a unions actions individually is not the test of good-faith bargaining, but the impact of
all such occasions or actions, considered as a whole.11  ςrνll

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: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

ART. 250. Procedure in collective bargaining. The following procedures shall be observed in

collective bargaining: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

(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) ςrαlαωlιbrαrÿ

GMCs 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 GMCs refusal to make a counter-proposal to the unions 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  ςrνll

Failing to comply with the mandatory obligation to submit a reply to the unions 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 GMCs desperate attempts to cast doubt on the legitimate status of the union. We agree with
the CAs 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? chanroblesvirtualawlibrary

The Code provides: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

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
Labor II – 1
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) ςrαlαωlιbrαrÿ

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 v. 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:
ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

petitioner Companys 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  ςrνll

Likewise, in Divine Word University of Tacloban v. 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: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

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  ςrνll

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
GMCs employees for the remaining two (2) years of the CBAs 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 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
Labor II – 1
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 courts 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.

Labor II – 1
16.1) 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   of the National Labor Relations Commission (NLRC) dated July 20, 1979
1

which found petitioner Sweden Ice Cream guilty of unfair labor practice for unjustified refusal to bargain, in violation
of par. (g) of Article 249  of the New Labor Code,   and declared the draft proposal of the Union for a collective
2 3

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   the Company with two copies of its
4

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.

Labor II – 1
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 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,  is one of the democratic
6

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.  The mechanics of collective bargaining is set in motion only when the
7

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.

Labor II – 1
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.   A Company's refusal to make counter proposal if considered in relation to the entire bargaining process,
8

may indicate bad faith and this is specially true where the Union's request for a counter proposal is left
unanswered.   Even during the period of compulsory arbitration before the NLRC, petitioner Company's approach
9

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   the rule had been laid down that "unfair labor practice is committed when it is shown that the
11

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   wherein it was further ruled that "while the law does not compel the parties to reach
12

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.  More so, as in the instant case, where
13

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.

Labor II – 1
16.) G.R. No. L-77282 May 5, 1989

ASSOCIATED LABOR UNIONS (ALU) petitioner,

vs.
HON. PURA FERRER-CALLEJA, as Director of the Bureau of Labor Relations, Ministry of Labor and
Employment; PHILIPPINE SOCIAL SECURITY LABOR UNION (PSSLU); SOUTHERN PHILIPPINES
FEDERATION OF LABOR (SPFL) and GAW TRADING, INC., respondents.

Romeo S. Occena, Leonard U. Sawal, Edgemelo C. Rosales and Ernesto Carreon for petitioner.

Henrick F. Gingoyon for respondent SPFL.

Wilfredo L. Orcullo for respondent Southern Philippines Federation of Labor.

Miguel A. Enrique, Jr. for respondent GAW Trading, Inc.

REGALADO, J.:

Petitioner Associated Labor Unions (ALU, for brevity) instituted this special civil action for certiorari and prohibition to
overturn the decision of the respondent direcstor   dated December 10, 1986, which ordered the holding of a
1

certification election among the rank-and-file workers of the private respondent GAW Trading, Inc. The averments in
the petition therefor, which succinctly but sufficiently detail the relevant factual antecedents of this proceedings,
justify their being quoted in full, thus:

1. The associated Labor Unions (ALU) thru its regional Vice-Presidents Teofanio C. Nuñez, in a
letter dated May 7, 1986 (ANNEX C) informed GAW Trading, Inc. that majority of the latter's
employees have authorized ALU to be their sole and exclusive bargaining representative, and
requested GAW Trading Inc., in the same Letter for a conference for the execution of an initial
Collective Bargaining Agreement (CBA);

2. GAW Trading Inc. received the Letter of ALU aforesaid on the same day of May 7, 1986 as
acknowledged thereunder and responded (sic) ALU in a letter dated May 12, 1986 (Annex D)
indicating its recognition of ALU as the sole and exclusive bargaining agent for the majority of its
employees and for which it set the time for conference and/or negotiation at 4:00 P.M. on May 12,
1986 at the Pillsbury Office, Aboitiz Building Juan Luna Street, Cebu City;

3. On the following day of May13, 1986, ALU in behalf of the majority of the employees of GAW
Trading Inc. signed and excuted the Collective Bargaining (ANNEX F) ...

4. On May 15, 1986, ALU in behalf of the majority of the employees of GAW Trading Inc. and GAW
Trading Inc. signed and executed the Collective Bargaining Agreements (ANNEX F) . . . .

5. In the meantime, at about 1:00 P.M. of May 9, 1986, the Southern Philippines Federation of Labor
(SPFL) together with Nagkahiusang Mamumuo sa GAW (NAMGAW) undertook a ... Strike ... after it
failed to get the management of GAW Trading Inc. to sit for a conference respecting its demands
presented at 11: A.M. on the same day in an effort to pressure GAW Trading Inc. to make a
turnabout of its standign recognition of ALU as the sole and exclusive bargaining representative of
its employees, as to which strike GAW Trading Inc. filed a petition for Restraining Order/Preliminary
Injunction, dfated June 1, 1986 (Annex H) and which strike Labor Arbiter Bonifacio B. Tumamak held
as illegal in a decision dated August 5, 1986 (ANNEX I);

6. On May 19, 1986, GAW Lumad Labor Union (GALLU-PSSLU) Federation ... filed a Certification
Election petition (ANNEX J), but as found by Med-Arbiter Candido M. Cumba in its (sic) Order dated
Labor II – 1
 Ju ne 11, 1986 (ANNEX K), without having complied (sic) the subscription requirement for which it
was merely considered an intervenor until compliance thereof in the other petition for direct
recogbnition as bargaining agent filed on MAy 28, 1986 by southern Philippines Federation of Labor
(SPFL) as found in the same order (ANNEX K);

7. Int he meantime, the Collective Bargaining Agreement executed by ALU and GAW Trading Inc.
(ANNEX F) was duly filed May 27, 1986 with the Ministry of Labor and Employment in Region VII,
Cebu city;

8. Nevertheless, Med-Arbiter Candido M. Cumba in his order of June 11, 1986 (Annex K) ruled for
the holding of a ceritfication election in all branches of GAW Trading Inc. in Cebu City, as to which
ALU filed a Motion for Reconsideration dated June 19, 1986 (ANNEX L) which was treated as an
appeal on that questioned Order for which reason the entire record of subject certification case was
forwarded for the Director, Bureau of LAbor Relations, Ministry of Labor and Employment, Manila
(ANNEX M);

9. Bureau of Labor Relations Director Cresencio B. Trajano, rendered a Decision on August 13,
1986 (Annex B) granting ALU's appeal (Motion for Reconsideration) and set aside the questioned
Med-Arbiter Order of June 11, 1986 (Annex K), on the ground that the CBA has been effective and
valid and the contract bar rule applicable;

10. But the same Decision of Director Crecensio B. Trajano was sought for reconsideratrion both by
Southern Philippines Federation of Labor (SPFL) on August 26, 1986 (ANNEX N), supplemented by
the 'SUBMISSION OD ADDITIONAL EVIDENCE' dated September 29, 1986 (ANNEX O), and the
Philppine Social Security Labor Union (PSSLU) on October 2, 1986 (ANNEX P), which were
opposed by both GAW Trading, Inc. on September 2, 1986 (ANNEX Q) and ALU on September 12,
1986 (ANNEX R);  2

The aforesaid decision of then Director Trajano was thereafter reversed by respondent director in her aforecited
decision which is now assailed in this action. A motion for reconsideration of ALU   appears to have been
3

disregarded, hence, its present resort grounded on grave abuse of discretion by public respondent.

Public respondent ordered the holding of a certification election ruling that the "contract bar rule" relied upon by her
predecessor does not apply in the present controversy. According to the decision of said respondent, the collective
bargaining agreement involved herein is defective because it "was not duly submitted in accordance with Section I,
Rule IX, Book V of the Implementing Rules of Batas Pambansa Blg. 130." It was further observed that "(t)here is no
proof tending to show that the CBA has been posted in at least two conspicuous places in the 1 establishment at
least five days before its ratification and that it has been ratified by the majority of the employees in the bargaining
unit."

We find no reversible error in the challenged decision of respondent director. A careful consideration of the facts
culled from the records of this case, especially the allegations of petitioner itself as hereinabove quoted, yields the
conclusion that the collective bargaining agreement in question is indeed defective hence unproductive of the legal
effects attributed to it by the former director in his decision which was subsequently and properly reversed.

We have previously held that the mechanics of collective bargaining are set in motion only when the
following jurisdictional preconditions are present, namely, (1) possession of the status of majority
representation by the employees' representative in accordance with any of the means of selection and/or
designation provided for by the Labor Code; (2) proof of majority representation; and (3) a demand to
bargain under Article 251, paragraph (a), of the New Labor Code.   In the present case, the standing of
4

petitioner as an exclusive bargaining representative is dubious, to say the least. It may be recalled that respondent
company, in a letter dated May 12, 1986 and addressed to petitioner, merely indicated that it was "not against the
desire of (its) workers" and required petitioner to present proof that it was supported by the majority thereof in a
meeting to be held on the same date.   The only express recognition of petitioner as said employees' bargaining
5

representative that We see in the records is in the collective bargaining agreement entered into two days
thereafter.   Evidently, there was precipitate haste on the part of respondent company in recognizing petitioner
6

union, which recognition appears to have been based on the self-serving claim of the latter that it had the support of
Labor II – 1
the majority of the employees in the bargaining unit. Furthermore, at the time of the supposed recognition, the
employer was obviously aware that there were other unions existing in the unit. As earlier stated, respondent
company's letter is dated May 12, 1986 while the two other unions, Southern Philippine Federation of Labor
(hereafter, SPFL and Philippine Social Security Labor Union (PSSLU, for short), went on strike earlier on May 9,
1986. The unusual promptitude in the recognition of petitioner union by respondent company as the exclusive
bargaining representative of the workers in GAW Trading, Inc. under the fluid and amorphous circumstances then
obtaining, was decidedly unwarranted and improvident.

It bears mention that even in cases where it was the then Minister of Labor himself who directly certified the union
as the bargaining representative, this Court voided such certification where there was a failure to properly determine
with legal certainty whether the union enjoyed a majority representation. In such a case, the holding of a certification
election at a proper time would not necessarily be a mere formality as there was a compelling reason not to directly
and unilaterally certify a union. 
7

An additional infirmity of the collective bargaining agreement involved was the failure to post the same in at least two
(2) conspicuous places in the establishment at least five days before its ratification.   Petitioners rationalization was
8

that "(b)ecause of the real existence of the illegal strike staged by SPFL in all the stores of GAW Trading, Inc. it had
become impossible to comply with the posting requirement in so far as the realization of tits purpose is concerned
as there were no impartial members of the unit who could be appraised of the CBA's contents. "   This justification is
9

puerile and unacceptable.

In the first place, the posting of copies of the collective bargaining agreement is the responsibility of the employer
which can easily comply with the requirement through a mere mechanical act. The fact that there were "no impartial
members of the unit" is immaterial. The purpose of the requirement is precisely to inform the employees in the
bargaining unit of the contents of said agreement so that they could intelligently decide whether to accept the same
or not. The assembly of the members of ALU wherein the agreement in question was allegedly explained does not
cure the defect. The contract is intended for all employees and not only for the members of the purpoted
representative alone. It may even be said the the need to inform the non-members of the terms thereof is more
exigent and compelling since, in all likehood, their contact with the persons who are supposed to represent them is
limited. Moreover, to repeat, there was an apparent and suspicious hurry in the formulation and finalization of said
collective bargaining accord. In the sforementioned letter where respondent company required petitioner union to
present proof of its support by the employees, the company already suggested that petitioner ALU at the same time
submit the proposals that it intended to embody in the projected agreement. This was on May 12, 1986, and
prompltly on thre following day the negoltiation panel; furnish respondent company final copies of the desired
agreement whcih, with equal dispatch, was signed on May 15, 1986.

Another potent reason for annulling the disputed collective bargaining is the finding of respondent director that one
hundred eighty-one( 181) of the two hundred eighty-one (281) workers who "ratified" the same now " strongly and
vehemently deny and/or repudiate the alleged negotiations and ratification of the CBA. "   Although petitioner claims
10

that only sev en (7) of the repudiating group of workers belong to the total number who allegedly ratified the
agreement, nevertheless such substantiated contention weighed against the factujal that the controverted contract
will not promote industrial stability . The Court has long since declared that:

... Basic to the contract bar rule is the proposition that the delay of the right to select represen tatives
can be justified only where stability is deemed paramount. Excepted from the contract which do not
foster industrial stability, such as contracts where the identity of the representative is in doubt. Any
stability derived from such contracts must be subordinated to the employees' freedom of choice
because it does nto establish the type of industrial peace contemplated by the law.  11

At this juncture, petitioner should be reminded that the technical rules of procedure do not strictly apply in the
adjudication of labor disputes.   Consequently, its objection that the evidence with respect to the aforesaid
12

repudiiation of the supposed collective bargaining agreement cannot be considered for the first time on appeal on
the Bureau of Labor Relations should be disregarded, especially considering the weighty significance thereof.

Both petitioner and private respondent GAW Trading, Inc. allege that the employees of the latter are now enjoying
the benefits of the collective bargaining agreement that both parties had forged. However, We cannot find sufficient
evidence of record to support this contention. The only evidence cited by petitioner is supposed payment of union
Labor II – 1
fees by said employees, a premise too tenuous to sustain the desired conclusion. Even the actual number of
workers in the respondent company is not clear from the records. Said private respondent claims that it is two
hundred eighty-one (281)  but petitioner suggests that it is more than that number. The said parties should be aware
13

that this Court is not an adjudicator of facts. Worse, to borrow a trite but apt phrase, they would heap the Ossa of
confusion upon the Pelion of uncertainty and still expect a definitive ruling on the matter thus confounded.

Additionally, the inapplicability of the contract bar rule is further underscored by the fact that when the disputed
agreement was filed before the Labor Regional Office on May 27, 1986, a petition for certification election had
already been filed on May 19, 1986. Although the petition was not supported by the signatures of thirty percent
(30%) of the workers in the bargaining unit, the same was enough to initiate said certification election.

WHEREFORE, the order of the public respondent for the conduct of a certification election among the rank-and-file
workers of respondent GAW Trading Inc. is AFFIRMED. The temporary restraining order issued in this case
pursuant to the Resolution of March 25, 1987 is hereby lifted.

Labor II – 1
17.) G.R. Nos. 158930-31             March 3, 2008

UNION OF FILIPRO EMPLOYEES - DRUG, FOOD AND ALLIED INDUSTRIES UNIONS - KILUSANG MAYO
UNO (UFE-DFA-KMU), petitioner,
vs.
NESTLÉ PHILIPPINES, INCORPORATED, respondent.

x------------------------------------------x

G.R. Nos. 158944-45             March 3, 2008

NESTLÉ PHILIPPINES, INCORPORATED, petitioner,

vs.
UNION OF FILIPRO EMPLOYEES - DRUG, FOOD AND ALLIED INDUSTRIES UNIONS - KILUSANG MAYO
UNO (UFE-DFA-KMU), respondent.

RESOLUTION

CHICO-NAZARIO, J.:

On 22 August 2006, this Court promulgated its Decision1 in the above-entitled cases, the dispositive part of which
reads –

WHEREFORE, in view of the foregoing, the Petition in G.R. No. 158930-31 seeking that Nestlé be declared
to have committed unfair labor practice in allegedly setting a precondition to bargaining is DENIED. The
Petition in G.R. No. 158944-45, however, is PARTLY GRANTED in that we REVERSE the ruling of the
Court of Appeals in CA G.R. SP No. 69805 in so far as it ruled that the Secretary of the DOLE gravely
abused her discretion in failing to confine her assumption of jurisdiction power over the ground rules of the
CBA negotiations; but the ruling of the Court of Appeals on the inclusion of the Retirement Plan as a valid
issue in the collective bargaining negotiations between UFE-DFA-KMU and Nestlé is AFFIRMED. The
parties are directed to resume negotiations respecting the Retirement Plan and to take action consistent with
the discussions hereinabove set forth. No costs.

Subsequent thereto, Nestlé Philippines, Incorporated (Nestlé) filed a Motion for Clarification 2 on 20 September 2006;
while Union of Filipro Employees – Drug, Food and Allied Industries Union – Kilusang Mayo Uno (UFE-DFA-KMU),
on 21 September 2006, filed a Motion for Partial Reconsideration3 of the foregoing Decision.

The material facts of the case, as determined by this Court in its Decision, may be summarized as follows:

UFE-DFA-KMU was the sole and exclusive bargaining agent of the rank-and-file employees of Nestlé belonging to
the latter’s Alabang and Cabuyao plants. On 4 April 2001, as the existing collective bargaining agreement (CBA)
between Nestlé and UFE-DFA-KMU4 was to end on 5 June 2001, 5 the Presidents of the Alabang and Cabuyao
Divisions of UFE-DFA-KMU informed Nestlé of their intent to "open [our] new Collective Bargaining Negotiation for
the year 2001-2004 x x x as early as June 2001."6 In response thereto, Nestlé informed them that it was also
preparing its own counter-proposal and proposed ground rules to govern the impending conduct of the CBA
negotiations.

On 29 May 2001, in another letter to the UFE-DFA-KMU (Cabuyao Division only) 7, Nestlé reiterated its stance that
"unilateral grants, one-time company grants, company-initiated policies and programs, which include, but are not
limited to the Retirement Plan, Incidental Straight Duty Pay and Calling Pay Premium, are by their very nature not
proper subjects of CBA negotiations and therefore shall be excluded therefrom."8

Dialogue between the company and the union thereafter ensued.

Labor II – 1
On 14 August 2001, however, Nestlé requested 9 the National Conciliation and Mediation Board (NCMB), Regional
Office No. IV, Imus, Cavite, to conduct preventive mediation proceedings between it and UFE-DFA-KMU owing to
an alleged impasse in said dialogue; i.e., that despite fifteen (15) meetings between them, the parties failed to reach
any agreement on the proposed CBA.

Conciliation proceedings proved ineffective, though, and the UFE-DFA-KMU filed a Notice of Strike10 on 31 October
2001 with the NCMB, complaining, in essence, of a bargaining deadlock pertaining to economic issues, i.e.,
"retirement (plan), panel composition, costs and attendance, and CBA". 11 On 07 November 2001, another Notice of
Strike12 was filed by the union, this time predicated on Nestlé’s alleged unfair labor practices, that is, bargaining in
bad faith by setting pre-conditions in the ground rules and/or refusing to include the issue of the Retirement Plan in
the CBA negotiations. The result of a strike vote conducted by the members of UFE-DFA-KMU yielded an
overwhelming approval of the decision to hold a strike.13

On 26 November 2001, prior to holding the strike, Nestlé filed with the DOLE a Petition for Assumption of
Jurisdiction,14 praying for the Secretary of the DOLE, Hon. Patricia A. Sto. Tomas, to assume jurisdiction over the
current labor dispute in order to effectively enjoin any impending strike by the members of the UFE-DFA-KMU at the
Nestlé’s Cabuyao Plant in Laguna.

On 29 November 2001, Sec. Sto. Tomas issued an Order 15 assuming jurisdiction over the subject labor dispute. The
fallo of said Order states that:

CONSIDERING THE FOREGOING, this Office hereby assumes jurisdiction over the labor dispute at the
Nestlé Philippines, Inc. (Cabuyao Plant) pursuant to Article 263 (g) of the Labor Code, as amended.

Accordingly, any strike or lockout is hereby enjoined. The parties are directed to cease and desist from
committing any act that might lead to the further deterioration of the current labor relations situation.

The parties are further directed to meet and convene for the discussion of the union proposals and company
counter-proposals before the National Conciliation and Mediation Board (NCMB) who is hereby designated
as the delegate/facilitator of this Office for this purpose. The NCMB shall report to this Office the results of
this attempt at conciliation and delimitation of the issues within thirty (30) days from the parties’ receipt of
this Order, in no case later than December 31, 2001. If no settlement of all the issues is reached, this Office
shall thereafter define the outstanding issues and order the filing of position papers for a ruling on the merits.

UFE-DFA-KMU sought reconsideration16 of the above but nonetheless moved for additional time to file its position
paper as directed by the Assumption of Jurisdiction Order.

On 14 January 2002, Sec. Sto. Tomas denied said motion for reconsideration.

On 15 January 2002, despite the order enjoining the conduct of any strike or lockout and conciliation efforts by the
NCMB, the employee members of UFE-DFA-KMU at Nestlé’s Cabuyao Plant went on strike.

In view of the above, in an Order dated on 16 January 2002, Sec. Sto. Tomas directed: (1) the members of UFE-
DFA-KMU to return-to-work within twenty-four (24) hours from receipt of such Order; (2) Nestlé to accept back all
returning workers under the same terms and conditions existing preceding to the strike; (3) both parties to cease
and desist from committing acts inimical to the on-going conciliation proceedings leading to the further deterioration
of the situation; and (4) the submission of their respective position papers within ten (10) days from receipt thereof.
But notwithstanding the Return-to-Work Order, the members of UFE-DFA-KMU continued with their strike, thus,
prompting Sec. Sto. Tomas to seek the assistance of the Philippine National Police (PNP) for the enforcement of
said order.

On 7 February 2002, Nestlé and UFE-DFA-KMU filed their respective position papers. Nestlé addressed several
issues concerning economic provisions of the CBA as well as the non-inclusion of the issue of the Retirement Plan
in the collective bargaining negotiations. On the other hand, UFE-DFA-KMU limited itself to the issue of whether or
not the retirement plan was a mandatory subject in its CBA negotiations.

Labor II – 1
On 11 February 2002, Sec. Sto. Tomas allowed UFE-DFA-KMU the chance to tender its stand on the other issues
raised by Nestlé but not covered by its initial position paper by way of a Supplemental Position Paper.

UFE-DFA-KMU, instead of filing the above-mentioned supplement, filed several pleadings, one of which was
a Manifestation with Motion for Reconsideration of the Order dated February 11, 2002 assailing the Order of
February 11, 2002 for supposedly being contrary to law, jurisprudence and the evidence on record. The union
posited that Sec. Sto. Tomas "could only assume jurisdiction over the issues mentioned in the notice of strike
subject of the current dispute,"17 and that the Amended Notice of Strike it filed did not cite, as one of the grounds, the
CBA deadlock.

On 8 March 2002, Sec. Sto. Tomas denied the motion for reconsideration of UFE-DFA-KMU.

Thereafter, UFE-DFA-KMU filed a Petition for Certiorari18 before the Court of Appeals, alleging that Sec. Sto. Tomas
committed grave abuse of discretion amounting to lack or excess of jurisdiction when she issued the Orders of 11
February 2002 and 8 March 2002.

In the interim, in an attempt to finally resolve the crippling labor dispute between the parties, then Acting Secretary
of the DOLE, Hon. Arturo D. Brion, came out with an Order19 dated 02 April 2002, ruling that:

a. we hereby recognize that the present Retirement Plan at the Nestlé Cabuyao Plant is a unilateral grant
that the parties have expressly so recognized subsequent to the Supreme Court’s ruling in Nestlé, Phils. Inc.
vs. NLRC, G.R. No. 90231, February 4, 1991, and is therefore not a mandatory subject for bargaining;

b. the Union’s charge of unfair labor practice against the Company is hereby dismissed for lack of merit;

c. the parties are directed to secure the best applicable terms of the recently concluded CBSs between
Nestlé Phils. Inc. and it eight (8) other bargaining units, and to adopt these as the terms and conditions of
the Nestlé Cabuyao Plant CBA;

d. all union demands that are not covered by the provisions of the CBAs of the other eight (8) bargaining
units in the Company are hereby denied;

e. all existing provisions of the expired Nestlé Cabuyao Plant CBA without any counterpart in the CBAs of
the other eight bargaining units in the Company are hereby ordered maintained as part of the new Nestlé
Cabuyao Plant CBA;

f. the parties shall execute their CBA within thirty (30) days from receipt of this Order, furnishing this Office a
copy of the signed Agreement;

g. this CBA shall, in so far as representation is concerned, be for a term of five (5) years; all other provisions
shall be renegotiated not later than three (3) years after its effective date which shall be December 5, 2001
(or on the first day six months after the expiration on June 4, 2001 of the superceded CBA).

UFE-DFA-KMU moved to reconsider the aforequoted ruling, but such was subsequently denied on 6 May 2002.

For the second time, UFE-DFA-KMU went to the Court of Appeals via another Petition for Certiorari seeking to annul
the Orders of 02 April 2002 and 06 May 2002 of the Secretary of the DOLE, having been issued in grave abuse of
discretion amounting to lack or excess of jurisdiction.

On 27 February 2003, the appellate court promulgated its Decision on the twin petitions for certiorari, ruling entirely
in favor of UFE-DFA-KMU, the dispositive part thereof stating –

WHEREFORE, in view of the foregoing, there being grave abuse on the part of the public respondent in
issuing all the assailed Orders, both petitions are hereby GRANTED. The assailed Orders dated February
11, 2001, and March 8, 2001 (CA-G.R. SP No. 69805), as well as the Orders dated April 2, 2002 and May 6,
2002 (CA-G.R. SP No. 71540) of the Secretary of Labor and Employment in the case entitled: "IN RE:
Labor II – 1
 LABOR DISPUTE AT NESTLE PHILIPPINES INC. (CABUYAO FACTORY)" under OS-AJ-0023-01 (NCMB-
RBIV-CAV-PM-08-035-01, NCMB-RBIV-LAG-NS-10-037-01, NCMB-RBIV-LAG-NS-11-10-039—01) are
hereby ANNULLED and SET ASIDE. Private respondent is hereby directed to resume the CBA negotiations
with the petitioner.20

Both parties appealed the aforequoted ruling. Nestlé essentially assailed that part of the decision finding the DOLE
Secretary to have gravely abused her discretion amounting to lack or excess of jurisdiction when she ruled that the
Retirement Plan was not a valid issue to be tackled during the CBA negotiations; UFE-DFA-KMU, in contrast,
questioned the appellate court’s decision finding Nestlé free and clear of any unfair labor practice.

Since the motions for reconsideration of both parties were denied by the Court of Appeals in a joint Resolution dated
27 June 2003, UFE-DFA-KMU and Nestlé separately filed the instant Petitions for Review on Certiorari under Rule
45 of the Rules of Court, as amended.

G.R. No. 158930-31 was filed by UFE-DFA-KMU against Nestlé seeking to reverse the Court of Appeals Decision
insofar as the appellate court’s failure to find Nestlé guilty of unfair labor practice was concerned; while G.R. No.
158944-45 was instituted by Nestlé against UFE-DFA-KMU likewise looking to annul and set aside the part of the
Court of Appeals Decision declaring that: 1) the Retirement Plan was a valid collective bargaining issue; and 2) the
scope of the power of the Secretary of the Department of Labor and Employment (DOLE) to assume jurisdiction
over the labor dispute between UFE-DFA-KMU and Nestlé was limited to the resolution of questions and matters
pertaining merely to the ground rules of the collective bargaining negotiations to be conducted between the parties.

On 29 March 2004, this Court resolved21 to consolidate the two petitions inasmuch as they (1) involved the same set
of parties; (2) arose from the same set of circumstances, i.e., from several Orders issued by then DOLE Secretary,
Hon. Patricia A. Sto. Tomas, respecting her assumption of jurisdiction over the labor dispute between Nestlé and
UFE-DFA-KMU, Alabang and Cabuyao Divisions;22 and (3) similarly assailed the same Decision and Resolution of
the Court of Appeals.

After giving due course to the instant consolidated petitions, this Court promulgated on 22 August 2006 its Decision,
now subject of UFE-DFA-KMU’s Motion for Partial Reconsideration and Nestlé’s Motion for Clarification.

In its Motion for Partial Reconsideration, UFE-DFA-KMU would have this Court address and discuss anew points or
arguments that have basically been passed upon in this Court’s 22 August 2006 Decision. Firstly, it questions this
Court’s finding that Nestlé was not guilty of unfair labor practice, considering that the transaction speaks for
itself, i.e, res ipsa loquitor. And made an issue again is the question of whether or not the DOLE Secretary can take
cognizance of matters beyond the amended Notice of Strike.

As to Nestlé’s prayer for clarification, the corporation seeks elucidation respecting the dispositive part of this Court’s
Decision directing herein parties to resume negotiations on the retirement compensation package of the concerned
employees. It posits that "[i]n directing the parties to negotiate the Retirement Plan, the Honorable Court x x x might
have overlooked the fact that here, the Secretary of Labor had already assumed jurisdiction over the entire 2001-
2004 CBA controversy x x x."

As to the charge of unfair labor practice:

The motion does not put forward new arguments to substantiate the prayer for reconsideration of this Court’s
Decision except for the sole contention that the transaction speaks for itself, i.e., res ipsa loquitor. Nonetheless,
even a perusal of the arguments of UFE-DFA-KMU in its petition and memorandum in consideration of the point
heretofore raised will not convince us to change our disposition of the question of unfair labor practice. UFE-DFA-
KMU argues therein that Nestlé’s "refusal to bargain on a very important CBA economic provision
constitutes unfair labor practice."23 It explains that Nestlé set as a precondition for the holding of collective
bargaining negotiations the non-inclusion of the issue of Retirement Plan. In its words, "respondent Nestlé Phils.,
Inc. insisted that the Union should first agree that the retirement plan is not a bargaining issue before respondent
Nestlé would agree to discuss other issues in the CBA."24 It then concluded that "the Court of Appeals committed a
legal error in not ruling that respondent company is guilty of unfair labor practice. It also committed a legal error in
failing to award damages to the petitioner for the ULP committed by the respondent." 25

Labor II – 1
We are unconvinced still.

The duty to bargain collectively is mandated by Articles 252 and 253 of the Labor Code, as amended, which state –

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 with respect to wages, hours, of work and all other terms and conditions of
employment including proposals for adjusting any grievances or questions arising under such agreement
and executing a contract incorporating such agreements if requested by either party but such duty does not
compel any party to agree to a proposal or to make any concession.

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

Obviously, the purpose of collective bargaining is the reaching of an agreement resulting in a contract binding on the
parties; but the failure to reach an agreement after negotiations have continued for a reasonable period does not
establish a lack of good faith. The statutes invite and contemplate a collective bargaining contract, but they do not
compel one. The duty to bargain does not include the obligation to reach an agreement.

The crucial question, therefore, of whether or not a party has met his statutory duty to bargain in good faith typically
turns on the facts of the individual case. As we have said, there is no per se test of good faith in bargaining. Good
faith or bad faith is an inference to be drawn from the facts. To some degree, the question of good faith may be a
question of credibility. The effect of an employer’s or a union’s individual actions is not the test of good-faith
bargaining, but the impact of all such occasions or actions, considered as a whole, and the inferences fairly drawn
therefrom collectively may offer a basis for the finding of the NLRC.26

For a charge of unfair labor practice to prosper, it must be shown that Nestlé was motivated by ill will, "bad faith, or
fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy, and, of
course, that social humiliation, wounded feelings, or grave anxiety resulted x x x"27 in disclaiming unilateral grants as
proper subjects in their collective bargaining negotiations. While the law makes it an obligation for the employer and
the employees to bargain collectively with each other, such compulsion does not include the commitment to
precipitately accept or agree to the proposals of the other. All it contemplates is that both parties should approach
the negotiation with an open mind and make reasonable effort to reach a common ground of agreement.

Herein, the union merely bases its claim of refusal to bargain on a letter 28 dated 29 May 2001 written by Nestlé
where the latter laid down its position that "unilateral grants, one-time company grants, company-initiated policies
and programs, which include, but are not limited to the Retirement Plan, Incidental Straight Duty Pay and Calling
Pay Premium, are by their very nature not proper subjects of CBA negotiations and therefore shall be excluded
therefrom." But as we have stated in this Court’s Decision, said letter is not tantamount to refusal to bargain. In
thinking to exclude the issue of Retirement Plan from the CBA negotiations, Nestlé, cannot be faulted for
considering the same benefit as unilaterally granted, considering that eight out of nine bargaining units have
allegedly agreed to treat the Retirement Plan as a unilaterally granted benefit. This is not a case where the
employer exhibited an indifferent attitude towards collective bargaining, because the negotiations were not the
unilateral activity of the bargaining representative. Nestlé’s desire to settle the dispute and proceed with the
negotiation being evident in its cry for compulsory arbitration is proof enough of its exertion of reasonable effort at
good-faith bargaining.

In the case at bar, Nestle never refused to bargain collectively with UFE-DFA-KMU. The corporation simply wanted
to exclude the Retirement Plan from the issues to be taken up during CBA negotiations, on the postulation that such
was in the nature of a unilaterally granted benefit. An employer’s steadfast insistence to exclude a particular
substantive provision is no different from a bargaining representative’s perseverance to include one that they deem
of absolute necessity. Indeed, an adamant insistence on a bargaining position to the point where the negotiations
reach an impasse does not establish bad faith.[fn24 p.10] It is but natural that at negotiations, management and
Labor II – 1
labor adopt positions or make demands and offer proposals and counter-proposals. On account of the importance of
the economic issue proposed by UFE-DFA-KMU, Nestle could have refused to bargain with the former – but it did
not. And the management’s firm stand against the issue of the Retirement Plan did not mean that it was bargaining
in bad faith. It had a right to insist on its position to the point of stalemate.

The foregoing things considered, this Court replicates below its clear disposition of the issue:

The concept of "unfair labor practice" is defined by the Labor Code as:

ART. 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 interests 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.

x x x x.

The same code likewise provides the acts constituting unfair labor practices committed by employers, to wit:

ART. 248. UNFAIR LABOR PRACTICES OF EMPLOYERS. – It shall be unlawful for an employer to
commit any of the following unfair labor practices:

(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization;

(b) To require as a condition of employment that a person or an employee shall not join a labor
organization or shall withdraw from one to which he belongs;

(c) To contract out services or functions being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their right to self-organization;

(d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any
labor organization, including the giving of financial or other support to it or its organizers or
supporters;

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment
in order to encourage or discourage membership in any labor organization. Nothing in this Code or
in any other law shall stop the parties from requiring membership in a recognized collective
bargaining agent as a condition for employment, except those employees who are already members
of another union at the time of the signing of the collective bargaining agreement.

Employees of an appropriate 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 nonmembers of the recognized
collective bargaining agent; [The article referred to is 241, not 242. – CAA]

(f) To dismiss, discharge, or otherwise prejudice or discriminate against an employee for having
given or being about to give testimony under this Code;

(g) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attorney’s fees to the union or its officers or agents as part of the
settlement of any issue in collective bargaining or any other dispute; or

Labor II – 1
 (i) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers and agents of
corporations associations or partnerships who have actually participated, authorized or ratified unfair
labor practices shall be held criminally liable. (Emphasis supplied.)

Herein, Nestlé is accused of violating its duty to bargain collectively when it purportedly imposed a pre-
condition to its agreement to discuss and engage in collective bargaining negotiations with UFE-DFA-KMU.

A meticulous review of the record and pleadings of the cases at bar shows that, of the two notices of strike
filed by UFE-DFA-KMU before the NCMB, it was only on the second that the ground of unfair labor practice
was alleged. Worse, the 7 November 2001 Notice of Strike merely contained a general allegation that Nestlé
committed unfair labor practice by bargaining in bad faith for supposedly "setting pre-condition in the ground
rules (Retirement issue)." (Notice of Strike of 7 November 2001; Annex "C" of UFE-DFA-KMU Position
Paper; DOLE original records, p. 146.) In contrast, Nestlé, in its Position Paper, did not confine itself to the
issue of the non-inclusion of the Retirement Plan but extensively discussed its stance on other economic
matters pertaining to the CBA. It is UFE-DFA-KMU, therefore, who had the burden of proof to present
substantial evidence to support the allegation of unfair labor practice.

A perusal of the allegations and arguments raised by UFE-DFA-KMU in the Memorandum (in G.R. Nos.
158930-31) will readily disclose the need for the presentation of evidence other than its bare contention of
unfair labor practice in order to make certain the propriety or impropriety of the ULP charge hurled against
Nestlé. Under Rule XIII, Sec. 4, Book V of the Implementing Rules of the Labor Code:

x x x. In cases of unfair labor practices, the notice of strike shall as far as practicable, state the
acts complained of and the efforts to resolve the dispute amicably." (Emphasis supplied.)

In the case at bar, except for the assertion put forth by UFE-DFA-KMU, neither the second Notice of Strike
nor the records of these cases substantiate a finding of unfair labor practice. It is not enough that the union
believed that the employer committed acts of unfair labor practice when the circumstances clearly negate
even a prima facie showing to warrant such a belief. (Tiu v. National Labor Relations Commission, G.R. No.
123276, 18 August 1997, 277 SCRA 681, 688.)

Employers are accorded rights and privileges to assure their self-determination and independence and
reasonable return of capital. (Capitol Medical Center, Inc. v. Meris, G.R. No. 155098, 16 September 2005,
470 SCRA 125, 136.) This mass of privileges comprises the so-called management prerogatives. (Capitol
Medical Center, Inc. v. Meris, G.R. No. 155098, 16 September 2005, 470 SCRA 125, 136.) In this
connection, the rule is that good faith is always presumed. As long as the company’s exercise of the same is
in good faith to advance its interest and not for purpose of defeating or circumventing the rights of
employees under the law or a valid agreement, such exercise will be upheld. (Capitol Medical Center, Inc. v.
Meris, G.R. No. 155098, 16 September 2005, 470 SCRA 125, 136.)

There is no per se test of good faith in bargaining. (Hongkong Shanghai Banking Corporation Employees
Union v. National Labor Relations Commission, G.R. No. 125038, 6 November 1997, 281 SCRA 509, 518.)
Good faith or bad faith is an inference to be drawn from the facts. (Hongkong Shanghai Banking Corporation
Employees Union v. National Labor Relations Commission, G.R. No. 125038, 6 November 1997, 281 SCRA
509, 518.) Herein, no proof was presented to exemplify bad faith on the part of Nestlé apart from mere
allegation. Construing arguendo that the content of the aforequoted letter of 29 May 2001 laid down a pre-
condition to its agreement to bargain with UFE-DFA-KMU, Nestlé’s inclusion in its Position Paper of its
proposals affecting other matters covered by the CBA negates the claim of refusal to bargain or bargaining
in bad faith. Accordingly, since UFE-DFA-KMU failed to proffer substantial evidence that would overcome
the legal presumption of good faith on the part of Nestlé, the award of moral and exemplary damages is
unavailing.

As to the jurisdiction of the DOLE Secretary under the amended Notice of Strike:

Labor II – 1
This Court is not convinced by the argument raised by UFE-DFA-KMU that the DOLE Secretary should not have
gone beyond the disagreement on the ground rules of the CBA negotiations. The union doggedly asserts that the
entire labor dispute between herein parties concerns only the ground rules.

Lest it be forgotten, it was UFE-DFA-KMU which first alleged a bargaining deadlock as the basis for the filing of its
Notice of Strike; and at the time of the filing of the first Notice of Strike, several conciliation conferences had already
been undertaken where both parties had already exchanged with each other their respective CBA proposals. In fact,
during the conciliation meetings before the NCMB, but prior to the filing of the notices of strike, the parties had
already delved into matters affecting the meat of the collective bargaining agreement.

The Secretary of the DOLE simply relied on the Notices of Strike that were filed by UFE-DFA-KMU as stated in her
Order of 08 March 2002, to wit:

x x x The records disclose that the Union filed two Notices of Strike. The First is dated October 31, 2001
whose grounds are cited verbatim hereunder:

"A. Bargaining Deadlock

1. Economic issues (specify)

1. Retirement

2. Panel Composition

3. Costs and Attendance

4. CBA"

The second Notice of Strike is dated November 7, 2001 and the cited ground is like quoted verbatim below:

"B. Unfair Labor Practices (specify)

Bargaining in bad faith –

Setting pre-condition in the ground rules (Retirement issue)"

Nowhere in the second Notice of Strike is it indicated that this Notice is an amendment to and took the place of the
first Notice of Strike. In fact, our Assumption of Jurisdiction Order dated November 29, 2001 specifically cited the
two (2) Notices of Strike without any objection on the part of the Union x x x. 29

Had the parties not been at the stage where the substantive provisions of the proposed CBA had been put in issue,
the union would not have based thereon its initial notice to strike. This Court maintains its original position in the
Decision that, based on the Notices of Strike filed by UFE-DFA-KMU, the Secretary of the DOLE rightly decided on
matters of substance. That the union later on changed its mind is of no moment because to give premium to such
would make the legally mandated discretionary power of the Dole Secretary subservient to the whims of the parties.

As to the point of clarification on the resumption of negotiations respecting the Retirement Plan:

As for the supposed confusion or uncertainty of the dispositive part of this Court’s Decision, Nestle moves for
clarification of the statement – "The parties are directed to resume negotiations respecting the Retirement Plan and
to take action consistent with the discussion hereinabove set forth. No costs." The entire fallo of this Court’s
Decision reads:

WHEREFORE, in view of the foregoing, the Petition in G.R. No. 158930-31 seeking that Nestlé be declared
to have committed unfair labor practice in allegedly setting a precondition to bargaining is DENIED. The
Labor II – 1
 Petition in G.R. No. 158944-45, however, is PARTLY GRANTED in that we REVERSE the ruling of the
Court of Appeals in CA G.R. SP No. 69805 in so far as it ruled that the Secretary of the DOLE gravely
abused her discretion in failing to confine her assumption of jurisdiction power over the ground rules of the
CBA negotiations; but the ruling of the Court of Appeals on the inclusion of the Retirement Plan as a valid
issue in the collective bargaining negotiations between UFE-DFA-KMU and Nestlé is AFFIRMED. The
parties are directed to resume negotiations respecting the Retirement Plan and to take action consistent with
the discussions hereinabove set forth. No costs.

Nestle interprets the foregoing as an order for the parties to resume negotiations by themselves respecting the issue
of retirement benefits due the employees of the Cabuyao Plant. Otherwise stated, Nestle posits that the dispositive
part of the Decision directs the parties to submit to a voluntary mode of dispute settlement.

A read-through of this Court’s Decision reveals that the ambiguity is more ostensible than real. This Court’s Decision
of 22 August 2006 designated marked boundaries as to the implications of the assailed Orders of the Secretary of
the DOLE. We said therein that 1) the Retirement Plan is still a valid issue for herein parties’ collective bargaining
negotiations; 2) the Court of Appeals committed reversible error in limiting to the issue of the ground rules the scope
of the power of the Secretary of Labor to assume jurisdiction over the subject labor dispute; and 3) Nestlé is not
guilty of unfair labor practice. Nowhere in our Decision did we require parties to submit to negotiate by themselves
the tenor of the retirement benefits of the concerned employees of Nestlé, precisely because the Secretary of the
DOLE had already assumed jurisdiction over the labor dispute subject of herein petitions. Again, we spell out what
encompass the Secretary’s assumption of jurisdiction power. The Secretary of the DOLE has been explicitly granted
by Article 263(g) of the Labor Code the authority to assume jurisdiction over a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national interest, and decide the same accordingly. And,
as a matter of necessity, it includes questions incidental to the labor dispute; that is, issues that are necessarily
involved in the dispute itself, and not just to that ascribed in the Notice of Strike or otherwise submitted to him for
resolution. In the case at bar, the issue of retirement benefits was specifically what was presented before the
Secretary of the DOLE; hence, We reject Nestlé’s interpretation. Our decision is crystal and cannot be interpreted
any other way. The Secretary having already assumed jurisdiction over the labor dispute subject of these
consolidated petitions, the issue concerning the retirement benefits of the concerned employees must be remanded
back to him for proper disposition.

All told, in consideration of the points afore-discussed and the fact that no substantial arguments have been raised
by either party, this Court remains unconvinced that it should modify or reverse in any way its disposition of herein
cases in its earlier Decision. The labor dispute between the Nestle and UFE-DFA-KMU has dragged on long
enough. As no other issues are availing, let this Resolution write an ending to the protracted labor dispute between
Nestlé and UFE-DFA-KMU (Cabuyao Division).

WHEREFORE, premises considered, the basic issues of the case having been passed upon and there being no
new arguments availing, the Motion for Partial Reconsideration is hereby DENIED WITH FINALITY for lack of merit.
Let these cases be remanded to the Secretary of the Department of Labor and Employment for proper disposition,
consistent with the discussions in this Court’s Decision of 22 August 2006 and as hereinabove set forth. No costs.

Labor II – 1
18.) G.R. No. 142399               March 12, 2008

PHILIPPINE AIRLINES, INCORPORATED, Petitioner,

vs.
PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), Respondent.

DECISION

CHICO-NAZARIO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended, seeks to set aside the 30
April 1999 Decision1 and 10 March 2000 Resolution2 of the Court of Appeals in CA-G.R. SP No. 50161 entitled,
"Philippine Airlines, Inc. v. National Labor Relations Commission and Philippine Airlines Employees Association
(PALEA)." In the assailed decision, the appellate court dismissed the petition filed by petitioner Philippine Airlines,
Inc. (PAL) and affirmed the 28 January 1998 Decision3 and 23 June 1998 Resolution,4 both of the First Division of
the National Labor Relations Commission (NLRC) wherein the said Commission reversed and set aside the 12
March 1990 Decision5 of the Labor Arbiter in NLRC NCR No. 00-03-01134-89 dismissing the labor complaint filed by
Philippine Airlines Employees Association (PALEA), the collective bargaining agent of the rank and file employees
of petitioner PAL.

The present petition arose from a labor complaint, 6 filed by respondent PALEA against petitioners PAL and one
Mary Anne del Rosario, Director of Personnel of petitioner PAL, on 1 March 1989. The labor complaint charged both
petitioners with unfair labor practice for the alleged non-payment of the 13th month pay of petitioner PAL’s
employees who had not been regularized as of the 30 of April 1988, allegedly in contravention of the Collective
Bargaining Agreement (CBA) entered into by petitioner PAL and respondent PALEA.

The facts are undisputed.

On 6 February 1987, petitioner PAL and respondent PALEA entered into a CBA 7 covering the period of 1986-1989,
to be applied, thus:

Section 3 – Application

All the terms and conditions of employment of employees within the bargaining unit are embodied in this
Agreement, and the same shall govern the relationship between the Company and such employees. On the other
hand, all such benefits and/or privileges as are not expressly provided for in this Agreement but which are now
being accorded in accordance with the PAL Personnel Policies and Procedures Manual, shall be deemed also part
and parcel of the terms and conditions of employment, or of this Agreement. 8

Part of said agreement required petitioner PAL to pay its rank and file employees the following bonuses:

Section 4 – 13th Month Pay (Mid-year Bonus)

A 13th month pay, equivalent to one month’s current basic pay, consistent with the existing practice shall be paid in
advance in May.

Section 5 – Christmas Bonus

The equivalent of one month’s current basic pay as of November 30, shall be paid in December as a Christmas
bonus. Payment may be staggered in two (2) stages. It is distinctly understood that nothing herein contained shall
be construed to mean that the Company may not at its sole discretion give an additional amount or increase the
Christmas bonus.9

Labor II – 1
On 22 April 1988, prior to the payment of the 13th month pay (mid-year bonus), petitioner PAL released a
guideline10 implementing the aforequoted provision, to wit:

1) Eligibility

a) Ground employees in the general payroll who are regular as of April 30, 1988;

b) Other ground employees in the general payroll, not falling within category a) above shall receive
their 13th Month Pay on or before December 24, 1988;

2) Amount

a) For category a) above, one month basic salary as of April 30, 1988;

b) Employees covered under 1 b) above shall be paid not less than 1/12 of their basic salary for
every month of service within the calendar year.

3) Payment Date: May 9, 1988 for category 1 a) above. 11

Respondent PALEA assailed the implementation of the foregoing guideline on the ground that all employees of
PAL, regular or non-regular, must be paid their 13th month pay. In fact, in a letter dated 16 December 1988,
respondent PALEA, through Herbert C. Baldovino, 12 informed petitioner PAL that the following regular employees
failed to receive their 13th Month Pay as of the date of the correspondence. Said letter reads in part:

16 December 1988

To : Ms. Marie Anne E. Del Rosario

Director-Personnel Services

From : PALEA Board Member-Engineering

Subject : 13th Month Pay

Please be informed that the following regular employees have not received their 13th month pay as of today.

NAME Date Employed Date Regularized

1. Renato C. Buenaventura -Nov. 17, 1987 May 17, 1988

2. Rene Zaragoza -Dec. 1, 1987 June 1, 1988

3. Ronald Lumibao -Dec. 1, 1987 June 1, 1988

4. Ruel Villa-real -Dec. 1, 1987 June 1, 1988

5. Rene Philip Banzon -Dec. 1, 1987 June 1, 1988

We feel that these employees are entitled to the 13th month pay in accordance with the guidelines issued by your
office last 22 April 1988. (Copy attached.)

May we request your good office to do the necessary to effect payment of the 13th month pay to the above listed
regular employees in the next regular payroll.

Praying for usual prompt attention.

Labor II – 1
(Sgd.) HERBERT C. BALDOVINO13

In response thereto, petitioner PAL informed respondent PALEA that rank and file employees who were regularized
after 30 April 1988 were not entitled to the 13th month pay as they were already given their Christmas bonuses on 9
December 1988 per the Implementing Rules of Presidential Decree No. 851. 14 Petitioner PAL’s response is
hereunder quoted in full –

January 2, 1989

Mr. Herbert C. Baldovino

PALEA Board Member and

Mr. George M. Pulido

PALEA President
2nd Floor, Philbanking Bldg.
Baclaran, Parañaque, M.M.

Dear Messrs. Baldovino and Pulido:

This pertains to your letter which we received on December 19, 1988 requesting for payment of 13th month pay to
employees: Renato Buenaventura, Rene Zaragoza, Ronald Lumibao, Ruel Villareal and Rene Philip Banzon.

We would like to clarify the following:

1. The above-mentioned employees and other similarly situated employees were not paid the 13th month
pay on May 9, 1988 because they were not qualified regular employees as of April 30, 1988. However, the
guidelines provide that they should be granted their 13th month pay on or before December 24, 1988.

2. The guideline providing for the payment of the 13th month pay on or before December 24, 1988 for those
who were not entitled to receive such in May is anchored on the Company’s compliance with the Rules and
Regulations Implementing PD 851 (pp. 236-237, Labor Code of the Philippines 1988 Edition), to wit:

"Sec. 3. Employees covered – the Decree shall apply to all employees except to: x x x

c) Employers already paying their employees 13-month pay or more in a calendar year or its
equivalent at the time of this issuance; x x x the term "its equivalent" as used in paragraph (c) hereof
shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses
amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends,
cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-
monetary benefits."

3. In accordance with 1 and 2, the above-mentioned employees were paid the equivalent of their 13th month
pay in the form of the Christmas bonus granted by the Company on December 9, 1988. The same was
applied to similarly situated employees in compliance with pertinent provisions of the 1986-1989 PAL-
PALEA CBA and the Labor Code of the Philippines.

(SGD.) MARIE ANNE E. DEL ROSARIO15

Disagreeing with petitioner PAL, respondent PALEA filed a labor complaint 16 for unfair labor practice against
petitioner PAL before the NLRC on 1 March 1989. The complaint interposed that "the cut-off period for
regularization should not be used as the parameter for granting [the] 13th month pay considering that the law does
not distinguish the status of employment but (sic) the law covers all employees."

In its Position Paper submitted before the Labor Arbiter, petitioner PAL countered that those rank and file
employees who were not regularized by 30 April of a particular year are, in principle, not denied their 13th month
pay considering they receive said mandatory bonus in the form of the Christmas Bonus; that the Christmas Bonus
Labor II – 1
given to all its employees is deemed a compliance with Presidential Decree No. 851 and the latter’s implementing
rules; and that the foregoing has been the practice formally adopted in previous CBAs’ as early as 1970.

On 12 March 1990, the Labor Arbiter rendered a Decision dismissing the respondent PALEA’s complaint for lack of
merit. The Labor Arbiter ruled that petitioner PAL was not guilty of unfair labor practice in withholding the grant of the
13th Month Pay or Mid Year Bonus to the concerned employees. The giving of the particular bonus was said to be
merely an additional practice made in the past, "such being the case, it violated no agreement or existing practice or
committed unfair labor practice, as charged." 17 The decretal part of said ruling reads:

WHEREFORE, decision is hereby issued ordering the dismissal of the complaint. 18

Respondent PALEA appealed to the NLRC. In a Decision dated 28 January 1998, the Commission reversed the
Decision of the Arbiter. The fallo of said decision is quoted hereunder:

WHEREFORE, finding the appeal well-impressed with merit, the decision appealed from is REVERSED and SET
ASIDE and a new one ENTERED ordering [herein petitioner] PAL to pay the 13th month pay or mid-year bonus of
the members as discussed above.19

The NLRC held that after going through the documents submitted by respondent PALEA in support of its contention,
the Commission is convinced that the 13th month pay or mid-year bonus is distinct from the Christmas Bonus, and
although petitioner PAL already paid its employees the latter, it must likewise pay them the former. Petitioner PAL
moved for reconsideration of the NLRC Decision but this was denied in a Resolution dated 23 June 1998.

Undaunted, petitioner PAL went directly to this Court via a Petition for Review on Certiorari. In view of this Court’s
decision in St. Martin Funeral Homes v. National Labor Relations Commission, 20 however, the Petition was referred
to the Court of Appeals for proper disposition. The case was docketed therein as CA-G.R. SP No. 50161.

On 30 April 1999, the Court of Appeals promulgated its Decision dismissing the Petition filed by petitioner PAL,
hence, affirming the 28 January 1998 Decision of the NLRC. The dismissal reads –

WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit. 21

The Court of Appeals held that "from the x x x provision of the said inter-office memo, employees who are regular as
of 30 April 1988 and those regularized thereafter, are entitled for (sic) the payment of the non-regular employees as
provided for under letter (c) of the Guidelines issued." 22 It reasoned that "if the intention is not to include employees
regularized beyond 30 April 1988, they would not have placed letter (c)." 23 The Court of Appeals further rationalized
that "well-settled is the rule that all doubts should be resolved in favor of labor. To rule otherwise is a betrayal of our
zealous commitment to uphold the constitutional provision affording protection to labor." 24

Petitioner PAL seasonably moved for the reconsideration of the aforequoted Court of Appeals Decision, but was
also denied in a Resolution dated 10 March 2000. 1avvphi1

Hence, the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended.

In a Resolution25 dated 19 June 2007, We resolved to suspend the proceedings of the case at bar in view of the on-
going rehabilitation of petitioner PAL as mandated by the Securities and Exchange Commission. On 28 September
2007, however, the SEC issued an Order26 granting petitioner PAL’s request to exit from rehabilitation after
successfully stabilizing its financial operations. Hence, the suspension earlier issued by this Court is hereby lifted,
making the present Petition ripe for resolution.

In refusing payment of the mid-year bonus, petitioner PAL argues that 1) the CBA does not apply to non-regular
employees such that any benefits arising from said agreement cannot be made to apply to them, including the mid-
year bonus; and 2) it has always been the company practice not to extend the mid-year bonus to those employees
who have not attained regular status prior to the month of May, when payment of the particular bonus accrues.

Labor II – 1
Respondent PALEA, however, disputes petitioner PAL’s allegations and maintains that "the benefits to all
employees in the collective bargaining unit, including those who do not belong to the chosen bargaining labor
organization, applies."27 Put in another way, "[a]ll employees in PAL are entitled to the same benefit as they are
within the same collective bargaining unit and the entitlement to such benefit spills over to even non-union
members."28 Anent the supposed company practice of petitioner PAL not to extend the payment of the 13th month
pay or mid-year bonus to non-regular employees, respondent PALEA contends that non-payment of said benefit is
considered a diminution of privileges or benefits proscribed by Presidential Decree No. 851; that petitioner PAL
misrepresented that the 13th month pay or mid-year bonus is the same as the Christmas bonus when, in actuality,
the latter is entirely different as it is a benefit paid under the provisions of the CBA, while the former is one mandated
by law, Presidential Decree No. 851, in particular.

The sole issue for resolution of this Court is whether or not the Court of Appeals committed reversible error
in affirming the order of the NLRC for the payment of the 13th month pay or mid-year bonus to its
employees regularized after 30 April 1988. We rule in the negative.

Petitioner PAL maintains that in extending the grant of the 13th month pay or mid-year bonus to employees who are
not covered by the CBA, the Court of Appeals, in effect, "modified or altered the terms of said agreement and
expanded its coverage to non-regular employees who are not covered by the bargaining unit." 29 The issue on
modification or alteration of the CBA, however, was raised by petitioner PAL rather belatedly and invoked for the first
time on appeal. This being the case, We are barred from taking cognizance of and resolving the issue for it would
be violative of the proscription against the presentation of new issues on appeal. To do otherwise would be
offensive to the basic rules of fair play, justice and due process.30

Be that as it may, a cursory reading of the 1986-1989 CBA of the parties herein will instantly reveal that Art. I, Sec. 3
of said agreement made its provision applicable to all employees in the bargaining unit. The particular section
specifically defined the scope of application of the CBA, thus:

Section 3 – Application. All the terms and conditions of employment of employees within the bargaining unit are
embodied in this Agreement, and the same shall govern the relationship between the Company and such
employees. On the other hand, all such benefits and/or privileges as are not expressly provided for in this
Agreement but which are now being accorded in accordance with the PAL Personnel Policies and Procedures
Manual, shall be deemed also part and parcel of the terms and conditions of employment, or of this Agreement.

without distinguishing between regular and non-regular employees. As succinctly put by respondent PALEA in its
Memorandum:

All employees in (sic) PAL are entitled to the same benefit as they are within the same collective bargaining unit and
the entitlement to such benefit spills over to even non-union members. 31

It is a well-settled doctrine that the benefits of a CBA extend to the laborers and employees in the collective
bargaining unit, including those who do not belong to the chosen bargaining labor organization.32 Otherwise, it would
be a clear case of discrimination.

Hence, to be entitled to the benefits under the CBA, the employees must be members of the bargaining unit, but not
necessarily of the labor organization designated as the bargaining agent. A "bargaining unit" has been 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, indicates to be the best suited to
serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law. 33 At this
point, the allegation of petitioner PAL that the non-regular employees do not belong to the collective bargaining unit
and are thus not covered by the CBA is unjustified and unsubstantiated. It is apparent to us that petitioner PAL
excludes certain employees from the benefits of the CBA only because they have not yet achieved regular status by
the cut-off date, 30 April 1988. There is no showing that the non-regular status of the concerned employees by said
cut-off date sufficiently distinguishes their interests from those of the regular employees so as to exclude them from
the collective bargaining unit and the benefits of the CBA.

Labor II – 1
Having ruled that the benefits provided by the subject CBA are applicable even to non-regular employees who
belong to the bargaining unit concerned, the next and crucial query to be addressed is whether the 13th month pay
or mid-year bonus can be equated to the Christmas bonus.

Petitioner PAL equates the 13th month pay, also referred to as the mid-year bonus in the CBA, to the Christmas
bonus. It insists that "[u]nder the 13th Month Pay Law (P.D. 851, as amended), the 13th Month Pay is due on or
before December 24th of the year. Therefore, non-regular employees are entitled to their 13th Month Pay, not in the
month of May, but in the month of December when the Christmas Bonus becomes due. The Christmas bonus
becomes their 13th Month Pay, by express provision of Section 2, Presidential Decree 851." 34 Simply put, as far as
non-regular employees are concerned, petitioner PAL alleges that their 13th month pay shall be the same as their
Christmas bonus and will be paid according to the terms governing the latter.

We do not agree. From the facts of the present Petition, it is crystal clear that petitioner PAL is claiming an
exemption from payment of the 13th month pay or mid-year bonus provided in the CBA under the guise of paying
the Christmas bonus which it claims to be the equivalent of the 13th month pay under Presidential Decree No. 851.

Presidential Decree No. 851 mandates that all employers must pay all their employees receiving a basic salary of
not more than ₱1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than 24
December of every year. Memorandum Order No. 28, 35 dated 13 August 1986, removed the salary ceiling, generally
making all employees entitled to the 13th month pay regardless of the amount of their basic salary, designation or
employment status, and irrespective of the method by which their wages are paid, provided that they have worked
for at least one (1) month during a calendar year.36 Presidential Decree No. 851, as amended, does admit of certain
exceptions or exclusions from its coverage, among which is:

Sec. 3(c). Employers already paying their employees 13-month pay or more in a calendar year or its equivalent at
the time of this issuance.

While employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at
the time of the issuance of Presidential Decree No. 851 are already exempted from the mandatory coverage of said
law, petitioner PAL cannot escape liability in this case by virtue thereof.

It must be stressed that in the 1986-1989 CBA, petitioner PAL agreed to pay its employees 1) the 13th month pay or
the mid-year bonus, and 2) the Christmas bonus. The 13th month pay, guaranteed by Presidential Decree No. 851,
is explicitly covered or provided for as the mid-year bonus in the CBA, while the Christmas bonus is evidently and
distinctly a separate benefit. Petitioner PAL may not be allowed to brush off said distinction, and unilaterally and
arbitrarily declare that for non-regular employees, their Christmas bonus is the same as or equivalent to the 13th
month pay.

Presidential Decree No. 851 mandates the payment of the 13th month pay to uniformly provide the low-paid
employees with additional income. It but sets a minimum requirement that employers must comply with. It does not
intend, however, to preclude the employers from voluntarily granting additional bonuses that will benefit their
employees. A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to
the success of the employer's business and made possible the realization of profits. It is an act of generosity of the
employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to
spur the employee to greater efforts for the success of the business and realization of bigger profits. 37 We deem that
the Christmas bonus in this case is of this nature, although, by virtue of its incorporation into the CBA, it has become
more than just an act of generosity on the part of petitioner PAL, but a contractual obligation it has undertaken.

The inclusion of a provision for the continued payment of the Christmas bonus in the 1986-1989 CBA between
respondent PALEA and petitioner PAL contradicts the company’s claim that the grant of such benefit was intended
to be credited as compliance with the statutory mandate to give the 13th month pay. Memorandum Order No. 28,
extending Presidential Decree No. 851 to all employees regardless of the amount of their monthly salaries, was
issued on 13 August 1986. As early as said date, therefore, petitioner PAL was already fully aware that it was
lawfully compelled to accord all its employees a 13th month pay. Accordingly, if petitioner PAL truly intended that the
Christmas bonus be treated as the "equivalent" of the 13th month pay required by law, then said intention should
have been expressly declared in their 1986-1989 CBA, or the separate provision therein on the Christmas bonus
should have been removed because it would only be superfluous. 38 1avvphil.zw+

Labor II – 1
In United CMC Textile Workers Union v. The Labor Arbiter, 39 one of the issues passed upon by the Court was
whether or not an employer who was already paying Christmas bonus pursuant to a CBA, was still bound to pay the
13th month pay pursuant to Presidential Decree No. 851. Finding that the intention of the parties to the CBA was
that the Christmas bonus was meant to be on top of the 13th month pay, the Court ordered the employer to pay the
employees both. The Court ratiocinated:

If the Christmas bonus was included in the 13th month pay, then there would be no need for having a specific
provision on Christmas bonus in the CBA. But is did provide for a bonus in graduated amounts depending on the
length of service of the employee. The intention is clear therefore that the bonus provided in the CBA was meant to
be in addition to the legal requirement. x x x A bonus under the CBA is an obligation created by the contract
between the management and workers while the 13th month pay is mandated by the law (P.D. 851).

In the case under consideration, the provision for the payment of the Christmas bonus, apart from the 13th month
pay, was incorporated into the 1986-1989 CBA between respondent PALEA and petitioner PAL without any
condition. The Christmas bonus, payable in December of every year, is distinguished from the 13th month pay, due
yearly in May, for which reason it was denominated as the mid-year bonus. Such being the case, the only logical
inference that could be derived therefrom is that petitioner PAL intended to give the members of the bargaining unit,
represented by respondent PALEA, a Christmas bonus over and above its legally mandated obligation to grant the
13th month pay.

The non-regular rank and file employees of petitioner PAL as of 30 April 1988, are not actually seeking more
benefits than what the other member-employees of the same bargaining unit are already enjoying. They are only
requesting that all members of the bargaining unit be treated equally and afforded the same privileges and benefits
as agreed upon between respondent PALEA and petitioner PAL in the CBA. Petitioner PAL is committing a patent
act of inequity that is grossly prejudicial to the non-regular rank and file employees there being no rational basis for
withholding from the latter the benefit of a Christmas bonus besides the 13th month pay or mid-year bonus, while
the same is being granted to the other rank and file employees of petitioner PAL who have been regularized as of
30 April 1988, although both types of employees are members of the same bargaining unit. As it had willfully and
intentionally agreed to under the terms of the CBA, petitioner PAL must pay its regular and non-regular employees
who are members of the bargaining unit represented by respondent PALEA their 13th month pay or mid-year bonus
separately from and in addition to their Christmas bonus.

A collective bargaining agreement refers to a 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.40 As in all other contracts, the parties to a CBA may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided these are not contrary to law, morals, good customs, public order or public
policy.41 Thus, where the CBA is clear and unambiguous, it becomes the law between the parties, and compliance
therewith is mandated by the express policy of the law.42

WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals
promulgated on 30 April 1999, and its Resolution dated 10 March 2000, are hereby AFFIRMED. Costs against
petitioner Philippine Airlines, Inc.

Labor II – 1
 19.) [G.R. NO. 168569 : October 5, 2007]

SAN MIGUEL FOODS, INC., Petitioner, v. SAN MIGUEL CORPORATION EMPLOYEES UNION-

PTWGO, Respondent.

DECISION

CARPIO MORALES, J.:

The present Petition for Review on Certiorari raises the issue of whether respondent's complaint is
one for unfair labor practice (ULP) over which a Labor Arbiter has jurisdiction.

At the time material to the case, respondent, San Miguel Corporation Employees Union - PTWGO (the
Union), was the sole bargaining agent of all the monthly paid employees of petitioner San Miguel
Foods, Incorporated (SMFI). On November 9, 1992, some employees of SMFI's Finance Department,
through the Union represented by Edgar Moraleda, brought a grievance against Finance Manager
Gideon Montesa (Montesa), for "discrimination, favoritism, unfair labor practices, not flexible [sic],
harassment, promoting divisiveness and sectarianism, etc.,"1 before SMFI Plant Operations Manager
George Nava in accordance with Step 1 of the grievance machinery adopted in the Collective
Bargaining Agreement (CBA) forged by SMFI and the Union.

The Union sought the "1. review, evaluat[ion] & upgrad[ing of] all Finance staff and 2. promot[ion of]
G.Q. Montesa to other SMC affiliate[s] & subsidiaries." 2

At the grievance meeting held on January 14, 1993, SMFI informed the Union that it planned to
address the grievance through a "work management review" which would be completed by March
1993, hence, it asked the finance personnel to give it their attention and cooperation.

The "work management review" was not completed by March 1993, however, prompting the Union
to, on March 26, 1993, elevate the grievance to Step 2. 3

Almost nine months after the grievance meeting was held or on October 6, 1993, SMFI rendered a
"Decision on Step 1 Grievance" stating that it was still in the process of completing the "work
management review,"4 hence, the Union's requests could not be granted.

The Union thereupon filed a complaint on October 20, 1993 before the National Labor Relations
Commission (NLRC), Arbitration Branch, against SMFI, 5 its President Amadeo P. Veloso, and its
Finance Manager Montesa for "unfair labor practice, [and] unjust discrimination in matters of
promotion . . . "6 It prayed that SMFI et al. be ordered to promote the therein named employees
"with the corresponding pay increases or adjustment including payment of salary differentials plus
attorney's fees[,] and to cease and desist from committing the same unjust discrimination in matters
of promotion."7

Instead of filing a position paper as required by the Labor Arbiter, SMFI et al. filed a motion to
dismiss,8 contending that the issues raised in the complaint were grievance issues and, therefore,
"should be resolved in the grievance machinery provided in [the] collective bargaining agreements
[sic] of the parties or in the mandated provision of voluntary arbitration which is also provided in the
CBA."9 The Union opposed the motion to dismiss.

In its Position Paper, the Union specified acts of ULP of SMFI et al. under Article 248, paragraphs (e)
and (i) of the Labor Code10 which Article reads:

Labor II – 1
Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of
the following unfair labor practices:

x   x   x

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment
in order to encourage or discourage membership in any labor organization. x x x

x   x   x

(i) To violate a collective bargaining agreement.

x   x   x

By Order of February 18, 1994, the Labor Arbiter granted SMFI et al.'s motion to dismiss and ordered
the remand of the case to the grievance machinery for completion of the proceedings. 11 The Union
appealed the said order to the NLRC by "Motion for Reconsideration/Appeal" 12 which its Second
Division granted and accordingly ordered the Labor Arbiter to continue the proceedings on the
Union's complaint.13 SMFI et al. filed a Motion for Reconsideration of the NLRC order but it was
denied, hence, they filed a petition for certiorari with this Court. After the parties and the Solicitor
General had filed their respective pleadings, this Court, by Resolution of January 25, 1999, referred
the case to the Court of Appeals pursuant to St. Martin Funeral Homes v. NLRC.14

By Decision of July 31, 2002,15 the Court of Appeals denied SMFI et al.'s petition for certiorari, it
holding that the Labor Arbiter has jurisdiction over the complaint of the Union, they having violated
the seniority rule under the CBA by appointing and promoting certain employees which amounted to
a ULP.16

Before this Court, SMFI lodged the present Petition for Review on Certiorari, faulting the appellate
court in

A.

. . . FINDING THAT THE LABOR ARBITER HAS JURISDICTION OVER THE COMPLAINT OF
RESPONDENT UNION

B.

. . . FINDING THAT SMFI'S ALLEGED VIOLATION OF THE CBA CONSTITUTES UNFAIR LABOR
PRACTICE.

The jurisdiction of Labor Arbiters, enumerated in Article 217 of the Labor Code, includes complaints
for ULP.

SMFI argues that the allegations in the Union's complaint filed before the Labor Arbiter do not
establish a cause of action for ULP, the Union having merely contended that SMFI was guilty thereof
without specifying the ultimate facts upon which it was based. It cites Section 1 of Rule 8 of the
Rules of Court as applying suppletorily to the proceedings before the Labor Arbiter, which Section
reads:

Section 1. In general. - Every pleading shall contain in a methodical and logical form, a plain concise
and direct statement of the ultimate facts on which the party pleading relies for his claim . . .

Labor II – 1
Alleging that the Union failed to comply with this Rule, SMFI concludes that the Labor Arbiter has no
jurisdiction over its complaint.

A perusal of the complaint shows that, indeed, the particular acts of ULP alleged to have been
committed by SMFI were not specified; neither were the ultimate facts in support thereof. In its
Position Paper, however, the Union detailed the particular acts of ULP attributed to SMFI and the
ultimate facts in support thereof.

Section 7, Rule V of the New Rules of Procedure of the NLRC provides:

Nature of Proceedings. - The proceedings before the Labor Arbiter shall be non-litigious in
nature. Subject to the requirements of due process, the technicalities of law and procedure
and the rules obtaining in the courts of law shall not strictly apply thereto . The Labor Arbiter
may avail himself of all reasonable means to ascertain the facts of the controversy speedily, including
ocular inspection and examination of well-informed persons. (Emphasis and underscoring supplied) cralawlibrary

Section 1 of Rule 8 of the Rules of Court should thus not be strictly applied to a case filed before a
Labor Arbiter. In determining jurisdiction over a case, allegations made in the complaint, as well as
those in the position paper, may thus be considered.

As stated above, the Union, in its Position Paper, mentioned the particular acts of ULP and the
ultimate facts in support thereof. Thus it alleged:

This is a complaint for unfair labor practices pursuant to Article 248 (e) and (i) of the Labor
Code, as amended, which reads:

Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of
the following unfair labor practices:

x   x   x

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor organization.

x   x   x

(i) to violate a collective bargaining agreement.

and which was committed by herein respondents as follows:

1. large scale and wanton unjust discrimination in matters of promotion, particularly upon
the following members of complainant: Ellen Ventura, Julie Geronimo, Ronnie Cruz, Rita Calasin,
Romy de Peralta, Malou Alano, And E. M. Moraleda, all assigned with the Finance Department or
respondent SMFI.

2. gross and blatant violations by respondent SMFI of Section 5, Article III (Job Security)

and Section 4, Article VIII (Grievance Machinery) of the current collective bargaining
agreement (CBA) between complainant and respondent SMFI, which provisions of said CBA are
hereunder quoted for easy reference. (Emphasis and underscoring supplied) cralawlibrary

On the questioned promotions, the Union did not allege that they were done to encourage or
discourage membership in a labor organization. In fact, those promoted were members of the

Labor II – 1
complaining Union. The promotions do not thus amount to ULP under Article 248(e) of the Labor
Code.

As for the alleged ULP committed under Article 248(i), for violation of a CBA, this Article is qualified
by Article 261 of the Labor Code, the pertinent portion of which latter Article reads:

x x x violations of a Collective Bargaining Agreement, except those which are gross in

character, shall no longer be treated as unfair labor practice and shall be resolved as grievances
under the Collective Bargaining Agreement. For purposes of this article, gross violations of
Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to comply
with the economic provisions of such agreement. (Emphasis and underscoring supplied) cralawlibrary

Silva v. NLRC instructs that for a

ULP case to be cognizable by the Labor Arbiter, and the NLRC to exercise its appellate jurisdiction,
the allegations in the complaint should show prima facie the concurrence of two things, namely: (1)
gross violation of the CBA; AND (2) the violation pertains to the economic provisions of the
CBA.17 (Emphasis and underscoring supplied) cralawlibrary

As reflected in the above-quoted allegations of the Union in its Position Paper, the Union charges
SMFI to have violated the grievance machinery provision in the CBA. The grievance machinery
provision in the CBA is not an economic provision, however, hence, the second requirement for a
Labor Arbiter to exercise jurisdiction of a ULP is not present.

The Union likewise charges SMFI, however, to have violated the Job Security provision in the CBA,
specifically the seniority rule, in that SMFI "appointed less senior employees to positions at its
Finance Department, consequently intentionally by-passing more senior employees who are
deserving of said appointment."

Article 4 of the Labor Code provides that "All doubts in the implementation and interpretation of the
provisions of this Code, including implementing rules and regulations, shall be resolved in favor of
labor." Since the seniority rule in the promotion of employees has a bearing on salary and benefits, it
may, following a liberal construction of Article 261 of the Labor Code, be considered an "economic
provision" of the CBA.

As above-stated, the Union charges SMFI to have promoted less senior employees, thus bypassing
others who were more senior and equally or more qualified. It may not be seriously disputed that this
charge is a gross or flagrant violation of the seniority rule under the CBA, a ULP over which the Labor
Arbiter has jurisdiction.

SMFI, at all events, questions why the Court of Appeals came out with a finding that it (SMFI)
disregarded the seniority rule under the CBA when its petition before said court merely raised a
question of jurisdiction. The Court of Appeals having affirmed the NLRC decision finding that the
Labor Arbiter has jurisdiction over the Union's complaint and thus remanding it to the Labor Arbiter
for continuation of proceedings thereon, the appellate court's said finding may be taken to have been
made only for the purpose of determining jurisdiction.

WHEREFORE, the Petition is DENIED.

Labor II – 1
20.) G.R. No. 155690               June 30, 2005

CAPITOL MEDICAL CENTER, INC., petitioner,

vs.
HON. CRESENCIANO B. TRAJANO, in his capacity as Secretary of the Department of Labor and
Employment, and CAPITOL MEDICAL CENTER EMPLOYEES ASSOCIATION-AFW, respondents.

SANDOVAL-GUTIERREZ, J.:

For our resolution is the instant petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
as amended, assailing the Decision1 dated September 20, 2001 and the Resolution2 dated October 18, 2002
rendered by the Court of Appeals in CA-G.R. SP No. 53479, entitled "Capitol Medical Center, Inc. vs. Hon.
Cresenciano B. Trajano, in his capacity as Secretary of the Department of Labor and Employment and Capitol
Medical Center Employees Association-AFW."

The factual antecedents as gleaned from the records are:

Capitol Medical Center, Inc., petitioner, is a hospital with address at Panay Avenue corner Scout Magbanua Street,
Quezon City. Upon the other hand, Capitol Medical Center Employees Association-Alliance of Filipino
Workers, respondent, is a duly registered labor union acting as the certified collective bargaining agent of the rank-
and-file employees of petitioner hospital.

On October 2, 1997, respondent union, through its president Jaime N. Ibabao, sent petitioner a letter requesting a
negotiation of their Collective Bargaining Agreement (CBA).

In its reply dated October 10, 1997, petitioner, challenging the union’s legitimacy, refused to bargain with
respondent. Subsequently or on October 15, 1997, petitioner filed with the Bureau of Labor Relations (BLR),
Department of Labor and Employment, a petition for cancellation of respondent’s certificate of registration, docketed
as NCR-OD-9710-006-IRD.3

For its part, on October 29, 1997, respondent filed with the National Conciliation and Mediation Board (NCMB),
National Capital Region, a notice of strike, docketed as NCMB-NCR-NS-10-453-97. Respondent alleged that
petitioner’s refusal to bargain constitutes unfair labor practice. Despite several conferences and efforts of the
designated conciliator-mediator, the parties failed to reach an amicable settlement.

On November 28, 1997, respondent staged a strike.

On December 4, 1997, former Labor Secretary Leonardo A. Quisumbing, now Associate Justice of this Court,
issued an Order assuming jurisdiction over the labor dispute and ordering all striking workers to return to work and
the management to resume normal operations, thus:

"WHEREFORE, this Office assumes jurisdiction over the labor disputes at Capitol Medical Center pursuant to Article
263 (g) of the Labor Code, as amended. Consequently, all striking workers are directed to return to work within
twenty-four (24) hours from the receipt of this Order and the management to resume normal operations and accept
back all striking workers under the same terms and conditions prevailing before the strike. Further, parties are
directed to cease and desist from committing any act that may exacerbate the situation.

Moreover, parties are hereby directed to submit within 10 days from receipt of this Order proposals and counter-
proposals leading to the conclusion of the collective bargaining agreement in compliance with aforementioned
Resolution of the Office as affirmed by the Supreme Court.

SO ORDERED."

Petitioner then filed a motion for reconsideration but was denied in an Order dated April 27, 1998.

Labor II – 1
On June 23, 1998, petitioner filed with this Court a petition for certiorari assailing the Labor Secretary’s Orders.
Pursuant to our ruling in St. Martin Funeral Home vs.The National Labor Relations Commission, et al.,4 we referred
the petition to the Court of Appeals for its appropriate action and disposition.

Meantime, on October 1, 1998, the Regional Director, in NCR-OD-9710-006-IRD, issued an Order denying the
petition for cancellation of respondent union’s certificate of registration. 5

On September 20, 2001, the Appellate Court rendered a Decision affirming the Orders of the Secretary of Labor.
The Court of Appeals held:

"Anent the first issue raised by the petitioner, We find the same untenable. The public respondent acted well within
his duty to order the petitioner hospital to bargain collectively, for it was the surest way to end the dispute. In LMG
Chemicals Corporation vs. Secretary of the Department of Labor and Employment, the Hon. Leonardo A.
Quisumbing and Chemical Worker’s Union (G.R. No. 127422, April 17, 2001), the Supreme Court made the
following pronouncement, to wit:

‘It is well settled in our jurisprudence that the authority of the Secretary of Labor to assume jurisdiction over a labor
dispute causing or likely to cause a strike or lockout in an industry indispensable to national interest includes and
extends to all questions and controversies arising therefrom. The power is plenary and discretionary in nature to
enable him to effectively and efficiently dispose of the primary dispute.

xxxxxx

Indeed, We find no grave abuse of discretion on the part of respondent Secretary of Labor whose power is plenary
and includes the resolution of all controversies arising from the labor dispute. In fact, he was merely following the
directive laid down by the Supreme Court (Decision dated February 4, 1997) in the case of Capitol Medical Center
Alliance of Concerned Employees-Unified Filipino Service Workers (CMC-ACE-UFSW) vs. Hon. Bienvenido E.
Laguesma, Undersecretary of the Department of Labor and Employment, Capitol Medical Center Employees
Association-Alliance of Filipino Workers and Capitol Medical Center Incorporated and Dra. Thelma Clemente,
President, ordering petitioner hospital to collectively bargain with the Capitol Medical Center Employees
Association-Alliance of Filipino Workers (private respondent herein) – the certified bargaining agent.

As earlier mentioned, the petition for cancellation was dismissed by the regional director in a decision dated
September 30, 1998. x x x.

xxxxxx

Said decision by the regional director was affirmed by the Director of the Bureau of Labor Relations in a resolution
dated December 29, 1998, dismissing the appeal of the petitioner hospital from the said DOLE-NCR’s decision.

Finally, the petition for certiorari (docketed as CA-G.R. SP No. 52736) entitled – Capitol Medical Center, Inc. vs.
Hon. Benedictor R. Bitonio, Jr., in his capacity as Director of the Bureau of Labor Relations, Department of Labor
and Employment; Hon. Maximo B. Lim in his capacity as Regional Director, National Capital Region, Department of
Labor and Employment and Capitol Medical Center Employees Association (CMCEA-AFW), was dismissed in a
decision dated January 11, 2001. The motion for reconsideration which was subsequently filed was denied on
March 23, 2001.

xxxxxx

In order to allow an employer to validly suspend the bargaining process, there must be a valid petition for
certification election. The mere filing of a petition does not ipso facto justify the suspension of negotiation by the
employer (Colegio de San Juan de Letran vs. Association of Employees and Faculty of Letran and Eleanor Ambas,
G.R. No. 141471, September 18, 2000). If pending a petition for certification, the collective bargaining is allowed by
the Supreme Court to proceed, with more reason should the collective bargaining (in this case) continue since the
High Court had recognized the respondent as the certified bargaining agent in spite of several petitions for
cancellation filed against it.
Labor II – 1
xxxxxx

Secondly, We are inclined to agree with the public respondent’s statement that ‘the primary assumption of
jurisdiction may be exercised by this Office even without the necessity of prior notice or hearing given to any of the
parties disputants.’ (page 56 of the Rollo).

xxxxxx

We are also not convinced by the arguments raised by the petitioner with respect to its third assigned error. This
Court fails to see any supervening event that would render the execution of the decision of public respondent
impossible. The petitioner asserts that the respondent union has lost its legitimacy, but at every turn it has been
ruled by the various labor administrative officials that the respondent union is legitimate. It has failed to convince the
labor administrative officials, We are likewise not persuaded. Unless and until the Certificate of Registration of the
union is cancelled, it (union) remains the certified bargaining agent and the Hospital has the duty to enter into a
collective bargaining agreement with it.

xxxxxx

WHEREFORE, premises considered, the instant petition is DENIED, hereby AFFIRMING the two assailed orders,
dated December 4, 1997 and April 27, 1998, of the public respondent in OS-AJ-0024-97 (NCMB-NCR-NS-10-453-
97).

SO ORDERED."

On October 18, 2002, the Court of Appeals issued a Resolution denying petitioner’s motion for reconsideration.

Hence, this petition for review on certiorari.

Petitioner contends that its petition for the cancellation of respondent union’s certificate of registration involves a
prejudicial question that should first be settled before the Secretary of Labor could order the parties to bargain
collectively.

We are not persuaded.

As aptly stated by the Solicitor General in his comment on the petition, the Secretary of Labor correctly ruled that the
pendency of a petition for cancellation of union registration does not preclude collective bargaining, thus:

"That there is a pending cancellation proceedings against the respondent Union is not a bar to set in motion the
mechanics of collective bargaining. If a certification election may still be ordered despite the pendency of a petition
to cancel the union’s registration certificate (National Union of Bank Employees vs. Minister of Labor, 110 SCRA
274), more so should the collective bargaining process continue despite its pendency. We must emphasize that the
majority status of the respondent Union is not affected by the pendency of the Petition for Cancellation pending
against it. Unless its certificate of registration and its status as the certified bargaining agent are revoked, the
Hospital is, by express provision of the law, duty bound to collectively bargain with the Union. Indeed, no less than
the Supreme Court already ordered the Hospital to collectively bargain with the Union when it affirmed the resolution
of this Office dated November 18, 1994 directing the management of the Hospital to negotiate a collective
bargaining agreement with the Union. That was the categorical directive of the High Court in its Resolution dated
February 4, 1997 in Capitol Medical Center Alliance of Concerned Employees-United Filipino Service Worker vs.
Hon. Bienvenido E. Laguesma, et al., G.R. No. L-118915."

Moreover, as mentioned earlier, during the pendency of this case before the Court of Appeals, the Regional
Director, in NCR-OD-9710-006-IRD, issued an Order on October 1, 1998 denying the petition for cancellation of
respondent’s certificate of registration. This Order became final and executory and recorded in the BLR’s Book of
Entries of Judgments on June 3, 1999.

Labor II – 1
Petitioner also maintains that the Secretary of Labor cannot exercise his powers under Article 263 (g) of the Labor
Code without observing the requirements of due process.

Article 263 (g) of the Labor Code, as amended, provides:

"ART. 263. Strikes, Picketing and Lockouts. –

xxxxxx

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry
indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the
dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified
in the assumption or certification order. If one has already taken place at the time of assumption or certification, all
striking or locked out employees shall immediately resume operations and readmit all workers under the same terms
and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission
may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such
orders as he may issue to enforce the same.

x x x. In labor disputes adversely affecting the continued operation of such hospitals, clinics or medical institutions, it
shall be the duty of the striking union or locking-out employer to provide and maintain an effective skeletal workforce
of medical and other health personnel, whose movement and services shall be unhampered and unrestricted, as
are necessary to insure the proper and adequate protection of the life and health of its patients, most especially
emergency cases, for the duration of the strike or lockout. In such cases, therefore, the Secretary of Labor and
Employment is mandated to immediately assume, within twenty-four (24) hours from knowledge of the
occurrence of such a strike or lockout, jurisdiction over the same or certify it to the Commission for
compulsory arbitration. For this purpose, the contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and Employment or the Commission, under
pain of immediate disciplinary action, including dismissal or loss of employment status or payment by the locking-out
employer of backwages, damages and other affirmative relief, even criminal prosecution against either or both of
them.

The foregoing notwithstanding, the President of the Philippines shall not be precluded from determining the
industries that, in his opinion, are indispensable to the national interest, and from intervening at any time and
assuming jurisdiction over any such labor dispute in order to settle or terminate the same.

x x x x x x."

In Magnolia Poultry Employees Union vs. Sanchez,6 we held that the discretion to assume jurisdiction may be
exercised by the Secretary of Labor and Employment without the necessity of prior notice or hearing given to any of
the parties. The rationale for his primary assumption of jurisdiction can justifiably rest on his own consideration of
the exigency of the situation in relation to the national interests.

In sum, petitioner’s submissions are bereft of merit.

WHEREFORE, the petition is DENIED. The assailed Decision dated September 20, 2001 and the Resolution dated
October 18, 2002 of the Court of Appeals in CA-G.R. SP No. 53479 are AFFIRMED. Costs against petitioner.

Labor II – 1
 21.) [G.R. NO. 114974 : June 16, 2004]

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), Petitioner, v. The Honorable

MA. NIEVES R. CONFESOR, in her capacity as SECRETARY OF LABOR AND EMPLOYMENT;
and the STANDARD CHARTERED BANK, Respondents.

DECISION

CALLEJO, SR., J.:

This is a petition for certiorari under Rule 65 of the Rules of Court filed by the Standard Chartered
Bank Employees Union, seeking the nullification of the October 29, 1993 Order 1 of then Secretary of
Labor and Employment Nieves R. Confesor and her resolutions dated December 16, 1993 and
February 10, 1994.

The Antecedents

Standard Chartered Bank (the Bank, for brevity) is a foreign banking corporation doing business in
the Philippines.The exclusive bargaining agent of the rank and file employees of the Bank is the
Standard Chartered Bank Employees Union (the Union, for brevity).

In August of 1990, the Bank and the Union signed a five-year collective bargaining agreement (CBA)
with a provision to renegotiate the terms thereof on the third year. Prior to the expiration of the
three-year period2 but within the sixty-day freedom period, the Union initiated the negotiations. On
February 18, 1993, the Union, through its President, Eddie L. Divinagracia, sent a letter 3 containing
its proposals4 covering political provisions5 and thirty-four (34) economic provisions.6 Included
therein was a list of the names of the members of the Unions negotiating panel. 7 cralawred

In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H. Harris, took
note of the Unions proposals.The Bank attached its counter-proposal to the non-economic provisions
proposed by the Union.8 The Bank posited that it would be in a better position to present its counter-
proposals on the economic items after the Union had presented its justifications for the economic
proposals.9 The Bank, likewise, listed the members of its negotiating panel. 10 The parties agreed to
set meetings to settle their differences on the proposed CBA.

Before the commencement of the negotiation, the Union, through Divinagracia, suggested to the
Banks Human Resource Manager and head of the negotiating panel, Cielito Diokno, that the bank
lawyers should be excluded from the negotiating team. The Bank acceded. 11 Meanwhile, Diokno
suggested to Divinagracia that Jose P. Umali, Jr., the President of the National Union of Bank
Employees (NUBE), the federation to which the Union was affiliated, be excluded from the Unions
negotiating panel.12 However, Umali was retained as a member thereof.

On March 12, 1993, the parties met and set the ground rules for the negotiation.Diokno suggested
that the negotiation be kept a family affair. The proposed non-economic provisions of the CBA were
discussed first.13 Even during the final reading of the non-economic provisions on May 4, 1993, there
were still provisions on which the Union and the Bank could not agree. Temporarily, the notation
DEFERRED was placed therein.Towards the end of the meeting, the Union manifested that the same
should be changed to DEADLOCKED to indicate that such items remained unresolved. Both parties
agreed to place the notation DEFERRED/DEADLOCKED. 14  cralawred

On May 18, 1993, the negotiation for economic provisions commenced. A presentation of the basis of
the Unions economic proposals was made.The next meeting, the Bank made a similar presentation.
Towards the end of the Banks presentation, Umali requested the Bank to validate the
Labor II – 1
Unions guestimates, especially the figures for the rank and file staff. 15 In the succeeding meetings,
Umali chided the Bank for the insufficiency of its counter-proposal on the provisions on salary
increase, group hospitalization, death assistance and dental benefits. He reminded the Bank, how the
Union got what it wanted in 1987, and stated that if need be, the Union would go through the same
route to get what it wanted.16 cralawred

Upon the Banks insistence, the parties agreed to tackle the economic package item by item.Upon the
Unions suggestion, the Bank indicated which provisions it would accept, reject, retain and agree to
discuss.17 The Bank suggested that the Union prioritize its economic proposals, considering that many
of such economic provisions remained unresolved.The Union, however, demanded that the Bank
make a revised itemized proposal.

In the succeeding meetings, the Union made the following proposals: chanroblesvirtua1awlibrary

Wage Increase:

1st Year Reduced from 45% to 40%

2nd Year -Retain at 20%

Total = 60%

Group Hospitalization Insurance:

Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness annually

Death Assistance:

For the employee -- Reduced from P50,000.00 to P45,000.00

For Immediate Family Member -- Reduced from P30,000.00 to P25,000.00

Dental and all others -- No change from the original demand. 18  cralawred

In the morning of the June 15, 1993 meeting, the Union suggested that if the Bank would not make
the necessary revisions on its counter-proposal, it would be best to seek a third party
assistance.19 After the break, the Bank presented its revised counter-proposal 20 as follows: chanroblesvirtua1awlibrary

Wage Increase : 1st Year from P1,000 to P1,050.00

2nd Year P800.00 no change

Group Hospitalization Insurance

From: P35,000.00 per illness

To: P35,000.00 per illness per year

Death Assistance For employee

From: P20,000.00

To: P25,000.00
Labor II – 1
Dental Retainer Original offer remains the same 21  cralawred

The Union, for its part, made the following counter-proposal: chanroblesvirtua1awlibrary

Wage Increase:1st Year - 40%

2nd Year - 19.5%

Group Hospitalization Insurance

From: P60,000.00 per year

To:P50,000.00 per year

Dental:

Temporary Filling/ P150.00

Tooth Extraction

Permanent Filling 200.00

Prophylaxis 250.00

Root Canal From P2,000 per tooth

To: 1,800.00 per tooth

Death Assistance:

For Employees: From P45,000.00 to P40,000.00

For Immediate Family Member: From P25,000.00 to P20,000.00.22  cralawred

The Unions original proposals, aside from the above-quoted, remained the same.

Another set of counter-offer followed: chanroblesvirtua1awlibrary

Management Union

Wage Increase

1st Year P1,050.00 40%

2nd Year -850.00 19.0%23  cralawred

Diokno stated that, in order for the Bank to make a better offer, the Union should clearly identify
what it wanted to be included in the total economic package.Umali replied that it was impossible to
do so because the Banks counter-proposal was unacceptable.He furthered asserted that it would
have been easier to bargain if the atmosphere was the same as before, where both panels trusted
each other.Diokno requested the Union panel to refrain from involving personalities and to instead
focus on the negotiations.24 He suggested that in order to break the impasse, the Union should
prioritize the items it wanted to iron out.Divinagracia stated that the Bank should make the first
Labor II – 1
move and make a list of items it wanted to beincluded in the economic package.Except for the
provisions on signing bonus and uniforms, the Union and the Bank failed to agree on the remaining
economic provisions of the CBA. The Union declared a deadlock 25 and filed a Notice of Strike before
the National Conciliation and Mediation Board (NCMB) on June 21, 1993, docketed as NCMB-NCR-NS-
06-380-93.26  cralawred

On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP) and Damages before
the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, docketed as
NLRC Case No. 00-06-04191-93 against the Union on June 28, 1993.The Bank alleged that the Union
violated its duty to bargain, as it did not bargain in good faith.It contended that the Union demanded
sky high economic demands, indicative of blue-sky bargaining.27 Further, the Union violated its no
strike- no lockout clause by filing a notice of strike before the NCMB.Considering that the filing of
notice of strike was an illegal act, the Union officers should be dismissed.Finally, the Bank alleged
that as a consequence of the illegal act, the Bank suffered nominal and actual damages and was
forced to litigate and hire the services of the lawyer. 28  cralawred

On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R. Confesor, pursuant to
Article 263(g) of the Labor Code, issued an Order assuming jurisdiction over the labor dispute at the
Bank.The complaint for ULP filed by the Bank before the NLRC was consolidated with the complaint
over which the SOLE assumed jurisdiction.After the parties submitted their respective position
papers, the SOLE issued an Order on October 29, 1993, the dispositive portion of which is herein
quoted: chanroblesvirtua1awlibrary

WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank Employees Union NUBE
are hereby ordered to execute a collective bargaining agreement incorporating the dispositions
contained herein.The CBA shall be retroactive to 01 April 1993 and shall remain effective for two
years thereafter, or until such time as a new CBA has superseded it.All provisions in the expired CBA
not expressly modified or not passed upon herein are deemed retained while all new provisions which
are being demanded by either party are deemed denied, but without prejudice to such agreements
as the parties may have arrived at in the meantime.

The Banks charge for unfair labor practice which it originally filed with the NLRC as NLRC-NCR Case
No. 00-06-04191-93 but which is deemed consolidated herein, is dismissed for lack of merit.On the
other hand, the Unions charge for unfair labor practice is similarly dismissed.

Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR Case No. 00-06-
04191-93 is pending for his guidance and appropriate action. 29  cralawred

The SOLEgave the following economic awards: chanroblesvirtua1awlibrary

1.Wage Increase: chanroblesvirtua1awlibrary

a) To be incorporated to present salary rates:

Fourth year : 7% of basic monthly salary

Fifth year: 5% of basic monthly salary based on the 4 th year adjusted salary

b) Additional fixed amount:

Fourth year :P600.00 per month

Fifth year:P400.00 per month

Labor II – 1
2.Group Insurance

a) Hospitalization : P45,000.00

b) Life: P130,000.00

c) Accident: P130,000.00

3.Medicine Allowance

Fourth year : P5,500.00

Fifth year: P6,000.00

4.Dental Benefits

Provision of dental retainer as proposed by the Bank, but without diminishing existing benefits

5.Optical Allowance

Fourth year:P2,000.00

Fifth year:P2,500.00

6.Death Assistance

a) Employee :P30,000.00

b) Immediate Family Member :P5,000.00

7.Emergency Leave Five (5) days for each contingency

8.Loans

a) Car Loan : P200,000.00

b) Housing Loan :It cannot be denied that the costs attendant to having ones own home have
tremendously gone up.The need, therefore, to improve on this benefit cannot be
overemphasized.Thus, the management is urged to increase the existing and allowable housing loan
that the Bank extends to its employees to an amount that will give meaning and substance to this
CBA benefit.30 cralawred

The SOLE dismissed the charges of ULP of both the Union and the Bank, explaining that both parties
failed to substantiate their claims.Citing National Labor Union v. Insular-Yebana Tobacco
Corporation,31 the SOLE stated that ULP charges would prosper only if shown to have directly
prejudiced the public interest.

Dissatisfied, the Union filed a motion for reconsideration with clarification, while the Bank filed a
motion for reconsideration.On December 16, 1993, the SOLE issued a Resolution denying the
motions.The Union filed a second motion for reconsideration, which was, likewise, denied on February
10, 1994.

Labor II – 1
On March 22, 1994, the Bank and the Union signed the CBA. 32 Immediately thereafter, the wage
increase was effected and the signing bonuses based on the increased wage were distributed to the
employees covered by the CBA.

The Present Petition

On April 28, 1994, the Union filed this petition for certiorari under Rule 65 of the Rules of Procedure
alleging as follows: chanroblesvirtua1awlibrary

A.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF JURISDICTION IN DISMISSING THE UNIONS CHARGE OF UNFAIR LABOR PRACTICE IN
VIEW OF THE CLEAR EVIDENCE OF RECORD AND ADMISSIONS PROVING THE UNFAIR LABOR
PRACTICES CHARGED.33  cralawred

B.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF JURISDICTION IN FAILING TO RULE ON OTHER UNFAIR LABOR PRACTICES
CHARGED.34  cralawred

C.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING

TO LACK OF JURISDICTION IN DISMISSING THE CHARGES OF UNFAIR LABOR PRACTICES ON THE
GROUND THAT NO PROOF OF INJURY TO THE PUBLIC INTEREST WAS PRESENTED. 35  cralawred

The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or excess of
jurisdiction when it found that the Bank did not commit unfair labor practice when it interfered with
the Unions choice of negotiator.It argued that, Dioknos suggestion that the negotiation be limited as
a family affair was tantamount to suggesting that Federation President Jose Umali, Jr. be excluded
from the Unions negotiating panel.It further argued that contrary to the ruling of the public
respondent, damage or injury to the public interest need not be present in order for unfair labor
practice to prosper.

The Union, likewise, pointed out that the public respondent failed to rule on the ULP charges arising
from the Banks surface bargaining.The Union contended that the Bank merely went through the
motions of collective bargaining without the intent to reach an agreement, and made bad faith
proposals when it announced that the parties should begin from a clean slate.It argued that the Bank
opened the political provisions up for grabs, which had the effect of diminishing or obliterating the
gains that the Union had made.

The Union also accused the Bank of refusing to disclose material and necessary data, even after a
request was made by the Union to validate its guestimates.

In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped,
considering that it signed the Collective Bargaining Agreement (CBA) on April 22, 1994.It asserted
that contrary to the Unions allegations, it was the Union that committed ULP when negotiator Jose
Umali, Jr. hurled invectives at the Banks head negotiator, Cielito Diokno, and demanded that she be
excluded from the Banks negotiating team.Moreover, the Union engaged in blue-sky bargaining and
isolated the no strike-no lockout clause of the existing CBA.

The Office of the Solicitor General, in representation of the public respondent, prayed that the
petition be dismissed.It asserted that the Union failed to prove its ULP charges and that the public
respondent did not commit any grave abuse of discretion in issuing the assailed order and
resolutions.

The Issues

Labor II – 1
The issues presented for resolution arethe following: (a) whether or not the Union was able to
substantiate its claim of unfair labor practice against the Bank arising from the latters alleged
interference with its choice of negotiator; surface bargaining; making bad faith non-economic
proposals; and refusal to furnish the Union with copies of the relevant data; (b) whether or not the
public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when she issued the assailed order and resolutions; and, (c) whether or not the petitioner is
estopped from filing the instant action.

The Courts Ruling

The petition is bereft of merit.

Interference under Article

248 (a) of the Labor Code

The petitioner asserts that the private respondent committed ULP, i.e., interference in the selection
of the Unions negotiating panel, when Cielito Diokno, the Banks Human Resource Manager,
suggested to the Unions President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the
NUBE, be excluded from the Unions negotiating panel.In support of its claim, Divinagracia executed
an affidavit, stating that prior to the commencement of the negotiation, Diokno approached him and
suggested the exclusion of Umali from the Unions negotiating panel, and that during the first
meeting, Diokno stated that the negotiation be kept a family affair.

Citing the cases of U.S. Postal Service36 and Harley Davidson Motor Co., Inc., AMF,37 the Union claims
that interference in the choice of the Unions bargaining panel is tantamount to ULP.

In the aforecited cases, the alleged ULP was based on the employers violation of Section 8(a) (1) and
(5) of the National Labor Relations Act (NLRA),38 which pertain to the interference, restraint or
coercion of the employer in the employees exercise of their rights to self-organization and to bargain
collectively through representatives of their own choosing; and the refusal of the employer to bargain
collectively with the employees representatives.In both cases, the National Labor Relations Board
held that upon the employers refusal to engage in negotiations with the Union for collective-
bargaining contract when the Union includes a person who is not an employee, or one who is a
member or an official of other labor organizations, such employer is engaged in unfair labor practice
under Section 8(a) (1) and (5) of the NLRA.

The Union further cited the case of Insular Life Assurance Co., Ltd. Employees Association NATU v.
Insular Life Assurance Co., Ltd.,39 wherein this Court said that the test of whether an employer has
interfered with and coerced employees in the exercise of their right to self-organization within the
meaning of subsection (a) (1) is whether the employer has engaged in conduct which it may
reasonably be said, tends to interfere with the free exercise of employees rights under Section 3 of
the Act.40 Further, it is not necessary that there be direct evidence that any employee was in fact
intimidated or coerced by statements of threats of the employer if there is a reasonable inference
that anti-union conduct of the employer does have an adverse effect on self-organization and
collective bargaining.41 
cralawred

Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF ASSOCIATION
AND PROTECTION OF THE RIGHT TO ORGANIZE to which the Philippines is a signatory, workers and
employers, without distinction whatsoever, shall have the right to establish and, subject only to the
rules of the organization concerned, to job organizations of their own choosing without previous
authorization.42 Workers and employers organizations shall have the right to draw up their
constitutions and rules, to elect their representatives in full freedom to organize their administration

Labor II – 1
and activities and to formulate their programs.43 Article 2 of ILO Convention No. 98 pertaining to the
Right to Organize and Collective Bargaining, provides: chanroblesvirtua1awlibrary

Article 2

1.Workers and employers organizations shall enjoy adequate protection against any acts or
interference by each other or each others agents or members in their establishment, functioning or
administration.

2.In particular, acts which are designed to promote the establishment of workers organizations under
the domination of employers or employers organizations or to support workers organizations by
financial or other means, with the object of placing such organizations under the control of employers
or employers organizations within the meaning of this Article.

The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article 243 thereof,
which provides: chanroblesvirtua1awlibrary

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 of collective bargaining.
Ambulant, intermittent and itinerant workers, self-employed people, rural workers and those without
any definite employers may form labor organizations for their mutual aid and protection.

and Articles 248 and 249 respecting ULP of employers and labor organizations.

The said ILO Conventions were ratified on December 29, 1953. However, even as early as the 1935
Constitution,44 the State had already expressly bestowed protection to labor as part of the general
provisions. The 1973 Constitution, 45 on the other hand, declared it as a policy of the state to afford
protection to labor, specifying that the workers rights to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work would be assured. For its part, the 1987
Constitution, aside from making it a policy to protect the rights of workers and promote their
welfare,46 devotes an entire section, emphasizing its mandate to afford protection to labor, and
highlights the principle of shared responsibility between workers and employers to promote industrial
peace.47  cralawred

Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer interferes,
restrains or coerces employees in the exercise of their right to self-organization or the right to form
association.The right to self-organization necessarily includes the right to collective bargaining.

Parenthetically, if an employer interferes in the selection of its negotiators or coerces the Union to
exclude from its panel of negotiators a representative of the Union, and if it can be inferred that the
employer adopted the said act to yield adverse effects on the free exercise to right to self-
organization or on the right to collective bargaining of the employees, ULP under Article 248(a) in
connection with Article 243 of the Labor Code is committed.

In order to show that the employer committed ULP under the Labor Code, substantial evidence is
required to support the claim.Substantial evidence has been defined as such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion. 48 In the case at bar, the Union
bases its claim of interference on the alleged suggestions of Diokno to exclude Umali from the Unions
negotiating panel.

The circumstances that occurred during the negotiation do not show that the suggestion made by
Diokno to Divinagracia is an anti-union conduct from which it can be inferred that the Bank
Labor II – 1
consciously adopted such act to yield adverse effects on the free exercise of the right to self-
organization and collective bargaining of the employees, especially considering that such was
undertaken previous to the commencement of the negotiation and simultaneously with Divinagracias
suggestion that the bank lawyers be excluded from its negotiating panel.

The records show that after the initiation of the collective bargaining process, with the inclusion of
Umali in the Unions negotiating panel, the negotiations pushed through. The complaint was made
only on August 16, 1993 after a deadlock was declared by the Union on June 15, 1993.

It is clear that such ULP charge was merely an afterthought.The accusation occurred after the
arguments and differences over the economic provisions became heated and the parties had become
frustrated.It happened after the parties started to involve personalities. As the public respondent
noted, passions may rise, and as a result, suggestions given under less adversarial situations may be
colored with unintended meanings.49 Such is what appears to have happened in this case.

The Duty to Bargain Collectively

If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the normal
relations and innocent communications, which are all part of the friendly relations between the Union
and Bank.

The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under Article
248(g) when it engaged in surface bargaining. It alleged that the Bank just went through the motions
of bargaining without any intent of reaching an agreement, as evident in the Banks counter-
proposals.It explained that of the 34 economic provisions it made, the Bank only made 6 economic
counterproposals.Further, as borne by the minutes of the meetings, the Bank, after indicating the
economic provisions it had rejected, accepted, retained or were open for discussion, refused to make
a list of items it agreed to include in the economic package.

Surface bargaining is defined as going through the motions of negotiating without any legal intent to
reach an agreement.50 The resolution of surface bargaining allegations never presents an easy issue.
The determination of whether a party has engaged in unlawful surface bargaining is usually a difficult
one because it involves, at bottom, a question of the intent of the party in question, and usually such
intent can only be inferred from the totality of the challenged partys conduct both at and away from
the bargaining table.51 It involves the question of whether an employers conduct demonstrates an
unwillingness to bargain in good faith or is merely hard bargaining. 52 cralawred

The minutes of meetings from March 12, 1993 to June 15, 1993 do not show that the Bank had any
intention of violating its duty to bargain with the Union. Records show that after the Union sent its
proposal to the Bank on February 17, 1993, the latter replied with a list of its counter-proposals on
February 24, 1993.Thereafter, meetings were set for the settlement of their differences.The minutes
of the meetings show that both the Bank and the Union exchanged economic and non-economic
proposals and counter-proposals.

The Union has not been able to show that the Bank had done acts, both at and away from the
bargaining table, which tend to show that it did not want to reach an agreement with the Union or to
settle the differences between it and the Union.Admittedly, the parties were not able to agree and
reached a deadlock.However, it is herein emphasized that the duty to bargain does not compel either
party to agree to a proposal or require the making of a concession. 53 Hence, the parties failure to
agree did not amount to ULP under Article 248(g) for violation of the duty to bargain.

We can hardly dispute this finding, for it finds support in the evidence.The inference that respondents
did not refuse to bargain collectively with the complaining union because they accepted some of the
demands while they refused the others even leaving open other demands for future discussion is
Labor II – 1
correct, especially so when those demands were discussed at a meeting called by respondents
themselves precisely in view of the letter sent by the union on April 29, 1960 54  cralawred

In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank made bad
faith provisions has no leg to stand on.The records show that the Banks counter-proposals on the
non-economic provisions or political provisions did not put up for grabs the entire work of the Union
and its predecessors.As can be gleaned from the Banks counter-proposal, there were many
provisions which it proposed to be retained.The revisions on the other provisions were made after the
parties had come to an agreement.Far from buttressing the Unions claim that the Bank made bad-
faith proposals on the non-economic provisions, all these, on the contrary, disprove such allegations.

We, likewise, find that the Union failed to substantiate its claim that the Bank refused to furnish the
information it needed.

While the refusal to furnish requested information is in itself an unfair labor practice, and also
supports the inference of surface bargaining, 55 in the case at bar, Umali, in a meeting dated May 18,
1993, requested the Bank to validate its guestimates on the data of the rank and file.However, Umali
failed to put his request in writing as provided for in Article 242(c) of the Labor Code:

Article 242.Rights of Legitimate Labor Organization

(c) To be furnished by the employer, upon written request, with the annual audited financial
statements, including the balance sheet and the profit and loss statement, within thirty (30) calendar
days from the date of receipt of the request, after the union has been duly recognized by the
employer or certified as the sole and exclusive bargaining representatives of the employees in the
bargaining unit, or within sixty (60) calendar days before the expiration of the existing collective
bargaining agreement, or during the collective negotiation; chanroblesvirtuallawlibrary

The Union, did not, as the Labor Code requires, send a written request for the issuance of a copy of
the data about the Banks rank and file employees.Moreover, as alleged by the Union, the fact that
the Bank made use of the aforesaid guestimates, amounts to a validation of the data it had used in
its presentation.

No Grave Abuse of Discretion

On the Part of the Public Respondent

The special civil action for certiorari may be availed of when the tribunal, board, or officer exercising
judicial or quasi-judicial functions has acted without or in excess of jurisdiction and there is no appeal
or any plain, speedy, and adequate remedy in the ordinary course of law for the purpose of annulling
the proceeding.56 Grave abuse of discretion implies such capricious and whimsical exercise of
judgment as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or
despotic manner by reason of passion or personal hostility which must be so patent and gross as to
amount to an invasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at
all in contemplation of law.Mere abuse of discretion is not enough. 57  cralawred

While it is true that a showing of prejudice to public interest is not a requisite for ULP charges to
prosper, it cannot be said that the public respondent acted in capricious and whimsical exercise of
judgment, equivalent to lack of jurisdiction or excess thereof. Neither was it shown that the public
respondent exercised its power in an arbitrary and despotic manner by reason of passion or personal
hostility.

Estoppel not Applicable

Labor II – 1
In the Case at Bar

The respondent Bank argues that the petitioner is estopped from raising the issue of ULP when it
signed the new CBA.

Article 1431 of the Civil Code provides: chanroblesvirtua1awlibrary

Through estoppel an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon.

A person, who by his deed or conduct has induced another to act in a particular manner, is barred
from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or
injury to another.58 cralawred

In the case, however, the approval of the CBA and the release of signing bonus do not necessarily
mean that the Union waived its ULP claim against the Bank during the past negotiations.After all, the
conclusion of the CBA was included in the order of the SOLE, while the signing bonus was included in
the CBA itself.Moreover, the Union twice filed a motion for reconsideration respecting its ULP charges
against the Bank before the SOLE.

The Union Did Not Engage

In Blue-Sky Bargaining

We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky bargaining or
making exaggerated or unreasonable proposals.59 The Bank failed to show that the economic
demands made by the Union were exaggerated or unreasonable.The minutes of the meeting show
that the Union based its economic proposals on data of rank and file employees and the prevailing
economic benefits received by bank employees from other foreign banks doing business in the
Philippines and other branches of the Bank in the Asian region.

In sum, we find that the public respondent did not act with grave abuse of discretion amounting to
lack or excess of jurisdiction when it issued the questioned order and resolutions.While the approval
of the CBA and the release of the signing bonus did not estop the Union from pursuing its claims of
ULP against the Bank, we find that the latter did not engage in ULP.We, likewise, hold that the Union
is not guilty of ULP.

In light of the foregoing, the October 29, 1993 Order and December 16, 1993 and February 10,
1994 Resolutions of then Secretary of Labor Nieves R. Confesor are AFFIRMED.The Petition is hereby
DISMISSED.

Labor II – 1
 22.) [G.R. NO. 146728. February 11, 2004]

GENERAL MILLING CORPORATION, Petitioner, v.  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 decision 2 dated January 30, 1998 of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-0112-94.

The antecedent facts are as follows: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

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 unions 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  ςrνll

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.

Labor II – 1
The union appealed to the NLRC.

On January 30, 1998, the NLRC set aside the labor arbiters 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 attorneys fees. 5  ςrνll

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 unions claim of discrimination, the NLRC found the claim unsupported by
substantial evidence.

On GMCs motion for reconsideration, the NLRC set aside its decision of January 30, 1998, through a
resolution dated October 6, 1998. It found GMCs doubts as to the status of the union justified and
the allegation of coercion exerted by GMC on the unions 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
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: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

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
attorneys fees which is hereby deleted, REINSTATED.6  ςrνll

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 Certiorarialleging 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

Labor II – 1
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  ςrνll

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.

On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No. 6715, states: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

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 unions 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: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

ART. 248. Unfair labor practices of employers . It shall be unlawful for an employer to commit
any of the following unfair labor practice: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

.. .

(g) To violate the duty to bargain collectively as prescribed by this Code; chanroblesvirtuallawlibrary

.. .

Article 252 of the Labor Code elucidates the meaning of the phrase duty to bargain collectively,
thus: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

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....

Labor II – 1
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.9 Good faith or bad faith is an inference to be drawn from the facts. 10 The effect of an
employers or a unions actions individually is not the test of good-faith bargaining, but the impact of
all such occasions or actions, considered as a whole.11  ςrνll

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: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

ART. 250. Procedure in collective bargaining. The following procedures shall be observed in

collective bargaining: ςηαñrοblεš  νιr†υαl  lαω lιbrαrÿ

(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) ςrαlαωlιbrαrÿ

GMCs 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 GMCs refusal to make a counter-proposal to the unions 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  ςrνll

Failing to comply with the mandatory obligation to submit a reply to the unions 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 GMCs desperate attempts to cast doubt on the legitimate status of the union. We agree with
the CAs 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? chanroblesvirtualawlibrary

The Code provides: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

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
Labor II – 1
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) ςrαlαωlιbrαrÿ

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 v. 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:
ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

petitioner Companys 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  ςrνll

Likewise, in Divine Word University of Tacloban v. 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: ςηαñrοblεš νιr†υαl  lαω lιbrαrÿ

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  ςrνll

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
GMCs employees for the remaining two (2) years of the CBAs 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 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
Labor II – 1
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 courts 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.

Labor II – 1
23.) G.R. No. 172013               October 2, 2009

PATRICIA HALAGUEÑA, MA. ANGELITA L. PULIDO, MA. TERESITA P. SANTIAGO, MARIANNE V. KATINDIG,
BERNADETTE A. CABALQUINTO, LORNA B. TUGAS, MARY CHRISTINE A. VILLARETE, CYNTHIA A.
STEHMEIER, ROSE ANNA G. VICTA, NOEMI R. CRESENCIO, and other flight attendants of PHILIPPINE
AIRLINES, Petitioners,
vs.
PHILIPPINE AIRLINES INCORPORATED, Respondent.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul and set
aside the Decision1 and the Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No. 86813.

Petitioners were employed as female flight attendants of respondent Philippine Airlines (PAL) on different dates prior
to November 22, 1996. They are members of the Flight Attendants and Stewards Association of the Philippines
(FASAP), a labor organization certified as the sole and exclusive certified as the sole and exclusive bargaining
representative of the flight attendants, flight stewards and pursers of respondent.

On July 11, 2001, respondent and FASAP entered into a Collective Bargaining Agreement 3 incorporating the terms
and conditions of their agreement for the years 2000 to 2005, hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For the Cabin Attendants hired before 22 November 1996:

xxxx

3. Compulsory Retirement

Subject to the grooming standards provisions of this Agreement, compulsory retirement shall be fifty-five (55) for
females and sixty (60) for males. x x x.

In a letter dated July 22, 2003,4 petitioners and several female cabin crews manifested that the aforementioned CBA
provision on compulsory retirement is discriminatory, and demanded for an equal treatment with their male
counterparts. This demand was reiterated in a letter 5 by petitioners' counsel addressed to respondent demanding
the removal of gender discrimination provisions in the coming re-negotiations of the PAL-FASAP CBA.

On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA proposals 6 and
manifested their willingness to commence the collective bargaining negotiations between the management and the
association, at the soonest possible time.

On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief with Prayer for the Issuance of
Temporary Restraining Order and Writ of Preliminary Injunction 7 with the Regional Trial Court (RTC) of Makati City,
Branch 147, docketed as Civil Case No. 04-886, against respondent for the invalidity of Section 144, Part A of the
PAL-FASAP CBA. The RTC set a hearing on petitioners' application for a TRO and, thereafter, required the parties
to submit their respective memoranda.

On August 9, 2004, the RTC issued an Order 8 upholding its jurisdiction over the present case. The RTC reasoned
that:

Labor II – 1
In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA which is allegedly discriminatory as it
discriminates against female flight attendants, in violation of the Constitution, the Labor Code, and the CEDAW. The
allegations in the Petition do not make out a labor dispute arising from employer-employee relationship as none is
shown to exist. This case is not directed specifically against respondent arising from any act of the latter, nor does it
involve a claim against the respondent. Rather, this case seeks a declaration of the nullity of the questioned
provision of the CBA, which is within the Court's competence, with the allegations in the Petition constituting the
bases for such relief sought.

The RTC issued a TRO on August 10, 2004, 9 enjoining the respondent for implementing Section 144, Part A of the
PAL-FASAP CBA.

The respondent filed an omnibus motion10 seeking reconsideration of the order overruling its objection to the
jurisdiction of the RTC the lifting of the TRO. It further prayed that the (1) petitioners' application for the issuance of
a writ of preliminary injunction be denied; and (2) the petition be dismissed or the proceedings in this case be
suspended.

On September 27, 2004, the RTC issued an Order 11 directing the issuance of a writ of preliminary injunction
enjoining the respondent or any of its agents and representatives from further implementing Sec. 144, Part A of the
PAL-FASAP CBA pending the resolution of the case.

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari and Prohibition with Prayer for a
Temporary Restraining Order and Writ of Preliminary Injunction 12 with the Court of Appeals (CA) praying that the
order of the RTC, which denied its objection to its jurisdiction, be annuled and set aside for having been issued
without and/or with grave abuse of discretion amounting to lack of jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting the respondent's petition, and ruled that:

WHEREFORE, the respondent court is by us declared to have NO JURISDICTION OVER THE CASE BELOW and,
consequently, all the proceedings, orders and processes it has so far issued therein are ANNULED and SET
ASIDE. Respondent court is ordered to DISMISS its Civil Case No. 04-886.

SO ORDERED.

Petitioner filed a motion for reconsideration,13 which was denied by the CA in its Resolution dated March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABOR DISPUTE OR
GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.

The main issue in this case is whether the RTC has jurisdiction over the petitioners' action challenging the legality or
constitutionality of the provisions on the compulsory retirement age contained in the CBA between respondent PAL
and FASAP.

Petitioners submit that the RTC has jurisdiction in all civil actions in which the subject of the litigation is incapable of
pecuniary estimation and in all cases not within the exclusive jurisdiction of any court, tribunal, person or body
exercising judicial or quasi-judicial functions. The RTC has the power to adjudicate all controversies except those
expressly witheld from the plenary powers of the court. Accordingly, it has the power to decide issues of
constitutionality or legality of the provisions of Section 144, Part A of the PAL-FASAP CBA. As the issue involved is
constitutional in character, the labor arbiter or the National Labor Relations Commission (NLRC) has no jurisdiction
over the case and, thus, the petitioners pray that judgment be rendered on the merits declaring Section 144, Part A
of the PAL-FASAP CBA null and void.

Respondent, on the other hand, alleges that the labor tribunals have jurisdiction over the present case, as the
controversy partakes of a labor dispute. The dispute concerns the terms and conditions of petitioners' employment
in PAL, specifically their retirement age. The RTC has no jurisdiction over the subject matter of petitioners' petition
Labor II – 1
for declaratory relief because the Voluntary Arbitrator or panel of Voluntary Arbitrators have original and exclusive
jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the
CBA. Regular courts have no power to set and fix the terms and conditions of employment. Finally, respondent
alleged that petitioners' prayer before this Court to resolve their petition for declaratory relief on the merits is
procedurally improper and baseless.

The petition is meritorious.

Jurisdiction of the court is determined on the basis of the material allegations of the complaint and the character of
the relief prayed for irrespective of whether plaintiff is entitled to such relief. 14

In the case at bar, the allegations in the petition for declaratory relief plainly show that petitioners' cause of action is
the annulment of Section 144, Part A of the PAL-FASAP CBA. The pertinent portion of the petition recites:

CAUSE OF ACTION

24. Petitioners have the constitutional right to fundamental equality with men under Section 14, Article II,
1987 of the Constitution and, within the specific context of this case, with the male cabin attendants of
Philippine Airlines.

26. Petitioners have the statutory right to equal work and employment opportunities with men under Article
3, Presidential Decree No. 442, The Labor Code and, within the specific context of this case, with the male
cabin attendants of Philippine Airlines.

27. It is unlawful, even criminal, for an employer to discriminate against women employees with respect to
terms and conditions of employment solely on account of their sex under Article 135 of the Labor Code as
amended by Republic Act No. 6725 or the Act Strengthening Prohibition on Discrimination Against Women.

28. This discrimination against Petitioners is likewise against the Convention on the Elimination of All Forms
of Discrimination Against Women (hereafter, "CEDAW"), a multilateral convention that the Philippines
ratified in 1981. The Government and its agents, including our courts, not only must condemn all forms of
discrimination against women, but must also implement measures towards its elimination.

29. This case is a matter of public interest not only because of Philippine Airlines' violation of the
Constitution and existing laws, but also because it highlights the fact that twenty-three years after the
Philippine Senate ratified the CEDAW, discrimination against women continues.

31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsory retirement from service is
invidiously discriminatory against and manifestly prejudicial to Petitioners because, they are compelled to
retire at a lower age (fifty-five (55) relative to their male counterparts (sixty (60).

33. There is no reasonable, much less lawful, basis for Philippine Airlines to distinguish, differentiate or
classify cabin attendants on the basis of sex and thereby arbitrarily set a lower compulsory retirement age of
55 for Petitioners for the sole reason that they are women.

37. For being patently unconstitutional and unlawful, Section 114, Part A of the PAL-FASAP 2000-2005 CBA
must be declared invalid and stricken down to the extent that it discriminates against petitioner.

38. Accordingly, consistent with the constitutional and statutory guarantee of equality between men and
women, Petitioners should be adjudged and declared entitled, like their male counterparts, to work until they
are sixty (60) years old.

PRAYER

WHEREFORE, it is most respectfully prayed that the Honorable Court:

Labor II – 1
c. after trial on the merits:

(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID, NULL and VOID to the extent that it
discriminates against Petitioners; x x x x

From the petitioners' allegations and relief prayed for in its petition, it is clear that the issue raised is whether Section
144, Part A of the PAL-FASAP CBA is unlawful and unconstitutional. Here, the petitioners' primary relief in Civil
Case No. 04-886 is the annulment of Section 144, Part A of the PAL-FASAP CBA, which allegedly discriminates
against them for being female flight attendants. The subject of litigation is incapable of pecuniary estimation,
exclusively cognizable by the RTC, pursuant to Section 19 (1) of Batas Pambansa Blg. 129, as amended. 15 Being an
ordinary civil action, the same is beyond the jurisdiction of labor tribunals.

The said issue cannot be resolved solely by applying the Labor Code. Rather, it requires the application of the
Constitution, labor statutes, law on contracts and the Convention on the Elimination of All Forms of Discrimination
Against Women,16 and the power to apply and interpret the constitution and CEDAW is within the jurisdiction of trial
courts, a court of general jurisdiction. In Georg Grotjahn GMBH & Co. v. Isnani,17 this Court held that not every
dispute between an employer and employee involves matters that only labor arbiters and the NLRC can
resolve in the exercise of their adjudicatory or quasi-judicial powers. The jurisdiction of labor arbiters and
the NLRC under Article 217 of the Labor Code is limited to disputes arising from an employer-employee
relationship which can only be resolved by reference to the Labor Code, other labor statutes, or their
collective bargaining agreement.

Not every controversy or money claim by an employee against the employer or vice-versa is within the
exclusive jurisdiction of the labor arbiter. Actions between employees and employer where the employer-
employee relationship is merely incidental and the cause of action precedes from a different source of
obligation is within the exclusive jurisdiction of the regular court.18 Here, the employer-employee relationship
between the parties is merely incidental and the cause of action ultimately arose from different sources of obligation,
i.e., the Constitution and CEDAW.

Thus, where the principal relief sought is to be resolved not by reference to the Labor Code or other labor
relations statute or a collective bargaining agreement but by the general civil law, the jurisdiction over the
dispute belongs to the regular courts of justice and not to the labor arbiter and the NLRC. In such situations,
resolution of the dispute requires expertise, not in labor management relations nor in wage structures and other
terms and conditions of employment, but rather in the application of the general civil law. Clearly, such claims fall
outside the area of competence or expertise ordinarily ascribed to labor arbiters and the NLRC and the rationale for
granting jurisdiction over such claims to these agencies disappears. 19

If We divest the regular courts of jurisdiction over the case, then which tribunal or forum shall determine the
constitutionality or legality of the assailed CBA provision?

This Court holds that the grievance machinery and voluntary arbitrators do not have the power to determine and
settle the issues at hand. They have no jurisdiction and competence to decide constitutional issues relative to the
questioned compulsory retirement age. Their exercise of jurisdiction is futile, as it is like vesting power to someone
who cannot wield it.

In Gonzales v. Climax Mining Ltd.,20 this Court affirmed the jurisdiction of courts over questions on constitutionality of
contracts, as the same involves the exercise of judicial power. The Court said:

Whether the case involves void or voidable contracts is still a judicial question. It may, in some instances, involve
questions of fact especially with regard to the determination of the circumstances of the execution of the contracts.
But the resolution of the validity or voidness of the contracts remains a legal or judicial question as it requires the
exercise of judicial function. It requires the ascertainment of what laws are applicable to the dispute, the
interpretation and application of those laws, and the rendering of a judgment based thereon. Clearly, the dispute is
not a mining conflict. It is essentially judicial. The complaint was not merely for the determination of rights under the
mining contracts since the very validity of those contracts is put in issue.

Labor II – 1
In Saura v. Saura, Jr.,21 this Court emphasized the primacy of the regular court's judicial power enshrined in the
Constitution that is true that the trend is towards vesting administrative bodies like the SEC with the power to
adjudicate matters coming under their particular specialization, to insure a more knowledgeable solution of the
problems submitted to them. This would also relieve the regular courts of a substantial number of cases that would
otherwise swell their already clogged dockets. But as expedient as this policy may be, it should not deprive the
courts of justice of their power to decide ordinary cases in accordance with the general laws that do not
require any particular expertise or training to interpret and apply. Otherwise, the creeping take-over by the
administrative agencies of the judicial power vested in the courts would render the judiciary virtually
impotent in the discharge of the duties assigned to it by the Constitution.

To be sure, in Rivera v. Espiritu,22 after Philippine Airlines (PAL) and PAL Employees Association (PALEA) entered
into an agreement, which includes the provision to suspend the PAL-PALEA CBA for 10 years, several employees
questioned its validity via a petition for certiorari directly to the Supreme Court. They said that the suspension was
unconstitutional and contrary to public policy. Petitioners submit that the suspension was inordinately long, way
beyond the maximum statutory life of 5 years for a CBA provided for in Article 253-A of the Labor Code. By agreeing
to a 10-year suspension, PALEA, in effect, abdicated the workers' constitutional right to bargain for another CBA at
the mandated time.

In that case, this Court denied the petition for certiorari, ruling that there is available to petitioners a plain, speedy,
and adequate remedy in the ordinary course of law. The Court said that while the petition was denominated as one
for certiorari and prohibition, its object was 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.

The change in the terms and conditions of employment, should Section 144 of the CBA be held invalid, is but a
necessary and unavoidable consequence of the principal relief sought, i.e., nullification of the alleged discriminatory
provision in the CBA. Thus, it does not necessarily follow that a resolution of controversy that would bring about a
change in the terms and conditions of employment is a labor dispute, cognizable by labor tribunals. It is unfair to
preclude petitioners from invoking the trial court's jurisdiction merely because it may eventually result into a change
of the terms and conditions of employment. Along that line, the trial court is not asked to set and fix the terms and
conditions of employment, but is called upon to determine whether CBA is consistent with the laws.

Although the CBA provides for a procedure for the adjustment of grievances, such referral to the grievance
machinery and thereafter to voluntary arbitration would be inappropriate to the petitioners, because the union and
the management have unanimously agreed to the terms of the CBA and their interest is unified.

In Pantranco North Express, Inc., v. NLRC,23 this Court held that:

x x x Hence, only disputes involving the union and the company shall be referred to the grievance machinery or
voluntary arbitrators.

In the instant case, both the union and the company are united or have come to an agreement regarding the
dismissal of private respondents. No grievance between them exists which could be brought to a grievance
machinery. The problem or dispute in the present case is between the union and the company on the one hand and
some union and non-union members who were dismissed, on the other hand. The dispute has to be settled before
an impartial body. The grievance machinery with members designated by the union and the company cannot be
expected to be impartial against the dismissed employees. Due process demands that the dismissed workers’
grievances be ventilated before an impartial body. x x x .

Applying the same rationale to the case at bar, it cannot be said that the "dispute" is between the union and
petitioner company because both have previously agreed upon the provision on "compulsory retirement" as
embodied in the CBA. Also, it was only private respondent on his own who questioned the compulsory retirement. x
x x.

In the same vein, the dispute in the case at bar is not between FASAP and respondent PAL, who have both
previously agreed upon the provision on the compulsory retirement of female flight attendants as embodied
in the CBA. The dispute is between respondent PAL and several female flight attendants who questioned
Labor II – 1
the provision on compulsory retirement of female flight attendants. Thus, applying the principle in the
aforementioned case cited, referral to the grievance machinery and voluntary arbitration would not serve
the interest of the petitioners.

Besides, a referral of the case to the grievance machinery and to the voluntary arbitrator under the CBA would be
futile because respondent already implemented Section 114, Part A of PAL-FASAP CBA when several of its female
flight attendants reached the compulsory retirement age of 55.

Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted its association's bargaining proposal
for the remaining period of 2004-2005 of the PAL-FASAP CBA, which includes the renegotiation of the subject
Section 144. However, FASAP's attempt to change the questioned provision was shallow and superficial, to say the
least, because it exerted no further efforts to pursue its proposal. When petitioners in their individual capacities
questioned the legality of the compulsory retirement in the CBA before the trial court, there was no showing that
FASAP, as their representative, endeavored to adjust, settle or negotiate with PAL for the removal of the difference
in compulsory age retirement between its female and male flight attendants, particularly those employed before
November 22, 1996. Without FASAP's active participation on behalf of its female flight attendants, the utilization of
the grievance machinery or voluntary arbitration would be pointless.

The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA. Interpretation, as
defined in Black's Law Dictionary, is the art of or process of discovering and ascertaining the meaning of a statute,
will, contract, or other written document.24 The provision regarding the compulsory retirement of flight attendants is
not ambiguous and does not require interpretation. Neither is there any question regarding the implementation of
the subject CBA provision, because the manner of implementing the same is clear in itself. The only controversy lies
in its intrinsic validity.

Although it is a rule that a contract freely entered between the parties should be respected, since a contract is the
law between the parties, said rule is not absolute.

In Pakistan International Airlines Corporation v. Ople, 25 this Court held that:

The principle of party autonomy in contracts is not, however, an absolute principle. The rule in Article 1306, of our
Civil Code is that the contracting parties may establish such stipulations as they may deem convenient, "provided
they are not contrary to law, morals, good customs, public order or public policy." Thus, counter-balancing the
principle of autonomy of contracting parties is the equally general rule that provisions of applicable law, especially
provisions relating to matters affected with public policy, are deemed written into the contract. Put a little differently,
the governing principle is that parties may not contract away applicable provisions of law especially peremptory
provisions dealing with matters heavily impressed with public interest. The law relating to labor and employment is
clearly such an area and parties are not at liberty to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.

Moreover, the relations between capital and labor are not merely contractual. They are so impressed with public
interest that labor contracts must yield to the common good.x x x 26 The supremacy of the law over contracts is
explained by the fact that labor contracts are not ordinary contracts; these are imbued with public interest and
therefore are subject to the police power of the state. 27 It should not be taken to mean that retirement provisions
agreed upon in the CBA are absolutely beyond the ambit of judicial review and nullification. A CBA, as a labor
contract, is not merely contractual in nature but impressed with public interest. If the retirement provisions in the
CBA run contrary to law, public morals, or public policy, such provisions may very well be voided. 28

Finally, the issue in the petition for certiorari brought before the CA by the respondent was the alleged exercise of
grave abuse of discretion of the RTC in taking cognizance of the case for declaratory relief. When the CA annuled
and set aside the RTC's order, petitioners sought relief before this Court through the instant petition for review under
Rule 45. A perusal of the petition before Us, petitioners pray for the declaration of the alleged discriminatory
provision in the CBA against its female flight attendants.

This Court is not persuaded. The rule is settled that pure questions of fact may not be the proper subject of an
appeal by certiorari under Rule 45 of the Revised Rules of Court. This mode of appeal is generally limited only to
questions of law which must be distinctly set forth in the petition. The Supreme Court is not a trier of facts. 29
Labor II – 1
The question as to whether said Section 114, Part A of the PAL-FASAP CBA is discriminatory or not is a question of
fact. This would require the presentation and reception of evidence by the parties in order for the trial court to
ascertain the facts of the case and whether said provision violates the Constitution, statutes and treaties. A full-
blown trial is necessary, which jurisdiction to hear the same is properly lodged with the the RTC. Therefore, a
remand of this case to the RTC for the proper determination of the merits of the petition for declaratory relief is just
and proper. 1avvphi1

WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of the Court of Appeals, dated
August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813 are REVERSED and SET ASIDE. The
Regional Trial Court of Makati City, Branch 147 is DIRECTED to continue the proceedings in Civil Case No. 04-886
with deliberate dispatch.

Labor II – 1
 24.) [G.R. NO. 173849 : September 28, 2007]

PIER 8 ARRASTRE & STEVEDORING SERVICES, INC. and/ or ELIODORO C.

CRUZ, Petitioners, v. JEFF B. BOCLOT, Respondent.

DECISION

CHICO-NAZARIO, J.:

In this Petition for Review on Certiorari under Rule 45 of the Rules of Civil Procedure, petitioners pray
that this Court annul and set aside the (a) Decision1 dated 18 November 2005 of the Court of Appeals
in CA-G.R. SP No. 88929 affirming the twin Resolutions 2 dated 29 October 20043 and 29 December
20044 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 038683-04; and (b)
Resolution dated 21 July 2006 of the appellate court in the same case, denying petitioners' Motion for
Reconsideration of the aforementioned Decision.

The factual antecedents of the present petition are as follows:

Petitioner Pier 8 Arrastre and Stevedoring Services, Inc. (PASSI) is a domestic corporation engaged
in the business of providing arrastre and stevedoring services 5 at Pier 8 in the Manila North Harbor.
PASSI has been rendering arrastre and stevedoring services at the port area since 1974 and employs
stevedores who assist in the loading and unloading of cargoes to and from the vessels. Petitioner
Eliodoro C. Cruz is its Vice-President and General Manager.

Respondent Jeff B. Boclot was hired by PASSI to perform the functions of a stevedore starting 20
September 1999.

The facts show that respondent rendered actual services to PASSI during the following periods:

Period Duration

September - December 1999 (4 months) 21 days

January - April 2000 (4 months) 20 days

March - December 2001 (10 months) 85 days

January - December 2002 (12 months) 70.5 days

January - June 2003 (6 months) 32 days

Total 36 months 228.5 days6

On 15 April 2000, the Philippine Ports Authority (PPA) seized the facilities and took over the
operations of PASSI through its Special Takeover Unit, absorbing PASSI workers as well as their
relievers. By virtue of a Decision dated 9 January 2001 of the Court of Appeals, petitioners were able
to regain control of their arrastre and stevedoring operations at Pier 8 on 12 March 2001. 7

On 9 May 2003, respondent filed a Complaint with the Labor Arbiter of the NLRC, claiming
regularization; payment of service incentive leave and 13th month pays; moral, exemplary and
actual damages; and attorney's fees. Respondent alleged that he was hired by PASSI in October
1999 and was issued company ID No. 304, 8 a PPA Pass and SSS documents. In fact, respondent

Labor II – 1
contended that he became a regular employee by April 2000, since it was his sixth continuous month
in service in PASSI's regular course of business. He argued on the basis of Articles 280 9 and 28110 of
the Labor Code. He maintains that under paragraph 2 of Article 280, he should be deemed a regular
employee having rendered at least one year of service with the company.

According to respondent, he remained a casual employee from the time he was first hired to perform
the services of a stevedore. Thus, respondent claimed he was denied the rights and privileges of a
regular employee, including those granted under the Collective Bargaining Agreement (CBA) such as
wage increase; medical, dental and hospitalization benefits; vacation and sick leaves; uniforms,
Christmas gifts, productivity bonus, accident insurance, special separation pays, and others. 11

Respondent relied on Article XXV of the company's existing CBA, effective 4 March 1998 to 3 March
2003, which states the following:

The Company agrees to convert to regular status all incumbent probationary or casual employees
and workers in the Company who have served the Company for an accumulated service term of
employment of not less than six (6) months from his original date of hiring

The probationary period for all future workers or employees shall be the following:

A. All skilled workers such as crane operator, mechanic, carpenter, winchman, signalman and
checkers shall become regular after three (3) months continuous employment;

b. All semi-skilled personnel shall become regular after four (4) months of continuous employment;

c. All non-skilled personnel shall be regular after six (6) months continuous employment. 12

In opposition thereto, petitioners alleged that respondent was hired as a mere "reliever" stevedore
and could thus not become a regular employee.

On 24 November 2003, NLRC Labor Arbiter Felipe P. Pati ruled for petitioners and dismissed
respondent's complaint. In finding no factual or legal basis for the regularization of respondent, the
Labor Arbiter came to the conclusion that respondent was "nothing more than an extra worker who is
called upon to work at the pier in the absence of regular stevedores at a certain shift." 13 He deemed
that Articles 280 and 281 of the Labor Code were inapplicable, on the contention that the
aforementioned articles speak of probationary employees and casual employees while respondent, as
a reliever, is neither a probationary employee nor a casual employee. Neither was respondent
qualified to avail himself of Service Incentive Leave benefits, even assuming he was a regular
employee, because the number of days of service he had rendered reached a total of 228.5 days only
- - short of 365 days, the one-year requirement to qualify for this benefit. Finally, respondent's
prayer for the grant of attorney's fees, and for moral and exemplary damages, was also denied.

Respondent appealed the Labor Arbiter's dismissal of his complaint to the NLRC. Thereafter, the
NLRC issued a Resolution on 29 October 2004 modifying the Labor Arbiter's Decision, ruling:

WHEREFORE, premises considered, complainant's appeal is partly GRANTED. The Labor Arbiter's
assailed Decision in the above-entitled case is hereby MODIFIED. Complainant is hereby declared a
regular employee of Respondents. The dismissal of Complainant's claim for benefits under the CBA
and other monetary claims are AFFIRMED for lack of jurisdiction and lack of merit,
respectively.14 (Italics ours.)

The NLRC gave credence to respondent's allegations that the Labor Arbiter committed grave abuse of
discretion in dismissing respondent's claim for regularization. The NLRC ruled that petitioners' failure,
without reasonable explanation, to present proof of absences of "regular" stevedores leads to the
Labor II – 1
conclusion that the stevedores, termed by petitioners as "relievers," work on rotation basis, just like
the "regular" stevedores. The NLRC predicated its findings that respondent is a regular employee of
petitioners on the reasonable connection between the activity performed by the employee in relation
to the usual business or trade of the employer. According to the NLRC, although respondent rendered
an average of 6.34 days of work a month, the activities performed were usually necessary and
desirable in the business of petitioners.

Petitioners filed a Motion for Reconsideration of the foregoing NLRC Resolution dated 29 October
2004 but this was subsequently denied in another NLRC Resolution issued on 29 December 2004.

Upon a denial of their motion for reconsideration by the NLRC, petitioners elevated their case to the
Court of Appeals via a Petition for Certiorari with prayer for the issuance of a Temporary Restraining
Order (TRO) and/or writ of preliminary injunction.

On 18 November 2005, the Court of Appeals dismissed the Petition for Certiorari and affirmed the
Resolutions of the NLRC finding respondent to be a regular employee. The Court of Appeals grounded
its Decision on this Court's previous rulings that what determines regularity or casualness is not the
employment contract, written or otherwise, but the nature of the job. Citing De Leon v. National
Labor Relations Commission,15 which enumerated the standards for determining regular employment,
the Court of Appeals ruled that even assuming that respondent was able to render services for only
228.5 days in a period of 36 months, the fact remains that his services were continuously utilized by
petitioners in their business. Where the job is usually necessary or desirable to the main business of
the employer, then the employment is regular. 16 The pertinent portions of the assailed Decision of
the Court of Appeals are herein reproduced:

Applying the above-mentioned principles, private respondent's task of loading and unloading cargoes
to and from the vessels is undoubtedly necessary and desirable to the business of petitioners'
arrastre and stevedoring services. Equally unavailing is the petitioners' contention that being a
reliever or an extra worker, private respondent cannot be deemed as a regular employee. This
cannot be accorded with merit as the same does not change the nature of the latter's employment.
Whether private respondent was hired only in the absence of regular stevedores, as petitioners
maintain, let it be emphasized that the determination of whether the employment is casual or regular
does not depend on the will or word of the employer, and the procedure of hiring and manner of
paying, but on the nature of the activities performed by an employee, and to some extent, the length
of performance, and its continued existence. Petitioners' admission that it has been an industry
practice to hire relievers whenever the need arises to ensure that operations at the pier continue for
24 hours only proves that private respondent's services are necessary or desirable in its usual
business, otherwise, private respondent should not have been at the employ of petitioners for a
period [of] 36 months. Even assuming that private respondent was able to render only 228.5 days
out of 36 months, the undisputed fact remains that private respondent's services was continuously
utilized by petitioners in the operation of its business. Whether one's employment is regular is not
determined by the number of the hours one works, but by the nature of the work and by the length
of time one has been in that particular job. To uphold petitioners' argument would preclude and
deprive workers, like private respondent herein, to acquire regular status favorably mandated by the
Labor Code.

xxx

WHEREFORE, the instant petition is DISMISSED for lack of merit and the assailed resolutions of
public respondent National Labor Relations Commission dated October 29, 2004 and December 29,
2004 are hereby AFFIRMED.17

On 14 December 2005, petitioners filed a Motion for Reconsideration, which was denied by the Court
of Appeals in a Resolution dated 21 July 2006.

Labor II – 1
Hence, through this Petition for Review on Certiorari, petitioners assail the Decision of the Court of
Appeals, raising the sole argument that:

THE COURT OF APPEALS ERRED IN RULING THAT PRIVATE RESPONDENT JEFF BOCLOT IS A
REGULAR EMPLOYEE OF PETITIONER PIER 8 ARRASTRE & STEVEDORING SERVICES, INC. BECAUSE
HE PERFORMED TASKS WHICH ARE USUALLY NECESSARY AND DESIRABLE TO THE MAIN BUSINESS
OF PETITIONER CORPORATION

Evidently, the only issue subject to the resolution of this Court is whether or not respondent has
attained regular status as PASSI's employee.

In the instant petition, petitioners are vehemently denying that respondent has become PASSI's
regular employee. Petitioners insist that respondent was hired as a mere "reliever" stevedore and,
thus, could not become a regular stevedore. Petitioners presented a list of the days when
respondent's services as stevedore were engaged, to support its claim that respondent is a reliever.
Petitioners aver that the employment of the stevedores is governed by a system of rotation. Based
on this system of rotation, the work available to reliever stevedores is dependent on the actual
stevedoring and arrastre requirements at a current given time. Petitioners posit that respondent, as a
reliever stevedore, is a mere extra worker whose work is dependent on the absence of regular
stevedores during any given shift. During "rotation proper," as petitioners term it, all regular
employees are first called and given work before any reliever is assigned. Petitioners assert that
while the regular stevedores work an average of 4 days a week (or 16 days a month), respondent
performed services for a total of 228.5 days (or only for an average of 6.34 days a month) from
September 1999 to June 2003. In defense of the Court of Appeals' ruling grounded on Articles 280
and 281 of the Labor Code, petitioners maintain that the foregoing provisions are inapplicable on the
postulation that respondent is neither a probationary nor a casual employee. For the same reasons,
petitioners argue that Article XXV of the CBA cannot be used to support respondent's contention that
he is a regular employee since the CBA provision he invokes refers to "all incumbent probationary or
casual employees and workers in the company" and not to respondent who is neither a casual nor a
probationary employee.

After a deliberate study of Labor Law provisions and jurisprudence, and in light of the particular
circumstances of this case, this Court has arrived at the same conclusion as those of the NLRC and
the Court of Appeals that respondent is a regular employee, but on a different basis.

Under the 1987 Philippine Constitution, the State affords full protection to labor, local and overseas,
organized and unorganized; and the promotion of full employment and equality of employment
opportunities for all. The State affirms labor as a primary social economic force and guarantees that
it shall protect the rights of workers and promote their welfare. 18

The Labor Code, which implements the foregoing Constitutional mandate, draws a fine line between
regular and casual employees to protect the interests of labor. 19 "Its language evidently manifests
the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits
due a regular employee by virtue of lopsided agreements with the economically powerful employer
who can maneuver to keep an employee on a casual status for as long as convenient." 20 Thus, the
standards for determining whether an employee is a regular employee or a casual or project
employee have been delineated in Article 280 of the Labor Code, to wit:

Article 280. Regular and Casual Employment. - The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed
to be regular where the employee has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer, except where the employment
has been fixed for a specific project or undertaking the completion or termination of which has been

Labor II – 1
determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph:

Provided, That, any employee who has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee with respect to the activity in which he
is employed and his employment shall continue while such actually exist.

Under the foregoing provision, a regular employee is (1) one who is either engaged to perform
activities that are necessary or desirable in the usual trade or business of the employer except for
project21 or seasonal employees; or (2) a casual employee who has rendered at least one year of
service, whether continuous or broken, with respect to the activity in which he is
employed.22 Additionally, Article 281 of the Labor Code further considers a regular employee as one
who is allowed to work after a probationary period. Based on the aforementioned, although
performing activities that are necessary or desirable in the usual trade or business of the employer,
an employee such as a project or seasonal employee is not necessarily a regular employee. The
situation of respondent is similar to that of a project or seasonal employee, albeit on a daily basis.

Under the second paragraph of the same provision, all other employees who do not fall under the
definition of the preceding paragraph are casual employees. However, the second paragraph also
provides that it deems as regular employees those casual employees who have rendered at least one
year of service regardless of the fact that such service may be continuous or broken.

De Leon v. National Labor Relations Commission23 succinctly explains the delineation of the foregoing
employee classification, to wit:

The primary standard, therefore, of determining a regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade
of the employer. The test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by considering the nature of
the work performed and its relation to the scheme of the particular business or trade in its entirety.
Also, if the employee has been performing the job for at least one year, even if the performance is
not continuous or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is also considered regular, but only with respect to such activity
and while such activity exists. (Emphasis supplied.)

PASSI is engaged in providing stevedoring and arrastre services in the port area in Manila.
Stevedoring, dock and arrastre operations include, but are not limited to, the opening and closing of
a vessel's hatches; discharging of cargoes from ship to truck or dock, lighters and barges, and vice-
versa; movement of cargoes inside vessels, warehouses, terminals and docks; and other related
work. In line with this, petitioners hire stevedores who assist in the loading and unloading of cargoes
to and from the vessels.

Petitioners concede that whenever respondent worked as a reliever stevedore due to the absence of
a regular stevedore, he performed tasks that are usually necessary and desirable to their business.
Petitioners, however, contend that this in itself does not make him a regular stevedore, postulating
that the hiring of respondent as a reliever is akin to a situation in which a worker goes on vacation
leave, sick leave, maternity leave or paternity leave; and the employer is constrained to hire another
worker from outside the establishment to ensure the smooth flow of its operations.

Based on the circumstances of the instant case, this Court agrees. It takes judicial notice 24 that it is
an industry practice in port services to hire "reliever" stevedores in order to ensure smooth-flowing
24-hour stevedoring and arrastre operations in the port area. No doubt, serving as a stevedore,

Labor II – 1
respondent performs tasks necessary or desirable to the usual business of petitioners. However, it
should be deemed part of the nature of his work that he can only work as a stevedore in the absence
of the employee regularly employed for the very same function. Bearing in mind that respondent
performed services from September 1999 until June 2003 for a period of only 228.5 days in 36
months, or roughly an average of 6.34 days a month; while a regular stevedore working for
petitioners, on the other hand, renders service for an average of 16 days a month, demonstrates that
respondent's employment is subject to the availability of work, depending on the absences of the
regular stevedores. Moreover, respondent does not contest that he was well aware that he would
only be given work when there are absent or unavailable employees. Respondent also does not
allege, nor is there any showing, that he was disallowed or prevented from offering his services to
other cargo handlers in the other piers at the North Harbor other than petitioners. As aforestated, the
situation of respondent is akin to that of a seasonal or project or term employee, albeit on a daily
basis.

Anent petitioners' contention that respondent is neither a probationary nor a casual employee, this
Court again refers to Article 280 of the Labor Code.

The second paragraph thereof stipulates in unequivocal terms that all other employees who do not
fall under the definitions in the first paragraph of regular, project and seasonal employees, are
deemed casual employees.25 Not qualifying under any of the kinds of employees covered by the first
paragraph of Article 280 of the Labor Code, then respondent is a casual employee under the second
paragraph of the same provision.

The same provision, however, provides that a casual employee can be considered as regular
employee if said casual employee has rendered at least one year of service regardless of the fact that
such service may be continuous or broken. Section 3, Rule V, Book II of the Implementing Rules and
Regulations of the Labor Code clearly defines the term "at least one year of service" to mean service
within 12 months, whether continuous or broken, reckoned from the date the employee started
working, including authorized absences and paid regular holidays, unless the working days in the
establishment as a matter of practice or policy, or that provided in the employment contract, is less
than 12 months, in which case said period shall be considered one year. 26 If the employee has been
performing the job for at least one year, even if the performance is not continuous or merely
intermittent, the law deems the repeated and continuing need for its performance as sufficient
evidence of the necessity, if not indispensability, of that activity to the business of the
employer.27 Applying the foregoing, respondent, who has performed actual stevedoring services for
petitioners only for an accumulated period of 228.5 days does not fall under the classification of a
casual turned regular employee after rendering at least one year of service, whether continuous or
intermittent.28

Both the Constitution and the Labor Code mandate the protection of labor. Hence, as a matter of
judicial policy, this Court has, in a number of instances, leaned backwards to protect labor and the
working class against the machinations and incursions of their more financially entrenched
employers.29 Where from the circumstances it is apparent that periods have been imposed to
preclude acquisition of tenurial security by an employee, such imposition should be struck down or
disregarded as contrary to public policy and morals.30 However, we take this occasion to emphasize
that the law, while protecting the rights of the employees, authorizes neither the oppression nor the
destruction of the employer. When the law tilts the scale of justice in favor of labor, the scale should
never be so tilted if the result would be an injustice to the employer. 31 Thus, this Court cannot be
compelled to declare respondent as a regular employee when by the nature of respondent's work as
a reliever stevedore and his accumulated length of service of only eight months do not qualify him to
be declared as such under the provisions of the Labor Code alone. 32

Labor II – 1
NONETHELESS, this Court still finds respondent to be a regular employee on the basis of pertinent
provisions under the CBA between PASSI and its Workers' union, which was effective from 4 March
1998 to 3 March 2003:

The Company agrees to convert to regular status all incumbent probationary or casual employees
and workers in the Company who have served the Company for an accumulated service term of
employment of not less than six (6) months from his original date of hiring.

The probationary period for all future workers or employees shall be the following:

(a) All skilled workers such as crane operator, mechanic, carpenter, winchman, signalman and
checkers shall become regular after three (3) months continuous employment;

(b) All semi-skilled personnel shall become regular after four (4) months of continuous employment;

(c) All non-skilled personnel shall be regular after six (6) months continuous employment. 33 (Italics
ours.)

Petitioners were crucified on this argument raised by respondent. The union which negotiated the
existing CBA is the sole and exclusive bargaining representative of all the stevedores, dock workers,
gang bosses, rank and file employees working at Pier 8, and its offices. The NLRC ruled that
respondent's reliance on the CBA to show that he has become a regular employee is misplaced for
the reason that the CBA applies only to regular workers of the company. 34 Respondent assents that
he is not a member of the union, as he was not recognized by PASSI as its regular employee, but this
Court notes that PASSI adopts a union-shop agreement, culling from Article II of the CBA which
stipulates:

The Union and the Company (PASSI) hereby agree to adopt the "Union Shop" as a condition of
employment to the position (sic) covered by this Agreement. 35

Under a union-shop agreement, although nonmembers may be hired, an employee is required to

become a union member after a certain period, in order to retain employment. This requirement
applies to present and future employees.36 The same article of the CBA stipulates that employment in
PASSI cannot be obtained without prior membership in the union. ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ

Apropos, applying the foregoing provisions of the CBA, respondent should be considered a regular
employee after six months of accumulated service. It is clearly stipulated therein that petitioners
shall agree to convert to regular status all incumbent probationary or casual employees and workers
in PASSI who have served PASSI for an accumulated service term of employment of not less than six
months from the original date of hiring. Having rendered 228.5 days, or eight months of service to
petitioners since 1999, then respondent is entitled to regularization by virtue of the said CBA
provisions.

In light of the foregoing, petitioners must accord respondent the status of a regular employee.

Additionally, respondent is not yet entitled to avail himself of service incentive leave benefits for his
failure to render at least one year of service. As to the 13th month pay, petitioners have shown that
respondent has been paid the same. Respondent is also not entitled to moral and exemplary
damages and attorney's fees for the reason that an employer may only be held liable for damages if
the attendant facts show that it was oppressive to labor or done in a manner contrary to morals,
good customs and public policy. None of the aforementioned circumstances are present. Neither was
there any appeal raised by respondent pertaining to the non-award of the foregoing claims.

Labor II – 1
WHEREFORE, in view of the foregoing, the instant Petition is DENIED and the Decision of the Court of
Appeals dated 18 November 2005 and its Resolution dated 21 January 2006, in CA-G.R. SP No.
88929 are AFFIRMED in the manner herein discussed. Costs against petitioners.

Labor II – 1
 25.) [G.R. NO. 176249 : November 27, 2009]

FVC LABOR UNION-PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION

(FVCLU-PTGWO), Petitioner, v. SAMA-SAMANG NAGKAKAISANG MANGGAGAWA SA FVC-
SOLIDARITY OF INDEPENDENT AND GENERAL LABOR ORGANIZATIONS (SANAMA-FVC-
SIGLO), Respondent.

DECISION

BRION, J.:

We pass upon the Petition for Review on Certiorari under Rule 45 of the Rules of Court1 filed by FVC
Labor Union Philippine Transport and General Workers Organization (FVCLU-PTGWO) to challenge the
Court of Appeals' (CA) decision of July 25, 2006 2 and its resolution rendered on January 15, 20073 in
C.A. G.R. SP No. 83292.4

THE ANTECEDENTS

The facts are undisputed and are summarized below.

On December 22, 1997, the petitioner FVCLU-PTGWO - the recognized bargaining agent of the rank-
and-file employees of the FVC Philippines, Incorporated (company) - signed a five-year collective
bargaining agreement (CBA) with the company. The five-year CBA period was from February 1, 1998
to January 30, 2003.5 At the end of the 3rd year of the five-year term and pursuant to the CBA,
FVCLU-PTGWO and the company entered into the renegotiation of the CBA and modified, among
other provisions, the CBA's duration. Article XXV, Section 2 of the renegotiated CBA provides that
"this re-negotiation agreement shall take effect beginning February 1, 2001 and until May 31, 2003"
thus extending the original five-year period of the CBA by four (4) months.

On January 21, 2003, nine (9) days before the January 30, 2003 expiration of the originally-agreed
five-year CBA term (and four [4] months and nine [9] days away from the expiration of the amended
CBA period), the respondent Sama-Samang Nagkakaisang Manggagawa sa FVC-Solidarity of
Independent and General Labor Organizations (SANAMA-SIGLO) filed before the Department of Labor
and Employment (DOLE) a petition for certification election for the same rank-and-file unit covered
by the FVCLU-PTGWO CBA. FVCLU-PTGWO moved to dismiss the petition on the ground that the
certification election petition was filed outside the freedom period or outside of the sixty (60) days
before the expiration of the CBA on May 31, 2003.

Action on the Petition and Related Incidents

On June 17, 2003, Med-Arbiter Arturo V. Cosuco dismissed the petition on the ground that it was
filed outside the 60-day period counted from the May 31, 2003 expiry date of the amended
CBA.6 SANAMA-SIGLO appealed the Med-Arbiter's Order to the DOLE Secretary, contending that the
filing of the petition on January 21, 2003 was within 60-days from the January 30, 2003 expiration of
the original CBA term.

DOLE Secretary Patricia A. Sto. Tomas sustained SANAMA-SIGLO's position, thereby setting aside the
decision of the Med-Arbiter.7 She ordered the conduct of a certification election in the company.
FVCLU-PTGWO moved for the reconsideration of the Secretary's decision.

On November 6, 2003, DOLE Acting Secretary Manuel G. Imson granted the motion; he set aside the
August 6, 2003 DOLE decision and dismissed the petition as the Med-Arbiter's Order of June 17,
2003 did.8 The Acting Secretary held that the amended CBA (which extended the representation
Labor II – 1
aspect of the original CBA by four [4] months) had been ratified by members of the bargaining unit
some of whom later organized themselves as SANAMA-SIGLO, the certification election applicant.
Since these SANAMA-SIGLO members fully accepted and in fact received the benefits arising from
the amendments, the Acting Secretary rationalized that they also accepted the extended term of the
CBA and cannot now file a petition for certification election based on the original CBA expiration date.

SANAMA-SIGLO moved for the reconsideration of the Acting Secretary's Order, but Secretary Sto.
Tomas denied the motion in her Order of January 30, 2004. 9

SANAMA-SIGLO sought relief from the CA through a petition for certiorari under Rule 65 of the Rules
of Court based on the grave abuse of discretion the Labor Secretary committed when she reversed
her earlier decision calling for a certification election. SANAMA-SIGLO pointed out that the
Secretary's new ruling is patently contrary to the express provision of the law and established
jurisprudence.

THE CA DECISION

The CA found SANAMA-SIGLO's petition meritorious on the basis of the applicable law 10 and the
rules,11 as interpreted in the congressional debates. It set aside the challenged DOLE Secretary
decisions and reinstated her earlier ruling calling for a certification election. The appellate court
declared:

It is clear from the foregoing that while the parties may renegotiate the other provisions (economic
and non-economic) of the CBA, this should not affect the five-year representation aspect of the
original CBA. If the duration of the renegotiated agreement does not coincide with but rather exceeds
the original five-year term, the same will 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. In the event a new union wins in the certification election,
such union is required to honor and administer the renegotiated CBA throughout the excess period.

FVCLU-PTGWO moved to reconsider the CA decision but the CA denied the motion in its resolution of
January 15, 2007.12 With this denial, FVCLU-PTGWO now comes before us to challenge the CA
rulings.13 It argues that in light of the peculiar attendant circumstances of the case, the CA erred in
strictly applying Section 11 (11b), Rule XI, Book V of the Omnibus Rules Implementing the Labor
Code, as amended by Department Order No. 9, s. 1997.14

Apparently, the "peculiar circumstances" the FVCLU-PTGWO referred to relate to the economic and
other provisions of the February 1, 1998 to January 30, 2003 CBA that it renegotiated with the
company. The renegotiated CBA changed the CBA's remaining term from February 1, 2001 to May
31, 2003. To FVCLU-PTGWO, this extension of the CBA term also changed the union's exclusive
bargaining representation status and effectively moved the reckoning point of the 60-day freedom
period from January 30, 2003 to May 30, 2003. FVCLU-PTGWO thus moved to dismiss the petition for
certification election filed on January 21, 2003 (9 days before the expiry date on January 30, 2003 of
the original CBA) by SANAMA-SIGLO on the ground that the petition was filed outside the authorized
60-day freedom period.

It also submits in its petition that the SANAMA-SIGLO is estopped from questioning the extension of
the CBA term under the amendments because its members are the very same ones who approved
the amendments, including the expiration date of the CBA, and who benefited from these
amendments.

Lastly, FVCLU-PTGWO posits that the representation petition had been rendered moot by a new CBA
it entered into with the company covering the period June 1, 2003 to May 31, 2008. 15  ςηαñrοblεš  Î½Î¹r†υαl  lαω  lιbrαrÿ

Labor II – 1
Required to comment by the Court16 and to show cause for its failure to comply,17 SANAMA-SIGLO
manifested on October 10, 2007 that: since the promulgation of the CA decision on July 25, 2006 or
three years after the petition for certification election was filed, the local leaders of SANAMA-SIGLO
had stopped reporting to the federation office or attending meetings of the council of local leaders;
the SANAMA-SIGLO counsel, who is also the SIGLO national president, is no longer in the position to
pursue the present case because the local union and its leadership, who are principals of SIGLO, had
given up and abandoned their desire to contest the representative status of FVCLU-PTGWO; and a
new CBA had already been signed by FVCLU-PTGWO and the company. 18 Under these circumstances,
SANAMA-SIGLO contends that pursuing the case has become futile, and accordingly simply adopted
the CA decision of July 25, 2006 as its position; its counsel likewise asked to be relieved from filing a
comment in the case. We granted the request for relief and dispensed with the filing of a comment. 19

THE COURT'S RULING

While SANAMA-SIGLO has manifested its abandonment of its challenge to the exclusive bargaining
representation status of FVCLU-PTGWO, we deem it necessary in the exercise of our discretion to
resolve the question of law raised since this exclusive representation status issue will inevitably recur
in the future as workplace parties avail of opportunities to prolong workplace harmony by extending
the term of CBAs already in place.20

The legal question before us centers on the effect of the amended or extended term of the CBA on
the exclusive representation status of the collective bargaining agent and the right of another union
to ask for certification as exclusive bargaining agent. The question arises because the law allows a
challenge to the exclusive representation status of a collective bargaining agent through the filing of
a certification election petition only within 60 days from the expiration of the five-year CBA.

Article 253-A of the Labor Code covers this situation and it provides:

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.

This Labor Code provision is implemented through Book V, Rule VIII of the Rules Implementing the
Labor Code21 which states:

Sec. 14. Denial of the petition; grounds. - The Med-Arbiter may dismiss the petition on any of the
following grounds:

x    x    x

(b) the petition was filed before or after the freedom period of a duly registered collective bargaining
agreement; provided that the sixty-day period based on the original collective bargaining agreement

Labor II – 1
shall not be affected by any amendment, extension or renewal of the collective bargaining
agreement (underscoring supplied).

x    x    x

The root of the controversy can be traced to a misunderstanding of the interaction between a union's
exclusive bargaining representation status in a CBA and the term or effective period of the CBA.

FVCLU-PTGWO has taken the view that its exclusive representation status should fully be in step with
the term of the CBA and that this status can be challenged only within 60 days before the expiration
of this term. Thus, when the term of the CBA was extended, its exclusive bargaining status was
similarly extended so that the freedom period for the filing of a petition for certification election
should be counted back from the expiration of the amended CBA term.

We hold this FVCLU-PTGWO position to be correct, but only with respect to the original five-year term
of the CBA which, by law, is also the effective period of the union's exclusive bargaining
representation status. While the parties may agree to extend the CBA's original five-year term
together with all other CBA provisions, any such amendment or term in excess of five years will not
carry with it a change in the union's exclusive collective bargaining status. By express provision of
the above-quoted Article 253-A, the exclusive bargaining status cannot go beyond five years and the
representation status is a legal matter not for the workplace parties to agree upon. In other words,
despite an agreement for a CBA with a life of more than five years, either as an original provision or
by amendment, the bargaining union's exclusive bargaining status is effective only for five years and
can be challenged within sixty (60) days prior to the expiration of the CBA's first five years. As we
said in San Miguel Corp. Employees Union PTGWO, et al. v. Confesor, San Miguel Corp., Magnolia
Corp. and San Miguel Foods, Inc.,22 where we cited the Memorandum of the Secretary of Labor and
Employment dated February 24, 1994:

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 five-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.

In the present case, the CBA was originally signed for a period of five years, i.e., from February 1,
1998 to January 30, 2003, with a provision for the renegotiation of the CBA's other provisions at the
end of the 3rd year of the five-year CBA term. Thus, prior to January 30, 2001 the workplace parties
sat down for renegotiation but instead of confining themselves to the economic and non-economic
CBA provisions, also extended the life of the CBA for another four months, i.e., from the original
expiry date on January 30, 2003 to May 30, 2003.

As discussed above, this negotiated extension of the CBA term has no legal effect on the FVCLU-
PTGWO's exclusive bargaining representation status which remained effective only for five years
ending on the original expiry date of January 30, 2003. Thus, sixty days prior to this date, or starting
December 2, 2002, SANAMA-SIGLO could properly file a petition for certification election. Its petition,
filed on January 21, 2003 or nine (9) days before the expiration of the CBA and of FVCLU-PTGWO's
exclusive bargaining status, was seasonably filed.

We thus find no error in the appellate court's ruling reinstating the DOLE order for the conduct of a
certification election. If this ruling cannot now be given effect, the only reason is SANAMA-SIGLO's
own desistance; we cannot disregard its manifestation that the members of SANAMA themselves are
no longer interested in contesting the exclusive collective bargaining agent status of FVCLU-PTGWO.

Labor II – 1
This recognition is fully in accord with the Labor Code's intent to foster industrial peace and harmony
in the workplace.

WHEREFORE, premises considered, we AFFIRM the correctness of the challenged Decision and
Resolution of the Court of Appeals and accordingly DISMISS the petition, but nevertheless DECLARE
that no certification election, pursuant to the underlying petition for certification election filed with
the Department of Labor and Employment, can be enforced as this petition has effectively been
abandoned.

Labor II – 1
26.) G.R. No. 162324               February 4, 2009

RFM CORPORATION-FLOUR DIVISION and SFI FEEDS DIVISION, Petitioner,

vs.
KASAPIAN NG MANGGA-GAWANG PINAGKAISA-RFM (KAMPI-NAFLU-KMU) and SANDIGAN AT UGNAYAN
NG MANGGAGAWANG PINAGKAISA-SFI (SUMAPI-NAFLU-KMU) Respondents.

DECISION

CARPIO MORALES, J.:

Petitioner RFM Corporation (RFM) is a domestic corporation engaged in flour-milling and animal feeds
manufacturing. Sometime in 2000, its Flour Division and SFI Feeds Division entered into collective bargaining
agreements (CBAs) with their respective labor unions, the Kasapian ng Manggagawang Pinagkaisa-RFM (KAMPI-
NAFLU-KMU) for the Flour Division, and Sandigan at Ugnayan ng Manggagawang Pinagkaisa-SFI (SUMAPI-
NAFLU-KMU) for the Feeds Division (respondents). The CBAs, which contained similar provisions, were effective
for five years, from July 1, 2000 up to June 30, 2005.

Sec. 3, Art. XVI of each of the CBAs reads:

Section. 3. Special Holidays with Pay – The COMPANY agrees to make payment to all daily paid employees, in
respect of any of the days enumerated hereunto if declared as special holidays by the national government:

a) Black Saturday

b) November 1

c) December 31

The compensation rate shall be the regular rate. Any work beyond eight (8) hours shall be paid the standard
ordinary premium. (Emphasis and underscoring supplied)

During the first year of the effectivity of the CBAs in 2000, December 31 which fell on a Sunday was declared by the
national government as a special holiday. Respondents thus claimed payment of their members’ salaries, invoking
the above-stated CBA provision. Petitioner refused the claims for payment, averring that December 31, 2000 was
not compensable as it was a rest day. The controversy resulted in a deadlock, drawing the parties to submit the
same for voluntary arbitration.

Following the submission by the parties of their respective position papers, Voluntary Arbitrator (VA) Bernardino M.
Volante, by Decision1 of October 11, 2001, declared that the above-quoted provision of the CBA is clear. It
accordingly ruled in favor of respondents and ordered petitioner to pay the salaries of respondents’ members for
December 31, 2000, and to pay attorney’s fees to respondents equivalent to 10% of the monetary award.

Its motion for reconsideration of the VA ruling having been denied, 2 petitioner appealed to the Court of Appeals
which affirmed the same by Decision3 dated October 30, 2003.

The appellate court held that if it was indeed petitioner’s intent to pay the salaries of daily-paid employees during a
special holiday, even if unworked, only if such special holiday fell on weekdays, then it should have been clearly and
expressly stipulated in the CBAs. And it held inapplicable Kimberly Clark Philippines v. Lorredo 4 cited by petitioner
which case held that whenever there is a conflict between the words in the CBA and the evident intention of the
parties, the latter prevails. For, so the appellate court explained, there were no words or provisions in the CBAs
which would result in an absurd interpretation vis a vis the parties’ true intention.
1avvphi1

Labor II – 1
In sustaining the award of attorney’s fees, the appellate court ruled that respondents were entitled thereto as they
were compelled to engage a lawyer to pursue their claims.

Petitioner’s motion for reconsideration having been denied, the present petition was filed.

Petitioner insists that the CBA provision in question was intended to protect the employees from reduction of their
take-home pay, hence, it was not meant to remunerate them on Sundays, which are rest days, nor to increase their
salaries.

On the award of attorney’s fees, petitioner argues that it is not warranted as it did not arbitrarily refuse to pay
respondents’ demands.

The petition is bereft of merit.

If the terms of a CBA are clear and have no doubt upon the intention of the contracting parties, as in the herein
questioned provision, the literal meaning thereof shall prevail. That is settled. 5 As such, the daily-paid employees
must be paid their regular salaries on the holidays which are so declared by the national government, regardless of
whether they fall on rest days.

Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that the State shall afford
protection to labor. Its purpose is not merely "to prevent diminution of the monthly income of the workers on account
of work interruptions. In other words, although the worker is forced to take a rest, he earns what he should earn, that
is, his holiday pay."6 (Emphasis and underscoring supplied) 1avvphi1 .zw+

The CBA is the law between the parties, hence, they are obliged to comply with its provisions. 7 Indeed, if petitioner
and respondents intended the provision in question to cover payment only during holidays falling on work or
weekdays, it should have been so incorporated therein.

Petitioner maintains, however, that the parties failed to foresee a situation where the special holiday would fall on a
rest day. The Court is not persuaded. The Labor Code specifically enjoins that in case of doubt in the interpretation
of any law or provision affecting labor, it should be interpreted in favor of labor. 8

Respondents having been compelled to litigate as a result of petitioner’s failure to satisfy their valid claim, the Court
deems it just and equitable to sustain the award of attorney’s fees.

WHEREFORE, the petition is DENIED

Labor II – 1
27.) G.R. No. 183810               January 21, 2010

FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO, JEFFREY LAGUNZAD, MAGDALENA MALIG-
ON BIGNO, FRANCISCO CABAS, JR., HARVEY PONCE and ALAN C. ALMENDRAS, Petitioners,
vs.
ABS-CBN BROADCASTING CORPORATION, Respondent.

DECISION

BRION, J.:

The petition for review on certiorari1 now before us seeks to set aside the decision2 and resolution3 of the Court of
Appeals, Nineteenth Division (CA) promulgated on March 25, 2008 and July 8, 2008, respectively, in CA- G.R. SP
No. 01838.4

The Antecedents

The Regularization Case.

In June 2001, petitioners Farley Fulache, Manolo Jabonero, David Castillo, Jeffrey Lagunzad, Magdalena Malig-on
Bigno, Francisco Cabas, Jr., Harvey Ponce and Alan C. Almendras (petitioners) and Cresente Atinen (Atinen) filed
two separate complaints for regularization, unfair labor practice and several money claims (regularization case)
against ABS-CBN Broadcasting Corporation-Cebu (ABS-CBN). Fulache and Castillo were drivers/cameramen;
Atinen, Lagunzad and Jabonero were drivers; Ponce and Almendras were cameramen/editors; Bigno was a
PA/Teleprompter Operator-Editing, and Cabas was a VTR man/editor. The complaints (RAB VII Case Nos. 06-
1100-01 and 06-1176-01) were consolidated and were assigned to Labor Arbiter Julie C. Rendoque.

The petitioners alleged that on December 17, 1999, ABS-CBN and the ABS-CBN Rank-and-File Employees Union
(Union) executed a collective bargaining agreement (CBA) effective December 11, 1999 to December 10, 2002;
they only became aware of the CBA when they obtained copies of the agreement; they learned that they had been
excluded from its coverage as ABS-CBN considered them temporary and not regular employees, in violation of the
Labor Code. They claimed they had already rendered more than a year of service in the company and, therefore,
should have been recognized as regular employees entitled to security of tenure and to the privileges and benefits
enjoyed by regular employees. They asked that they be paid overtime, night shift differential, holiday, rest day and
service incentive leave pay. They also prayed for an award of moral damages and attorney’s fees.

ABS-CBN explained the nature of the petitioners’ employment within the framework of its operations. It claimed that:
it operates in several divisions, one of which is the Regional Network Group (RNG). The RNG exercises control and
supervision over all the ABS-CBN local stations to ensure that ABS-CBN programs are extended to the provinces. A
local station, like the Cebu station, can resort to cost-effective and cost-saving measures to remain viable; local
stations produced shows and programs that were constantly changing because of the competitive nature of the
industry, the changing public demand or preference, and the seasonal nature of media broadcasting programs.
ABS-CBN claimed, too, that the production of programs per se is not necessary or desirable in its business because
it could generate profits by selling airtime to block-timers or through advertising.

ABS-CBN further claimed that to cope with fluctuating business conditions, it contracts on a case-to-case basis the
services of persons who possess the necessary talent, skills, training, expertise or qualifications to meet the
requirements of its programs and productions. These contracted persons are called "talents" and are considered
independent contractors who offer their services to broadcasting companies.

Instead of salaries, ABS-CBN pointed out that talents are paid a pre-arranged consideration called "talent fee" taken
from the budget of a particular program and subject to a ten percent (10%) withholding tax. Talents do not undergo
probation. Their services are engaged for a specific program or production, or a segment thereof. Their contracts
are terminated once the program, production or segment is completed.

Labor II – 1
ABS-CBN alleged that the petitioners’ services were contracted on various dates by its Cebu station as independent
contractors/off camera talents, and they were not entitled to regularization in these capacities.

On January 17, 2002, Labor Arbiter Rendoque rendered his decision 5 holding that the petitioners were regular
employees of ABS-CBN, not independent contractors, and are entitled to the benefits and privileges of regular
employees.

ABS-CBN appealed the ruling to the National Labor Relations Commission (NLRC) Fourth Division, mainly
contending that the petitioners were independent contractors, not regular employees. 6

The Illegal Dismissal Case.

While the appeal of the regularization case was pending, ABS-CBN dismissed Fulache, Jabonero, Castillo,
Lagunzad and Atinen (all drivers) for their refusal to sign up contracts of employment with service contractor Able
Services. The four drivers and Atinen responded by filing a complaint for illegal dismissal (illegal dismissal case).
The case (RAB VII Case No. 07-1300-2002) was likewise handled by Labor Arbiter Rendoque.

In defense, ABS-CBN alleged that even before the labor arbiter rendered his decision of January 17, 2002 in the
regularization case, it had already undertaken a comprehensive review of its existing organizational structure to
address its operational requirements. It then decided to course through legitimate service contractors all driving,
messengerial, janitorial, utility, make-up, wardrobe and security services for both the Metro Manila and provincial
stations, to improve its operations and to make them more economically viable. Fulache, Jabonero, Castillo,
Lagunzad and Atinen were not singled out for dismissal; as drivers, they were dismissed because they belonged to
a job category that had already been contracted out. It argued that even if the petitioners had been found to have
been illegally dismissed, their reinstatement had become a physical impossibility because their employer-employee
relationships had been strained and that Atinen had executed a quitclaim and release.

In her April 21, 2003 decision in the illegal dismissal case, 7 Labor Arbiter Rendoque upheld the validity of ABS-
CBN's contracting out of certain work or services in its operations. The labor arbiter found that petitioners Fulache,
Jabonero, Castillo, Lagunzad and Atinen had been dismissed due to redundancy, an authorized cause under the
law.8 He awarded them separation pay of one (1) month’s salary for every year of service.

Again, ABS-CBN appealed to the NLRC which rendered on December 15, 2004 a joint decision on the
regularization and illegal dismissal cases.9 The NLRC ruled that there was an employer-employee relationship
between the petitioners and ABS-CBN as the company exercised control over the petitioners in the performance of
their work; the petitioners were regular employees because they were engaged to perform activities usually
necessary or desirable in ABS-CBN's trade or business; they cannot be considered contractual employees since
they were not paid for the result of their work, but on a monthly basis and were required to do their work in
accordance with the company’s schedule. The NLRC thus affirmed with modification the labor arbiter's
regularization decision of January 17, 2002, additionally granting the petitioners CBA benefits and privileges.

The NLRC reversed the labor arbiter’s ruling in the illegal dismissal case; it found that petitioners Fulache,
Jabonero, Castillo, Lagunzad and Atinen had been illegally dismissed and awarded them backwages and
separation pay in lieu of reinstatement. Under both cases, the petitioners were awarded CBA benefits and privileges
from the time they became regular employees up to the time of their dismissal.

The petitioners moved for reconsideration, contending that Fulache, Jabonero, Castillo and Lagunzad are entitled to
reinstatement and full backwages, salary increases and other CBA benefits as well as 13th month pay, cash
conversion of sick and vacation leaves, medical and dental allowances, educational benefits and service awards.
Atinen appeared to have been excluded from the motion and there was no showing that he sought reconsideration
on his own.

ABS-CBN likewise moved for the reconsideration of the decision, reiterating that Fulache, Jabonero, Castillo and
Lagunzad were independent contractors, whose services had been terminated due to redundancy; thus, no
backwages should have been awarded. It further argued that the petitioners were not entitled to the CBA benefits
because they never claimed these benefits in their position paper before the labor arbiter while the NLRC failed to

Labor II – 1
make a clear and positive finding that that they were part of the bargaining unit; neither was there evidence to
support this finding.

The NLRC resolved the motions for reconsideration on March 24, 2006 10 by reinstating the two separate decisions of
the labor arbiter dated January 17, 2002, 11 and April 21, 2003,12 respectively. Thus, on the regularization issue, the
NLRC stood by the ruling that the petitioners were regular employees entitled to the benefits and privileges of
regular employees. On the illegal dismissal case, the petitioners, while recognized as regular employees, were
declared dismissed due to redundancy. The NLRC denied the petitioners’ second motion for reconsideration in its
order of May 31, 2006 for being a prohibited pleading. 13

The CA Petition and Decision

The petitioners went to the CA through a petition for certiorari under Rule 65 of the Rules of Court.14 They charged
the NLRC with grave abuse of discretion in: (1) denying them the benefits under the CBA; (2) finding no evidence
that they are part of the company’s bargaining unit; (3) not reinstating and awarding backwages to Fulache,
Jabonero, Castillo and Lagunzad; and (4) ruling that they are not entitled to damages and attorney’s fees.

ABS-CBN, on the other hand, questioned the propriety of the petitioners’ use of a certiorari petition. It argued that
the proper remedy for the petitioners was an appeal from the reinstated decisions of the labor arbiter.

In its decision of March 25, 2008,15 the appellate court brushed aside ABS-CBN’s procedural question, holding that
the petition was justified because there is no plain, speedy or adequate remedy from a final decision, order or
resolution of the NLRC; the reinstatement of the labor arbiter’s decisions did not mean that the proceedings reverted
back to the level of the arbiter. It likewise affirmed the NLRC ruling that the petitioners’ second motion for
reconsideration is a prohibited pleading under the NLRC rules. 16

On the merits of the case, the CA ruled that the petitioners failed to prove their claim to CBA benefits since they
never raised the issue in the compulsory arbitration proceedings, and did not appeal the labor arbiter’s decision
which was silent on their entitlement to CBA benefits. The CA found that the petitioners failed to show with
specificity how Section 1 (Appropriate Bargaining Unit) and the other provisions of the CBA applied to them.

On the illegal dismissal issue, the CA upheld the NLRC decision reinstating the labor arbiter’s April 21, 2003
ruling.17 Thus, the drivers – Fulache, Jabonero, Castillo and Lagunzad – were not illegally dismissed as their
separation from the service was due to redundancy; they had not presented any evidence that ABS-CBN abused its
prerogative in contracting out the services of drivers. Except for separation pay, the CA denied the petitioners’ claim
for backwages, moral and exemplary damages, and attorney’s fees.

The petitioners moved for reconsideration, but the CA denied the motion in a resolution promulgated on July 8,
2008.18 Hence, the present petition.

The Petition

The petitioners challenge the CA ruling on both procedural and substantive grounds. As procedural questions, they
submit that the CA erred in: (1) affirming the NLRC resolution which reversed its own decision; (2) sustaining the
NLRC ruling that their second motion for reconsideration is a prohibited pleading; (3) not ruling that ABS-CBN
admitted in its position paper before the labor arbiter that they were members of the bargaining unit as the matter
was not raised in its appeal to the NLRC; and, (4) not ruling that notwithstanding their failure to appeal from the first
decision of the Labor Arbiter, they can still participate in the appeal filed by ABS-CBN regarding their employment
status.

On the substantive aspect, the petitioners contend that the CA gravely erred in: (1) not considering the evidence
submitted to the NLRC on appeal to bolster their claim that they were members of the bargaining unit and therefore
entitled to the CBA benefits; (2) not ordering ABS-CBN to pay the petitioners’ salaries, allowances and CBA benefits
after the NLRC has declared that they were regular employees of ABS-CBN; (3) not ruling that under existing
jurisprudence, the position of driver cannot be declared redundant, and that the petitioners-drivers were illegally
dismissed; and, (4) not ruling that the petitioners were entitled to damages and attorney’s fees.

Labor II – 1
The petitioners argue that the NLRC resolution of March 24, 2006 19 which set aside its joint decision of December
15, 200420 and reinstated the twin decisions of the labor arbiter, 21 had the effect of promulgating a new decision
based on issues that were not raised in ABS-CBN’s partial appeal to the NLRC. They submit that the NLRC should
have allowed their second motion for reconsideration so that it may be able to equitably evaluate the parties’
"conflicting versions of the facts" instead of denying the motion on a mere technicality.

On the question of their CBA coverage, the petitioners contend that the CA erred in not considering that ABS-CBN
admitted their membership in the bargaining unit, for nowhere in its partial appeal from the labor arbiter’s decision in
the regularization case did it allege that the petitioners failed to prove that they are members of the bargaining unit;
instead, the company stood by its position that the petitioners were not entitled to the CBA benefits since they were
independent contractors/program employees.

The petitioners submit that while they did not appeal the labor arbiter’s decision in the regularization case, ABS-CBN
raised the employment status issue in its own appeal to the NLRC; this appeal laid this issue open for review. They
argue that they could still participate in the appeal proceedings at the NLRC; pursue their position on the issue; and
introduce evidence as they did in their reply to the company’s appeal. 22 They bewail the appellate court’s failure to
consider the evidence they presented to the NLRC (consisting of documents and sworn statements enumerating the
activities they are performing) clearly indicating that they are part of the rank-and-file bargaining unit at ABS-CBN.

The petitioners then proceeded to describe the work they render for the company. Collectively, they claim that they
work as assistants in the production of the Cebuano news program broadcast daily over ABS-CBN Channel 3, as
follows: Fulache, Jabonero, Castillo and Lagunzad as production assistants to drive the news team; Ponce and
Almendras, to shoot scenes and events with the use of cameras owned by ABS-CBN; Malig-on Bigno, as studio
production assistant and assistant editor/teleprompter operator; and Cabas, Jr., as production assistant for video
editing and operating the VTR machine recorder. As production assistants, the petitioners submit that they are rank-
and-file employees (citing in support of their position the Court’s ruling in ABS-CBN Broadcasting Corp. v.
Nazareno23) who are entitled to salary increases and other benefits under the CBA. Relying on the Court’s ruling
in New Pacific Timber and Supply Company, Inc. v. NLRC,24 they posit that to exclude them from the CBA "would
constitute undue discrimination and would deprive them of monetary benefits they would otherwise be entitled to."

As their final point, the petitioners argue that even if they were not able to prove that they were members of the
bargaining unit, the CA should not have dismissed their petition. When the CA affirmed the rulings of both the labor
arbiter and the NLRC that they are regular employees, the CA should have ordered ABS-CBN to recognize their
regular employee status and to give them the salaries, allowances and other benefits and privileges under the
CBA. 1avvphi1

On the dismissal of Fulache, Jabonero, Castillo and Lagunzad, the petitioners impute bad faith on ABS-CBN when it
abolished the positions of drivers claiming that the company failed to comply with the requisites of a valid
redundancy action. They maintain that ABS-CBN did not present any evidence on the new staffing pattern as
approved by the management of the company, and did not even bother to show why it considered the positions of
drivers superfluous and unnecessary; it is not true that the positions of drivers no longer existed because these
positions were contracted out to an agency that, in turn, recruited four drivers to take the place of Fulache,
Jabonero, Castillo and Lagunzad. As further indication that the redundancy action against the four drivers was done
in bad faith, the petitioners call attention to ABS-CBN’s abolition of the position of drivers after the labor arbiter
rendered her decision declaring Fulache, Jabonero, Castillo and Lagunzad regular company employees. The
petitioners object to the dismissal of the four drivers when they refused to sign resignation letters and join Able
Services, a contracting agency, contending that the four had no reason to resign after the labor arbiter declared
them regular company employees.

Since their dismissal was illegal and attended by bad faith, the petitioners insist that they should be reinstated with
backwages, and should likewise be awarded moral and exemplary damages, and attorney's fees.

The Case for ABS-CBN

In its Comment filed on January 28, 2009, 25 ABS-CBN presents several grounds which may be synthesized as
follows:

Labor II – 1
 1. The petition raises questions of fact and not of law.

2. The CA committed no error in affirming the resolution of the NLRC reinstating the decisions of the labor
arbiter.

ABS-CBN submits that the petition should be dismissed for having raised questions of fact and not of law in violation
of Rule 45 of the Rules of Court. It argues that the question of whether the petitioners were covered by the CBA
(and therefore entitled to the CBA benefits) and whether the petitioners were illegally dismissed because of
redundancy, are factual questions that cannot be reviewed on certiorari because the Court is not a trier of facts.

ABS-CBN dismisses the petitioners’ issues and arguments as mere rehash of what they raised in their pleadings
with the CA and as grounds that do not warrant further consideration. It further contends that because the
petitioners did not appeal the labor arbiter decisions, these decisions had lapsed to finality and could no longer be
the subject of a petition for certiorari; the petitioners cannot obtain from the appellate court affirmative relief other
than those granted in the appealed decision. It also argues that the NLRC did not commit any grave abuse of
discretion in reinstating the twin decisions of the labor arbiter, thereby affirming that no CBA benefits can be
awarded to the petitioners; in the absence of any illegal dismissal, the petitioners were not entitled to reinstatement,
backwages, damages, and attorney's fees.

The Court's Ruling

We first resolve the parties’ procedural questions.

ABS-CBN wants the petition to be dismissed outright for its alleged failure to comply with the requirement of Rule 45
of the Rules of Court that the petition raises only questions of law.26

We find no impropriety in the petition from the standpoint of Rule 45. The petitioners do not question the findings of
facts of the assailed decisions. They question the misapplication of the law and jurisprudence on the facts
recognized by the decisions. For example, they question as contrary to law their exclusion from the CBA after they
were recognized as regular rank-and-file employees of ABS-CBN. They also question the basis in law of the
dismissal of the four drivers and the legal propriety of the redundancy action taken against. To reiterate the
established distinctions between questions of law and questions of fact, we quote hereunder our ruling in New Rural
Bank of Guimba (N.E.) Inc. v. Fermina S. Abad and Rafael Susan: 27

We reiterate the distinction between a question of law and a question of fact. A question of law exists when
the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of facts;
or when the issue does not call for an examination of the probative value of the evidence presented, the
truth or falsehood of the facts being admitted. A question of fact exists when a doubt or difference arises as
to the truth or falsehood of facts or when the query invites calibration of the whole evidence considering
mainly the credibility of the witnesses, the existence and relevancy of specific surrounding circumstances,
as well as their relation to each other and to the whole, and the probability of the situation.

We also find no error in the CA’s affirmation of the denial of the petitioners’ second motion for reconsideration of the
March 24, 2006 resolution of the NLRC reinstating the labor arbiter’s twin decisions. The petitioners’ second motion
for reconsideration was a prohibited pleading under the NLRC rules of procedure. 28

The parties’ other procedural questions directly bear on the merits of their positions and are discussed and resolved
below, together with the core substantive issues of: (1) whether the petitioners, as regular employees, are members
of the bargaining unit entitled to CBA benefits; and (2) whether petitioners Fulache, Jabonero, Castillo and
Lagunzad were illegally dismissed.

The Claim for CBA Benefits

We find merit in the petitioners’ positions.

Labor II – 1
As regular employees, the petitioners fall within the coverage of the bargaining unit and are therefore entitled to
CBA benefits as a matter of law and contract. In the root decision (the labor arbiter’s decision of January 17, 2002)
that the NLRC and CA affirmed, the labor arbiter declared:

WHEREFORE, IN THE LIGHT OF THE FOREGOING, taking into account the factual scenario and the evidence
adduced by both parties, it is declared that complainants in these cases are REGULAR EMPLOYEES of
respondent ABS-CBN and not INDEPENDENT CONTRACTORS and thus henceforth they are entitled to the
benefits and privileges attached to regular status of their employment.

This declaration unequivocally settled the petitioners’ employment status: they are ABS-CBN’s regular employees
entitled to the benefits and privileges of regular employees. These benefits and privileges arise from entitlements
under the law (specifically, the Labor Code and its related laws), and from their employment contract as regular
ABS-CBN employees, part of which is the CBA if they fall within the coverage of this agreement. Thus, what only
needs to be resolved as an issue for purposes of implementation of the decision is whether the petitioners fall within
CBA coverage.

The parties’ 1999-2002 CBA provided in its Article I (Scope of the Agreement) that: 29

Section 1. APPROPRIATE BARGAINING UNIT. – The parties agree that the appropriate bargaining unit shall
be regular rank-and-file employees of ABS-CBN BROADCASTING CORPORATION but shall not include:

a) Personnel classified as Supervisor and Confidential employees;

b) Personnel who are on "casual" or "probationary" status as defined in Section 2 hereof;

c) Personnel who are on "contract" status or who are paid for specified units of work such as writer-
producers, talent-artists, and singers.

The inclusion or exclusion of new job classifications into the bargaining unit shall be subject of discussion between
the COMPANY and the UNION. [emphasis supplied]

Under these terms, the petitioners are members of the appropriate bargaining unit because they are regular rank-
and-file employees and do not belong to any of the excluded categories. Specifically, nothing in the records shows
that they are supervisory or confidential employees; neither are they casual nor probationary employees. Most
importantly, the labor arbiter’s decision of January 17, 2002 – affirmed all the way up to the CA level – ruled against
ABS-CBN’s submission that they are independent contractors. Thus, as regular rank-and-file employees, they fall
within CBA coverage under the CBA’s express terms and are entitled to its benefits.

We see no merit in ABS-CBN’s arguments that the petitioners are not entitled to CBA benefits because: (1) they did
not claim these benefits in their position paper; (2) the NLRC did not categorically rule that the petitioners were
members of the bargaining unit; and (3) there was no evidence of this membership. To further clarify what we stated
above, CBA coverage is not only a question of fact, but of law and contract. The factual issue is whether the
petitioners are regular rank-and-file employees of ABS-CBN. The tribunals below uniformly answered this question
in the affirmative. From this factual finding flows legal effects touching on the terms and conditions of the petitioners’
regular employment. This was what the labor arbiter meant when he stated in his decision that "henceforth they are
entitled to the benefits and privileges attached to regular status of their employment." Significantly, ABS-CBN itself
posited before this Court that "the Court of Appeals did not gravely err nor gravely abuse its discretion when it
affirmed the resolution of the NLRC dated March 24, 2006 reinstating and adopting in toto the decision of the Labor
Arbiter dated January 17, 2002 x x x."30 This representation alone fully resolves all the objections – procedural or
otherwise – ABS-CBN raised on the regularization issue.

The Dismissal of Fulache, Jabonero,

Castillo and Lagunzad

The termination of employment of the four drivers occurred under highly questionable circumstances and with plain
and unadulterated bad faith.
Labor II – 1
The records show that the regularization case was in fact the root of the resulting bad faith as this case gave rise
and led to the dismissal case. First, the regularization case was filed leading to the labor arbiter’s
decision31 declaring the petitioners, including Fulache, Jabonero, Castillo and Lagunzad, to be regular employees.
ABS-CBN appealed the decision and maintained its position that the petitioners were independent contractors.

In the course of this appeal, ABS-CBN took matters into its own hands and terminated the petitioners’ services,
clearly disregarding its own appeal then pending with the NLRC. Notably, this appeal posited that the petitioners
were not employees (whose services therefore could be terminated through dismissal under the Labor Code); they
were independent contractors whose services could be terminated at will, subject only to the terms of their
contracts. To justify the termination of service, the company cited redundancy as its authorized cause but offered no
justificatory supporting evidence. It merely claimed that it was contracting out the petitioners’ activities in the
exercise of its management prerogative.

ABS-CBN’s intent, of course, based on the records, was to transfer the petitioners and their activities to a service
contractor without paying any attention to the requirements of our labor laws; hence, ABS-CBN dismissed the
petitioners when they refused to sign up with the service contractor. 32 In this manner, ABS-CBN fell into a downward
spiral of irreconcilable legal positions, all undertaken in the hope of saving itself from the decision declaring its
"talents" to be regular employees.

By doing all these, ABS-CBN forgot labor law and its realities.

It forgot that by claiming redundancy as authorized cause for dismissal, it impliedly admitted that the petitioners
were regular employees whose services, by law, can only be terminated for the just and authorized causes defined
under the Labor Code.

Likewise ABS-CBN forgot that it had an existing CBA with a union, which agreement must be respected in any move
affecting the security of tenure of affected employees; otherwise, it ran the risk of committing unfair labor practice –
both a criminal and an administrative offense. 33 It similarly forgot that an exercise of management prerogative can be
valid only if it is undertaken in good faith and with no intent to defeat or circumvent the rights of its employees under
the laws or under valid agreements.34

Lastly, it forgot that there was a standing labor arbiter’s decision that, while not yet final because of its own pending
appeal, cannot simply be disregarded. By implementing the dismissal action at the time the labor arbiter’s ruling was
under review, the company unilaterally negated the effects of the labor arbiter’s ruling while at the same time
appealling the same ruling to the NLRC. This unilateral move is a direct affront to the NLRC’s authority and an
abuse of the appeal process.

All these go to show that ABS-CBN acted with patent bad faith. A close parallel we can draw to characterize this bad
faith is the prohibition against forum-shopping under the Rules of Court. In forum-shopping, the Rules characterize
as bad faith the act of filing similar and repetitive actions for the same cause with the intent of somehow finding a
favorable ruling in one of the actions filed. 35 ABS-CBN’s actions in the two cases, as described above, are of the
same character, since its obvious intent was to defeat and render useless, in a roundabout way and other than
through the appeal it had taken, the labor arbiter’s decision in the regularization case. Forum-shopping is penalized
by the dismissal of the actions involved. The penalty against ABS-CBN for its bad faith in the present case should
be no less.

The errors and omissions do not belong to ABS-CBN alone. The labor arbiter himself who handled both cases did
not see the totality of the company’s actions for what they were. He appeared to have blindly allowed what he
granted the petitioners with his left hand, to be taken away with his right hand, unmindful that the company already
exhibited a badge of bad faith in seeking to terminate the services of the petitioners whose regular status had just
been recognized. He should have recognized the bad faith from the timing alone of ABS-CBN’s conscious and
purposeful moves to secure the ultimate aim of avoiding the regularization of its so-called "talents."

The NLRC, for its part, initially recognized the presence of bad faith when it originally ruled that:

Labor II – 1
While notice has been made to the employees whose positions were declared redundant, the element of good faith
in abolishing the positions of the complainants appear to be wanting. In fact, it remains undisputed that herein
complainants were terminated when they refused to sign an employment contract with Able Services which would
make them appear as employees of the agency and not of ABS-CBN. Such act by itself clearly demonstrates bad
faith on the part of the respondent in carrying out the company’s redundancy program x x x. 36

On motion for reconsideration by both parties, the NLRC reiterated its "pronouncement that complainants were
illegally terminated as extensively discussed in our Joint Decision dated December 15, 2004." 37 Yet, in an
inexplicable turnaround, it reconsidered its joint decision and reinstated not only the labor arbiter’s decision of
January 17, 2002 in the regularization case, but also his illegal dismissal decision of April 21, 2003. 38 Thus, the
NLRC joined the labor arbiter in his error that we cannot but characterize as grave abuse of discretion.

The Court cannot leave unchecked the labor tribunals’ patent grave abuse of discretion that resulted, without doubt,
in a grave injustice to the petitioners who were claiming regular employment status and were unceremoniously
deprived of their employment soon after their regular status was recognized. Unfortunately, the CA failed to detect
the labor tribunals’ gross errors in the disposition of the dismissal issue. Thus, the CA itself joined the same errors
the labor tribunals committed.

The injustice committed on the petitioners/drivers requires rectification. Their dismissal was not only unjust and in
bad faith as the above discussions abundantly show. The bad faith in ABS-CBN’s move toward its illegitimate goal
was not even hidden; it dismissed the petitioners – already recognized as regular employees – for refusing to sign
up with its service contractor. Thus, from every perspective, the petitioners were illegally dismissed.

By law,39 illegally dismissed employees are entitled to reinstatement without loss of seniority rights and other
privileges and to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent from the
time their compensation was withheld from them up to the time of their actual reinstatement. The four dismissed
drivers deserve no less.

Moreover, they are also entitled to moral damages since their dismissal was attended by bad faith. 40 For having
been compelled to litigate and to incur expenses to protect their rights and interest, the petitioners are likewise
entitled to attorney’s fees.41

WHEREFORE, premises considered, we hereby GRANT the petition. The decision dated March 25, 2008 and the
resolution dated July 8, 2008 of the Court of Appeals in CA-G.R. SP No. 01838 are hereby REVERSED and SET
ASIDE. Accordingly, judgment is hereby rendered as follows:

1. Confirming that petitioners FARLEY FULACHE, MANOLO JABONERO, DAVID CASTILLO, JEFFREY
LAGUNZAD, MAGDALENA MALIG-ON BIGNO, FRANCISCO CABAS, JR., HARVEY PONCE and ALAN C.
ALMENDRAS are regular employees of ABS-CBN BROADCASTING CORPORATION, and declaring them
entitled to all the rights, benefits and privileges, including CBA benefits, from the time they became regular
employees in accordance with existing company practice and the Labor Code;

2. Declaring illegal the dismissal of Fulache, Jabonero, Castillo and Lagunzad, and ordering ABS-CBN to
immediately reinstate them to their former positions without loss of seniority rights with full backwages and
all other monetary benefits, from the time they were dismissed up to the date of their actual reinstatement;

3. Awarding moral damages of ₱100,000.00 each to Fulache, Jabonero, Castillo and Lagunzad; and,

4. Awarding attorney’s fees of 10% of the total monetary award decreed in this Decision.

Labor II – 1
28.) G.R. No. 183122               June 15, 2011

GENERAL MILLING CORPORATION-INDEPENDENT LABOR UNION (GMC-ILU), Petitioner,

vs.
GENERAL MILLING CORPORATION, Respondent.

x - - - - - - - - - - - - - - - - - - - - - - -x

G.R. No. 183889

GENERAL MILLING CORPORATION, Petitioner,

vs.
GENERAL MILLING CORPORATION-INDEPENDENT LABOR UNION (GMC-ILU), ET. AL, Respondents.

DECISION

PEREZ, J.:

Assailed in these petitions for review on certiorari filed pursuant to Rule 45 of the 1997 Rules of Civil Procedure are
the Court of Appeals’(CA) resolution of the separate petitions for certiorari questioning the 20 July 2006
Decision1 rendered and the 23 August 2006 Resolution 2 issued by the Fourth Division of the National Labor
Relations Commission (NLRC), Cebu City, in NLRC Case No. V-000632-2005. In G.R. No. 183122, petitioner
General Milling Corporation-Independent Labor Union (the Union) seeks the reversal of the 10 October 2007
Decision rendered by the Special Twentieth Division of the CA in CA-G.R. CEB-SP No. 02226, 3 the dispositive
portion of which states:

WHEREFORE, all the foregoing premises considered, the instant Petition is hereby PARTIALLY GRANTED.

The July 20, 2006 Decision of respondent NLRC in NLRC Case No. V-000632-2005 is hereby AFFIRMED insofar
as it affirmed the October 27, 2005 Order of Executive Labor Arbiter Ortiz in RAB Case No. VII-06-0475-1992 with
the modification of: a) excluding the vacation leave salary rate differentials, sick leave salary rate differentials, b)
excluding employees who have executed quitclaims which are hereby declared valid, and c) deducting salary
increases and other employment benefits voluntarily given by respondent GMC in the computation of benefits.

Accordingly, the instant case is hereby REFERRED to the GRIEVANCE MACHINERY under the imposed CBA for
the recomputation of benefits claimed by petitioner GMC-ILU under the said imposed CBA taking into consideration
the guidelines laid down by the Court in this Decision as well as the validity of the subject quitclaims hereinbefore
discussed.

SO ORDERED.4

In G.R. No. 183889, petitioner General Milling Corporation (GMC) prays for the setting aside of the 16 November
2007 Decision rendered by the Eighteenth Division of the CA in CA-G.R. CEB-SP No. 02232, 5 the decretal portion of
which states:

WHEREFORE, the Decision dated July 20, 2006 and the Resolution dated August 23, 2006 of public respondent
NLRC are hereby AFFIRMED IN TOTO and the instant petition is DISMISSED.

SO ORDERED.6

The Facts

On 28 April 1989, GMC and the Union entered into a collective bargaining agreement (CBA) which provided, among
other terms, the latter’s representation of the collective bargaining unit for a three-year term made to retroact to 1

Labor II – 1
December 1988. On 29 November 1991 or one day before the expiration of the subject CBA, the Union sent a draft
CBA proposal to GMC, with a request for counter-proposals from the latter, for the purpose of renegotiating the
existing CBA between the parties. In view of GMC’s failure to comply with said request, the Union commenced the
complaint for unfair labor practice which, under docket of RAB Case No. VII-06-0475-92, was dismissed for lack of
merit in a decision dated 21 December 1993 issued by the Regional Arbitration Branch-VII (RAB-VII) of the National
Labor Relations Commission (NLRC).7 On appeal, however, said dismissal was reversed and set aside in the 30
January 1998 decision rendered by the Fourth Division of the NLRC in NLRC Case No. V-0112-94, 8 the dispositive
portion of which states:

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision dated December 21,
1993 is hereby VACATED and SET ASIDE and a new one issued ordering the imposition upon the respondent
company of the complainant union[‘s] draft CBA proposal for the remaining two years duration of the original CBA
which is from December 1, 1991 to November 30, 1993; and for the respondent to pay attorney’s fees.

SO ORDERED.9

With the reconsideration and setting aside of the foregoing decision in the NLRC’s resolution dated 6 October
1998,10 the Union filed the petitions for certiorari docketed before the CA as CA-G.R. SP Nos. 50383 and 51763. In a
decision dated 19 July 2000, the then Fourteenth Division of the CA reversed and set aside the NLRC’s 6 October
1998 resolution and reinstated the aforesaid 30 January 1998 decision, except with respect to the undetermined
award of attorney’s fees which was deleted for lack of statement of the basis therefor in the assailed
decision.11 Aggrieved by the CA’s 26 October 2000 resolution denying its motion for reconsideration, GMC elevated
the case to this Court via the petition for review on certiorari docketed before this Court as G.R. No. 146728. In a
decision dated 11 February 2004 rendered by the Court’s then Second Division, the CA’s 30 January 1998 decision
and 26 October 2000 resolution were affirmed,12 upon the following findings and conclusions, to wit:

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 worker, 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.

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.

xxxx

x x x (I)t 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 World
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.

xxxx

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 with impunity to schemes feigning
negotiations by going through empty gestures. 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 the parties regained
equal footing, which was lost when GMC thwarted the negotiations for new economic terms of the CBA.13

Labor II – 1
With the ensuing finality of the foregoing decision, the Union filed a motion for issuance of a writ of execution dated
21 March 2005, to enforce the claims of the covered employees which it computed in the sum of ₱433,786,786.36
and to require GMC to produce said employee’s time cards for the purpose of computing their overtime pay, night
shift differentials and labor standard benefits for work rendered on rest days, legal holidays and special
holidays.14 On 18 April 2005, however, GMC opposed said motion on the ground, among other matters, that the
bargaining unit no longer exist in view of the resignation, retrenchment, retirement and separation from service of
workers who have additionally executed waivers and quitclaims acknowledging full settlement of their claims; that
the covered employees have already received salary increases and benefits for the period 1991 to 1993; and, that
aside from the aforesaid supervening events which precluded the enforcement thereof, the decision rendered in the
case simply called for the execution of a CBA incorporating the Union’s proposal, not the outright computation of
benefits thereunder.15

In a "Submission" dated 27 May 2005, GMC further manifested that the Union membership in the bargaining unit did
not exceed 286 and that following employees should be excluded from the coverage of the decision sought to be
enforced: (a) 47 employees who were hired after 1992; (b) 234 employees who had been separated from the
service; (c) 37 employees who, as daily paid rank and file employees, were represented by another union and
covered by a different CBA; and, (d) 41 workers holding managerial/supervisory/confidential positions. 16 In its
comment to the foregoing "Submission", however, the Union argued that the benefits derived from its proposed CBA
extended to both union members and non-members; that the newly hired employees were entitled to the benefits
accruing after their employment by GMC; that the employees who had, in the meantime, been separated from
service could not have validly waived the benefits which were only determined with finality in the 11 February 2004
decision rendered in G.R. No. 146728; that the CBA benefits can be extended the daily paid employees upon their
re-classification as monthly paid employees as well as to GMC’s managerial and supervisory employees, prior to
their promotion; and, that the imposition of its CBA proposals necessarily calls for the computation of the benefits
therein provided.17

Acting on the memoranda the parties filed in support of their respective positions, 18 Executive Labor Arbiter Violeta
Ortiz-Bantug issued the 27 October 2005 order, limiting the computation of the benefits of the Union’s CBA proposal
to the remaining two years of the duration of the original CBA or from 1 December 1991 up to 30 November 1993.
The computation covered the 436 employees included in the Union’s list, less the following: (a) 77 employees who
were hired or regularized after 30 November 1993; (b) 36 daily paid rank and file employees who were covered by a
separate CBA; (c) 41 managerial/supervisory employees; and (d) 1 employee for whom no salary-rate information
was submitted in the premises.19 As a consequence, said Executive Labor Arbiter disposed of the aforesaid pending
motion and incidents in the following wise:

Based on all the foregoing, computations have been made, details of which are prepared and reflected in separate
pages but which still form part of this Order. By way of summary, the grand total consists of the following:

Salary Increase Differentials ₱17,575,000.00

Rest Day 4,320,148.50

Vacation Leave Differentials 920,013.42

Sick Leave Differentials 920,013.42

School Opening Bonus 5,094,044.69

13th Month Pay Differentials 1,468,999.98

Christmas Bonus 4,560,816.78

Signing Bonus 1,310,000.00

Total Money Claims ₱36,169,036.79

Sacks of Rice 6,372

Labor II – 1
Issue the appropriate writ of execution based on the foregoing computations.

SO ORDERED.20

Aggrieved, the Union filed a partial appeal dated 2 November 2005, on the ground that the Executive Labor Arbiter
abused her discretion in: (a) confining the computation of the benefits from 1 December 1991 to 30 November 1993
in favor of only 281 employees out of the 436 included in its list; (b) computing only 10 out of the 15 benefits
provided under its CBA proposal; and (c) failing to direct the GMC to produce the employees’ time cards and other
pertinent documents essential for the computation of the benefits due in the premises. 21 In turn, GMC filed its 17
November 2005 "Objections" to the aforesaid 22 October 2005 order, arguing that the Executive Labor Arbiter not
only varied the dispositive portion of the NLRC decision dated 30 January 1998 but also ignored the quitclaims
executed and the benefits actually paid in the premises. 22 Reiterating the foregoing arguments in its 16 May 2006
opposition to the Union’s partial appeal, GMC further maintained that its not being duly heard on the computation of
the award in the subject 27 October 2005 order rendered the Union’s partial appeal premature; and, that its CBA
with the Union had expired on 30 November 1993, with the latter exerting no effort at all for its renewal. 23

On 20 July 2006, the NLRC rendered a decision in NLRC Case No. V-000632-2005, affirming the aforesaid 27
October 2005 order of execution. Finding that the duty to maintain the status quo and to continue in full force and
effect the terms of the existing agreement under Article 253 of the Labor Code of the Philippines applies only when
the parties agreed to the terms and conditions of the CBA, the NLRC upheld the Executive Labor Arbiter’s
computation on the ground, among others, that the decision sought to be enforced covered only the remaining two
years of the duration of the original CBA, i.e., from 1 December 1991 to 30 November 1993; that like GMC’s
supposed grant of additional benefits during the remaining term of the original CBA, the Union’s claims for payment
of vacation leave salary differentials, sick leave salary rate differentials, dislocation allowance, separation pay for
voluntary resignation and separation pay salary rate differentials were not sufficiently established; that required by
law to preserve its records for a period of five years, GMC cannot possibly be expected to preserve employees’
records for the period 1 December 1991 to 30 November 1993; and, that the claimant has the burden of proving
entitlement to holiday pay, premium for holiday and rest day as well night shift differentials. Giving short shrift to
GMC’s objections as aforesaid, the NLRC likewise ruled that computation of the monetary award was necessary for
the enforcement of this Court’s 11 February 2004 decision and avoidance of multiplicity of suits. 24

Dissatisfied with the NLRC’s 23 August 2006 denial of their motions for reconsideration of the foregoing
decision,25 GMC and the Union filed separate Rule 65 petitions for certiorari before the CA. Docketed as CA-G.R.
CEB-SP No. 02226 before the CA’s Special Twentieth Division, the Union’s petition was partially granted in the 10
October 2007 decision rendered in the case,26 upon the finding that the parties’ old CBA was superseded by the
imposed CBA which provided a term of five years from 1 December 1991 and remained in force until a new CBA is
concluded between the parties. Brushing aside the Executive Labor Arbiter’s computation of the benefits as "too
sweeping" and "inaccurate", the CA ruled that: (a) employees hired after the effectivity of the imposed CBA are
entitled to its benefits on their first day of work; (b) daily paid employees are entitled to said benefits from the first
day they became regular monthly paid employees; (c) managerial and supervisory employees are entitled to the
same benefits until their promotion as such; (d) employees for whom no information as to salary rate were submitted
are entitled to the CBA benefits upon submission of proof in respect thereto; and, (e) employees who signed Deeds
of waiver, release and quitclaim are no longer entitled to said benefits. 27

Rejecting the argument that the NLRC erred in upholding the Executive Labor Arbiter’s computation of only 10 out
of the 15 benefits provided under the imposed CBA, the CA went on to take appropriate note of the fact that no
proof was submitted by the Union to justify the grant of said benefits. While ruling that the imposed CBA had the
same force and effect as a negotiated CBA, the CA, however, faulted the Union for its "hasty" and "premature" filing
of its motion for issuance of a writ of execution, instead of first demanding the enforcement of the imposed CBA
from GMC and, failing the same, referring the matter to the grievance machinery or voluntary arbitration provided
under the imposed CBA, in accordance with Articles 260 and 261 of the Labor Code. Acknowledging the difficulty of
computing the benefits demanded by the Union in the absence of evidence upon which to base the same, the CA
referred the case to the Grievance Machinery under the imposed CBA and directed the exclusion of the following
items from said computation: (a) the Union’s claims for vacation leave salary rate differentials and sick leave salary
rate differentials; (b) the benefits in favor of the employees who have already executed quitclaims in favor of GMC;
and (c) the salary increases and other employment benefits GMC had, in the meantime, extended its

Labor II – 1
employees.28 Discontented with the CA’s 14 May 2008 resolution denying its motion for reconsideration of the
foregoing decision,29 the Union filed its Rule 45 petition currently docketed before this Court as G.R. No. 183122. 30

On the other hand, GMC’s petition for certiorari assailing the NLRC’s 20 July 2006 decision was docketed as CA-
G.R. SP No. CEB-SP No. 02232 before the CA’s Eighteenth Division 31 which subsequently rendered the decision
dated on 16 November 2007, dismissing the same for lack of merit. Finding that both parties were given an
opportunity to present their respective positions during the pre-execution conference conducted a quo, the CA ruled
that the Executive Labor Arbiter’s 27 October 2005 order had attained finality insofar as GMC is concerned, in view
of its failure to perfect an appeal therefrom by paying the required appeal fee and posting the cash or surety bond in
an amount equivalent to the benefits computed. In addition to rejecting GMC’s argument that the quitclaims
executed by its employees were in the nature of a supervening event which rendered execution proceedings
impossible, the CA held that said quitclaims did not extend to the benefits provided under the imposed CBA and that
the additional benefits supposedly received by GMC’s employees should not be deducted therefrom, for lack of
sufficient evidence to prove the same.32 Aggrieved by the denial of its motion for reconsideration of the foregoing
decision in the CA’s resolution dated 10 July, 2008, 33 GMC filed the petition for review on certiorari docketed before
us as G.R. No. 183889.34

The Issues

In G.R. No. 183122, the Union proffers the following grounds for the grant of its petition, to wit:

I. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED REVERSIBLE
ERROR IN AFFIRMING THE COMPUTATION OF THE NLRC IN ITS DECISION DATED JULY 20, 2006
AND DISTORTING THE APPLICATION OF ARTICLE 253 OF THE LABOR CODE IN THE EXECUTION OF
THE DECISION OF THIS HONORABLE COURT IN G.R. NO. 146728.

II. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED REVERSIBLE
ERROR IN EXCLUDING FROM THE COMPUTATION THE EMPLOYEES WHO HAVE EXECUTED
QUITCLAIMS, IN EXCLUDING FROM THE COMPUTATION VACATION AND SICK LEAVE SALARY
DIFFERENTIALS, AND IN DEDUCTING ALLEGED SALARY INCREASES AND OTHER BENEFITS GIVEN
BY [GMC].

III. THE COURT OF APPEALS GRAVELY ABUSED ITS DISCRETION AND COMMITTED REVERSIBLE
ERROR IN REFERRING THE INSTANT CASE TO THE GRIEVANCE MACHINERY FOR COMPUTATION
OF THE BENEFITS DUE UNDER THE IMPOSED CBA.

IV. THE DECISION IN THE INSTANT CASE IS IN DIRECT CONFLICT WITH THE DECISION OF
ANOTHER DIVISION OF THE COURT OF APPEALS INVOLVING THE SAME ISSUES. 35

In G.R. No. 183889, GMC prays for the setting aside of the CA’s 16 November 2007 decision in CA-G.R. CEB-SP
No. 02232, on the following grounds, to wit:

A. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE COURT
OF APPEALS ARE CONTRARY TO LAW.

B. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE COURT
OF APPEALS ARE NOT IN ACCORD WITH THE APPLICABLE DECISIONS OF THIS HONORABLE
COURT.

C. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE
COURT OF APPEALS ARE CONTRARY TO THE ESTABLISHED FACTS.

D. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE
COURT OF APPEALS VIOLATE THE LAW OF THE CASE.

Labor II – 1
 E. THE DECISION OF NOVEMBER 16, 2007 AND THE RESOLUTION OF JULY 10, 2008 OF THE COURT
OF APPEALS CONTRAVENE THEIR OWN DECISION IN AN EXACTLY SIMILAR CASE INVOLVING THE
SAME PARTIES.36

As may be gleaned from the grounds GMC and the Union interpose in support of their respective petitions, it is
evident that we are called upon to determine the following matters: (a) the period of effectivity of the imposed
CBA; (b) the employees covered by the imposed CBA; and, (c) the benefits to be included in the execution of the 11
February 2004 decision rendered in G.R. No. 146728. Preliminary to the foregoing considerations is the effect of the
rendition of diametrically opposed decisions in CA-G.R. CEB. SP Nos. 02226 and 02232 by the CA’s Special
Twentieth and Eighteenth Divisions on the parties’ conflicting claims.

The Court’s Ruling

We find the reversal of the assailed decisions in order.

Both GMC and the Union call our attention to the fact that the 10 October 2007 decision rendered by the CA’s
Special Twentieth Division in CA-G.R. CEB-SP No. 02226 is in conflict with the 16 November 2007 decision
rendered by the same court’s Eighteenth Division in CA-G.R. CEB-SP No. 02232. In G.R. No. 183122, the Union
argues that, given the identity of parties and issues raised in said cases, the 16 November 2007 decision in CA-G.R.
CEB-SP No. 02232 should have been taken considered and adopted by the CA’s Special Twentieth Division in
resolving its motion for reconsideration of the 10 October 2007 decision in CA-G.R. CEB-SP No. 02226. 37 In G.R.
No. 183889, on the other hand, GMC maintains that, having been rendered ahead of the 16 November 2007
decision in CA-G.R. CEB-SP No. 02232, the CA’s Special Twentieth Division’s 10 October 2007 in CA-G.R. CEB-
SP No. 02226 is the law of the case which the Eighteenth Division erroneously contravened when it dismissed its
petition for certiorari.38

The conflicting decisions in CA-G.R. CEB-SP Nos. 02226 and 02232 would have been, in the first place, avoided
had the CA consolidated said cases pursuant to Section 3, Rule III of its 2002 Internal Rules (IRCA). 39 Being
intimately and substantially related cases, their consolidation should have been ordered to avert the possibility of
conflicting decisions in the two cases.40 Although rendered on the merits by a court of competent jurisdiction acting
within its authority, neither one of said decisions can, however, be invoked as law of the case insofar as the other
case is concerned. The doctrine of "law of the case" means that whatever is once irrevocably established as the
controlling legal rule or decision between the same parties in the same case continues to be the law of the case,
whether correct on general principles or not,41 so long as the facts on which such decision was predicated continue
to be the facts of the case before the court.42 Considering that a decision becomes the law of the case once it attains
finality,43 it is evident that, without having achieved said status, the herein assailed decisions cannot be invoked as
the law of the case by either GMC or the Union.

Anent its period of effectivity, Article XIV of the imposed CBA provides that "(t)his Agreement shall be in full force
and effect for a period of five (5) years from 1 December 1991, provided that sixty (60) days prior to the lapse of the
third year of effectivity hereof, the parties shall open negotiations on economic aspect for the fourth and fifth years
effectivity of this Agreement."44 Considering that no new CBA had been, in the meantime, agreed upon by GMC and
the Union, we find that the CA’s Special Twentieth Division correctly ruled in CA-G.R. CEB-SP No. 02226 that,
pursuant to Article 253 of the Labor Code,45 the provisions of the imposed CBA continues to have full force and
effect until a new CBA has been entered into by the parties. Article 253 mandates the parties to keep the status
quo and to continue in full force and effect the terms and conditions of the existing agreement during the 60-day
period prior to the expiration of the old CBA and/or until a new agreement is reached by the parties.46 In the same
manner that it does not provide for any exception nor qualification on which economic provisions of the existing
agreement are to retain its force and effect,47 the law does not distinguish between a CBA duly agreed upon by the
parties and an imposed CBA like the one under consideration.

The foregoing disquisition notwithstanding, it bears emphasizing, however, that the dispositive portion of the 30
January 1998 decision rendered by the Fourth Division of the NLRC in NLRC Case No. V-0112-94 specifically
ordered "the imposition upon [GMC] of the [Union’s] draft CBA proposal for the remaining two years duration of the
original CBA which is from 1 December 1991 to 30 November 1993." 48 Initially set aside in the 6 October 1998
resolution issued in the same case by the NLRC49 and reinstated in the 19 July 2000 decision rendered by the CA’s
then Fourteenth Division in CA-G.R. SP Nos. 50383 and 51763, 50 said 30 January 1998 decision was upheld in the
Labor II – 1
11 February 2004 decision rendered by this Court in G.R. No. 146728 which, in turn, affirmed the CA’s 19 July 2000
decision as aforesaid.51 Considering that the 30 January 1998 decision sought to be enforced confined the
application of the imposed CBA to the remaining two-year duration of the original CBA, we find that the computation
of the benefits due GMC’s covered employees was correctly limited to the period 1 December 1991 to 30 November
1993 in the 27 October 2005 order issued by Executive Labor Arbiter Violeta Ortiz-Bantug and the 20 July 2006
decision rendered by the NLRC in NLRC Case No. V-000632-2005.

Consequently, insofar as the execution of the 30 January 1998 decision is concerned, the Union is out on a limb in
espousing a computation which extends the benefits of the imposed CBA beyond the remaining two-year duration of
the original CBA. The rule is, after all, settled that an order of execution which varies the tenor of the judgment or
exceeds the terms thereof is a nullity.52 Since execution not in harmony with the judgment is bereft of validity, 53 it
must conform, more particularly, to that ordained or decreed in the dispositive portion of the decision sought to be
enforced. Considering that the decision sought to be enforced pertains to the period 1 December 1991 to 30
November 1993, it necessarily follows that the computation of benefits under the imposed CBA should be limited to
covered employees who were in GMC’s employ during said period of time. While it is true that the provisions of the
imposed CBA extend beyond said remaining two-year duration of the original CBA in view of the parties’ admitted
failure to conclude a new CBA, the corresponding computation of the benefits accruing in favor of GMC’s covered
employees after the term of the original CBA was correctly excluded in the aforesaid 27 October 2005 order issued
in RAB VII-06-0475-1992. Rather than the abbreviated pre-execution proceedings before Executive Labor Arbiter
Violeta Ortiz-Bantug, the computation of the same benefits beyond 30 November 1993 should, instead, be threshed
out by GMC and the Union in accordance with the Grievance Procedure outlined as follows under Article XII of the
imposed CBA, to wit:

Article XII
GRIEVANCE PROCEDURE

Section 1. Whenever an employee covered by the terms of this Agreement believes that the COMPANY has
violated the express terms thereof, or is aggrieved on the enforcement or application of the COMPANY’s personnel
policies, he/she shall be required to follow the procedure hereinafter set forth in processing the grievance. The
COMPANY will not be required to consider a grievance unless it is presented within 7 days from the alleged breach
of the express terms of this Agreement or the COMPANY personnel policies,

STEP I. The employee, through the UNION Steward, shall present the alleged grievance in writing to the immediate
superior and they shall endeavor to settle the grievance within ten (10) days.

STEP II. Failing the settlement in Step I, the UNION President and the Personnel Officer shall meet and adjust the
grievance within fifteen (15) days.

STEP III. Any unresolved grievance shall be referred to the Arbitration Committee provided hereunder.

Section 2. Procedure before the Grievance Committee.

A. In the event a dispute arises concerning the application or interpretation of the terms of this
Agreement or enforcement/application of the COMPANY personnel policies which cannot be settled
pursuant to Section I and II, Section 1 hereof, an Arbitration Committee shall be formed for the
purpose of settling that particular dispute only. The Grievance Committee shall be composed of
three (3) members, one to be appointed by the COMPANY as its representative, another to be
appointed by the UNION, and the third to be appointed by common agreement of the two
representatives selected from among the list of accredited voluntary arbitrators in the Province of
Cebu, or from government officials or civic leaders and responsible citizens in the community.

B. In all meetings of the Grievance Committee organized for the purpose of resolving a particular
dispute, all members must be present and no business shall be deliberated upon if any member
thereof is absent. However, if any member is unable to attend the meeting, he/she shall immediately
appoint one to represent him/her, but if the one appointed by agreement of both representatives of
the COMPANY and the UNION is the one absent, the two representatives present shall agree
between themselves on any person to take the place of the absent member. Any business or matter
Labor II – 1
 shall be considered as passed and approved by the Committee when there is a vote thereo[n] by at
least two (2) members present and the same shall be final and binding on the parties concerned.

C. All decisions of the Committee shall be final: provided, however, that all decisions of the
Committee shall be limited to the terms and provisions of this Agreement and in no event may the
terms and provisions of this Agreement be altered, amended or modified by the Committee. 54

Article II of the imposed CBA, relatedly, provides that "(t)he employees covered by this Agreement are those
employed as regular monthly paid employees at the [GMC] offices in Cebu City and Lapulapu City, including cadet
engineers, salesmen, veterinarians, field and laboratory workers, with the exception of managerial employees,
supervisory employees, executive and confidential secretaries, probationary employees and the employees covered
by a separate Collective Bargaining Agreement at the Company’s Mill in Lapulapu City." 55 Gauged from the express
language of the foregoing provision, we find that Executive Labor Arbiter Violeta Ortiz-Bantug correctly excluded the
following employees from the list of 436 employees submitted by the Union 56 and the computation of the benefits for
the period 1 December 1991 to 30 November 1993, to wit: (a) 77 employees who were hired or regularized after 30
November 1993; (b) 36 daily paid rank and file employees who were covered by a separate CBA; (c) 41
managerial/supervisory employees; and, (d) 1 employee for whom no salary-rate information was submitted in the
premises.57 However, we find that the 234 employees who had already been separated from GMC’s employ by the
time of the rendition of the 11 February 2004 decision in G.R. No. 146728 should further be added to these
excluded employees.

The record shows that said 234 employees were union members whose employment with GMC ceased as a
consequence of death, termination due to redundancy, termination due to closure of plant, termination for cause,
voluntary resignation, separation or dismissal from service as well as retirement. 58 Upon compliance with GMC’s
clearance requirements59 and in consideration of sums ranging from ₱38,980.12 to ₱631,898.72, due payment and
receipt of which were duly acknowledged, it appears that said employees executed deeds of waiver, release and
quitclaim60 which uniformly stated as follows:

THAT, for and in consideration of the said payment, I have remised, released and do hereby discharge, and by
these presents do for myself, my heirs, executors and administrators, remise, release and forever discharge said
GENERAL MILLING CORPORATION, its successors and assigns, and/or any of its officers or employees of and
from any and all manner of actions, cause or causes of actions, sum or sums of money, account damages, claims
and demands whatsoever by way of separation pay, benefits, bonuses, and all other rights to compensation, salary,
wage, emolument, reimbursement, or monetary benefits, which I ever had, now have or which my heirs , executors
and administrators hereafter can, shall or may have, upon or by reason of any matter, cause or things whatsoever in
connection with my former employment in and retirement from the said GENERAL MILLING CORPORATION. 1avvphi1

THAT, I have signed this Deed of Waiver, Release and Quitclaim after I have read the contents thereof and
understood the same and its legal effects.

In its assailed 16 November 2007 decision in CA-G.R. CEB-SP No. 02232, the CA’s then Eighteenth Division
brushed aside said deeds of waiver, release and quitclaim on the ground, among other matters, that the same only
covered the employees’ separation pay and retirement benefits but did not extend to the benefits which had accrued
in their favor under the imposed CBA; and, that to be valid, the waiver "should be couched in clear and unequivocal
terms leaving no doubt as to the intention of those giving up a right or a benefit that legally pertains to them." 61 In so
doing, however, the CA’s Eighteenth Division egregiously disregarded the clear intent on the part of the employees
who executed said deeds of waiver, release and quitclaim to relinquish all present and future claims arising out of
their employment with GMC. Although generally looked upon with disfavor, 62 it cannot be gainsaid that legitimate
waivers that represent a voluntary and reasonable settlement of laborers' claims should be so respected by the
Court as the law between the parties.63 It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to
annul the questionable transaction.64 The absence of showing of these factors in the case at bench impels us to
uphold the validity of said deeds of waiver, release and quitclaim and, to exclude the employees who executed the
same from those still entitled to the benefits under the imposed CBA both before and after the remaining term of the
original CBA. The waiver was all inclusive. There was not even a hint of a limitation of coverage.

Labor II – 1
Inasmuch as mere allegation is not evidence, the basic evidentiary rule is to the effect that the burden of evidence
lies with the party who asserts the affirmative of an issue has the burden of proving the same 65 with such quantum of
evidence required by law. In administrative or quasi-judicial proceedings like those conducted before the NLRC, the
standard of proof is substantial evidence which is understood to be more than just a scintilla or such amount of
relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. 66 Since it does not
mean just any evidence in the record of the case for, otherwise, no finding of fact would be wanting in basis, the test
to be applied is whether a reasonable mind, after considering all the relevant evidence in the record of a case,
would accept the findings of fact as adequate.67 Viewed in the light of Union’s failure to prove the factual bases for
the computation of the same, we find that the NLRC correctly affirmed Executive Labor Arbiter Violeta Ortiz-
Bantug’s exclusion of the following benefits from the order dated 27 October, 2005, to wit: (a) vacation leave salary
rate differentials; (b) sick leave salary rate differentials; (c) dislocation allowance; (d) separation pay for voluntary
resignation; and (e) separation pay salary rate differentials. 68 For want of substantial evidence to prove the same,
the CA’s Eighteenth Division also correctly brushed aside GMC’s insistence on the deduction of the additional
benefits it purportedly extended to its employees from 1 December 1991 to 30 November 1993. 69

As for the benefits after the expiration of the term of the parties’ original CBA, we find that the extent thereof as well
as identity of the employees entitled thereto will be better and more thoroughly threshed out by the parties
themselves in accordance with the grievance procedure outlined in Article XII of the imposed CBA. Aside from being
already beyond the scope of the decision sought to be enforced, these matters will not be accurately ascertained
from the summaries of claims the parties have been wont to submit at the pre-execution conference conducted a
quo. Taking into consideration such factors as hiring of new employees, personnel movement and/or promotions as
well as separations from employment which may have, in the meantime, occurred after the expiration of the
remaining term of the original CBA, the identity of the covered employees as well as the extent of the benefits due
them should clearly be reckoned from acquisition and/or until loss of their status as regular monthly paid GMC
employees. Since the computation must likewise necessarily take into consideration the increases in salaries and
benefits that may have been given in the intervening period, both GMC and the Union are enjoined to make the
pertinent employment and company records available to each other, to facilitate the expeditious and accurate
determination of said benefits.

WHEREFORE, premises considered the assailed decisions dated 10 October 2007 and 16 November 2007 are
REVERSED and SET ASIDE. In lieu thereof, the 27 October 2005 order issued by Labor Arbiter Violeta Ortiz-
Bantug is ordered REINSTATED and MODIFIED to further exclude the 234 employees who have executed deeds of
waiver, release and quitclaim from the computation of the benefits for the remaining term of the original CBA.

Labor II – 1
29.) G.R. No. 162943               December 6, 2010

EMPLOYEES UNION OF BAYER PHILS., FFW and JUANITO S. FACUNDO, in his capacity as
President, Petitioners,
vs.
BAYER PHILIPPINES, INC., DIETER J. LONISHEN (President), ASUNCION AMISTOSO (HRD Manager),
AVELINA REMIGIO AND ANASTACIA VILLAREAL, Respondents.

DECISION

VILLARAMA, JR., J.:

This petition for review on certiorari assails the Decision1 dated December 15, 2003 and Resolution2 dated March
23, 2004 of the Court of Appeals (CA) in CA-G.R. SP No. 73813.

Petitioner Employees Union of Bayer Philippines 3 (EUBP) is the exclusive bargaining agent of all rank-and-file
employees of Bayer Philippines (Bayer), and is an affiliate of the Federation of Free Workers (FFW). In 1997, EUBP,
headed by its president Juanito S. Facundo (Facundo), negotiated with Bayer for the signing of a collective
bargaining agreement (CBA). During the negotiations, EUBP rejected Bayer’s 9.9% wage-increase proposal
resulting in a bargaining deadlock. Subsequently, EUBP staged a strike, prompting the Secretary of the Department
of Labor and Employment (DOLE) to assume jurisdiction over the dispute.

In November 1997, pending the resolution of the dispute, respondent Avelina Remigio (Remigio) and 27 other union
members, without any authority from their union leaders, accepted Bayer’s wage-increase proposal. EUBP’s
grievance committee questioned Remigio’s action and reprimanded Remigio and her allies. On January 7, 1998, the
DOLE Secretary issued an arbitral award ordering EUBP and Bayer to execute a CBA retroactive to January 1,
1997 and to be made effective until December 31, 2001. The said CBA4 was registered on July 8, 1998 with the
Industrial Relations Division of the DOLE-National Capital Region (NCR). 5

Meanwhile, the rift between Facundo’s leadership and Remigio’s group broadened. On August 3, 1998, barely six
months from the signing of the new CBA, during a company-sponsored seminar, 6 Remigio solicited signatures from
union members in support of a resolution containing the decision of the signatories to: (1) disaffiliate from FFW, (2)
rename the union as Reformed Employees Union of Bayer Philippines (REUBP), (3) adopt a new constitution and
by-laws for the union, (4) abolish all existing officer positions in the union and elect a new set of interim officers, and
(5) authorize REUBP to administer the CBA between EUBP and Bayer. 7 The said resolution was signed by 147 of
the 257 local union members. A subsequent resolution was also issued affirming the first resolution. 8

A tug-of-war then ensued between the two rival groups, with both seeking recognition from Bayer and demanding
remittance of the union dues collected from its rank-and-file members. On September 8, 1998, Remigio’s splinter
group wrote Facundo, FFW and Bayer informing them of the decision of the majority of the union members to
disaffiliate from FFW.9 This was followed by another letter informing Facundo, FFW and Bayer that an interim set of
REUBP executive officers and board of directors had been appointed, and demanding the remittance of all union
dues to REUBP. Remigio also asked Bayer to desist from further transacting with EUBP. Facundo, meanwhile, sent
similar requests to Bayer10 requesting for the remittance of union dues in favor of EUBP and accusing the company
of interfering with purely union matters.11 Bayer responded by deciding not to deal with either of the two groups, and
by placing the union dues collected in a trust account until the conflict between the two groups is resolved. 12

On September 15, 1998, EUBP filed a complaint for unfair labor practice (first ULP complaint) against Bayer for non-
remittance of union dues. The case was docketed as NLRC-NCR-Case No. 00-09-07564-98. 13

EUBP later sent a letter dated November 5, 1998 to Bayer asking for a grievance conference. 14 The meeting was
conducted by the management on November 11, 1998, with all REUBP officers including their lawyers present.
Facundo did not attend the meeting, but sent two EUBP officers to inform REUBP and the management that a
preventive mediation conference between the two groups has been scheduled on November 12, 1998 before the
National Conciliation and Mediation Board (NCMB). 15

Labor II – 1
Apparently, the two groups failed to settle their issues as Facundo again sent respondent Dieter J. Lonishen two
more letters, dated January 14, 1999 16 and September 2, 1999,17 asking for a grievance meeting with the
management to discuss the failure of the latter to comply with the terms of their CBA. Both requests remained
unheeded.

On February 9, 1999, while the first ULP case was still pending and despite EUBP’s repeated request for a
grievance conference, Bayer decided to turn over the collected union dues amounting to ₱254,857.15 to respondent
Anastacia Villareal, Treasurer of REUBP.

Aggrieved by the said development, EUBP lodged a complaint 18 on March 4, 1999 against Remigio’s group before
the Industrial Relations Division of the DOLE praying for their expulsion from EUBP for commission of "acts that
threaten the life of the union."

On June 18, 1999, Labor Arbiter Jovencio Ll. Mayor, Jr. dismissed the first ULP complaint for lack of
jurisdiction.19 The Arbiter explained that the root cause for Bayer’s failure to remit the collected union dues can be
traced to the intra-union conflict between EUBP and Remigio’s group 20 and that the charges imputed against Bayer
should have been submitted instead to voluntary arbitration. 21 EUBP did not appeal the said decision. 22

On December 14, 1999, petitioners filed a second ULP complaint against herein respondents docketed as NLRC-
RAB-IV Case No. 12-11813-99-L. Three days later, petitioners amended the complaint charging the respondents
with unfair labor practice committed by organizing a company union, gross violation of the CBA and violation of their
duty to bargain.23 Petitioners complained that Bayer refused to remit the collected union dues to EUBP despite
several demands sent to the management.24 They also alleged that notwithstanding the requests sent to Bayer for a
renegotiation of the last two years of the 1997-2001 CBA between EUBP and Bayer, the latter opted to negotiate
instead with Remigio’s group.25

On even date, REUBP and Bayer agreed to sign a new CBA. Remigio immediately informed her allies of the
management’s decision.26

In response, petitioners immediately filed an urgent motion for the issuance of a restraining order/injunction 27 before
the National Labor Relations Commission (NLRC) and the Labor Arbiter against respondents. Petitioners asserted
their authority as the exclusive bargaining representative of all rank-and-file employees of Bayer and asked that a
temporary restraining order be issued against Remigio’s group and Bayer to prevent the employees from ratifying
the new CBA. Later, petitioners filed a second amended complaint 28 to include in its complaint the issue of gross
violation of the CBA for violation of the contract bar rule following Bayer’s decision to negotiate and sign a new CBA
with Remigio’s group.

Meanwhile, on January 26, 2000, the Regional Director of the Industrial Relations Division of DOLE issued a
decision dismissing the issue on expulsion filed by EUBP against Remigio and her allies for failure to exhaust reliefs
within the union and ordering the conduct of a referendum to determine which of the two groups should be
recognized as union officers.29 EUBP seasonably appealed the said decision to the Bureau of Labor Relations
(BLR).30 On June 16, 2000, the BLR reversed the Regional Director’s ruling and ordered the management of Bayer
to respect the authority of the duly-elected officers of EUBP in the administration of the prevailing CBA. 31

Unfortunately, the said BLR ruling came late since Bayer had already signed a new CBA 32 with REUBP on February
21, 2000. The said CBA was eventually ratified by majority of the bargaining unit. 33

On June 2, 2000, Labor Arbiter Waldo Emerson R. Gan dismissed EUBP’s second ULP complaint for lack of
jurisdiction.34 The Labor Arbiter explained the dismissal as follows:

All told, were it not for the fact that there were two (2) [groups] of employees, the Union led by its President Juanito
Facundo and the members who decided to disaffiliate led by Ms. Avelina Remigio, claiming to be the rightful
representative of the rank and file employees, the Company would not have acted the way it did and the Union
would not have filed the instant case.

Labor II – 1
Clearly then, as the case involves intra-union disputes, this Office is bereft of any jurisdiction pursuant to Article 226
of the Labor Code, as amended, which provides pertinently in part, thus:

"Bureau of Labor Relations – The Bureau of Labor Relations and the Labor Relations Divisions in the regional
offices of the Department of Labor and Employment shall have original and exclusive authority to act, at their own
initiative or upon request of either or both parties, on all inter-union and intra-union conflicts, and all disputes,
grievances or problems arising from or affecting labor-management relations in all workplaces whether agricultural
or non-agricultural, except those arising from the implementation or interpretation of collective bargaining
agreements which shall be the subject of grievance procedure and/or voluntary arbitration."

Specifically, with respect to the union dues, the authority is the case of Cebu Seamen’s Association[,] Inc. vs.
Ferrer-Calleja, (212 SCRA 51), where the Supreme Court held that when the issue calls for the determination of
which between the two groups within a union is entitled to the union dues, the same cannot be taken cognizance of
by the NLRC.

xxxx

WHEREFORE, premises considered, the instant complaint is hereby DISMISSED on the ground of lack of
jurisdiction.

SO ORDERED.35

On June 28, 2000, the NLRC resolved to dismiss36 petitioners’ motion for a restraining order and/or injunction stating
that the subject matter involved an intra-union dispute, over which the said Commission has no jurisdiction. 37

Aggrieved by the Labor Arbiter’s decision to dismiss the second ULP complaint, petitioners appealed the said
decision, but the NLRC denied the appeal. 38 EUBP’s motion for reconsideration was likewise denied. 39

Thus, petitioners filed a Rule 65 petition to the CA. On December 15, 2003, the CA sustained both the Labor Arbiter
and the NLRC’s rulings. The appellate court explained,

A cursory reading of the three pleadings, to wit: the Complaint (Vol. I, Rollo, p[p]. 166-167); the Amended
Complaint (Vol. I, Rollo[,] pp. 168-172) and the Second Amended Complaint dated March 8, 2000 (Vol. II, Rollo, pp.
219-225) will readily show that the instant case was brought about by the action of the Group of REM[I]GIO to
disaffiliate from FFW and to organized (sic) REUBP under the tutelage of REM[I]GIO and VILLAREAL. At first
glance of the case at bar, it involves purely an (sic) inter-union and intra-union conflicts or disputes between EUBP-
FFW and REUBP which issue should have been resolved by the Bureau of Labor Relations under Article 226 of the
Labor Code. However, since no less than petitioners who admitted that respondents committed gross violations of
the CBA, then the BLR is divested of jurisdiction over the case and the issue should have been referred to the
Grievance Machinery and Voluntary Arbitrator and not to the Labor Arbiter as what petitioners did in the case at bar.
xxx

xxxx

Furthermore, the CBA entered between BAYER and EUBP-FFW [has] a life span of only five years and after the
said period, the employees have all the right to change their bargaining unit who will represent them. If there exist[s]
two opposing unions in the same company, the remedy is not to declare that such act is considered unfair labor
practice but rather they should conduct a certification election provided [that] it should be conducted within 60 days
of the so[-]called freedom period before the expiration of the CBA.

WHEREFORE, premises considered, this Petition is DENIED and the assailed Decision dated September 27, 2001
as well as the Order dated June 21, 2002, denying the motion for reconsideration, by the National Labor Relations
Commission, First Division, in NLRC Case No. RAB-IV-12-11813-99-L, are hereby AFFIRMED in toto. Costs
against petitioners.

SO ORDERED.40
Labor II – 1
Undaunted, petitioners filed this Rule 45 petition before this Court. Initially, the said petition was denied for having
been filed out of time and for failure to comply with the requirements provided in the 1997 Rules of Civil Procedure,
as amended.41 Upon petitioners’ motion, however, we decided to reinstate their appeal.

The following are the issues raised by petitioners, to wit:

I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS, IN ARRIVING AT THE DECISION

PROMULGATED ON 15 DECEMBER 2003 AND RESOLUTION PROMULGATED ON 23 MARCH 2004,
DECIDED THE CASE IN ACCORDANCE WITH LAW AND JURISPRUDENCE; AND

II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS, IN ARRIVING AT THE DECISION
PROMULGATED ON 15 DECEMBER 2003 AND RESOLUTION PROMULGATED ON 23 MARCH 2004,
GRAVELY ABUSE[D] ITS DISCRETION IN ITS FINDINGS AND CONCLUSION THAT:

THE ACTS OF ABETTING OR ASSISTING IN THE CREATION OF ANOTHER UNION, NEGOTIATING OR

BARGAINING WITH SUCH UNION, WHICH IS NOT THE SOLE AND EXCLUSIVE BARGAINING AGENT,
VIOLATING THE DUTY TO BARGAIN COLLECTIVELY, REFUSAL TO PROCESS GRIEVABLE ISSUES IN
THE GRIEVANCE MACHINERY AND/OR REFUSAL TO DEAL WITH THE SOLE AND EXCLUSIVE
BARGAINING AGENT ARE ACTS CONSTITUTING OR TANTAMOUNT TO UNFAIR LABOR PRACTICE. 42

Respondents Bayer, Lonishen and Amistoso, meanwhile, identify the issues as follows:

I. WHETHER OR NOT THE UNIFORM FINDINGS OF THE COURT OF APPEALS, THE NLRC AND THE
LABOR ARBITER ARE BINDING ON THIS HONORABLE COURT;

II. WHETHER OR NOT THE LABOR ARBITER AND THE NLRC HAVE JURISDICTION OVER THE
INSTANT CASE;

III. WHETHER OR NOT THE INSTANT CASE INVOLVES AN INTRA-UNION DISPUTE;

IV. WHETHER OR NOT RESPONDENTS COMPANY, LONISHEN AND AMISTOSO COMMITTED AN ACT
OF UNFAIR LABOR PRACTICE; AND

V. WHETHER OR NOT THE INSTANT CASE HAS BECOME MOOT AND ACADEMIC. 43

Essentially, the issue in this petition is whether the act of the management of Bayer in dealing and negotiating with
Remigio’s splinter group despite its validly existing CBA with EUBP can be considered unfair labor practice and, if
so, whether EUBP is entitled to any relief.

Petitioners argue that the subject matter of their complaint, as well as the subsequent amendments thereto, pertain
to the unfair labor practice act of respondents Bayer, Lonishen and Amistoso in dealing with Remigio’s splinter
union. They contend that (1) the acts of abetting or assisting in the creation of another union is among those
considered by the Labor Code, as amended, specifically under Article 248 (d)44 thereof, as unfair labor practice; (2)
the act of negotiating with such union constitutes a violation of Bayer’s duty to bargain collectively; and (3) Bayer’s
unjustified refusal to process EUBP’s grievances and to recognize the said union as the sole and exclusive
bargaining agent are tantamount to unfair labor practice. 45

Respondents Bayer, Lonishen and Amistoso, on the other hand, contend that there can be no unfair labor practice
on their part since the requisites for unfair labor practice – i.e., that the violation of the CBA should be gross, and
that it should involve violation in the economic provisions of the CBA – were not satisfied. Moreover, they cite the
ruling of the Labor Arbiter that the issues raised in the complaint should have been ventilated and threshed out
before the voluntary arbitrators as provided in Article 261 of the Labor Code, as amended.46 Respondents Remigio
and Villareal, meanwhile, point out that the case should be dismissed as against them since they are not real parties
in interest in the ULP complaint against Bayer,47 and since there are no specific or material acts imputed against
them in the complaint.48

Labor II – 1
The petition is partly meritorious.

An intra-union dispute refers to any conflict between and among union members, including grievances arising from
any violation of the rights and conditions of membership, violation of or disagreement over any provision of the
union’s constitution and by-laws, or disputes arising from chartering or disaffiliation of the union. 49 Sections 1 and 2,
Rule XI of Department Order No. 40-03, Series of 2003 of the DOLE enumerate the following circumstances as
inter/intra-union disputes, viz:

RULE XI
INTER/INTRA-UNION DISPUTES AND
OTHER RELATED LABOR RELATIONS DISPUTES

Section 1. Coverage. - Inter/intra-union disputes shall include:

(a) cancellation of registration of a labor organization filed by its members or by another labor organization;

(b) conduct of election of union and workers’ association officers/nullification of election of union and
workers’ association officers;

(c) audit/accounts examination of union or workers’ association funds;

(d) deregistration of collective bargaining agreements;

(e) validity/invalidity of union affiliation or disaffiliation;

(f) validity/invalidity of acceptance/non-acceptance for union membership;

(g) validity/invalidity of impeachment/expulsion of union and workers’ association officers and members;

(h) validity/invalidity of voluntary recognition;

(i) opposition to application for union and CBA registration;

(j) violations of or disagreements over any provision in a union or workers’ association constitution and by-
laws;

(k) disagreements over chartering or registration of labor organizations and collective bargaining
agreements;

(l) violations of the rights and conditions of union or workers’ association membership;

(m) violations of the rights of legitimate labor organizations, except interpretation of collective bargaining
agreements;

(n) such other disputes or conflicts involving the rights to self-organization, union membership and collective
bargaining –

(1) between and among legitimate labor organizations;

(2) between and among members of a union or workers’ association.

Section 2. Coverage. – Other related labor relations disputes shall include any conflict between a labor union and
the employer or any individual, entity or group that is not a labor organization or workers’ association. This includes:
(1) cancellation of registration of unions and workers’ associations; and (2) a petition for interpleader.

Labor II – 1
It is clear from the foregoing that the issues raised by petitioners do not fall under any of the aforementioned
circumstances constituting an intra-union dispute. More importantly, the petitioners do not seek a determination of
whether it is the Facundo group (EUBP) or the Remigio group (REUBP) which is the true set of union officers.
Instead, the issue raised pertained only to the validity of the acts of management in light of the fact that it still has an
existing CBA with EUBP. Thus as to Bayer, Lonishen and Amistoso the question was whether they were liable for
unfair labor practice, which issue was within the jurisdiction of the NLRC. The dismissal of the second ULP
complaint was therefore erroneous.

However, as to respondents Remigio and Villareal, we find that petitioners’ complaint was validly dismissed.

Petitioners’ ULP complaint cannot prosper as against respondents Remigio and Villareal because the issue, as
against them, essentially involves an intra-union dispute based on Section 1 (n) of DOLE Department Order No. 40-
03. To rule on the validity or illegality of their acts, the Labor Arbiter and the NLRC will necessarily touch on the
issues respecting the propriety of their disaffiliation and the legality of the establishment of REUBP – issues that are
outside the scope of their jurisdiction. Accordingly, the dismissal of the complaint was validly made, but only with
respect to these two respondents.

But are Bayer, Lonishen and Amistoso liable for unfair labor practice? On this score, we find that the evidence
supports an answer in the affirmative.

It must be remembered that a CBA is entered into in order to foster stability and mutual cooperation between labor
and capital. An employer should not be allowed to rescind unilaterally its CBA with the duly certified bargaining
agent it had previously contracted with, and decide to bargain anew with a different group if there is no legitimate
reason for doing so and without first following the proper procedure. If such behavior would be tolerated, bargaining
and negotiations between the employer and the union will never be truthful and meaningful, and no CBA forged
after arduous negotiations will ever be honored or be relied upon. Article 253 of the Labor Code, as amended,
plainly provides:

ART. 253. Duty to bargain collectively when there exists a collective bargaining agreement. – Where there is a
collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate or
modify such agreement during its lifetime. However, either party can serve a written notice to terminate or modify
the agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and conditions of the existing agreement during the
60-day period and/or until a new agreement is reached by the parties. (Emphasis supplied.) 1avvphi1

This is the reason why it is axiomatic in labor relations that a CBA entered into by a legitimate labor organization that
has been duly certified as the exclusive bargaining representative and the employer becomes the law between
them. Additionally, in the Certificate of Registration 50 issued by the DOLE, it is specified that the registered CBA
serves as the covenant between the parties and has the force and effect of law between them during the period of
its duration. Compliance with the terms and conditions of the CBA is mandated by express policy of the law primarily
to afford protection to labor 51 and to promote industrial peace. Thus, when a valid and binding CBA had been
entered into by the workers and the employer, the latter is behooved to observe the terms and conditions thereof
bearing on union dues and representation.52 If the employer grossly violates its CBA with the duly recognized union,
the former may be held administratively and criminally liable for unfair labor practice. 53

Respondents Bayer, Lonishen and Amistoso, contend that their acts cannot constitute unfair labor practice as the
same did not involve gross violations in the economic provisions of the CBA, citing the provisions of Articles 248 (1)
and 26154 of the Labor Code, as amended.55 Their argument is, however, misplaced.

Indeed, in Silva v. National Labor Relations Commission, 56 we explained the correlations of Article 248 (1) and
Article 261 of the Labor Code to mean that for a ULP case to be cognizable by the Labor Arbiter, and for the NLRC
to exercise appellate jurisdiction thereon, the allegations in the complaint must show prima facie the concurrence of
two things, namely: (1) gross violation of the CBA; and (2) the violation pertains to the economic provisions of the
CBA.57

This pronouncement in Silva, however, should not be construed to apply to violations of the CBA which can
be considered as gross violations per se, such as utter disregard of the very existence of the CBA itself,
Labor II – 1
similar to what happened in this case. When an employer proceeds to negotiate with a splinter union
despite the existence of its valid CBA with the duly certified and exclusive bargaining agent, the former
indubitably abandons its recognition of the latter and terminates the entire CBA.

Respondents cannot claim good faith to justify their acts. They knew that Facundo’s group represented the duly-
elected officers of EUBP. Moreover, they were cognizant of the fact that even the DOLE Secretary himself had
recognized the legitimacy of EUBP’s mandate by rendering an arbitral award ordering the signing of the 1997-2001
CBA between Bayer and EUBP. Respondents were likewise well-aware of the pendency of the intra-union dispute
case, yet they still proceeded to turn over the collected union dues to REUBP and to effusively deal with Remigio.
The totality of respondents’ conduct, therefore, reeks with anti-EUBP animus.

Bayer, Lonishen and Amistoso argue that the case is already moot and academic following the lapse of the 1997-
2001 CBA and their renegotiation with EUBP for the 2006-2007 CBA. They also reason that the act of the company
in negotiating with EUBP for the 2006-2007 CBA is an obvious recognition on their part that EUBP is now the
certified collective bargaining agent of its rank-and-file employees. 58

We do not agree. First, a legitimate labor organization cannot be construed to have abandoned its pending claim
against the management/employer by returning to the negotiating table to fulfill its duty to represent the interest of
its members, except when the pending claim has been expressly waived or compromised in its subsequent
negotiations with the management. To hold otherwise would be tantamount to subjecting industrial peace to the
precondition that previous claims that labor may have against capital must first be waived or abandoned before
negotiations between them may resume. Undoubtedly, this would be against public policy of affording protection to
labor and will encourage scheming employers to commit unlawful acts without fear of being sanctioned in the
future.
1avvphi1

Second, that the management of Bayer decided to recognize EUBP as the certified collective bargaining agent of its
rank-and-file employees for purposes of its 2006-2007 CBA negotiations is of no moment. It did not obliterate the
fact that the management of Bayer had withdrawn its recognition of EUBP and supported REUBP during the
tumultuous implementation of the 1997-2001 CBA. Such act of interference which is violative of the existing CBA
with EUBP led to the filing of the subject complaint.

On the matter of damages prayed for by the petitioners, we have held that as a general rule, a corporation cannot
suffer nor be entitled to moral damages. A corporation, and by analogy a labor organization, being an artificial
person and having existence only in legal contemplation, has no feelings, no emotions, no senses; therefore, it
cannot experience physical suffering and mental anguish. Mental suffering can be experienced only by one having a
nervous system and it flows from real ills, sorrows, and griefs of life – all of which cannot be suffered by an artificial,
juridical person.59 A fortiori, the prayer for exemplary damages must also be denied. 60 Nevertheless, we find it in
order to award (1) nominal damages in the amount of ₱250,000.00 on the basis of our ruling in De La Salle
University v. De La Salle University Employees Association (DLSUEA-NAFTEU) 61 and Article 2221,62 and (2)
attorney’s fees equivalent to 10% of the monetary award. The remittance to petitioners of the collected union dues
previously turned over to Remigio and Villareal is likewise in order.

WHEREFORE, the petition for review on certiorari is PARTLY GRANTED. The Decision dated December 15, 2003
and the Resolution dated March 23, 2004 of the Court of Appeals in CA-G.R. SP No. 73813 are MODIFIED as
follows:

1) Respondents Bayer Phils., Dieter J. Lonishen and Asuncion Amistoso are found LIABLE for Unfair Labor
Practice, and are hereby ORDERED to remit to petitioners the amount of ₱254,857.15 representing the
collected union dues previously turned over to Avelina Remigio and Anastacia Villareal. They are likewise
ORDERED to pay petitioners nominal damages in the amount of ₱250,000.00 and attorney’s fees
equivalent to 10% of the monetary award; and

2) The complaint, as against respondents Remigio and Villareal. is DISMISSED due to the lack of
jurisdiction of the Labor Arbiter and the NLRC, the complaint being in the nature of an intra-union dispute.

Labor II – 1
30.) G.R. No. 181357               February 2, 2010

MALAYAN EMPLOYEES ASSOCIATION-FFW and RODOLFO MANGALINO, Petitioners,

vs.
MALAYAN INSURANCE COMPANY, INC., Respondent.

DECISION

BRION, J.:

The petitioner Malayan Employees Association-FFW (union) asks us in this petition for certiorari,1 to set aside the
June 26, 2007 decision2 and the November 29, 2007 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No.
80691, ruling that the suspension imposed by the respondent Malayan Insurance Company, Inc. (company) on
union member Rodolfo Mangalino (Mangalino) is valid. Mangalino was suspended for taking a union leave without
the prior authority of his department head and despite a previous disapproval of the requested leave.

BACKGROUND FACTS

The union is the exclusive bargaining agent of the rank-and-file employees of the company. A provision in the
union’s collective bargaining agreement (CBA) with the company allows union officials to avail of union leaves with
pay for a total of "ninety-man" days per year for the purpose of attending grievance meetings, Labor-Management
Committee meetings, annual National Labor Management Conferences, labor education programs and seminars,
and other union activities.

The company issued a rule in November 2002 requiring not only the prior notice that the CBA expressly requires,
but prior approval by the department head before the union and its members can avail of union leaves. The rule was
placed into effect in November 2002 without any objection from the union until a union officer, Mangalino, filed union
leave applications in January and February, 2004. His department head disapproved the applications because the
department was undermanned at that time.

Despite the disapproval, Mangalino proceeded to take the union leave. He said he believed in good faith that he had
complied with the existing company practice and with the procedure set forth in the CBA. The company responded
by suspending him for one week and, thereafter, for a month, for his second offense in February 2004.

The union raised the suspensions as a grievance issue and went through all the grievance processes, including the
referral of the matter to the company’s president, Yvonne Yuchengco. After all internal remedies failed, the union
went to the National Conciliation and Mediation Board for preventive mediation. When this recourse also failed, the
parties submitted the dispute to voluntary arbitration4 on the following issues:

1. whether or not Mangalino’s suspensions were valid; and

2. whether or not Mangalino should be paid backwages for the duration of the suspensions.

The Voluntary Arbitrators decided the submitted dispute on November 26, 2004, 5 ruling as follows:

WHEREFORE, in view of the foregoing, this Honorable Office adjudged the suspension of Mr. Rodolfo Mangalino’s
on first availment of union leave invalid while the second suspension valid but illicit in terms of penalty of thirty (30)
days suspension. We consider the honesty of the same as mitigating circumstances, for the Chairman of this panel
of Arbitrators attested that complainant attended labor matter in the Office of Voluntary Arbitrator last January 19,
2004 and February 5, 2004. However, it is good to note the wisdom of Justice Narvasa in the aforecited Supreme
Court Ruling of obey first before you complain.

In view thereof, this Honorable Office reduced the suspension from thirty seven (37) days to ten (10) days only.
Henceforth, the Complainant is entitled to twenty seven (27) days backwages.

Labor II – 1
Proof of payment of backwages should be submitted to the chairman of this Panel of Arbitrators within ten (10) days
from receipt hereof.

Parties are hereby enjoined to comply in this Award as provided in the submission Agreement.

SO ORDERED.

Notably, the decision was not unanimous. Voluntary Arbitrator dela Fuente submitted the following dissent: 6

The act of any employee that can only be interpreted to be an open and utter display of arrogance and unconcern
for the welfare of his Company thru the use of what he pretends to believe to be an unbridled political right cannot
be allowed to pass without sanction lest the employer desires anarchy and chaos to reign in its midst.

Hence, having failed to comply with the requirements for availment of union leaves and for going on such leave
despite the express disapproval of his superior, Mr. Mangalino’s two suspensions are valid and he is not entitled to
any backwages for the duration of his suspensions.

The company appealed the decision to the CA on May 12, 2005 through a petition for review under Rule 43 of the
Rules of Court (Rules). In a decision promulgated on June 26, 2007, the CA granted the company’s petition and
upheld the validity of Mangalino’s suspension on the basis of the company’s prerogative to prescribe reasonable
rules to regulate the use of union leaves.7

The union moved for the reconsideration of the CA decision and received the CA’s denial (through its resolution of
November 29, 2007) on December 8, 2007.8

THE PETITION

The union seeks relief from this Court against the CA decision through its Rule 65 petition for certiorari filed on
February 6, 2008.9 It alleged that the CA committed grave abuse of discretion when, despite the clear terms of the
CBA grant of union leaves, it disregarded the evidence on record and recognized that the company’s use of its
management prerogative as justification was proper.

In our Resolution of March 5, 2008, we resolved to treat the Rule 65 petition as a petition for review on certiorari
under Rule 45 of the Rules, and required the respondent company to comment. 10 After comment, we required the
union to file its reply.11 Thereafter, the parties submitted their respective memoranda. 12

In its comment, the company raised both procedural and substantive objections.

It questioned the petition’s compliance with the Rules, particularly the use of a petition for certiorari under Rule 65 to
question the CA decision, when the appropriate remedy is a petition for review on certiorari under Rule 45. The
company also asserted that the union violated Section 2, Rule 45 when it failed to attach the material portions of the
record as would support its petition, such as the company’s pleadings and the entirety of the company’s evidence.
More importantly, it posited that the petition is barred by time limitation and has lapsed to finality as it was filed sixty-
two (62) days after the union’s receipt of the CA decision.

On the substantive aspect, the company mainly contended that the regulation of the use of union leaves is within
the company’s management prerogative, and the company was simply exercising its management prerogative when
it required its employees to first obtain the approval of either the department head or the human resource manager
before making use of any union leave. Thus, Mangalino committed acts of insubordination when he insisted on
going on leave despite the disapproval of his leave applications.

In its reply and subsequent memorandum, the union presented its justification for the technical deficiencies the
company cited (quoted below), and maintained as well that the use of management prerogative was improper
because the CBA grant of the union leave benefit did not require prior company approval as a condition; any change
in the CBA grant requires union conformity. The union posited as well that any unilateral change in the CBA terms
violates Article 255 of the Labor Code, which guarantees the right of employees to participate in the company’s
Labor II – 1
policy and decision-making processes on matters directly affecting their interests. It argued against the company
position that it had not objected to the company rule and is now in estoppel.

THE COURT’S RULING

We deny the petition for lack of merit.

The company position that the union should have filed an appeal under Rule 45 of the Rules and not a petition for
certiorari is correct. Section 1, Rule 45 of the Rules states that:

SECTION 1. Filing of petition with Supreme Court. – A party desiring to appeal by certiorari from a judgment or final
order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever
authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise
only questions of law which must be distinctly set forth. [Emphasis supplied.]

Complementing this Rule is Section 1, Rule 65 which provides that a special civil action for certiorari under Rule 65
lies only when "there is no appeal, nor plain, speedy and adequate remedy in the ordinary course of law." From this
Rule proceeds the established jurisprudential ruling that a petition for certiorari cannot be allowed when a party fails
to appeal a judgment despite the availability of that remedy, as certiorari is not a substitute for a lost appeal. 13

In our Resolution of March 5, 2008, we opted to liberally apply the rules and to treat the petition as a petition for
review on certiorari under Rule 45 in order to have a total view of the merits of the petition in light of the importance
of a ruling on the presented issues. The union – which did not present any justification at the outset for the petition’s
deficiencies, particularly for the late filing – had this to say:

9) In a resolution dated 05 March 2008, this Honorable Court resolved to treat the petition in the above-
captioned case as a petition for review on certiorari under Rule 45 of the Rules of Civil Procedure. All along
the petitioner thought that the filing of the petition for certiorari under Rule 65 is appropriate considering that
the ground raised is grave abuse of discretion by the Honorable Court of Appeals for reversing the decision
of the majority decision of the Panel of Voluntary Arbitration in arbitrary and whimsical manner.

10) For having treated this petition under Rule 45 of the Rules of Civil Procedure, petitioner humbly admits
that delay was incurred in the filing thereof, such delay was caused by several factors beyond control such
as the transfer of handling legal assistant to another office and the undersigned had to reassign the case for
the preparation of the petition. Furthermore, the undersigned counsel, other than being the Chief of FFW
LEGAL CENTER is also the Vice President of the Federation of Free Workers (FFW), who has to attend
similar and urgent pressing problems of local affiliates arising from the effects of contracting out and closure
of companies.

11) Considering the issue to be resolved requires only two CBA provisions – (1) the recognition of
management prerogative (Section 1, Article III of the CBA), and union leave (Section 3, Article XV of the
CBA) to guide the Honorable Court reached (sic) a decision, petitioner honestly thought that the other
pleadings referred to by respondent are not relevant.

With this kind and tenor of justification, we appear to have acted with extreme liberality in recognizing the petition as
a Rule 45 petition and in giving it due course. We cannot extend the same liberality, however, with respect to the
union’s violation of the established rules on timelines in the filing of petitions, which violations the company has kept
alive by its continuing objection. While we can be liberal in considering the mode of review of lower court decisions
(and even in the contents of the petition which the company insists are deficient), we cannot do the same with
respect to the time requirements that govern the finality of these decisions. A final judgment can no longer be
disturbed under the combined application of the principles of immutability of final judgments 14 and res
judicata,15 subject only to very exceptional circumstances not at all present in this case. 16

Under Rule 45, a petition for review on certiorari should be filed within 15 days from notice of judgment, extendible
in meritorious cases for a total of another 30 days. 17 Given that a Rule 45 petition is appropriate in the present case,
the period of 60 days after notice of judgment is way past the deadline allowed, so that the CA decision had lapsed

Labor II – 1
to finality by the time the petition with us was filed. This reason alone – even without considering the company’s
other technical objection based on the union’s failure to attach relevant documents in support of the petition – amply
supports the denial of the petition.

The lack of merit of the petition likewise precludes us from resolving it in the union’s favor. In short, we see no
reversible error in the CA’s ruling.

While it is true that the union and its members have been granted union leave privileges under the CBA, the grant
cannot be considered separately from the other provisions of the CBA, particularly the provision on management
prerogatives where the CBA reserved for the company the full and complete authority in managing and running its
business.18 We see nothing in the wordings of the union leave provision that removes from the company the
right to prescribe reasonable rules and regulations to govern the manner of availing of union leaves,
particularly the prerogative to require prior approval. Precisely, prior notice is expressly required under the CBA
so that the company can appropriately respond to the request for leave. In this sense, the rule requiring prior
approval only made express what is implied in the terms of the CBA.

In any event, any doubt in resolving any interpretative conflict is settled by subsequent developments in the course
of the parties’ implementation of the CBA, specifically, by the establishment of the company regulation in November
2002 requiring prior approval before the union leave can be used. The union accepted this regulation without
objection since its promulgation (or more than a year before the present dispute arose), and the rule on its face is
not unreasonable, oppressive, nor violative of CBA terms. Ample evidence exists in the records indicating the
union’s acquiescence to the rule.19 Notably, no letter from the union complaining about the unilateral change in
policy or any request for a meeting to discuss this policy appears on record. The union and its members have
willingly applied for approval as the rule requires. 20 Even Mangalino himself, in the past, had filed applications for
union leave with his department manager, and willingly complied with the disapproval without protest of any
kind.21 Thus, when Mangalino asserted his right to take a leave without prior approval, the requirement for prior
approval was already in place and established, and could no longer be removed except with the company’s consent
or by negotiation and express agreement in future CBAs.

The "prior approval" policy fully supported the validity of the suspensions the company imposed on Mangalino. We
point out additionally that as an employee, Mangalino had the clear obligation to comply with the management
disapproval of his requested leave while at the same time registering his objection to the company regulation and
action. That he still went on leave, in open disregard of his superior’s orders, rendered Mangalino open to the
charge of insubordination, separately from his absence without official leave. 22 This charge, of course, can no longer
prosper even if laid today, given the lapse of time that has since transpired.

In light of the petition’s procedural infirmities, particularly its late filing that rendered the CA decision final, and the
petition’s lack of substantive merit, denial of the petition necessarily follows.

WHEREFORE, premises considered, we DENY the petition for lack of merit. Costs against the petitioners.

Labor II – 1
 31.) [G.R. No. 174420 : March 22, 2010]

MIGUELA SANTUYO, CORAZON ZACARIAS, EUGENIA CINCO, ELIZABETH PERALES, SUSANA

BELEDIANO, RUFINA TABINAS, LETICIA L. DELA ROSA, NENITA LINESES, EDITHA DELA
RAMA, MARIBEL M. OLIVAR, LOEVEL MALAPAD, FLORENDA M. GONZALO, ELEANOR O.
BUEN, EULALIA ABAGAO, LORECA MOCORRO, DIANA MAGDUA, LUZ RAGAY, LYDIA MONTE,
CORNELIA BALTAZAR AND DAISY MANGANTE, PETITIONERS, VS. REMERCO GARMENTS
MANUFACTURING, INC. AND/OR VICTORIA REYES.[1] RESPONDENTS.

DECISION

CORONA, J.:

From 1992 to 1994, due to a serious industrial dispute, the Kaisahan ng Manggagawa sa Remerco
Garments Manufacturing Inc.- KMM Kilusan (union) staged a strike against respondent Remerco
Garments Manufacturing, Inc. (RGMI). Because the strike was subsequently declared illegal, all union
officers were dismissed. Employees who wanted to sever their employment were paid separation pay
while those who wanted to resume work were recalled on the condition that they would no longer be
paid a daily rate but on a piece-rate basis.

Petitioners, who had been employed as sewers, were among those recalled.

Without allowing RGMI to normalize its operations, the union filed a notice of strike in the National
Conciliation and Mediation Board (NCMB) on August 8, 1995. [2] According to the union, RGMI
conducted a time and motion study and changed the salary scheme from a daily rate to piece-rate
basis without consulting it. RGMI therefore not only violated the existing collective bargaining
agreement (CBA) but also diminished the salaries agreed upon. It therefore committed an unfair
labor practice.

On August 24, 1995, RGMI filed a notice of lockout in the NCMB. [3]

On November 11, 1995, while the union and RGMI were undergoing conciliation in the NCMB, RGMI
transferred its factory site.

On November 13, 1995, the union went on strike and blocked the entry to RGMI's (new) premises.

In an order dated November 21, 1995,[4] the Secretary of Labor assumed jurisdiction pursuant to
Article 263(g) of the Labor Code[5] and ordered RGMI's striking workers to return to work
immediately. He likewise ordered the union and RGMI to submit their respective position papers.

In its position paper, the union denied going on strike and blocking entries (and exits) at RGMI's
premises. Furthermore, the union enumerated RGMI's alleged unfair labor practices. RGMI not only
changed its salary scheme but also refused to pay wages to its employees for three weeks and
transferred the plant to a new site. The union therefore asked for the reinstatement of all employees
to their former positions at the old worksite and payment of their unpaid salaries based on the daily
rate (as provided in the CBA).

RGMI, on the other hand, insisted that its employees refused to obey the November 21, 1995 order.
Thus, it prayed that the strike be declared illegal and that all union officers and those employees who
refused to return to work be declared to have abandoned their employment.

After evaluating the respective arguments of the union and RGMI, the Secretary of Labor held that
RGMI did not lock out its employees inasmuch as it informed them of the transfer of the worksite.
However, he did not rule on the legality of the strike.

Labor II – 1
Furthermore, based on the time and motion study, the Secretary of Labor found that the employees
would receive higher wages if they were paid on a piece-rate rather than on a daily rate basis.
Hence, the new salary scheme would be more advantageous to the employees. For this reason,
despite the provisions of the CBA, the change in salary scheme was validated.

In an order dated September 18, 1996, [6] the Secretary of Labor ordered all employees to return to
work and RGMI to pay its employees their unpaid salaries (from September 25, 1995 to October 14,
1995) on the piece-rate basis. Neither the union nor RGMI appealed the aforementioned order.

On October 18, 1995, while the conciliation proceedings between the union and respondent were
pending, petitioners filed a complaint for illegal dismissal against RGMI and respondent Victoria
Reyes, accusing the latter of harassment.[7] Petitioners subsequently amended their complaint,
[8]
 demanding payment of their accrued salaries from September 25 to October 14, 1995 (computed
at the daily rate of P145 plus the CBA-decreed increase of P11 per day) and the monetary equivalent
of benefits they were entitled to under the CBA but allegedly withheld by RGMI, namely:

(1) P200 Christmas package and P50 per person budget for the 1994 and 1995 Christmas party
which was not held and

(2) 17-day vacation leave in 1994 and 1995.

Later, petitioners again amended their complaint, stating that respondents suspended them for
questioning their decision to pay salaries on a piece-rate basis. [9]

Respondents, on the other hand, moved to dismiss the complaint in view of the pending conciliation
proceedings (which involved the same issue) in the NCMB. Moreover, alleged violations of the CBA
should be resolved according to the grievance procedure laid out therein. [10] Thus, the labor arbiter
had no jurisdiction over the complaint.

The labor arbiter found that respondents did not pay petitioners their salaries and deprived them of
the benefits they were entitled to under the CBA. Thus, in a decision dated July 15, 1999, [11] he
ordered respondents to pay petitioners their unpaid salaries according to their daily rate with the
corresponding increase provided in the CBA and benefits, separation pay and attorney's fees.

Respondents appealed the decision of the labor arbiter in the National Labor Relations Commission
(NLRC)[12] but it was denied.[13]

Aggrieved, respondents filed a petition for certiorari in the Court of Appeals (CA) claiming that the
NLRC acted with grave abuse of discretion in affirming the decision of the labor arbiter. They argued
that since the complaint involved the implementation of the CBA, the labor arbiter had no jurisdiction
over it.

In a decision dated April 27, 2006,[14] the CA reversed and set aside the decision of the NLRC on the
ground that the labor arbiter had no jurisdiction over the complaint. [15]

Petitioners moved for reconsideration but it was denied. [16] Hence, this recourse.[17]

Petitioners insist that the labor arbiter had jurisdiction inasmuch as the complaint was for illegal
dismissal. Furthermore, they claim that the September 18, 1996 order of the Secretary of Labor was
inapplicable to them. Despite being members of the union, they were not among those who went on
strike.

The petition has no merit.

Petitioners clearly and consistently questioned the legality of RGMI's adoption of the new salary
Labor II – 1
scheme (i.e., piece-rate basis), asserting that such action, among others, violated the existing CBA.
Indeed, the controversy was not a simple case of illegal dismissal but a labor dispute [18] involving the
manner of ascertaining employees' salaries, a matter which was governed by the existing CBA.

With regard to the question of jurisdiction over the subject matter, Article 217(c) of the Labor Code
provides:

Article 217. Jurisdiction of Labor Arbiters and the Commission.

x x x         x x x         x x x

(c) Cases arising from the interpretation or implementation of collective bargaining

agreements and those arising from the interpretation or enforcement of company personnel
policies shall be disposed of by the Labor Arbiter by referring the same to the grievance
machinery and voluntary arbitration as may be provided in said agreements. (emphasis
supplied)

This provision requires labor arbiters to refer cases involving the implementation of CBAs to the
grievance machinery provided therein and to voluntary arbitration.

Moreover, Article 260 of the Labor Code clarifies that such disputes must be referred first to the
grievance machinery and, if unresolved within seven days, they shall automatically be referred to
voluntary arbitration.[19] In this regard, Article 261 thereof states:

Article 261. Jurisdiction of voluntary arbitrators and panel of voluntary arbitrators. -- The Voluntary
Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to
hear and decide all unresolved grievances arising from the interpretation or implementation
of the Collective Bargaining Agreement and those arising from the interpretation or enforcement
of company personnel policies referred to in the immediately preceding Article. Accordingly,
violations of a Collective Bargaining Agreement, except those which are gross in
character, shall no longer be treated as unfair labor practice and shall be resolved as
grievances under the Collective Bargaining Agreement. For purposes of this Article, gross
violations of a Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to
comply with the economic provisions of such agreement. (emphasis supplied)

x x x         x x x         x x x

Under this provision, voluntary arbitrators have original and exclusive jurisdiction over matters which
have not been resolved by the grievance machinery.

Pursuant to Articles 217 in relation to Articles 260 and 261 of the Labor Code, the labor arbiter
should have referred the matter to the grievance machinery provided in the CBA. Because the labor
arbiter clearly did not have jurisdiction over the subject matter, his decision was void.

Nonetheless, the Secretary of the Labor assumed jurisdiction over the labor dispute between the
union and RGMI and resolved the same in his September 18, 1996 order. Article 263(g) of the Labor
Code[20] gives the Secretary of Labor discretion[21] to assume jurisdiction over a labor dispute likely to
cause a strike or a lockout in an industry indispensable to the national interest and to decide the
controversy or to refer the same to the NLRC for compulsory arbitration. In doing so, the Secretary
of Labor shall resolve all questions and controversies in order to settle the dispute. His power is
therefore plenary and discretionary in nature to enable him to effectively and efficiently dispose of
the issue. [22]

The Secretary of Labor assumed jurisdiction over the controversy because RGMI had a substantial
number of employees and was a major exporter of garments to the United States and Canada. [23] In

Labor II – 1
view of these considerations, the Secretary of Labor resolved the labor dispute between the union
and RGMI in his September 18, 1996 order.[24] Since neither the union nor RGMI appealed the said
order, it became final and executory.

Settled is the rule that unions are the agent of its members for the purpose of securing just and fair
wages and good working conditions.[25] Since petitioners were part of the bargaining unit represented
by the union and members thereof, the September 18, 1996 order of the Secretary of Labor applies
to them.

Furthermore, since the union was the bargaining agent of petitioners, the complaint was barred
under the principle of conclusiveness of judgments. The parties to a case are bound by the findings in
a previous judgment with respect to matters actually raised and adjudged therein. [26] Hence, the
labor arbiter should have dismissed the complaint on the ground of res judicata.

WHEREFORE, the petition is hereby DENIED

Labor II – 1
 32.) [G.R. Nos. 174040-41 : September 22, 2010]

INSULAR HOTEL EMPLOYEES UNION-NFL, PETITIONER, VS. WATERFRONT INSULAR HOTEL

DAVAO, RESPONDENT.

DECISION

PERALTA, J.:

Before this Court is a petition for review on certiorari,[1] under Rule 45 of the Rules of Court, seeking
to set aside the Decision[2] dated October 11, 2005, and the Resolution[3] dated July 13, 2006 of the
Court of Appeals (CA) in consolidated labor cases docketed as CA-G.R. SP No. 83831 and CA-G.R. SP
No. 83657. Said Decision reversed the Decision [4] dated the April 5, 2004 of the Accredited Voluntary
Arbitrator Rosalina L. Montejo (AVA Montejo).

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

On November 6, 2000, respondent Waterfront Insular Hotel Davao (respondent) sent the Department
of Labor and Employment (DOLE), Region XI, Davao City, a Notice of Suspension of
Operations[5] notifying the same that it will suspend its operations for a period of six months due to
severe and serious business losses. In said notice, respondent assured the DOLE that if the company
could not resume its operations within the six-month period, the company would pay the affected
employees all the benefits legally due to them.

During the period of the suspension, Domy R. Rojas (Rojas), the President of Davao Insular Hotel
Free Employees Union (DIHFEU-NFL), the recognized labor organization in Waterfront Davao, sent
respondent a number of letters asking management to reconsider its decision.

In a letter[6] dated November 8, 2000, Rojas intimated that the members of the Union were
determined to keep their jobs and that they believed they too had to help respondent, thus:

xxxx

Sir, we are determined to keep our jobs and push the Hotel up from sinking. We believe that we have
to help in this (sic) critical times. Initially, we intend to suspend the re-negotiations of our CBA. We
could talk further on possible adjustments on economic benefits, the details of which we are hoping
to discuss with you or any of your emissaries. x x x [7]

In another letter[8] dated November 10, 2000, Rojas reiterated the Union's desire to help respondent,
to wit:

We would like to thank you for giving us the opportunity to meet [with] your representatives in order
for us to air our sentiments and extend our helping hands for a possible reconsideration of the
company's decision.

The talks have enabled us to initially come up with a suggestion of solving the high cost on payroll.

We propose that 25 years and above be paid their due retirement benefits and put their length of
service to zero without loss of status of employment with a minimum hiring rate.

Thru this scheme, the company would be able to save a substantial amount and reduce greatly the
payroll costs without affecting the finance of the families of the employees because they will still have
a job from where they could get their income.

Moreover, we are also open to a possible reduction of some economic benefits as our gesture of
Labor II – 1
sincere desire to help.

We are looking forward to a more fruitful round of talks in order to save the hotel. [9]

In another letter[10] dated November 20, 2000, Rojas sent respondent more proposals as a form of
the Union's gesture of their intention to help the company, thus:

1) Suspension of [the] CBA for ten years, No strike no lock-out shall be enforced.

2) Pay all the employees their benefits due, and put the length of service to zero with a minimum
hiring rate. Payment of benefits may be on a staggered basis or as available.

3) Night premium and holiday pays shall be according to law. Overtime hours rendered shall be
offsetted as practiced.

4) Reduce the sick leaves and vacation leaves to 15 days/15days.

5) Emergency leave and birthday off are hereby waived.

6) Duty meal allowance is fixed at P30.00 only. No more midnight snacks and double meal allowance.
The cook drinks be stopped as practiced.

7) We will shoulder 50% of the group health insurance and family medical allowance be reduced to
1,500.00 instead of 3,000.00.

8) The practice of bringing home our uniforms for laundry be continued.

9) Fixed manning shall be implemented, the rest of manpower requirements maybe sourced thru
WAP and casual hiring. Manpower for fixed manning shall be 145 rank-and-file union members.

10) Union will cooperate fully on strict implementation of house rules in order to attain desired
productivity and discipline. The union will not tolerate problem members.

11) The union in its desire to be of utmost service would adopt multi-tasking for the hotel to be more
competitive.

It is understood that with the suspension of the CBA renegotiations, the same existing CBA shall be
adopted and that all provisions therein shall remain enforced except for those mentioned in this
proposal.

These proposals shall automatically supersede the affected provisions of the CBA. [11]

In a handwritten letter[12] dated November 25, 2000, Rojas once again appealed to respondent for it
to consider their proposals and to re-open the hotel. In said letter, Rojas stated that manpower for
fixed manning shall be one hundred (100) rank-and-file Union members instead of the one hundred
forty-five (145) originally proposed.

Finally, sometime in January 2001, DIHFEU-NFL, through Rojas, submitted to respondent a

Manifesto[13] concretizing their earlier proposals.

After series of negotiations, respondent and DIHFEU-NFL, represented by its President, Rojas, and
Vice-Presidents, Exequiel J. Varela Jr. and Avelino C. Bation, Jr., signed a Memorandum of
Agreement[14] (MOA) wherein respondent agreed to re-open the hotel subject to certain concessions
offered by DIHFEU-NFL in its Manifesto.

Labor II – 1
Accordingly, respondent downsized its manpower structure to 100 rank-and-file employees as set
forth in the terms of the MOA. Moreover, as agreed upon in the MOA, a new pay scale was also
prepared by respondent.

The retained employees individually signed a "Reconfirmation of Employment" [15] which embodied the
new terms and conditions of their continued employment. Each employee was assisted by Rojas who
also signed the document.

On June 15, 2001, respondent resumed its business operations.

On August 22, 2002, Darius Joves (Joves) and Debbie Planas, claiming to be local officers of the
National Federation of Labor (NFL), filed a Notice of Mediation [16] before the National Conciliation and
Mediation Board (NCMB), Region XI, Davao City. In said Notice, it was stated that the Union involved
was "DARIUS JOVES/DEBBIE PLANAS ET. AL, National Federation of Labor." The issue raised in said
Notice was the "Diminution of wages and other benefits through unlawful Memorandum of
Agreement."

On August 29, 2002, the NCMB called Joves and respondent to a conference to explore the possibility
of settling the conflict. In the said conference, respondent and petitioner Insular Hotel Employees
Union-NFL (IHEU-NFL), represented by Joves, signed a Submission Agreement [17] wherein they chose
AVA Alfredo C. Olvida (AVA Olvida) to act as voluntary arbitrator. Submitted for the resolution of AVA
Olvida was the determination of whether or not there was a diminution of wages and other benefits
through an unlawful MOA. In support of his authority to file the complaint, Joves, assisted by Atty.
Danilo Cullo (Cullo), presented several Special Powers of Attorney (SPA) which were, however,
undated and unnotarized.

On September 2, 2002, respondent filed with the NCMB a Manifestation with Motion for a Second
Preliminary Conference,[18] raising the following grounds:

1) The persons who filed the instant complaint in the name of the Insular Hotel Employees Union-NFL
have no authority to represent the Union;

2) The individuals who executed the special powers of attorney in favor of the person who filed the
instant complaint have no standing to cause the filing of the instant complaint; and

3) The existence of an intra-union dispute renders the filing of the instant case premature. [19]

On September 16, 2002, a second preliminary conference was conducted in the NCMB, where Cullo
denied any existence of an intra-union dispute among the members of the union. Cullo, however,
confirmed that the case was filed not by the IHEU-NFL but by the NFL. When asked to present his
authority from NFL, Cullo admitted that the case was, in fact, filed by individual employees named in
the SPAs. The hearing officer directed both parties to elevate the aforementioned issues to AVA
Olvida.[20]

The case was docketed as Case No. AC-220-RB-11-09-022-02 and referred to AVA Olvida.
Respondent again raised its objections, specifically arguing that the persons who signed the
complaint were not the authorized representatives of the Union indicated in the Submission
Agreement nor were they parties to the MOA. AVA Olvida directed respondent to file a formal motion
to withdraw its submission to voluntary arbitration.

On October 16, 2002, respondent filed its Motion to Withdraw. [21] Cullo then filed an
Opposition[22] where the same was captioned:

Labor II – 1
NATIONAL FEDERATION OF LABOR

And 79 Individual Employees, Union Members,

Complainants,

-versus-

Waterfront Insular Hotel Davao,

Respondent.

In said Opposition, Cullo reiterated that the complainants were not representing IHEU-NFL, to wit:

xxxx

1. Respondent must have been lost when it said that the individuals who executed the SPA have
no standing to represent the union nor to assail the validity of Memorandum of Agreement
(MOA). What is correct is that the individual complainants are not representing the
union but filing the complaint through their appointed attorneys-in-fact to assert their
individual rights as workers who are entitled to the benefits granted by law and stipulated in
the collective bargaining agreement.[23]

On November 11, 2002, AVA Olvida issued a Resolution [24] denying respondent's Motion to Withdraw.
On December 16, 2002, respondent filed a Motion for Reconsideration [25] where it stressed that the
Submission Agreement was void because the Union did not consent thereto. Respondent pointed out
that the Union had not issued any resolution duly authorizing the individual employees or NFL to file
the notice of mediation with the NCMB.

Cullo filed a Comment/Opposition[26] to respondent's Motion for Reconsideration. Again, Cullo

admitted that the case was not initiated by the IHEU-NFL, to wit:

The case was initiated by complainants by filling up Revised Form No. 1 of the NCMB duly furnishing
respondent, copy of which is hereto attached as Annex "A" for reference and consideration of the
Honorable Voluntary Arbitrator. There is no mention there of Insular Hotel Employees Union, but only
National Federation of Labor (NFL). The one appearing at the Submission Agreement was only a
matter of filling up the blanks particularly on the question there of Union; which was filled up with
Insular Hotel Employees Union-NFL. There is nothing there that indicates that it is a complainant as
the case is initiated by the individual workers and National Federation of Labor, not by the local
union. The local union was not included as party-complainant considering that it was a party to the
assailed MOA.[27]

On March 18, 2003, AVA Olvida issued a Resolution [28] denying respondent's Motion for
Reconsideration. He, however, ruled that respondent was correct when it raised its objection to NFL
as proper party-complainant, thus:

Anent to the real complainant in this instant voluntary arbitration case, the respondent is correct
when it raised objection to the National Federation of Labor (NFL) and as proper party-complainants.

The proper party-complainant is INSULAR HOTEL EMPLOYEES UNION-NFL, the recognized and
incumbent bargaining agent of the rank-and-file employees of the respondent hotel. In the
submission agreement of the parties dated August 29, 2002, the party complainant written is
INSULAR HOTEL EMPLOYEES UNION-NFL and not the NATIONAL FEDERATION OF LABOR and 79
other members.

However, since the NFL is the mother federation of the local union, and signatory to the existing CBA,
Labor II – 1
it can represent the union, the officers, the members or union and officers or members, as the case
may be, in all stages of proceedings in courts or administrative bodies provided that the issue of the
case will involve labor-management relationship like in the case at bar.

The dispositive portion of the March 18, 2003 Resolution of AVA Olvida reads:

WHEREFORE, premises considered, the motion for reconsideration filed by respondent is DENIED.
The resolution dated November 11, 2002 is modified in so far as the party-complainant is concerned;
thus, instead of "National Federation of Labor and 79 individual employees, union members," shall be
"Insular Hotel Employees Union-NFL et. al., as stated in the joint submission agreement dated
August 29, 2002. Respondent is directed to comply with the decision of this Arbitrator dated
November 11, 2002,

No further motion of the same nature shall be entertained. [29]

On May 9, 2003, respondent filed its Position Paper Ad Cautelam,[30] where it declared, among others,
that the same was without prejudice to its earlier objections against the jurisdiction of the NCMB and
AVA Olvida and the standing of the persons who filed the notice of mediation.

Cullo, now using the caption "Insular Hotel Employees Union-NFL, Complainant," filed a

Comment[31] dated June 5, 2003. On June 23, 2003, respondent filed its Reply. [32]

Later, respondent filed a Motion for Inhibition [33] alleging AVA Olvida's bias and prejudice towards the
cause of the employees. In an Order[34] dated July 25, 2003, AVA Olvida voluntarily inhibited himself
out of "delicadeza" and ordered the remand of the case to the NCMB.

On August 12, 2003, the NCMB issued a Notice requiring the parties to appear before the conciliator
for the selection of a new voluntary arbitrator.

In a letter[35] dated August 19, 2003 addressed to the NCMB, respondent reiterated its position that
the individual union members have no standing to file the notice of mediation before the NCMB.
Respondent stressed that the complaint should have been filed by the Union.

On September 12, 2003, the NCMB sent both parties a Notice [36] asking them to appear before it for
the selection of the new voluntary arbitrator. Respondent, however, maintained its stand that the
NCMB had no jurisdiction over the case. Consequently, at the instance of Cullo, the NCMB
approved ex parte the selection of AVA Montejo as the new voluntary arbitrator.

On April 5, 2004, AVA Montejo rendered a Decision [37] ruling in favor of Cullo, the dispositive portion
of which reads:

WHEREOF, in view of the all the foregoing, judgment is hereby rendered:

1. Declaring the Memorandum of Agreement in question as invalid as it is contrary to law and public
policy;

2. Declaring that there is a diminution of the wages and other benefits of the Union members and
officers under the said invalid MOA.

3. Ordering respondent management to immediately reinstate the workers wage rates and other
benefits that they were receiving and enjoying before the signing of the invalid MOA;

4. Ordering the management respondent to pay attorney's fees in an amount equivalent to ten
percent (10%) of whatever total amount that the workers union may receive representing individual
wage differentials.
Labor II – 1
As to the other claims of the Union regarding diminution of other benefits, this accredited voluntary
arbitrator is of the opinion that she has no authority to entertain, particularly as to the computation
thereof.

SO ORDERED.[38]

Both parties appealed the Decision of AVA Montejo to the CA. Cullo only assailed the Decision in so
far as it did not categorically order respondent to pay the covered workers their differentials in wages
reckoned from the effectivity of the MOA up to the actual reinstatement of the reduced wages and
benefits. Cullos' petition was docketed as CA-G.R. SP No. 83831. Respondent, for its part, questioned
among others the jurisdiction of the NCMB. Respondent maintained that the MOA it had entered into
with the officers of the Union was valid. Respondent's petition was docketed as CA-G.R. SP No.
83657. Both cases were consolidated by the CA.

On October 11, 2005, the CA rendered a Decision [39] ruling in favor of respondent, the dispositive
portion of which reads:

WHEREFORE, premises considered, the petition for review in CA-G.R. SP No. 83657 is hereby
GRANTED, while the petition in CA-G.R. SP No. 83831 is DENIED. Consequently, the assailed
Decision dated April 5, 2004 rendered by AVA Rosalina L. Montejo is hereby REVERSED and a new
one entered declaring the Memorandum of Agreement dated May 8, 2001 VALID and ENFORCEABLE.
Parties are DIRECTED to comply with the terms and conditions thereof.

SO ORDERED.[40]

Aggrieved, Cullo filed a Motion for Reconsideration, which was, however, denied by the CA in a
Resolution[41] dated July 13, 2006.

Hence, herein petition, with Cullo raising the following issues for this Court's resolution, to wit:

I.

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERRORS IN
FINDING THAT THE ACCREDITED VOLUNTARY ARBITRATOR HAS NO JURISDICTION OVER THE CASE
SIMPLY BECAUSE THE NOTICE OF MEDIATION DOES NOT MENTION THE NAME OF THE LOCAL UNION
BUT ONLY THE AFFILIATE FEDERATION THEREBY DISREGARDING THE SUBMISSION AGREEMENT
DULY SIGNED BY THE PARTIES AND THEIR LEGAL COUNSELS THAT MENTIONS THE NAME OF THE
LOCAL UNION.

II.

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS ERROR BY
DISREGARDING THE PROVISIONS OF THE CBA SIMPLY BECAUSE IT BELIEVED THE UNPROVEN
ALLEGATIONS OF RESPONDENT HOTEL THAT IT WAS SUFFERING FROM FINANCIAL CRISIS.

III.

THE HONORABLE COURT OF APPEALS MUST HAVE SERIOUSLY ERRED IN CONCLUDING THAT
ARTICLE 100 OF THE LABOR CODE APPLIES ONLY TO BENEFITS ENJOYED PRIOR TO THE ADOPTION
OF THE LABOR CODE WHICH, IN EFFECT, ALLOWS THE DIMINUTION OF THE BENEFITS ENJOYED BY
EMPLOYEES FROM ITS ADOPTION HENCEFORTH. [42]

The petition is not meritorious.

Labor II – 1
Anent the first error raised, Cullo argues that the CA erred when it overlooked the fact that before
the case was submitted to voluntary arbitration, the parties signed a Submission Agreement which
mentioned the name of the local union and not only NFL. Cullo, thus, contends that the CA
committed error when it ruled that the voluntary arbitrator had no jurisdiction over the case simply
because the Notice of Mediation did not state the name of the local union thereby disregarding the
Submission Agreement which states the names of local union as Insular Hotel Employees Union-NFL.
[43]

In its Memorandum,[44] respondent maintains its position that the NCMB and Voluntary Arbitrators
had no jurisdiction over the complaint. Respondent, however, now also contends that IHEU-NFL is a
non-entity since it is DIHFEU-NFL which is considered by the DOLE as the only registered union in
Waterfront Davao.[45] Respondent argues that the Submission Agreement does not name the local
union DIHFEU-NFL and that it had timely withdrawn its consent to arbitrate by filing a motion to
withdraw.

A review of the development of the case shows that there has been much confusion as to the identity
of the party which filed the case against respondent. In the Notice of Mediation [46] filed before the
NCMB, it stated that the union involved was "DARIUS JOVES/DEBBIE PLANAS ET. AL., National
Federation of Labor." In the Submission Agreement, [47] however, it stated that the union involved was
"INSULAR HOTEL EMPLOYEES UNION-NFL."

Furthermore, a perusal of the records would reveal that after signing the Submission Agreement,
respondent persistently questioned the authority and standing of the individual employees to file the
complaint. Cullo then clarified in subsequent documents captioned as "National Federation of Labor
and 79 Individual Employees, Union Members, Complainants" that the individual complainants are
not representing the union, but filing the complaint through their appointed attorneys-in-fact. [48] AVA
Olvida, however, in a Resolution dated March 18, 2003, agreed with respondent that the proper
party-complainant should be INSULAR HOTEL EMPLOYEES UNION-NFL, to wit:

x x x In the submission agreement of the parties dated August 29, 2002, the party complainant
written is INSULAR HOTEL EMPLOYEES UNION-NFL and not the NATIONAL FEDERATION OF LABOR
and 79 other members.[49]

The dispositive portion of the Resolution dated March 18, 2003 of AVA Olvida reads:

WHEREFORE, premises considered, the motion for reconsideration filed by respondent is DENIED.
The resolution dated November 11, 2002, is modified in so far as the party complainant is concerned,
thus, instead of "National Federation of Labor and 79 individual employees, union members," shall be
"Insular Hotel Employees Union-NFL et. al., as stated in the joint submission agreement dated
August 29, 2002. Respondent is directed to comply with the decision of this Arbitrator dated
November 11, 2002.[50]

After the March 18, 2003 Resolution of AVA Olvida, Cullo adopted "Insular Hotel Employees Union-
NFL et. al., Complainant" as the caption in all his subsequent pleadings. Respondent, however, was
still adamant that neither Cullo nor the individual employees had authority to file the case in behalf of
the Union.

While it is undisputed that a submission agreement was signed by respondent and "IHEU-NFL," then
represented by Joves and Cullo, this Court finds that there are two circumstances which affect its
validity: first, the Notice of Mediation was filed by a party who had no authority to do so; second,
that respondent had persistently voiced out its objection questioning the authority of Joves, Cullo and
the individual members of the Union to file the complaint before the NCMB.

Procedurally, the first step to submit a case for mediation is to file a notice of preventive mediation
with the NCMB. It is only after this step that a submission agreement may be entered into by the
Labor II – 1
parties concerned.

Section 3, Rule IV of the NCMB Manual of Procedure provides who may file a notice of preventive
mediation, to wit:

Who may file a notice or declare a strike or lockout or request preventive mediation. -

Any certified or duly recognized bargaining representative may file a notice or declare a

strike or request for preventive mediation in cases of bargaining deadlocks and unfair
labor practices. The employer may file a notice or declare a lockout or request for preventive
mediation in the same cases. In the absence of a certified or duly recognized bargaining
representative, any legitimate labor organization in the establishment may file a notice, request
preventive mediation or declare a strike, but only on grounds of unfair labor practice.

From the foregoing, it is clear that only a certified or duly recognized bargaining agent may file a
notice or request for preventive mediation. It is curious that even Cullo himself admitted, in a
number of pleadings, that the case was filed not by the Union but by individual members thereof.
Clearly, therefore, the NCMB had no jurisdiction to entertain the notice filed before it.

Even though respondent signed a Submission Agreement, it had, however, immediately manifested
its desire to withdraw from the proceedings after it became apparent that the Union had no part in
the complaint. As a matter of fact, only four days had lapsed after the signing of the Submission
Agreement when respondent called the attention of AVA Olvida in a "Manifestation with Motion for a
Second Preliminary Conference"[51] that the persons who filed the instant complaint in the name of
Insular Hotel Employees Union-NFL had no authority to represent the Union. Respondent cannot be
estopped in raising the jurisdictional issue, because it is basic that the issue of jurisdiction may be
raised at any stage of the proceedings, even on appeal, and is not lost by waiver or by estoppel.

In Figueroa v. People,[52] this Court explained that estoppel is the exception rather than the rule, to
wit:

Applying the said doctrine to the instant case, the petitioner is in no way estopped by laches in
assailing the jurisdiction of the RTC, considering that he raised the lack thereof in his appeal before
the appellate court. At that time, no considerable period had yet elapsed for laches to attach. True,
delay alone, though unreasonable, will not sustain the defense of "estoppel by laches" unless it
further appears that the party, knowing his rights, has not sought to enforce them until the condition
of the party pleading laches has in good faith become so changed that he cannot be restored to his
former state, if the rights be then enforced, due to loss of evidence, change of title, intervention of
equities, and other causes. In applying the principle of estoppel by laches in the exceptional case
of Sibonghanoy, the Court therein considered the patent and revolting inequity and unfairness of
having the judgment creditors go up their Calvary once more after more or less 15 years.The same,
however, does not obtain in the instant case.

We note at this point that estoppel, being in the nature of a forfeiture, is not favored by law. It is to
be applied rarely--only from necessity, and only in extraordinary circumstances. The doctrine must
be applied with great care and the equity must be strong in its favor.When misapplied, the doctrine
of estoppel may be a most effective weapon for the accomplishment of injustice. x x x (Italics
supplied.)[53]

The question to be resolved then is, do the individual members of the Union have the requisite
standing to question the MOA before the NCMB? On this note, Tabigue v. International Copra Export
Corporation (INTERCO)[54] is instructive:

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:

Labor II – 1
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 change any
provisions of the Agreement.The cost of arbitration shall be borne equally by the parties.

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, 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. (Emphasis and underscoring supplied.)[55]

If the individual members of the Union have no authority to file the case, does the federation to
which the local union is affiliated have the standing to do so? On this note, Coastal Subic Bay
Terminal, Inc. v. Department of Labor and Employment[56] is enlightening, thus:

x x x A local union does not owe its existence to the federation with which it is affiliated. It is a
separate and distinct voluntary association owing its creation to the will of its members. Mere
affiliation does not divest the local union of its own personality, neither does it give the
mother federation the license to act independently of the local union. It only gives rise to a
contract of agency, where the former acts in representation of the latter. Hence, local unions are
considered principals while the federation is deemed to be merely their agent. x x x [57]

Based on the foregoing, this Court agrees with approval with the disquisition of the CA when it ruled
that NFL had no authority to file the complaint in behalf of the individual employees, to wit:

Anent the first issue, We hold that the voluntary arbitrator had no jurisdiction over the case.
Waterfront contents that the Notice of Mediation does not mention the name of the Union but merely
referred to the National Federation of Labor (NFL) with which the Union is affiliated. In the
subsequent pleadings, NFL's legal counsel even confirmed that the case was not filed by the union
but by NFL and the individual employees named in the SPAs which were not even dated nor
notarized.

Even granting that petitioner Union was affiliated with NFL, still the relationship between that of the
local union and the labor federation or national union with which the former was affiliated is generally
understood to be that of agency, where the local is the principal and the federation the agency. Being
merely an agent of the local union, NFL should have presented its authority to file the Notice of
Mediation. While We commend NFL's zealousness in protecting the rights of lowly workers, We
cannot, however, allow it to go beyond what it is empowered to do.

As provided under the NCMB Manual of Procedures, only a certified or duly recognized bargaining
representative and an employer may file a notice of mediation, declare a strike or lockout or request
preventive mediation. The Collective Bargaining Agreement (CBA), on the other, recognizes that

Labor II – 1
DIHFEU-NFL is the exclusive bargaining representative of all permanent employees. The inclusion of
the word "NFL" after the name of the local union merely stresses that the local union is NFL's
affiliate. It does not, however, mean that the local union cannot stand on its own. The local union
owes its creation and continued existence to the will of its members and not to the federation to
which it belongs. The spring cannot rise higher than its source, so to speak. [58]

In its Memorandum, respondent contends that IHEU-NFL is a non-entity and that DIHFEU-NFL is the
only recognized bargaining unit in their establishment. While the resolution of the said argument is
already moot and academic given the discussion above, this Court shall address the same
nevertheless.

While the November 16, 2006 Certification[59] of the DOLE clearly states that "IHEU-NFL" is not a
registered labor organization, this Court finds that respondent is estopped from questioning the same
as it did not raise the said issue in the proceedings before the NCMB and the Voluntary Arbitrators. A
perusal of the records reveals that the main theory posed by respondent was whether or not the
individual employees had the authority to file the complaint notwithstanding the apparent non-
participation of the union. Respondent never put in issue the fact that DIHFEU-NFL was not the same
as IHEU-NFL. Consequently, it is already too late in the day to assert the same.

Anent the second issue raised by Cullo, the same is again without merit.

Cullo contends that respondent was not really suffering from serious losses as found by the CA. Cullo
anchors his position on the denial by the Wage Board of respondent's petition for exemption from
Wage Order No. RTWPB-X1-08 on the ground that it is a distressed establishment. [60] In said denial,
the Board ruled:

A careful analysis of applicant's audited financial statements showed that during the period ending
December 31, 1999, it registered retained earnings amounting to P8,661,260.00. Applicant's
interim financial statements for the quarter ending June 30, 2000 cannot be considered, as
the same was not audited. Accordingly, this Board finds that applicant is not qualified for
exemption as a distressed establishment pursuant to the aforecited criteria. [61]

In its Decision, the CA held that upholding the validity of the MOA would mean the continuance of the
hotel's operation and financial viability, to wit:

x x x We cannot close Our eyes to the impending financial distress that an employer may suffer
should the terms of employment under the said CBA continue.

If indeed We are to tilt the balance of justice to labor, then We would be inclined to favor for the
nonce petitioner Waterfront. To uphold the validity of the MOA would mean the continuance of the
hotel's operation and financial viability. Otherwise, the eventual permanent closure of the hotel would
only result to prejudice of the employees, as a consequence thereof, will necessarily lose their jobs.
[62]

In its petition before the CA, respondent submitted its audited financial statements [63] which show
that for the years 1998, 1999, until September 30, 2000, its total operating losses amounted to
P48,409,385.00. Based on the foregoing, the CA was not without basis when it declared that
respondent was suffering from impending financial distress. While the Wage Board denied
respondent's petition for exemption, this Court notes that the denial was partly due to the fact that
the June 2000 financial statements then submitted by respondent were not audited. Cullo did not
question nor discredit the accuracy and authenticity of respondent's audited financial statements.
This Court, therefore, has no reason to question the veracity of the contents thereof. Moreover, it
bears to point out that respondent's audited financial statements covering the years 2001 to 2005
show that it still continues to suffer losses.[64]

Labor II – 1
Finally, anent the last issue raised by Cullo, the same is without merit.

Cullo argues that the CA must have erred in concluding that Article 100 of the Labor Code applies
only to benefits already enjoyed at the time of the promulgation of the Labor Code.

Article 100 of the Labor Code provides:

PROHIBITION AGAINST ELIMINATION OR DIMINUTION OF BENEFITS- Nothing in this Book shall be

construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of the promulgation of this Code.

On this note, Apex Mining Company, Inc. v. NLRC[65] is instructive, to wit:

Clearly, the prohibition against elimination or diminution of benefits set out in Article 100 of the
Labor Code is specifically concerned with benefits already enjoyed at the time of the promulgation of
the Labor Code. Article 100 does not, in other words, purport to apply to situations arising after the
promulgation date of the Labor Code x x x. [66]

Even assuming arguendo that Article 100 applies to the case at bar, this Court agrees with
respondent that the same does not prohibit a union from offering and agreeing to reduce wages and
benefits of the employees. In Rivera v. Espiritu,[67] this Court ruled that the right to free collective
bargaining, after all, includes the right to suspend it, thus:

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." The primary purpose of a CBA is the
stabilization of labor-management relations in order to create a climate of a sound and stable
industrial peace. In construing a CBA, the courts must be practical and realistic and give due
consideration to the context in which it is negotiated and the purpose which it is intended to serve.

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.[68]

Lastly, this Court is not unmindful of the fact that DIHFEU-NFL's Constitution and By-Laws specifically
provides that "the results of the collective bargaining negotiations shall be subject to ratification and
approval by majority vote of the Union members at a meeting convened, or by plebiscite held for
such special purpose."[69] Accordingly, it is undisputed that the MOA was not subject to ratification by
the general membership of the Union. The question to be resolved then is, does the non-ratification
of the MOA in accordance with the Union's constitution prove fatal to the validity thereof?

It must be remembered that after the MOA was signed, the members of the Union individually signed

Labor II – 1
contracts denominated as "Reconfirmation of Employment." [70] Cullo did not dispute the fact that of
the 87 members of the Union, who signed and accepted the "Reconfirmation of Employment," 71 are
the respondent employees in the case at bar. Moreover, it bears to stress that all the employees
were assisted by Rojas, DIHFEU-NFL's president, who even co-signed each contract.

Stipulated in each Reconfirmation of Employment were the new salary and benefits scheme. In
addition, it bears to stress that specific provisions of the new contract also made reference to the
MOA. Thus, the individual members of the union cannot feign knowledge of the execution of the
MOA. Each contract was freely entered into and there is no indication that the same was attended by
fraud, misrepresentation or duress. To this Court's mind, the signing of the individual
"Reconfirmation of Employment" should, therefore, be deemed an implied ratification by the Union
members of the MOA.

In Planters Products, Inc. v. NLRC,[71] this Court refrained from declaring a CBA invalid
notwithstanding that the same was not ratified in view of the fact that the employees had enjoyed
benefits under it, thus:

Under Article 231 of the Labor Code and Sec. 1, Rule IX, Book V of the Implementing Rules, the
parties to a collective [bargaining] agreement are required to furnish copies of the appropriate
Regional Office with accompanying proof of ratification by the majority of all the workers in a
bargaining unit. This was not done in the case at bar. But we do not declare the 1984-1987 CBA
invalid or void considering that the employees have enjoyed benefits from it. They cannot receive
benefits under provisions favorable to them and later insist that the CBA is void simply because other
provisions turn out not to the liking of certain employees. x x x. Moreover, the two CBAs prior to the
1984-1987 CBA were not also formally ratified, yet the employees are basing their present claims on
these CBAs. It is iniquitous to receive benefits from a CBA and later on disclaim its validity.
[72]

Applied to the case at bar, while the terms of the MOA undoubtedly reduced the salaries and certain
benefits previously enjoyed by the members of the Union, it cannot escape this Court's attention that
it was the execution of the MOA which paved the way for the re-opening of the hotel,
notwithstanding its financial distress. More importantly, the execution of the MOA allowed
respondents to keep their jobs. It would certainly be iniquitous for the members of the Union to sign
new contracts prompting the re-opening of the hotel only to later on renege on their agreement on
the fact of the non-ratification of the MOA.

In addition, it bears to point out that Rojas did not act unilaterally when he negotiated with
respondent's management. The Constitution and By-Laws of DIHFEU-NFL clearly provide that the
president is authorized to represent the union on all occasions and in all matters in which
representation of the union may be agreed or required.[73] Furthermore, Rojas was properly
authorized under a Board of Directors Resolution [74] to negotiate with respondent, the pertinent
portions of which read:

SECRETARY's CERTIFICATE

I, MA. SOCORRO LISETTE B. IBARRA, x x x, do hereby certify that, at a meeting of the Board of
Directors of the DIHFEU-NFL, on 28 Feb. 2001 with a quorum duly constituted, the following
resolutions were unanimously approved:

RESOLVED, as it is hereby resolved that the Manifesto dated 25 Feb. 2001 be approved ratified and
adopted;

RESOLVED, FURTHER, that Mr. Domy R. Rojas, the president of the DIHFEU-NFL, be hereby
authorized to negotiate with Waterfront Insular Hotel Davao and to work for the latter's
acceptance of the proposals contained in DIHFEU-NFL Manifesto; and

Labor II – 1
RESOLVED, FINALLY, that Mr. Domy R. Rojas is hereby authorized to sign any and all
documents to implement, and carry into effect, his foregoing authority.[75]

Withal, while the scales of justice usually tilt in favor of labor, the peculiar circumstances herein
prevent this Court from applying the same in the instant petition. Even if our laws endeavor to give
life to the constitutional policy on social justice and on the protection of labor, it does not mean that
every labor dispute will be decided in favor of the workers. The law also recognizes that management
has rights which are also entitled to respect and enforcement in the interest of fair play. [76]

WHEREFORE, premises considered, the petition is DENIED. The Decision dated October 11, 2005,
and the Resolution dated July 13, 2006 of the Court of Appeals in consolidated labor cases docketed
as CA-G.R. SP No. 83831 and CA-G.R. SP No. 83657, are AFFIRMED

Labor II – 1
 33.) G.R. No. 190515 : November 15, 2010
CIRTEK EMPLOYEES LABOR UNION-FEDERATION OF FREE WORKERS, Petitioner, v. CIRTEK
ELECTRONICS, INC., Respondent.
 
DECISION
 
CARPIO MORALES, J.:
 
Cirtek Electronics, Inc. (respondent), an electronics and semi-conductor firm situated inside the
Laguna Technopark, had an existing Collective Bargaining Agreement (CBA) with Cirtek Employees Labor
Union-Federation of Free Workers (petitioner) for the period January 1, 2001 up to December 31,
2005.   Prior to the 3rd year of the CBA, the parties renegotiated its economic provisions but failed to reach
a settlement, particularly on the issue of wage increases.  Petitioner thereupon declared a bargaining
deadlock and filed a Notice of Strike with the National Conciliation and Mediation Board-Regional Office
No. IV (NCMB-RO IV) on April 26, 2004.  Respondent, upon the other hand, filed a Notice of Lockout  on
June 16, 2004. 
While the conciliation proceedings were ongoing, respondent placed seven union officers including
the President, a Vice President, the Secretary and the Chairman of the Board of Directors under
preventive suspension for allegedly spearheading a boycott of overtime work.  The officers were
eventually dismissed from employment, prompting petitioner to file another Notice of Strike which was,
after conciliation meetings, converted to a voluntary arbitration case.  The dismissal of the officers was
later found to be legal, hence, petitioner appealed. 
In the meantime, as amicable settlement of the CBA was deadlocked, petitioner went on strike on
June 20, 2005.  By Order[1]  dated June 23, 2005, the Secretary of Labor assumed jurisdiction over the
controversy and issued a Return to Work Order which was complied with. 
 Before the Secretary of Labor could rule on the controversy, respondent created a Labor
Management Council (LMC) through which it concluded with the remaining officers of petitioner a
Memorandum of Agreement (MOA)[2] providing for daily wage increases of P6.00 per day effective
January 1, 2004 and P9.00 per day effective January 1, 2005.   Petitioner submitted the MOA via Motion
and Manifestation[3] to the Secretary of Labor, alleging that the remaining officers signed the MOA under
respondent’s assurance that should the Secretary order a higher award of wage increase, respondent
would comply.
By Order[4] dated March 16, 2006, the Secretary of Labor resolved the CBA deadlock by awarding
a wage increase of from P6.00 to P10.00 per day effective January 1, 2004 and from P9.00 to P15.00 per
day effective January 1, 2005, and adopting all other benefits as embodied in the MOA. 
Respondent moved for a reconsideration of the Decision as petitioner’s vice-president submitted a
“Muling Pagpapatibay ng Pagsang-ayon sa Kasunduan na may Petsang ika-4 ng Agosto 2005,”[5] stating
that the union members were waiving their rights and benefits under the Secretary’s
Decision.  Reconsideration of the Decision was denied  by  Resolution[6] of August 12, 2008, hence,
respondent filed a petition for certiorari  before the Court of Appeals. 
By Decision[7] of September 24, 2009, the appellate court ruled in favor of respondent and
accordingly set aside the Decision of the Secretary of Labor.  It held that the Secretary of Labor gravely
abused his discretion in not respecting the MOA.  It did not give credence to the minutes of the
meeting[8] that attended the forging of the MOA as it was not verified, nor to the
“Paliwanag”[9] submitted by respondent union members explaining why they signed the MOA as it was
not notarized.
Petitioner’s motion for reconsideration having been denied by Resolution[10] of December 2, 2009,
the present petition was filed, maintaining that the Secretary of Labor’s award is in order, being in accord
with the parties’ CBA history ─ respondent having already granted P15.00 per day for 2001, P10.00 per

Labor II – 1
day for 2002, and P10.00 per day for 2003, and that the Secretary has the power to grant awards higher
than what are stated in the CBA. 
Respecting the MOA, petitioner posits that it was “surreptitiously entered into [in] bad faith,” it
having been forged without the assistance of the Federation of Free Workers or counsel, adding that
respondent could have waited for the Secretary’s resolution of the pending CBA deadlock or that the MOA
could have been concluded before representatives of the Secretary of Labor.
          The relevant issues for resolution are 1) whether the Secretary of Labor is authorized to give an
award higher than that agreed upon in the MOA, and 2) whether the MOA was entered into and ratified by
the remaining officers of petitioner under the condition, which was not incorporated in the MOA, that
respondent would honor the Secretary of Labor’s award in the event that it is higher.
          The Court resolves both issues in the affirmative.
          It is well-settled that the Secretary of Labor, in the exercise of his power to assume jurisdiction
under Art. 263 (g)[11] of the Labor Code, may resolve all issues involved in the controversy including the
award of wage increases and benefits.[12]  While an arbitral award cannot per se be categorized as an
agreement voluntarily entered into by the parties because it requires the intervention and imposing power
of the State thru the Secretary of Labor when he assumes jurisdiction, the arbitral award can be
considered an approximation of a collective bargaining agreement which would otherwise have been
entered into by the parties, hence, it has the force and effect of a valid contract obligation.[13] 
That the arbitral award was higher than that which was purportedly agreed upon in the MOA is of
no moment.  For the Secretary, in resolving the CBA deadlock, is not limited to considering the MOA as
basis in computing the wage increases. He could, as he did, consider the financial
documents[14] submitted by respondent as well as the parties’ bargaining history and respondent’s
financial outlook and improvements as stated in its website.[15] 
It bears noting that since the filing and submission of the MOA did not have the effect of
divesting the Secretary of his jurisdiction, or of automatically disposing the controversy,
then neither should the provisions of the MOA restrict the Secretary’s leeway in deciding the
matters before him.
          The appellate court’s brushing aside of the “Paliwanag” and the minutes of the meeting that
resulted in the conclusion of the MOA because they were not verified and notarized, thus violating, so the
appellate court reasoned, the rules on parol evidence, does not lie.  Like any other rule on evidence, parol
evidence should not be strictly applied in labor cases.   
 
The reliance on the parol evidence rule is misplaced. In labor cases pending
before the Commission or the Labor Arbiter, the rules of evidence prevailing in courts
of law or equity are not controlling. Rules of procedure and evidence are not applied in
a very rigid and technical sense in labor cases. Hence, the Labor Arbiter is not precluded
from accepting and evaluating evidence other than, and even contrary to, what is stated in
the CBA.[16] (emphasis supplied)
 
While a contract constitutes the law between the parties, this is so in the present case with respect
to the CBA, not to the MOA in which even the union’s signatories had expressed reservations thereto.  But
even assuming arguendo that the MOA is treated as a new CBA, since it is imbued with public interest, it
must be construed liberally and yield to the common good. 
 
While the terms and conditions of a CBA constitute the law between the
parties, it is not, however, an ordinary contract to which is applied the principles
of law governing ordinary contracts. A CBA, as a labor contract within the
contemplation of Article 1700 of the Civil Code of the Philippines which governs the relations
between labor and capital, is not merely contractual in nature but impressed with
public interest, thus, it must yield to the common good. As such, it must be construed
liberally rather than narrowly and technically, and the courts must place a practical and

Labor II – 1
 realistic construction upon it, giving due consideration to the context in which it is
negotiated and purpose which it is intended to serve.[17] (emphasis and underscoring
supplied)
 
          WHEREFORE, the petition is GRANTED. The Decision dated  September 24, 2009 and the
Resolution dated December 2, 2009 of the Court of Appeals are REVERSED  and SET ASIDE and the
Order dated March 16, 2006 and Resolution dated August 12, 2008 of the Secretary of Labor
are REINSTATED.

Labor II – 1
 34.) [G.R. No. 185665 : February 08, 2012]

EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., PETITIONER, VS. EASTERN

TELECOMS EMPLOYEES UNION, RESPONDENT.

DECISION

MENDOZA, J.:

Before the Court is a petition for review on certiorari seeking  modification of the June 25, 2008
Decision[1] of the Court of Appeals (CA) and its December 12, 2008 Resolution, [2] in CA-G.R. SP No.
91974, annulling the April 28, 2005 Resolution [3] of the National Labor Relations Commission (NLRC)
in NLRC-NCR-CC-000273-04 entitled “In the Matter of the Labor Dispute in Eastern
Telecommunications, Philippines, Inc.” cralaw

The Facts

As synthesized by the NLRC, the facts of the case are as follows, viz:

Eastern Telecommunications Phils., Inc. (ETPI) is a corporation engaged in the business of providing
telecommunications facilities, particularly leasing international date lines or circuits, regular landlines,
internet and data services, employing approximately 400 employees.

Eastern Telecoms Employees Union (ETEU) is the certified exclusive bargaining agent of the
company’s rank and file employees with a strong following of 147 regular members. It has an
existing collecti[ve] bargaining agreement with the company to expire in the year 2004 with a Side
Agreement signed on September 3, 2001.

In essence, the labor dispute was a spin-off of the company’s plan to defer payment of the 2003 14 th,
15th and 16th month bonuses sometime in April 2004. The company’s main ground in postponing the
payment of bonuses is due to allege continuing deterioration of company’s financial position which
started in the year 2000. However, ETPI while postponing payment of bonuses sometime in April
2004, such payment would also be subject to availability of funds.

Invoking the Side Agreement of the existing Collective Bargaining Agreement for the period 2001-
2004 between ETPI and ETEU which stated as follows:

“4. Employment Related Bonuses. The Company confirms that the 14th, 15th and 16th month bonuses
(other than 13th  month pay) are granted.”

The union strongly opposed the deferment in payment of the bonuses by filing a preventive
mediation complaint with the NCMB on July 3, 2003, the purpose of which complaint is to determine
the date when the bonus should be paid.

In the conference held at the NCMB, ETPI reiterated its stand that payment of the bonuses would
only be made in April 2004 to which date of payment, the union agreed. Thus, considering the
agreement forged between the parties, the said agreement was reduced to a Memorandum of
Agreement. The union requested that the President of the company should be made a signatory to
the agreement, however, the latter refused to sign. In addition to such a refusal, the company made
a sudden turnaround in its position by declaring that they will no longer pay the bonuses until the
issue is resolved through compulsory arbitration.

The company’s change in position was contained in a letter dated April 14, 2004 written to the union
by Mr. Sonny Javier, Vice-President for Human Resources and Administration, stating that “the
deferred release of bonuses had been superseded and voided due to the union’s filing of the issue to
Labor II – 1
the NCMB on July 18, 2003.” He declared that “until the matter is resolved in a compulsory
arbitration, the company cannot and will not pay any ‘bonuses’ to any and all union members.”

Thus, on April 26, 2004, ETEU filed a Notice of Strike on the ground of unfair labor practice for failure
of ETPI to pay the bonuses in gross violation of the economic provision of the existing CBA.

On May 19, 2004, the Secretary of Labor and Employment, finding that the company is engaged in
an industry considered vital to the economy and any work disruption thereat will adversely affect not
only its operation but also that of the other business relying on its services, certified the labor dispute
for compulsory arbitration pursuant to Article 263 (q) of the Labor Code as amended.

Acting on the certified labor dispute, a hearing was called on July 16, 2004 wherein the parties have
submitted that the issues for resolution are (1) unfair labor practice and (2) the grant of 14 th,
15th and 16th month bonuses for 2003, and 14th month bonus for 2004. Thereafter, they were
directed to submit their respective position papers and evidence in support thereof after which
submission, they agreed to have the case considered submitted for decision. [4]

In its position paper,[5] the Eastern Telecoms Employees Union (ETEU) claimed that Eastern
Telecommunications Philippines, Inc. (ETPI) had consistently and voluntarily been giving out
14th month bonus during the month of April, and 15th and 16th month bonuses every December of
each year (subject bonuses) to its employees from 1975 to 2002, even when it did not realize any
net profits. ETEU posited that by reason of its long and regular concession, the payment of these
monetary benefits had ripened into a company practice which could no longer be unilaterally
withdrawn by ETPI. ETEU added that this long-standing company practice had been expressly
confirmed in the Side Agreements of the 1998-2001 and 2001-2004 Collective Bargaining
Agreements (CBA) which provided for the continuous grant of these bonuses in no uncertain terms.
ETEU theorized that the grant of the subject bonuses is not only a company practice but also a
contractual obligation of ETPI to the union members.

ETEU contended that the unjustified and malicious refusal of the company to pay the subject bonuses
was a clear violation of the economic provision of the CBA and constitutes unfair labor practice (ULP).
According to ETEU, such refusal was nothing but a ploy to spite the union for bringing the matter of
delay in the payment of the subject bonuses to the National Conciliation and Mediation Board
(NCMB). It prayed for the award of moral and exemplary damages as well as attorney’s fees for the
unfair labor practice allegedly committed by the company.

On the other hand, ETPI in its position paper, [6] questioned the authority of the NLRC to take
cognizance of the case contending that it had no jurisdiction over the issue which merely involved the
interpretation of the economic provision of the 2001-2004 CBA Side Agreement. Nonetheless, it
maintained that the complaint for nonpayment of 14th, 15th and 16th month bonuses for 2003 and
14th month bonus for 2004 was bereft of any legal and factual basis. It averred that the subject
bonuses were not part of the legally demandable wage and the grant thereof to its employees was an
act of pure gratuity and generosity on its part, involving the exercise of management prerogative and
always dependent on the financial performance and realization of profits. It posited that it resorted to
the discontinuance of payment of the bonuses due to the unabated huge losses that the company
had continuously experienced. It claimed that it had been suffering serious business losses since
2000 and to require the company to pay the subject bonuses during its dire financial straits would in
effect penalize it for its past generosity. It alleged that the non-payment of the subject bonuses was
neither flagrant nor malicious and, hence, would not amount to unfair labor practice.

Further, ETPI argued that the bonus provision in the 2001-2004 CBA Side Agreement was a mere
affirmation that the distribution of bonuses was discretionary to the company, premised and
conditioned on the success of the business and availability of cash. It submitted that said bonus
provision partook of the nature of a “one-time” grant which the employees may demand only during
the year when the Side Agreement was executed and was never intended to cover the entire term of
Labor II – 1
the CBA. Finally, ETPI emphasized that even if it had an unconditional obligation to grant bonuses to
its employees, the drastic decline in its financial condition had already legally released it therefrom
pursuant to Article 1267 of the Civil Code.

On April 28, 2005, the NLRC issued its Resolution dismissing ETEU’s complaint and held that ETPI
could not be forced to pay the union members the 14th, 15th and 16th month bonuses for the year
2003 and the 14th month bonus for the year 2004 inasmuch as the payment of these additional
benefits was basically a management prerogative, being an act of generosity and munificence on the
part of the company and contingent upon the realization of profits. The NLRC pronounced that ETPI
may not be obliged to pay these extra compensations in view of the substantial decline in its financial
condition. Likewise, the NLRC found that ETPI was not guilty of the ULP charge elaborating that no
sufficient and substantial evidence was adduced to attribute malice to the company for its refusal to
pay the subject bonuses. The dispositive portion of the resolution reads:

WHEREFORE, premises considered, the instant complaint is hereby DISMISSED for lack of merit.

SO ORDERED.[7]

Respondent ETEU moved for reconsideration but the motion was denied by the NLRC in its Resolution
dated August 31, 2005.

Aggrieved, ETEU filed a petition for certiorari [8] before the CA ascribing grave abuse of discretion on
the NLRC for disregarding its evidence which allegedly would prove that the subject bonuses were
part of the union members’ wages, salaries or compensations. In addition, ETEU asserted that the
NLRC committed grave abuse of discretion when it ruled that ETPI is not contractually bound to give
said bonuses to the union members.

In its assailed June 25, 2008 Decision, the CA declared that the Side Agreements of the 1998 and
2001 CBA created a contractual obligation on ETPI to confer the subject bonuses to its employees
without qualification or condition. It also found that the grant of said bonuses has already ripened
into a company practice and their denial would amount to diminution of the employees’ benefits. It
held that ETPI could not seek refuge under Article 1267 of the Civil Code because this provision
would apply only when the difficulty in fulfilling the contractual obligation was manifestly beyond the
contemplation of the parties, which was not the case therein. The CA, however, sustained the NLRC
finding that the allegation of ULP was devoid of merit. The dispositive portion of the questioned
decision reads:

WHEREFORE, premises considered, the instant petition is GRANTED and the resolution of the National
Labor Relations Commission dated April 28, 2005 is hereby ANNULLED and SET ASIDE. Respondent
Eastern Telecommunications Philippines, Inc. is ordered to pay the members of petitioner their 14th,
15th and 16th month bonuses for the year 2003 and 14th month for the year 2004. The complaint
for unfair labor practice against said respondent is DISMISSED.

SO ORDERED.[9]

ISSUES

Dissatisfied, ETPI now comes to this Court via Rule 45, raising the following errors allegedly
committed by the CA, to wit:

I.

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT ANNULLED AND SET
ASIDE THE RESOLUTIONS OF THE NLRC DISREGARDING THE WELL SETTLED RULE THAT A
WRIT OF CERTIORARI (UNDER RULE 65) ISSUES ONLY FOR CORRECTION OF ERRORS OF

Labor II – 1
JURISDICTION OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION.

II.

THE COURT OF APPEALS COMMITTED GRAVE ERROR OF LAW WHEN IT DISREGARDED THE
RULE THAT FINDINGS OF FACTS OF QUASI-JUDICIAL BODIES ARE ACCORDED FINALITY IF
THEY ARE SUPPORTED BY SUBSTANTIAL EVIDENCE CONSIDERING THAT THE
CONCLUSIONS OF THE NLRC WERE BASED ON SUBSTANTIAL AND OVERWHELMING
EVIDENCE AND UNDISPUTED FACTS.

III.

IT WAS A GRAVE ERROR OF LAW FOR THE COURT OF APPEALS TO CONSIDER THAT THE
BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS EMPLOYEES IS NOT DEPENDENT ON
THE REALIZATION OF PROFITS.

IV.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT DISREGARDED

THE UNDISPUTED FACT THAT EASTERN COMMUNICATIONS IS SUFFERING FROM
TREMENDOUS FINANCIAL LOSSES, AND ORDERED EASTERN COMMUNICATIONS TO GRANT
THE BONUSES REGARDLESS OF THE FINANCIAL DISTRESS OF EASTERN
COMMUNICATIONS.

V.

THE COURT OF APPEALS COMMITTED A GRAVE ERROR OF LAW WHEN IT ARRIVED AT THE
CONCLUSION THAT THE GRANT OF BONUS GIVEN BY EASTERN COMMUNICATIONS TO ITS
EMPLOYEES HAS RIPENED INTO A COMPANY PRACTICE.[10]

A careful perusal of the voluminous pleadings filed by the parties leads the Court to conclude that
this case revolves around the following core issues:

1. Whether or not petitioner ETPI is liable to pay 14 th, 15th and 16th month bonuses for the year 2003
and 14th month bonus for the year 2004 to the members of respondent union; and

2. Whether or not the CA erred in not dismissing outright ETEU’s petition for certiorari.

ETPI insists that it is under no legal compulsion to pay 14 th, 15th and 16th month bonuses for the year
2003 and 14th month bonus for the year 2004 contending that they are not part of the demandable
wage or salary and that their grant is conditional based on successful business performance and the
availability of company profits from which to source the same. To thwart ETEU’s monetary claims, it
insists that the distribution of the subject bonuses falls well within the company’s prerogative, being
an act of pure gratuity and generosity on its part. Thus, it can withhold the grant thereof especially
since it is currently plagued with economic difficulties and financial losses. It alleges that the
company’s fiscal situation greatly declined due to tremendous and extraordinary losses it sustained
beginning the year 2000. It claims that it cannot be compelled to act liberally and confer upon its
employees additional benefits over and above those mandated by law when it cannot afford to do so.
It posits that so long as the giving of bonuses will result in the financial ruin of an already distressed
company, the employer cannot be forced to grant the same.

ETPI further avers that the act of giving the subject bonuses did not ripen into a company practice
arguing that it has always been a contingent one dependent on the realization of profits and, hence,
the workers are not entitled to bonuses if the company does not make profits for a given year. It

Labor II – 1
asseverates that the 1998 and 2001 CBA Side Agreements did not contractually afford ETEU a vested
property right to a perennial payment of the bonuses. It opines that the bonus provision in the Side
Agreement allows the giving of benefits only at the time of its execution. For this reason, it cannot be
said that the grant has ripened into a company practice. In addition, it argues that even if such
traditional company practice exists, the CA should have applied Article 1267 of the Civil Code which
releases the obligor from the performance of an obligation when it has become so difficult to fulfill
the same.

It is the petitioner’s stance that the CA should have dismissed outright the respondent union’s
petition for certiorari alleging that no question of jurisdiction whatsoever was raised therein but,
instead, what was being sought was a judicial re-evaluation of the adequacy or inadequacy of the
evidence on record. It claims that the CA erred in disregarding the findings of the NLRC which were
based on substantial and overwhelming evidence as well as on undisputed facts. ETPI added that the
CA court should have refrained from tackling issues of fact and, instead, limited itself on issues of
jurisdiction and grave abuse of jurisdiction amounting to lack or excess of it.

The Court’s Ruling

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not
normally embark on a re-examination of the evidence presented by the contending parties during the
trial of the case considering that the findings of facts of the CA are conclusive and binding on the
Court. The rule, however, admits of several exceptions, one of which is when the findings of the
appellate court are contrary to those of the trial court or the lower administrative body, as the case
may be.[11] Considering the incongruent factual conclusions of the CA and the NLRC, this Court finds
Itself obliged to resolve it.

The pivotal question determinative of this controversy is whether the members of ETEU are entitled
to the payment of 14th, 15th and 16th month bonuses for the year 2003 and 14th month bonus for year
2004.

After an assiduous assessment of the record, the Court finds no merit in the petition.

From a legal point of view, a bonus is a gratuity or act of liberality of the giver which the recipient
has no right to demand as a matter of right. [12] The grant of a bonus is basically a management
prerogative which cannot be forced upon the employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the employee’s basic salaries or
wages.[13]

A bonus, however, becomes a demandable or enforceable obligation when it is made part of the
wage or salary or compensation of the employee.[14] Particularly instructive is the ruling of the Court
in Metro Transit Organization, Inc. v. National Labor Relations Commission,[15] where it was written:

Whether or not a bonus forms part of wages depends upon the circumstances and conditions for its
payment. If it is additional compensation which the employer promised and agreed to give without
any conditions imposed for its payment, such as success of business or greater production or output,
then it is part of the wage. But if it is paid only if profits are realized or if a certain level of
productivity is achieved, it cannot be considered part of the wage. Where it is not payable to all but
only to some employees and only when their labor becomes more efficient or more productive, it is
only an inducement for efficiency, a prize therefore, not a part of the wage.

The consequential question that needs to be settled, therefore, is whether the subject bonuses are
demandable or not. Stated differently, can these bonuses be considered part of the wage, salary or
compensation making them enforceable obligations?

The Court believes so.

Labor II – 1
In the case at bench, it is indubitable that ETPI and ETEU agreed on the inclusion of a provision for
the grant of 14th, 15th and 16th month bonuses in the 1998-2001 CBA Side Agreement, [16] as well as
in the 2001-2004 CBA Side Agreement,[17] which was signed on September 3, 2001. The provision,
which was similarly worded, states:

Employment-Related Bonuses

The Company confirms that the 14th, 15th and 16th month bonuses (other than the 13th month pay)
are granted.

A reading of the above provision reveals that the same provides for the giving of 14 th, 15th and
16th month bonuses without qualification. The wording of the provision does not allow any other
interpretation. There were no conditions specified in the CBA Side Agreements for the grant of the
benefits contrary to the claim of ETPI that the same is justified only when there are profits earned by
the company. Terse and clear, the said provision does not state that the subject bonuses shall be
made to depend on the ETPI’s financial standing or that their payment was contingent upon the
realization of profits. Neither does it state that if the company derives no profits, no bonuses are to
be given to the employees. In fine, the payment of these bonuses was not related to the profitability
of business operations.

The records are also bereft of any showing that the ETPI made it clear before or during the execution
of the Side Agreements that the bonuses shall be subject to any condition. Indeed, if ETPI and ETEU
intended that the subject bonuses would be dependent on the company earnings, such intention
should have been expressly declared in the Side Agreements or the bonus provision should have
been deleted altogether. In the absence of any proof that ETPI’s consent was vitiated by fraud,
mistake or duress, it is presumed that it entered into the Side Agreements voluntarily, that it had full
knowledge of the contents thereof and that it was aware of its commitment under the contract.
Verily, by virtue of its incorporation in the CBA Side Agreements, the grant of 14 th, 15th and
16th month bonuses has become more than just an act of generosity on the part of ETPI but a
contractual obligation it has undertaken. Moreover, the continuous conferment of bonuses by ETPI to
the union members from 1998 to 2002 by virtue of the Side Agreements evidently negates its
argument that the giving of the subject bonuses is a management prerogative.

From the foregoing, ETPI cannot insist on business losses as a basis for disregarding its undertaking.
It is manifestly clear that although it incurred business losses of P149,068,063.00 in the year 2000, it
continued to distribute 14th, 15th and 16th month bonuses for said year. Notwithstanding such huge
losses, ETPI entered into the 2001-2004 CBA Side Agreement on September 3, 2001 whereby it
contracted to grant the subject bonuses to ETEU in no uncertain terms. ETPI continued to sustain
losses for the succeeding years of 2001 and 2002 in the amounts of P348,783,013.00 and
P315,474,444.00, respectively. Still and all, this did not deter it from honoring the bonus provision in
the Side Agreement as it continued to give the subject bonuses to each of the union members in
2001 and 2002 despite its alleged precarious financial condition. Parenthetically, it must be
emphasized that ETPI even agreed to the payment of the 14 th, 15th and 16th month bonuses for 2003
although it opted to defer the actual grant in April 2004. All given, business losses could not be cited
as grounds for ETPI to repudiate its obligation under the 2001-2004 CBA Side Agreement.

The Court finds no merit in ETPI’s contention that the bonus provision confirms the grant of the
subject bonuses only on a single instance because if this is so, the parties should have included such
limitation in the agreement. Nowhere in the Side Agreement does it say that the subject bonuses
shall be conferred once during the year the Side Agreement was signed. The Court quotes with
approval the observation of the CA in this regard:

ETPI argues that assuming the bonus provision in the Side Agreement of the 2001-2004 CBA entitles
the union members to the subject bonuses, it is merely in the nature of a “one-time” grant and not
Labor II – 1
intended to cover the entire term of the CBA. The contention is untenable. The bonus provision in
question is exactly the same as that contained in the Side Agreement of the 1998-2001 CBA and
there is no denying that from 1998 to 2001, ETPI granted the subject bonuses for each of those
years. Thus, ETPI may not now claim that the bonus provision in the Side Agreement of the 2001-
2004 CBA is only a “one-time” grant. [18]

ETPI then argues that even if it is contractually bound to distribute the subject bonuses to ETEU
members under the Side Agreements, its current financial difficulties should have released it from the
obligatory force of said contract invoking Article 1267 of the Civil Code. Said provision declares:

Article 1267. When the service has become so difficult as to be manifestly beyond the contemplation
of the parties, the obligor may also be released therefrom, in whole or in part.

The Court is not persuaded.

The parties to the contract must be presumed to have assumed the risks of unfavorable
developments. It is, therefore, only in absolutely exceptional changes of circumstances that equity
demands assistance for the debtor.[19] In the case at bench, the Court determines that ETPI’s claimed
depressed financial state will not release it from the binding effect of the 2001-2004 CBA Side
Agreement.

ETPI appears to be well aware of its deteriorating financial condition when it entered into the 2001-
2004 CBA Side Agreement with ETEU and obliged itself to pay bonuses to the members of ETEU.
Considering that ETPI had been continuously suffering huge losses from 2000 to 2002, its business
losses in the year 2003 were not exactly unforeseen or unexpected. Consequently, it cannot be said
that the difficulty in complying with its obligation under the Side Agreement was “manifestly beyond
the contemplation of the parties.”  Besides, as held in Central Bank of the Philippines v. Court of
Appeals,[20] mere pecuniary inability to fulfill an engagement does not discharge a contractual
obligation. Contracts, once perfected, are binding between the contracting parties. Obligations arising
therefrom have the force of law and should be complied with in good faith. ETPI cannot renege from
the obligation it has freely assumed when it signed the 2001-2004 CBA Side Agreement.

Granting arguendo that the CBA Side Agreement does not contractually bind petitioner ETPI to give
the subject bonuses, nevertheless, the Court finds that its act of granting the same has become an
established company practice such that it has virtually become part of the employees’ salary or
wage. A bonus may be granted on equitable consideration when the giving of such bonus has been
the company’s long and regular practice. In Philippine Appliance Corporation v. Court of Appeals,[21] it
was pronounced:

To be considered a “regular practice,” however, the giving of the bonus should have been done over
a long period of time, and must be shown to have been consistent and deliberate. The test or
rationale of this rule on long practice requires an indubitable showing that the employer agreed to
continue giving the benefits knowing fully well that said employees are not covered by the law
requiring payment thereof.

The records show that ETPI, aside from complying with the regular 13th month bonus, has been
further giving its employees 14th month bonus every April as well as 15th and 16th month bonuses
every December of the year, without fail, from 1975 to 2002 or for 27 years whether it earned profits
or not. The considerable length of time ETPI has been giving the special grants to its employees
indicates a unilateral and voluntary act on its part to continue giving said benefits knowing that such
act was not required by law. Accordingly, a company practice in favor of the employees has been
established and the payments made by ETPI pursuant thereto ripened into benefits enjoyed by the
employees.

Labor II – 1
The giving of the subject bonuses cannot be peremptorily withdrawn by ETPI without violating Article
100 of the Labor Code:

Art. 100. Prohibition against elimination or diminution of benefits. – Nothing in this Book shall be
construed to eliminate or in any way diminish supplements, or other employee benefits being
enjoyed at the time of promulgation of this Code.

The rule is settled that any benefit and supplement being enjoyed by the employees cannot be
reduced, diminished, discontinued or eliminated by the employer. The principle of non-diminution of
benefits is founded on the constitutional mandate to protect the rights of workers and to promote
their welfare and to afford labor full protection.[22]

Interestingly, ETPI never presented countervailing evidence to refute ETEU’s claim that the company
has been continuously paying bonuses since 1975 up to 2002 regardless of its financial state. Its
failure to controvert the allegation, when it had the opportunity and resources to do so, works in
favor of ETEU. Time and again, it has been held that should doubts exist between the evidence
presented by the employer and the employee, the scales of justice must be tilted in favor of the
latter.[23]
cralaw

WHEREFORE, the petition is DENIED. The June 25, 2008 Decision of the Court of Appeals and its
December 12, 2008 Resolution are AFFIRMED.

Labor II – 1
 35.) [G.R. No. 171231 : February 17, 2010]

PNCC SKYWAY TRAFFIC MANAGEMENT AND SECURITY DIVISION WORKERS

ORGANIZATION (PSTMSDWO), REPRESENTED BY ITS PRESIDENT, RENE SORIANO,
PETITIONER, VS. PNCC SKYWAY CORPORATION, RESPONDENT.

DECISION

PERALTA, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to
set aside the Decision[1] and the Resolution[2] of the Court of Appeals (CA) in CA-G.R. SP. No. 87069,
which annulled and set aside the Decision and Order of the Voluntary Arbitrator dated July 12, 2004
and August 11, 2004, respectively.

The factual antecedents are as follows:

Petitioner PNCC Skyway Corporation Traffic Management and Security Division Workers' Organization
(PSTMSDWO) is a labor union duly registered with the Department of Labor and Employment (DOLE).
Respondent PNCC Skyway Corporation is a corporation duly organized and operating under and by
virtue of the laws of the Philippines.

On November 15, 2002, petitioner and respondent entered into a Collective Bargaining Agreement
(CBA) incorporating the terms and conditions of their agreement which included vacation leave and
expenses for security license provisions.

The pertinent provisions of the CBA relative to vacation leave and sick leave are as follows:

ARTICLE VIII
VACATION LEAVE AND SICK LEAVE

Section 1. Vacation Leave.

[a] Regular Employees covered by the bargaining unit who have completed at least one [1] year of
continuous service shall be entitled to vacation leave with pay depending on the length of service as
follows:

1-9 years of service- 15 working days

10-15 years of service- 16 working days
16-20 years of service- 17 working days
21-25 years of service- 18 working days
26 and above years of service - 19 working days.

[b] The company shall schedule the vacation leave of employees during the year taking
into consideration the request of preference of theemployees.(emphasis supplied)

[c] Any unused vacation leave shall be converted to cash and shall be paidto the employees on the
first week of December each year."

ARTICLE XXI

Section 6. Security License - All covered employees must possess a valid License [Security Guard
License] issued by the Chief, Philippine National Police or his duly authorized representative, to
perform his duties as security guard. All expenses of security guard in securing/renewing their
licenses shall be for their personal account. Guards, securing/renewing their license must apply for a
Labor II – 1
leave of absence and/or a change of schedule. Any guard who fails to renew his security guard
license should be placed on forced leave until such time that he can present a renewed security
license.

In a Memorandum dated December 29, 2003,[3] respondent's Head of the Traffic Management and
Security Department (TMSD) published the scheduled vacation leave of its TMSD personnel for the
year 2004. Thereafter, the Head of the TMSD issued a Memorandum [4] dated January 9, 2004 to all
TMSD personnel. In the said memorandum, it was provided that:

SCHEDULED VACATION LEAVE WITH PAY.

The 17 days (15 days SVL plus 2-day-off) scheduled vacation leave (SVL) with pay for the year 2004
had been published for everyone to take a vacation with pay which will be our opportunity to enjoy
quality time with our families and perform our other activities requiring our personal attention and
supervision. Swapping of SVL schedule is allowed on a one-on-one basis by submitting a written
request at least 30 days before the actual schedule of SVL duly signed by the concerned parties.
However, the undersigned may consider the re-scheduling of the SVL upon the written request of
concerned TMSD personnel at least 30 days before the scheduled SVL. Re-scheduling will be
evaluated taking into consideration the TMSDs operational requirement.

Petitioner objected to the implementation of the said memorandum. It insisted that the individual
members of the union have the right to schedule their vacation leave. It opined that the unilateral
scheduling of the employees' vacation leave was done to avoid the monetization of their vacation
leave in December 2004. This was allegedly apparent in the memorandum issued by the Head HRD,
[5]
 addressed to all department heads, which provides:

FOR : All Dept. Heads

FROM: Head, HRD
SUBJECT : Leave Balances as of January 01, 2004

DATE: January 9, 2004

We are furnishing all the departments the leave balances of their respective staff as of January 01,
2004, so as to have them monitor and program the schedule of such leave.

Please consider the leave credit they earned each month [1-2-0], one day and two hours in
anticipation of the later schedule. As we are targeting the zero conversion comes December 2004, it
is suggested that the leave balances as of to date be given preferential scheduling.

x x x.

Petitioner also demanded that the expenses for the required in-service training of its member
security guards, as a requirement for the renewal of their license, be shouldered by the respondent.
However, the respondent did not accede to petitioner's demands and stood firm on its decision to
schedule all the vacation leave of petitioner's members.

Due to the disagreement between the parties, petitioner elevated the matter to the DOLE-NCMB for
preventive mediation. For failure to settle the issue amicably, the parties agreed to submit the issue
before the voluntary arbitrator.

The voluntary arbitrator issued a Decision dated July 12, 2004, the dispositive portion of which
reads:

WHEREFORE, premises all considered, declaring that:

Labor II – 1
a) The scheduling of all vacation leaves under Article VIII, Section 6, thereof, shall be under the
discretion of the union members entitled thereto, and the management to convert them into cash all
the leaves which the management compelled them to use.

b) To pay the expenses for the in-service-training of the company security guards, as a requirement
for renewal of licenses, shall not be their personal account but that of the company.

All other claims are dismissed for lack of merit.

SO ORDERED.[6]

Respondent filed a motion for reconsideration, which the voluntary arbitrator denied in the
Order[7] dated August 11, 2004.

Aggrieved, on October 22, 2004, respondent filed a Petition for Certiorari  with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction with the CA, and the CA rendered a Decision
dated October 4, 2005,[8] annulling and setting aside the decision and order of the voluntary
arbitrator. The CA ruled that since the provisions of the CBA were clear, the voluntary arbitrator has
no authority to interpret the same beyond what was expressly written.

Petitioner filed a motion for reconsideration, which the CA denied through a Resolution dated January
23, 2006.[9] Hence, the instant petition assigning the following errors:

WITH ALL DUE RESPECT, THE HONORABLE PUBLIC RESPONDENT COURT OF APPEALS [THIRTEENTH
DIVISION] ERRED IN HOLDING THAT:

A) THE MANAGEMENT HAS THE SOLE DISCRETION TO SCHEDULE THE VACATION LEAVE OF HEREIN
PETITIONER.

B) THE MANAGEMENT IS NOT LIABLE FOR THE IN-SERVICE-TRAINING OF THE SECURITY GUARDS.

II

THE HONORABLE PUBLIC RESPONDENT ERRED IN OVERSEEING THE CONVERSION ASPECT OF THE
UNUSED LEAVE.

Before considering the merits of the petition, We shall first address the objection based on
technicality raised by respondent.

Respondent alleged that the petition was fatally defective due to the lack of authority of its union
president, Rene Soriano, to sign the certification and verification against forum shopping on
petitioner's behalf. It alleged that the authority of Rene Soriano to represent the union was only
conferred on June 30, 2006 by virtue of a board resolution, [10] while the Petition for Review had long
been filed on February 27, 2006. Thus, Rene Soriano did not possess the required authority at the
time the petition was filed on February 27, 2006.

The petitioner countered that the Board Resolution [11] dated June 30, 2006 merely reiterated the
authority given to the union president to represent the union, which was conferred as early as
October 2005. The resolution provides in part that:

WHEREAS, in a meeting duly called for October 2005, the Union decided to file a Motion for
Reconsideration and if the said motion be denied, to file a petition before the Supreme Court.
(Emphasis supplied)

Labor II – 1
Thus, the union president, representing the union, was clothed with authority to file the petition on
February 27, 2006.

The purpose of requiring verification is to secure an assurance that the allegations in the petition
have been made in good faith; or are true and correct, not merely speculative. This requirement is
simply a condition affecting the form of pleadings, and non-compliance therewith does not
necessarily render it fatally defective. Truly, verification is only a formal, not a jurisdictional,
requirement.

With respect to the certification of non-forum shopping, it has been held that the certification
requirement is rooted in the principle that a party-litigant shall not be allowed to pursue
simultaneous remedies in different fora, as this practice is detrimental to an orderly judicial
procedure. However, this Court has relaxed, under justifiable circumstances, the rule requiring the
submission of such certification considering that, although it is obligatory, it is not jurisdictional. Not
being jurisdictional, it can be relaxed under the rule of substantial compliance. [12]

In Cagayan Valley Drug Corporation v. Commissioner of Internal Revenue,[13] We said that:

In a slew of cases, however, we have recognized the authority of some corporate officers to sign the
verification and certification against forum shopping. In Mactan-Cebu International Airport Authority
v. CA, we recognized the authority of a general manager or acting general manager to sign the
verification and certificate against forum shopping; in Pfizer v. Galan, we upheld the validity of a
verification signed by an "employment specialist" who had not even presented any proof of her
authority to represent the company; in Novelty Philippines, Inc., v. CA, we ruled that a personnel
officer who signed the petition but did not attach the authority from the company is authorized to
sign the verification and non-forum shopping certificate; and in Lepanto Consolidated Mining
Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that the Chairperson of the
Board and President of the Company can sign the verification and certificate against non-forum
shopping even without the submission of the board's authorization.

In sum, we have held that the following officials or employees of the company can sign the
verification and certification without need of a board resolution: (1) the Chairperson of the Board of
Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager, (4)
Personnel Officer, and (5) an Employment Specialist in a labor case.

While the above cases do not provide a complete listing of authorized signatories to the verification
and certification required by the rules, the determination of the sufficiency of the authority was done
on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to sign the verification or certificate against
forum shopping, being "in a position to verify the truthfulness and correctness of the allegations in
the petition."

In the case at bar, We rule that Rene Soriano has sufficient authority to sign the verification and
certification against forum shopping for the following reasons: First, the resolution dated June 30,
2006 was merely a reiteration of the authority given to the Union President to file a case before this
Court assailing the CBA violations committed by the management, which was previously conferred
during a meeting held on October 5, 2005. Thus, it can be inferred that even prior to the filing of the
petition before Us on February 27, 2006, the president of the union was duly authorized to represent
the union and to file a case on its behalf. Second, being the president of the union, Rene Soriano is in
a position to verify the truthfulness and correctness of the allegations in the petition. Third, assuming
that Mr. Soriano has no authority to file the petition on February 27, 2006, the passing on June 30,
2006 of a Board Resolution authorizing him to represent the union is deemed a ratification of his
prior execution, on February 27, 2006, of the verification and certificate of non-forum shopping, thus
curing any defects thereof. Ratification in agency is the adoption or confirmation by one person of an
Labor II – 1
act performed on his behalf by another without authority. [14]

We now go to the merits of the case.

Petitioner insisted that their union members have the preference in scheduling their vacation leave.
On the other hand, respondent argued that Article VIII, Section 1 (b) gives the management the final
say regarding the vacation leave schedule of its employees. Respondent may take into consideration
the employees' preferred schedule, but the same is not controlling.

Petitioner also requested the respondent to provide and/or shoulder the expenses for the in-service
training of their members as a requirement for the renewal of the security guards' license.
Respondent did not accede to the union's request invoking the CBA provision which states that all
expenses of security guards in securing /renewing their license shall be for their personal account.
The petitioner further argued that any doubts or ambiguity in the interpretation of the CBA should be
resolved in favor of the laborer.

As to the issue on vacation leaves, the same has no merit.

The rule is that where the language of a contract is plain and unambiguous, its meaning should be
determined without reference to extrinsic facts or aids. The intention of the parties must be gathered
from that language, and from that language alone. Stated differently, where the language of a
written contract is clear and unambiguous, the contract must be taken to mean that which, on its
face, it purports to mean, unless some good reason can be assigned to show that the words used
should be understood in a different sense.[15]

In the case at bar, the contested provision of the CBA is clear and unequivocal. Article VIII, Section 1
(b) of the CBA categorically provides that the scheduling of vacation leave shall be under the option
of the employer. The preference requested by the employees is not controlling because respondent
retains its power and prerogative to consider or to ignore said request.

Thus, if the terms of a CBA are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of its stipulation shall prevail. [16] In fine, the CBA must be strictly adhered
to and respected if its ends have to be achieved, being the law between the parties. In Faculty
Association of Mapua Institute of Technology (FAMIT) v. Court of Appeals,[17]  this Court held that the
CBA during its lifetime binds all the parties. The provisions of the CBA must be respected since its
terms and conditions constitute the law between the parties. The parties cannot be allowed to change
the terms they agreed upon on the ground that the same are not favorable to them.

As correctly found by the CA:

The words of the CBA were unequivocal when it provided that "The company shall schedule the
vacation leave of employees during the year taking into consideration the request of preference of
the employees." The word shall in this instance connotes an imperative command, there being
nothing to show a different intention. The only concession given under the subject clause was that
the company should take into consideration the preferences of the employees in scheduling the
vacations; but certainly, the concession never diminished the positive right of management to
schedule the vacation leaves in accordance with what had been agreed and stipulated upon in the
CBA.

There is, thus, no basis for the Voluntary Arbitrator to interpret the subject provision relating to the
schedule of vacation leaves as being subject to the discretion of the union members. There is simply
nothing in the CBA which grants the union members this right.

It must be noted the grant to management of the right to schedule vacation leaves is not without
good reason. Indeed, if union members were given the unilateral discretion to schedule their vacation
Labor II – 1
leaves, the same may result in significantly crippling the number of key employees of the petitioner
manning the toll ways on holidays and other peak seasons, where union members may wittingly or
unwittingly choose to have a vacation. Put another way, the grant to management of the right to
schedule vacation leaves ensures that there would always be enough people manning and servicing
the toll ways, which in turn assures the public plying the same orderly and efficient toll way service.

Indeed, the multitude or scarcity of personnel manning the tollways should not rest upon the option
of the employees, as the public using the skyway system should be assured of its safety, security and
convenience.

Although the preferred vacation leave schedule of petitioner's members should be given priority, they
cannot demand, as a matter of right, that their request be automatically granted by the respondent.
If the petitioners were given the exclusive right to schedule their vacation leave then said right
should have been incorporated in the CBA. In the absence of such right and in view of the mandatory
provision in the CBA giving respondent the right to schedule the vacation leave of its employees,
compliance therewith is mandated by law.

In the grant of vacation leave privileges to an employee, the employer is given the leeway to impose
conditions on the entitlement to and commutation of the same, as the grant of vacation leave is not a
standard of law, but a prerogative of management. [18] It is a mere concession or act of grace of the
employer and not a matter of right on the part of the employee. [19] Thus, it is well within the power
and authority of an employer to impose certain conditions, as it deems fit, on the grant of vacation
leaves, such as having the option to schedule the same.

Along that line, since the grant of vacation leave is a prerogative of the employer, the latter can
compel its employees to exhaust all their vacation leave credits. Of course, any vacation leave credits
left unscheduled by the employer, or any scheduled vacation leave that was not enjoyed by the
employee upon the employer's directive, due to exigencies of the service, must be converted to cash,
as provided in the CBA. However, it is incorrect to award payment of the cash equivalent of vacation
leaves that were already used and enjoyed by the employees. By directing the conversion to cash of
all utilized and paid vacation leaves, the voluntary arbitrator has licensed unjust enrichment in favor
of the petitioner and caused undue financial burden on the respondent. Evidently, the Court cannot
tolerate this.

It would seem that petitioner's goal in relentlessly arguing that its members preferred vacation leave
schedule should be given preference is not allowed to them to avail themselves of their respective
vacation leave credits at all but, instead, to convert these into cash.

In Cuajo v. Chua Lo Tan,[20] We said that the purpose of a vacation leave is to afford a laborer a
chance to get a much-needed rest to replenish his worn-out energy and acquire a new vitality to
enable him to efficiently perform his duties, and not merely to give him additional salary and bounty.

This purpose is manifest in the Memorandum dated January 9, 2004 [21] addressed to all TMSD
Personnel which provides that:

SCHEDULED VACATION LEAVE WITH PAY

The 17 days (15 days SVL plus 2-Day-Off) scheduled vacation leave (SVL) with pay for the year 2004
had been published for everyone to take a vacation with pay which will be our opportunity to
enjoy quality time with our families and perform our other activities requiring our personal
attention and supervision.(Emphasis ours.)

Accordingly, the vacation leave privilege was not intended to serve as additional salary, but as a non-
monetary benefit. To give the employees the option not to consume it with the aim of converting it to
cash at the end of the year would defeat the very purpose of vacation leave.
Labor II – 1
Petitioner's contention that labor contracts should be construed in favor of the laborer is without
basis and, therefore, inapplicable to the present case. This rule of construction does not benefit
petitioners because, as stated, there is here no room for interpretation. Since the CBA is clear and
unambiguous, its terms should be implemented as they are written.

This brings Us to the issue of who is accountable for the in-service training of the security guards. On
this point, We find the petition meritorious.

Although it is a rule that a contract freely entered into between the parties should be respected, since
a contract is the law between the parties, there are, however, certain exceptions to the rule,
specifically Article 1306 of the Civil Code, which provides:

The contracting parties may establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs, public order, or
public policy.

Moreover, the relations between capital and labor are not merely contractual. "They are so impressed
with public interest that labor contracts must yield to the common good x x x." [22] The supremacy of
the law over contracts is explained by the fact that labor contracts are not ordinary contracts; they
are imbued with public interest and therefore are subject to the police power of the state.
[23]
 However, it should not be taken to mean that provisions agreed upon in the CBA are absolutely
beyond the ambit of judicial review and nullification. If the provisions in the CBA run contrary to law,
public morals, or public policy, such provisions may very well be voided.

In the present case, Article XXI, Section 6 of the CBA provides that "All expenses of security guards
in securing /renewing their licenses shall be for their personal account." A reading of the provision
would reveal that it encompasses all possible expenses a security guard would pay or incur in order
to secure or renew his license. In-service training is a requirement for the renewal of a security
guard's license.[24] Hence, following the aforementioned CBA provision, the expenses for the same
must be on the personal account of the employee. However, the 1994 Revised Rules and Regulations
Implementing Republic Act No. 5487 provides the following:

Section 17. Responsibility for Training and Progressive Development. It is the primary responsibility
of all operators private security agency and company security forces to maintain and upgrade the
standards of efficiency, discipline, performance and competence of their personnel. To attain this
end, each duly licensed private security agency and company security force shall establish a staff
position for training and appoint a training officer whose primary functions are to determine the
training needs of the agency/guards in relation to the needs of the client/ market/ industry, and to
supervise and conduct appropriate training requirements. All private security personnel shall be re-
trained at least once very two years.

Section 12. In service training. - a. To maintain and/or upgrade the standard of efficiency, discipline
and competence of security guards and detectives, company security force and private security
agencies upon prior authority shall conduct-in-service training at least two (2) weeks duration for
their organic members by increments of at least two percent (2%) of their total strength. Where the
quality of training is better served by centralization, the CSFD Directors may activate a
training staff from local talents to assist. The cost of training shall be pro-rated among the
participating agencies/private companies. All security officer must undergo in-service training at
least once every two (2) years preferably two months before his or her birth month.

Since it is the primary responsibility of operators of company security forces to maintain and upgrade
the standards of efficiency, discipline, performance and competence of their personnel, it follows that
the expenses to be incurred therein shall be for the personal account of the company. Further, the
intent of the law to impose upon the employer the obligation to pay for the cost of its employees'
Labor II – 1
training is manifested in the aforementioned law's provision that Where the quality of training is
better served by centralization, the CFSD Directors may activate a training staff from local talents to
assist. The cost of training shall be pro-rated among the participating agencies/private companies.  It
can be gleaned from the said provision that cost of training shall be pro-rated among participating
agencies and companies if the training is best served by centralization. The law mandates pro-rating
of expenses because it would be impracticable and unfair to impose the burden of expenses suffered
by all participants on only one participating agency or company. Thus, it follows that if there is no
centralization, there can be no pro-rating, and the company that has its own security forces shall
shoulder the entire cost for such training. If the intent of the law were to impose upon individual
employees the cost of training, the provision on the pro-rating of expenses would not have found
print in the law.

Further, petitioner alleged that prior to the inking of the CBA, it was the respondent company
providing for the in-service training of the guards. [25] Respondent never controverted the said
allegation and is thus deemed to have admitted the same. [26] Implicit from respondent's actuations
was its acknowledgment of its legally mandated responsibility to shoulder the expenses for in-service
training.

WHEREFORE, the petition is PARTIALLY GRANTED. The Decision and Resolution of the Court of
Appeals, dated October 4, 2005 and January 23, 2006, respectively, in CA-G.R. SP. No. 87069
is MODIFIED. The cost of in-service training of the respondent company's security guards shall be at
the expense of the respondent company. This case is remanded to the voluntary arbitrator for the
computation of the expenses incurred by the security guards for their in-service training, and
respondent company is directed to reimburse its security guards for the expenses incurred.

Labor II – 1
 36.) [G.R. No. 185556, March 28 : 2011]

SUPREME STEEL CORPORATION, PETITIONER, VS. NAGKAKAISANG MANGGAGAWA NG

SUPREME INDEPENDENT UNION (NMS-IND-APL), RESPONDENT.

DECISION

NACHURA, J.:

This petition for review on certiorari assails the Court of Appeals (CA) Decision[1] dated September
30, 2008, and Resolution dated December 4, 2008, which affirmed the finding of the National Labor
Relations Commission (NLRC) that petitioner violated certain provisions of the Collective Bargaining
Agreement (CBA).

Petitioner Supreme Steel Pipe Corporation is a domestic corporation engaged in the business of
manufacturing steel pipes for domestic and foreign markets. Respondent Nagkakaisang Manggagawa
ng Supreme Independent Union is the certified bargaining agent of petitioner's rank-and-file
employees. The CBA[2] in question was executed by the parties to cover the period from June 1, 2003
to May 31, 2008.

The Case

On July 27, 2005, respondent filed a notice of strike with the National Conciliation and Mediation
Board (NCMB) on the ground that petitioner violated certain provisions of the CBA. The parties failed
to settle their dispute. Consequently, the Secretary of Labor certified the case to the NLRC for
compulsory arbitration pursuant to Article 263(g) of the Labor Code.

Respondent alleged eleven CBA violations, delineated as follows:

A. Denial to four employees of the CBA- provided wage increase

Article XII, Section 1 of the CBA provides:

Section 1. The COMPANY shall grant a general wage increase, over and above to all employees,
according to the following schedule:

A. Effective June 1, 2003      P14.00 per working day;

B. Effective June 1, 2004      P12.00 per working day; and
C. Effective June 1, 2005      P12.00 per working day.[3]

Respondent alleged that petitioner has repeatedly denied the annual CBA increases to at least four
individuals: Juan Niño, Reynaldo Acosta, Rommel Talavera, and Eddie Dalagon. According to
respondent, petitioner gives an anniversary increase to its employees upon reaching their first year
of employment. The four employees received their respective anniversary increases and petitioner
used such anniversary increase to justify the denial of their CBA increase for the year. [4]

Petitioner explained that it has been the company's long standing practice that upon reaching one
year of service, a wage adjustment is granted, and, once wages are adjusted, the increase provided
for in the CBA for that year is no longer implemented. Petitioner claimed that this practice was not
objected to by respondent as evidenced by the employees' pay slips. [5]

Respondent countered that petitioner failed to prove that, as a matter of company practice, the
anniversary increase took the place of the CBA increase. It contended that all employees should
receive the CBA stipulated increase for the years 2003 to 2005. [6]

Labor II – 1
B. Contracting-out labor

Article II, Section 6 of the CBA provides:

Section 6. Prohibition of Contracting Out of Work of Members of Bargaining Unit. Thirty (30)

days from the signing of this CBA, contractual employees in all departments, except Warehouse and
Packing Section, shall be phased out. Those contractual employees who are presently in the
workforce of the COMPANY shall no longer be allowed to work after the expiration of their contracts
without prejudice to being hired as probationary employees of the COMPANY. [7]

Respondent claimed that, contrary to this provision, petitioner hired temporary workers for five
months based on uniformly worded employment contracts, renewable for five months, and assigned
them to almost all of  the

departments in the company. It pointed out that, under the CBA, temporary workers are allowed only
in the Warehouse and Packing Section; consequently, employment of contractual employees outside
this section, whether direct or agency-hired, was absolutely prohibited. Worse, petitioner never
regularized them even if the position they occupied and the services they performed were necessary
and desirable to its business. Upon the expiration of their contracts, these workers would be replaced
with other workers with the same employment status. This scheme is a clear circumvention of the
laws on regular employment. [8]

Respondent argued that the right to self-organization goes beyond the maintenance of union
membership. It emphasized that the CBA maintains a union shop clause which gives the regular
employees 30 days within which to join respondent as a condition for their continued employment.
Respondent maintained that petitioner's persistent refusal to grant regular status to its employees,
such as Dindo Buella, who is assigned in the Galvanizing Department, violates the employees' right
to self-organization in two ways: (1) they are deprived of a representative for collective bargaining
purposes; and (2) respondent is deprived the right to expand its membership. Respondent contended
that a union's strength lies in its number, which becomes crucial especially during negotiations; after
all, an employer will not bargain seriously with a union whose membership constitutes a minority of
the total workforce of the company. According to respondent, out of the 500 employees of the
company, only 147 are union members, and at least 60 employees would have been eligible for
union membership had they been recognized as regular employees. [9]

For its part, petitioner admitted that it hired temporary workers. It purportedly did so to cope with
the seasonal increase of the job orders from abroad.  In order to comply with the job orders,
petitioner hired the temporary workers to help the regular workers in the production of steel pipes.
Petitioner maintained that these workers do not affect respondent's membership. Petitioner claimed
that it agreed to terminate these temporary employees on the condition that the regular employees
would have to perform the work that these employees were performing, but respondent refused.
Respondent's refusal allegedly proved that petitioner was not contracting out the services being
performed by union members. Finally, petitioner insisted that the hiring of temporary workers is a
management prerogative.[10]

C. Failure to provide shuttle service

Petitioner has allegedly reneged on its obligation to provide shuttle service for its employees
pursuant to Article XIV, Section 7 of the CBA, which provides:

Section 7. Shuttle Service. As per company practice, once the company vehicle used for the
purpose has been reconditioned.[11]

Respondent claimed that the company vehicle which would be used as shuttle service for its
employees has not been reconditioned by petitioner since the signing of the CBA on February 26,
Labor II – 1
2004.[12]  Petitioner explained that it is difficult to implement this provision and simply denied that it
has reneged on its obligation.[13]

D. Refusal to answer for the  medical

expenses incurred by three employees

Respondent asserted that petitioner is liable for the expenses incurred by three employees who were
injured while in the company premises. This liability allegedly stems from Article VIII, Section 4 of
the CBA which provides:

Section 4. The COMPANY agrees to provide first aid medicine and first aid service and consultation
free of charge to all its employees.[14]

According to respondent, petitioner's definition of what constitutes first aid service is limited to the
bare minimum of treating injured employees while still within the company premises and referring
the injured employee to the Chinese General Hospital for treatment, but the travel expense in going
to the hospital is charged to the  employee. Thus, when Alberto Guevarra and Job Canizares, union
members, were injured, they had to pay P90.00 each for transportation expenses in going to the
hospital for treatment and going back to the company thereafter. In the case of Rodrigo Solitario,
petitioner did not even shoulder the cost of the first aid medicine, amounting to P2,113.00, even if he
was injured during the company sportsfest, but the amount was deducted, instead, from his salary.
Respondent insisted that this violates the above cited provision of the CBA. [15]

Petitioner insisted that it provided medicine and first aid assistance to Rodrigo Solitario.   It  alleged 
that  the  latter  cannot  claim hospitalization

benefits under Article VIII, Section 1[16] of the CBA because he was not confined in a hospital.[17]

E. Failure to comply with the

time-off with pay provision

Article II, Section 8 of the CBA provides:

Section 8. Time-Off with Pay. The COMPANY shall grant to the UNION's duly authorized
representative/s or to any employee who are on duty, if summoned by the UNION to testify, if
his/her presence is necessary, a paid time-off for the handling of grievances, cases, investigations,
labor-management conferences provided that if the venue of the case is outside Company premises
involving [the] implementation and interpretation of the CBA, two (2) representatives of the UNION
who will attend the said hearing shall be considered time-off with pay. If an employee on a night shift
attends grievance on labor-related cases and could not report for work due to physical condition, he
may avail of union leave without need of the two (2) days prior notice. [18]

Respondent contended that under the said provision,  petitioner was obliged to grant a paid time-off
to respondent's duly authorized representative or to any employee who was on duty, when
summoned by respondent to testify or when the employee's presence was necessary in the grievance
hearings, meetings, or investigations. [19]

Petitioner admitted that it did not honor the claim for wages of the union officers who attended the
grievance meetings because these meetings were  initiated by  respondent  itself.  It argued that
since the union  officers

were performing their functions as such, and not as employees of the company, the latter should not
be liable. Petitioner further asserted that it is not liable to pay the wages of the union officers when
the meetings are held beyond company time (3:00 p.m.). It claimed that time-off with pay is allowed
only if the venue of the meeting is outside company premises and the meeting involves the
Labor II – 1
implementation and interpretation of the CBA.[20]

In reply, respondent averred that the above quoted provision does not make a qualification that the
meetings should be held during office hours (7:00 a.m. to 3:00 p.m.); hence, for as long as the
presence of the employee is needed, time spent during the grievance meeting should be paid. [21]

F.  Visitors' free access to

company premises

Respondent charged petitioner with violation of Article II, Section 7 of the CBA which provides:

Section 7. Free Access to Company Premises. Local Union and Federation officers (subject to
company's security measure) shall be allowed during working hours to enter the COMPANY premises
for the following reasons:

a. To investigate grievances that have arisen;

b. To interview Union Officers, Stewards and members during reasonable hours; and
c. To attend to any meeting called by the Management or the UNION. [22]
G. Failure to comply with reporting
time-off provision

Respondent maintained that a brownout is covered by Article XII, Section 3 of the CBA which states:

Section 3. Reporting Time-Off. The employees who have reported for work but are unable to
continue working because of emergencies such as typhoons, flood, earthquake, transportation strike,
where the COMPANY is affected and in case of fire which occurs in the block where the home of the
employee is situated and not just across the street and serious illness of an immediate member of
the family of the employee living with him/her and no one in the house can bring the sick family
member to the hospital, shall be paid as follows:

a. At least half day if the work stoppage occurs within the first four (4) hours of work; and
b. A whole day if the work stoppage occurs after four (4) hours of work. [23]

Respondent averred that petitioner paid the employees' salaries for one hour only of the four-hour
brownout that occurred on July 25, 2005 and refused to pay for the remaining three hours.  In
defense, petitioner simply insisted that brownouts are not included in the above list of emergencies.
[24]

Respondent rejoined that, under the principle of ejusdem generis, brownouts or power outages come
within the "emergencies" contemplated by the CBA provision. Although brownouts were not
specifically identified as one of the emergencies listed in the said CBA provision, it cannot be denied
that brownouts fall within the same kind or class of the enumerated emergencies. Respondent
maintained that the intention of the provision was to compensate the employees for occurrences
which are beyond their control, and power outage is one of such occurrences. It insisted that the list
of emergencies is not an exhaustive list but merely gives an idea as to what constitutes an actual
emergency that is beyond the control of the employee. [25]

H. Dismissal of Diosdado Madayag

Diosdado Madayag was employed as welder by petitioner. He was served a Notice of Termination
dated March 14, 2005 which read:

Please consider this as a Notice of Termination of employment effective March 14, 2005 under Art.
284 of the Labor Code and its Implementing Rules.

Labor II – 1
This is based on the medical certificate submitted by your attending physician, Lucy Anne E. Mamba,
M.D., Jose R. Reyes Memorial Medical Center dated March 7, 2005 with the following diagnosis:

`Diabetes Mellitus Type 2'

Please be guided accordingly.[26]

Respondent contended that Madayag's dismissal from employment is illegal because petitioner failed
to obtain a certification from a competent public authority that his disease is of such nature or at
such stage that it cannot be cured within six months even after proper medical treatment. Petitioner
also failed to prove that Madayag's continued employment was prejudicial to his health or that of his
colleagues.[27]

Petitioner, on the other hand, alleged that Madayag was validly terminated under Art. 284 [28] of the
Labor Code and that his leg was amputated by reason of diabetes, which disease is not work-related.
Petitioner claimed that it was willing to pay Madayag 13 days for every year of service but
respondent was asking for additional benefits.[29]

I. Denial of paternity leave

benefit to two employees

Article XV, Section 2 of the CBA provides:

Section 2. Paternity Leave. As per law[,] [t]he Company shall, as much as possible, pay paternity
leave within 2 weeks from submission of documents. [30]

Petitioner admitted that it denied this benefit to the claimants for failure to observe the requirement
provided in the Implementing Rules and Regulations of Republic Act No. 8187 (Paternity Leave Act of
1995), that is, to notify the employer of the pregnancy of their wives and the expected date of
delivery.[31]

Respondent argued that petitioner is relying on technicalities by insisting that the denial was due to
the two employees' failure to notify it of the pregnancy of their respective spouses. It maintained
that the notification requirement runs counter to the spirit of the law. Respondent averred that, on
grounds of social justice, the oversight to notify petitioner should not be dealt with severely by
denying the two claimants this benefit.[32]

J.  Discrimination and

harassment

According to respondent, petitioner was contemptuous over union officers for protecting the rights of
union members. In an affidavit executed by Chito Guadaña, union secretary, he narrated that
Alfred Navarro, Officer-in-Charge of the Packing Department, had been harsh in dealing with his
fellow employees and would even challenge some workers to a fight. He averred that Navarro had an
overbearing attitude during work and grievance meetings. In November 2004, Navarro removed
Guadaña, a foreman, from his position and installed another foreman from another section. The
action was allegedly brought about by earlier grievances against Navarro's abuse. Petitioner
confirmed his transfer to another section in violation of Article VI, Section 6 of the CBA, [33] which
states in part:

Section 6. Transfer of Employment. - No permanent positional transfer outside can be effected by

the COMPANY without discussing the grounds before the Grievance Committee. All transfer shall be
with advance notice of two (2) weeks. No transfer shall interfere with the employee's exercise of the
right to self-organization. [34]

Labor II – 1
Respondent also alleged that Ariel Marigondon, union president, was also penalized for working for
his fellow employees. One time, Marigondon inquired from management about matters concerning
tax discrepancies because it appeared that non-taxable items were included as part of taxable
income. Thereafter, Marigondon was transferred from one area of operation to another until he was
allegedly forced to accept menial jobs of putting control tags on steel pipes, a kind of job which did
not require his 16 years of expertise in examining steel pipes. [35]

Edgardo Masangcay, respondent's Second Vice President, executed an affidavit wherein he cited
three instances when his salary was withheld by petitioner. The first incident happened on May 28,
2005 when petitioner refused to give his salary to his wife despite presentation of a proof of
identification (ID) and letter of authorization. On June 18, 2005, petitioner also refused to release his
salary to Pascual Lazaro despite submission of a letter of authority and his ID and, as a result, he
was unable to buy medicine for his child who was suffering from asthma attack. The third instance
happened on June 25, 2005 when his salary was short of P450.00; this amount was however
released the following week.[36]

Petitioner explained that the transfer of the employee from one department to another was the result
of downsizing the Warehouse Department, which is a valid exercise of management prerogative. In
Guadaña's case, Navarro denied that he was being harsh but claimed that he merely wanted to
stress some points. Petitioner explained that Guadaña was transferred when the section where he
was assigned was phased out due to the installation of new machines. Petitioner pointed out that the
other workers assigned in said section were also transferred. [37]

For the petitioner, Emmanuel Mendiola, Production Superintendent, also executed an affidavit
attesting that the allegation of Ariel Marigondon, that he was harassed and was a victim of
discrimination for being respondent's President, had no basis. Marigondon pointed out that after the
job order was completed, he was reassigned to his original shift and group. [38]

Petitioner also submitted the affidavits of Elizabeth Llaneta Aguilar, disbursement clerk and hiring
staff, and Romeo T. Sy, Assistant Personnel Manager. Aguilar explained that she did not mean to
harass Masangcay, but she merely wanted to make sure that he would receive his salary. Affiant Sy
admitted that he refused to release Masangcay's salary to a woman who presented herself as his
(Masangcay's) wife since nobody could attest to it. He claimed that such is not an act of harassment
but a precautionary measure to protect Masangcay's interest.[39]

K.     Non-implementation of COLA in

Wage Order Nos. RBIII-10 and 11

Respondent posited that any form of wage increase granted through the CBA should not be treated
as compliance with the wage increase given through the wage boards. Respondent claimed that, for a
number of years, petitioner has complied with Article XII, Section 2 of the CBA which provides:

Section 2. All salary increase granted by the COMPANY shall not be credited to any future
contractual or legislated wage increases. Both increases shall be implemented separate and distinct
from the increases stated in this Agreement. It should be understood by both parties that contractual
salary increase are separate and distinct from legislated wage increases, thus the increase brought
by the latter shall be enjoyed also by all covered employees. [40]

Respondent maintained that for every wage order that was issued in Region 3, petitioner never
hesitated to comply and grant a similar increase. Specifically, respondent cited petitioner's
compliance with Wage Order No. RBIII-10 and grant of the mandated P15.00 cost of living allowance
(COLA) to all its employees. Petitioner, however, stopped implementing it to non-minimum wage
earners on July 24, 2005. It contended that this violates Article 100 of the Labor Code which
prohibits the diminution of benefits already enjoyed by the workers and that such grant of benefits
Labor II – 1
had already ripened into a company practice.[41]

Petitioner explained that the COLA provided under Wage Order No. RBIII-10 applies to minimum
wage earners only and that, by mistake, it implemented the same across the board or to all its
employees. After realizing its mistake, it stopped integrating the COLA to the basic pay of the
workers who were earning above the minimum wage. [42]

The NLRC's Ruling

Out of the eleven issues raised by respondent, eight were decided in its favor; two (denial of
paternity leave benefit and discrimination of union members) were decided in favor of petitioner;
while the issue on visitor's free access to company premises was deemed settled during the
mandatory conference.     The dispositive portion of the NLRC Decision dated March 30, 2007 reads:

WHEREFORE, Supreme Steel Pipe Corporation (the Company) is hereby ordered to:

1) implement general wage increase to Juan Niño, Eddie Dalagon and Rommel Talavera pursuant to
the CBA in June 2003, 2004 and 2005;

2) regularize workers Dindo Buella and 60 other workers and to respect CBA provision on
contracting-out labor;

3) recondition the company vehicle pursuant to the CBA;

4) answer for expenses involved in providing first aid services including transportation expenses for
this purpose, as well as to reimburse Rodrigo Solitario the sum of P2,113.00;

5) pay wages of union members/officers who attended grievance meetings as follows:

1)  D. Serenilla          -           P115.24375

2)  D. Miralpes          -           P115.80625
3)  E. Mallari             -           P108.7625
4)  C. Cruz                -           P114.65313
5)  J. Patalbo             -           P161.0625
6)  J.J. Muñoz            -           P111.19375
7)  C. Guadaña          -           P56.94375
8)  J. Patalbo             -           P161.0625
9)  E. Mallari              -           P108.7625
10)  C. Guadaña         -           P113.8875
11)  A. Marigondon    -           P170.30625
12)  A. Marigondon    -           P181.66
13)  A. Marigondon    -           P181.66
14)   E. Masangcay      -           P175.75
15)   A. Marigondon    -           P181.66
16)   E. Masangcay      -           P175.75
17)   A. Marigondon    -           P181.66
18)   F. Servano           -           P174.02
19)   R. Estrella           -           P181.50
20)   A. Marigondon   -           P181.66

6) pay workers their salary for the 3 hours of the 4 hour brownout as follows:

1)  Alagon, Jr., Pedro            -           P130.0875

2)  Aliwalas, Cristeto             -           P108.5625
3)  Baltazar, Roderick            -           P 90.1875

Labor II – 1
4)  Bañez, Oliver                    -           P 90.9375
5)  Prucal, Eduardo                -           P126.015
6)  Calimquin, Rodillo             -           P131.0362
7)  Clave, Arturo                    -           P125.64
8)  Cadavero, Rey                  -           P108.5625
9)  De Leon, Romulo              -           P124.35
10)  Lactao, Noli                    -           P126.015
11)  Layco, Jr., Dandino         -           P130.5375
12)  Legaspi, Melencio            -           P127.63
13)  Quiachon, Rogelio            -           P130.5525
14)  Sacmar, Roberto              -           P108.9375
15)   Tagle, Farian                   -           P129.3375
16)   Villavicencio, Victor        -           P126.015
17)   Agra, Romale                  -           P126.015
18)   Basabe, Luis                    -           P128.5575
19)   Bornasal, Joel                  -           P127.53
20)   Casitas, Santiago              -           P128.5575
21)   Celajes, Bonifacio            -           P128.1825
22)   Avenido, Jerry                  -           P133.2487
23)   Gagarin, Alfredo               -           P108.9375
24)   Layson, Paulo                   -           P131.745
25)   Lledo, Asalem                   -           P128.5575
26)   Marigondon, Ariel             -           P131.745
27)   Orcena, Sonnie                 -           P126.015
28)   Servano, Fernando            -           P126.015
29)   Versola, Rodrigo               -           P126.015

7) reinstate Diosdado Madayag to his former position without loss of seniority rights and to pay full
backwages and other benefits from 14 March 2005, date of dismissal, until the date of this Decision;
if reinstatement is impossible[,] to pay separation pay of one month pay for every year of service in
addition to backwages;

8) dismiss the claim for paternity leave for failure of claimants to observe the requirements;

9) dismiss the charge of harassment and discrimination for lack of merit; and to

10) continue to implement COLA under Wage Order Nos. [RBIII]-10 & 11 across the board.

The issue on Visitors' Free Access to Company Premises is dismissed for being moot and academic
after it was settled during the scheduled conferences.

SO ORDERED.[43]

Forthwith, petitioner elevated the case to the CA, reiterating its arguments on the eight issues
resolved by the NLRC in respondent's favor.

The CA's Ruling

On September 30, 2008, the CA rendered a decision dismissing the petition, thus:

WHEREFORE, premises considered, the present petition is hereby DENIED DUE COURSE and
accordingly DISMISSED, for lack of merit. The assailed Decision dated March 30, 2007 and
Resolution dated April 28, 2008 of the National Labor Relations Commission in NLRC NCR CC No.
000305-05 are hereby AFFIRMED.

Labor II – 1
With costs against the petitioner.

SO ORDERED.[44]

According to the CA, petitioner failed to show that the NLRC committed grave abuse of discretion in
finding that it violated certain provisions of the CBA. The NLRC correctly held that every employee is
entitled to the wage increase under the CBA despite receipt of an anniversary increase.  The CA
concluded that, based on the wording of the CBA, which uses the words "general increase" and "over
and above," it cannot be said that the parties have intended the anniversary increase to be given in
lieu of the CBA wage increase.[45]

The CA declared that the withdrawal of the COLA under Wage Order No. RBIII-10 from the
employees who were not minimum wage earners amounted to a diminution of benefits because such
grant has already ripened into a company practice. It pointed out that there was no ambiguity or
doubt as to who were covered by the wage order. Petitioner, therefore, may not invoke error or
mistake in extending the COLA to all employees and such act can only be construed as "as a
voluntary act on the part of the employer." [46] The CA opined that, considering the foregoing, the
ruling in Globe Mackay Cable and Radio Corp. v. NLRC[47] clearly did not apply as there was no
doubtful or difficult question involved in the present case. [48]

The CA sustained the NLRC's interpretation of Art. VIII, Section 4 of the CBA as including the
expenses for first aid medicine and transportation cost in going to the hospital. The CA stressed that
the CBA should be construed liberally rather than narrowly and technically, and the courts must place
a practical and realistic construction upon it, giving due consideration to the context in which it was
negotiated and the purpose which it intended to serve. [49]

Based on the principle of liberal construction of the CBA, the CA likewise sustained the NLRC's rulings
on the issues pertaining to the shuttle service, time-off for attendance in grievance
meetings/hearings, and time-off due to brownouts. [50]

The CA further held that management prerogative is not unlimited: it is subject to limitations found
in law, a CBA, or the general principles of fair play and justice. It stressed that the CBA provided
such limitation on management prerogative to contract-out labor, and compliance with the CBA is
mandated by the express policy of the law.[51]

Finally, the CA affirmed the NLRC's finding that Madayag's dismissal was illegal. It emphasized that
the burden to prove that the employee's disease is of such nature or at such stage that it cannot be
cured within a period of six months rests on the employer. Petitioner failed to submit a certification
from a competent public authority attesting to such fact; hence, Madayag's dismissal is illegal. [52]

Petitioner moved for a reconsideration of the CA's decision. On December 4, 2008, the CA denied the
motion for lack of merit.[53]

Dissatisfied, petitioner filed this petition for review on certiorari, contending that the CA erred in
finding that it violated certain provisions of the CBA.

The Court's Ruling

The petition is partly meritorious.

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and
compliance therewith is mandated by the express policy of the law. If the terms of a CBA are clear
and there is no doubt as to the intention of the contracting parties, the literal meaning of its
stipulation shall prevail.[54]  Moreover, the CBA must be construed liberally rather than narrowly and
technically and the Court must place a practical and realistic construction upon it. [55] Any doubt in the
Labor II – 1
interpretation of any law or provision affecting labor should be resolved in favor of labor. [56]

Upon these well-established precepts, we sustain the CA's findings and conclusions on all the issues,
except the issue pertaining to the denial of the COLA under Wage Order No. RBIII-10 and 11 to the
employees who are not minimum wage earners.

The wording of the CBA on general wage increase cannot be interpreted any other way: The CBA
increase should be given to all employees "over and above" the amount they are receiving, even if
that amount already includes an anniversary increase. Stipulations in a contract must be read
together, not in isolation from one another.[57] Consideration of Article XIII, Section 2 (non-crediting
provision), bolsters such interpretation. Section 2 states that "[a]ll salary increase granted by the
company shall not be credited to any future contractual or legislated wage increases." Clearly then,
even if petitioner had already awarded an anniversary increase to its employees, such increase
cannot be credited to the "contractual" increase as provided in the CBA, which is considered
"separate and distinct."

Petitioner claims that it has been the company practice to offset the anniversary increase with the
CBA increase. It however failed to prove such material fact. Company practice, just like any other
fact, habits, customs, usage or patterns of conduct must be proven. The offering party must allege
and prove specific, repetitive conduct that might constitute evidence of habit, [58] or company practice.
Evidently, the pay slips of the four employees do not serve as sufficient proof.

Petitioner's excuse in not providing a shuttle service to its employees is unacceptable. In fact, it can
hardly be considered as an excuse. Petitioner simply says that it is difficult to implement the
provision. It relies on the fact that "no time element [is] explicitly stated [in the CBA] within which to
fulfill the undertaking." We cannot allow petitioner to dillydally in complying with its obligation and
take undue advantage of the fact that no period is provided in the CBA. Petitioner should recondition
the company vehicle at once, lest it be charged with and found guilty of unfair labor practice.

Petitioner gave a narrow construction to the wording of the CBA when it denied (a) reimbursement
for the first-aid medicines taken by Rodrigo Solitario when he was injured during the company
sportsfest and the transportation cost incurred by Alberto Guevara and Job Canizares in going to the
hospital, (b) payment of the wages of certain employees during the time they spent at the grievance
meetings, and (c) payment of the employees' wages during the brownout that occurred on July 25,
2002. As previously stated, the CBA must be construed liberally rather than narrowly and technically.
It is the duty of the courts to place a practical and realistic construction upon the CBA, giving due
consideration to the context in which it is negotiated and the purpose which it is intended to serve.
Absurd and illogical interpretations should be avoided.[59] A CBA, like any other contract, must be
interpreted according to the intention of the parties. [60]

The CA was correct in pointing out that the concerned employees were not seeking hospitalization
benefits under Article VIII, Section 1 of the CBA, but under Section 4 thereof; hence, confinement in
a hospital is not a prerequisite for the claim. Petitioner should reimburse Solitario for the first aid
medicines; after all, it is the duty of the employer to maintain first- aid medicines in its premises.
[61]
 Similarly, Guevara and Canizares should also be reimbursed for the transportation cost incurred in
going to the hospital. The Omnibus Rules Implementing the Labor Code provides that, where the
employer does not have an emergency hospital in its premises, the employer is obliged to transport
an employee to the nearest hospital or clinic in case of emergency. [62]

We likewise agree with the CA on the issue of nonpayment of the time-off for attending grievance
meetings. The intention of the parties is obviously to compensate the employees for the time that
they spend in a grievance meeting as the CBA provision categorically states that the company will
pay the employee "a paid time-off for handling of grievances, investigations, labor-management
conferences." It does not make a qualification that such meeting should be held during office hours
or within the company premises.
Labor II – 1
The employees should also be compensated for the time they were prevented from working due to
the brownout. The CBA enumerates some of the instances considered as "emergencies" and these
are "typhoons, flood earthquake, transportation strike." As correctly argued by respondent, the CBA
does not exclusively enumerate the situations which are considered "emergencies." Obviously, the
key element of the provision is that employees "who have reported for work are unable to continue
working" because of the incident. It is therefore reasonable to conclude that brownout or power
outage is considered an "emergency" situation.

Again, on the issue of contracting-out labor, we sustain the CA. Petitioner, in effect, admits having
hired "temporary" employees, but it maintains that it was an exercise of management prerogative,
necessitated by the increase in demand for its product.

Indeed, jurisprudence recognizes the right to exercise management prerogative. Labor laws also
discourage interference with an employer's judgment in the conduct of its business. For this reason,
the Court often declines to interfere in legitimate business decisions of employers. The law must
protect not only the welfare of employees, but also the right of employers. [63] However, the exercise
of management prerogative is not unlimited. Managerial prerogatives are subject to limitations
provided by law, collective bargaining agreements, and general principles of fair play and justice. [64] 
The CBA is the norm of conduct between the parties and, as previously stated, compliance therewith
is mandated by the express policy of the law.[65]

The CBA is clear in providing that temporary employees will no longer be allowed in the company
except in the Warehouse and Packing Section. Petitioner is bound by this provision. It cannot exempt
itself from compliance by invoking management prerogative. Management prerogative must take a
backseat when faced with a CBA provision. If petitioner needed additional personnel to meet the
increase in demand, it could have taken measures without violating the CBA.

Respondent claims that the temporary employees were hired on five-month contracts, renewable for
another five months. After the expiration of the contracts, petitioner would hire other persons for the
same work, with the same employment status.

Plainly, petitioner's scheme seeks to prevent employees from acquiring the status of regular
employees. But the Court has already held that, where from the circumstances it is apparent that the
periods of employment have been imposed to preclude acquisition of security of tenure by the
employee, they should be struck down or disregarded as contrary to public policy and morals. [66] The
primary standard to determine a regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the business or trade of the employer.
The test is whether the former is usually necessary or desirable in the usual business or trade of the
employer. If the employee has been performing the job for at least one year, even if the performance
is not continuous or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not indispensability, of that activity to the
business of the employer. Hence, the employment is also considered regular, but only with respect to
such activity and while such activity exists.[67]

We also uphold the CA's finding that Madayag's dismissal was illegal. It is already settled that the
burden to prove the validity of the dismissal rests upon the employer. Dismissal based on Article 284
of the Labor Code is no different, thus:

The law is unequivocal: the employer, before it can legally dismiss its employee on the ground of
disease, must adduce a certification from a competent public authority that the disease of which its
employee is suffering is of such nature or at such a stage that it cannot be cured within a period of
six months even with proper treatment.

xxxx
Labor II – 1
In Triple Eight Integrated Services, Inc. v. NLRC, the Court explains why the submission of the
requisite medical certificate is for the employer's compliance, thus:
The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed
with; otherwise, it would sanction the unilateral and arbitrary determination by the employer of the
gravity or extent of the employee's illness and thus defeat the public policy on the protection of
labor.

x x x x[68]

However, with respect to the issue of whether the COLA under Wage Order Nos. RBIII-10 and 11
should be implemented across the board, we hold a different view from that of the CA. No diminution
of benefits would result if the wage orders are not implemented across the board, as no such
company practice has been established.

Diminution of benefits is the unilateral withdrawal by the employer of benefits already enjoyed by the
employees. There is diminution of benefits when it is shown that: (1) the grant or benefit is founded
on a policy or has ripened into a practice over a long period of time; (2) the practice is consistent and
deliberate; (3) the practice is not due to error in the construction or application of a doubtful or
difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the
employer.[69]

To recall, the CA arrived at its ruling by relying on the fact that there was no ambiguity in the
wording of the wage order as to the employees covered by it. From this, the CA concluded that
petitioner actually made no error or mistake, but acted voluntarily, in granting the COLA to all its
employees. It therefore took exception to the Globe Mackay  case which, according to it, applies only
when there is a doubtful or difficult question involved.

The CA failed to note that Globe Mackay primarily emphasized that, for the grant of the benefit to be
considered voluntary, "it should have been practiced over a long period of time, and must be shown
to have been consistent and deliberate."[70]  The fact that the practice must not have been due to
error in the construction or application of a doubtful or difficult question of law is a distinct
requirement.

The implementation of the COLA under Wage Order No. RBIII-10 across the board, which only lasted
for less than a year, cannot be considered as having been practiced "over a long period of time."
While it is true that jurisprudence has not laid down any rule requiring a specific minimum number of
years in order for a practice to be considered as a voluntary act of the employer, under existing
jurisprudence on this matter, an act carried out within less than a year would certainly not qualify as
such. Hence, the withdrawal of the COLA Wage Order No. RBIII-10 from the salaries of non-minimum
wage earners did not amount to a "diminution of benefits" under the law.

There is also no basis in enjoining petitioner to implement Wage Order No. RBIII-11 across the
board. Similarly, no proof was presented showing that the implementation of wage orders across the
board has ripened into a company practice. In the same way that we required petitioner to prove the
existence of a company practice when it alleged the same as defense, at this instance, we also
require respondent to show proof of the company practice as it is now the party claiming its
existence. Absent any proof of specific, repetitive conduct that might constitute evidence of the
practice, we cannot give credence to respondent's claim.  The isolated act of implementing a wage
order across the board can hardly be considered a company practice, [71] more so when such
implementation was erroneously made.

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The CA Decision

September 30, 2008 and Resolution dated December 4, 2008 are AFFIRMED  with
MODIFICATION that the order for petitioner to continue implementing Wage Order No. RBIII-10
Labor II – 1
and 11 across the board is SET ASIDE. Accordingly, item 10 of the NLRC Decision dated March 30,
2007 is modified to read "dismiss the claim for implementation of Wage Order Nos. RBIII-10 and 11
to the employees who are not minimum wage earners."

Labor II – 1
 37.) G.R. No. 181806, March 12, 2014

WESLEYAN UNIVERSITY PHILIPPINES, Petitioner, v. WESLEYAN UNIVERSITY- PHILIPPINES

FACULTY AND STAFF ASSOCIATION, Respondent.

DECISION

DEL CASTILLO, J.:

A Collective Bargaining Agreement (CBA) is a contract entered into by an employer and a legitimate
labor organization concerning the terms and conditions of employment. 1  Like any other contract, it
has the force of law between the parties and, thus, should be complied with in good faith. 2 Unilateral
changes or suspensions in the implementation of the provisions of the CBA, therefore, cannot be
allowed without the consent of both parties.

This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the September 25,
2007 Decision4 and the February 5, 2008 Resolution5 of the Court of Appeals (CA) in CA-G.R. SP No.
97053.

Factual Antecedents

Petitioner Wesleyan University-Philippines is a non-stock, non-profit educational institution duly

organized and existing under the laws of the Philippines. 6  Respondent Wesleyan University-
Philippines Faculty and Staff Association, on the other hand, is a duly registered labor
organization7 acting as the sole and exclusive bargaining agent of all rank-and-file faculty and staff
employees of petitioner.8crallawlibrary

In December 2003, the parties signed a 5-year CBA 9 effective June 1, 2003 until May 31, 2008.10 crallawlibrary

On August 16, 2005, petitioner, through its President, Atty. Guillermo T. Maglaya (Atty. Maglaya),
issued a Memorandum11 providing guidelines on the implementation of vacation and sick leave credits
as well as vacation leave commutation.  The pertinent portions of the Memorandum read: chanRoblesVirtualawlibrary

1. VACATION AND SICK LEAVE CREDITS

Vacation and sick leave credits are not automatic.  They have to be earned.  Monthly, a
qualified employee earns an equivalent of 1.25 days credit each for VL and SL.  Vacation
Leave and Sick Leave credits of 15 days become complete at the cut off date of May 31 of
each year.  (Example,  only a total of 5 days credit will be given to an employee for each of
sick leave [or] vacation leave, as of month end September,  that is, 4 months from June to
September multiplied by 1.25 days).  An employee, therefore, who takes VL or SL beyond his
leave credits as of date will have to file leave without pay for leaves beyond his credit.

2. VACATION LEAVE COMMUTATION

Only vacation leave is commuted or monetized to cash.  Vacation leave commutation is

effected after the second year of continuous service of an employee.  Hence, an employee who
started working June 1, 2005 will get his commutation on May 31, 2007 or thereabout. 12

On August 25, 2005, respondent’s President, Cynthia L. De Lara (De Lara) wrote a letter 13 to Atty.
Maglaya informing him that respondent is not amenable to the unilateral changes made by

Labor II – 1
petitioner.14  De Lara questioned the guidelines for being violative of existing practices and the
CBA,15 specifically Sections 1 and 2, Article XII of the CBA, to wit: chanRoblesVirtualawlibrary

ARTICLE XII
VACATION LEAVE AND SICK LEAVE

SECTION 1. VACATION LEAVE - All regular and non-tenured rank-and-file faculty and staff who are
entitled to receive shall enjoy fifteen (15) days vacation leave with pay annually.

1.1   All unused vacation leave after the second year of service shall be converted into cash and be
paid to the entitled employee at the end of each school year to be given not later than August 30 of
each year.

SECTION 2. SICK LEAVE - All regular and non-tenured rank-and-file faculty and staff shall enjoy
fifteen (15) days sick leave with pay annually. 16

On February 8, 2006, a Labor Management Committee (LMC) Meeting was held during which
petitioner advised respondent to file a grievance complaint on the implementation of the vacation
and sick leave policy.17  In the same meeting, petitioner announced its plan of implementing a one-
retirement policy,18 which was unacceptable to respondent.

Ruling of the Voluntary Arbitrator

Unable to settle their differences at the grievance level, the parties referred the matter to a Voluntary
Arbitrator.  During the hearing, respondent submitted affidavits to prove that there is an established
practice of giving two retirement benefits, one from the Private Education Retirement Annuity
Association (PERAA) Plan and another from the CBA Retirement Plan.  Sections 1, 2, 3 and 4 of
Article XVI of the CBA provide: chanRoblesVirtualawlibrary

ARTICLE XVI
SEPARATION, DISABILITY AND RETIREMENT PAY

SECTION 1. ELIGIBILITY FOR MEMBERSHIP - Membership in the Plan shall be automatic for all full-
time, regular staff and tenured faculty of the University, except the University President. 
Membership in the Plan shall commence on the first day of the month coincident with or next
following his statement of Regular/Tenured Employment Status.

SECTION 2. COMPULSORY RETIREMENT DATE - The compulsory retirement date of each Member
shall be as follows:
chanRoblesVirtualawlibrary

a.   Faculty - The last day of the School Year, coincident with his attainment of age sixty (60) with at
least five (years) of unbroken, credited service.

b.  Staff - Upon reaching the age of sixty (60) with at least five (5) years of unbroken, credited
service.

SECTION 3. OPTIONAL RETIREMENT DATE - A Member may opt for an optional retirement prior to his
compulsory retirement.  His number of years of service in the University shall be the basis of
computing x x x his retirement benefits regardless of his chronological age.

SECTION 4. RETIREMENT BENEFIT - The retirement benefit shall be a sum equivalent to 100% of the
member’s final monthly salary for compulsory retirement.

For optional retirement, the vesting schedule shall be: chanRoblesVirtualawlibrary

Labor II – 1
x x x x19

On November 2, 2006, the Voluntary Arbitrator rendered a Decision 20 declaring the one-retirement
policy and the Memorandum dated August 16, 2005 contrary to law.  The dispositive portion of the
Decision reads: chanRoblesVirtualawlibrary

WHEREFORE, the following award is hereby made: chanRoblesVirtualawlibrary

1.  The assailed University guidelines on the availment of vacation and sick leave credits and vacation
leave commutation are contrary to law.  The University is consequently ordered to reinstate the
earlier scheme, practice or policy in effect before the issuance of the said guidelines on August 16,
2005;

2.  The “one retirement” policy is contrary to law and is hereby revoked and rescinded.  The
University is ordered x x x to resume and proceed with the established practice of extending to
qualified employees retirement benefits under both the CBA and the PERAA Plan.

3.  The other money claims are denied. 21

Ruling of the Court of Appeals

Aggrieved, petitioner appealed the case to the CA via a Petition for Review under Rule 43 of the
Rules of Court.

On September 25, 2007, the CA rendered a Decision 22 finding the rulings of the Voluntary Arbitrator
supported by substantial evidence.  It also affirmed the nullification of the one-retirement policy and
the Memorandum dated August 16, 2005 on the ground that these unilaterally amended the CBA
without the consent of respondent.23  Thus: chanRoblesVirtualawlibrary

WHEREFORE, the instant appeal is DISMISSED for lack of merit.

SO ORDERED.24

Petitioner moved for reconsideration but the same was denied by the CA in its February 5, 2008
Resolution.25 crallawlibrary

Issues

Hence, this recourse by petitioner raising the following issues: chanRoblesVirtualawlibrary

a.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that the Affidavits submitted by Respondent WU-PFSA are substantial evidence as defined by
the rules and jurisprudence that would substantiate that Petitioner WU-P has long been in the
practice of granting its employees two (2) sets of Retirement Benefits.

b.
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that a university practice of granting its employees two (2) sets of Retirement Benefits had
already been established as defined by the law and jurisprudence especially in light of the illegality
and lack of authority of such alleged grant.

c.

Labor II – 1
Whether x x x the [CA] committed grave and palpable error in sustaining the Voluntary Arbitrator’s
ruling that it is incumbent upon Petitioner WU-P to show proof that no Board Resolution was issued
granting two (2) sets of Retirement Benefits.

d.
Whether x x x the [CA] committed grave and palpable error in revoking the 16 August 2005
Memorandum of Petitioner WU-P for being contrary to extant policy. 26

Petitioner’s Arguments

Petitioner argues that there is only one retirement plan as the CBA Retirement Plan and the PERAA
Plan are one and the same.27  It maintains that there is no established company practice or policy of
giving two retirement benefits to its employees. 28  Assuming, without admitting, that two retirement
benefits were released,29 petitioner insists that these were done by mere oversight or mistake as
there is no Board Resolution authorizing their release. 30  And since these benefits are unauthorized
and irregular, these cannot ripen into a company practice or policy. 31  As to the affidavits submitted
by respondent, petitioner claims that these are self-serving declarations, 32 and thus, should not be
given weight and credence.33 crallawlibrary

In addition, petitioner claims that the Memorandum dated August 16, 2005, which provides for the
guidelines on the implementation of vacation and sick leave credits as well as vacation leave
commutation, is valid because it is in full accord with existing policy. 34 crallawlibrary

Respondent’s Arguments

Respondent belies the claims of petitioner and asserts that there are two retirement plans as the
PERAA Retirement Plan, which has been implemented for more than 30 years, is different from the
CBA Retirement Plan.35  Respondent further avers that it has always been a practice of petitioner to
give two retirement benefits36 and that this practice was established by substantial evidence as found
by both the Voluntary Arbitrator and the CA. 37 crallawlibrary

As to the Memorandum dated August 16, 2005, respondent asserts that it is arbitrary and contrary to
the CBA and existing practices as it added qualifications or limitations which were not agreed upon by
the parties.38 crallawlibrary

Our Ruling

The Petition is bereft of merit.

The Non-Diminution Rule found in Article 100 39 of the Labor Code explicitly prohibits employers from
eliminating or reducing the benefits received by their employees.  This rule, however, applies only if
the benefit is based on an express policy, a written contract, or has ripened into a practice. 40  To be
considered a practice, it must be consistently and deliberately made by the employer over a long
period of time.41 crallawlibrary

An exception to the rule is when “the practice is due to error in the construction or application of a
doubtful or difficult question of law.”42  The error, however, must be corrected immediately after its
discovery;43 otherwise, the rule on Non-Diminution of Benefits would still apply.

The practice of giving two retirement

benefits to petitioner’s employees is
supported by substantial evidence.

In this case, respondent was able to present substantial evidence in the form of affidavits to support
its claim that there are two retirement plans.  Based on the affidavits, petitioner has been giving two
Labor II – 1
retirement benefits as early as 1997.44  Petitioner, on the other hand, failed to present any evidence
to refute the veracity of these affidavits.  Petitioner’s contention that these affidavits are self-serving
holds no water.  The retired employees of petitioner have nothing to lose or gain in this case as they
have already received their retirement benefits.  Thus, they have no reason to perjure themselves. 
Obviously, the only reason they executed those affidavits is to bring out the truth.  As we see it then,
their affidavits, corroborated by the affidavits of incumbent employees, are more than sufficient to
show that the granting of two retirement benefits to retiring employees had already ripened into a
consistent and deliberate practice.

Moreover, petitioner’s assertion that there is only one retirement plan as the CBA Retirement Plan
and the PERAA Plan are one and the same is not supported by any evidence.  There is nothing in
Article XVI of the CBA to indicate or even suggest that the “Plan” referred to in the CBA is the PERAA
Plan.  Besides, any doubt in the interpretation of the provisions of the CBA should be resolved in
favor of respondent.  In fact, petitioner’s assertion is negated by the announcement it made during
the LMC Meeting on February 8, 2006 regarding its plan of implementing a “one-retirement plan.” 
For if it were true that petitioner was already implementing a one-retirement policy, there would
have been no need for such announcement.  Equally damaging is the letter-memorandum 45 dated
May 11, 2006, entitled “Suggestions on the defenses we can introduce to justify the abolition of
double retirement policy,” prepared by the petitioner’s legal counsel.  These circumstances, taken
together, bolster the finding that the two-retirement policy is a practice.  Thus, petitioner cannot,
without the consent of respondent, eliminate the two-retirement policy and implement a one-
retirement policy as this would violate the rule on non-diminution of benefits.

As a last ditch effort to abolish the two-retirement policy, petitioner contends that such practice is
illegal or unauthorized and that the benefits were erroneously given by the previous administration. 
No evidence, however, was presented by petitioner to substantiate its allegations.

Considering the foregoing disquisition, we agree with the findings of the Voluntary Arbitrator, as
affirmed by the CA, that there is substantial evidence to prove that there is an existing practice of
giving two retirement benefits, one under the PERAA Plan and another under the CBA Retirement
Plan.

The Memorandum dated August 16, 2005

is contrary to the existing CBA.

Neither do we find any reason to disturb the findings of the CA that the Memorandum dated August
16, 2005 is contrary to the existing CBA.

Sections 1 and 2 of Article XII of the CBA provide that all covered employees are entitled to 15 days
sick leave and 15 days vacation leave with pay every year and that after the second year of service,
all unused vacation leave shall be converted to cash and paid to the employee at the end of each
school year, not later than August 30 of each year.

The Memorandum dated August 16, 2005, however, states that vacation and sick leave credits are
not automatic as leave credits would be earned on a month-to-month basis.  This, in effect, limits the
available leave credits of an employee at the start of the school year.  For example, for the first four
months of the school year or from June to September, an employee is only entitled to five days
vacation leave and five days sick leave.46  Considering that the Memorandum dated August 16, 2005
imposes a limitation not agreed upon by the parties nor stated in the CBA, we agree with the CA that
it must be struck down.

In closing, it may not be amiss to mention that when the provision of the CBA is clear, leaving no
doubt on the intention of the parties, the literal meaning of the stipulation shall govern. 47  However, if
there is doubt in its interpretation, it should be resolved in favor of labor, 48 as this is mandated by no
less than the Constitution. 49
crallawlibrary

Labor II – 1
WHEREFORE, the Petition is hereby DENIED.  The assailed September 25, 2007 Decision and the
February 5, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 97053 are
hereby AFFIRMED.

Labor II – 1
38.) G.R. No. 217730

PHILIPPINE AIRLINES, INC, Petitioner

vs
ARJAN T. HASSARAM, Respondent

DECISION

SERENO, CJ.:

This resolves the Petition for Review   filed by Philippine Airlines, Inc. (PAL), which prays for the reversal of the
1

Court of Appeals (CA) Decision   and Resolution   in CA-G.R. SP No. 128970. The CA declared that respondent
2 3

Arjan T. Hassaram (Hassaram), a former PAL pilot, was entitled to receive retirement benefits from PAL under
Article 287 of the Labor Code, notwithstanding his earlier receipt of ₱4,456,817.75 under the PAL Pilots' Retirement
Benefit Plan (the Plan).

The case stemmed from a Complaint4 filed by Hassaram against PAL for illegal dismissal and the payment of
retirement benefits, damages, and attorney's fees. He claimed that he had applied for retirement from PAL in August
2000 after rendering 24 years of service as a pilot, but that his application was denied. Instead, PAL informed him
that he had lost his employment in the company as of 9 June 1998, in view of his failure to comply with the Return to
Work Order issued by the Secretary of Labor against members of the Airline Pilots Association of the Philippines
(ALPAP) on 7 June 1998.  5

Before the Labor Arbiter (LA),   Hassaram argued that he was not covered by the Secretary's Return to Work Order;
6

hence, PAL had no valid ground for his dismissal.  He asserted that on 9 June 1998, he was already on his way to
7

Taipei to report for work at Eva Air, pursuant to a four-year contract approved by PAL itself.   Petitioner further
8

claimed that his arrangement with PAL allowed him to go on leave without pay while working for Eva Air, with the
right to accrue seniority and retire from PAL during the period of his leave. 9

In its Position Paper, PAL contended that (a) the LA had no jurisdiction over the case, which was a mere off-shoot of
ALPAP's strike, a matter over which the Secretary of Labor had already assumed jurisdiction; (b) the Complaint
should be considered barred by res judicata, forum shopping, and prescription; (c) the case should be suspended
while PAL was under receivership; and (d) if at all, Hassaram was entitled only to retirement benefits of ₱5,000 for
every year of service pursuant to the Collective Bargaining Agreement (CBA) between PAL and ALPAP.

THE RULING OF THE LA

In a Decision dated 17 February 2004,   the LA awarded retirement benefits and attorney's fees to Hassaram. The
10

former explained that Hassaram did not defy the Return to Work Order, as he was in fact already on leave when the
order was implemented.   As to the computation of benefits, the LA ruled that Article 287 of the Labor Code should
11

be applied, since the statute provided better benefits than the PAL-ALPAP CBA.   Hassaram's other claims, on the
12

other hand, were dismissed.  13

THE NLRC RULING

PAL appealed the LA's Decision to the NLRC.   Aside from reiterating its arguments on lack of jurisdiction, res
14

judicata, and prescription, PAL contended that Hassaram was not entitled to retirement benefits, because he had
earlier been terminated from employment for defying the Return to Work Order.   It further claimed that the LA' s
15

Decision contradicted the ruling in PAL v. ALPAP,  in which this Court awarded retirement benefits to qualified PAL
16

pilots under the company's own retirement plans, instead of the Labor Code. 17

The NLRC initially affinned the LA's Decision to award retirement benefits to Hassaram under Article 287 of the
Labor Code.   This affirmation prompted PAL to seek reconsideration of the ruling   citing, for the first time,
18 19

Hassaram's purported receipt of retirement benefits in the amount of ₱4,456,817.75 pursuant to the Plan.  PAL
20

Labor II – 1
likewise alleged that, as a consequence of this newly discovered payment, any claim made by Hassaram for
retirement benefits should be deemed extinguished.  21

The NLRC granted PAL's Motion for Reconsideration.   Reversing its earlier Decision, it set aside the ruling of the
22

LA on account of Hassaram's receipt of retirement benefits under the Plan.   This payment, according to the NLRC,
23

was sufficient to discharge his claim for retirement pay.  24

Hassaram sought reconsideration   of the NLRC Resolution, but his motion was denied. He then elevated the
25

matter to the CA via a Petition for Certiorari. 26

THE CA RULING

Before the CA, Hassaram asserted that the NLRC acted with grave abuse of discretion amounting to lack of
jurisdiction when the latter reversed its previous ruling and set aside the Decision of the LA.   While admitting that
27

he received ₱4,456,817.75 under the Plan, he maintained that his receipt of that sum did not preclude him from
claiming retirement benefits from PAL, since that amount represented only a return of his share in a distinct and
separate provident fund established for PAL pilots. 28

In a Comment   filed before the CA, PAL belied Hassaram's claims. Citing PAL v. ALP AP,   it asserted that the
29 30

Plan was a retirement fund it "wholly financed"; consequently, the payment Hassaram received therefrom should be
considered part of his retirement pay.

On 25 September 2014, the CA issued the assailed Decision   reversing the NLRC and reinstating the ruling of the
31

LA. The appellate court declared that the funds received under the Plan were not the retirement benefits
contemplated by law.   Hence, it ruled that Hassaram was still entitled to receive retirement benefits in the amount
32

of ₱2, 111,984.60 pursuant to Article 287 of the Labor Code.  33

PAL sought reconsideration of the ruling,   but its motion was denied. 
34 35

PROCEEDINGS BEFORE THIS COURT

In its Petition for Review before this Court, PAL no longer questions the entitlement of Hassaram to retirement
benefits.   Its only contention is that the CA erred in declaring that his benefits should be computed on the basis of
36

Section 287 of the Labor Code. PAL asse1is, instead, that its own company retirement plans - both the PAL Pilots'
Retirement Benefit Plan   and the 1967 PAL-ALPAP Retirement Plan   - should have been applied to determine
37 38

Hassaram's retirement benefits.

In his Comment,  Hassaram insists that the sum he received from the Plan was a benefit separate from that
39

provided under Article 287 of the Labor Code. He reiterates that his receipt of ₱4,456,817. 75 from the Plan does
not preclude him from claiming his retirement pay under the statute, because those benefits he obtained were
supposedly meant to reward him for his loyalty and service to PAL.   He likewise asse1is that the Plan was not truly
40

a retirement plan, but a provident fund "set up for the benefit of the pilots-members by way of saving a portion of
their salary [forced savings]." Underlying the Plan, he said, was the understanding that their shares in the fund
would be returned upon retirement, disability or unemployment.  41

ISSUES

The following issues are presented for resolution in this case:

1. Whether the amount received by Hassaram under the Plan should be deemed part of his retirement pay

2. Whether Hassaram is entitled to receive retirement benefits under Article 287 of the Labor Code

Labor II – 1
OUR RULING

We GRANT the Petition.

Pursuant to the Decisions of this Court in Elegir v. PAL   and PAL v. ALP AP,   the amount received by Hassaram
42 43

under the Plan must be considered part of his retirement pay. Combined with the retirement benefits under the CBA
between PAL and ALP AP, this scheme would allow Hassaram to receive superior retirement benefits, thereby
rendering Article 287 of the Labor Code inapplicable.

The amount received by Hassaram under the PAL Pilots' Retirement Benefit Plan must be considered part
of his retirement pay.

The threshold question before this Court concerns the proper characterization of the sum of ₱4,456,817.75 received
by Hassaram from the Plan. For its part, PAL avers that this amount formed part of Hassaram's retirement pay,
because the Plan was a retirement fund wholly financed by the company. Hassaram, on the other hand, insists that
the amount he received from the Plan represented only a return of his share in a distinct and separate provident
fund established for PAL pilots.

We rule for petitioner.

It is clear from the provisions of the Plan that it is the company that contributes to a "retirement fund" for the account
of the pilots.   These contributions comprise the benefits received by the latter upon retirement, separation from
44

service, or disability.   In Philippine Airlines, Inc. v. Airline Pilots Association of the Phils.   the Court utilized these
45 46

provisions to explain the nature of the Plan:

The PAL Pilots' Retirement Benefit Plan is a retirement fund raised from contributions exclusively from [PALI of
amounts equivalent to 20% of each pilot's gross monthly pay. Upon retirement, each pilot stands to receive the full
amount of the contribution. In sum, therefore, the pilot gets an amount equivalent to 240% of his gross monthly
income for every year of service he rendered to petitioner. This is in addition to the amount of not less than
₱100,000.00 that he shall receive under the 1967 Retirement Plan.47 (Emphasis supplied and citations omitted)

Based on the foregoing characterization, the Court included the amount received from the Plan in the computation
of the retirement pay of the pilot involved in that case. The same rule was later applied to Elegir v. Philippine
Airlines, Inc.: 48

Consistent with the purpose of the law, the CA correctly ruled for the computation of the petitioner's retirement
benefits based on the two (2) PAL retirement plans because it is under the same that he will reap the most benefits.
Under the PAL-ALPAP Retirement Plan, the petitioner, who qualified for late retirement after rendering more than
twenty (20) years of service as a pilot, is entitled to a lump sum payment of ₱125,000.00 for his twenty-five (25)
years of service to PAL. xxx.

x x xx

Apart from the abovementioned benefit, the petitioner is also entitled to the equity of the retirement fund under PAL
Pilots' Retirement Benefit Plan, which pertains to the retirement fund raised from contributions exclusively from PAL
of amounts equivalent to 20% of each pilot's gross monthly pay. Each pilot stands to receive the full amount of the
contribution upon his retirement which is equivalent to 240% of his gross monthly income for every year of service
he rendered to PAL. This is in addition to the amount of not less than ₱l 00,000.00 that he shall receive under the
PAL-ALP AP Retirement Plan. (Emphasis supplied and citations omitted)

Considering that the very same retirement plan is involved in this petition, we adopt the pronouncements in the
above cases. We therefore rule that the amount of ₱4,456,8l7.75 received by Hassaram from the PAL Plan formed
part of his retirement pay.

Hassaram's retirement pay should be computed on the basis of the retirement plans provided by PAL.

Labor II – 1
 

Bearing in mind our conclusion that the sum received by Hassaram from the Plan formed part of his retirement pay,
we now proceed to determine whether his retirement pay must be computed on the basis of Article 287, or on the
retirement plans provided by PAL.

We first examine Article 287 of the Labor Code, which provides in relevant part:

Art. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned
under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an
employee's retirement benefits under any collective bargaining and other agreements shall not be less than those
provided therein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years
which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said
establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1 /2) month salary
for every year of service, a fraction of at least six (6) months being considered as one whole year.

Interpreting the language of this provision, we declared in Elegir as follows:  49

It can be clearly inferred from the language of the foregoing provision that it is applicable only to a situation where (l)
there is no CBA or other applicable employment contract providing for retirement benefits for an employee, or (2)
there is a CBA or other applicable employment contract providing for retirement benefits for an employee, but it is
below the requirement set by law. The rationale for the first situation is to prevent the absurd situation where an
employee, deserving to receive retirement benefits, is denied them through the nefarious scheme of employers to
deprive employees of the benefits due them under existing labor laws. On the other hand, the second situation aims
to prevent private contracts from derogating from the public law.

xxxx

Emphasis must be placed on the fact that the purpose of the amendment is not merely to establish precedence in
application or accord blanket priority to existing CBAs in computing retirement benefits. The determining factor in
choosing which retirement scheme to apply is still superiority in terms of benefits provided. Thus, even if there is an
existing CBA but the same does not provide for retirement benefits equal or superior to that which is provided under
Article 287 of the Labor Code, the latter will apply. In this manner, the employee can be assured of a reasonable
amount of retirement pay for his sustenance.   (Emphasis supplied)
50

In the assailed Decision and Resolution, the CA declared that Hassaram was entitled to retirement benefits under
Article 287, because the benefits provided under that provision were supposedly superior to those granted to him
under the PAL retirement plans.

We disagree.

It is clear from the records that Hassaram is a member of ALP AP and as such, is entitled to benefits from both the
retirement plans under the 196 7 PAL-ALPAP CBA and the Plan.  51

Parenthetically, we note the declaration of the CA that the agreement had already expired two years before
Hassaram's claim.   This declaration appears to be inaccurate, as the RTC and the CA themselves declared that
52

the CBA expired only on 31 December 2000,   while Hassaram had applied for retirement earlier, on 31 August
53

2000.   The provisions of the CBA are therefore applicable as they would allow Hassaram to claim the following
54

benefits under two separate plans provided under the CBA: (a) the amount of ₱5,000 for every year of service under

Labor II – 1
the PAL-ALP AP Retirement Plan; and (b) an equity equivalent to 240% of his gross monthly salary for every year of
employment pursuant to the Plan.

In contrast, Article 287 would entitle a retiring pilot to the equivalent of only 22.5 days of his monthly salary for every
year of service.  This scheme was thus considered by the Court as inferior to the retirement plans granted by PAL to
1âwphi1

the latter's pilots in Elegir and PAL:

In sum, therefore, the petitioner will receive the following retirement benefits:

(1) ₱125,000.00 (25 years x ₱5,000.00) for his 25 years of service to PAL under the PAL-ALP AP Retirement Plan,
and;

(2) 240% of his gross monthly salary for every year of his employment or, more specifically, the summation of PAL's
monthly contribution of an amount equivalent to 20% of his actual monthly salary, under the PAL Pilots' Retirement
Benefit Plan.

x x xx

On the other hand, under Article 287 of the Labor Code, the petitioner would only be receiving a retirement pay
equivalent to at least one-half (1/2) of his monthly salary for every year of service, a fraction of at least six (6)
months being considered as one whole year. To stress, one-half (112) month salary means 22.S days: 15 days plus
2.5 days representing one-twelfth (1/12) of the 13th month pay and the remaining 5 days for service incentive leave.

Comparing the benefits under the two (2) retirement schemes, it can readily be perceived that the 22.5 days worth
of salary for every year of service provided under Article 287 of the Labor Code cannot match the 240% of salary or
almost two and a half worth of monthly salary per year of service provided under the PAL Pilots' Retirement Benefit
Plan, which will be further added to the ₱125,000.00 to which the petitioner is entitled under the PAL-ALP AP
Retirement Plan. Clearly then, it is to the petitioner's advantage that P AL's retirement plans were applied in the
computation of his retirement benefits.   (Emphasis supplied and citations omitted)
55

Following the above pronouncement, we therefore declare that Hassaram's retirement benefits must be computed
based on the retirement plans of PAL, and not on Article 287 of the Labor Code.

In view of the undisputed fact that Hassaram has received his benefits under the Plan,   he is now entitled to claim
56

only his remaining benefits under the CBA, i.e. the amount of ₱l20,000 (24 years x ₱5,000) for his 24 years of
service to the company.

WHEREFORE, the Petition for Review on Certiorari is GRANTED. The CA Decision and Resolution dated 25
September 2014 and 23 March 2015, respectively, are SET ASIDE. Petitioner Philippine Airlines, Inc., is hereby
ORDERED to PAY respondent Arjan T. Hassaram the amount of ₱120,000 representing the balance of his
retirement pay, computed based on the 1967 PAL-ALP AP Retirement Plan and the PAL Pilots' Retirement Benefit
Plan.

Labor II – 1
 39.) G.R. No. 220383, October 05, 2016

SONEDCO WORKERS FREE LABOR UNION (SWOFLU) / RENATO YUDE, MARIANITO REGINO,
MANUEL YUMAGUE, FRANCISCO DACUDAG, RUDY ABABAO, DOMINIC SORNITO, SERGIO
CAJUYONG, ROMULO LABONETE, GENEROSO GRANADA, EMILIO AGUS, ARNOLD CAYAO,
BEN GENEVE, VICTOR MAQUE, RICARDO GOMEZ, RODOLFO GAWAN, JIMMY SULLIVAN,
FEDERICO SUMUGAT, JR., ROMULO AVENTURA, JR., JURRY MAGALLANES, HERNAN
EPISTOLA, JR., ROBERTO BELARTE, EDMON MONTALVO, TEODORO MAGUAD, DOMINGO
TABABA, MAXIMO SALE, CYRUS DIONILLO, LEONARDO JUNSAY, JR., DANILO SAMILLION,
MARIANITO BOCATEJA, JUANITO GEBUSION, RICARDO MAYO, RAUL ALIMON, ARNEL
ARNAIZ, REBENCY BASOY, JIMMY VICTORIO BERNALDE, RICARDO BOCOL, JR., JOB
CALAMBA, WOLFRANDO CALAMBA, RODOLFO CASISID, JR., EDGARDO DELA PENA, ALLAN
DIONILLO, EDMUNDO EBIDO, JOSE ELEPTICO, JR., MARCELINO FLORES, HERNANDO
FUENTEBILLA, SAUL HITALIA, JOSELITO JAGODILLA, NONITO JAYME, ADJIE JUANILLO,
JEROLD JUDILLA, EDILBERTO NACIONAL, SANDY NAVALES, FELIPE NICOLASORA, JOSE
PAMALO-AN, ISMAEL PEREZ, JR., ERNESTO RANDO, JR., PHILIP REPULLO, VICENTE RUIZ,
JR., JOHN SUMUGAT, CARLO SUSANA, ROMEO TALAPIERO, JR., FERNANDO TRIENTA,
FINDY VILLACRUZ, JOEL VILLANUEVA, AND JERRY
MONTELIBANO, Petitioners, v. UNIVERSAL ROBINA CORPORATION, SUGAR DIVISION-
SOUTHERN NEGROS DEVELOPMENT CORPORATION (SONEDCO), Respondent.

DECISION

LEONEN, J.:

An employer who refuses to bargain with the union and tries to restrict its bargaining power is guilty
of unfair labor practice. In determining whether an employer has not bargained in good faith, the
totality of all the acts of the employer at the time of negotiations must be taken into account.

This resolves a Petition1 for review assailing the Decision2 dated January 30, 2015 and the
Resolution3 dated July 27, 2015 of the Court of Appeals. The Court of Appeals dismissed the Petition
for Certiorari filed by members of SONEDCO Workers Free Labor Union for lack of merit. 4

On May 6, 2002, Universal Robina Corporation Sugar Division - Southern Negros Development
Corporation (URC-SONEDCO) and Philippine Agricultural Commercial and Industrial Workers Union
(PACIWU-TUCP), then the exclusive bargaining representative of URC-SONEDCO's rank-and-file
employees, entered into a Collective Bargaining Agreement (2002 Collective Bargaining Agreement)
effective January 1, 2002 to December 31, 2006. 5 Under the 2002 Collective Bargaining Agreement,
rank-and-file employees were entitled to a wage increase of P14.00/day for 2002 and P12.00/day for
the succeeding years until 2006.6

On May 17, 2002, days after the 2002 Collective Bargaining Agreement was signed, a certification
election was conducted. SONEDCO Workers Free Labor Union won and replaced PACIWU-TUCP as the
exclusive bargaining representative.7

PACIWU-TUCP questioned the results of the certification election before the Department of Labor and
Employment. On July 8, 2002, Med-Arbiter Romulo Sumalinog certified SONEDCO Workers Free
Labor Union as the sole and exclusive bargaining representative of URC-SONEDCO. 8 This was
affirmed by the Labor Secretary in a Resolution dated December 27, 2002, which became final on
April 15, 2003.9 PACIWU-TUCP elevated the same issue to the Court of Appeals and thereafter this
Court, which on July 11, 2007, resolved that the certification election was valid. SONEDCO Workers
Free Labor Union was declared the exclusive bargaining agent of URC-SONEDCO's rank-and-file
employees.10

Labor II – 1
URC-SONEDCO consistently refused to negotiate a new collective bargaining agreement with
SONEDCO Workers Free Labor Union, despite several demands from SONEDCO Workers Free Labor
Union, allegedly due to the 2002 Collective Bargaining Agreement, which it signed with PACIWU-
TUCP.12

Despite being the incumbent exclusive bargaining agent, SONEDCO Workers Free Labor Union filed
before the Department of Labor and Employment a Petition 13 for certification election on December 6,
2006 in view of the approaching expiration of the 2002 Collective Bargaining Agreement. On
December 31, 2006, the 2002 Collective Bargaining Agreement expired with no new collective
bargaining agreement being signed.14

On August 28, 2007, with no collective bargaining agreement in effect, URC-SONEDCO informed the
rank-and-file employees that they would be granted the following economic benefits: chanRoblesvirtualLawlibrary

(1) Wage increase of P16.00/day effective January 1, 2007;

(2) Group life insurance of P50,000.00 coverage/year;
(3) Emergency leave in lieu of bereavement leave, up to five (5) days per year; and
(4) Cash loan in lieu of emergency loan of P5,000.00, payable in 11 months.15
chanrobleslaw

URC-SONEDCO asked the employees who wished to avail themselves of these-benefits to sign an
acknowledgment receipt/waiver (2007 waiver), which stated that "[i]n the event that a subsequent
[collective bargaining agreement] is negotiated between Management and Union, the new [Collective
Bargaining Agreement] shall only be effective January 1, 2008." 16 URC-SONEDCO claimed that the
2007 waiver was designed to avoid and/or prevent double compensation. 17

Several SONEDCO Workers Free Labor Union members refused to sign the 2007 waiver. Hence, they
did not receive the benefits given to other members of the bargaining unit who had done so. 18

In 2008, another wage increase of P16.00/day effective January 1, 2008 were given to employees
who signed an acknowledgment receipt/waiver (2008 waiver). 19 The 2008 waiver stated that "[s]a
panahon na kung saan may  [collective bargaining agreement] na maisasara sa pagitan ng
Management at Uniyon, ito ay magiging epektibo lamang Simula  January 1, 2009."20

Again, several SONEDCO Workers Free Labor Union members refused to sign the 2008 waiver. They
did not receive the benefits from URC-SONEDCO.20

On August 20, 2008, a certification election was conducted. 21 SONEDCO Workers Free Labor Union
won again and proceeded to negotiate a new collective bargaining agreement, which became
effective January 1, 2009 to December 31, 2013 (2009 Collective Bargaining Agreement). 22

On July 2, 2009, SONEDCO Workers Free Labor Union and its members who refused to sign the 2007
and 2008 waivers filed a complaint for unfair labor practices against URC-SONEDCO. 23 They argued
that the requirement of a waiver before the release of the wage increase violated their right to self-
organization, collective bargaining, and concerted action. 24

The Labor Arbiter found that URC-SONEDCO did not commit unfair labor practice when it increased
the wages of the rank-and-file employees for 2007 and 2008. 25 He found that, the requirement of a
waiver aside, it was benevolent for URC-SONEDCO to give its employees additional benefits outside
the Collective Bargaining Agreement.26 However, the Labor Arbiter ordered URC-SONEDCO to pay the
employees who refused to sign the 2007 and 2008 waivers of the benefits received by their fellow
employees for 2007 and 2008. As a new collective bargaining agreement had already been

Labor II – 1
renegotiated and did not include the years 2007 and 2008, the purpose of the waivers was already
served.

On appeal, the National Labor Relations Commission sustained 27 the Labor Arbiter's Decision that the
requirement of a waiver before the release of the benefits for 2007 and 2008 did not constitute unfair
labor practice: chanRoblesvirtualLawlibrary

Such an act does not constitute interference, restraining or coercing employees in the exercise of
their right to  self organization or to bargain collectively, neither is it tantamount to discrimination
against union members who refused to waive wage increase in a CBA. As aptly termed by
respondents, it is an "offer" during the absence of a Collective Bargaining Agreement (CBA) and
during the time when there was an unresolved union representation, which this Commission
considers as reasonable.29
chanrobleslaw

The National Labor Relations Commission likewise affirmed the decision to award the wage increase
to the employees who initially refused to sign the waiver. 30

Aggrieved, members of SONEDCO Workers Free Labor Union filed before the Court of Appeals a
Petition for Certiorari assailing the National Labor Relations Commission Decision. The Court of
Appeals found no grave abuse of discretion in the assailed decision and dismissed the Petition. 31

Hence, on October 22, 2015, this Petition32 was filed.

In the Resolution33 dated January 11, 2016, this Court required respondent URC-SONEDCO to file its
comment on the Petition. Respondent filed its Comment 34 on March 22, 2016.

Petitioners now argue that the Court of Appeals failed to consider the totality of respondent's
dealings with them.35 They allege that despite their several invitations, respondent consistently failed
to bargain with them, and the wage increase was just another move to avoid
negotiations.36 Petitioners claim that the benefits given by respondent was an economic incentive
meant to encourage individual employees to give up agreement bargaining for 2007 and
2008.37 Moreover, petitioners maintain that the wage increase for 2007 and 2008 should be
considered as a continuing benefit over what was already provided in the 2009 Collective Bargaining
Agreement because Article XXI of the 2009 Collective Bargaining Agreement excluded claims pending
before the courts. 38 Article XXI provides: chanRoblesvirtualLawlibrary

ARTICLE XXI
COMPLETE SETTLEMENT

The parties agree that this Agreement is full and complete settlement of all demands, requests,
claims and disputes of any nature, written or verbal, that either party have or may have against the
other prior to the effectivity hereof, except those subject of pending cases before the NLRC or its
arbitration branch, or before the DOLE or regular courts. 39
chanrobleslaw

Respondent points out that petitioners merely rehashed the same matters already ruled upon by the
Court of Appeals.40 It reiterates that both the National Labor Relations Commission and the Court of
Appeals found them not guilty of unfair labor practice since the waivers did not violate the
employees' right to organize.41 Moreover, the employees freely signed the waivers; even petitioners
did not accuse respondent of coercing employees to sign these waivers. 42 Respondent claims that the
benefits that it offered were higher than what the employees had previously received; there was no
diminution of benefits involved.43

For resolution are the following issues: cralawlawlibrary

First, whether respondent committed unfair labor practice; ChanRoblesVirtualawlibrary

Second, whether petitioners, who refused to sign the 2007 and 2008 waivers, are entitled to the
wage increase and other economic benefits as a continuing employee benefit notwithstanding the
2009 Collective Bargaining Agreement; and
Labor II – 1
Lastly, whether respondent is liable for damages. chanroblesvirtuallawlibrary

Respondent is guilty of unfair labor practice.

Both the National Labor Relations Commission and the Court of Appeals ruled that respondent did not
commit unfair labor practice since the requirement of a waiver for 2007 and 2008 did not interfere
with the employees 5 exercise of their right to self-organization. 44 However, the Court of Appeals
failed to take into account that unfair labor practice not only involves acts that violate the right to
self-organization but also covers several acts enumerated in Article 259 of the Labor Code, thus: chanRoblesvirtualLawlibrary

ARTICLE 259. [248] Unfair Labor Practices of Employers. — It shall be unlawful for an employer to
commit any of the following unfair labor practices: cralawlawlibrary

(a) To interfere with,  restrain or coerce employees in the exercise of their right to self-
organization;

(b) To require as a condition of employment that a person or an employee shall not join a labor
organization or shall withdraw from one to which he belongs; ChanRoblesVirtualawlibrary

(c) To contract out services or functions being performed by union members when such will interfere
with, restrain or coerce employees in the exercise of their right to self-organization; ChanRoblesVirtualawlibrary

(d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any
labor organization, including the giving of financial or other support to it or its organizers or
supporters; ChanRoblesVirtualawlibrary

(e) To discriminate in regard to wages, hours of work and other terms and conditions of
employment in order to encourage or discourage membership in any labor
organization.  Nothing in this Code or in any other law shall stop the parties from requiring
membership in a recognized collective bargaining agent as a condition for employment, except those
employees who are already members of another union at the time of the signing of the collective
bargaining agreement. Employees of an appropriate bargaining unit who are not members of the
recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and
other fees paid by members of the recognized collective bargaining agent, if such non-union
members accept the benefits under the collective bargaining agreement: Provided,  That the
individual authorization required under Article 242, paragraph (o) of this Code 204 shall not apply to
the non-members of the recognized collective bargaining agent; ChanRoblesVirtualawlibrary

(f) To dismiss, discharge or otherwise prejudice or discriminate against an employee for having given
or being about to give testimony under this Code; ChanRoblesVirtualawlibrary

(g) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attorney's fees to the union or its officers or agents as part of the
settlement of any issue in collective bargaining or any other dispute; or

(i) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers and agents of
corporations, associations or partnerships who have actually participated in, authorized or ratified
unfair labor practices shall be held criminally liable. (Emphasis supplied)
chanrobleslaw

Under this provision, an employer is guilty of unfair labor practice when it fails in its duty to bargain
Labor II – 1
in good faith.

Although it Is well-settled that the findings of fact of quasi-judicial agencies such as the National
Labor Relations Commission are accorded great respect, this rule does admit exceptions. 45 One of
these exceptions is when, as in this case, the Court of Appeals errs in appreciating the facts. In Culili
v. Eastern Telecommunications Philippines, Inc.:46 chanroblesvirtuallawlibrary

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 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. 47
chanrobleslaw

In ruling that respondent did not commit unfair labor practice, the National Labor Relations
Commission and the Court of Appeals failed to consider the totality of respondent's acts, which
showed that it violated its duty to bargain collectively. This constitutes unfair labor practice under
Article 259(g) of the Labor Code.

Article 263 of the Labor Code defines the duty to bargain collectively: chanRoblesvirtualLawlibrary

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

Respondent repeatedly refused to meet and bargain with SONEDCO Workers Free Labor Union, the
exclusive bargaining agent of its rank-and-file employees. In its Position Paper48 before the National
Labor Relations Commission, respondent cited the different instances when petitioners sent it letters
trying to set meetings to discuss a new collective bargaining agreement. 49 Respondent admitted that
it refused to meet with petitioners in light of the 2002 Collective Bargaining Agreement, which it
signed with PACIWU-TUCP, the previous bargaining representative. It claimed that the 2002
Collective Bargaining Agreement remained in full force and effect without change until December 31,
2006, despite PACIWU-TUCP losing the May 17, 2002 certification election to SONEDCO Workers Free
Labor Union.50

Respondent's argument has no merit. Respondent's reliance on the 2002 Collective Bargaining
Agreement as basis for not negotiating with petitioners is unjustified. The Collective Bargaining
Agreement that respondent invoked had been entered into when a Petition for Certification Election
was already filed.

In Associated Trade Unions v. Trajano,50 this Court ruled on the temporary nature of this type of
collective bargaining agreement: chanRoblesvirtualLawlibrary

The Court will not rule on the merits and/or defects of the new CBA and shall only consider the fact
that it was entered into at a time when the petition for certification election had already been filed by
TUP AS and was then pending resolution. The said CBA cannot be deemed permanent, precluding the
commencement of negotiations by another union with the management. In the meantime however,
so as not to deprive the workers of the benefits of the said agreement, it shall be recognized and
given effect on a temporary basis, subject to the results of the certification election. The agreement
may be continued in force if ATU is certified as the exclusive bargaining representative of the workers
or may be rejected and replaced in the event that TUP AS emerges as the winner. 51 (Emphasis
supplied)
chanrobleslaw

Respondent claimed that it refused to bargain with petitioners because the issue of representation
was still pending before the courts. It claimed that when the 2002 Collective Bargaining Agreement
expired on December 31, 2006, it had no bargaining agent to deal with as SONEDCO Workers Free
Labor Union had filed before the Department of Labor and Employment a Petition for Certification
Election on December 6, 2006, which resulted in the absence of a duly elected bargaining
Labor II – 1
representative.52 Respondent claimed it was only on September 25, 2008 that SONEDCO Workers
Free Labor Union was certified by the Department of Labor and Employment as the exclusive
bargaining agent of respondent's rank-and-file employees.53

This argument fails to persuade.

The Department of Labor and Employment, in its Order54 dated May 4, 2007 granting SONEDCO
Workers Free Labor Union's second Petition for Certification Election, illustrated why respondent's
argument is untenable: chanRoblesvirtualLawlibrary

Let it be noted that based on the results of the certification election conducted in the establishment
on 17 May 2002, Mediator-Arbiter Sumalinog, declared and certified SWOFLU as the sole and
exclusive bargaining agent of the rank-and-file employees of SONEDCO. The office of the Secretary
affirmed SWOFLU's certification in OS-A-6-63-01, and the decision became final and executory on 15
April 2003. As such, the suspension of the running of the one (1) year period referred in Section 3(a)
Rule VIII was automatically lifted on 15 April 2003. Hence, the one (1) year bar cannot be used to
deny the subject petition. Furthermore, despite PACIWU-TUCP's act of questioning the Office of the
Secretary's affirmation before the Court of Appeals by way of a petition for certiorari, no restraining
order was issued to stay the implementation of the decision.

In other words, as far as this Office is concerned, SWOFLU is the incumbent sole and exclusive
bargaining agent of the rank-and-file employees of SONEDCO. As such, there was actually no
necessity for SWOFLU to file the subject petition, as its representation status remains to be effective
unless challenged by other legitimate labor organizations during the freedom period of the CBA that
was entered into by PACIWU-TUCP and employer SONEDCO.

Incidentally, the Office of the Secretary declared in OS-A-6-63-01 that SWOFLU had the option to
adopt the interim CBA or negotiate with SONEDCO a new CBA. Whether SWOFLU was able to actually
administer the said CBA, or whether it attempted to negotiate with the employer for a new CBA but
was rejected, the issues are already moot and academic by reason of the expiration of the effectivity
of the agreement.56 (Emphasis supplied)
chanrobleslaw

Respondent's duty to bargain with SONEDCO Workers Free Labor Union as the incumbent bargaining
agent is clear. The last paragraph of Article 268 of the Labor Code states:chanRoblesvirtualLawlibrary

ARTICLE 268 [256]. Representation issue in organized establishments. —  In organized

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

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. (Emphasis
supplied)
chanrobleslaw

When petitioners held a conference on May 26, 2003, respondent refused to attend. 57 Because
respondent failed to appear in the conference, petitioners wrote their demands in a letter sometime
in July 2003. The letter included, among others, a wage increase of P50.00/day from September
2003 to 2006.58 Instead of explaining its non-attendance to the conference or making a counter-
offer, respondent replied on August 15, 2003 acknowledging the receipt and contents of the July
2003 letter but invoking the 2002 Collective Bargaining Agreement as an excuse not to answer
Labor II – 1
petitioners' demands to negotiate.59 This is contrary to Article 261 of the Labor Code, which requires
the other party to reply within 10 days from receipt of the written demand: chanRoblesvirtualLawlibrary

ARTICLE 261. [250] Procedure in Collective Bargaining.  — The following procedures shall be

observed in collective bargaining:cralawlawlibrary

(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[.]
chanrobleslaw

This was not respondent's only violation of Article 261. Respondent likewise failed to reply to the
collective bargaining agreement proposal sent by petitioners on August 21, 2007. 60 The September
22, 2007 letter, sent with the agreement proposal, also went unheeded. 61

Respondent's reliance on the 2002 Collective Bargaining Agreement is contrary to jurisprudence.

In Associated Labor Unions v. Trajano,62 this Court explicitly held that the winning union had the
option to either continue the existing collective bargaining agreement or negotiate a new one: chanRoblesvirtualLawlibrary

The new CBA negotiated by petitioners whether or not submitted to the MOLE in accordance with
Article 231 of the Labor Code cannot be deemed permanent, precluding commencement of
negotiations by another union with management, considering that it was entered into at a time when
the petition for certification election had already been filed by respondent union. . . . Meantime, this
interim agreement must be recognized and given effect on a temporary basis so as not to deprive the
workers of the favorable terms of the agreement. . . .

If, as a result of the certification election, respondent union or a union other than petitioner union
which executed the interim agreement is certified as the exclusive bargaining representative of the
rank and file employees of respondent company, then, such union may adopt the interim collective
bargaining agreement or negotiate with management for a new collective bargaining
agreement[.]63 (Citations omitted, emphasis supplied)
chanrobleslaw

As petitioners asked for a P50.00 wage increase, as opposed to the P12.00 wage increase they had
been receiving under the 2002 Collective Bargaining Agreement, petitioners were justified in
demanding a renegotiation. Respondent was remiss in its duty when it repeatedly refused
negotiations with petitioners.

Respondent's refusal is even more unfounded considering that the Labor Secretary's
Resolution,64 which upheld the result of the May 17, 2002 certification election and declared
SONEDCO Workers Free Labor Union as the exclusive bargaining agent, became final and executory
as early as April 15, 2003.65 Even though there had been a pending petition for certiorari questioning
the election results, no temporary restraining order was issued to preclude respondent from
bargaining with SONEDCO Workers Free Labor Union, the declared incumbent union.

Even if we consider respondent's refusal to bargain as merely a mistake made in good faith, its
subsequent acts show an attempt to restrict petitioners' negotiating power.

First, the 2002 Collective Bargaining Agreement was done on May 6, 2002, only days before the May
17, 2002 certification election. When respondent and PACIWU-TUCP entered into the 2002 Collective
Bargaining Agreement, they had been aware that a certification election was going to be conducted
in a few days. In pushing through with negotiations instead of waiting for the outcome of the
election, respondent risked needing to renegotiate with a new union if PACIWU-TUCP loses. It
cannot, thus, invoke the hastily concluded 2002 Collective Bargaining Agreement as an excuse not to
bargain with petitioners. If respondent had truly intended to bargain in good faith, it could have
easily waited a few more days to know the result of the certification election.

Second, when the 2002 Collective Bargaining Agreement expired in December 2006, the Labor
Secretary's Resolution declaring SONEDCO Workers Free Labor Union as the bargaining agent of
respondent's rank-and-file employees was already final and executory. Respondent's initial basis for
refusal to bargain had expired, and since no temporary restraining order was issued, nothing was
Labor II – 1
legally preventing respondent from negotiating a new collective bargaining agreement with
petitioners. That it chose to refuse negotiations and instead entered into an agreement with its
employees to essentially waive negotiations for 2007 and 2008 betrays its intention of limiting
petitioners' bargaining power.

The 2007 waiver provided, in part: chanRoblesvirtualLawlibrary

In the event that a subsequent CBA is negotiated between Management and Union, the new CBA
shall only be effective January 1, 2008.66
chanrobleslaw

The 2008 waiver provided, in part: chanRoblesvirtualLawlibrary

Sa panahon na kung saan may CBA na maisasara sa pagitan ng Management at Unyon, ito ay
magiging epektibo lamang Simula January l, 2009.67
chanrobleslaw

The wording of the waivers shows a clear attempt to limit petitioners' bargaining power by making
them waive the negotiations for 2007 and 2008. In stipulating that the collective bargaining
agreement that would be entered into would only be effective the year following the 2008 waiver,
respondent limited when the collective bargaining agreement could be deemed effective. Tn other
words, respondent asked petitioners to forego any benefits they might have received under a
collective bargaining agreement in exchange for the company-granted benefits.

Both the National Labor Relations Commission and the Court of Appeals regarded the incentives as a
magnanimous move because it gave the employees a P16.00 wage increase, P4.00 more than the
P12.00 increase under the 2002 Collective Bargaining Agreement. However, respondent's claim of
benevolence falls short: the wage increase proposed by petitioners in 2007 was P50.00. If a
collective bargaining agreement had been concluded in 2007, employees who signed the waivers
would have lost the chance to receive P34.00 wage increase for that year.

Lastly, when the 2007 waiver was circulated, respondent already had a copy of petitioners'
agreement proposal. Respondent was aware that petitioners asked for a P50.00 wage increase. More
importantly, the last bar preventing respondent from recognizing SONEDCO Workers Free Labor
Union as the bargaining agent has been resolved by the time it issued the waivers. The Petition for
Certiorari relative to the May 17, 2002 certification election was denied with finality by this Court on
July 11, 2007.68 There was no reason to doubt that SONEDCO Workers Free Labor Union was the sole
and exclusive bargaining representative. If respondent did indeed act in good faith, it would have
undergone agreement negotiations with petitioners. However, respondent incessantly refused to
meet with petitioners to discuss the agreement proposal even after petitioners sent their September
22, 2007 letter.69 Instead of negotiating the proposed P50.00 wage increase, respondent granted a
P16.00 wage increase on the condition that if a collective bargaining agreement was to be signed, it
would only be effective the succeeding year. In effect, respondent hindered petitioners' bargaining
power when it made them waive the bargaining efforts for 2007 and 2008. chanroblesvirtuallawlibrary

II
The National Labor Relations Commission did not err in granting the benefits for 2007 and 2008 to
the employees who did not sign the waiver.

After SONEDCO Workers Free Labor Union was again declared as the exclusive bargaining
representative in the August 20, 2008 certification election, the 2009 Collective Bargaining
Agreement was created to cover 2009 to 2013.70 Since the 2009 Collective Bargaining Agreement did
not include the years 2007 and 2008, the alleged purpose of the waivers, which was to prevent
double compensation, was already served. 71 It would be unfair for the employees to still not receive
the benefits for 2007 and 2008 simply because they refused to sign a waiver that was already moot.

However, there is no need for the continuation of the wage increase for 2007 and 2008 since the
2009 Collective Bargaining Agreement contains wage increase provisions for 2009 to 2013. As
explained in Samahang Manggagawa sa Top Form Manufacturing v. National Labor Relations
Commission,72 if a proposal is not printed in the collective bargaining agreement, it cannot be
demanded: chanRoblesvirtualLawlibrary

Labor II – 1
The CBA is the law between the contracting parties — the collective bargaining representative and
the employer-company. Compliance with a CBA is mandated by the expressed policy to give
protection to labor, hi the same vein, CBA provisions should be "construed liberally rather than
narrowly and technically, and the courts must place a practical and realistic construction upon it,
giving due consideration to the context in which it is negotiated and purpose which it is intended to
serve." This is founded on the dictum that a CBA is not an ordinary contract but one impressed with
public interest. It goes without saying, however, that only provisions embodied in the CBA should be
so interpreted and complied with. Where a proposal raised by a contracting party does not find print
in the CBA, it is not a part thereof and the proponent has no claim whatsoever to its
implementation.72 (Citations omitted)
chanrobleslaw

If petitioners wanted the wage increase for 2007 and 2008 to be carried on, the proper recourse
would have been to demand that this be included in the 2009 Collective Bargaining Agreement. chanroblesvirtuallawlibrary

III

Respondent is liable to pay moral and exemplary damages. In Nueva Ecija Electric Cooperative, Inc.
v. National Labor Relations Commission:73 chanroblesvirtuallawlibrary

Unfair labor practices violate the constitutional rights of workers and employees to self-organization,
are inimical to the legitimate interests 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; and
disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.
As the conscience of the government, it is the Courts sworn duty to ensure that none trifles with
labor rights.

For this reason, we find it proper in this case to impose moral and exemplary damages on private
respondent.74
chanrobleslaw

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated January 30,
2015 and the Resolution dated July 27, 2015 in CA-GR. SP No. 05950 are SET ASIDE. Respondent
Universal Robina Corporation. Sugar Division - Southern Negros Development Corporation
is GUILTY of unfair labor practice and is ORDERED to pay each of the petitioners the wage increase
of P16.00 for the years 2007 and 2008; and to pay SONEDCO Workers Free Labor Union moral
damages in the amount of P100,000.00; and exemplary damages in the amount of P200,000.00.

Labor II – 1
40.) G.R. No. L-30241 June 30, 1972

MACTAN WORKERS UNION and TOMAS FERRER, as President thereof, plaintiffs-appellees,

vs.
DON RAMON ABOITIZ, President, Cebu Shipyard & Engineering Works, Inc.; EDDIE LIM, as Treasurer;
JESUS DIAGO, Superintendent of the aforesaid corporation; WILFREDO VIRAY, as Resident Manager of the
Shipyard & Engineering Works, Inc.; and the CEBU SHIPYARD & ENGINEERING WORKS, INC., defendants-
appellees; ASSOCIATION LABOR UNION, intervenor-appellant.

Andales Law Office for plaintiffs-appellees.

Pedro B. Uy Calderon for defendants-appellees.

Seno, Mendoza & Associates for intervenor-appellant.

FERNANDO, J.:p

The dispute in this appealed decision from the Court of First Instance of Cebu on questions of law is between plaintiff Mactan Workers Union 1 and intervenor
Associated Labor Union. The former in its complaint on behalf of seventy-two of its members working in defendant corporation, Cebu Shipyard and Engineering
Works, Inc.2 did file a money claim in the amount of P4,035.82 representing the second installment of a profit-sharing agreement under a collective bargaining
contract entered into between such business firm and intervenor labor union as the exclusive collective bargaining representative of its workers. The plaintiff was
successful both in the City Court of Lapulapu where such complaint was first started as well as in the Court of First Instance of Cebu. It is from the decision of the
latter court, rendered on February 22, 1968, that this appeal was interposed by intervenor Associated Labor Union. It must have been an awareness on appellant's
part that on the substantive aspect, the claim of plaintiff to what was due its members under such collective bargaining agreement was meritorious that led it to rely
on alleged procedural obstacles for the reversal sought. Intervenor, however, has not thereby dented the judgment. As will be more fully explained, there are no
applicable procedural doctrines that stand in the way of plaintiff's suit. We affirm.

The facts are not in dispute. According to the decision: "From the evidence presented it appears that the defendant
Cebu Shipyard & Engineering Works, Inc. in Lapulapu City is employing laborers and employees belonging to two
rival labor unions. Seventy-two of these employees or laborers whose names appear in the complaint are affiliated
with the Mactan Workers Union while the rest are members of the intervenor Associated Labor Union. On November
28, 1964, the defendant Cebu Shipyard & Engineering Works, Inc. and the Associated Labor Union entered into a
'Collective Bargaining Agreement' ... the pertinent part of which, Article XIII thereof, [reads thus]: '... The [Company]
agrees to give a profit-sharing bonus to its employees and laborers to be taken from ten per cent (10%) of its net
profits or net income derived from the direct operation of its shipyard and shop in Lapulapu City and after deducting
the income tax and the bonus annually given to its General Manager and the Superintendent and the members of
the Board of Directors and Secretary of the Corporation, to be payable in two (2) installments, the first installment
being payable in March and the second installment in June, each year out of the profits in agreement. In the
computation of said ten per cent (10%) to [be] distributed as a bonus among the employees and laborers of the
[Company] in proportion to their salaries or wages, only the income derived by the [Company] from the direct
operation of its shipyard and shop in Lapulapu City, as stated herein-above-commencing from the earnings during
the year 1964, shall be included. Said profit-sharing bonus shall be paid by the [Company] to [Associated Labor
Union] to be delivered by the latter to the employees and laborers concerned and it shall be the duty of the
Associated Labor Union to furnish and deliver to the [Company] the corresponding receipts duly signed by the
laborers and employees entitled to receive the profit-sharing bonus within a period of sixty (60) days from the date
of receipt by [it] from the [Company] of the profit-sharing bonus. If a laborer or employee of the [Company] does not
want to accept the profit-sharing bonus which the said employee or laborer is entitled under this Agreement, it shall
be the duty of the [Associated Labor Union] to return the money received by [it] as profit-sharing bonus to the
[Company] within a period of sixty (60) days from the receipt by the [Union] from the [Company] of the said profit-
sharing bonus.'"  The decision went on to state: "In compliance with the said collective bargaining agreement, in
3

March, 1965 the defendant Cebu Shipyard & Engineering Works, Inc. delivered to the ALU for distribution to the
laborers or employees working with the defendant corporation to the profit-sharing bonus corresponding to the first
installment for the year 1965. Again in June 1965 the defendant corporation delivered to the Associated Labor
Union the profit-sharing bonus corresponding to the second installment for 1965. The members of the Mactan
Workers Union failed to receive their shares in the second installment of bonus because they did not like to go to the
office of the ALU to collect their shares. In accordance with the terms of the collective bargaining after 60 days, the
Labor II – 1
uncollected shares of the plaintiff union members was returned by the ALU to the defendant corporation. At the
same time the defendant corporation was advised by the ALU not to deliver the said amount to the members of the
Mactan Workers Union unless ordered by the Court, otherwise the ALU will take such step to protect the interest of
its members ... . Because this warning given by the intervenor union the defendant corporation did not pay to the
plaintiffs the sum of P4,035.82 which was returned by the Associated Labor Union, but instead, deposited the said
amount with the Labor Administrator. For the recovery of this amount this case was filed with the lower court." 4

The dispositive portion of such decision follows: "[Wherefore], judgment is hereby rendered ordering the defendants
to deliver to the Associated Labor Union the sum of P4,035.82 for distribution to the employees of the defendant
corporation who are members of the Mactan Workers Union; and ordering the intervenor Associated Labor Union,
immediately after receipt of the said amount, to pay the members of the Mactan Workers Union their corresponding
shares in the profit-sharing bonus for the second installments for the year 1965." 5

It is from such a decision that an appeal was taken by intervenor Associated Labor Union. As is quite apparent on
the face of such judgment, the lower court did nothing except to require literal compliance with the terms of a
collective bargaining contract. Nor, as will be hereafter discussed, has any weakness thereof been demonstrated on
the procedural questions raised by appellant. To repeat, we have to affirm.

1. The terms and conditions of a collective bargaining contract constitute the law between the parties. Those who
are entitled to its benefits can invoke its provisions. In the event that an obligation therein imposed is not fulfilled, the
aggrieved party has the right to go to court for redress.  Nor does it suffice as a defense that the claim is made on
6

behalf of non-members of intervenor Associated Labor Union, for it is a well-settled doctrine that the benefits of a
collective bargaining agreement extend to the laborers and employees in the collective bargaining unit, including
those who do not belong to the chosen bargaining labor organization.  Any other view would be a discrimination on
7

which the law frowns. It is appropriate that such should be the case. As was held in United Restauror's Employees
and Labor Union v. Torres,  this Court speaking through Justice Sanchez, "the right to be the exclusive
8

representative of all the employees in an appropriate collective bargaining unit is vested in the labor union
'designated or selected' for such purpose 'by the majority of the employees' in the unit concerned."  If it were
9

otherwise, the highly salutory purpose and objective of the collective bargaining scheme to enable labor to secure
better terms in employment condition as well as rates of pay would be frustrated insofar as non-members are
concerned, deprived as they are of participation in whatever advantages could thereby be gained. The labor union
that gets the majority vote as the exclusive bargaining representative does not act for its members alone. It
represents all the employees in such a bargaining unit. It is not to be indulged in any attempt on its part to disregard
the rights of non-members. Yet that is what intervenor labor union was guilty of, resulting in the complaint filed on
behalf of the laborers, who were in the ranks of plaintiff Mactan Labor Union.

The outcome was not at all unexpected. The right being clear all that had to be done was to see to its enforcement.
Nor did the lower court in the decision now on appeal, require anything else other than that set forth in the collective
bargaining agreement. All that was done was to have the covenants therein contained as to the profit-sharing
scheme carried out and respected. It would be next to impossible for intervenor Associated Labor Union to point to
any feature thereof that could not in any wise be objected to as repugnant to the provisions of the collective
bargaining contract. Certainly the lower court, as did the City Court of Lapu-lapu, restricted itself to compelling the
parties to abide by what was agreed upon. How then can the appealed decision be impugned?

2. Intervenor Associated Labor Union, laboring under such a predicament had perforce to rely on what it considered
procedural lapses. It would assail the alleged lack of a cause of action, of jurisdiction of the City Court of Lapulapu
and of personality of the Mactan Workers Union to represent its members. There is no merit to such an approach.
The highly sophisticated line of argument followed in its brief as appellant does not carry a persuasive ring. What is
apparent is that intervenor was hard put to prop up what was inherently a weak, not to say an indefensible, stand.
The impression given is that of a litigant clutching at straws.

How can the allegation of a lack of a cause of action be taken seriously when precisely there was a right violated on
the part of the members of plaintiff Mactan Workers Union, a grievance that called for redress? The assignment of
error that the City Court of Lapulapu was bereft of jurisdiction is singularly unpersuasive. The amount claimed by
plaintiff Mactan Workers Union on behalf of its members was P4,035.82 and if the damages and attorney's fees be
added, the total sum was less than P10,000.00. Section 88 of the Judiciary Act in providing for the original
jurisdiction of city courts in civil cases provides: "In all civil actions, including those mentioned in Rules fifty-nine and
Labor II – 1
sixty-two (now Rules 57 and 60) of the Rules of Court, arising in his municipality or city, and not exclusively
cognizable by the Court of First Instance, the municipal judge and the judge of a city court shall have exclusive
original jurisdiction where the value of the subject matter or amount of the demand does not exceed ten thousand
pesos, exclusive of interests and costs."   It is true that if an element of unfair labor practice may be discerned in a
10

suit for the enforcement of a collective bargaining contract, then the matter is solely cognizable by the Court of
Industrial Relations.   It is equally true that as of the date the lower court decision was rendered, the question of
11

such enforcement had been held to be for the regular courts to pass upon.   Counsel for intervenor Associated
12

Labor Union was precisely the petitioner in one of the decisions of this Court, Seno v . Mendoza,   where such a
13

doctrine was reiterated. In the language of Justice Makalintal, the ponente: "As the issue involved in the instant
case, although arising from a labor dispute, does not refer to one affecting an industry which is indispensable to the
national interest and certified by the President to the Industrial Court, nor to minimum wage under the Minimum
Wage Law, nor to hours of employment under the Eight-Hour Labor Law, nor to an unfair labor practice, but seeks
the enforcement of a provision of the collective bargaining agreement, ..., jurisdiction pertains to the ordinary courts
and not to the Industrial Court."   There was only a half-hearted attempt, if it could be called that, to lend credence
14

to the third error assigned, namely that plaintiff Mactan Workers Union could not file the suit on behalf of its
members. That is evident by intervenor Associated Labor Union devoting only half a page in its brief to such an
assertion. It is easy to see why it should be thus. On its face, it certainly appeared to be oblivious of how far a labor
union can go, or is expected to, in the defense of the rights of its rank and file. There was an element of surprise,
considering that such a contention came from a labor organization, which under normal condition should be the last
to lay itself open to a charge that it is not averse to denigrating the effectiveness of labor unions.

3. This brings us to one last point. It is quite understandable that labor unions in their campaign for membership, for
acquiring ascendancy in any shop, plant, or industry would do what lies in their power to put down competing
groups. The struggle is likely to be marked with bitterness, no quarter being given or expected on the part of either
side. Nevertheless, it is not to be forgotten that what is entitled to constitutional protection is labor, or more
specifically the working men and women, not labor organizations. The latter are merely the instrumentalities through
which their welfare may be promoted and fostered. That is the raison d'etre of labor unions. The utmost care should
be taken then, lest in displaying an unyielding, intransigent attitude on behalf of their members, injustice be
committed against opposing labor organizations. In the final analysis, they alone are not the sole victims, but the
labor movement itself, which may well be the recipient of a crippling blow. Moreover, while it is equally
understandable that their counsel would take advantage of every legal doctrine deemed applicable or conjure up
any defense that could serve their cause, still, as officers of the court, there should be an awareness that resort to
such a technique does result in clogged dockets, without the least justification especially so if there be insistence on
flimsy and insubstantial contentions just to give some semblance of plausibility to their pleadings. Certainly,
technical virtuosity, or what passes for it, is no substitute for an earnest and sincere desire to assure that there be
justice according to law. That is a creed to which all members of the legal profession, labor lawyers not excluded,
should do their best to live by.

WHEREFORE, the decision of the lower court of February 22, 1968 is affirmed. Costs against Associated Labor
Union.

Labor II – 1
41.) G.R. No. L-24711             April 30, 1968

BENGUET CONSOLIDATED, INC., plaintiff-appellant,

vs.
BCI EMPLOYEES and WORKERS UNION-PAFLU, PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS,
CIPRIANO CID and JUANITO GARCIA, defendants-appellees.

Ross, Selph, Del Rosario, Bito and Misa for plaintiff-appellant.

Cipriano Cid and Associates for defendants-appellees.

BENGZON, J.P., J.:

The contending parties in this case —Benguet Consolidated, Inc., ("BENGUET") on the one hand, and on the other,
BCI Employees & Workers Union ("UNION") and the Philippine Association of Free Labor Unions ("PAFLU") —do
not dispute the following factual settings established by the lower court.

On June 23, 1959, the Benguet-Balatoc Workers Union ("BBWU"), for and in behalf of all BENGUET employees in
its mines and milling establishment located at Balatoc, Antamok and Acupan, Municipality of Itogon, Mt. Province,
entered into a Collective Bargaining Contract, Exh. "Z" ("CONTRACT") with BENGUET. Pursuant to its very terms,
said CONTRACT became effective for a period of four and a half (4-½) years, or from June 23, 1959 to December
23, 1963. It likewise embodied a No-Strike, No-Lockout clause. 1

About three years later, or on April 6, 1962, a certification election was conducted by the Department of Labor
among all the rank and file employees of BENGUET in the same collective bargaining units. UNION obtained more
than 50% of the total number of votes, defeating BBWU, and accordingly, the Court of Industrial Relations, on
August 18, 1962, certified UNION as the sole and exclusive collective bargaining agent of all BENGUET employees
as regards rates of pay, wages, hours of work and such other terms and conditions of employment allowed them by
law or contract.

Subsequently, separate meetings were conducted on November 22, 23 and 24, 1962 at Antamok, Balatoc and
Acupan Mines respectively by UNION. The result thereof was the approval by UNION members of a
resolution 2 directing its president to file a notice of strike against BENGUET for:

1. [Refusal] to grant any amount as monthly living allowance for the workers;

2. Violation of Agreements reached in conciliation meetings among which is the taking down of investigation
[sic] and statements of employees without the presence of union representative;

3. Refusal to dismiss erring executive after affidavits had been presented, thereby company showing [sic]
bias and partiality to company personnel;

4. Discrimination against union members in the enforcement of disciplinary actions.

The Notice of Strike 3 was filed on December 28, 1962. Three months later, in the evening of March 2, 1963, UNION
members who were BENGUET employees in the mining camps at Acupan, Antamok and Balatoc, went on strike.
Regarding the conduct of the strike, the trial court reports: 4

... Picket lines were formed at strategic points within the premises of the plaintiff. The picketers, by means of
threats and intimidation, and in some instances by the use of force and violence, prevented passage thru the
picket lines by personnel of the plaintiff who were reporting for work. Human blocks were formed on points of
entrance to working areas so that even vehicles could not pass thru, while the officers of the plaintiff were
not allowed for sometime to leave the "staff" area.

The strikers forming picket lines bore placards with the letters BBWU-PAFLU written thereon. As a general
rule, the picketers were unruly, aggressive and uttered threatening remarks to staff members and non-
Labor II – 1
 strikers who desire to pass thru the picket lines. On some occasions, the picketers resorted to violence by
pushing back the car wherein staff officers were riding who would like to enter the mine working area. The
picketers lifted one side of the vehicle and were in the act of overturning it when they were prevented from
doing so by the timely intervention of PC soldiers, who threw tear gas bombs to make the crowd disperse.
Many of the picketers were apprehended by the PC soldiers and criminal charges for grave coercion were
filed against them before the Court of First Instance of Baguio. Two of the strike leaders and twenty-two
picketers, however, were found guilty of light coercion while nineteen other accused were acquitted.

There was a complete stoppage of work during the strike in all the mines. After two weeks elapsed, repair
and maintenance of the water pump was allowed by the strikers and some of the staff members were
permitted to enter the mines, who inspected the premises in the company of PC soldiers to ascertain the
extent of the damage to the equipment and losses of company property.

xxx     xxx     xxx

On May 2, 1963, the parties agreed to end the raging dispute. Accordingly, BENGUET and UNION executed the
AGREEMENT, Exh. 1. PAFLU placed its conformity thereto and said agreement was attested to by the Director of
the Bureau of Labor Relations. About a year later or on January 29, 1964, a collective bargaining contract was
finally executed between UNION-PAFLU and BENGUET.  5

Meanwhile, as a result, allegedly, of the strike staged by UNION and its members, BENGUET had to incur expenses
for the rehabilitation of mine openings, repair of mechanical equipment, cost of pumping water out of the mines,
value of explosives, tools and supplies lost and/or destroyed, and other miscellaneous expenses, all amounting to
P1,911,363.83. So, BENGUET sued UNION, PAFLU and their respective Presidents to recover said amount in the
Court of First Instance of Manila, on the sole premise that said defendants breached their undertaking in the existing
CONTRACT not to strike during the effectivity thereof .

In answer to BENGUET's complaint, defendants unions and their respective presidents put up the following
defenses: (1) they were not bound by the CONTRACT which BBWU, the defeated union, had executed with
BENGUET; (2) the strike was due, inter alia, to unfair labor practices of BENGUET; and (3) the strike was lawful and
in the exercise of the legitimate rights of UNION-PAFLU under Republic Act 875.

Issues having been joined, trial commenced. On February 23, 1965, the trial court rendered judgment dismissing
the complaint on the ground that the CONTRACT, particularly the No-Strike clause, did not bind defendants. The
latters' counterclaim was likewise denied. Failing to get a reconsideration of said decision, BENGUET interposed the
present appeal.

The several errors assigned by BENGUET basically ask three questions:

(1) Did the Collective Bargaining Contract executed between BENGUET and BBWU on June 23, 1959 and
effective until December 23, 1963 automatically bind UNION-PAFLU upon its certification, on August 18,
1962, as sole bargaining representative of all BENGUET employees?

(2) Are defendants labor unions and their respective presidents liable for the illegal acts committed during
the course of the strike and picketing by some union members?

(3) Are defendants liable to pay the damages claimed by BENGUET?

In support of an affirmative answer to the first question, BENGUET first invokes the so-called "Doctrine of
Substitution" referred to in General Maritime Stevedores' Union v. South Sea Shipping Lines, L-14689, July 26,
1960. There it was remarked:

xxx     xxx     xxx

We also hold that where the bargaining contract is to run for more than two years, the principle of
substitution may well be adopted and enforced by the CIR to the effect that after two years of the life of a
Labor II – 1
 bargaining agreement, a certification election may be allowed by the CIR; that if a bargaining agent other
than the union or organization that executed the contract, is elected, said new agent would have to respect
said contract, but that it may bargain with the management for the shortening of the life of the contract if it
considers it too long, or refuse to renew the contract pursuant to an automatic renewal clause. (Emphasis
supplied)

xxx     xxx     xxx

The submission utterly fails to persuade Us. The above-quoted pronouncement was obiter dictum. The only issue in
the General Maritime Stevedores' Union case was whether a collective bargaining agreement which had practically
run for 5 years constituted a bar to certification proceedings. We held it did not and accordingly directed the court a
quo to order certification elections. With that, nothing more was necessary for the disposition of the case. Moreover,
the pronouncement adverted to was rather premature. The possible certification of a union different from that which
signed the bargaining contract was a mere contingency then since the elections were still to be held. Clearly, the
Court was not called upon to rule on possible effects of such proceedings on the bargaining agreement. 6

But worse, BENGUET's reliance upon the Principle of Substitution is totally misplaced. This principle, formulated by
the NLRB 7 as its initial compromise solution to the problem facing it when there occurs a shift in employees' union
allegiance after the execution of a bargaining contract with their employer, merely states that even during the
effectivity of a collective bargaining agreement executed between employer and employees thru their agent, the
employees can change said agent but the contract continues to bind them up to its expiration date. They may
bargain however for the shortening of said expiration date. 8

In formulating the "substitutionary" doctrine, the only consideration involved was the employees' interest in the
existing bargaining agreement. The agent's interest never entered the picture. In fact, the justification 9 for said
doctrine was:

... that the majority of the employees, as an entity under the statute, is the true party in interest to the
contract, holding rights through the agency of the union representative. Thus, any exclusive interest claimed
by the agent is defeasible at the will of the principal.... (Emphasis supplied)

Stated otherwise, the "substitutionary" doctrine only provides that the employees cannot revoke the validly executed
collective bargaining contract with their employer by the simple expedient of changing their bargaining agent. And it
is in the light of this that the phrase "said new agent would have to respect said contract" must be understood. It
only means that the employees, thru their new bargaining agent, cannot renege on their collective bargaining
contract, except of course to negotiate with management for the shortening thereof.

The "substitutionary" doctrine, therefore, cannot be invoked to support the contention that a newly certified collective
bargaining agent automatically assumes all the personal undertakings — like the no-strike stipulation here — in the
collective bargaining agreement made by the deposed union. When BBWU bound itself and its officers not to strike,
it could not have validly bound also all the other rival unions existing in the bargaining units in question. BBWU was
the agent of the employees, not of the other unions which possess distinct personalities. To consider UNION
contractually bound to the no-strike stipulation would therefore violate the legal maxim that res inter alios nec
prodest nec nocet. 10

Of course, UNION, as the newly certified bargaining agent, could always voluntarily assume all the personal
undertakings made by the displaced agent. But as the lower court found, there was no showing at all that, prior to
the strike, 11 UNION formally adopted the existing CONTRACT as its own and assumed all the liability ties imposed
by the same upon BBWU.

BENGUET also alleges that UNION is now in estoppel to claim that it is not contractually bound by the CONTRACT
for having filed on September 28, 1962, in Civil Case No. 1150 of the Court of First Instance of Baguio, entitled
"Bobok Lumber Jack Ass'n. vs. Benguet Consolidated, Inc. and BCI Employees Workers Union-PAFLU" 12 a motion
praying for the dissolution of the ex parte writ of preliminary injunction issued therein, wherein the following appears:

Labor II – 1
 In that case, the CIR transfered the contactual rights of the BBWU to the defendant union. One of such
rights transferred was the right to the modified union-shop — checked off union dues arrangement now
under injunction.

The collective bargaining contract mentioned in the plaintiff's complaint did not expire by the mere fact that
the defendant union was certified as bargaining agent in place of the BBWU. The Court of Industrial
Relations in the case above mentioned made it clear that the collective bargaining contract would be
respected unless and until the parties act otherwise. In effect, the defendant union by act of subrogation
took the place of the BBWU as the UNION referred to in the contract. (Emphasis supplied)

There is no estoppel. UNION did not assert the above statement against BENGUET to force it to rely upon the same
to effect the union check-off in its favor. UNION and BENGUET were together as co-defendants in said Civil Case
No. 1150. Rather, the statement was directed against Bobok Lumber Jack Ass'n., plaintiff therein, to weaken its
cause of action. Moreover, BENGUET did not rely upon said statement. What prompted Bobok Lumber Jack Ass'n.
to file the complaint for declaratory relief was the fact that "... the defendants [UNION and BENGUET] are planning
to agree to the continuation of a modified union shop in the three camps mentioned above without giving the
employees concerned the opportunity to express their wishes on the matter ..." BENGUET even went further in its
answer filed on October 18, 1962, by asserting that "... defendants have already agreed to the continuation of the
modified union shop provision in the collective bargaining agreement...." 13

Neither can we accept BENGUET's contention that the inclusion of said aforequoted motion in the record on appeal
filed in said Civil Case No. 1150, now on appeal before Us docketed as case No. L-24729, refutes UNION's
allegation that it has subsequently abandoned its stand against Bobok Lumber Jack Ass'n., in said case. The mere
appearance of such motion in the record on appeal is but a compliance with the procedural requirement of Rule 41,
Sec. 6, of the Rules of Court, that all matters necessary for a proper understanding of the issues involved be
included in the record on appeal. This therefore cannot be taken as a rebuttal of the UNION's explanation.

There is nothing then, in law as well as in fact, to support plaintiff BENGUET's contention that defendants are
contractually bound by the CONTRACT. And the stand taken by the trial court all the more becomes unassailable in
the light of Art. 1704 of the Civil Code providing that:

In the collective bargaining, the labor union or members of the board or committee signing the contract shall
be liable for non-fulfillment thereof. (Emphasis supplied)

There is no question, defendants were not signatories nor participants in the CONTRACT.

Lastly, BENGUET contends, citing Clause II in connection with Clause XVIII of the CONTRACT, that since all the
employees, as principals, continue being bound by the no-strike stipulation until the CONTRACT's expiration,
UNION, as their agent, must necessarily be bound also pursuant to the Law on Agency. This is untenable. The way
We understand it, everything binding on a duly authorized agent, acting as such, is binding on the principal;
not vice-versa, unless there is a mutual agency, or unless the agent expressly binds himself to the party with whom
he contracts. As the Civil Code decrees it: 14

The agent who acts as such is not personally liable to the party with whom he contracts, unless he
expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his
powers. (Emphasis supplied) 1äwphï1.ñët

Here, it was the previous agent who expressly bound itself to the other party, BENGUET. UNION, the new agent,
did not assume this undertaking of BBWU.

In view of all the foregoing, We see no further necessity of delving further into the other less important points raised
by BENGUET in connection with the first question.

On the second question, it suffices to consider, in answer thereto, that the rule of vicarious liability has, since the
passage of Republic Act 875, been expressly legislated out. 15 The standing rule now is that for a labor union and/or
its officials and members to be liable, there must be clear proof of actual participation in, or authorization or

Labor II – 1
ratification of the illegal acts. 16 While the lower court found that some strikers and picketers resorted to intimidation
and actual violence, it also found that defendants presented uncontradicted evidence that before and during the
strike, the strike leaders had time and again warned the strikers not to resort to violence but to conduct peaceful
picketing only. 17 Assuming that the strikers did not heed these admonitions coming from their leaders, the failure of
the union officials to go against the erring union members pursuant to the UNION and PAFLU constitutions and by-
laws exposes, at the most, only a flaw or weakness in the defense which, however, cannot be the basis for plaintiff
BENGUET to recover.

Lastly, paragraph VI of the Answer 18 sufficiently traverses the material allegations in paragraph VI of the
Complaint, 19 thus precluding a fatal admission on defendants' part. The purpose behind the rule requiring specific
denial is obtained: defendants have set forth the matters relied upon in support of their denial. Paragraph VI of the
Answer may not be a model pleading, but it suffices for purposes of the rule. Pleadings should, after all, be liberally
construed. 20

Since defendants were not contractually bound by the no-strike clause in the CONTRACT, for the simple reason
that they were not parties thereto, they could not be liable for breach of contract to plaintiff. The lower court
therefore correctly absolved them from liability.

WHEREFORE, the judgment of the lower court appealed from is hereby affirmed. No costs. So ordered.

Labor II – 1
42.) G.R. No. 101619 July 8, 1992

SANYO PHILIPPINES WORKERS UNION-PSSLU LOCAL CHAPTER NO. 109 AND/OR ANTONIO DIAZ, PSSLU
NATIONAL PRESIDENT, petitioners,
vs.
HON. POTENCIANO S. CANIZARES, in his capacity as Labor Arbiter, BERNARDO YAP, RENATO BAYBON,
SALVADOR SOLIBEL, ALLAN MISTERIO, EDGARDO TANGKAY, LEONARDO DIONISIO, ARNEL SALVO,
REYNALDO RICOHERMOSO, BENITO VALENCIA, GERARDO LASALA AND ALEXANDER
ATANASIO, respondents.

MEDIALDEA, J.:

This petition seeks to nullify: 1) the order of respondent Labor Arbiter Potenciano Cañizares dated August 6, 1991
deferring the resolution of the motion to dismiss the complaint of private respondents filed by petitioner Sanyo Philippines
Workers Union-PSSLU Local Chapter No. 109 (PSSLU, for brevity) on the ground that the labor arbiter had no jurisdiction
over said complaint and 2) the order of the same respondent clarifying its previous order and ruling that it had jurisdiction
over the case.

The facts of the case are as follows:

PSSLU had an existing CBA with Sanyo Philippines Inc. (Sanyo, for short) effective July 1, 1989 to June 30, 1994. The
same CBA contained a union security clause which provided:

Sec. 2. All members of the union covered by this agreement must retain their membership in good
standing in the union as condition of his/her continued employment with the company. The union shall
have the right to demand from the company the dismissal of the members of the union by reason of their
voluntary resignation from membership or willful refusal to pay the Union Dues or by reasons of their
having formed, organized, joined, affiliated, supported and/or aided directly or indirectly another labor
organization, and the union thus hereby guarantees and holds the company free and harmless from any
liability whatsoever that may arise consequent to the implementation of the provision of this article. (pp. 5-
6, Rollo)

In a letter dated February 7, 1990, PSSLU, through its national president, informed the management of Sanyo that the
following employees were notified that their membership with PSSLU were cancelled for anti-union, activities, economic
sabotage, threats, coercion and intimidation, disloyalty and for joining another union: Benito Valencia, Bernardo Yap,
Arnel Salvo, Renato Baybon, Eduardo Porlaje, Salvador Solibel, Conrado Sarol, Angelito Manzano, Allan Misterio,
Reynaldo Ricohermoso, Mario Ensay and Froilan Plamenco. The same letter informed Sanyo that the same employees
refused to submit themselves to the union's grievance investigation committee (p. 53, Rollo). It appears that many of
these employees were not members of PSSLU but of another union, KAMAO.

On February 14, 1990, some officers of KAMAO, which included Yap, Salvo, Baybon, Solibel, Valencia, Misterio and
Ricohermoso, executed a pledged of cooperation with PSSLU promising cooperation with the latter union and among
others, respecting, accepting and honoring the CBA between Sanyo and specifically:

1. That we shall remain officers and members of KAMAO until we finally decide to rejoin Sanyo Phil.
Workers Union-PSSLU;

2. That henceforth, we support and cooperate with the duly elected union officers of Sanyo Phil. Workers
Union-PSSLU in any and all its activities and programs to insure industrial peace and harmony;

3. That we collectively accept, honor, and respect the Collective Bargaining Agreement entered into
between Sanyo Phil. Inc. and Sanyo Phil. Workers Union-PSSLU dated February 7, 1990;

4 That we collectively promise not to engage in any activities inside company premises contrary to law,
the CBA and existing policies;
Labor II – 1
 5 That we are willing to pay our individual agency fee in accordance with the provision of the Labor Code,
as amended;

6 That we collectively promise not to violate this pledge of cooperation. (p. 55, Rollo)

On March 4, 1991, PSSLU through its national and local presidents, wrote another letter to Sanyo recommending the
dismissal of the following non-union workers: Bernardo Yap, Arnel Salvo, Renato Baybon, Reynaldo Ricohermoso,
Salvador Solibel, Benito Valencia, and Allan Misterio, allegedly because: 1) they were engaged and were still engaging in
anti-union activities; 2) they willfully violated the pledge of cooperation with PSSLU which they signed and executed on
February 14, 1990; and 3) they threatened and were still threatening with bodily harm and even death the officers of the
union (pp. 37-38, Rollo).

Also recommended for dismissal were the following union members who allegedly joined, supported and sympathized
with a minority union, KAMAO: Gerardo Lasala, Legardo Tangkay, Alexander Atanacio, and Leonardo Dionisio.

The last part of the said letter provided:

The dismissal of the above-named union members is without prejudice to receive (sic) their termination
pay if management decide (sic) to grant them benefits in accordance with law. The union hereby holds
the company free and harmless from any liability that may arise consequent to the implementation by the
company of our recommendations for the dismissal of the above-mentioned workers.

It is however suggested that the Grievance Machinery be convened pursuant to Section 3, Article XV of
the Collective Bargaining Agreement (CBA) before their actual dismissal from the company. (p. 38, Rollo)

Pursuant to the above letter of the union, the company sent a memorandum to the same workers advising them that:

As per the attached letter from the local union President SPWU and the federation President, PSSLU,
requesting management to put the herein mentioned employees on preventive suspension, effective
immediately, preliminary to their subsequent dismissal, please be informed that the following employees
are under preventive suspension effective March 13, 1991 to wit:

1. Bernardo Yap

2. Renato Baybon

3. Salvador Solibel

4. Allan Misterio

5. Edgardo Tangkay

6. Leonardo Dionisio

7. Arnel Salvo

8. Reynaldo Ricohermoso

9. Benito Valencia

10. Gerardo Lasala

11. Alexander Atanacio

The above listed employees shall not be allowed within company premises without the permission of
management.

Labor II – 1
 As per request of the union's letter to management, should the listed employees fail to appeal the
decision of the union for dismissal, then effective March 23, 1991, said listed employees shall be
considered dismissed from the company. (p 39, Rollo)

The company received no information on whether or not said employees appealed to PSSLU. Hence, it considered them
dismissed as of March 23, 1991 (p. 40, Rollo).

On May 20, 1991, the dismissed employees filed a complaint (pp. 32-35, Rollo) with the NLRC for illegal dismissal.
Named respondent were PSSLU and Sanyo.

On June 20, 1991, PSSLU filed a motion to dismiss the complaint alleging that the Labor Arbiter was without jurisdiction
over the case, relying on Article 217 (c) of P.D. 442, as amended by Section 9 of Republic Act No. 6715 which provides
that cases arising from the interpretation or implementation of the collective bargaining agreements shall be disposed of
by the labor arbiter by referring the same to the grievance machinery and voluntary arbitration.

The complainants opposed the motion to dismiss complaint on these grounds: 1) the series of conferences before the
National Conciliation and Mediation Board had been terminated; 2) the NLRC Labor Arbiter had jurisdiction over the case
which was a termination dispute pursuant to Article 217 (2) of the Labor Code; and 3) there was nothing in the CBA which
needs interpretation or implementation (pp. 44-46, Rollo).

On August 7, 1991, the respondent Labor Arbiter issued the first questioned order. It held that:

xxx xxx xxx

While there are seemingly contradictory provisions in the aforecited article of the Labor Code, the better
interpretation will be to give effect to both, and termination dispute being clearly spelled as falling under
the jurisdiction of the Labor Arbiter, the same shall be respected. The jurisdiction of the grievance
machinery and voluntary arbitration shall cover other controversies.

However, the resolution of the instant issue shall be suspended until both parties have fully presented
their respective positions and the said issue shall be included in the final determination of the above-
captioned case.

WHEREFORE, the instant Motions to Dismiss are hereby held pending.

Consequently, the parties are hereby directed to submit their position papers and supporting documents
pursuant to Section 2, Rule VII of the Rules of the Commission on or before the hearing on the merit of
this case scheduled on August 29, 1991 at 11:00 a.m. (p. 23, Rollo)

On August 27, 1991, PSSLU filed another motion to resolve motion to dismiss complaint with a prayer that the Labor
Arbiter resolve the issue of jurisdiction.

On September 4, 1991, the respondent Labor Arbiter issued the second questioned order which held that it was assuming
jurisdiction over the complaint of private respondents, in effect, holding that it had jurisdiction over the case.

On September 19, 1991, PSSLU filed this petition alleging that public respondent Labor Arbiter cannot assume jurisdiction
over the complaint of public respondents because it had no jurisdiction over the dispute subject of said complaint. It is
their submission that under Article 217 (c) of the Labor Code, in relation to Article 261 thereof, as well as Policy Instruction
No. 6 of the Secretary of Labor, respondent Arbiter has no jurisdiction and authority to take cognizance of the complaint
brought by private respondents which involves the implementation of the union security clause of the CBA. The function of
the Labor Arbiter under the same law and rule is to refer this case to the grievance machinery and voluntary arbitration.

In its comment, private respondents argue that Article 217(a) 2 and 4 of the Labor Code is explicit, to wit:

Art. 217. Jurisdiction of the Labor Arbiters and the Commission.

Labor II – 1
 a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive
jurisdiction to hear and decide . . . the following cases involving all workers, . . . :

xxx xxx xxx

2) Termination disputes,

xxx xxx xxx

4) Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations.

The private respondents also claimed that insofar as Salvo, Baybon, Ricohermoso, Solibel, Valencia, Misterio and Lasala
were concerned, they joined another union, KAMAO during the freedom period which commenced on May 1, 1989 up to
June 30, 1989 or before the effectivity of the July 1, 1989 CBA. Hence, they are not covered by the provisions of the CBA
between Sanyo and PSSLU. Private respondents Tangkay, Atanacio and Dionisio admit that in September 1989, they
resigned from KAMAO and rejoined PSSLU (pp.
66(a)-68, Rollo).

For its part, public respondent, through the Office of the Solicitor General, is of the view that a distinction should be made
between a case involving "interpretation or implementation of collective bargaining agreement or "interpretation" or
"enforcement" of company personnel policies, on the one hand and a case involving termination, on the other hand. It
argued that the case at bar does not involve an "interpretation or implementation" of a collective bargaining agreement or
"interpretation or enforcement" of company policies but involves a "termination." Where the dispute is just in the
interpretation, implementation or enforcement stage, it may be referred to the grievance machinery set up in the CBA or
by voluntary arbitration. Where there was already actual termination, i.e., violation of rights, it is already cognizable by the
Labor Arbiter.

Article 217 of the Labor Code defines the jurisdiction of the Labor Arbiter.

Art. 217. Jurisdiction of Labor Arbiters and the Commission. a) Except as otherwise provided under this
Code the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30)
calendar days after the submission of the case by the parties for decision without extension even in the
absence of stenographic notes, the following cases involving all workers, whether agricultural or non-
agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages, rates
of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee
relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the legality of
strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all other
claims, arising from employer-employee relations, including those of persons in domestic or household
service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of whether
accompanied with a claim for reinstatement.

(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor Arbiters.

Labor II – 1
 (c) Cases arising from the interpretation or implementation of collective bargaining agreements and those
arising from the interpretation or enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be
provided in said agreements.

It is clear from the above article that termination cases fall under the jurisdiction of the Labor Arbiter. It should be noted
however that said article at the outset excepted from the said provision cases otherwise provided for in other provisions of
the same Code, thus the phrase "Except as otherwise provided under this Code . . . ." Under paragraph (c) of the same
article, it is expressly provided that "cases arising from the interpretation or implementation of collective bargaining
agreements and those arising from the interpretation and enforcement of company personnel policies shall be disposed of
by the Labor Arbiter by referring the same to the grievance machinery and voluntary arbitration as may be provided in said
agreements.

It was provided in the CBA executed between PSSLU and Sanyo that a member's voluntary resignation from
membership, willful refusal to pay union dues and his/her forming, organizing, joining, supporting, affiliating or aiding
directly or indirectly another labor union shall be a cause for it to demand his/her dismissal from the company. The
demand for the dismissal and the actual dismissal by the company on any of these grounds is an enforcement of the
union security clause in the CBA. This act is authorized by law provided that enforcement should not be characterized by
arbitrariness (Manila Mandarin Employee Union v. NLRC, G.R. No. 76989, 29 Sept. 1987, 154 SCRA 368) and always
with due process (Tropical Hut Employees Union v. Tropical Food Market, Inc., L-43495-99, Jan. 20, 1990).

The reference to a Grievance Machinery and Voluntary Arbitrators for the adjustment or resolution of grievances arising
from the interpretation or implementation of their CBA and those arising from the interpretation or enforcement of
company personnel policies is mandatory. The law grants to voluntary arbitrators original  and exclusive jurisdiction  to
hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining
Agreement and those arising from the interpretation or enforcement of company personnel policies (Art. 261, Labor
Code).

In its order of September 4, 1991, respondent Labor Arbiter explained its decision to assume jurisdiction over the
complaint, thus:

The movants failed to show (1) the provisions of the CBA to be implemented, and (2) the grievance
machinery and voluntary arbitrator already formed and properly named. What self-respecting judge would
refer a case from his responsibility to a shadow? To whom really and specifically shall the case be
indorsed or referred? In brief, they could have shown the (1) existence of the grievance machinery and (2)
its being effective.

Furthermore, the aforecited law merely directs the "referral" cases. It does not expressly confer
jurisdiction on the grievance machinery or voluntary arbitration panel, created or to be created. Article 260
of the Labor Code describes the formation of the grievance and voluntary arbitration. All this of course
shall be on voluntary basis. Is there another meaning of voluntary arbitration? (The herein complainant
have strongly opposed the motion to dismiss. Would they go willingly to the grievance machinery and
voluntary arbitration which are installed by their opponents if directed to do so?) (p. 26,  Rollo)

The failure of the parties to the CBA to establish the grievance machinery and its unavailability is not an excuse for the
Labor Arbiter to assume jurisdiction over disputes arising from the implementation and enforcement of a provision in the
CBA. In the existing CBA between PSSLU and Sanyo, the procedure and mechanics of its establishment had been clearly
laid out as follows:

ARTICLE XV — GRIEVANCE MACHINERY

Sec. 1. Whenever any controversy should arise between the company and the union as to the
interpretation or application of the provision of this agreement, or whenever any difference shall exist
between said parties relative to the terms and conditions of employment, an earnest effort shall be made
to settle such controversy in substantially the following manner:

First step. (Thru Grievance) The dispute shall initially be resolved by conference between the
management to be represented by the Management's authorized representatives on the one hand, and
the Union to be represented by a committee composed of the local union president and one of the local
Labor II – 1
 union officer appointed by the local union president, on the other hand within three days from date of
concurrence of grievance action. In the absence of the local union president, he (shall) appoint another
local union officer to take over in his behalf. Where a controversy personally affects an employee, he shall
not be allowed to be a member of the committee represented by the union.

Second step. (Thru Arbitrator mutually chosen) Should such dispute remain unsettled after twenty (20)
days from the first conference or after such period as the parties may agree upon in specified cases, it
shall be referred to an arbitrator chosen by the consent of the company and the union. In the event of
failure to agree on the choice of voluntary arbitrator, the National Conciliation and Mediation Board,
Department of Labor and Employment shall be requested to choose an Arbitrator in accordance with
voluntary arbitration procedures.

Sec. 2. The voluntary Arbitrator shall have thirty (30) days to decide the issue presented to him and his
decision shall be final, binding and executory upon the parties. He shall have no authority to add or
subtract from and alter any provision of this agreement. The expenses of voluntary arbitration including
the fee of the arbitrator shall be shared equally by the company and the union. In the event the arbitrator
chosen either by the mutual agreement of the company and the union by (the) way of voluntary arbitration
or by the National Conciliation and Mediation Board (NCMB) failed to assume his position, died, become
disabled or any other manner failed to function and or reach a decision, the company and the union shall
by mutual agreement choose another arbitrator; in the event of failure to agree on the choice of a new
voluntary arbitrator, the matter shall again be referred back to the NCMB who shall be requested again to
choose a new arbitrator as above provided. Any grievance not elevated or processed as above provided
within the stipulated period shall be deemed settled and terminated.

Sec. 3. It is hereby agreed that decisions of the union relative to their members, for implementation by the
COMPANY, should be resolved for review thru the Grievance Machinery; and management be invited to
participate in the Grievance procedure to be undertaken by the union relative to (the) case of the union
against members. (pp. 134-135, Rollo)

All that needs to be done to set the machinery into motion is to call for the convening thereof. If the parties to the CBA had
not designated their representatives yet, they should be ordered to do so.

The procedure introduced in RA 6715 of referring certain grievances originally and exclusively to the grievance machinery
and when not settled at this level, to a panel of voluntary arbitrators outlined in CBA's does not only include grievances
arising from the interpretation or implementation of the CBA but applies as well to those arising from the implementation of
company personnel policies. No other body shall take cognizance of these cases. The last paragraph of Article 261
enjoins other bodies from assuming jurisdiction thereof:

The commission, its Regional Offices and the Regional Directors of the Department of Labor and
Employment shall not entertain disputes, grievances or matters under the exclusive and original
jurisdiction of the Voluntary Arbitrator or panel of voluntary arbitrators and shall immediately dispose and
refer the same to the grievance machinery or voluntary arbitration provided in the Collective Bargaining
Agreement.

In the instant case, however, We hold that the Labor Arbiter and not the Grievance Machinery provided for in the CBA has
the jurisdiction to hear and decide the complaints of the private respondents. While it appears that the dismissal of the
private respondents was made upon the recommendation of PSSLU pursuant to the union security clause provided in the
CBA, We are of the opinion that these facts do not come within the phrase "grievances arising from the interpretation or
implementation of (their) Collective Bargaining Agreement and those arising from the interpretation or enforcement of
company personnel policies," the jurisdiction of which pertains to the Grievance Machinery or thereafter, to a voluntary
arbitrator or panel of voluntary arbitrators. Article 260 of the Labor Code on grievance machinery and voluntary arbitrator
states that "(t)he  parties to a Collective Bargaining Agreement shall include therein provisions that will ensure the mutual
observance of its terms and conditions. They shall establish a machinery for the adjustment and resolution of grievances
arising from the interpretation or implementation of their Collective Bargaining Agreement and those arising from the
interpretation or enforcement of company personnel policies." It is further provided in said article that the parties to a CBA
shall name or designate their respective representatives to the grievance machinery and if the grievance is not settled in
that level, it shall automatically be referred to voluntary arbitrators (or panel of voluntary arbitrators) designated in advance
by the parties. It need not be mentioned that the parties to a CBA are the union and the company. Hence, only disputes
involving the union and the company shall be referred to the grievance machinery or voluntary arbitrators.

Labor II – 1
In the instant case, both the union and the company are united or have come to an agreement regarding the dismissal of
private respondents. No grievance between them exists which could be brought to a grievance machinery. The problem or
dispute in the present case is between the union and the company on the one hand and some union and non-union
members who were dismissed, on the other hand. The dispute has to be settled before an impartial body. The grievance
machinery with members designated by the union and the company cannot be expected to be impartial against the
dismissed employees. Due process demands that the dismissed workers grievances be ventilated before an impartial
body. Since there has already been an actual termination, the matter falls within the jurisdiction of the Labor Arbiter.

ACCORDINGLY, the petition is DISMISSED. Public respondent Labor Arbiter is directed to resolve the complaints of
private respondents immediately.

Labor II – 1
 43.) G.R. No. 124013. June 5, 1998

ROSARIO MANEJA, Petitioner, v. NATIONAL LABOR RELATIONS COMMISSION and MANILA

MIDTOWN HOTEL, Respondents.

DECISION

MARTINEZ, J.:

Assailed in this petition for certiorari under Rule 65 of the Revised Rules of Court are the
Resolution1 dated June 3, 1994 of the respondent National Labor Relations Commission in NLRC NCR-
00-10-05297-90, entitled "Rosario Maneja, Complainant, v. Manila Midtown Hotel, Respondent,"
which dismissed the illegal dismissal case filed by petitioner against private respondent
company for lack of jurisdiction of the Labor Arbiter over the case; and its
Resolution2 dated October 20, 1995 denying petitioner's motion for reconsideration.

Petitioner Rosario Maneja worked with private respondent Manila Midtown Hotel beginning
January, 1985 as a telephone operator. She was a member of the National Union of
Workers in Hotels, Restaurants and Allied Industries (NUWHRAIN) with an existing
Collective Bargaining Agreement (CBA) with private respondent.

In the afternoon of February 13, 1990, a fellow telephone operator, Rowena Loleng
received a Request for Long Distance Call (RLDC) form and a deposit of P500.00 from a
page boy of the hotel for a call by a Japanese guest named Hirota Ieda. The call was
unanswered. The P500.00 deposit was forwarded to the cashier. In the evening, Ieda
again made an RLDC and the page boy collected another P500.00 which was also given to
the operator Loleng. The second call was also unanswered. Loleng passed on the RLDC to
petitioner for follow-up. Petitioner monitored the call.

On February 15, 1990, a hotel cashier inquired about the P1,000.00 deposit made by Ieda.
After a search, Loleng found the first deposit of P500.00 inserted in the guest folio while
the second deposit was eventually discovered inside the folder for cancelled calls with
deposit and official receipts.

When petitioner saw that the second RLDC form was not time-stamped, she immediately
placed it inside the machine which stamped the date February 15, 1990. Realizing that the
RLDC was filed 2 days earlier, she wrote and changed the date to February 13, 1990.
Loleng then delivered the RLDC and the money to the cashier. The second deposit
of P500.00 by Ieda was later returned to him.

On March 7, 1990, the chief telephone operator issued a memorandum 3 to petitioner and
Loleng directing the two to explain the February 15 incident. Petitioner and Loleng
thereafter submitted their written explanation .4 cräläwvirtualibräry

On March 20, 1990, a written report 5 was submitted by the chief telephone operator, with
the recommendation that the offenses committed by the operators concerned covered
violations of the Offenses Subject to Disciplinary Actions (OSDA): (1) OSDA 2.01: forging,
falsifying official document(s), and (2) OSDA 1.11: culpable carelessness - negligence or
failure to follow specific instruction(s) or established procedure(s).

On March 23, 1990, petitioner was served a notice of dismissal 6 effective April 1, 1990.
Petitioner refused to sign the notice and wrote therein "under protest."

Labor II – 1
Meanwhile, a criminal case7 for Falsification of Private Documents and Qualified Theft was
filed before the Office of the City Prosecutor of Manila by private respondent against
Loleng and petitioner. However, the resolution recommending the filing of a case for
estafa was reversed by 2nd Asst. City Prosecutor Virgilio M. Patag.

On October 2, 1990, petitioner filed a complaint for illegal dismissal against private
respondent before the Labor Arbiter. The complaint was later amended to include a claim
for unpaid wages, unpaid vacation leave conversion and moral damages.

Position papers were filed by the parties. Thereafter, the motion to set the case for hearing
filed by private respondent was granted by the Labor Arbiter and trial on the merits
ensued.

In his decision8 dated May 29, 1992, Labor Arbiter Oswald Lorenzo found that the
petitioner was illegally dismissed. However, in the decision, the Labor Arbiter stated that:

Preliminarily, we hereby state that on the face of the instant complaint, it is one that
revolves on the matter of the implementation and interpretation of existing company
policies, which per the last par. of Art. 217 of the Labor Code, as amended, is one within
the jurisdictional ambit of the grievance procedure under the CBA and thereafter, if
unresolved, one proper for voluntary arbitration. This observation is re-entrenched by the
fact, that complainant claims she is a member of NUWHRAIN with an existing CBA with
respondent hotel.

On this score alone, this case should have been dismissed outright. 9cräläwvirtualibräry

Despite the aforequoted preliminary statement, the Labor Arbiter still assumed jurisdiction
since Labor Arbiters under Article 217 of the same Labor Code, are conferred original and
exclusive jurisdiction of all termination case(sic.). The dispositive portion of the decision
states that:

"WHEREFORE, premises considered, judgment is hereby rendered as follows:

Declaring complainant's dismissal by respondent hotel as illegally effected;

Ordering respondent to immediately reinstate complainant to her previous position

without loss of seniority rights;

Ordering further respondent to pay complainant the full backwages due her, which is
computed as follows:

3/23/90 - 10/31/90 = 7.26/mos.

P 2,540 x 7.26/mos. P18,440.40

11/1/90 - 1/7/91 = 2.23/mos.

P 3,224.16 x 2.23/mos. 7,189.87

1/8/91 - 4/29/92 = 15.7/mos.

P 3,589.16 x 15.7/mos. 56,349.89

Labor II – 1
P 81,980.08

Moreover, respondent is ordered to pay the 13th month pay due the complainant in the
amount of P6,831.67 including moral and exemplary damages of P15,000.00
and P10,000.00 respectively, as well as attorney's fees equivalent to ten (10) percent of
the total award herein in the amount of P11,381.17;

Finally, all other claims are hereby dismissed for lack of merit.

"SO ORDERED."

Private respondent appealed the decision to the respondent commission on the

ground inter alia that the Labor Arbiter erred in assuming jurisdiction over the illegal
dismissal case after finding that the case falls within the jurisdictional ambit of the
grievance procedure under the CBA, and if unresolved, proper for voluntary
arbitration.10 An Opposition11 was filed by petitioner.

In the assailed Resolution12 dated June 3, 1994, respondent NLRC dismissed the illegal
dismissal case for lack of jurisdiction of the Labor Arbiter because the same should have
instead been subjected to voluntary arbitration.

Petitioners motion for reconsideration 13 was denied by respondent NLRC for lack of merit.

In this petition for certiorari, petitioner ascribes to respondent NLRC grave abuse of
discretion in -

Ruling that the Labor Arbiter was without jurisdiction over the illegal dismissal case;

Not ruling that private respondent is estopped by laches from questioning the jurisdiction
of the Labor Arbiter over the illegal dismissal case;

Reversing the decision of the Labor Arbiter based on a technicality notwithstanding the
merits of the case.

Petitioner contends that Article 217(a)(2) and (c) relied upon by respondent NLRC in
divesting the labor arbiter of jurisdiction over the illegal dismissal case, should be read in
conjunction with Article 26114 of the Labor Code. It is the view of petitioner that
termination cases arising from the interpretation or enforcement of company personnel
policies pertaining to violations of Offenses Subject to Disciplinary Actions (OSDA), are
under the jurisdiction of the voluntary arbitrator only if these are unresolved in the plant-
level grievance machinery. Petitioner insists that her termination is not an unresolved
grievance as there has been no grievance meeting between the NUWHRAIN union and the
management. The reason for this, petitioner adds, is that it has been a company practice
that termination cases are not anymore referred to the grievance machinery but directly to
the labor arbiter.

In its comment, private respondent argues that the Labor Arbiter should have dismissed
the illegal dismissal case outright after finding that it is within the jurisdictional ambit of
the grievance procedure. Moreover, private respondent states that the issue of jurisdiction
may be raised at any time and at any stage of the proceedings even on appeal, and is not
in estoppel by laches as contended by the petitioner.

Labor II – 1
For its part, public respondent, through the Office of the Solicitor General, cited the ruling
of this Court in Sanyo Philippines Workers Union-PSSLU vs. Caizares 15 in dismissing the
case for lack of jurisdiction of the Labor Arbiter.

The legal issue in this case is whether or not the Labor Arbiter has jurisdiction over the
illegal dismissal case.

The respondent Commission, in holding that the Labor Arbiter lacks jurisdiction to hear the
illegal dismissal case, cited as basis therefor Article 217 of the Labor Code, as amended by
Republic Act No. 6715. It said:

While it is conceded that under Article 217(a), Labor Arbiters shall have original and
exclusive jurisdiction over cases involving termination disputes, the Supreme Court, in a
fairly recent case ruled:

The procedure introduced in RA 6715 of referring certain grievances originally and

exclusively to the grievance machinery, and when not settled at this level, to a panel of
voluntary arbitrators outlined in CBAs does not only include grievances arising from the
interpretation or implementation of the CBA but applies as well to those arising from the
implementation of company personnel policies. No other body shall take cognizance of
these cases. x x x. (Sanyo vs. Caizares, 211 SCRA 361, 372) 16 cräläwvirtualibräry

We find that the respondent Commission has erroneously interpreted the aforequoted
portion of our ruling in the case of Sanyo, as divesting the Labor Arbiter of jurisdiction in a
termination dispute.

Article 217 of the Labor Code gives us the clue as to the jurisdiction of the Labor Arbiter, to
wit:

Article 217. Jurisdiction of Labor Arbiters and the Commission. a) Except as otherwise

provided under this Code the Labor Arbiters shall have original and exclusive jurisdiction
to hear and decide within thirty (30) calendar days after the submission of the case by the
parties for decision without extension even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:

1.Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file
involving wages, rates of pay, hours of work and other terms and conditions of
employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the
employer-employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions
involving the legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and maternity
benefits, all other claims, arising from employer-employee relations, including those of
persons in domestic or household service, involving an amount exceeding five thousand
pesos (P5,000.00) regardless of whether accompanied with a claim for reinstatement.

Labor II – 1
b) The Commission shall have exclusive appellate jurisdiction over all cases decided by
Labor Arbiters.

c) Cases arising from the interpretation or implementation of collective bargaining

agreements and those arising from the interpretation or enforcement of company
personnel policies shall be disposed of by the Labor Arbiter by referring the same to the
grievance machinery and voluntary arbitration as may be provided in said agreements.

As can be seen from the aforequoted Article, termination cases fall under the original and
exclusive jurisdiction of the Labor Arbiter. It should be noted, however, that in the opening
paragraph there appears the phrase: Except as otherwise provided under this Code x x x.
It is paragraph (c) of the same Article which respondent Commission has erroneously
interpreted as giving the voluntary arbitrator jurisdiction over the illegal dismissal case.

However, Article 217 (c) should be read in conjunction with Article 261 of the Labor Code
which grants to voluntary arbitrators original and exclusive jurisdiction to hear and decide
all unresolved grievances arising from the interpretation or implementation of the
collective bargaining agreement and those arising from the interpretation or enforcement
of company personnel policies. Note the phrase unresolved grievances. In the case at bar,
the termination of petitioner is not an unresolved grievance.

The stance of the Solicitor General in the Sanyo case is totally the reverse of its posture in
the case at bar. In Sanyo, the Solicitor General was of the view that a distinction should be
made between a case involving interpretation or implementation of Collective Bargaining
Agreement or interpretation or enforcement of company personnel policies, on the one
hand and a case involving termination, on the other hand. It argued that the dismissal of
the private respondents does not involve an interpretation or implementation of a
Collective Bargaining Agreement or interpretation or enforcement of company personnel
policies but involves termination. The Solicitor General further said that where the dispute
is just in the interpretation, implementation or enforcement stage, it may be referred to
the grievance machinery set up in the Collective Bargaining Agreement or by voluntary
arbitration. Where there was already actual termination, i.e., violation of rights, it is
already cognizable by the Labor Arbiter.17 We fully agree with the theory of the Solicitor
General in the Sanyo case, which is radically apposite to its position in this case.

Moreover, the dismissal of petitioner does not fall within the phrase grievances arising
from the interpretation or implementation of collective bargaining agreement and those
arising from the interpretation or enforcement of company personnel policies, the
jurisdiction of which pertains to the grievance machinery or thereafter, to a voluntary
arbitrator or panel of voluntary arbitrators. It is to be stressed that under Article 260 of
the Labor Code, which explains the function of the grievance machinery and voluntary
arbitrator, (T)he parties to a Collective Bargaining Agreement shall include therein
provisions that will ensure the mutual observance of its terms and conditions. They shall
establish a machinery for the adjustment and resolution of grievances arising from the
interpretation or implementation of their Collective Bargaining Agreement and those
arising from the interpretation or enforcement of company personnel policies. Article 260
further provides that the parties to a CBA shall name or designate their respective
representative to the grievance machinery and if the grievance is unsettled in that level, it
shall automatically be referred to the voluntary arbitrators designated in advance by the
parties to a CBA of the union and the company. It can thus be deduced that only disputes
involving the union and the company shall be referred to the grievance machinery or
voluntary arbitrators.18
cräläwvirtualibräry

Labor II – 1
In the case at bar, the union does not come into the picture, not having objected or voiced
any dissent to the dismissal of the herein petitioner. The reason for this, according to
petitioner is that the practice in said Hotel in cases of termination is that the latter cases
are not referred anymore to the grievance committee; and that the terminated employee
who wishes to question the legality of his termination usually goes to the Labor Arbiter for
arbitration, whether the termination arose from the interpretation or enforcement of the
company personnel policies or otherwise.19 cräläwvirtualibräry

As we ruled in Sanyo, Since there has been an actual termination, the matter falls within
the jurisdiction of the Labor Arbiter. The aforequoted doctrine is applicable foursquare in
petitioners case. The dismissal of the petitioner does not call for the interpretation or
enforcement of company personnel policies but is a termination dispute which comes
under the jurisdiction of the Labor Arbiter.

It should be explained that company personnel policies are guiding principles stated in
broad, long-range terms that express the philosophy or beliefs of an organizations top
authority regarding personnel matters. They deal with matters affecting efficiency and
well-being of employees and include, among others, the procedure in the administration of
wages, benefits, promotions, transfer and other personnel movements which are usually
not spelled out in the collective agreement. The usual source of grievances, however, are
the rules and regulations governing disciplinary actions. 20 cräläwvirtualibräry

The case of Pantranco North Express, Inc. vs. NLRC21 sheds further light on the issue of
jurisdiction where the Court cited the Sanyo case and quoted the decision of therein Labor
Arbiter Olairez in this manner:

In our honest opinion we have jurisdiction over the complaint on the following grounds:

First, this is a complaint of illegal dismissal of which original and exclusive jurisdiction
under Article 217 has been conferred to the Labor Arbiters. The interpretation of the CBA
or enforcement of the company policy is only corollary to the complaint of illegal dismissal.
Otherwise, an employee who was on AWOL, or who committed offenses contrary to the
personnel policies(sic) can no longer file a case of illegal dismissal because the discharge
is premised on the interpretation or enforcement of the company policies(sic).

Second. Respondent voluntarily submitted the case to the jurisdiction of this labor
tribunal. It adduced arguments to the legality of its act, whether such act may be
retirement and/or dismissal, and prayed for reliefs on the merits of the case. A litigant
cannot pray for reliefs on the merits and at the same time attacks(sic) the jurisdiction of
the tribunal. A person cannot have ones cake and eat it too. x x x.

As to the second ground, petitioner correctly points out that respondent NLRC should have
ruled that private respondent is estopped by laches in questioning the jurisdiction of the
Labor Arbiter.

Clearly, estoppel lies. The issue of jurisdiction was mooted by herein private respondents
active participation in the proceedings below. In Marquez vs. Secretary of Labor, 22 the
Court said:

x x x. The active participation of the party against whom the action was brought, coupled
with his failure to object to the jurisdiction of the court or quasi-judicial body where the
action is pending, is tantamount to an invocation of that jurisdiction and a willingness to
abide by the resolution of the case and will bar said party from later on impugning the
court or bodys jurisdiction.
Labor II – 1
In the assailed Resolution,23 respondent NLRC cited La Naval Drug Corporation vs. Court of
Appeals24 in holding that private respondent is not in estoppel. Thus,

The operation of the principle of estoppel on the question of jurisdiction seemingly

depends upon whether the lower court actually had jurisdiction or not. If it had no
jurisdiction, but the case was tried and decided upon the theory that it had jurisdiction,
the parties are not barred, on appeal, from assailing such jurisdiction, for the same must
exist as a matter of law, and may not be conferred by consent of the parties or by estoppel
(5 C.J.S., 861-863). However, if the lower court had jurisdiction, and the case was heard
and decided upon a given theory, such, for instance, as that the court had no jurisdiction,
the party who induced it to adopt such theory will not be permitted, on appeal, to assume
an inconsistent position that the lower court had jurisdiction. Here, the principle of
estoppel applies. The rule that jurisdiction is conferred by law, and does not depend upon
the will of the parties, has no bearing thereon. (Underscoring ours)

Again, the respondent NLRC has erroneously interpreted our ruling in the La Naval case.
Under the said ruling, estoppel lies in this case. Private respondent is estopped from
questioning the jurisdiction of the Labor Arbiter before the respondent NLRC having
actively participated in the proceedings before the former. At no time before or during the
trial on the merits did private respondent assail the jurisdiction of the Labor Arbiter.
Private respondent took the cue only from the preliminary statement in the decision of the
Labor Arbiter, which was a mere obiter, and raised the issue of jurisdiction before the
Commission. It was then too late. Estoppel had set in.

Turning now to the merits of the case, We uphold the ruling of the Labor Arbiter that
petitioner was illegally dismissed.

The requisites of a valid dismissal are (1) the dismissal must be for any of the causes
expressed in Article 282 of the Labor Code,25 and (2) the employee must be given an
opportunity to be heard and to defend himself. 26 The substantive and procedural laws must
be strictly complied with before a worker can be dismissed from his employment because
what is at stake is not only the employees position but his livelihood. 27
cräläwvirtualibräry

Petitioners dismissal was grounded on culpable carelessness, negligence and failure to

follow specific instruction(s) or established procedure(s) under OSDA 1.11; and, having
forged or falsified official document(s) under OSDA 2.01.

Private respondent blames petitioner for failure to follow established procedure in the
hotel on a guests request for long distance calls. Petitioner, however, explained that the
usual or established procedures are not followed by the operators and hotel employees
when circumstances warrant. For instance, the RLDC forms and the deposits are brought
by the page boy directly to the operators instead of the cashiers if the latter are busy and
cannot attend to the same. Furthermore, she avers that the telephone operators are not
conscious of the serial numbers in the RLDCs and at times, the used RLDCs are recycled.
Even the page boys do not actually check the serial numbers of all RLDCs in one batch,
except for the first and the last.

On the charge of taking of the money by petitioner, it is to be noted that the

second P500.00 deposit made by the Japanese guest Ieda was later discovered to be
inserted in the folder for cancelled calls with deposit and official receipts. Thus, there
exists no basis for personal appropriation by the petitioner of the money involved. Another
reason is the alleged tampering of RLDC No. 862406.28 While petitioner and her co-
operator Loleng admitted that they indeed altered the date appearing therein from

Labor II – 1
February 15, 1990 to February 13, the same was purposely made to reflect the true date of
the transaction without any malice whatsoever on their part.

As pointed out by Labor Arbiter Oswald B. Lorenzo, thus:

The specifics of the grounds relied by respondent hotels dismissal of complainant are
those stated in Annex F of the latters POSITION PAPER, which is the Notice of Dismissal,
notably:

OSDA 2.01 - Forging, falsifying official document(s)

OSDA 1.11 - Culpable negligence or failure to follow specific instruction(s) or established

procedure(s)

On this score, we are persuaded by the complainants arguments that under OSDA 1.11,
infractions of this sort is not without qualifications, which is, that the alleged culpable
carelessness, negligence or failure to follow instruction(s) or established procedure(s),
RESULTING IN LOSS OR DAMAGE TO COMPANY PROPERTY. From the facts obtaining in this
case, there is no quantum of proof whatsoever, except the general allegations in
respondents POSITION PAPER and other pleadings that loss or damage to company
property resulted from the charged infraction. To our mind, this is where labor tribunals
should come in and help correct interpretation of company policies which in the
enforcement thereof wreaks havoc to the constitutional guarantee of security of tenure.
Apparently, the exercise of little flexibility by complainant and co-employees which is
predicated on good faith should not be taken against them and more particularly against
the complainant herein. In this case, to sustain the generalized charge of respondent hotel
under OSDA 1.11 would unduly be sanctioning the imposition of too harsh a penalty -
which is dismissal.

In the same tenor, the respondents charge under OSDA 1.11 on the alleged falsification of
private document is also with a qualification, in that the alleged act of falsification must
have been done IN SUCH A WAY AS TO MISLEAD THE USER(S) THEREOF. Again, based on
the facts of the complained act, there appeared no one to have been misled on the change
of date from RLDC #862406 FROM 15 TO 13 February 1990.

As a matter of fact, we are in agreement with the jurisprudence cited by VIRGILIO M.

PATAG, the 2nd Asst. City Prosecutor of the City of Manila, who exculpated complainant
MANEJA from the charges of falsification of private documents and qualified theft under IS
No. 90-11083 and marked Annex H of complainants POSITION PAPER, when he ruled that
an altercation which makes the document speak the truth cannot be the foundation of a
criminal action. As to the charge of qualified theft, we too are of the finding, like the city
prosecutor above-mentioned that there was no evidence on the part of MANEJA to have
unlawfully taken the P500.00 either from the hotel or from guest IEDA on 13 February
1990 and moreover, we too, find no evidence that complainant MANEJA had the intention
to profit thereby nor had misappropriated the P500.00 in question.29 cräläwvirtualibräry

Given the factual circumstances of the case, we cannot deduce dishonesty from the act
and omission of petitioner. Our norms of social justice demand that we credit employees
with the presumption of good faith in the performance of their duties, 30 especially
petitioner who has served private respondent since 1985 up to 1990 without any tinge of
dishonesty and was even named Model Employee for the month of April, 1989. 31 cräläwvirtualibräry

Petitioner has been charged with a very serious offense - dishonesty. This can irreparably
wreck her life as an employee for no employer will take to its bosom a dishonest
Labor II – 1
employee. Dismissal is the supreme penalty that can be meted to an employee and its
imposition cannot be justified where the evidence is ambivalent. 32 It must, therefore, be
based on a clear and not on an ambiguous or ambivalent ground. Any ambiguity or
ambivalence on the ground relied upon by an employer in terminating the services of an
employee denies the latter his full right to contest its legality. Fairness cannot
countenance such ambiguity or ambivalence.33 cräläwvirtualibräry

An employer can terminate the services of an employee only for valid and just causes
which must be supported by clear and convincing evidence. The employer has the burden
of proving that the dismissal was indeed for a valid and just cause. 34 Failure to do so
results in a finding that the dismissal was unjustified. 35 cräläwvirtualibräry

Finding that there was no just cause for dismissal of petitioner, we now determine if the
rudiments of due process have been duly accorded to her.

Well-settled is the dictum that the twin requirements of notice and hearing constitute the
essential elements of due process in the dismissal of employees. It is a cardinal rule in our
jurisdiction that the employer must furnish the employee with two written notices before
the termination of employment can be effected: (a) the first apprises the employee of the
particular acts or omissions for which his dismissal is sought; and, (b) the second informs
the employee of the employers decision to dismiss him. 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. 36 cräläwvirtualibräry

In the case at bar, petitioner and her co-operator Loleng were issued a memorandum on
March 7, 1990. On March 11, 1990, they submitted their written explanation thereto. On
March 20, 1990, a written report was made with a recommendation that the offenses
committed by them were covered by OSDA 1.11 and 2.01. Thereafter, on March 23, 1990,
petitioner was served with a notice of dismissal for said violations effective April 1, 1990.

An examination of the record reveals that no hearing was ever conducted by private
respondent before petitioner was dismissed. While it may be true that petitioner submitted
a written explanation, no hearing was actually conducted before her employment was
terminated. She was not accorded the opportunity to fully defend herself.

Consultations or conferences may not be a substitute for the actual holding of a hearing.
Every opportunity and assistance must be accorded to the employee by the management
to enable him to prepare adequately for his defense, including legal
representation.37 Considering that petitioner denied having allegedly taken the
second P500.00 deposit of the Japanese guest which was eventually found; and, having
made the alteration of the date on the second RLDC merely to reflect the true date of the
transaction, these circumstances should have at least warranted a separate hearing to
enable petitioner to fully ventilate her side. Absent such hearing, petitioners right to due
process was clearly violated.38cräläwvirtualibräry

It bears stressing that a workers employment is property in the constitutional sense. He

cannot be deprived of his work without due process of law. Substantive due
process mandates that an employee can only be dismissed based on just or authorized
causes. Procedural due process requires further that he can only be dismissed after he has
been given an opportunity to be heard. The import of due process necessitates the
compliance of these two aspects.

Accordingly, we hold that the labor arbiter did not err in awarding full backwages in view
of his finding that petitioner was dismissed without just cause and without due process.

Labor II – 1
We ruled in the case of Bustamante vs. NLRC39 that the amount of backwages to be
awarded to an illegally dismissed employee must be computed from the time he was
dismissed to the time he is actually reinstated, without deducting the earnings he derived
elsewhere pending the resolution of the case.

Petitioner is likewise entitled to the thirteenth-month pay. Presidential Decree No. 851, as
amended by Memorandum Order No. 28, provides that employees are entitled to the
thirteenth-month pay benefit regardless of their designation and irrespective of the
method by which their wages are paid. 40 cräläwvirtualibräry

The award of moral and exemplary damages to petitioner is also warranted where there is
lack of due process in effecting the dismissal.

Where the termination of the services of an employee is attended by fraud or bad faith on
the part of the employer, as when the latter knowingly made false allegations of a
supposed valid cause when none existed, moral and exemplary damages may be awarded
in favor of the former.41
cräläwvirtualibräry

The anti-social and oppressive abuse of its right to investigate and dismiss its employees
constitute a violation of Article 1701 of the New Civil Code which prohibits acts of
oppression by either capital or labor against the other, and Article 21 on human relations.
The grant of moral damages to the employees by reason of such conduct on the part of the
company is sanctioned by Article 2219, No. 10 of the Civil Code, which allows recovery of
such damages in actions referred to in Article 21. 42 cräläwvirtualibräry

The award of attorneys fees amounting to ten percent (10%) of the total award by the
labor arbiter is justified under Article 111 of the Labor Code.

WHEREFORE, premises considered, the petition is GRANTED and the assailed resolutions of

the respondent National Labor Relations Commission dated June 3, 1994 and October 20,
1995 are hereby REVERSED AND SET ASIDE. The decision dated May 29, 1992 of the Labor
Arbiter is therefore REINSTATED.

Labor II – 1
44.) G.R. No. 90426 December 15, 1989

SIME DARBY PILIPINAS, INC., petitioners,

vs.
DEPUTY ADMINISTRATOR BUENAVENTURA C. MAGSALIN as Voluntary Arbitrator and the SIME DARBY
EMPLOYEES ASSOCIATION, respondents.

Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner.

Cezar F. Maravilla, Jr. for private respondent.

FELICIANO, J.:

The Petition for certiorari before us assails the award of Voluntary Arbitrator Buenaventura Magsalin dated 17
August 1989 which directed petitioner Sime Darby Pilipinas, Inc. (Sime Darby) to pay the members of private
respondent Sime Darby Employees Association (SDEA) a performance bonus equivalent to seventy-five percent
(75%) of their monthly basic pay for the year 1988-1989.

On 13 June 1989, petitioner Sime Darby and private respondent SDEA executed a Collective Bargaining Agreement
(CBA) providing, among others, that:

Article X, Section 1. A performance bonus shall be granted, the amount of which [is] to be
determined by the Company depending on the return of [sic] capital investment as reflected in the
annual financial statement.

On 31 July 1989, the Sime Darby Salaried Employees Association- ALU (SDSEA-ALU) wrote petitioner demanding
the implementation of a provision Identical to the above contained in their own CBA with petitioner. Subsequently,
petitioner called both respondent SDEA and SDEA-ALU to a meeting wherein the former explained that it was
unable to grant the performance bonus corresponding to the fiscal year 1988-1989 on the ground that the workers'
performance during said period did not justify the award of such bonus. On 27 July 1989, private respondent SDEA
filed with the National Conciliation and Mediation Board (NCMB) an urgent request for preventive conciliation
between private respondent and petitioner.

On 1 August 1989, the parties were called to a conciliation meeting and in such meeting, both parties agreed to
submit their dispute to voluntary arbitration. Their agreement to arbitrate stated, among other things, that they were
"submitting the issue of performance bonus to voluntary arbitration" and that "the decision/award of the voluntary
arbitrator shall be respected and implemented by the parties as final and executory, in accordance with the law."  1

On 14 August 1989, petitioner filed its position paper which aimed to show that the performance of the members of
respondent union during the year was below the production goals or targets set by Sime Darby for 1988-1989 and
below previous years' levels for which reason the performance bonus could not be granted. Petitioner there referred
to the following performance indicators: a) number of tires produced; b) degree of wastage of production materials;
and c) number of pounds of tires produced per man hour. On that same day, 14 August 1989, petitioner manifested
before the Voluntary Arbitrator that it would file a Reply to the union's Position Paper submitted on 10 August 1989
not later than 18 August 1989.

However, before petitioner could submit its Reply to the union's Position Paper, the Voluntary Arbitrator on 17
August 1989 issued an award which declared respondent union entitled to a performance bonus equivalent to 75%
of the monthly basic pay of its members. In that award, the Voluntary Arbitrator held that a reading of the CBA
provision on the performance bonus would show that said provision was mandatory hence the only issue to be
resolved was the amount of performance bonus. The Voluntary Arbitrator further stated that petitioner company's
financial statements as of 30 June 1988 revealed retained earnings in the amount of P 324,370,372.32. From the
foregoing, the Voluntary Arbitrator concluded that petitioner company could well afford to give members of
Labor II – 1
respondent union a substantial performance bonus. The Voluntary Arbitrator also stated that there was evidence to
show that the company has given performance bonuses to its managerial and non-unionized employees as well as
to monthly paid workers of the year 1988-1989.

Petitioner filed a motion for reconsideration which motion was not entertained by the Voluntary Arbitrator upon the
ground that under the ruling of this Court in Solidbank v. Bureau of Labor Relations, (G.R. No. 64926, promulgated
8 October 1984; unpublished) he, the Voluntary Arbitrator, had automatically lost jurisdiction over the arbitration
case upon the issuance of the award.

In this Petition for Certiorari, petitioner mainly argues that respondent Voluntary Arbitrator gravely abused his
discretion in holding that the grant of performance bonus was mandatory and that the only issue before him was the
amount of the bonus. It is contended that since a performance bonus is a "gift" based on the company's
performance, the same is not justified when the company's performance has been poor. Petitioner claims that
during the fiscal year of 1988-1989, the company performed poorly as shown by the decline in tire production for the
said year as well as the increase of the rate of wastage of production materials, and also by the decrease in the
number of tires produced per man hour. Petitioner also argues that even if a performance bonus were justified, the
Voluntary Arbitrator gravely abused his discretion in giving an award of 75% of the monthly basic rate without any
evidence of the basis used in arriving at such an award. It is insisted that under the relevant CBA provision, the
company determines the amount of the bonus if the same be justified. Petitioner also alleged that respondent
Arbitrator gravely erred when he based the award on the company's retained earnings the level of which represents
earnings accumulated during prior years and not merely during the fiscal year 1988-1989.

On 8 November 1989, the Court temporarily restrained the enforcement of the Voluntary Arbitrator's award to
prevent the petition at bar becoming moot and academic.

We are not persuaded by petitioner's arguments.

One point needs to be stressed at the outset: the award of a Voluntary Arbitrator is final and executory after ten (10)
calendar days from receipt of the award by the parties.   There was a time when the award of a Voluntary Arbitrator
2

relating to money claims amounting to more than P 100,000.00 or forty percent (40%) of the paid-up capital of the
employer (whichever was lower), could be appealed to the National Labor Relations Commission upon the grounds
of (a) abuse of discretion; or (b) gross incompetence, presumably of the arbitrator.   This is no longer so today
3

although, of course, certiorari will lie in appropriate cases. A petition for certiorari under Rule 65 of the Revised
Rules of Court will lie only where a grave abuse of discretion or an act without or in excess of jurisdiction on the part
of the Voluntary Arbitrator is clearly shown. It must be borne in mind that the writ of certiorari is an extraordinary
remedy and that certiorari jurisdiction is not to be equated with appellate jurisdiction. In a special civil action
of certiorari, the Court will not engage in a review of the facts found nor even of the law as interpreted or applied by
the Arbitrator unless the supposed errors of fact or of law are so patent and gross and prejudicial as to amount to a
grave abuse of discretion or an excess de pouvoir on the part of the Arbitrator.  The Labor Code and its
4

Implementing Rules thus clearly reflect the important public policy of encouraging recourse to voluntary arbitration
and of shortening the arbitration process by rendering the arbitral award non- appealable to the NLRC. The result is
that a voluntary arbitral award may be modified and set aside only upon the same grounds on which a decision of
the NLRC itself may be modified or set aside, by this Court.

Examination of the pleadings in the instant Petition shows that two (2) principal issues are raised: The first is
whether or not the Voluntary Arbitrator acted with grave abuse of discretion or without or in excess of jurisdiction in
passing upon both the question of whether or not a performance bonus is to be granted by petitioner Sime Darby to
the private respondents and the further question of the amount thereof. The second is whether or not the award by
the Arbitrator of a performance bonus amounting to seventy five percent (75%) of the basic monthly salary of
members of private respondent union itself constituted a grave abuse of discretion or an act without or in excess of
jurisdiction. We consider these issues seriatim

1. In respect of the first issue, petitioner Sime Darby urges that the Arbitrator gravely abused his
discretion in passing upon not only the question of whether or not a performance bonus is to be
granted but also, in the affirmative case, the matter of the amount thereof. The position of petitioner,
to the extent we can understand it, is that the Arbitrator was authorized to determine only the
question of whether or not a performance bonus was to be granted, the second question being
Labor II – 1
 reserved for determination by the employer Sime Darby. We noted earlier that in their agreement to
arbitrate, the parties submitted to the Voluntary Arbitrator "the issue of performance bonus." The
language of the agreement to arbitrate may be seen to be quite cryptic. There is no indication at all
that the parties to the arbitration agreement regarded "the issue of performance bonus" as a two-
tiered issue, only one tier of which was being submitted to arbitration. Possibly, Sime Darby's
counsel considered that issue as having dual aspects and intended in his own mind to submit only
one of those aspects to the Arbitrator; if he did, however, he failed to reflect his thinking and intent in
the arbitration agreement.

It is thus essential to stress that the Voluntary Arbitrator had plenary jurisdiction and authority to interpret the
agreement to arbitrate and to determine the scope of his own authority subject only, in a proper case, to
the certiorari jurisdiction of this Court. The Arbitrator, as already indicated, viewed his authority as embracing not
merely the determination of the abstract question of whether or not a performance bonus was to be granted but
also, in the affirmative case, the amount thereof. The Arbitrator said in his award:

At this juncture, it would not be amiss to emphasize to the parties that the matter of performance
bonus necessarily includes not only the determination of the existence of the right of the union to this
benefit but also the amount thereof. This conclusion arises from a perusal of the terms of the
submission agreement entered into by Sime Darby Pilipinas, Inc. and Sime Darby Employees
Association which limited the voluntary arbitration only with regard to submission of position papers
of the parties, disposition and rendition of the award. Nary (sic) a trace of qualification as to the sole
issue of performance bonus may be gleaned from a review of said agreement.

With that as a timely reminder, this Arbitrator now proceeds to resolve the issues herein submitted
for resolution. Without doubt, the Sime Darby Employees Association is entitled to performance
bonus. This conclusion arises from an analysis of the imperative terms of the CBA provision on
production bonus, hereinunder reproduced, to wit:

A performance bonus shall be granted the amount of which to be determined by the Company
depending on the return of capital investment as reflected in the annual financial
statements.   (Emphasis supplied)
5

Analysis of the relevant provisions of the CBA between the parties and examination of the record of the instant case
lead us to the conclusion that the Arbitrator's reading of the scope of his own authority must be sustained.

Article X, Section 1 of the CBA is, grammatically speaking, cast in mandatory terms: "A performance bonus shall be
granted ..." The CBA provision goes on, however, immediately to say that the amount of the performance bonus "[is]
to be determined by the Company." Thus, notwithstanding the literal or grammatical tenor of Article X, Section 1, as
a practical matter, only the issue relating to the amount of the bonus to be declared appears important. Not much
reflection is needed to show that the critical issue is the scope of authority of the company to determine the amount
of any bonus to be granted. If the company's discretionary authority were to be regarded as unlimited and if the
company may declare in any event a merely nominal bonus, the use of mandatory language in Article X, Section 1,
would seem largely illusory and cosmetic in effect. Alternatively, even if one were to disregard the use of "shall"
rather than "may" in Article X, Section 1, the question of whether or not a performance bonus is to be granted, still
cannot realistically be dissociated from the intensely practical issue of the amount of the bonus to be granted. It is
noteworthy that petitioner Sime Darby itself did not spend much time discussing as an abstract question whether or
not the grant of a performance bonus is per se obligatory upon the company. Petitioner instead focused upon the
production performance of the company's employees as bearing upon the appropriateness of any amount of bonus.
Further, if petitioner Sime Darby's argument were to be taken seriously, one must conclude that the parties to the
arbitration agreement intended to refer only a theoretical and practically meaningless issue to the Voluntary
Arbitrator, a conclusion that we find thoroughly unacceptable.

2. We turn then to the issue of whether or not the Voluntary Arbitrator gravely abused his discretion
or acted without or in excess of jurisdiction in awarding an amount equivalent to seventy-five percent
(75%) of the basic monthly pay of members of respondent union. Petitioner Sime Darby contends
that that award is devoid of factual basis. We understand this contention to be that the Arbitrator did
not apply the relevant CBA provision.
Labor II – 1
Once more, we are not persuaded by petitioner's contention.

Article X, Section 1 of the CBA does not in express terms identify whose performance is to appraised in determining
an appropriate amount to be awarded as performance bonus. The Court considers that it is the performance of the
company as a whole, and not merely the production or manufacturing performance of its employees, which is
relevant in that determination. The CBA provision refers to the return on investment of the company (ROI). The
return on the stockholders' investment, as we understand it, relates basically to the net profits shown by the
company and therefore to many more factors than simply the extent to which production targets were achieved or
the rise and fall of the manufacturing efficiency ratios. Among those factors would be the cost of production, the
quality of the products, the cost of money, the debt-equity ratio, the cost of sales, the level of taxes due and
payable, the gross revenues realized, and so forth.

We note upon the other hand, that petitioner's counsel failed to discuss at all before the Voluntary Arbitrator the rate
of return on stockholders' investment achieved by Sime Darby for the year 1988- 1989; as earlier noted, counsel
confined his argument and the evidence submitted by him to the number of tires produced, the decrease in the rate
of wastage of manufacturing materials, and the productivity of the work force measured in terms of the number of
tires produced per man hour.

The Voluntary Arbitrator, upon the other hand, explicitly considered the net earnings of petitioner Sime Darby in
1988 (P 100,000,000.00) and in the first semester of 1989 (P 95,377,507.00) as well as the increase in the
company's retained earnings from P 265,729,826.00 in 1988 to P 324, 370,372.00 as of 30 June 1989. Thus, the
Arbitrator impliedly or indirectly took into account the return on stockholders' investment realized for the fiscal year
1988-1989. It should also be noted that the relevant CBA provision does not specify a minimum rate of return on
investment (ROI) which must be realized before any particular amount of bonus may or should be declared by the
company.

The Voluntary Arbitrator also took into account, again in an indirect manner, the performance of Sime Darby's
employees by referring in his award to "the total labor cost incurred by the Company":

This Arbitrator, however, is well aware that any effort in this regard must be tempered and balanced
as against the need to sustain the continued viability of Sime Darby Pilipinas, Inc. in accordance with
the constitutional provision which recognizes the 'right of enterprise to reasonable returns on
investment and to expansion and growth.' Furthermore, any award to be rendered must likewise take
into account the total labor cost incurred by the Company. It should not merely be confined to those
pertaining to the members of the Sime Darby Employees Association but necessarily include that
which shall be paid and granted to all other employees of Sime Darby this year.   (Emphasis
6

supplied)

On balance, we believe and so hold that the award of the Voluntary Arbitrator of a bonus amounting to seventy-five
percent (75%) of the basic monthly salary cannot be said to be merely arbitrary or capricious or to constitute an
excess de pouvoir.

The remaining assertions of petitioner Sime Darby relating to denial of procedural due process by the Voluntary
Arbitrator, consisting of failure to wait for petitioner's announced Reply (basically reiterative and amplificatory in
nature) to the union's Position Paper and of alleged failure to consider evidence submitted by petitioner, do not
require extended consideration; they are evidently bereft of merit.

WHEREFORE, the Petition for Certiorari is DISMISSED for lack of merit. The Temporary Restraining Order issued
on 8 November 1989 is hereby LIFTED. This Decision is immediately executory. Costs against petitioner.

Labor II – 1
45.) .R. No. 94960 March 8, 1993

IMPERIAL TEXTILE MILLS, INC., petitioner,

vs.
HON. VLADIMIR P.L. SAMPANG and IMPERIAL TEXTILE MILLS-MONTHLY EMPLOYEES ASSOCIATION
(ITM-MEA), respondents.

Batino, Angala, Salud & Fabia Law Offices for petitioner.

Carlo A. Domingo for private respondent.

CRUZ, J.:

On March 20, 1987, petitioner Imperial Textile Mills, Inc. (the Company, for brevity) and respondent Imperial Textile
Mills-Monthly Employees Association (the Union, for brevity) entered into a collective bargaining agreement
providing across-the-board salary increases and other benefits retroactive to November 1, 1986.

On August 21, 1987, they executed another agreement on the job classification and wage standardization plan. This
was also to take effect retroactively on November 1, 1986.

A dispute subsequently arose in the interpretation of the two agreements. The parties then submitted it to arbitration
and designated public respondent Vladimir P.L. Sampang as the Voluntary Arbitrator. The understanding was that
his decision would be final, executory and inappealable. 1

The Company maintained that the wage of a particular employee subject of possible adjustment on base pay should
be the pay with the first year CBA increase already integrated therein.

The Union argued that the CBA increases should not be included in adjusting the wages to the base pay level, as it
was separate and distinct from the increases resulting from the job classification and standardization scheme.

On July 12, 1988, the Voluntary Arbitrator rendered a decision upholding the formula used by the Company.

The Union filed a motion for reconsideration which was opposed by the Company.

On December 14, 1988, after a conference with the parties, the Voluntary Arbitrator rendered another decision, this
time in favor of the Union.

On January 20, 1989, the Company appealed to the NLRC. The appeal was dismissed for lack of jurisdiction. The
reason was that the original rule allowing appeal if the Voluntary Arbitrator's award was more than P100,000.00 had
already been repealed by BP 130. Moreover, under Article 262-A of the Labor Code, as amended, awards or
decisions of voluntary arbitrators become final and executory after calendar 10 days from notice thereof to the
parties.

The Company then came to this Court in this petition for certiorari under Rule 65 of the Rules of Court.

The Court has deliberated on the arguments of the parties in light of the established facts and the applicable law
and finds for the Company.

The Union erred in filing a motion for reconsideration of the decision dated July 12, 1988. So did the respondent
Voluntary Arbitrator in entertaining the motion and vacating his first decision.

Labor II – 1
When the parties submitted their grievance to arbitration, they expressly agreed that the decision of the Voluntary
Arbitrator would be final, executory and inappealable. In fact, even without this stipulation, the first decision had
already become so by virtue of Article 263 of the Labor Code making voluntary arbitration awards or
decisions final and executory.

The philosophy underlying this rule was explained by Judge Freedman in the case of La Vale Plaza, Inc., v. R.S.
Noonan, Inc.,  thus:
2

It is an equally fundamental common law principle that once an arbitrator has made and published a
final award, his authority is exhausted and be is functus officio and can do nothing more in regard to
the subject matter of the arbitration. The policy which lies behind this is an unwillingness to permit
one who not a is judicial officer and who acts informally and sporadically, to re-examine a final
decision which he has already rendered, because of the potential evil of outside communication and
unilateral influence which might affect a new conclusion. The continuity of judicial office and the
tradition which surround judicial conduct is lacking in the isolated activity of an arbitrator, although
even here the vast increase in the arbitration of labor disputes has created the office of the
specialized provisional arbitrator. (Washington-Baltimore N.G., Loc. 35 v. Washington Post Co., 442
F. 2d 1234 (1971], pp. 1238-1239)

In the case of The Consolidated Bank & Trust Corporation (SOLIDBANK) v. Bureau of Labor Relations, et al.,  this 3

Court held that the Voluntary Arbitrator lost jurisdiction over the case submitted to him the moment be rendered his
decision. Therefore, he could no longer entertain a motion for reconsideration of the decision for its reversal or
modification. Thus:

By modifying the original award, respondent arbitrator exceeded his authority as such, a fact he was
well aware of, as shown by his previous Resolution of Inhibition wherein he refused to act on the
Union's motion for reconsideration of the award or decision. Thus, respondent arbitrator emphatically
ruled:

It would be well to remind the Parties in this case that the arbitration law or
jurisprudence on the matter is explicit in its stand against revocation and amendment
of the submission agreement and the arbitration award once such has been made.
The rationale behind this is that:

An award should be regarded as the judgment of a court of last resort, so that all
reasonable presumptions should be ascertained in its favor and none to overthrow it.
Otherwise, arbitration proceedings, instead of being a quick and easy mode of
obtaining justice, would be merely an unnecessary step in the course of litigation,
causing delay and expenses, but not finally settling anything. Notwithstanding the
natural reluctance of the courts to interfere with matters determined by the
arbitrators. they will do so in proper cases where the law ordains them. (Arbitration,
Manguiat, citing U.S. v. Gleason, 175 US 588)

The power and authority of the Voluntary Arbitrator to act in the case commences from his
appointment and acceptance to act as such under the submission agreement of the Parties
and terminates upon his rendition of his decision or award which is accorded the benefits of the
doctrine of res judicata as in judgments of our regular courts of law. Since the power and authority of
the arbitrator to render a valid award, order or resolution rest upon the continuing mutual consent of
the parties, and there is none shown here, the Voluntary Arbitrator has no choice but to decline to
rule on the pleadings submitted by the parties. (Emphasis supplied)

It is true that the present rule makes the voluntary arbitration award final and executory after ten calendar days from
receipt of the copy of the award or decision by the parties.  Presumably, the decision may still be reconsidered by
4

the Voluntary Arbitrator on the basis of a motion for reconsideration duly filed during that period. Such a provision,
being procedural, may be applied retroactively to pending actions as we have held in a number of cases.  However,
5

it cannot be applied to a case in which the decision had become final before the new provision took effect, as in the
case at bar.  R.A. 6715, which introduced amended Article 262-A of the Labor Code, became effective on March 21,
6

Labor II – 1
1989. The first decision of the Voluntary Arbitrator was rendered on July 12, 1988, when the law in force was Article
263 of the Labor Code, which provided that:

Voluntary arbitration awards or decisions shall be final, inappealable, and executory.

The above-quoted provision did not expressly fix the time when the Voluntary Arbitrator's decision or award would
become final. We have held, however, that it would assume the attribute of finality upon its issuance, subject only to
judicial review in appropriate cases.
7

The public respondent exceeded his authority when he acted on the Union's motion for reconsideration and
reversed his original decision. Corollarily his second decision dated December 14, 1988, having been rendered in
violation of law, must be considered null and void and of no force and effect whatsoever. 8

WHEREFORE, the decision of the Voluntary Arbitrator dated December 14, 1988, is SET ASIDE for lack of
jurisdiction and his decision dated July 12, 1988, is REINSTATED

Labor II – 1
46.) G.R. No. L-43825 May 9, 1988

CONTINENTAL MARBLE CORP. and FELIPE DAVID, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC); ARBITRATOR JOSE T. COLLADO and RODITO
NASAYAO, respondents.

Benito P. Fabie for petitioners.

Narciso C. Parayno, Jr. for respondents.

PADILLA, J.:

In this petition for mandamus, prohibition and certiorari with preliminary injunction, petitioners seek to annul and set aside the decision rendered by the respondent
Arbitrator Jose T. Collado, dated 29 December 1975, in NLRC Case No. LR-6151, entitled: "Rodito Nasayao, complainant, versus Continental Marble Corp. and
Felipe David, respondents," and the resolution issued by the respondent Commission, dated 7 May 1976, which dismissed herein petitioners' appeal from said
decision.

In his complaint before the NLRC, herein private respondent Rodito Nasayao claimed that sometime in May 1974,
he was appointed plant manager of the petitioner corporation, with an alleged compensation of P3,000.00, a month,
or 25% of the monthly net income of the company, whichever is greater, and when the company failed to pay his
salary for the months of May, June, and July 1974, Rodito Nasayao filed a complaint with the National Labor
Relations Commission, Branch IV, for the recovery of said unpaid varies. The case was docketed therein as NLRC
Case No. LR-6151.

Answering, the herein petitioners denied that Rodito Nasayao was employed in the company as plant manager with
a fixed monthly salary of P3,000.00. They claimed that the undertaking agreed upon by the parties was a joint
venture, a sort of partnership, wherein Rodito Nasayao was to keep the machinery in good working condition and, in
return, he would get the contracts from end-users for the installation of marble products, in which the company
would not interfere. In addition, private respondent Nasayao was to receive an amount equivalent to 25% of the net
profits that the petitioner corporation would realize, should there be any. Petitioners alleged that since there had
been no profits during said period, private respondent was not entitled to any amount.

The case was submitted for voluntary arbitration and the parties selected the herein respondent Jose T. Collado as
voluntary arbitrator. In the course of the proceedings, however, the herein petitioners challenged the arbitrator's
capacity to try and decide the case fairly and judiciously and asked him to desist from further hearing the case. But,
the respondent arbitrator refused. In due time, or on 29 December 1975, he rendered judgment in favor of the
complainant, ordering the herein petitioners to pay Rodito Nasayao the amount of P9,000.00, within 10 days from
notice. 1

Upon receipt of the decision, the herein petitioners appealed to the National Labor Relations Commission on
grounds that the labor arbiter gravely abused his discretion in persisting to hear and decide the case
notwithstanding petitioners' request for him to desist therefrom: and that the appealed decision is not supported by
evidence. 2

On 18 March 1976, Rodito Nasayao filed a motion to dismiss the appeal on the ground that the decision of the
voluntary arbitrator is final, unappealable, and immediately executory;   and, on 23 March 1976, he filed a motion for
3

the issuance of a writ of execution.  4

Acting on the motions, the respondent Commission, in a resolution dated 7 May 1976, dismissed the appeal on the
ground that the decision appealed from is final, unappealable and immediately executory, and ordered the herein
petitioners to comply with the decision of the voluntary arbitrator within 10 days from receipt of the resolution. 5

Labor II – 1
The petitioners are before the Court in the present recourse. As prayed for, the Court issued a temporary restraining
order, restraining herein respondents from enforcing and/or carrying out the questioned decision and resolution. 6

The issue for resolution is whether or not the private respondent Rodito Nasayao was employed as plant manager
of petitioner Continental Marble Corporation with a monthly salary of P3,000.00 or 25% of its monthly income,
whichever is greater, as claimed by said respondent, or entitled to receive only an amount equivalent to 25% of net
profits, if any, that the company would realize, as contended by the petitioners.

The respondent arbitrator found that the agreement between the parties was for the petitioner company to pay the
private respondent, Rodito Nasayao, a monthly salary of P3,000.00, and, consequently, ordered the company to
pay Rodito Nasayao the amount of P9,000.00 covering a period of three (3) months, that is, May, June and July
1974.

The respondent Rodito Nasayao now contends that the judgment or award of the voluntary arbitrator is final,
unappealable and immediately executory, and may not be reviewed by the Court. His contention is based upon the
provisions of Art. 262 of the Labor Code, as amended.

The petitioners, upon the other hand, maintain that "where there is patent and manifest abuse of discretion, the rule
on unappealability of awards of a voluntary arbitrator becomes flexible and it is the inherent power of the Courts to
maintain the people's faith in the administration of justice." The question of the finality and unappealability of a
decision and/or award of a voluntary arbitrator had been laid to rest in Oceanic Bic Division (FFW) vs. Romero,   and
7

reiterated in Mantrade FMMC Division Employees and Workers Union vs. Bacungan.  The Court therein ruled that it
8

can review the decisions of voluntary arbitrators, thus-

We agree with the petitioner that the decisions of voluntary arbitrators must be given the highest
respect and as a general rule must be accorded a certain measure of finality. This is especially true
where the arbitrator chosen by the parties enjoys the first rate credentials of Professor Flerida Ruth
Pineda Romero, Director of the U.P. Law Center and an academician of unquestioned expertise in
the field of Labor Law. It is not correct, however, that this respect precludes the exercise of judicial
review over their decisions. Article 262 of the Labor Code making voluntary arbitration awards final,
inappealable, and executory except where the money claims exceed P l 00,000.00 or 40% of paid-
up capital of the employer or where there is abuse of discretion or gross incompetence refers to
appeals to the National Labor Relations Commission and not to judicial review.

Inspite of statutory provisions making 'final' the decisions of certain administrative agencies, we have
taken cognizance of petitions questioning these decisions where want of jurisdiction, grave abuse of
discretion, violation of due process, denial of substantial justice, or erroneous interpretation of the
law were brought to our attention. There is no provision for appeal in the statute creating the
Sandiganbayan but this has not precluded us from examining decisions of this special court brought
to us in proper petitions. ...

The Court further said:

A voluntary arbitrator by the nature of her fucntions acts in quasi-judicial capacity. There is no
reason why her decisions involving interpretation of law should be beyond this Court's review.
Administrative officials are presumed to act in accordance with law and yet we do hesitate to pass
upon their work where a question of law is involved or where a showing of abuse of authority or
discretion in their official acts is properly raised in petitions for certiorari.

The foregoing pronouncements find support in Section 29 of Republic Act No. 876, otherwise known as the
Arbitration Law, which provides:

Sec. 29. Appeals — An appeal may be taken from an order made in a proceeding under this Act, or
from a judgment entered upon an award through certiorari proceedings, but such appeals shall be
limited to questions of law. The proceedings upon such an appeal, including the judgment thereon
shall be governed by the Rules of Court in so far as they are applicable.

Labor II – 1
The private respondent, Rodito Nasayao, in his Answer to the petition,   also claims that the case is premature for
9

non-exhaustion of administrative remedies. He contends that the decision of the respondent Commission should
have been first appealed by petitioners to the Secretary of Labor, and, if they are not satisfied with his decision, to
appeal to the President of the Philippines, before resort is made to the Court.

The contention is without merit. The doctrine of exhaustion of administrative remedies cannot be invoked in this
case, as contended. In the recent case of John Clement Consultants, Inc. versus National Labor Relations
Commission,   the Court said:
10

As is well known, no law provides for an appeal from decisions of the National Labor Relations
Commission; hence, there can be no review and reversal on appeal by higher authority of its factual
or legal conclusions. When, however, it decides a case without or in excess of its jurisdiction, or with
grave abuse of discretion, the party thereby adversely affected may obtain a review and nullification
of that decision by this Court through the extraordinary writ of certiorari. Since, in this case, it
appears that the Commission has indeed acted without jurisdiction and with grave abuse of
discretion in taking cognizance of a belated appeal sought to be taken from a decision of Labor
Arbiter and thereafter reversing it, the writ of certiorari will issue to undo those acts, and do justice to
the aggrieved party.

We also find no merit in the contention of Rodito Nasayao that only questions of law, and not findings of fact of a
voluntary arbitrator may be reviewed by the Court, since the findings of fact of the voluntary arbitrator are conclusive
upon the Court.

While the Court has accorded great respect for, and finality to, findings of fact of a voluntary arbitrator   and11

administrative agencies which have acquired expertise in their respective fields, like the Labor Department and the
National Labor Relations Commission,   their findings of fact and the conclusions drawn therefrom have to be
12

supported by substantial evidence. ln that instant case, the finding of the voluntary arbitrator that Rodito Nasayao
was an employee of the petitioner corporation is not supported by the evidence or by the law.

On the other hand, we find the version of the petitioners to be more plausible and in accord with human nature and
the ordinary course of things. As pointed out by the petitioners, it was illogical for them to hire the private respondent
Rodito Nasayao as plant manager with a monthly salary of P3,000.00, an amount which they could ill-afford to pay,
considering that the business was losing, at the time he was hired, and that they were about to close shop in a few
months' time.

Besides, there is nothing in the record which would support the claim of Rodito Nasayao that he was an employee of
the petitioner corporation. He was not included in the company payroll, nor in the list of company employees
furnished the Social Security System.

Most of all, the element of control is lacking. In Brotherhood Labor Unity Movement in the Philippines vs.
Zamora,  the Court enumerated the factors in determining whether or not an employer-employee relationship exists,
13

to wit:

In determining the existence of an employer-employee relationship, the elements that are generally
considered are the following: (a) the selection and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer's power to control the employee with respect
to the means and methods by which the work is to be accomplished. It is the so-called "control test"
that is the most important element (Investment Planning Corp. of the Phils. vs. The Social Security
System, 21 SCRA 924; Mafinco Trading Corp. v. Ople, supra, and Rosario Brothers, Inc. v. Ople,
131 SCRA 72). <äre||anº•1àw>

In the instant case, it appears that the petitioners had no control over the conduct of Rodito Nasayao in the
performance of his work. He decided for himself on what was to be done and worked at his own pleasure. He was
not subject to definite hours or conditions of work and, in turn, was compensated according to the results of his own
effort. He had a free hand in running the company and its business, so much so, that the petitioner Felipe David did
not know, until very much later, that Rodito Nasayao had collected old accounts receivables, not covered by their

Labor II – 1
agreement, which he converted to his own personal use. It was only after Rodito Nasayao had abandoned the plant
following discovery of his wrong- doings, that Felipe David assumed management of the plant.

Absent the power to control the employee with respect to the means and methods by which his work was to be
accomplished, there was no employer-employee relationship between the parties. Hence, there is no basis for an
award of unpaid salaries or wages to Rodito Nasayao.

WHEREFORE, the decision rendered by the respondent Jose T. Collado in NLRC Case No. LR-6151, entitled:
"Rodito Nasayao, complainant, versus Continental Marble Corp. and Felipe David, respondents," on 29 December
1975, and the resolution issued by the respondent National Labor Relations Commission in said case on 7 May
1976, are REVERSED and SET ASIDE and another one entered DISMISSING private respondent's complaints.
The temporary restraning order heretofore isued by the Court is made permanent. Without costs.

Labor II – 1
47.) G.R. No. 120319 October 6, 1995

LUZON DEVELOPMENT BANK, petitioner,

vs.
ASSOCIATION OF LUZON DEVELOPMENT BANK EMPLOYEES and ATTY. ESTER S. GARCIA in her
capacity as VOLUNTARY ARBITRATOR, respondents.

ROMERO, J.:

From a submission agreement of the Luzon Development Bank (LDB) and the Association of Luzon Development
Bank Employees (ALDBE) arose an arbitration case to resolve the following issue:

Whether or not the company has violated the Collective Bargaining Agreement provision and the
Memorandum of Agreement dated April 1994, on promotion.

At a conference, the parties agreed on the submission of their respective Position Papers on December 1-15, 1994.
Atty. Ester S. Garcia, in her capacity as Voluntary Arbitrator, received ALDBE's Position Paper on January 18, 1995.
LDB, on the other hand, failed to submit its Position Paper despite a letter from the Voluntary Arbitrator reminding
them to do so. As of May 23, 1995 no Position Paper had been filed by LDB.

On May 24, 1995, without LDB's Position Paper, the Voluntary Arbitrator rendered a decision disposing as follows:

WHEREFORE, finding is hereby made that the Bank has not adhered to the Collective Bargaining
Agreement provision nor the Memorandum of Agreement on promotion.

Hence, this petition for certiorari and prohibition seeking to set aside the decision of the Voluntary Arbitrator and to
prohibit her from enforcing the same.

In labor law context, arbitration is the reference of a labor dispute to an impartial third person for determination on
the basis of evidence and arguments presented by such parties who have bound themselves to accept the decision
of the arbitrator as final and binding.

Arbitration may be classified, on the basis of the obligation on which it is based, as either compulsory or voluntary.

Compulsory arbitration is a system whereby the parties to a dispute are compelled by the government to forego their
right to strike and are compelled to accept the resolution of their dispute through arbitration by a third party.  The
1

essence of arbitration remains since a resolution of a dispute is arrived at by resort to a disinterested third party
whose decision is final and binding on the parties, but in compulsory arbitration, such a third party is normally
appointed by the government.

Under voluntary arbitration, on the other hand, referral of a dispute by the parties is made, pursuant to a voluntary
arbitration clause in their collective agreement, to an impartial third person for a final and binding resolution.  Ideally,
2

arbitration awards are supposed to be complied with by both parties without delay, such that once an award has
been rendered by an arbitrator, nothing is left to be done by both parties but to comply with the same. After all, they
are presumed to have freely chosen arbitration as the mode of settlement for that particular dispute. Pursuant
thereto, they have chosen a mutually acceptable arbitrator who shall hear and decide their case. Above all, they
have mutually agreed to de bound by said arbitrator's decision.

In the Philippine context, the parties to a Collective Bargaining Agreement (CBA) are required to include therein
provisions for a machinery for the resolution of grievances arising from the interpretation or implementation of the
CBA or company personnel policies.  For this purpose, parties to a CBA shall name and designate therein a
3

voluntary arbitrator or a panel of arbitrators, or include a procedure for their selection, preferably from those
accredited by the National Conciliation and Mediation Board (NCMB). Article 261 of the Labor Code accordingly
Labor II – 1
provides for exclusive original jurisdiction of such voluntary arbitrator or panel of arbitrators over (1) the
interpretation or implementation of the CBA and (2) the interpretation or enforcement of company personnel
policies. Article 262 authorizes them, but only upon agreement of the parties, to exercise jurisdiction over other labor
disputes.

On the other hand, a labor arbiter under Article 217 of the Labor Code has jurisdiction over the following
enumerated cases:

. . . (a) Except as otherwise provided under this Code the Labor Arbiters shall have original and
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the submission of the
case by the parties for decision without extension, even in the absence of stenographic notes, the
following cases involving all workers, whether agricultural or non-agricultural:

1. Unfair labor practice cases;

2. Termination disputes;

3. If accompanied with a claim for reinstatement, those cases that workers may file involving wages,
rates of pay, hours of work and other terms and conditions of employment;

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-
employee relations;

5. Cases arising from any violation of Article 264 of this Code, including questions involving the
legality of strikes and lockouts;

6. Except claims for Employees Compensation, Social Security, Medicare and maternity benefits, all
other claims, arising from employer-employee relations, including those of persons in domestic or
household service, involving an amount exceeding five thousand pesos (P5,000.00) regardless of
whether accompanied with a claim for reinstatement.

xxx xxx xxx

It will thus be noted that the jurisdiction conferred by law on a voluntary arbitrator or a panel of such arbitrators is
quite limited compared to the original jurisdiction of the labor arbiter and the appellate jurisdiction of the National
Labor Relations Commission (NLRC) for that matter.  The state of our present law relating to voluntary arbitration
4

provides that "(t)he award or decision of the Voluntary Arbitrator . . . shall be final and executory after ten (10)
calendar days from receipt of the copy of the award or decision by the parties,"  while the "(d)ecision, awards, or
5

orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within
ten (10) calendar days from receipt of such decisions, awards, or orders."  Hence, while there is an express mode of
6

appeal from the decision of a labor arbiter, Republic Act No. 6715 is silent with respect to an appeal from the
decision of a voluntary arbitrator.

Yet, past practice shows that a decision or award of a voluntary arbitrator is, more often than not, elevated to the
Supreme Court itself on a petition for certiorari,  in effect equating the voluntary arbitrator with the NLRC or the Court
7

of Appeals. In the view of the Court, this is illogical and imposes an unnecessary burden upon it.

In Volkschel Labor Union, et al. v. NLRC, et al.,  on the settled premise that the judgments of courts and awards of
8

quasi-judicial agencies must become final at some definite time, this Court ruled that the awards of voluntary
arbitrators determine the rights of parties; hence, their decisions have the same legal effect as judgments of a court.
In Oceanic Bic Division (FFW), et al. v. Romero, et al.,  this Court ruled that "a voluntary arbitrator by the nature of
9

her functions acts in a quasi-judicial capacity." Under these rulings, it follows that the voluntary arbitrator, whether
acting solely or in a panel, enjoys in law the status of a quasi-judicial agency but independent of, and apart from, the
NLRC since his decisions are not appealable to the latter. 10

Section 9 of B.P. Blg. 129, as amended by Republic Act No. 7902, provides that the Court of Appeals shall exercise:
Labor II – 1
 xxx xxx xxx

(B) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards
of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions,
including the Securities and Exchange Commission, the Employees Compensation Commission and
the Civil Service Commission, except those falling within the appellate jurisdiction of the Supreme
Court in accordance with the Constitution, the Labor Code of the Philippines under Presidential
Decree No. 442, as amended, the provisions of this Act, and of subparagraph (1) of the third
paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948.

xxx xxx xxx

Assuming arguendo that the voluntary arbitrator or the panel of voluntary arbitrators may not strictly be considered
as a quasi-judicial agency, board or commission, still both he and the panel are comprehended within the concept of
a "quasi-judicial instrumentality." It may even be stated that it was to meet the very situation presented by the quasi-
judicial functions of the voluntary arbitrators here, as well as the subsequent arbitrator/arbitral tribunal operating
under the Construction Industry Arbitration Commission,  that the broader term "instrumentalities" was purposely
11

included in the above-quoted provision.

An "instrumentality" is anything used as a means or agency.  Thus, the terms governmental "agency" or
12

"instrumentality" are synonymous in the sense that either of them is a means by which a government acts, or by
which a certain government act or function is performed.  The word "instrumentality," with respect to a state,
13

contemplates an authority to which the state delegates governmental power for the performance of a state
function.  An individual person, like an administrator or executor, is a judicial instrumentality in the settling of an
14

estate,  in the same manner that a sub-agent appointed by a bankruptcy court is an instrumentality of the
15

court,  and a trustee in bankruptcy of a defunct corporation is an instrumentality of the state.

16 17

The voluntary arbitrator no less performs a state function pursuant to a governmental power delegated to him under
the provisions therefor in the Labor Code and he falls, therefore, within the contemplation of the term
"instrumentality" in the aforequoted Sec. 9 of B.P. 129. The fact that his functions and powers are provided for in the
Labor Code does not place him within the exceptions to said Sec. 9 since he is a quasi-judicial instrumentality as
contemplated therein. It will be noted that, although the Employees Compensation Commission is also provided for
in the Labor Code, Circular No. 1-91, which is the forerunner of the present Revised Administrative Circular No. 1-
95, laid down the procedure for the appealability of its decisions to the Court of Appeals under the foregoing
rationalization, and this was later adopted by Republic Act No. 7902 in amending Sec. 9 of B.P. 129.

A fortiori, the decision or award of the voluntary arbitrator or panel of arbitrators should likewise be appealable to the
Court of Appeals, in line with the procedure outlined in Revised Administrative Circular No. 1-95, just like those of
the quasi-judicial agencies, boards and commissions enumerated therein.

This would be in furtherance of, and consistent with, the original purpose of Circular No. 1-91 to provide a uniform
procedure for the appellate review of adjudications of all quasi-judicial entities  not expressly excepted from the
18

coverage of Sec. 9 of B.P. 129 by either the Constitution or another statute. Nor will it run counter to the legislative
intendment that decisions of the NLRC be reviewable directly by the Supreme Court since, precisely, the cases
within the adjudicative competence of the voluntary arbitrator are excluded from the jurisdiction of the NLRC or the
labor arbiter.

In the same vein, it is worth mentioning that under Section 22 of Republic Act No. 876, also known as the Arbitration
Law, arbitration is deemed a special proceeding of which the court specified in the contract or submission, or if none
be specified, the Regional Trial Court for the province or city in which one of the parties resides or is doing business,
or in which the arbitration is held, shall have jurisdiction. A party to the controversy may, at any time within one (1)
month after an award is made, apply to the court having jurisdiction for an order confirming the award and the court
must grant such order unless the award is vacated, modified or corrected. 19

In effect, this equates the award or decision of the voluntary arbitrator with that of the regional trial court.
Consequently, in a petition for certiorari from that award or decision, the Court of Appeals must be deemed to have

Labor II – 1
concurrent jurisdiction with the Supreme Court. As a matter of policy, this Court shall henceforth remand to the
Court of Appeals petitions of this nature for proper disposition.

ACCORDINGLY, the Court resolved to REFER this case to the Court of Appeals

Labor II – 1
48.) G.R. No. 82341 December 6, 1989

SUNDOWNER DEVELOPMENT CORPORATION, petitioner,

vs.
HON. FRANKLIN M. DRILON, in his capacity as Secretary of the Department of Labor and Employment,
NATIONAL UNION OF WORKERS IN HOTEL, RESTAURANT AND ALLIED INDUSTRIES, (NUWHRAIN),
HOTEL MABUHAY CHAPTER, THE CHAPTER OFFICERS AND MEMBERS, HOTEL MABUHAY, INC. and MR.
MARIANO PENANO, President of Hotel Mabuhay, Inc., respondents.

Carmelita S. Bautista-Lozada for petitioner.

Paterno D. Menzon Law Office for private respondent NUWHRAIN.

GANCAYCO, J.:

The principal issue in this case is whether or not the purchaser of the assets of an employer corporation can be
considered a successor employer of the latter's employees.

Private respondent Hotel Mabuhay, Inc. (Mabuhay for short,) leased the premises belonging to Santiago Syjuco,
Inc. (Syjuco for short) located at 1430 A. Mabini St., Ermita, Manila. However, due to non-payment of rentals, a case
for ejectment was filed by Syjuco against Mabuhay in the Metropolitan Trial Court of Manila. Mabuhay offered to
amicably settle the case by surrendering the premises to Syjuco and to sell its assets and personal property to any
interested party.

Syjuco offered the said premises for lease to petitioner. The negotiation culminated with the execution of the lease
agreement on April 16, 1987 to commence on May 1, 1987 and to expire on April 30,1992.  Mabuhay offered to sell
1

its assets and personal properties in the premises to petitioner to which petitioner agreed. A deed of assignment of
said assets and personal properties was executed by Mabuhay on April 29,1987 in favor of petitioner.  2

On same date Syjuco formally turned over the possession of the leased premises to petitioner who actually took
possession and occupied the same on May 1, 1987.

On May 4, 1987, respondent National Union of Workers in Hotel, Restaurant and Allied Services (NUWHRAIN for
short) picketed the leased premises, barricaded the entrance to the leased premises and denied petitioner's officers,
employees and guests free access to and egress from said premises. Thus, petitioner wrote a letter-complaint to
Syjuco.

A complaint for damages with preliminary injunction and/or temporary restraining order was filed by petitioner on
May 7, 1987 with the Regional Trial Court of Manila docketed as Civil Case No. 87-40436. On the same day, the
Executive Judge of said court issued a restraining order against respondent NUWHRAIN and its officers and
members as prayed for in the petition. Nevertheless, NUWHRAIN maintained their strike on the subject premises
but filed an answer to the complaint.

On May 14, 1987, an order was issued by public respondent Secretary of Labor assuming jurisdiction over the labor
dispute pursuant to Article 263(g) of the Labor Code as amended and in the interim, requiring all striking employees
to return to work and for respondent Mabuhay to accept all returning employees pending final determination of the
issue of the absorption of the former employees of Mabuhay. The parties were also directed to submit their
respective position papers within ten (10) days from receipt of the order.

On May 25, 1987, Mabuhay submitted its position paper alleging among others that it had sold all its assets and
personal properties to petitioner and that there was no sale or transfer of its shares whatsoever and that Mabuhay
completely ceased operation effective April 28,1987 and surrendered the premises to petitioner so that there exists
a legal and physical impossibility on its part to comply with the return to work order specifically on absorption.
Labor II – 1
On June 26, 1987, petitioner in order to commence its operation, signed a tri-partite agreement so the workers may
lift their strike, by and among petitioner, respondents NUWHRAIN and Mabuhay whereby the latter paid to
respondent NUWHRAIN the sum of P 638,000.00 in addition to the first payment in the sum of P 386,447.11, for
which reason respondent NUWHRAIN agreed to lift the picket . 3

Respondent NUWHRAIN on July 13, 1987 filed its position paper alleging connivance between Mabuhay and
petitioner in selling the assets and closing the hotel to escape its obligations to the employees of Mabuhay and so it
prays that petitioner accept the workforce of Mabuhay and pay backwages from April 15,1986 to April 28,1987, the
day Mabuhay stopped operation.

On the other hand, petitioner filed a "Partial Motion for Reconsideration and Position Paper," alleging that it was
denied due process; that there were serious errors in the findings of fact which would cause grave and irreparable
damage to its interest; as well as on questions of law. On January 20, 1988, the public respondent issued an order
requiring petitioner to absorb the members of the union and to pay backwages from the time it started operations up
to the date of the order. 
4

Petitioner filed on January 27,1988 a motion for reconsideration of the aforesaid order alleging that the theory of
implied acceptance and assumption of statutory wrong does not apply in the instant case; that the prevailing
doctrine that there is no law requiring bona fide purchasers of the assets of an on-going concern to absorb in its
employ the employees of the latter should be applied in this case; that the order for absorption of the employees of
Mabuhay as well as the payment of their backwages is contrary to law. Respondent NUWHRAIN also filed a motion
for clarification of the aforesaid order.

On March 8, 1988, the public respondent denied said motion for reconsideration and motion for clarification for lack
of merit.

Hence, this petition for review by certiorari with prayer for preliminary injunction and/or temporary restraining order
filed by petitioner in this Court. Petitioner presents seven issues for resolution which all revolve about the singular
issue of whether or not under the circumstances of this case the petitioner may be compelled to absorb the
employees of respondent Mabuhay.

On March 23, 1988, this Court, without giving due course to the petition, required respondents to comment thereon
within ten (10) days from notice and issued a temporary restraining order enjoining public respondent or his duly
authorized representatives from executing and implementing the orders dated January 20, 1988 and March 8, 1988.

The petition is impressed with merit.

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 .5 A labor contract merely creates an action in personally and does not create any
real right which should be respected by third parties. This conclusion draws its force from the right of an employer to
select his employees and to decide when to engage them as protected under our Constitution, and the same can
only be restricted by law through the exercise of the police power. 6

As a general rule, there is no law requiring a bona fide purchaser of assets of an on-going concern to absorb in its
employ the employees of the latter.  7

However, although the purchaser of the assets or enterprise is not legally bound to absorb in its employ the
employers of the seller of such assets or enterprise, the parties are liable to the employees if the transaction
between the parties is colored or clothed with bad faith. 8

In the case at bar, contrary to the claim of the public respondent that the transaction between petitioner and
Mabuhay was attended with bad faith, the court finds no cogent basis for such contention. Thus, the absorption of
the employees of Mabuhay may not be imposed on petitioner.

Labor II – 1
It is undisputed that when Mabuhay surrendered the leased premises to Syjuco and asked Syjuco to offer same to
other lessees it was Syjuco who found petitioner and persuaded petitioner to lease said premises. Mabuhay had
nothing to do with the negotiation and consummation of the lease contract between petitioner and Syjuco.

It was only when Mabuhay offered to sell its assets and personal properties in the premises to petitioner that they
came to deal with each other. It appears that petitioner agreed to purchase said assets of respondent Mabuhay to
enable Mabuhay to pay its obligations to its striking employees and to Syjuco. Indeed, in the deed of assignment
that was executed by Mabuhay in favor of petitioner on April 14, 1 987 for and in consideration of P2,500,000.00, it
is specifically provided therein that the same is "purely for and in consideration of the sale/transfer and assignment
of the personal properties and assets of Hotel Mabuhay, Inc. listed . . . " and "in no way involves any assumption or
undertaking on the part of Second Party (petitioner) of any debts or liabilities whatsoever of Hotel Mabuhay,
Inc."   The liabilities alluded to in this agreement should be interpreted to mean not only any monetary liability of
9

Mabuhay but any other liability or obligation arising from the operation of its business including its liability to its
employees.

Moreover, in the tripartite agreement that was entered into by petitioner with respondents NUWHRAIN and
Mabuhay, it is clearly stipulated as follows:

8. That, immediately after the execution of this Agreement, the FIRST PARTY shall give a list of its
members to the THIRD PARTY that it desires to recommend for employment so that the latter can
consider them for employment, with no commitment whatsoever on the part of the THIRD PARTY to
hire them in the business that it will operate in the premises formerly occupied by the Hotel
Mabuhay;  10

From the foregoing, it is clear that petitioner has no liability whatsoever to the employees of Mabuhay And its
responsibility if at all, is only to consider them for re-employment in the operation of the business in the same
premises. There can be no implied acceptance of the employees of Mabuhay by petitioner and acceptance of
statutory wrong as it is expressly provided in the agreement that petitioner has no commitment or duty to absorb
them.

Moreover, the court does not subscribe to the theory of public respondent that petitioner should have informed
NUWHRAIN of its lease of the premises and its purchase of the assets and personal properties of Mabuhay therein
so that said employees could have taken steps to protect their interest. The court finds no such duty on the part of
petitioner and its failure to notify said employees cannot be an indicium of bad faith.

Much less is there any evidence that petitioner and respondent Mabuhay are joint tortfeasors as found by public
respondent. While it is true that petitioner is using the leased property for the same type of business as that of
respondent Mabuhay, there can be no continuity of the business operations of the predecessor employer by the
successor employer as respondent Mabuhay had not retained control of the business. Petitioner is a corporation
entirely different from Mabuhay. It has no controlling interest whatever in respondent Mabuhay. Petitioner and
Mabuhay have no privity and are strangers to each other.

What is obvious is that the petitioner, by purchasing the assets of respondent Mabuhay in the hotel premises,
enabled Mabuhay to pay its obligations to its employees. There being no employer-employee relationship between
the petitioner and the Mabuhay employees, the petition must fail. Petitioner can not be compelled to absorb the
employees of Mabuhay and to pay them backwages.

WHEREFORE, the petition is GRANTED and the questioned orders of public respondent Secretary of Labor and
Employment dated January 20, 1988 and March 8, 1988 are reversed and set aside. The restraining order that this
Court issued on March 20,1988 is hereby made permanent. No pronouncement as to costs.

Labor II – 1
 49.) [G.R. No. 127598. January 27, 1999.]

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

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

DECISION

MARTINEZ, J.:

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

MEWA is the duly recognized labor organization of the rank-and-file employees of MERALCO. chanrobles law library

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

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

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

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

‘Undersecretary Jose M. Espanol, Jr. is deputized to conduct conciliation conferences between the
parties to bridge their differences and eventually hammer out a solution that is mutually acceptable.
He shall be assisted by the Legal Service.

SO ORDERED." cralaw virtua1aw library

Thereafter, the parties submitted their respective memoranda and on August 19, 1996, the Secretary
Labor II – 1
resolved the labor dispute through an Order, 6 containing the following awards: jgc:chanrobles.com.ph

"ECONOMIC DEMANDS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Labor II – 1
Midyear Bonus — one month’s pay to be included in the CBA.

Anniversary Bonus — union’s demand is denied.

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

Retirement Benefits: chanrob1es virtual 1aw library

a. Full retirement-present policy is maintained;

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

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

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

e. HMP coverage for retiree’s dependents is denied

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

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

Optional retirement — union’s demand is denied; present policy is maintained; employee is eligible
for optional retirement if he has rendered at least 18 years of service.

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

Resignation benefits — union’s demand is denied.

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

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

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

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

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

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

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

Labor II – 1
Holdup Allowance — the union demand is denied; the present policy shall be maintained.

Meal and Lodging Allowance — shall be increased effective December 1, 1995 as follows: chanrob1es virtual 1aw library

Breakfast from P25.00 to P35.00

Lunch from P35.00 to P45.00

Dinner from P35.00 to P45.00

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

MERALCO franchise areas

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

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

Benefits for Collectors: chanrob1es virtual 1aw library

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

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

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

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

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

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

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

Political Demands: chanrob1es virtual 1aw library

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

b. Union recognition and security —

Labor II – 1
i. The union shall be recognized by the Company as sole and exclusive bargaining representative of
the rank-and-file employees included in the bargaining unit. The Company shall agree to meet only
with Union officers and its authorized representatives on all matters involving the Union and all
issues arising from the implementation and interpretation of the new CBA.

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

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

c. Transfer of assignment and job security —

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

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

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

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

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

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

f. Union Representation in Committees — the union is allowed to participate in policy formulation and
in the decision-making process on matters affecting their rights and welfare, particularly in the
Uniform Committee, the Safety Committee and other committees that may be formed in the future.

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

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

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

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

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

Labor II – 1
3. in ordering the ‘incorporation into the CBA of all existing employee benefits, on the one hand, and
those that MERALCO has unilaterally granted to its employees by virtue of voluntary company policy
or practice, on the other hand.’

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

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

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

MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order on the wage
increase, leaves, decentralized filing of paternity and maternity leaves, bonuses, retirement benefits,
optional retirement, medical, dental and hospitalization benefits, short swing and payroll treatment.
On its political demands, MEWA asked the Secretary to rule on its proposal to institute a Code of
Discipline for its members and the union’s representation in the administration of the Pension Fund.

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

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

Economic Demands

2) Wage Increase: chanrob1es virtual 1aw library

First year — P2,200.00 per month;

Second year — P2,200.00 per month.

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

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

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

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

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

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

One sack of rice per quarter of the year shall be given to those retiring between August 19, 1996 and
November 30, 1997.
Labor II – 1
On HMP Coverage for Retirees — The parties ‘maintain the status quo, that is, with the Company
complying with the present arrangement and the obligations to retirees as is.’

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

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

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

12) Shortswing — the original award is deleted.

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

Political Demands: chanrob1es virtual 1aw library

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

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

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

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

18) Check off of union dues

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

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

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

19) Union Representation in Committees — The union is granted representation in the Safety
Committee, the Uniform Committee and other committees of a similar nature and purpose involving
personnel welfare, rights and benefits as well as duties.
Labor II – 1
Dissatisfied, petitioner filed this petition contending that the Secretary of Labor gravely abused his
discretion:chanrob1es virtual 1aw library

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

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

a. Two months Christmas bonus;

b. Rice Subsidy and retirement benefits for retirees;

c. Loan for the employees’ cooperative;

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

e. Signing bonus;

f. Integration of the Red Circle Rate Allowance

g. Sick leave reserve of 15 days

h. The 40-day union leave;

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

j. Benefits for collectors

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

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

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

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

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

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

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

The union disputes the allegation of MERALCO that the Secretary abused his discretion in issuing the
Labor II – 1
assailed orders arguing that he acted within the scope of the powers granted him by law and by the
Constitution. The union contends that any judicial review is limited to an examination of the
Secretary’s decision-making/discretion — exercising process to determine if this process was
attended by some capricious or whimsical act that constitutes "grave abuse" ; in the absence of such
abuse, his findings — considering that he has both jurisdiction and expertise to make them — are
valid.

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

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

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

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

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

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

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

The natural and ever present limitation on the Secretary’s acts is, of course, the Constitution. And we
recognize that indeed the constitutional provisions the union cited are State policies on labor and
social justice that can serve as standards in assessing the validity of a Secretary of Labor’s actions.
However, we note that these provisions do not provide clear, precise and objective standards of
conduct that lend themselves to easy application. We likewise recognize that the Constitution is not a
lopsided document that only recognizes the interests of the working man; it too protects the interests
Labor II – 1
of the property owner and employer as well. 14

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

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

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

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

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

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

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

MERALCO based its projection on the increase of the income for the first 6 months of 1996 over the
same period in 1995. The union, on the other hand, projected that the 1996 income would increase
Labor II – 1
by 29% to 35% because the "consumption of electric power is at its highest during the last two
quarters with the advent of the Yuletide season." The union likewise relied heavily on a newspaper
report citing an estimate by an all Asia capital financial analyst that the net operating income would
amount to 5.795 Billion. 21

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

Projected net operating

income for 1996 5,795,000,000

Principals and interests 1,426,571,703

Dividends at 1995 rate 1,636,949,000

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

Add: Tax credit equivalent to

35% of labor cost 231,804,940

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

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

x          x           x

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

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

We find after considering the records that the Secretary gravely abused his discretion in making this
wage award because he disregarded evidence on record. Where he considered MERALCO’s evidence
at all, he apparently misappreciated this evidence in favor of claims that do not have evidentiary
support. To our mind, the MERALCO projection had every reason to be reliable because it was based
on actual and undisputed figures for the first six months of 1996. 23 On the other hand, the union
projection was based on a speculation of Yuletide consumption that the union failed to substantiate.
In fact, as against the union’s unsubstantiated Yuletide consumption claim, MERALCO adduced
evidence in the form of historical consumption data showing that a lengthy consumption does not
tend to rise during the Christmas period. 24 Additionally, the All-Asia Capital Report was nothing
more than a newspaper report that did not show any specific breakdown or computations. While the
union claimed that its cited figure is based on MERALCO’s 10-year income stream, 25 no data or
computation of this 10-year stream appear in the record.

While the Secretary is not expected to accept the company-offered figures wholesale in determining
Labor II – 1
a wage award, we find it a grave abuse of discretion to completely disregard data that is based on
actual and undisputed record of financial performance in favor of the third-hand and unfounded
claims the Secretary eventually relied upon. At the very least, the Secretary should have properly
justified his disregard of the company figures. The Secretary should have also reasonably insured
that the figure that served as the starting point for his computation had some substantial basis.

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

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

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

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

AMOUNT OF CBA INCREASES DIFFERENCE

CBA

COVERAGE RANK-AND-FILE SUPERVISORY AMOUNT PERCENT

1980 230.00 342.50 112.50 48.91%

1981 210.00 322.50 112.50 53.57

Labor II – 1
1982 200.00 312.50 112.50 56.25

TOTAL 640.00 977.50 337.50 52.73

1983 320.00 432.50 112.50 35.16

1984 350.00 462.50 112.50 32.14

1985 370.00 482.50 112.50 30.41

TOTAL 1,040.00 1,377.50 337.50 32.45

1986 860.00 972.50 112.50 13.08

1987 640.00 752.50 112.50 17.58

1988 600.00 712.50 112.50 18.75

TOTAL 2,100.00 2,437.50 337.50 16.07

1989 1,100.00 1,212.50 112.50 10.23

1990 1,200.00 1,312.50 112.50 9.38

1991 1,300.00 1,412.50 112.50 8.65

TOTAL 3,600.00 3,937.50 337.50 9.38

1992 1,400.00 1,742.50 342.50 24.46

1993 1,350.00 1,682.50 332.50 24.63

1994 1,150.00 1,442.50 292.50 25.43

TOTAL 3,900.00 4,867.50 967.50 24.81

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

We now go to the economic issues.

1. CHRISTMAS BONUS

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

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

Labor II – 1
"We note that each of the grant mentioned in the commonly adopted table of grants has a special
description. Christmas bonuses were given in 1988 and 1989. However, the amounts of bonuses
given differed. In 1988, it was P1,500. In 1989, it was ½ month salary. The use of "Christmas bonus"
title stopped after 1989. In 1990, what was given was a "cash gift" of ½ month’s salary. The grants
thereafter bore different titles and were for varying amounts. Significantly, the Company explained
the reason for the 1995 bonuses and this explanation was not substantially contradicted by the
Union.

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

"x       x       x

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

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

We do not agree.

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

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

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

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

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

We can not, however, affirm the Secretary’s award of a two-month special Christmas bonus to the
employees since there was no recognized company practice of giving a two-month special grant. The
two-month special bonus was given only in 1995 in recognition of the employees’ prompt and
Labor II – 1
efficient response during the calamities. Instead, a one-month special bonus, We believe, is
sufficient, this being merely a generous act on the part of MERALCO.

2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES

It appears that the Secretary of Labor originally ordered the increase of the retirement pay, rice
subsidy and medical benefits of MERALCO retirees. This ruling was reconsidered based on the
position that retirees are no longer employees of the company and therefore are no longer bargaining
members who can benefit from a compulsory arbitration award. The Secretary, however, ruled that
all members of the bargaining unit who retire between August 19, 1996 and November 30, 1997
(i.e., the term of the disputed CBA under the Secretary’s disputed orders) are entitled to receive an
additional rice subsidy.

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

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

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

3. EMPLOYEES’ COOPERATIVE

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

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

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

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

Labor II – 1
". . . Additionally and more importantly, GHSIP and HMP, aside from being contributory plans, have
been the subject of previous rulings from this Office as bargainable matters. At this point, we cannot
do any less and must recognize that GHSIP and HMP are matters where the union can demand and
negotiate for improvements within the framework of the collective bargaining system." 35

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

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

5. SIGNING BONUS

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

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

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

6. RED-CIRCLE-RATE ALLOWANCE

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

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

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

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

Labor II – 1
7. SICK LEAVE RESERVE OF 15 DAYS

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

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

8. 40-DAY UNION LEAVE

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

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

9. HIGH VOLTAGE,/HIGH POLE/TOWING ALLOWANCE

MERALCO argues that there is no justification for the increase of these allowances. The personnel
concerned will not receive any additional risk during the life of the current CBA that would justify the
increase demanded by the union. In the absence of such risk, then these personnel deserve only the
same salary increase that all other members of the bargaining unit will get as a result of the disputed
CBA. MERALCO likewise assails the grant of the high voltage/high pole allowance to members of the
team who are not exposed to the high voltage/high pole risks. The risks that justify the higher salary
and the added allowance are personal to those who are exposed to those risks. They are not granted
to a team because some members of the team are not exposed to the given risks.

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

We do not, however, subscribe to the Secretary’s order granting these allowances to the members of
the team who are not exposed to the given risks. The reason is obvious- no risk, no pay. To award
them the said allowances would be manifestly unfair for the company and even to those who are
Labor II – 1
exposed to the risks, as well as to the other members of the bargaining unit who do not receive the
said allowances.

10. BENEFITS FOR COLLECTORS

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

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

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

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

We shall now resolve the non-economic issues.

1. SCOPE OF THE BARGAINING UNIT

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

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

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

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

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

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

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

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

2. ISSUE OF UNION SECURITY

Labor II – 1
The Secretary in his Order of August 19, 1996, 42 ruled that: jgc:chanrobles.com.ph

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

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

x          x           x

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

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

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

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

We agree with MERALCO’s contention.

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

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

Consequently, We rule that the maintenance of membership regime should govern at MERALCO in
accordance with the Secretary’s order of August 19, 1996 which neither party disputed.

3. THE CONTRACTING OUT ISSUE

This issue is limited to the validity of the requirement that the union be consulted before the
implementation of any contracting out that would last for 6 months or more. Proceeding from our
Labor II – 1
ruling in San Miguel Employees Union-PTGWO v. Bersamira, 43 (where we recognized that
contracting out of work is a proprietary right of the employer in the exercise of an inherent
management prerogative) the issue we see is whether the Secretary’s consultation requirement is
reasonable or unduly restrictive of the company’s management prerogative. We note that the
Secretary himself has considered that management should not be hampered in the operations of its
business when he said that: jgc:chanrobles.com.ph

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

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

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

4. UNION REPRESENTATION IN COMMITTEES

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

"We see no convincing reason to modify our original Order on union representation in committees. It
reiterates what the Article 211 (A)(g) of the Labor Code provides: "To ensure the participation of
workers in decision and policy-making processes affecting their rights, duties and welfare.’Denying
this opportunity to the Union is to lay the claim that only management has the monopoly of ideas
that may improve management strategies in enhancing the Company’s growth. What every company
should remember is that there might be one among the Union members who may offer productive
and viable ideas on expanding the Company’s business horizons. The Union’s participation in such
committees might just be the opportune time for dormant ideas to come forward. So, the Company
must welcome this development (see also PAL v. NLRC, Et Al., G.R. 85985, August 13, 1995). It
must be understood, however, that the committees referred to here are the Safety Committee, the
Uniform Committee and other committees of a similar nature and purpose involving personnel
welfare, rights and benefits as well as duties." cralaw virtua1aw library

We do not find merit in MERALCO’s contention that the above-quoted ruling of the Secretary is an
intrusion into the management prerogatives of MERALCO. It is worthwhile to note that all the Union
demands and what the Secretary’s order granted is that the Union be allowed to participate in policy
formulation and decision-making process on matters affecting the Union members’ rights, duties and
welfare as required in Article 211 (A) (g) of the Labor Code. And this can only be done when the
Union is allowed to have representatives in the Safety Committee, Uniform Committee and other
Labor II – 1
committees of a similar nature. Certainly, such participation by the Union in the said committees is
not in the nature of a co-management control of the business of MERALCO. What is granted by the
Secretary is participation and representation. Thus, there is no impairment of management
prerogatives.

5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA

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

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

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

We agree with MERALCO.

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

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

6. RETROACTIVITY OF THE CBA

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

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

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

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

". . . [A]ll other provisions of the Collective Bargaining Agreement shall be re-negotiated not later
than 3 years after its execution. Any agreement on such other provision of the Collective Bargaining
Agreement entered into within 6 months from the date of expiry of the term of such other provisions
Labor II – 1
as fixed in such Collective Bargaining Agreement shall retroact to the day immediately following such
date. If such agreement is entered into beyond 6 months, the parties shall agree on the duration of
the effectivity thereof. . . ."
cralaw virtua1aw library

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

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

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

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

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

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

Labor II – 1
 50.) [G.R. No. 138094. May 29, 2003.]

MARILOU GUANZON APALISOK, Petitioner, v. RADIO PHILIPPINES NETWORK RADIO

STATION DYKC and STATION MANAGER GEORGE SUAZO, Respondents.

DECISION

CARPIO MORALES, J.:

Before this Court is a petition for review on certiorari under Rule 45 assailing the Court of Appeals
Decision 1 of October 30, 1998 and Resolution 2 of February 26, 1999. chanrob1es virtua1 1aw 1ibrary

On May 15, 1995, Marilou Gaunzon Apalisok (petitioner), then Production Chief of Radio Philippines
Network (RPN) Station DYKC, received a Memorandum 3 from Branches Operations Manager Gilito
Datoc asking her to submit a written explanation why no disciplinary action should be taken against
her for performance of acts hostile to RPN, and arrogant, disrespectful and defiant behavior towards
her superior Station Manager George Suazo.

Complying, petitioner submitted on May 16, 1995 her Answer 4 to the memorandum.

On May 31, 1995, petitioner received another memorandum from the Administrative Manager of
RPN, informing her of the termination of her services effective the close of regular office hours of
June 15, 1995.

By letter of June 5, 1995, petitioner informed RPN, by letter of June 5, 1995, of her decision to waive
her right to resolve her case through the grievance machinery of RPN as provided for in the Collective
Bargaining Agreement (CBA) and to lodge her case before the proper government forum. She
thereafter filed a complaint against RPN DYKC and Suazo (respondents) for illegal dismissal before
the National Labor Relations Commission, Regional Arbitration Branch of Region 7 which referred it to
the National Conciliation and Mediation Board.

By Submission Agreement 5 dated June 20, 1995 signed by their respective counsels, petitioner and
respondents agreed to submit for voluntary arbitration the issue of whether petitioner’s dismissal was
valid and to abide by the decision of the voluntary arbitrator.

In her position paper 6 submitted before the voluntary arbitrator, petitioner prayed that her dismissal
be declared invalid and that she be awarded separation pay, backwages and other benefits granted
to her by the Labor Code since reinstatement is no longer feasible due to strained relations. She also
prayed that she be awarded P2,000,000.00 for moral damages and P500,000.00 for exemplary
damages.

Respondents on the other hand prayed for the dismissal of the complaint, arguing that the voluntary
arbitrator had no jurisdiction over the case and, assuming that he had, the complaint is dismissible
for lack of merit as petitioner was not illegally dismissed. 7

On October 18, 1995, the voluntary arbitrator rendered an Award 8 in favor of petitioner, the
dispositive portion of which reads: chanrob1es virtual 1aw library

WHEREFORE, above premises considered, this Voluntary Arbitrator rules that the dismissal of
complainant was invalid.

However, considering the impracticality of reinstatement because of proven strained relation between
the parties, Respondents, instead shall pay complainant the amount of FOUR HUNDRED ELEVEN
Labor II – 1
THOUSAND ONE HUNDRED TWENTY SIX PESOS & SEVENTY-SIX CENTAVOS (P411,126.76) itemized
as follows: chanrob1es virtual 1aw library

In summary, the total award is hereunder itemized: chanrob1es virtual 1aw library

1. SEPARATION PAY (P14,600.00

divide by 30 days multiplied by 15

days per year of service x 19

years) ......................................... P138,700.95

2. BACKWAGES (P14,600 X 6

months) ...................................... P 88,817.00

3. MORAL AND EXEMPLARY

DAMAGES ................................ P100,000.00

4. SERVICE INCENTIVE LEAVES

(P14,600 divide by 30 days =

P486.67 x 5 days = P2,433.35 x

19 years ........................................ P 46,233.65

5. ATTORNEY’S FEES (10%) ....... P 37,375.16

All other claims are hereby denied.

SO ORDERED. (Emphasis supplied)

Respondents’ motion for reconsideration 9 of the Award having been denied by the voluntary
arbitrator by Order of November 21, 1995, they filed a petition for certiorari before this Court,
docketed as G.R. No. 122841. chanrob1es virtua1 1aw 1ibrary

By Resolution 10 of December 13, 1995, the Third Division of this Court referred G.R. No. 122841 to
the Court of Appeals, following the case of Luzon Development Bank v. Association of Luzon
Development Bank Employees, Et. Al. 11 holding that decisions or awards of a voluntary arbitrator or
panel of arbitrators in labor cases are reviewable by the Court of Appeals.

The Court of Appeals, finding that the option of petitioner not to subject the dispute to the grievance
machinery provided for in the CBA was tantamount to relinquishing her right to avail of the aid of a
voluntary arbitrator in settling the dispute which "likewise converted an unresolved grievance into a
resolved one," held that the voluntary arbitrator did not have jurisdiction over petitioner’s complaint
and accordingly nullified and set aside, by Decision of October 30, 1998, the voluntary arbitration
award.

Petitioner’s Motion for Reconsideration 12 of the Court of Appeals Decision having been denied by
Resolution 13 of February 26, 1999, the present petition was filed which raises the following issues:
1aw library
chanrob1es virtual

1. Whether or not the Voluntary Arbitrator had jurisdiction over petitioner’s complaint, and
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2. Whether or not respondents are guilty of estoppel. 14

Petitioner, citing Article 262 of the Labor Code of the Philippines, as amended which reads: chanrob1es virtual 1aw library

ARTICLE 262. JURISDICTION OVER OTHER LABOR DISPUTES. The Voluntary Arbitrator or panel of
Voluntary Arbitrators, upon agreement of the parties, shall hear and decide all other labor disputes
including unfair labor practices and bargaining deadlocks. (Emphasis and Italics supplied),

contends that her option not to subject the dispute to the grievance machinery of RPN did not
amount to her relinquishing of her right to avail of voluntary arbitration as a mode of settling it for
she and respondents in fact agreed to have the dispute settled by a voluntary arbitrator when they
freely executed the above-said Submission Agreement. She thus concludes that the voluntary
arbitrator has jurisdiction over the controversy. 15

Petitioner contends in any event that even assuming that the voluntary arbitrator had no jurisdiction
over the case, it would not be in keeping with settled jurisprudence to allow a losing party to
question the authority of the voluntary arbitrator after it had freely submitted itself to its authority.
16

The petition is impressed with merit.

The above quoted Article 262 of the Labor Code provides that upon agreement of the parties, the
voluntary arbitrator can hear and decide all other labor disputes.

Contrary to the finding of the Court of Appeals, voluntary arbitration as a mode of settling the
dispute was not forced upon respondents. Both parties indeed agreed to submit the issue of validity
of the dismissal of petitioner to the jurisdiction of the voluntary arbitrator by the Submission
Agreement duly signed by their respective counsels.

As the voluntary arbitrator had jurisdiction over the parties’ controversy, discussion of the second
issue is no longer necessary.

WHEREFORE, the Court of Appeals Decision of October 30, 1998 is hereby SET ASIDE and the
voluntary arbitration Award of October 18, 1995 is hereby REINSTATED. cha

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51.) G.R. No. 145561               June 15, 2005

HONDA PHILS., INC., petitioner,

vs.
SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

DECISION

YNARES-SANTIAGO, J.:

This petition for review under Rule 45 seeks the reversal of the Court of Appeals’ decision 1 dated September 14,
20002 and its resolution3 dated October 18, 2000, in CA-G.R. SP No. 59052. The appellate court affirmed the
decision dated May 2, 2000 rendered by the Voluntary Arbitrator who ruled that petitioner Honda Philippines, Inc.’s
(Honda) pro-rated payment of the 13th and 14th month pay and financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective Bargaining Agreement (CBA) forged between
petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa Honda (respondent union) which
contained the following provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the 13th month pay.

Section 6. 14th Month Pay

The COMPANY shall grant a 14th Month Pay, computed on the same basis as computation of 13th Month Pay.

Section 7. The COMPANY agrees to continue the practice of granting, in its discretion, financial assistance to
covered employees in December of each year, of not less than 100% of basic pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties started re-negotiations for the fourth and
fifth years of their CBA. When the talks between the parties bogged down, respondent union filed a Notice of Strike
on the ground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. On March 31, 1999, then
Department of Labor and Employment (DOLE) Secretary Laguesma assumed jurisdiction over the labor dispute and
ordered the parties to cease and desist from committing acts that would aggravate the situation. Both parties
complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike on the ground of unfair labor practice
alleging that Honda illegally contracted out work to the detriment of the workers. Respondent union went on strike
and picketed the premises of Honda on May 19, 1999. On June 16, 1999, DOLE Acting Secretary Felicisimo Joson,
Jr. assumed jurisdiction over the case and certified the same to the National Labor Relations Commission (NLRC)
for compulsory arbitration. The striking employees were ordered to return to work and the management accepted
them back under the same terms prior to the strike staged.

On November 22, 1999, the management of Honda issued a memorandum 4 announcing its new computation of the
13th and 14th month pay to be granted to all its employees whereby the thirty-one (31)-day long strike shall be
considered unworked days for purposes of computing said benefits. As per the company’s new formula, the amount
equivalent to 1/12 of the employees’ basic salary shall be deducted from these bonuses, with a commitment
however that in the event that the strike is declared legal, Honda shall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letter dated November 25, 1999. Honda
sought the opinion of the Bureau of Working Conditions (BWC) on the issue. In a letter dated January 4, 2000, 5 the
BWC agreed with the pro-rata payment of the 13th month pay as proposed by Honda.

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The matter was brought before the Grievance Machinery in accordance with the parties’ existing CBA but when the
issue remained unresolved, it was submitted for voluntary arbitration. In his decision 6 dated May 2, 2000, Voluntary
Arbitrator Herminigildo C. Javen invalidated Honda’s computation, to wit:

WHEREFORE, in view of all foregoing premises being duly considered and evaluated, it is hereby ruled that the
Company’s implementation of pro-rated 13th Month pay, 14th Month pay and Financial Assistance [is] invalid. The
Company is thus ordered to compute each provision in full month basic pay and pay the amounts in question within
ten (10) days after this Decision shall have become final and executory.

The three (3) days Suspension of the twenty one (21) employees is hereby affirmed.

SO ORDERED.7

Honda’s Motion for Partial Reconsideration was denied in a resolution dated May 22, 2000. Thus, a petition was
filed with the Court of Appeals, however, the petition was dismissed for lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-rated computation of the 13th month pay
and the other bonuses in question is valid and lawful.

The petition lacks merit.

A collective bargaining agreement 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.8 As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs, public order or public
policy.9 Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance
therewith is mandated by the express policy of the law.10

In some instances, however, the provisions of a CBA may become contentious, as in this case. Honda wanted to
implement a pro-rated computation of the benefits based on the "no work, no pay" rule. According to the company,
the phrase "present practice" as mentioned in the CBA refers to the manner and requisites with respect to the
payment of the bonuses, i.e., 50% to be given in May and the other 50% in December of each year. Respondent
union, however, insists that the CBA provisions relating to the implementation of the 13th month pay necessarily
relate to the computation of the same.

We agree with the findings of the arbitrator that the assailed CBA provisions are far from being unequivocal. A
cursory reading of the provisions will show that they did not state categorically whether the computation of the 13th
month pay, 14th month pay and the financial assistance would be based on one full month’s basic salary of the
employees, or pro-rated based on the compensation actually received. The arbitrator thus properly resolved the
ambiguity in favor of labor as mandated by Article 1702 of the Civil Code. 11 The Court of Appeals affirmed the
arbitrator’s finding and added that the computation of the 13th month pay should be based on the length of service
and not on the actual wage earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings of labor officials, who are deemed
to have acquired expertise in matters within their respective jurisdiction, are generally accorded not only respect but
even finality, and bind us when supported by substantial evidence. It is not our function to assess and evaluate the
evidence all over again, particularly where the findings of both the arbiter and the Court of Appeals coincide. 12

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, which required all employers to pay their
employees a 13th month pay, was issued to protect the level of real wages from the ravages of worldwide inflation. It
was enacted on December 16, 1975 after it was noted that there had been no increase in the minimum wage since
1970 and the Christmas season was an opportune time for society to show its concern for the plight of the working
masses so that they may properly celebrate Christmas and New Year. 13

Under the Revised Guidelines on the Implementation of the 13 th month pay issued on November 16, 1987, the salary
ceiling of P1,000.00 under P.D. No. 851 was removed. It further provided that the minimum 13 th month pay required
Labor II – 1
by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an employee within a calendar
year. The guidelines pertinently provides:

The "basic salary" of an employee for the purpose of computing the 13 th month pay shall include all remunerations
or earnings paid by his employer for services rendered but does not include allowances and monetary benefits
which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused
vacation and sick leave credits, overtime premium, night differential and holiday pay, and cost-of-living
allowances.14 (Emphasis supplied)

For employees receiving regular wage, we have interpreted "basic salary" to mean, not the amount actually
received by an employee, but 1/12 of their standard monthly wage multiplied by their length of service within a given
calendar year. Thus, we exclude from the computation of "basic salary" payments for sick, vacation and maternity
leaves, night differentials, regular holiday pay and premiums for work done on rest days and special
holidays.15 In Hagonoy Rural Bank v. NLRC,16 St. Michael Academy v. NLRC,17 Consolidated Food Corporation v.
NLRC,18 and similar cases, the 13th month pay due an employee was computed based on the employee’s basic
monthly wage multiplied by the number of months worked in a calendar year prior to separation from employment.

The revised guidelines also provided for a pro-ration of this benefit only in cases of resignation or separation from
work. As the rules state, under these circumstances, an employee is entitled to a pay in proportion to the length of
time he worked during the year, reckoned from the time he started working during the calendar year. 19 The Court of
Appeals thus held that:

Considering the foregoing, the computation of the 13th month pay should be based on the length of service and not
on the actual wage earned by the worker. In the present case, there being no gap in the service of the workers
during the calendar year in question, the computation of the 13th month pay should not be pro-rated but should be
given in full.20 (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented any pro-rating of the 13 th month pay
before the instant case. Honda did not adduce evidence to show that the 13 th month, 14th month and financial
assistance benefits were previously subject to deductions or pro-rating or that these were dependent upon the
company’s financial standing. As held by the Voluntary Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held that prompt[ed] them to adopt a pro-rata
computation, aside [from] being in [a] state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998
and 215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior to the strike, a full month basic
pay computation was the "present practice" intended to be maintained in the CBA.21

The memorandum dated November 22, 1999 which Honda issued shows that it was the first time a pro-rating
scheme was to be implemented in the company. It was a convenient coincidence for the company that the work
stoppage held by the employees lasted for thirty-one (31) days or exactly one month. This enabled them to devise a
formula using 11/12 of the total annual salary as base amount for computation instead of the entire amount for a 12-
month period.

That a full month payment of the 13th month pay is the established practice at Honda is further bolstered by the
affidavits executed by Feliteo Bautista and Edgardo Cruzada. Both attested that when they were absent from work
due to motorcycle accidents, and after they have exhausted all their leave credits and were no longer receiving their
monthly salary from Honda, they still received the full amount of their 13th month, 14th month and financial assistance
pay.22

The case of Davao Fruits Corporation v. Associated Labor Unions, et al. 23 presented an example of a voluntary act
of the employer that has ripened into a company practice. In that case, the employer, from 1975 to 1981, freely and
continuously included in the computation of the 13th month pay those items that were expressly excluded by the law.
We have held that this act, which was favorable to the employees though not conforming to law, has ripened into a
practice and therefore can no longer be withdrawn, reduced, diminished, discontinued or eliminated. Furthermore,
in Sevilla Trading Company v. Semana,24 we stated:

Labor II – 1
With regard to the length of time the company practice should have been exercised to constitute voluntary employer
practice which cannot be unilaterally withdrawn by the employer, we hold that jurisprudence has not laid down any
rule requiring a specific minimum number of years. In the above quoted case of Davao Fruits Corporation vs.
Associated Labor Unions, the company practice lasted for six (6) years. In another case, Davao Integrated Port
Stevedoring Services vs. Abarquez, the employer, for three (3) years and nine (9) months, approved the
commutation to cash of the unenjoyed portion of the sick leave with pay benefits of its intermittent workers. While
in Tiangco vs. Leogardo, Jr. the employer carried on the practice of giving a fixed monthly emergency allowance
from November 1976 to February 1980, or three (3) years and four (4) months. In all these cases, this Court held
that the grant of these benefits has ripened into company practice or policy which cannot be peremptorily
withdrawn. In the case at bar, petitioner Sevilla Trading kept the practice of including non-basic benefits such as
paid leaves for unused sick leave and vacation leave in the computation of their 13th-month pay for at least two (2)
years. This, we rule likewise constitutes voluntary employer practice which cannot be unilaterally withdrawn
by the employer without violating Art. 100 of the Labor Code.25 (Emphasis supplied)

Lastly, the foregoing interpretation of law and jurisprudence is more in keeping with the underlying principle for the
grant of this benefit. It is primarily given to alleviate the plight of workers and to help them cope with the exorbitant
increases in the cost of living. To allow the pro-ration of the 13 th month pay in this case is to undermine the wisdom
behind the law and the mandate that the workingman’s welfare should be the primordial and paramount
consideration.26 What is more, the factual milieu of this case is such that to rule otherwise inevitably results to
dissuasion, if not a deterrent, for workers from the free exercise of their constitutional rights to self-organization and
to strike in accordance with law.27

WHEREFORE, the instant petition is DENIED. The decision and the resolution of the Court of Appeals dated
September 14, 2000 and October 18, 2000, respectively, in CA-G.R. SP No. 59052, affirming the decision rendered
by the Voluntary Arbitrator on May 2, 2000, are hereby AFFIRMED in toto.

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 52.) [G.R. NO. 156260. March 10, 2005]

BABCOCK-HITACHI (PHILS.), INC., Petitioners, v. BABCOCK-HITACHI (PHILS.), INC.,

MAKATI EMPLOYEES UNION (BHPIMEU), Respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

At bar is a Petition for Review on Certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the Decision1 dated May 14, 2002 and Resolution2 dated November 26, 2002
rendered by the Court of Appeals in CA-G.R. SP No. 65260, entitled "Babcock-Hitachi (Phils.), Inc. v.
Babcock-Hitachi (Phils.), Inc., Makati Employees Union (BHPIMEU)."

The facts as borne by the records are:

Babcock-Hitachi (Phils.), Inc., Petitioner, is a manufacturing corporation, with branches at Makati City

and Bauan, Batangas.

Sometime in December 1997, petitioner, to improve the operating efficiency and coordination among
its various departments, formulated a plan to transfer the Design Department from its Makati office
to Bauan, Batangas.

With this development, petitioner, on February 24, 1999, sent separate notices to Justiniano G.
Iniego, Xavier Aguila and Bonifacio B. Vergara, who occupied Engineer 1 positions at the Design
Department, of their re-assignment and transfer to Bauan, Batangas effective April 1, 1999. This
prompted them to claim for their relocation allowance provided by Sections 1 and 2, Article XXI of
the collective bargaining agreement (CBA).3

However, petitioner refused to implement the CBA, claiming that the affected employees are not
entitled to relocation allowance under Policy Statement No. BHPI-G-044A dated October 1,
19964 considering that they are residents of Bauan or its adjacent towns. 5

Thus, the affected union members (Justiniano Iniego, et al.), represented by Babcock-Hitachi (Phils.),
Inc., Makati Employees Union, Respondent, filed with the National Conciliation and Mediation Board
(NCMB) a complaint for payment of relocation allowance against petitioner. In a Submission
Agreement dated March 18, 1999, the parties stipulated to submit the case for voluntary arbitration.

On July 25, 2000, after the parties submitted their pleadings and position papers, the Voluntary
Arbitrator rendered a Decision ordering petitioner to pay respondent's concerned members their
relocation allowances. Petitioner then filed a motion for reconsideration but was denied in a
Resolution dated May 30, 2001.

Thereafter, petitioner filed with the Court of Appeals a Petition for Review with prayer for issuance of
a temporary restraining order and/or writ of preliminary injunction.

On May 14, 2002, the Appellate Court promulgated its Decision affirming the Voluntary Arbitrator's
assailed Decision. The Court of Appeals ratiocinated as follows:

"After a thorough study of the case at hand, we are convinced that the affected employees are
entitled to the relocation allowance provided for in the Collective Bargaining Agreement (CBA)
entered into and signed by both the Union and petitioner Company on July 18, 1997. We share the

Labor II – 1
posture adopted by the Voluntary Arbitrator in rejecting petitioner's arguments that the affected
employees are not entitled to relocation allowance. Pursuant to the basic and irrefragable rule that in
carrying out and interpreting the provisions of the Labor Code and its implementing rules and
regulations, the workingman's welfare should be the primordial and paramount consideration.
Undoubtedly, this rule must likewise find application in the interpretation and meaning of the CBA
entered into by both the parties, for the same is the law between the parties. x x x.

xxx

In the case before this Court, petitioner Company's contention that the policy statement they issued
still finds application in the present CBA is misplaced. With the advent of the new CBA dated July 18,
1997, the policy statement, which previously finds application can no longer be controlling in the
present situation. Had it been the intent of the proponents of the CBA, then it could have been
incorporated in the agreement or contract, otherwise, it contravenes the very essence and purpose of
the CBA. Obviously, the purpose of collective bargaining agreement is the reaching of an agreement
resulting in a contract binding on the parties.

Moreover, the policy statement being invoked by petitioner Company is not a part of the contract or
CBA, thus, it cannot remain in full force and effect even beyond the stipulated term, especially, in the
light of the present CBA. Under the circumstances, the policy statement issued by the petitioner
company is a unilateral policy, which is contrary to the provisions of the CBA. The CBA operates as
the law that governs the employer-employee relationship of herein petitioner Company and the
Union.

Second. Petitioner Company contends that the rationale behind the CBA provision on relocation
allowance is clearly spelled out in the company policy on relocation allowance.

Under the circumstances obtaining in this case, petitioner Company's argument falters. The benefits
available in the present CBA (dated July 18, 1997) does not provide for any qualification, it was
written in straight and unequivocal terms, not susceptible to any other interpretation. x x x.

xxx

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

SO ORDERED."

On November 26, 2002, the Court of Appeals issued a Resolution denying petitioner's motion for
reconsideration.

Hence, this Petition for Review on Certiorari .

Petitioner contends that the Court of Appeals, in affirming the Voluntary Arbitrator's Decision, erred
in relying solely upon the parties' CBA providing that employees transferred from Makati to Bauan,
Batangas are entitled to relocation allowance equivalent to P1,500.00. Petitioner invokes Policy
Statement No. BHPI-G-044A (earlier quoted) expressly providing that employees, who are "residents
of Bauan or adjacent Batangas towns and assigned permanently back to the Bauan Plant," are not
entitled to relocation allowance.

Petitioner's contention lacks merit.

The basic issue for our resolution is whether union members are entitled to relocation allowance in
light of the CBA between the parties.

Labor II – 1
To begin with, any doubt or ambiguity in the contract between management and the union members
should be resolved in favor of the latter. This is pursuant to Article 1702 of the Civil Code which
provides: "(I)n case of doubt, all labor legislation and all labor contracts shall be construed in favor of
the safety and decent living for the laborer." 6

Pertinent are Sections 1 and 2, Article XXI of the CBA which provide:

"Section 1. The COMPANY shall provide a relocation allowance of ONE THOUSAND EIGHT HUNDRED
PESOS (P1,800.00) per month for employees who will be transferred from Bauan to Makati. For
employees who will be transferred from Makati to Bauan, the relocation assistance shall be
ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00).

Section 2. Employees can avail this provision provided their transfer is on a permanent basis or for a
duration exceeding one (1) month."

The above provisions state that employees transferred from Makati City to Bauan, Batangas are
entitled to a monthly relocation allowance of P1,500.00, provided their transfer is permanent or for a
period exceeding one month. Such provisions need no interpretation for they are clear. Contracts
which are not ambiguous are to be interpreted according to their literal meaning and not beyond
their obvious intendment. 7

In Mactan Workers Union v. Aboitiz,8 we held that "the terms and conditions of a collective
bargaining contract constitute the law between the parties. Those who are entitled to its
benefits can invoke its provisions. In the event that an obligation therein imposed is not fulfilled,
the aggrieved party has the right to go to court for redress."

Finally, we sustain the finding of the Court of Appeals that the policy statement being invoked by
petitioner is not a part of the CBA which is the law between the parties.

Thus, the Court of Appeals did not commit any error when it rendered the assailed Decision and
Resolution, the same being consistent with law and jurisprudence.

WHEREFORE, the petition is DENIED. The assailed Decision dated May 14, 2002 and Resolution
dated November 26, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 65260 are AFFIRMED.
Costs against petitioner.

Labor II – 1