95.

Heritage Hotel Manila vs Natl Union of Workers

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 178296

January 12, 2011

THE HERITAGE HOTEL MANILA, acting through its owner, GRAND PLAZA HOTEL
CORPORATION,Petitioner,
vs.
NATIONAL UNION OF WORKERS IN THE HOTEL, RESTAURANT AND ALLIED INDUSTRIESHERITAGE HOTEL MANILA SUPERVISORS CHAPTER (NUWHRAIN-HHMSC), Respondent.
DECISION
NACHURA, J.:
Before the Court is a petition for review on certiorari of the Decision 1 of the Court of Appeals (CA) dated
May 30, 2005 and Resolution dated June 4, 2007. The assailed Decision affirmed the dismissal of a
petition for cancellation of union registration filed by petitioner, Grand Plaza Hotel Corporation, owner of
Heritage Hotel Manila, against respondent, National Union of Workers in the Hotel, Restaurant and Allied
Industries-Heritage Hotel Manila Supervisors Chapter (NUWHRAIN-HHMSC), a labor organization of the
supervisory employees of Heritage Hotel Manila.
The case stemmed from the following antecedents:
On October 11, 1995, respondent filed with the Department of Labor and Employment-National Capital
Region (DOLE-NCR) a petition for certification election. 2 The Med-Arbiter granted the petition on February
14, 1996 and ordered the holding of a certification election. 3 On appeal, the DOLE Secretary, in a
Resolution dated August 15, 1996, affirmed the Med-Arbiters order and remanded the case to the MedArbiter for the holding of a preelection conference on February 26, 1997. Petitioner filed a motion for
reconsideration, but it was denied on September 23, 1996.
The preelection conference was not held as initially scheduled; it was held a year later, or on February 20,
1998. Petitioner moved to archive or to dismiss the petition due to alleged repeated non-appearance of
respondent. The latter agreed to suspend proceedings until further notice. The preelection conference
resumed on January 29, 2000.
Subsequently, petitioner discovered that respondent had failed to submit to the Bureau of Labor Relations
(BLR) its annual financial report for several years and the list of its members since it filed its registration
papers in 1995. Consequently, on May 19, 2000, petitioner filed a Petition for Cancellation of Registration
of respondent, on the ground of the non-submission of the said documents. Petitioner prayed that
respondents Certificate of Creation of Local/Chapter be cancelled and its name be deleted from the list of

legitimate labor organizations. It further requested the suspension of the certification election
proceedings.4
On June 1, 2000, petitioner reiterated its request by filing a Motion to Dismiss or Suspend the
[Certification Election] Proceedings,5 arguing that the dismissal or suspension of the proceedings is
warranted, considering that the legitimacy of respondent is seriously being challenged in the petition for
cancellation of registration. Petitioner maintained that the resolution of the issue of whether respondent is
a legitimate labor organization is crucial to the issue of whether it may exercise rights of a legitimate labor
organization, which include the right to be certified as the bargaining agent of the covered employees.
Nevertheless, the certification election pushed through on June 23, 2000. Respondent emerged as the
winner.6
On June 28, 2000, petitioner filed a Protest with Motion to Defer Certification of Election Results and
Winner,7stating that the certification election held on June 23, 2000 was an exercise in futility because,
once respondents registration is cancelled, it would no longer be entitled to be certified as the exclusive
bargaining agent of the supervisory employees. Petitioner also claimed that some of respondents
members were not qualified to join the union because they were either confidential employees or
managerial employees. It then prayed that the certification of the election results and winner be deferred
until the petition for cancellation shall have been resolved, and that respondents members who held
confidential or managerial positions be excluded from the supervisors bargaining unit.
Meanwhile, respondent filed its Answer8 to the petition for the cancellation of its registration. It averred
that the petition was filed primarily to delay the conduct of the certification election, the respondents
certification as the exclusive bargaining representative of the supervisory employees, and the
commencement of bargaining negotiations. Respondent prayed for the dismissal of the petition for the
following reasons: (a) petitioner is estopped from questioning respondents status as a legitimate labor
organization as it had already recognized respondent as such during the preelection conferences; (b)
petitioner is not the party-in-interest, as the union members are the ones who would be disadvantaged by
the non-submission of financial reports; (c) it has already complied with the reportorial requirements,
having submitted its financial statements for 1996, 1997, 1998, and 1999, its updated list of officers, and
its list of members for the years 1995, 1996, 1997, 1998, and 1999; (d) the petition is already moot and
academic, considering that the certification election had already been held, and the members had
manifested their will to be represented by respondent.
Citing National Union of Bank Employees v. Minister of Labor, et al. 9 and Samahan ng Manggagawa sa
Pacific Plastic v. Hon. Laguesma,10 the Med-Arbiter held that the pendency of a petition for cancellation of
registration is not a bar to the holding of a certification election. Thus, in an Order 11 dated January 26,
2001, the Med-Arbiter dismissed petitioners protest, and certified respondent as the sole and exclusive
bargaining agent of all supervisory employees.
Petitioner subsequently appealed the said Order to the DOLE Secretary.12 The appeal was later
dismissed by DOLE Secretary Patricia A. Sto. Tomas (DOLE Secretary Sto. Tomas) in the Resolution of
August 21, 2002.13Petitioner moved for reconsideration, but the motion was also denied. 14
In the meantime, Regional Director Alex E. Maraan (Regional Director Maraan) of DOLE-NCR finally
resolved the petition for cancellation of registration. While finding that respondent had indeed failed to file
financial reports and the list of its members for several years, he, nonetheless, denied the petition,

ratiocinating that freedom of association and the employees right to self-organization are more
substantive considerations. He took into account the fact that respondent won the certification election
and that it had already been certified as the exclusive bargaining agent of the supervisory employees. In
view of the foregoing, Regional Director Maraanwhile emphasizing that the non-compliance with the law
is not viewed with favorconsidered the belated submission of the annual financial reports and the list of
members as sufficient compliance thereof and considered them as having been submitted on time. The
dispositive portion of the decision15 dated December 29, 2001 reads:
WHEREFORE, premises considered, the instant petition to delist the National Union of Workers in the
Hotel, Restaurant and Allied Industries-Heritage Hotel Manila Supervisors Chapter from the roll of
legitimate labor organizations is hereby DENIED.
SO ORDERED.16
Aggrieved, petitioner appealed the decision to the BLR. 17 BLR Director Hans Leo Cacdac inhibited himself
from the case because he had been a former counsel of respondent.
In view of Director Cacdacs inhibition, DOLE Secretary Sto. Tomas took cognizance of the appeal. In a
resolution18 dated February 21, 2003, she dismissed the appeal, holding that the constitutionally
guaranteed freedom of association and right of workers to self-organization outweighed respondents
noncompliance with the statutory requirements to maintain its status as a legitimate labor organization.
Petitioner filed a motion for reconsideration,19 but the motion was likewise denied in a resolution 20 dated
May 30, 2003. DOLE Secretary Sto. Tomas admitted that it was the BLR which had jurisdiction over the
appeal, but she pointed out that the BLR Director had voluntarily inhibited himself from the case because
he used to appear as counsel for respondent. In order to maintain the integrity of the decision and of the
BLR, she therefore accepted the motion to inhibit and took cognizance of the appeal.
Petitioner filed a petition for certiorari with the CA, raising the issue of whether the DOLE Secretary acted
with grave abuse of discretion in taking cognizance of the appeal and affirming the dismissal of its petition
for cancellation of respondents registration.
In a Decision dated May 30, 2005, the CA denied the petition. The CA opined that the DOLE Secretary
may legally assume jurisdiction over an appeal from the decision of the Regional Director in the event that
the Director of the BLR inhibits himself from the case. According to the CA, in the absence of the BLR
Director, there is no person more competent to resolve the appeal than the DOLE Secretary. The CA
brushed aside the allegation of bias and partiality on the part of the DOLE Secretary, considering that
such allegation was not supported by any evidence.
The CA also found that the DOLE Secretary did not commit grave abuse of discretion when she affirmed
the dismissal of the petition for cancellation of respondents registration as a labor organization. Echoing
the DOLE Secretary, the CA held that the requirements of registration of labor organizations are an
exercise of the overriding police power of the State, designed for the protection of workers against
potential abuse by the union that recruits them. These requirements, the CA opined, should not be
exploited to work against the workers constitutionally protected right to self-organization.
Petitioner filed a motion for reconsideration, invoking this Courts ruling in Abbott Labs. Phils., Inc. v.
Abbott Labs. Employees Union,21 which categorically declared that the DOLE Secretary has no authority

to review the decision of the Regional Director in a petition for cancellation of union registration, and
Section 4,22 Rule VIII, Book V of the Omnibus Rules Implementing the Labor Code.
In its Resolution23 dated June 4, 2007, the CA denied petitioners motion, stating that the BLR Directors
inhibition from the case was a peculiarity not present in the Abbott case, and that such inhibition justified
the assumption of jurisdiction by the DOLE Secretary.
In this petition, petitioner argues that:
I.
The Court of Appeals seriously erred in ruling that the Labor Secretary properly assumed jurisdiction over
Petitioners appeal of the Regional Directors Decision in the Cancellation Petition x x x.
A. Jurisdiction is conferred only by law. The Labor Secretary had no jurisdiction to review the
decision of the Regional Director in a petition for cancellation. Such jurisdiction is conferred by
law to the BLR.
B. The unilateral inhibition by the BLR Director cannot justify the Labor Secretarys exercise of
jurisdiction over the Appeal.
C. The Labor Secretarys assumption of jurisdiction over the Appeal without notice violated
Petitioners right to due process.
II.
The Court of Appeals gravely erred in affirming the dismissal of the Cancellation Petition despite the
mandatory and unequivocal provisions of the Labor Code and its Implementing Rules. 24
The petition has no merit.
Jurisdiction to review the decision of the Regional Director lies with the BLR. This is clearly provided in
the Implementing Rules of the Labor Code and enunciated by the Court in Abbott. But as pointed out by
the CA, the present case involves a peculiar circumstance that was not present or covered by the ruling in
Abbott. In this case, the BLR Director inhibited himself from the case because he was a former counsel of
respondent. Who, then, shall resolve the case in his place?
In Abbott, the appeal from the Regional Directors decision was directly filed with the Office of the DOLE
Secretary, and we ruled that the latter has no appellate jurisdiction. In the instant case, the appeal was
filed by petitioner with the BLR, which, undisputedly, acquired jurisdiction over the case. Once jurisdiction
is acquired by the court, it remains with it until the full termination of the case. 25
Thus, jurisdiction remained with the BLR despite the BLR Directors inhibition. When the DOLE Secretary
resolved the appeal, she merely stepped into the shoes of the BLR Director and performed a function that
the latter could not himself perform. She did so pursuant to her power of supervision and control over the
BLR.26

Expounding on the extent of the power of control, the Court, in Araneta, et al. v. Hon. M. Gatmaitan, et
al.,27pronounced that, if a certain power or authority is vested by law upon the Department Secretary, then
such power or authority may be exercised directly by the President, who exercises supervision and
control over the departments. This principle was incorporated in the Administrative Code of 1987, which
defines "supervision and control" as including the authority to act directly whenever a specific function is
entrusted by law or regulation to a subordinate.28 Applying the foregoing to the present case, it is clear
that the DOLE Secretary, as the person exercising the power of supervision and control over the BLR,
has the authority to directly exercise the quasi-judicial function entrusted by law to the BLR Director.
It is true that the power of control and supervision does not give the Department Secretary unbridled
authority to take over the functions of his or her subordinate. Such authority is subject to certain guidelines
which are stated in Book IV, Chapter 8, Section 39(1)(a) of the Administrative Code of 1987. 29 However, in
the present case, the DOLE Secretarys act of taking over the function of the BLR Director was warranted
and necessitated by the latters inhibition from the case and the objective to "maintain the integrity of the
decision, as well as the Bureau itself."30
Petitioner insists that the BLR Directors subordinates should have resolved the appeal, citing the
provision under the Administrative Code of 1987 which states, "in case of the absence or disability of the
head of a bureau or office, his duties shall be performed by the assistant head." 31 The provision clearly
does not apply considering that the BLR Director was neither absent nor suffering from any disability; he
remained as head of the BLR. Thus, to dispel any suspicion of bias, the DOLE Secretary opted to resolve
the appeal herself.
Petitioner was not denied the right to due process when it was not notified in advance of the BLR
Directors inhibition and the DOLE Secretarys assumption of the case. Well-settled is the rule that the
essence of due process is simply an opportunity to be heard, or, as applied to administrative proceedings,
an opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling
complained of.32 Petitioner had the opportunity to question the BLR Directors inhibition and the DOLE
Secretarys taking cognizance of the case when it filed a motion for reconsideration of the latters
decision. It would be well to state that a critical component of due process is a hearing before an impartial
and disinterested tribunal, for all the elements of due process, like notice and hearing, would be
meaningless if the ultimate decision would come from a partial and biased judge. 33 It was precisely to
ensure a fair trial that moved the BLR Director to inhibit himself from the case and the DOLE Secretary to
take over his function.
Petitioner also insists that respondents registration as a legitimate labor union should be cancelled.
Petitioner posits that once it is determined that a ground enumerated in Article 239 of the Labor Code is
present, cancellation of registration should follow; it becomes the ministerial duty of the Regional Director
to cancel the registration of the labor organization, hence, the use of the word "shall." Petitioner points out
that the Regional Director has admitted in its decision that respondent failed to submit the required
documents for a number of years; therefore, cancellation of its registration should have followed as a
matter of course.
We are not persuaded.
Articles 238 and 239 of the Labor Code read:
ART. 238. CANCELLATION OF REGISTRATION; APPEAL

The certificate of registration of any legitimate labor organization, whether national or local, shall be
canceled by the Bureau if it has reason to believe, after due hearing, that the said labor organization no
longer meets one or more of the requirements herein prescribed. 34
ART. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION.
The following shall constitute grounds for cancellation of union registration:
xxxx
(d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the closing of
every fiscal year and misrepresentation, false entries or fraud in the preparation of the financial report
itself;
xxxx
(i) Failure to submit list of individual members to the Bureau once a year or whenever required by the
Bureau.35
These provisions give the Regional Director ample discretion in dealing with a petition for cancellation of a
unions registration, particularly, determining whether the union still meets the requirements prescribed by
law. It is sufficient to give the Regional Director license to treat the late filing of required documents as
sufficient compliance with the requirements of the law. After all, the law requires the labor organization to
submit the annual financial report and list of members in order to verify if it is still viable and financially
sustainable as an organization so as to protect the employer and employees from fraudulent or fly-bynight unions. With the submission of the required documents by respondent, the purpose of the law has
been achieved, though belatedly.
We cannot ascribe abuse of discretion to the Regional Director and the DOLE Secretary in denying the
petition for cancellation of respondents registration. The union members and, in fact, all the employees
belonging to the appropriate bargaining unit should not be deprived of a bargaining agent, merely
because of the negligence of the union officers who were responsible for the submission of the
documents to the BLR.
Labor authorities should, indeed, act with circumspection in treating petitions for cancellation of union
registration, lest they be accused of interfering with union activities. In resolving the petition, consideration
must be taken of the fundamental rights guaranteed by Article XIII, Section 3 of the Constitution, i.e., the
rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted
activities. Labor authorities should bear in mind that registration confers upon a union the status of
legitimacy and the concomitant right and privileges granted by law to a legitimate labor organization,
particularly the right to participate in or ask for certification election in a bargaining unit. 36 Thus, the
cancellation of a certificate of registration is the equivalent of snuffing out the life of a labor organization.
For without such registration, it loses - as a rule - its rights under the Labor Code. 37
It is worth mentioning that the Labor Codes provisions on cancellation of union registration and on
reportorial requirements have been recently amended by Republic Act (R.A.) No. 9481, An Act
Strengthening the Workers Constitutional Right to Self-Organization, Amending for the Purpose
Presidential Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines, which

lapsed into law on May 25, 2007 and became effective on June 14, 2007. The amendment sought to
strengthen the workers right to self-organization and enhance the Philippines compliance with its
international obligations as embodied in the International Labour Organization (ILO) Convention No.
87,38 pertaining to the non-dissolution of workers organizations by administrative authority.39 Thus, R.A.
No. 9481 amended Article 239 to read:
ART. 239. Grounds for Cancellation of Union Registration.The following may constitute grounds for
cancellation of union registration:
(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification of
the constitution and by-laws or amendments thereto, the minutes of ratification, and the list of
members who took part in the ratification;
(b) Misrepresentation, false statements or fraud in connection with the election of officers,
minutes of the election of officers, and the list of voters;
(c) Voluntary dissolution by the members.
R.A. No. 9481 also inserted in the Labor Code Article 242-A, which provides:
ART. 242-A. Reportorial Requirements.The following are documents required to be submitted to the
Bureau by the legitimate labor organization concerned:
(a) Its constitution and by-laws, or amendments thereto, the minutes of ratification, and the list of
members who took part in the ratification of the constitution and by-laws within thirty (30) days
from adoption or ratification of the constitution and by-laws or amendments thereto;
(b) Its list of officers, minutes of the election of officers, and list of voters within thirty (30) days
from election;
(c) Its annual financial report within thirty (30) days after the close of every fiscal year; and
(d) Its list of members at least once a year or whenever required by the Bureau.
Failure to comply with the above requirements shall not be a ground for cancellation of union registration
but shall subject the erring officers or members to suspension, expulsion from membership, or any
appropriate penalty.
ILO Convention No. 87, which we have ratified in 1953, provides that "workers and employers
organizations shall not be liable to be dissolved or suspended by administrative authority." The ILO has
expressed the opinion that the cancellation of union registration by the registrar of labor unions, which in
our case is the BLR, is tantamount to dissolution of the organization by administrative authority when
such measure would give rise to the loss of legal personality of the union or loss of advantages necessary
for it to carry out its activities, which is true in our jurisdiction. Although the ILO has allowed such measure
to be taken, provided that judicial safeguards are in place, i.e., the right to appeal to a judicial body, it has
nonetheless reminded its members that dissolution of a union, and cancellation of registration for that
matter, involve serious consequences for occupational representation. It has, therefore, deemed it

preferable if such actions were to be taken only as a last resort and after exhausting other possibilities
with less serious effects on the organization.40
The aforesaid amendments and the ILOs opinion on this matter serve to fortify our ruling in this case. We
therefore quote with approval the DOLE Secretarys rationale for denying the petition, thus:
It is undisputed that appellee failed to submit its annual financial reports and list of individual members in
accordance with Article 239 of the Labor Code. However, the existence of this ground should not
necessarily lead to the cancellation of union registration. Article 239 recognizes the regulatory authority of
the State to exact compliance with reporting requirements. Yet there is more at stake in this case than
merely monitoring union activities and requiring periodic documentation thereof.
The more substantive considerations involve the constitutionally guaranteed freedom of association and
right of workers to self-organization. Also involved is the public policy to promote free trade unionism and
collective bargaining as instruments of industrial peace and democracy.1avvphi1 An overly stringent
interpretation of the statute governing cancellation of union registration without regard to surrounding
circumstances cannot be allowed. Otherwise, it would lead to an unconstitutional application of the statute
and emasculation of public policy objectives. Worse, it can render nugatory the protection to labor and
social justice clauses that pervades the Constitution and the Labor Code.
Moreover, submission of the required documents is the duty of the officers of the union. It would be
unreasonable for this Office to order the cancellation of the union and penalize the entire union
membership on the basis of the negligence of its officers. In National Union of Bank Employees vs.
Minister of Labor, L-53406, 14 December 1981, 110 SCRA 296, the Supreme Court ruled:
As aptly ruled by respondent Bureau of Labor Relations Director Noriel: "The rights of workers to selforganization finds general and specific constitutional guarantees. x x x Such constitutional guarantees
should not be lightly taken much less nullified. A healthy respect for the freedom of association demands
that acts imputable to officers or members be not easily visited with capital punishments against the
association itself."
At any rate, we note that on 19 May 2000, appellee had submitted its financial statement for the years
1996-1999. With this submission, appellee has substantially complied with its duty to submit its financial
report for the said period. To rule differently would be to preclude the union, after having failed to meet its
periodic obligations promptly, from taking appropriate measures to correct its omissions. For the record,
we do not view with favor appellees late submission. Punctuality on the part of the union and its officers
could have prevented this petition.41
WHEREFORE, premises considered, the Court of Appeals Decision dated May 30, 2005 and Resolution
dated June 4, 2007 are AFFIRMED.
SO ORDERED.
-----------------------------------------96. Standard Chartered Bank Union v SOLE
Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION
G.R. No. 114974

June 16, 2004

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), petitioner,

vs.
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 provisions5and thirty-four (34) economic provisions.6 Included therein was a
list of the names of the members of the Unions negotiating panel. 7
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.13Even 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

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 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
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:
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
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-proposal20 as follows:
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
Dental Retainer Original offer remains the same21
The Union, for its part, made the following counter-proposal:
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
The Unions original proposals, aside from the above-quoted, remained the same.
Another set of counter-offer followed:
Management

Union

Wage Increase
1st Year P1,050.00

40%

2nd Year - 850.00

19.0%23

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 move and make a list of items
it wanted to be included 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 deadlock25 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
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
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:
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. 00-0604191-93 is pending for his guidance and appropriate action. 29

The SOLE gave the following economic awards:

1. Wage Increase:
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 4th year adjusted salary
b) Additional fixed amount:
Fourth year : P600.00 per month

Fifth year : P400.00 per month

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
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.
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:
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
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
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
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 strikeno 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
The issues presented for resolution are the 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
labororganizations, 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 vs.
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
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 and activities and to formulate
their programs.43Article 2 of ILO Convention No. 98 pertaining to the Right to Organize and Collective
Bargaining, provides:
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:
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 selforganization 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
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 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
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 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, 196054
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 counterproposals on the noneconomic 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 counterproposal, 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 noneconomic 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;
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
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

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:
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
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 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.
SO ORDERED.
--------------------------------------97. Sta. Lucia East Commercial Corp v Sec of Labor

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 162355

August 14, 2009

STA. LUCIA EAST COMMERCIAL CORPORATION, Petitioner,

vs.

HON. SECRETARY OF LABOR AND EMPLOYMENT and STA. LUCIA EAST COMMERCIAL
CORPORATION WORKERS ASSOCIATION (CLUP LOCAL CHAPTER), Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review1 assailing the Decision2 promulgated on 14 August 2003 as well as the
Resolution3promulgated on 24 February 2004 of the Court of Appeals (appellate court) in CA-G.R. SP No.
77015. The appellate court denied Sta. Lucia East Commercial Corporations (SLECC) petition for
certiorari with prayer for writ of preliminary injunction and temporary restraining order. The appellate court
further ruled that the Secretary of Labor and Employment (Secretary) was correct when she held that the
subsequent negotiations and registration of a collective bargaining agreement (CBA) executed by SLECC
with Samahang Manggagawa sa Sta. Lucia East Commercial (SMSLEC) could not bar Sta. Lucia East
Commercial Corporation Workers Associations (SLECCWA) petition for direct certification.
The Facts
The Secretary narrated the facts as follows:
On 27 February 2001, Confederated Labor Union of the Philippines (CLUP), in behalf of its chartered
local, instituted a petition for certification election among the regular rank-and-file employees of Sta. Lucia
East Commercial Corporation and its Affiliates, docketed as Case No. RO400-0202-RU-007. The affiliate
companies included in the petition were SLE Commercial, SLE Department Store, SLE Cinema, Robsan
East Trading, Bowling Center, Planet Toys, Home Gallery and Essentials.
On 21 August 2001, Med-Arbiter Bactin ordered the dismissal of the petition due to inappropriateness of
the bargaining unit. CLUP-Sta. Lucia East Commercial Corporation and its Affiliates Workers Union
appealed the order of dismissal to this Office on 14 September 2001. On 20 November 2001, CLUP-Sta.
Lucia East Commercial Corporation and its Affiliates Workers Union [CLUP-SLECC and its Affiliates
Workers Union] moved for the withdrawal of the appeal. On 31 January 2002, this Office granted the
motion and affirmed the dismissal of the petition.
In the meantime, on 10 October 2001, [CLUP-SLECC and its Affiliates Workers Union] reorganized itself
and re-registered as CLUP-Sta. Lucia East Commercial Corporation Workers Association (herein
appellant CLUP-SLECCWA), limiting its membership to the rank-and-file employees of Sta. Lucia East
Commercial Corporation. It was issued Certificate of Creation of a Local Chapter No. RO400-0110-CC004.
On the same date, [CLUP-SLECCWA] filed the instant petition. It alleged that [SLECC] employs about
115 employees and that more than 20% of employees belonging to the rank-and-file category are its
members. [CLUP-SLECCWA] claimed that no certification election has been held among them within the
last 12 months prior to the filing of the petition, and while there is another union registered with DOLERegional Office No. IV on 22 June 2001 covering the same employees, namely [SMSLEC], it has not
been recognized as the exclusive bargaining agent of [SLECCs] employees.

On 22 November 2001, SLECC filed a motion to dismiss the petition. It averred that it has voluntarily
recognized [SMSLEC] on 20 July 2001 as the exclusive bargaining agent of its regular rank-and-file
employees, and that collective bargaining negotiations already commenced between them. SLECC
argued that the petition should be dismissed for violating the one year and negotiation bar rules under
pars. (c) and (d), Section 11, Rule XI, Book V of the Omnibus Rules Implementing the Labor Code.
On 29 November 2001, a CBA between [SMSLEC] and [SLECC] was ratified by its rank-and-file
employees and registered with DOLE-Regional Office No. IV on 9 January 2002.
In the meantime, on 19 December 2001, [CLUP-SLECCWA] filed its Opposition and Comment to
[SLECCS] Motion to Dismiss. It assailed the validity of the voluntary recognition of [SMSLEC] by
[SLECC] and their consequent negotiations and execution of a CBA. According to [CLUP-SLECCWA], the
same were tainted with malice, collusion and conspiracy involving some officials of the Regional Office.
Appellant contended that Chief LEO Raymundo Agravante, DOLE Regional Office No. IV, Labor Relations
Division should have not approved and recorded the voluntary recognition of [SMSLEC] by [SLECC]
because it violated one of the major requirements for voluntary recognition, i.e., non-existence of another
labor organization in the same bargaining unit. It pointed out that the time of the voluntary recognition on
20 July 2001, appellants registration as [CLUP-SLECC and its Affiliates Workers Union], which covers the
same group of employees covered by Samahang Manggagawa sa Sta. Lucia East Commercial, was
existing and has neither been cancelled or abandoned. [CLUP-SLECCWA] also accused Med-Arbiter
Bactin of malice, collusion and conspiracy with appellee company when he dismissed the petition for
certification election filed by [SMSLEC] for being moot and academic because of its voluntary recognition,
when he was fully aware of the pendency of [CLUP-SLECCWAs] earlier petition for certification election.
Subsequent pleadings filed by [CLUP-SLECCWA] and [SLECC] reiterated their respective positions on
the validity and invalidity of the voluntary recognition. On 29 July 2002, Med-Arbiter Bactin issued the
assailed Order.4
The Med-Arbiters Ruling
In his Order dated 29 July 2002, Med-Arbiter Anastacio L. Bactin dismissed CLUP-SLECCWAs petition
for direct certification on the ground of contract bar rule. The prior voluntary recognition of SMSLEC and
the CBA between SLECC and SMSLEC bars the filing of CLUP-SLECCWAs petition for direct
certification. SMSLEC is entitled to enjoy the rights, privileges, and obligations of an exclusive bargaining
representative from the time of the recording of the voluntary recognition. Moreover, the duly registered
CBA bars the filing of the petition for direct certification.
CLUP-SLECCWA filed a Memorandum of Appeal of the Med-Arbiters Order before the Secretary.
The Ruling of the Secretary of Labor and Employment
In her Decision promulgated on 27 December 2002, the Secretary found merit in CLUP-SLECCWAs
appeal. The Secretary held that the subsequent negotiations and registration of a CBA executed by
SLECC with SMSLEC could not bar CLUP-SLECCWAs petition. CLUP-SLECC and its Affiliates Workers
Union constituted a registered labor organization at the time of SLECCs voluntary recognition of
SMSLEC. The dispositive portion of the Secretarys Decision reads:

WHEREFORE, the appeal is hereby GRANTED and the Order of the Med-Arbiter dated 29 July 2002 is
REVERSED and SET ASIDE. Accordingly, let the entire records of the case be remanded to the Regional
Office of origin for the immediate conduct of a certification election, subject to the usual pre-election
conference, among the regular rank-and-file employees of [SLECC], with the following choices:
1. Sta. Lucia East Commercial Corporation Workers Association CLUP Local Chapter;
2. Samahang Manggagawa sa Sta. Lucia East Commercial; and
3. No Union.
Pursuant to Rule XI, Section II.1 of Department Order No. 9, appellee corporation is hereby directed to
submit to the office of origin, within ten (10) days from receipt hereof, the certified list of its employees in
the bargaining unit or when necessary a copy of its payroll covering the same employees for the last three
(3) months preceding the issuance of this Decision.
Let a copy of this Decision be furnished the Bureau of Labor Relations and Labor Relations Division of
Regional Office No. IV for the cancellation of the recording of voluntary recognition in favor of Samahang
Manggagawa sa Sta. Lucia East Commercial and the appropriate annotation of re-registration of CLUPSta. Lucia East Commercial Corporation and its Affiliates Workers Union to Sta. Lucia East Commercial
Corporation Workers Association-CLUP Local Chapter.
SO DECIDED.5
SLECC filed a motion for reconsideration which the Secretary denied for lack of merit in a Resolution
dated 27 March 2003. SLECC then filed a petition for certiorari before the appellate court.
The Ruling of the Appellate Court
The appellate court affirmed the ruling of the Secretary and quoted extensively from the Secretarys
decision. The appellate court agreed with the Secretarys finding that the workers sought to be
represented by CLUP-SLECC and its Affiliates Workers Union included the same workers in the
bargaining unit represented by SMSLEC. SMSLEC was not the only legitimate labor organization
operating in the subject bargaining unit at the time of SMSLECs voluntary recognition on 20 July 2001.
Thus, SMSLECs voluntary recognition was void and could not bar CLUP-SLECCWAs petition for
certification election.
The Issue
SLECC raised only one issue in its petition. SLECC asserted that the appellate court commited a
reversible error when it affirmed the Secretarys finding that SLECCs voluntary recognition of SMSLEC
was done while a legitimate labor organization was in existence in the bargaining unit.
The Ruling of the Court
The petition has no merit. We see no reason to overturn the rulings of the Secretary and of the appellate
court.

Legitimate Labor Organization

Article 212(g) of the Labor Code defines a labor organization as "any union or association of employees
which exists in whole or in part for the purpose of collective bargaining or of dealing with employers
concerning terms and conditions of employment." Upon compliance with all the documentary
requirements, the Regional Office or Bureau shall issue in favor of the applicant labor organization a
certificate indicating that it is included in the roster of legitimate labor organizations. 6 Any applicant labor
organization shall acquire legal personality and shall be entitled to the rights and privileges granted by law
to legitimate labor organizations upon issuance of the certificate of registration. 7

Bargaining Unit
The concepts of a union and of a legitimate labor organization are different from, but related to, the
concept of a bargaining unit. We explained the concept of a bargaining unit in San Miguel Corporation v.
Laguesma,8 where we stated that:

A bargaining unitis a "group of employees of a given employer, comprised of all or less than all of the
entire body of employees, consistent with equity to the employer, indicated to be the best suited to serve
the reciprocal rights and duties of the parties under the collective bargaining provisions of the law."

The fundamental factors in determining the appropriate

collective bargaining unit are:
(1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees interest, such as
substantial similarity of work and duties, or similarity of compensation and working conditions (Substantial
Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status.
Contrary to petitioners assertion, this Court has categorically ruled that the existence of a prior
collective bargaining history is neither decisive nor conclusive in the determination of what
constitutes an appropriate bargaining unit.
However, employees in two corporations cannot be treated as a single bargaining unit even if the
businesses of the two corporations are related.9

A Legitimate Labor Organization Representing An

Inappropriate Bargaining Unit
CLUP-SLECC and its Affiliates Workers Unions initial problem was that they constituted a legitimate labor
organization representing a non-appropriate bargaining unit. However, CLUP-SLECC and its Affiliates
Workers Union subsequently re-registered as CLUP-SLECCWA, limiting its members to the rank-and-file
of SLECC. SLECC cannot ignore that CLUP-SLECC and its Affiliates Workers Union was a legitimate
labor organization at the time of SLECCs voluntary recognition of SMSLEC. SLECC and SMSLEC
cannot, by themselves, decide whether CLUP-SLECC and its Affiliates Workers Union represented an
appropriate bargaining unit.1avvphi1
The inclusion in the union of disqualified employees is not among the grounds for cancellation of
registration, unless such inclusion is due to misrepresentation, false statement or fraud under the

circumstances enumerated in Sections (a) to (c) of Article 239 of the Labor Code. 10 Thus, CLUP-SLECC
and its Affiliates Workers Union, having been validly issued a certificate of registration, should be
considered as having acquired juridical personality which may not be attacked collaterally. The proper
procedure for SLECC is to file a petition for cancellation of certificate of registration 11 of CLUP-SLECC
and its Affiliates Workers Union and not to immediately commence voluntary recognition proceedings with
SMSLEC.

SLECCs Voluntary Recognition of SMSLEC

The employer may voluntarily recognize the representation status of a union in unorganized
establishments.12SLECC was not an unorganized establishment when it voluntarily recognized SMSLEC
as its exclusive bargaining representative on 20 July 2001. CLUP-SLECC and its Affiliates Workers Union
filed a petition for certification election on 27 February 2001 and this petition remained pending as of 20
July 2001. Thus, SLECCs voluntary recognition of SMSLEC on 20 July 2001, the subsequent
negotiations and resulting registration of a CBA executed by SLECC and SMSLEC are void and cannot
bar CLUP-SLECCWAs present petition for certification election.

Employers Participation in a Petition for Certification Election

We find it strange that the employer itself, SLECC, filed a motion to oppose CLUP-SLECCWAs petition
for certification election. In petitions for certification election, the employer is a mere bystander and
cannot oppose the petition or appeal the Med-Arbiters decision. The exception to this rule, which
happens when the employer is requested to bargain collectively, is not present in the case before
us.13
WHEREFORE, we DENY the petition. We AFFIRM the Decision promulgated on 14 August 2003 as well
as the Resolution promulgated on 24 February 2004 of the Court of Appeals in CA-G.R. SP No. 77015.
SO ORDERED.
ANTONIO T. CARPIO
--------------------------------------------98. Samahang Manggagawa v Samma Corp

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167141

March 13, 2009

SAMAHAN NG MGA MANGGAGAWA SA SAMMA-LAKAS SA INDUSTRIYA NG KAPATIRANG

HALIGI NG ALYANSA (SAMMA-LIKHA), Petitioner,
vs.
SAMMA CORPORATION, Respondent.

DECISION
This is a petition for review on certiorari1 of the August 31, 2004 decision2 and February 15, 2005
resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 77156.
Petitioner Samahan ng mga Manggagawa sa Samma Lakas sa Industriya ng Kapatirang Haligi ng
Alyansa (SAMMA-LIKHA) filed a petition for certification election on July 24, 2001 in the Department of
Labor and Employment (DOLE), Regional Office IV.4 It claimed that: (1) it was a local chapter of the
LIKHA Federation, a legitimate labor organization registered with the DOLE; (2) it sought to represent all
the rank-and-file employees of respondent Samma Corporation; (3) there was no other legitimate labor
organization representing these rank-and-file employees; (4) respondent was not a party to any collective
bargaining agreement and (5) no certification or consent election had been conducted within the employer
unit for the last 12 months prior to the filing of the petition.
Respondent moved for the dismissal of the petition arguing that (1) LIKHA Federation failed to establish
its legal personality; (2) petitioner failed to prove its existence as a local chapter; (3) it failed to attach the
certificate of non-forum shopping and (4) it had a prohibited mixture of supervisory and rank-and-file
employees.5
In an order dated November 12, 2002, med-arbiter Arturo V. Cosuco ordered the dismissal of the
petition on the following grounds: (1) lack of legal personality for failure to attach the certificate of
registration purporting to show its legal personality; (2) prohibited mixture of rank-and-file and supervisory
employees and (3) failure to submit a certificate of non-forum shopping. 6
Petitioner moved for reconsideration on November 29, 2001. The Regional Director of DOLE Regional
Office IV forwarded the case to the Secretary of Labor. Meanwhile, on December 14, 2002, respondent
filed a petition for cancellation of petitioners union registration in the DOLE Regional Office IV.7
On January 17, 2003, Acting Secretary Manuel G. Imson, treating the motion for reconsideration as an
appeal, rendered a decision reversing the order of the med-arbiter. He ruled that the legal personality of a
union cannot be collaterally attacked but may only be questioned in an independent petition for
cancellation of registration. Thus, he directed the holding of a certification election among the rank-andfile employees of respondent, subject to the usual pre-election conference and inclusion-exclusion
proceedings.8
On January 23, 2003 or six days after the issuance of said decision, respondent filed its comment on the
motion for reconsideration of petitioner, asserting that the order of the med-arbiter could only be reviewed
by way of appeal and not by a motion for reconsideration pursuant to Department Order (D.O.) No. 9,
series of 1997.9
On February 6, 2003, respondent filed its motion for reconsideration of the January 17, 2003 decision. In
a resolution dated April 3, 2003, Secretary Patricia A. Sto. Tomas denied the motion. 10
Meanwhile, on April 14, 2003, Crispin D. Dannug, Jr., Officer-in-Charge/Regional Director of DOLE
Regional Office IV, issued a resolution revoking the charter certificate of petitioner as local chapter of
LIKHA Federation on the ground of prohibited mixture of supervisory and rank-and-file employees and
non-compliance with the attestation clause under paragraph 2 of Article 235 of the Labor Code. 11 On May
6, 2003, petitioner moved for the reconsideration of this resolution. 12

Respondent filed a petition for certiorari13 in the CA assailing the January 17, 2003 decision and April 3,
2003 resolution of the Secretary of Labor. In a decision dated August 31, 2004, the CA reversed the
same.14 It denied reconsideration in a resolution dated February 15, 2005. It held that Administrative
Circular No. 04-94 which required the filing of a certificate of non-forum shopping applied to petitions for
certification election. It also ruled that the Secretary of Labor erred in granting the appeal despite the lack
of proof of service on respondent. Lastly, it found that petitioner had no legal standing to file the petition
for certification election because its members were a mixture of supervisory and rank-and-file
employees.15
Hence, this petition.
The issues for our resolution are the following: (1) whether a certificate for non-forum shopping is required
in a petition for certification election; (2) whether petitioners motion for reconsideration which was treated
as an appeal by the Secretary of Labor should not have been given due course for failure to attach proof
of service on respondent and (3) whether petitioner had the legal personality to file the petition for
certification election.

Requirement of Certificate
Of Non-Forum Shopping
Is Not Required in a Petition
For Certification Election
In ruling against petitioner, the CA declared that under Administrative Circular No. 04-94, 16 a certificate of
non-forum shopping was required in a petition for certification election. The circular states:
The complaint and other initiatory pleadings referred to and subject of this Circular are the original civil
complaint, counterclaim, cross-claim, third (fourth, etc.) party complaint, or complaint-in-intervention,
petition, or applicationwherein a party asserts his claim for relief. (Emphasis supplied)
According to the CA, a petition for certification election asserts a claim, i.e., the conduct of a certification
election. As a result, it is covered by the circular.17
We disagree.
The requirement for a certificate of non-forum shopping refers to complaints, counter-claims, crossclaims, petitions or applications where contending parties litigate their respective positions regarding the
claim for relief of the complainant, claimant, petitioner or applicant. A certification proceeding, even though
initiated by a "petition," is not a litigation but an investigation of a non-adversarial and fact-finding
character.18
Such proceedings are not predicated upon an allegation of misconduct requiring relief, but, rather,
are merely of an inquisitorial nature. The Board's functions are not judicial in nature, but are merely of
an investigative character. The object of the proceedings is not the decision of any alleged commission of
wrongs nor asserted deprivation of rights but is merely the determination of proper bargaining units and
the ascertainment of the will and choice of the employees in respect of the selection of a bargaining
representative. The determination of the proceedings does not entail the entry of remedial orders to

redress rights, but culminates solely in an official designation of bargaining units and an affirmation of the
employees' expressed choice of bargaining agent.19(Emphasis supplied)
In Pena v. Aparicio,20 we ruled against the necessity of attaching a certification against forum shopping to
a disbarment complaint. We looked into the rationale of the requirement and concluded that the evil
sought to be avoided is not present in disbarment proceedings.
[The] rationale for the requirement of a certification against forum shopping is to apprise the Court of
the pendency of another action or claim involving the same issues in another court, tribunal or quasijudicial agency, and thereby precisely avoid the forum shopping situation. Filing multiple petitions or
complaints constitutes abuse of court processes, which tends to degrade the administration of justice,
wreaks havoc upon orderly judicial procedure, and adds to the congestion of the heavily burdened
dockets of the courts. Furthermore, the rule proscribing forum shopping seeks to promote candor and
transparency among lawyers and their clients in the pursuit of their cases before the courts to promote the
orderly administration of justice, prevent undue inconvenience upon the other party, and save the
precious time of the courts. It also aims to prevent the embarrassing situation of two or more courts or
agencies rendering conflicting resolutions or decisions upon the same issue.
It is in this light that we take a further look at the necessity of attaching a certification against forum
shopping to a disbarment complaint. It would seem that the scenario sought to be avoided, i.e., the
filing of multiple suits and the possibility of conflicting decisions, rarely happens in disbarment
complaints considering that said proceedings are either "taken by the Supreme Court motu proprio, or by
the Integrated Bar of the Philippines (IBP) upon the verified complaint of any person." Thus, if the
complainant in a disbarment case fails to attach a certification against forum shopping, the pendency of
another disciplinary action against the same respondent may still be ascertained with ease. 21 (Emphasis
supplied)
The same situation holds true for a petition for certification election. Under the omnibus rules
implementing the Labor Code as amended by D.O. No. 9, 22 it is supposed to be filed in the Regional
Office which has jurisdiction over the principal office of the employer or where the bargaining unit is
principally situated.23 The rules further provide that where two or more petitions involving the same
bargaining unit are filed in one Regional Office, the same shall be automatically consolidated. 24 Hence,
the filing of multiple suits and the possibility of conflicting decisions will rarely happen in this proceeding
and, if it does, will be easy to discover.
Notably, under the Labor Code and the rules pertaining to the form of the petition for certification election,
there is no requirement for a certificate of non-forum shopping either in D.O. No. 9, series of 1997 or in
D.O. No. 40-03, series of 2003 which replaced the former.25
Considering the nature of a petition for certification election and the rules governing it, we therefore hold
that the requirement for a certificate of non-forum shopping is inapplicable to such a petition.

Treatment of Motion for Reconsideration as an Appeal

The CA ruled that petitioners motion for reconsideration, which was treated as an appeal by the
Secretary of Labor, should not have been given due course for lack of proof of service in accordance with
the implementing rules as amended by D.O. No. 9:

Section 12. Appeal; finality of decision. The decision of the Med-Arbiter may be appealed to the
Secretary for any violation of these Rules. Interloculory orders issued by the Med-Arbiter prior to the grant
or denial of the petition, including order granting motions for intervention issued after an order calling for a
certification election, shall not be appealable. However, any issue arising therefrom may be raised in the
appeal on the decision granting or denying the petition.
The appeal shall be under oath and shall consist of a memorandum of appeal specifically stating the
grounds relied upon by the appellant with the supporting arguments and evidence. The appeal shall be
deemed not filed unless accompanied by proof of service thereof to appellee.26 (Emphasis supplied)
In accepting the appeal, the Secretary of Labor stated:
[Petitioners] motion for reconsideration of the Med-Arbiters Order dated November 12, 2002
was verified under oath by [petitioners] president Gil Dispabiladeras before Notary Public Wilfredo A.
Ruiz on 29 November 2002, and recorded in the Notarial Register under Document No. 186, Page No.
38, Book V, series of 2002. On page 7 of the said motion also appears the notation "copy of respondent to
be delivered personally with the name and signature of one Rosita Simon, 11/29/02." The
motion contained the grounds and arguments relied upon by [petitioner] for the reversal of the assailed
Order. Hence, the motion for reconsideration has complied with the formal requisites of an appeal.
The signature of Rosita Simon appearing on the last page of the motion can be considered
as compliance with the required proof of service upon respondent. Rosita Simons employment
status was a matter that should have been raised earlier by [respondent]. But [respondent] did not
question the same and slept on its right to oppose or comment on [petitioners] motion for
reconsideration. It cannot claim that it was unaware of the filing of the appeal by [petitioner], because
a copy of the indorsement of the entire records of the petition to the Office of the Secretary "in view of the
memorandum of appeal filed by Mr. Jesus B. Villamor" was served upon the employer and legal counsels
Atty. Ismael De Guzman and Atty. Anatolio Sabillo at the Samma Corporation Office, Main Avenue, PEZA,
Rosario, Cavite on December 5, 2002.27 (Emphasis supplied)
The motion for reconsideration was properly treated as an appeal because it substantially complied with
the formal requisites of the latter. The lack of proof of service was not fatal as respondent had actually
received a copy of the motion. Consequently, it had the opportunity to oppose the same. Under these
circumstances, we find that the demands of substantial justice and due process were satisfied.
We stress that rules of procedure are interpreted liberally to secure a just, speedy and inexpensive
disposition of every action. They should not be applied if their application serves no useful purpose or
hinders the just and speedy disposition of cases. Specifically, technical rules and objections should not
hamper the holding of a certification election wherein employees are to select their bargaining
representative. A contrary rule will defeat the declared policy of the State1avvphi1.zw+
to promote the free and responsible exercise of the right to self-organization through the establishment of
asimplified mechanism for the speedy registration of labor organizations and workers
associations,determination of representation status, and resolution of intra and inter-union
disputes.28 xxx (Emphasis supplied)

Legal Personality of Petitioner

Petitioner argues that the erroneous inclusion of one supervisory employee in the union of rank-and-file
employees was not a ground to impugn its legitimacy as a legitimate labor organization which had the
right to file a petition for certification election.
We agree.
LIKHA was granted legal personality as a federation under certificate of registration no. 92-1015-03211638-FED-LC. Subsequently, petitioner as its local chapter was issued its charter certificate no. 201.29 With certificates of registration issued in their favor, they are clothed with legal personality as
legitimate labor organizations:
Section 5. Effect of registration. The labor organization or workers association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of registration. Such
legal personality cannot thereafter be subject to collateral attack, but may be questioned only in an
independent petition for cancellation in accordance with these Rules. 30
-0Section 3. Acquisition of legal personality by local chapter. - A local/chapter constituted in accordance with
Section 1 of this Rule shall acquire legal personality from the date of filing of the complete documents
enumerated therein. Upon compliance with all the documentary requirements, the Regional Office or
Bureau of Labor Relations shall issue in favor of the local/chapter a certificate indicating that it is included
in the roster of legitimate labor organizations.31
Such legal personality cannot thereafter be subject to collateral attack, but may be questioned only in an
independent petition for cancellation of certificate of registration. 32 Unless petitioners union registration is
cancelled in independent proceedings, it shall continue to have all the rights of a legitimate labor
organization, including the right to petition for certification election.
Furthermore, the grounds for dismissal of a petition for certification election based on the lack of legal
personality of a labor organization are the following: (a) petitioner is not listed by the Regional Office or
the Bureau of Labor Relations in its registry of legitimate labor organizations or (b) its legal personality
has been revoked or cancelled with finality in accordance with the rules. 33
As mentioned, respondent filed a petition for cancellation of the registration of petitioner on December 14,
2002. In a resolution dated April 14, 2003, petitioners charter certificate was revoked by the DOLE. But
on May 6, 2003, petitioner moved for the reconsideration of this resolution. Neither of the parties alleged
that this resolution revoking petitioners charter certificate had attained finality. However, in this petition,
petitioner prayed that its charter certificate be "reinstated in the roster of active legitimate labor
[organizations]."34 This cannot be granted here. To repeat, the proceedings on a petition for cancellation of
registration are independent of those of a petition for certification election. This case originated from the
latter. If it is shown that petitioners legal personality had already been revoked or cancelled with
finality in accordance with the rules, then it is no longer a legitimate labor organization with the right to
petition for a certification election.
A Final Note

Respondent, as employer, had been the one opposing the holding of a certification election among its
rank-and-file employees. This should not be the case. We have already declared that, in certification
elections, the employer is a bystander; it has no right or material interest to assail the certification
election.35
[This] Court notes that it is petitioner, the employer, which has offered the most tenacious resistance to
the holding of a certification election among its monthly-paid rank-and-file employees. This must not be
so, for the choice of a collective bargaining agent is the sole concern of the employees. The only
exception to this rule is where the employer has to file the petition for certification election pursuant to
Article 258 of the Labor Code because it was requested to bargain collectively, which exception finds no
application in the case before us. Its role in a certification election has aptly been described in Trade
Unions of the Philippines and Allied Services (TUPAS) v. Trajano, as that of a mere bystander. It has no
legal standing in a certification election as it cannot oppose the petition or appeal the Med-Arbiter's orders
related thereto. . .36
WHEREFORE, the petition is hereby GRANTED. Let the records of the case be remanded to the office of
origin, the Regional Office IV of the Department of Labor and Employment, for determination of the status
of petitioners legal personality. If petitioner is still a legitimate labor organization, then said office shall
conduct a certification election subject to the usual pre-election conference.
SO ORDERED.
------------------------------------99.Sta Lucia East ,PICOP vs Taneca
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 160828

August 9, 2010

PICOP RESOURCES, INCORPORATED (PRI), Petitioner,

vs.
ANACLETO L. TAECA, GEREMIAS S. TATO, JAIME N. CAMPOS, MARTINIANO A. MAGAYON,
JOSEPH B. BALGOA, MANUEL G. ABUCAY, MOISES M. ALBARAN, MARGARITO G. ALICANTE,
JERRY ROMEO T. AVILA, LORENZO D. CANON, RAUL P. DUERO, DANILO Y. ILAN, MANUEL M.
MATURAN, JR., LUISITO R. POPERA, CLEMENTINO C. QUIMAN, ROBERTO Q. SILOT, CHARLITO
D. SINDAY, REMBERT B. SUZON ALLAN J. TRIMIDAL, and NAMAPRI-SPFL, Respondents.
DECISION
PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of the
Decision1 dated July 25, 2003 and Resolution2 dated October 23, 2003 of the Court of Appeals in CA-G.R.
SP No. 71760, setting aside the Resolutions dated October 8, 2001 3 and April 29, 20024 of the National

Labor Relations Commission in NLRC CA No. M-006309-2001 and reinstating the Decision 5 dated March
16, 2001 of the Labor Arbiter.
The facts, as culled from the records, are as follows:
On February 13, 2001, respondents Anacleto Taeca, Loreto Uriarte, Joseph Balgoa, Jaime Campos,
Geremias Tato, Martiniano Magayon, Manuel Abucay and fourteen (14) others filed a Complaint for unfair
labor practice, illegal dismissal and money claims against petitioner PICOP Resources, Incorporated
(PRI), Wilfredo Fuentes (in his capacity as PRI's Vice President/Resident Manager), Atty. Romero Boniel
(in his capacity as PRI's Manager of Legal/Labor), Southern Philippines Federation of Labor (SPFL), Atty.
Wilbur T. Fuentes (in his capacity as Secretary General of SPFL), Pascasio Trugillo (in his capacity as
Local President of Nagkahiusang Mamumuo sa PICOP Resources, Inc.- SPFL [NAMAPRI-SPFL]) and
Atty. Proculo Fuentes, Jr.6 (in his capacity as National President of SPFL).
Respondents were regular rank-and-file employees of PRI and bona fide members of Nagkahiusang
Mamumuo saPRI Southern Philippines Federation of Labor (NAMAPRI-SPFL), which is the collective
bargaining agent for the rank-and-file employees of petitioner PRI.
PRI has a collective bargaining agreement (CBA) with NAMAPRI-SPFL for a period of five (5) years from
May 22, 1995 until May 22, 2000.
The CBA contained the following union security provisions:
Article II- Union Security and Check-Off
Section 6. Maintenance of membership.
6.1 All employees within the appropriate bargaining unit who are members of the UNION at
the time of the signing of this AGREEMENT shall, as a condition of continued employment
by the COMPANY, maintain their membership in the UNION in good standing during the
effectivity of this AGREEMENT.
6.2 Any employee who may hereinafter be employed to occupy a position covered by the
bargaining unit shall be advised by the COMPANY that they are required to file an application for
membership with the UNION within thirty (30) days from the date his appointment shall have
been made regular.
6.3 The COMPANY, upon the written request of the UNION and after compliance with the
requirements of the New Labor Code, shall give notice of termination of services of any
employee who shall fail to fulfill the condition provided in Section 6.1 and 6.2 of this
Article, but it assumes no obligation to discharge any employee if it has reasonable grounds to
believe either that membership in the UNION was not available to the employee on the same
terms and conditions generally applicable to other members, or that membership was denied or
terminated for reasons other than voluntary resignation or non-payment of regular union dues.
Separation under the Section is understood to be for cause, consequently, the dismissed
employee is not entitled to separation benefits provided under the New Labor Code and in this
AGREEMENT."7

On May 16, 2000, Atty. Proculo P. Fuentes (Atty. Fuentes) sent a letter to the management of PRI
demanding the termination of employees who allegedly campaigned for, supported and signed the
Petition for Certification Election of the Federation of Free Workers Union (FFW) during the effectivity of
the CBA. NAMAPRI-SPFL considered said act of campaigning for and signing the petition for certification
election of FFW as an act of disloyalty and a valid basis for termination for a cause in accordance with its
Constitution and By-Laws, and the terms and conditions of the CBA, specifically Article II, Sections 6.1
and 6.2 on Union Security Clause.
In a letter dated May 23, 2000, Mr. Pascasio Trugillo requested the management of PRI to investigate
those union members who signed the Petition for Certification Election of FFW during the existence of
their CBA. NAMAPRI-SPFL, likewise, furnished PRI with machine copy of the authorization letters dated
March 19, 20 and 21, 2000, which contained the names and signatures of employees.
Acting on the May 16 and May 23, 2000 letters of the NAMAPRI-SPFL, Atty. Romero A. Boniel issued a
memorandum addressed to the concerned employees to explain in writing within 72 hours why their
employment should not be terminated due to acts of disloyalty as alleged by their Union.
Within the period from May 26 to June 2, 2000, a number of employees who were served "explanation
memorandum" submitted their explanation, while some did not.
In a letter dated June 2, 2000, Atty. Boniel endorsed the explanation letters of the employees to Atty.
Fuentes for evaluation and final disposition in accordance with the CBA.
After evaluation, in a letter dated July 12, 2000, Atty. Fuentes advised the management of PRI that the
Union found the member's explanations to be unsatisfactory. He reiterated the demand for termination,
but only of 46 member-employees, including respondents.
On October 16, 2000, PRI served notices of termination for causes to the 31 out of the 46 employees
whom NAMAPRIL-SPFL sought to be terminated on the ground of "acts of disloyalty" committed against it
when respondents allegedly supported and signed the Petition for Certification Election of FFW before the
"freedom period" during the effectivity of the CBA. A Notice dated October 21, 2000 was also served on
the Department of Labor and Employment Office (DOLE), Caraga Region.
Respondents then accused PRI of Unfair Labor Practice punishable under Article 248 (a), (b), (c), (d) and
(e) of the Labor Code, while Atty. Fuentes and Wilbur T. Fuentes and Pascasio Trujillo were accused of
violating Article 248 (a) and (b) of the Labor Code.
Respondents alleged that none of them ever withdrew their membership from NAMAPRI-SPFL or
submitted to PRI any union dues and check-off disauthorizations against NAMAPRI-SPFL. They claimed
that they continue to remain on record as bona fide members of NAMAPRI-SPFL. They pointed out that a
patent manifestation of ones disloyalty would have been the explicit resignation or withdrawal of
membership from the Union accompanied by an advice to management to discontinue union dues and
check-off deductions. They insisted that mere affixation of signature on such authorization to file a petition
for certification election was not per se an act of disloyalty. They claimed that while it may be true that
they signed the said authorization before the start of the freedom period, the petition of FFW was only
filed with the DOLE on May 18, 2000, or 58 days after the start of the freedom period.

Respondents maintained that their acts of signing the authorization signifying support to the filing of a
Petition for Certification Election of FFW was merely prompted by their desire to have a certification
election among the rank-and-file employees of PRI with hopes of a CBA negotiation in due time; and not
to cause the downfall of NAMAPRI-SPFL.
Furthermore, respondents contended that there was lack of procedural due process. Both the letter dated
May 16, 2000 of Atty. Fuentes and the follow-up letter dated May 23, 2000 of Trujillo addressed to PRI did
not mention their names. Respondents stressed that NAMAPRI-SPFL merely requested PRI to
investigate union members who supported the Petition for Certification Election of FFW. Respondents
claimed that they should have been summoned individually, confronted with the accusation and
investigated accordingly and from where the Union may base its findings of disloyalty and, thereafter,
recommend to management the termination for causes.1avvphi1
Respondents, likewise, argued that at the time NAMAPRI-SPFL demanded their termination, it was no
longer the bargaining representative of the rank-and-file workers of PRI, because the CBA had already
expired on May 22, 2000. Hence, there could be no justification in PRIs act of dismissing respondents
due to acts of disloyalty.
Respondents asserted that the act of PRI, Wilfredo Fuentes and Atty. Boniel in giving in to the wishes of
the Union in discharging them on the ground of disloyalty to the Union amounted to interference with,
restraint or coercion of respondents exercise of their right to self-organization. The act indirectly required
petitioners to support and maintain their membership with NAMAPRI-SPFL as a condition for their
continued employment. The acts of NAMAPRI-SPFL, Atty. Fuentes and Trujillo amounted to actual
restraint and coercion of the petitioners in the exercise of their rights to self-organization and constituted
acts of unfair labor practice.
In a Decision8 dated March 16, 2001, the Labor Arbiter declared the respondents dismissal to be illegal
and ordered PRI to reinstate respondents to their former or equivalent positions without loss of seniority
rights and to jointly and solidarily pay their backwages. The dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby entered:
1. Declaring complainants dismissal illegal; and
2. Ordering respondents Picop Resources Inc. (PRI) and NAMAPRI-SPFL to reinstate
complainants to their former or equivalent positions without loss of seniority rights and to jointly
and solidarily pay their backwages in the total amount of P420,339.30 as shown in the said
Annex "A" plus damages in the amount of P10,000.00 each, or a total of P210,000.00 and
attorneys fees equivalent to 10% of the total monetary award.
SO ORDERED.9
PRI and NAMAPRI-SPFL appealed to the National Labor Relations Commission (NLRC), which reversed
the decision of the Labor Arbiter; thus, declaring the dismissal of respondents from employment as legal.
Respondents filed a motion for reconsideration, but it was denied on April 29, 2001 for lack of merit.

Unsatisfied, respondents filed a petition for certiorari under Rule 65 before the Court of Appeals and
sought the nullification of the Resolution of the NLRC dated October 8, 2001 which reversed the Decision
dated March 16. 2001 of Labor Arbiter and the Resolution dated April 29, 2002, which denied
respondents motion for reconsideration.
On July 25, 2003, the Court of Appeals reversed and set aside the assailed Resolutions of the NLRC and
reinstated the Decision dated March 16, 2001 of the Labor Arbiter.
Thus, before this Court, PRI, as petitioner, raised the following issues:
I
WHETHER AN EXISTING COLLECTIVELY (sic) BARGAINING AGREEMENT (CBA) CAN BE GIVEN ITS
FULL FORCE AND EFFECT IN ALL ITS TERMS AND CONDITION INCLUDING ITS UNION SECURITY
CLAUSE, EVEN BEYOND THE 5-YEAR PERIOD WHEN NO NEW CBA HAS YET BEEN ENTERED
INTO.
II
WHETHER OR NOT AN HONEST ERROR IN THE INTERPRETATION AND/OR CONCLUSION OF LAW
FALL WITHIN THE AMBIT OF THE EXTRAORDINARY REMEDY OF CERTIORARI UNDER RULE 65,
REVISED RULES OF COURT.10
We will first delve on the technical issue raised.
PRI perceived a patent error in the mode of appeal elected by respondents for the purpose of assailing
the decision of the NLRC. It claimed that assuming that the NLRC erred in its judgment on the legal
issues, its error, if any, is not tantamount to abuse of discretion falling within the ambit of Rule 65.
Petitioner is mistaken.
The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has
been settled as early as in our decision in St. Martin Funeral Home v. National Labor Relations
Commission.11 This Court held that the proper vehicle for such review was a Special Civil Action
for Certiorari under Rule 65 of the Rules of Court, and that this action should be filed in the Court of
Appeals in strict observance of the doctrine of the hierarchy of courts. 12 Moreover, it is already settled that
under Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902[10] (An Act
Expanding the Jurisdiction of the Court of Appeals, amending for the purpose of Section Nine of Batas
Pambansa Blg. 129 as amended, known as the Judiciary Reorganization Act of 1980), the Court of
Appeals pursuant to the exercise of its original jurisdiction over Petitions for Certiorari is specifically
given the power to pass upon the evidence, if and when necessary, to resolve factual issues. 13

We now come to the main issue of whether there was just

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

Citing Article 253 of the Labor Code,14 PRI contends that as parties to the CBA, they are enjoined to keep
thestatus quo and continue in full force and effect the terms and conditions of the existing CBA during the
60-day period and/or until a new agreement is reached by the parties.
Petitioner's argument is untenable.
"Union security" is a generic term, which is applied to and comprehends "closed shop," "union shop,"
"maintenance of membership," or any other form of agreement which imposes upon employees the
obligation to acquire or retain union membership as a condition affecting employment. There is union
shop when all new regular employees are required to join the union within a certain period as a condition
for their continued employment. There is maintenance of membership shop when employees, who are
union members as of the effective date of the agreement, or who thereafter become members, must
maintain union membership as a condition for continued employment until they are promoted or
transferred out of the bargaining unit, or the agreement is terminated. A closed shop, on the other hand,
may be defined as an enterprise in which, by agreement between the employer and his employees or
their representatives, no person may be employed in any or certain agreed departments of the enterprise
unless he or she is, becomes, and, for the duration of the agreement, remains a member in good standing
of a union entirely comprised of or of which the employees in interest are a part. 15

requisites for valid just cause for termination

However, in terminating the employment of an employee by enforcing the union security clause, the
employer needs to determine and prove that: (1) the union security clause is applicable; (2) the union is
requesting for the enforcement of the union security provision in the CBA; and (3) there is sufficient
evidence to support the decision of the union to expel the employee from the union. These requisites
constitute just cause for terminating an employee based on the union security provision of the CBA. 16
As to the first requisite, there is no question that the CBA between PRI and respondents included a
union security clause, specifically, a maintenance of membership as stipulated in Sections 6 of Article II,
Union Security and Check-Off. Following the same provision, PRI, upon written request from the Union,
can indeed terminate the employment of the employee who failed to maintain its good standing as a union
member.
Secondly, it is likewise undisputed that NAMAPRI-SPFL, in two (2) occasions demanded from PRI, in
their letters dated May 16 and 23, 2000, to terminate the employment of respondents due to their acts of
disloyalty to the Union.
However, as to the third requisite, we find that there is no sufficient evidence to support the decision of
PRI to terminate the employment of the respondents.
PRI alleged that respondents were terminated from employment based on the alleged acts of disloyalty
they committed when they signed an authorization for the Federation of Free Workers (FFW) to file a
Petition for Certification Election among all rank-and-file employees of PRI. It contends that the acts of
respondents are a violation of the Union Security Clause, as provided in their Collective Bargaining
Agreement.
We are unconvinced.

We are in consonance with the Court of Appeals when it held that the mere signing of the authorization in
support of the Petition for Certification Election of FFW on March 19, 20 and 21, or before the "freedom
period," is not sufficient ground to terminate the employment of respondents inasmuch as the petition
itself was actually filed during the freedom period. Nothing in the records would show that respondents
failed to maintain their membership in good standing in the Union. Respondents did not resign or
withdraw their membership from the Union to which they belong. Respondents continued to pay their
union dues and never joined the FFW.
Significantly, petitioner's act of dismissing respondents stemmed from the latter's act of signing an
authorization letter to file a petition for certification election as they signed it outside the freedom period.
However, we are constrained to believe that an "authorization letter to file a petition for certification
election" is different from an actual "Petition for Certification Election." Likewise, as per records, it was
clear that the actual Petition for Certification Election of FFW was filed only on May 18, 2000. 17 Thus, it
was within the ambit of the freedom period which commenced from March 21, 2000 until May 21, 2000.
Strictly speaking, what is prohibited is the filing of a petition for certification election outside the 60-day
freedom period.18 This is not the situation in this case. If at all, the signing of the authorization to file a
certification election was merely preparatory to the filing of the petition for certification election, or an
exercise of respondents right to self-organization.
Moreover, PRI anchored their decision to terminate respondents employment on Article 253 of the Labor
Code which states that "it shall be the duty of both parties to keep the status quo and to continue in
full force and effect the terms and conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties." It claimed that they are still bound by the
Union Security Clause of the CBA even after the expiration of the CBA; hence, the need to terminate the
employment of respondents.
Petitioner's reliance on Article 253 is misplaced.

The provision of Article 256 of the Labor Code is particularly

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

At the expiration of the freedom period, the employer shall

continue to recognize the majority status of the incumbent
bargaining agent where no petition for certification election is
filed.19
Applying the same provision, it can be said that while it is incumbent for the employer to continue to
recognize the majority status of the incumbent bargaining agent even after the expiration of the freedom
period, they could only do so when no petition for certification election was filed. The reason is, with a
pending petition for certification, any such agreement entered into by management with a labor
organization is fraught with the risk that such a labor union may not be chosen thereafter as the collective
bargaining representative.20 The provision for statusquo is conditioned on the fact that no certification
election was filed during the freedom period. Any other view would render nugatory the clear statutory
policy to favor certification election as the means of ascertaining the true expression of the will of the
workers as to which labor organization would represent them. 21
In the instant case, four (4) petitions were filed as early as May 12, 2000. In fact, a petition for certification
election was already ordered by the Med-Arbiter of DOLE Caraga Region on August 23,
2000.22 Therefore, following Article 256, at the expiration of the freedom period, PRI's obligation to
recognize NAMAPRI-SPFL as the incumbent bargaining agent does not hold true when petitions for
certification election were filed, as in this case.
Moreover, the last sentence of Article 253 which provides for automatic renewal pertains only to the
economic provisions of the CBA, and does not include representational aspect of the CBA. An existing
CBA cannot constitute a bar to a filing of a petition for certification election. When there is a
representational issue, the statusquo provision in so far as the need to await the creation of a new
agreement will not apply. Otherwise, it will create an absurd situation where the union members will be
forced to maintain membership by virtue of the union security clause existing under the CBA and,
thereafter, support another union when filing a petition for certification election. If we apply it, there will
always be an issue of disloyalty whenever the employees exercise their right to self-organization. The
holding of a certification election is a statutory policy that should not be circumvented, 23 or
compromised.1avvphi
Time and again, we have ruled that we adhere to the policy of enhancing the welfare of the workers. Their
freedom to choose who should be their bargaining representative is of paramount importance. The fact
that there already exists a bargaining representative in the unit concerned is of no moment as long as the
petition for certification election was filed within the freedom period. What is imperative is that by such a
petition for certification election the employees are given the opportunity to make known of who shall have
the right to represent them thereafter. Not only some, but all of them should have the right to do so. What
is equally important is that everyone be given a democratic space in the bargaining unit concerned. 24
dismissal-limitation

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

Employers should, therefore, respect and protect the rights of their employees, which include the right to
labor.25
An employee who is illegally dismissed is entitled to the twin reliefs of full backwages and reinstatement.
If reinstatement is not viable, separation pay is awarded to the employee. In awarding separation pay to
an illegally dismissed employee, in lieu of reinstatement, the amount to be awarded shall be equivalent to
one month salary for every year of service. Under Republic Act No. 6715, employees who are illegally
dismissed are entitled to full backwages, inclusive of allowances and other benefits, or their monetary
equivalent, computed from the time their actual compensation was withheld from them up to the time of
their actual reinstatement. But if reinstatement is no longer possible, the backwages shall be computed
from the time of their illegal termination up to the finality of the decision. Moreover, respondents, having
been compelled to litigate in order to seek redress for their illegal dismissal, are entitled to the award of
attorneys fees equivalent to 10% of the total monetary award. 26
WHEREFORE, the petition is DENIED. The Decision dated July 25, 2003 and the Resolution dated
October 23, 2003 of the Court of Appeals in CA-G.R. SP No. 71760, which set aside the Resolutions
dated October 8, 2001 and April 29, 2002 of the National Labor Relations Commission in NLRC CA No.
M-006309-2001, are AFFIRMED accordingly. Respondents are hereby awarded full backwages and other
allowances, without qualifications and diminutions, computed from the time they were illegally dismissed
up to the time they are actually reinstated. Let this case be remanded to the Labor Arbiter for proper
computation of the full backwages due respondents, in accordance with Article 279 of the Labor Code, as
expeditiously as possible.
SO ORDERED.
----------------------------------------100. Yokohama Tire Phils v Yokohama Union
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 159553

December 10, 2007

YOKOHAMA TIRE PHILIPPINES, INC. Petitioner,

vs.
YOKOHAMA EMPLOYEES UNION Respondent.
DECISION
QUISUMBING, J.:
In this appeal, petitioner Yokohama Tire Philippines, Inc. (hereafter Yokohama, for brevity) assails the
Decision1dated April 9, 2003 of the Court of Appeals in CA-G.R. SP No. 74273 and its Resolution 2 dated
August 15, 2003, denying the motion for reconsideration.
The antecedent facts are as follows:

On October 7, 1999, respondent Yokohama Employees Union (Union) filed a petition for certification
election among the rank-and-file employees of Yokohama. Upon appeal from the Med-Arbiters order
dismissing the petition, the Secretary of the Department of Labor and Employment (DOLE) ordered an
election with (1) "Yokohama Employees Union" and (2) "No Union" as choices. 3 The election held on
November 23, 2001 yielded the following result:
YOKOHAMA EMPLOYEES UNION

131

NO UNION

117

SPOILED

2
--------250

VOTES CHALLENGED BY [YOKOHAMA]

78

VOTES CHALLENGED BY [UNION]

73
----------

TOTAL CHALLENGED VOTES

151

TOTAL VOTES CAST

401

Yokohama challenged 78 votes cast by dismissed employees. On the other hand, the Union
challenged 68 votes cast by newly regularized rank-and-file employees and another five (5) votes
by alleged supervisor-trainees. Yokohama formalized its protest and raised as an issue the eligibility to
vote of the 78 dismissed employees,5while the Union submitted only a handwritten manifestation during
the election.
On January 21, 2002, the Med-Arbiter resolved the parties protests, decreeing as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered as follows:
xxxx
2. The appreciation of the votes of the sixty-five (65) dismissed employees who contested their
dismissal before the National Labor Relations Commission shall be suspended until the final
disposition of their complaint for illegal dismissal. . . .
3. The votes of the sixty-eight (68) so-called "newly-regularized" rank-and-file employees shall be
appreciated in the final tabulation.
xxxx
SO ORDERED.6 (Emphasis supplied.)

On May 22, 2002, the DOLE Acting Secretary disposed of the

appeals as follows:
WHEREFORE, the partial appeal of [Yokohama] is DENIED and the appeal of [the union] is PARTIALLY
GRANTED. Thus, the Order of the Med-Arbiter dated 21 January 2002 is hereby MODIFIED as follows:
xxxx

2. The votes of dismissed employees who contested their dismissal before the National
Labor Relations Commission (NLRC) shall be appreciated in the final tabulation of the
certification election results.
3. The votes of the sixty-eight (68) newly regularized rank-and-file employees shall be
excluded.
xxxx
SO RESOLVED.7 (Emphasis supplied.)
The Court of Appeals affirmed in toto the decision of the DOLE Acting Secretary.8 The appellate court held
that the 78 employees who contested their dismissal were entitled to vote under Article 212 (f) 9 of the
Labor Code and Section 2, Rule XII10 of the rules implementing Book V of the Labor Code. However, it
disallowed the votes of the 68 newly regularized employees since they were not included in the voters list
submitted during the July 12, 2001 pre-election conference. The appellate court also noted that
Yokohamas insistence on their inclusion lends suspicion that it wanted to create a company union, and
ruled that Yokohama had no right to intervene in the certification election. Finally, it ruled that the unions
handwritten manifestation during the election was substantial compliance with the rule on protest.
Yokohama appealed.
On September 15, 2003, we issued a temporary restraining order against the implementation of the May
22, 2002 Decision of the DOLE Acting Secretary and the October 15, 2002 Resolution of the DOLE
Secretary, denying Yokohamas motion for reconsideration.11
In a manifestation with motion to annul the DOLE Secretarys entry of judgment filed with this Court on
October 16, 2003, Yokohama attached a Resolution12 dated April 25, 2003 of the Med-Arbiter. The
resolution denied Yokohamas motion to suspend proceedings and cited the decision of the Court of
Appeals. The resolution also certified that the Union obtained a majority of 208 votes in the certification
election while "No Union" obtained 121 votes. Yokohama also attached an entry of judgment 13 issued by
the DOLE stating that the April 25, 2003 Resolution of the Med-Arbiter was affirmed by the DOLE
Secretarys Office on July 29, 2003 and became final on September 29, 2003.
In a subsequent manifestation/motion with erratum filed on October 21, 2003, Yokohama deleted an
allegation in its October 16, 2003 manifestation which was included "through inadvertence and clerical
mishap." Said allegation reads:
xxxx
. . . Notably, the Resolution dated 29 July 2003 which affirmed the Resolution dated 25 April
2003 is still not final and executory considering the timely filing of a motion for its reconsideration
on 15 August 2003 which until now has yet to be resolved.14
In this appeal, petitioner raises the following issues:
I.
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN DISALLOWING THE
APPRECIATION OF THE VOTES OF SIXTY-EIGHT REGULAR RANK-AND-FILE.
II.

WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE

[DOLE SECRETARYS] DECLARATION THAT [THE UNIONS] MANIFESTATION ON THE DAY
OF THE CERTIFICATION ELECTION WAS SUFFICIENT COMPLIANCE WITH THE RULE ON
FORMALIZATION OF PROTESTS.
III.
WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN ALLOWING THE
APPRECIATION OF VOTES OF ALL OF ITS EMPLOYEES WHO WERE PREVIOUSLY
DISMISSED FOR SERIOUS MISCONDUCT AND ABANDONMENT OF WORK WHICH ARE
CAUSES UNRELATED TO THE CERTIFICATION ELECTION.15
We shall first resolve the last assigned issue:

Was it proper to appreciate the votes of the dismissed

employees?
Petitioner argues that "the Court of Appeals erred in ruling that the votes of the dismissed employees
should be appreciated." Petitioner posits that "employees who have quit or have been dismissed for just
cause prior to the date of the certification election are excluded from participating in the certification
election." Petitioner had questioned the eligibility to vote of the 78 dismissed employees.
Respondent counters that Section 2, Rule XII16 of the rules implementing Book V of the Labor Code
allows a dismissed employee to vote in the certification election if the case contesting the dismissal is still
pending.
Section 2, Rule XII, the rule in force during the November 23, 2001 certification election clearly,
unequivocally and unambiguously allows dismissed employees to vote during the certification
election if the case they filed contesting their dismissal is still pending at the time of the election. 17
Here, the votes of employees with illegal dismissal cases were challenged by petitioner although their
cases were still pending at the time of the certification election on November 23, 2001. These cases were
filed on June 27, 200118 and the appeal of the Labor Arbiters February 28, 2003 Decision was resolved
by the NLRC only on August 29, 2003.19
Even the new rule20 has explicitly stated that without a final judgment declaring the legality of
dismissal, dismissed employees are eligible or qualified voters. Thus,
Rule IX
Conduct of Certification Election

Section 5. Qualification of voters; inclusion-exclusion. . . .

An employee who has been dismissed from work but has contested the legality of the dismissal in a
forum of appropriate jurisdiction at the time of the issuance of the order for the conduct of a certification
election shall be considered a qualified voter, unless his/her dismissal was declared valid in a final
judgment at the time of the conduct of the certification election.1avvphi1
xxxx
Thus, we find no reversible error on the part of the DOLE Acting Secretary and the Court of Appeals in
ordering the appreciation of the votes of the dismissed employees.

Finally, we need not resolve the other issues for being moot. The 68 votes of the newly regularized
rank-and-file employees, even if counted in favor of "No Union," will not materially alter the result.
There would still be 208 votes in favor of respondent and 189 21 votes in favor of "No Union."
We also note that the certification election is already a fait accompli, and clearly petitioners rank-and-file
employees had chosen respondent as their bargaining representative.
WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision dated April 9, 2003 of the
Court of Appeals in CA-G.R. SP No. 74273 and the Resolution dated August 15, 2003 are AFFIRMED.
The temporary restraining order issued on September 15, 2003 is hereby DISSOLVED. No
pronouncement as to costs.
SO ORDERED.
----------------------------------101. Natl Union of Hotels resto v Sec of Labor
Republic of the Philippines
SUPREME COURT
Manila
G.R. No. 181531

July 31, 2009

NATIONAL UNION OF WORKERS IN HOTELS, RESTAURANTS AND ALLIED INDUSTRIES- MANILA

PAVILION HOTEL CHAPTER, Petitioner,
vs.
SECRETARY OF LABOR AND EMPLOYMENT, BUREAU OF LABOR RELATIONS, HOLIDAY INN
MANILA PAVILION HOTEL LABOR UNION AND ACESITE PHILIPPINES HOTEL
CORPORATION, Respondents.
DECISION
CARPIO MORALES, J.:
National Union of Workers in Hotels, Restaurants and Allied Industries Manila Pavilion Hotel Chapter
(NUWHRAIN-MPHC), herein petitioner, seeks the reversal of the Court of Appeals November 8, 2007
Decision1and of the Secretary of Labor and Employments January 25, 2008 Resolution 2 in OS-A-9-52-05
which affirmed the Med-Arbiters Resolutions dated January 22, 2007 3 and March 22, 2007.4
A certification election was conducted on June 16, 2006 among the rank-and-file employees of
respondent Holiday Inn Manila Pavilion Hotel (the Hotel) with the following results:
EMPLOYEES IN VOTERS LIST =

353

TOTAL VOTES CAST =

346

NUWHRAIN-MPHC =

151

HIMPHLU =

169

NO UNION =

SPOILED =

SEGREGATED =

22

In view of the significant number of segregated votes, contending unions, petitioner, NUHWHRAINMPHC, and respondent Holiday Inn Manila Pavillion Hotel Labor Union (HIMPHLU), referred the case
back to Med-Arbiter Ma. Simonette Calabocal to decide which among those votes would be opened and
tallied. Eleven (11) votes were initially segregated because they were cast by dismissed employees, albeit
the legality of their dismissal was still pending before the Court of Appeals. Six other votes were
segregated because the employees who cast them were already occupying supervisory positions at the
time of the election. Still five other votes were segregated on the ground that they were cast
by probationary employees and, pursuant to the existing Collective Bargaining Agreement (CBA), such
employees cannot vote. It bears noting early on, however, that the vote of one Jose Gatbonton
(Gatbonton), a probationary employee, was counted.
By Order of August 22, 2006, Med-Arbiter Calabocal ruled for the opening of 17 out of the 22 segregated
votes, specially those cast by the 11 dismissed employees and those cast by the six supposedly
supervisory employees of the Hotel.
Petitioner, which garnered 151 votes, appealed to the Secretary of Labor and Employment (SOLE),
arguing that the votes of the probationary employees should have been opened considering that
probationary employee Gatbontons vote was tallied. And petitioner averred that respondent HIMPHLU,
which garnered 169 votes, should not be immediately certified as the bargaining agent, as the opening of
the 17 segregated ballots would push the number of valid votes cast to 338 (151 + 169 + 1 + 17), hence,
the 169 votes which HIMPHLU garnered would be one vote short of the majority which would then
become 169.
By the assailed Resolution of January 22, 2007, the Secretary of Labor and Employment (SOLE), through
then Acting Secretary Luzviminda Padilla, affirmed the Med-Arbiters Order. It held that pursuant to
Section 5, Rule IX of the Omnibus Rules Implementing the Labor Code on exclusion and inclusion of
voters in a certification election, the probationary employees cannot vote, as at the time the Med-Arbiter
issued on August 9, 2005 the Order granting the petition for the conduct of the certification election, the
six probationary employees were not yet hired, hence, they could not vote.
The SOLE further held that, with respect to the votes cast by the 11 dismissed employees, they could be
considered since their dismissal was still pending appeal.
As to the votes cast by the six alleged supervisory employees, the SOLE held that their votes should be
counted since their promotion took effect months after the issuance of the above-said August 9, 2005
Order of the Med-Arbiter, hence, they were still considered as rank-and-file.
Respecting Gatbontons vote, the SOLE ruled that the same could be the basis to include the votes of the
other probationary employees, as the records show that during the pre-election conferences, there was
no disagreement as to his inclusion in the voters list, and neither was it timely challenged when he voted
on election day, hence, the Election Officer could not then segregate his vote.
The SOLE further ruled that even if the 17 votes of the dismissed and supervisory employees were to be
counted and presumed to be in favor of petitioner, still, the same would not suffice to overturn the 169
votes garnered by HIMPHLU.
In fine, the SOLE concluded that the certification of HIMPHLU as the exclusive bargaining agent was
proper.
Petitioners motion for reconsideration having been denied by the SOLE by Resolution of March 22, 2007,
it appealed to the Court of Appeals.
By the assailed Decision promulgated on November 8, 2007, the appellate court affirmed the ruling of the
SOLE. It held that, contrary to petitioners assertion, the ruling in Airtime Specialist, Inc. v. Ferrer

Calleja5 stating that in a certification election, all rank-and-file employees in the appropriate bargaining
unit, whether probationary or permanent, are entitled to vote, is inapplicable to the case at bar. For, the
appellate court continued, the six probationary employees were not yet employed by the Hotel at the time
the August 9, 2005 Order granting the certification election was issued. It thus held that Airtime Specialist
applies only to situations wherein the probationary employees were already employed as of the date of
filing of the petition for certification election.
Respecting Gatbontons vote, the appellate court upheld the SOLEs finding that since it was not properly
challenged, its inclusion could no longer be questioned, nor could it be made the basis to include the
votes of the six probationary employees.
The appellate court brushed aside petitioners contention that the opening of the 17 segregated votes
would materially affect the results of the election as there would be the likelihood of a run-off election in
the event none of the contending unions receive a majority of the valid votes cast. It held that the
"majority" contemplated in deciding which of the unions in a certification election is the winner
refers to the majority of valid votes cast, not the simple majority of votes cast, hence, the SOLE
was correct in ruling that even if the 17 votes were in favor of petitioner, it would still be insufficient to
overturn the results of the certification election.
Petitioners motion for reconsideration having been denied by Resolution of January 25, 2008, the
present recourse was filed.
Petitioners contentions may be summarized as follows:
1. Inclusion of Jose Gatbontons vote but excluding the vote of the six other probationary
employees violated the principle of equal protection and is not in accord with the ruling in Airtime
Specialists, Inc. v. Ferrer-Calleja;
2. The time of reckoning for purposes of determining when the probationary employees can be
allowed to vote is not August 9, 2005 the date of issuance by Med-Arbiter Calabocal of the
Order granting the conduct of certification elections, but March 10, 2006 the date the SOLE
Order affirmed the Med-Arbiters Order.
3. Even if the votes of the six probationary employees were included, still, HIMPHLU could not be
considered as having obtained a majority of the valid votes cast as the opening of the 17 ballots
would increase the number of valid votes from 321 to 338, hence, for HIMPHLU to be certified as
the exclusive bargaining agent, it should have garnered at least 170, not 169, votes.
Petitioner justifies its not challenging Gatbontons vote because it was precisely its position that
probationary employees should be allowed to vote. It thus avers that justice and equity dictate that since
Gatbontons vote was counted, then the votes of the 6 other probationary employees should likewise be
included in the tally.
Petitioner goes on to posit that the word "order" in Section 5, Rule 9 of Department Order No. 40-03
reading "[A]ll employees who are members of the appropriate bargaining unit sought to be represented by
the petitioner at the time of the issuance of the order granting the conduct of certification election shall be
allowed to vote" refers to an order which has already become final and executory, in this case the March
10, 2002 Order of the SOLE.
Petitioner thus concludes that if March 10, 2006 is the reckoning date for the determination of the
eligibility of workers, then all the segregated votes cast by the probationary employees should be opened
and counted, they having already been working at the Hotel on such date.

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

The relevant issues for resolution then are first, whether

employees on probationary status at the time of the
certification elections should be allowed to vote, and second,
whether HIMPHLU was able to obtain the required majority for
it to be certified as the exclusive bargaining agent.
On the first issue, the Court rules in the affirmative.
The inclusion of Gatbontons vote was proper not because it was not questioned but because
probationary employees have the right to vote in a certification election. The votes of the six other
probationary employees should thus also have been counted. As Airtime Specialists, Inc. v. Ferrer-Calleja
holds:

probationary
In a certification election, all rank and file employees in the appropriate bargaining unit, whether
probationary or permanent are entitled to vote. This principle is clearly stated in Art. 255 of the
Labor Code which states that the "labor organization designated or selected by the majority of the
employees in an appropriate bargaining unit shall be the exclusive representative of the
employees in such unit for purposes of collective bargaining." Collective bargaining covers all
aspects of the employment relation and the resultant CBA negotiated by the certified union binds all
employees in the bargaining unit. Hence, all rank and file employees, probationary or permanent, have a
substantial interest in the selection of the bargaining representative. The Code makes no distinction as to
their employment status as basis for eligibility in supporting the petition for certification election. The law
refers to "all" the employees in the bargaining unit. All they need to be eligible to support the petition is to
belong to the "bargaining unit." (Emphasis supplied)
Rule II, Sec. 2 of Department Order No. 40-03, series of 2003, which amended Rule XI of the Omnibus
Rules Implementing the Labor Code, provides:
Rule II
Section 2. Who may join labor unions and workers' associations. - All persons employed in commercial,
industrial and agricultural enterprises, including employees of government owned or controlled
corporations without original charters established under the Corporation Code, as well as employees of
religious, charitable, medical or educational institutions whether operating for profit or not, shall have the
right to self-organization and to form, join or assist labor unions for purposes of collective bargaining:
provided, however, that supervisory employees shall not be eligible for membership in a labor union of the
rank-and-file employees but may form, join or assist separate labor unions of their own. Managerial
employees shall not be eligible to form, join or assist any labor unions for purposes of collective
bargaining. Alien employees with valid working permits issued by the Department may exercise the right
to self-organization and join or assist labor unions for purposes of collective bargaining if they are
nationals of a country which grants the same or similar rights to Filipino workers, as certified by the
Department of Foreign Affairs.

For purposes of this section, any employee, whether employed for a

definite period or not, shall beginning on the first day of his/her service,
be eligible for membership in any labor organization.
All other workers, including ambulant, intermittent and other workers, the self-employed, rural workers
and those without any definite employers may form labor organizations for their mutual aid and protection
and other legitimate purposes except collective bargaining. (Emphasis supplied)

The provision in the CBA disqualifying probationary employees from

voting cannot override the Constitutionally-protected right of workers to
self-organization, as well as the provisions of the Labor Code and its
Implementing Rules on certification elections and jurisprudence thereon.
A law is read into, and forms part of, a contract. Provisions in a contract are valid only if they are not
contrary to law, morals, good customs, public order or public policy.6
Rule XI, Sec. 5 of D.O. 40-03, on which the SOLE and the appellate court rely to support their position
that probationary employees hired after the issuance of the Order granting the petition for the conduct of
certification election must be excluded, should not be read in isolation and must be harmonized with the
other provisions of D.O. Rule XI, Sec. 5 of D.O. 40-03, viz:
Rule XI
xxxx

Section 5. Qualification of voters; inclusion-exclusion. - All employees who

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

Section 13. Order/Decision on the petition.

Within ten (10) days from the date of the last hearing, the Med-Arbiter shall issue a formal order granting
the petition or a decision denying the same. In organized establishments, however, no order or decision
shall be issued by the Med-Arbiter during the freedom period.
The order granting the conduct of a certification election shall state the following:
(a) the name of the employer or establishment;
(b) the description of the bargaining unit;
(c) a statement that none of the grounds for dismissal enumerated in the succeeding paragraph
exists;
(d) the names of contending labor unions which shall appear as follows: petitioner union/s in the
order in which their petitions were filed, forced intervenor, and no union; and
(e) a directive upon the employer and the contending union(s) to submit within ten (10) days from
receipt of the order, the certified list of employees in the bargaining unit, or where necessary, the

payrolls covering the members of the bargaining unit for the last three (3) months prior to the
issuance of the order. (Emphasis supplied)
xxxx

Section 21. Decision of the Secretary.

The Secretary shall have fifteen (15) days from receipt of the entire records of the petition within which to
decide the appeal. The filing of the memorandum of appeal from the order or decision of the MedArbiter stays the holding of any certification election.
The decision of the Secretary shall become final and executory after ten (10) days from receipt thereof by
the parties. No motion for reconsideration of the decision shall be entertained. (Emphasis supplied)
In light of the immediately-quoted provisions, and prescinding from the principle that all
employees are, from the first day of their employment, eligible for membership in a labor
organization, it is evident that the period ofreckoning in determining who shall be included in the
list of eligible voters is, in cases where a timely appeal has been filed from the Order of the MedArbiter, the date when the Order of the Secretary of Labor and Employment,
whether affirming or denying the appeal, becomes final and executory.
The filing of an appeal to the SOLE from the Med-Arbiters Order stays its execution, in accordance with
Sec. 21, and rationally, the Med-Arbiter cannot direct the employer to furnish him/her with the list of
eligible voters pending the resolution of the appeal.
During the pendency of the appeal, the employer may hire additional employees. To exclude the
employees hired after the issuance of the Med-Arbiters Order but before the appeal has been resolved
would violate the guarantee that every employee has the right to be part of a labor organization from the
first day of their service.
In the present case, records show that the probationary employees, including Gatbonton, were included in
the list of employees in the bargaining unit submitted by the Hotel on May 25, 2006 in compliance with the
directive of the Med-Arbiter after the appeal and subsequent motion for reconsideration have been denied
by the SOLE, rendering the Med-Arbiters August 22, 2005 Order final and executory 10 days after the
March 22, 2007 Resolution (denying the motion for reconsideration of the January 22 Order denying the
appeal), and rightly so. Because, for purposes of self-organization, those employees are, in light of the
discussion above, deemed eligible to vote.

A certification election is the process of determining the sole

and exclusive bargaining agent of the employees in an
appropriate bargaining unit for purposes of collective
bargaining. Collective bargaining, refers to the negotiated
contract between a legitimate labor organization and the
employer concerning wages, hours of work and all other terms
and conditions of employment in a bargaining unit.7
The significance of an employees right to vote in a certification election cannot thus be
overemphasized. For he has considerable interest in the determination of who shall represent him
in negotiating the terms and conditions of his employment.

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

But while the Court rules

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

Double majority rule

As to whether HIMPHLU should be certified as the exclusive bargaining agent,
the Court rules in the negative. It is well-settled that under the so-called "double majority rule," for
there to be a valid certification election, majority of the bargaining unit must have voted AND the
winning union must have garnered majority of the valid votes cast.
Prescinding from the Courts ruling that all the probationary employees votes should be deemed valid
votes while that of the supervisory employees should be excluded, it follows that the number of valid
votes cast would increase from 321 to 337. Under Art. 256 of the Labor Code, the union obtaining the
majority of the valid votes cast by the eligible voters shall be certified as the sole and exclusive bargaining
agent of all the workers in the appropriate bargaining unit. This majority is 50% + 1. Hence, 50% of 337 is
168.5 + 1 or at least 170.
HIMPHLU obtained 169 while petitioner received 151 votes. Clearly, HIMPHLU was not able to obtain a
majority vote. The position of both the SOLE and the appellate court that the opening of the 17
segregated ballots will not materially affect the outcome of the certification election as for, so they
contend, even if such member were all in favor of petitioner, still, HIMPHLU would win, is thus untenable.
It bears reiteration that the true importance of ascertaining the number of valid votes cast is for it
to serve as basis for computing the required majority, and not just to determine which union won
the elections. The opening of the segregated but valid votes has thus become material. To be sure, the
conduct of a certification election has a two-fold objective: to determine the appropriate bargaining unit
and to ascertain the majority representation of the bargaining representative, if the employees desire to
be represented at all by anyone. It is not simply the determination of who between two or more
contending unions won, but whether it effectively ascertains the will of the members of the bargaining unit
as to whether they want to be represented and which union they want to represent them.

Run off election

Having declared that no choice in the certification election conducted obtained the required majority, it
follows that a run-off election must be held to determine which between HIMPHLU and petitioner should
represent the rank-and-file employees.
A run-off election refers to an election between the labor unions receiving the two (2) highest number of
votes in a certification or consent election with three (3) or more choices, where such a certified or
consent election results in none of the three (3) or more choices receiving the majority of the valid votes
cast; provided that the total number of votes for all contending unions is at least fifty percent (50%) of the
number of votes cast.8 With 346 votes cast, 337 of which are now deemed valid and HIMPHLU having
only garnered 169 and petitioner having obtained 151 and the choice "NO UNION" receiving 1 vote, then
the holding of a run-off election between HIMPHLU and petitioner is in order.

WHEREFORE, the petition is GRANTED. The Decision dated November 8, 2007 and Resolution dated
January 25, 2008 of the Court of Appeals affirming the Resolutions dated January 22, 2007 and March
22, 2007, respectively, of the Secretary of Labor and Employment in OS-A-9-52-05 are ANNULLED and
SET ASIDE.
The Department of Labor and Employment-Bureau of Labor Relations is DIRECTED to cause the holding
of a run-off election between petitioner, National Union of Workers in Hotels, Restaurants and Allied
Industries-Manila Pavilion Hotel Chapter (NUWHRAIN-MPC), and respondent Holiday Inn Manila Pavilion
Hotel Labor Union (HIMPHLU).
SO ORDERED.
---------------------------------------102. Lepanto Ceramics v Lepanto Union
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 180866

March 2, 2010

LEPANTO CERAMICS, INC., Petitioner,

vs.
LEPANTO CERAMICS EMPLOYEES ASSOCIATION, Respondent.
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 1 of the 1997 Rules of Civil
Procedure filed by petitioner Lepanto Ceramics, Inc. (petitioner), assailing the: (1) Decision 2 of the Court
of Appeals, dated 5 April 2006, in CA-G.R. SP No. 78334 which affirmed in toto the decision of the
Voluntary Arbitrator3 granting the members of the respondent association a Christmas Bonus in the
amount of Three Thousand Pesos (P3,000.00), or the balance of Two Thousand Four Hundred Pesos
(P2,400.00) for the year 2002, and the (2) Resolution 4 of the same court dated 13 December 2007
denying Petitioners Motion for Reconsideration.
The facts are:
Petitioner Lepanto Ceramics, Incorporated is a duly organized corporation existing and operating by virtue
of Philippine Laws. Its business is primarily to manufacture, make, buy and sell, on wholesale basis,
among others, tiles, marbles, mosaics and other similar products. 5
Respondent Lepanto Ceramics Employees Association (respondent Association) is a legitimate labor
organization duly registered with the Department of Labor and Employment. It is the sole and exclusive
bargaining agent in the establishment of petitioner.6

In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the respondent
Association.7
Subsequently, in September 1999, petitioner and respondent Association entered into a Collective
Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift
package/bonus to the members of the respondent Association. 8 The Christmas bonus was one of the
enumerated "existing benefit, practice of traditional rights" which "shall remain in full force and effect."
The text reads:

Christmas bonus
Section 8. All other existing benefits, practice of traditional rights consisting of Christmas Gift
package/bonus, reimbursement of transportation expenses in case of breakdown of service
vehicle and medical services and safety devices by virtue of company policies by the UNION and
employees shall remain in full force and effect.
Section 1. EFFECTIVITY
This agreement shall become effective on September 1, 1999 and shall remain in full force and
effect without change for a period of four (4) years or up to August 31, 2004 except as to the
representation aspect which shall be effective for a period of five (5) years. It shall bind each and
every employee in the bargaining unit including the present and future officers of the Union.

Tile redemption certificate

In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner gave each
of the members of respondent Association Tile Redemption Certificates equivalent to P3,000.00.9 The
bonus for the year 2002 is the root of the present dispute. Petitioner gave a year-end cash benefit
of Six Hundred Pesos (P600.00) and offered a cash advance to interested employees equivalent to
one (1) month salary payable in one year.10The respondent Association objected to the P600.00
cash benefit and argued that this was in violation of the CBA it executed with the petitioner.
The parties failed to amicably settle the dispute. The respondent Association filed a Notice of Strike with
the National Conciliation Mediation Board, Regional Branch No. IV, alleging the violation of the CBA. The
case was placed under preventive mediation. The efforts to conciliate failed. The case was then referred
to the Voluntary Arbitrator for resolution where the Complaint was docketed as Case No. LAG-PM-12095-02.
In support of its claim, respondent Association insisted that it has been the traditional practice of the
company to grant its members Christmas bonuses during the end of the calendar year, each in the
amount of P3,000.00 as an expression of gratitude to the employees for their participation in the
companys continued existence in the market. The bonus was either in cash or in the form of company
tiles. In 2002, in a speech during the Christmas celebration, one of the companys top executives assured
the employees of said bonus. However, the Human Resources Development Manager informed them that
the traditional bonus would not be given as the companys earnings were intended for the payment of its
bank loans. Respondent Association argued that this was in violation of their CBA.

The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no basis as
the same was not a demandable and enforceable obligation. It argued that the giving of extra
compensation was based on the companys available resources for a given year and the workers are not
entitled to a bonus if the company does not make profits. Petitioner adverted to the fact that it was debtridden having incurred net losses for the years 2001 and 2002 totaling to P1.5 billion; and since 1999,
when the CBA was signed, the companys accumulated losses amounted to over P2.7 billion. Petitioner
further argued that the grant of a one (1) month salary cash advance was not meant to take the place of a
bonus but was meant to show the companys sincere desire to help its employees despite its precarious
financial condition. Petitioner also averred that the CBA provision on a "Christmas gift/bonus" refers to
alternative benefits. Finally, petitioner emphasized that even if the CBA contained an unconditional
obligation to grant the bonus to the respondent Association, the present difficult economic times had
already legally released it therefrom pursuant to Article 1267 of the Civil Code. 11
The Voluntary Arbitrator rendered a Decision dated 2 June 2003, declaring that petitioner is bound to
grant each of its workers a Christmas bonus of P3,000.00 for the reason that the bonus was given prior to
the effectivity of the CBA between the parties and that the financial losses of the company is not a
sufficient reason to exempt it from granting the same. It stressed that the CBA is a binding contract and
constitutes the law between the parties. The Voluntary Arbitrator further expounded that since the
employees had already been given P600.00 cash bonus, the same should be deducted from the claimed
amount of P3,000.00, thus leaving a balance of P2,400.00. The dispositive portion of the decision states,
viz:
Wherefore, in view of the foregoing respondent LCI is hereby ordered to pay the members of the
complainant union LCEA their respective Christmas bonus in the amount of three thousand (P3,000.00)
pesos for the year 2002 less the P600.00 already given or a balance of P2,400.00.12
Petitioner sought reconsideration but the same was denied by the Voluntary Arbitrator in an Order dated
27 June 2003, in this wise:
The Motion for Reconsideration filed by the respondent in the above-entitled case which was received by
the Undersigned on June 26, 2003 is hereby denied pursuant to Section 7 Rule XIX on Grievance
Machinery and Voluntary Arbitration; Amending The Implementing Rules of Book V of the Labor Code of
the Philippines; to wit:
Section 7. Finality of Award/Decision The decision, order, resolution or award of the voluntary arbitrator
or panel of voluntary arbitrators shall be final and executory after ten (10) calendar days from receipt of
the copy of the award or decision by the parties and it shall not be subject of a motion for
reconsideration.13
Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules
of Court docketed as CA-G.R. SP No. 78334.14 As adverted to earlier, the Court of Appeals affirmed in
toto the decision of the Voluntary Arbitrator. The appellate court also denied petitioners motion for
reconsideration.
In affirming respondent Associations right to the Christmas bonus, the Court of Appeals held:
In the case at bar, it is indubitable that petitioner offered private respondent a Christmas bonus/gift in
1998 or before the execution of the 1999 CBA which incorporated the said benefit as a traditional right of

the employees. Hence, the grant of said bonus to private respondent can be deemed a practice as the
same has not been given only in the 1999 CBA. Apparently, this is the reason why petitioner specifically
recognized the grant of a Christmas bonus/gift as a practice or tradition as stated in the CBA. x x x.
xxxx
Evidently, the argument of petitioner that the giving of a Christmas bonus is a management prerogative
holds no water. There were no conditions specified in the CBA for the grant of said benefit contrary to the
claim of petitioner that the same is justified only when there are profits earned by the company. As can be
gleaned from the CBA, the payment of Christmas bonus was not contingent upon the realization of profits.
It does not state that if the company derives no profits, there are no bonuses to be given to the
employees. In fine, the payment thereof was not related to the profitability of business operations.
Moreover, it is undisputed that petitioner, aside from giving the mandated 13th month pay, has further
been giving its employees an additional Christmas bonus at the end of the year since 1998 or before the
effectivity of the CBA in September 1999. Clearly, the grant of Christmas bonus from 1998 up to 2001,
which brought about the filing of the complaint for alleged non-payment of the 2002 Christmas bonus
does not involve the exercise of management prerogative as the same was given continuously on or
about Christmas time pursuant to the CBA. Consequently, the giving of said bonus can no longer be
withdrawn by the petitioner as this would amount to a diminution of the employees existing benefits. 15
Not to be dissuaded, petitioner is now before this Court. The only issue before us is whether or not the
Court of Appeals erred in affirming the ruling of the voluntary arbitrator that the petitioner is obliged to give
the members of the respondent Association a Christmas bonus in the amount of P3,000.00 in 2002.16
We uphold the rulings of the voluntary arbitrator and of the Court of Appeals. Findings of labor officials,
who are deemed to have acquired expertise in matters within their respective jurisdictions, are generally
accorded not only respect but even finality, and bind us when supported by substantial evidence. This is
the rule particularly where the findings of both the arbitrator and the Court of Appeals coincide. 17
As a general proposition, an arbitrator is confined to the interpretation and application of the CBA. He
does not sit to dispense his own brand of industrial justice: his award is legitimate only in so far as it
draws its essence from the CBA.18 That was done in this case.
By definition, a "bonus" is a gratuity or act of liberality of the giver. It is something given in addition to
what is ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for
his industry and loyalty which contributed to the success of the employers business and made possible
the realization of profits.19
A bonus 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. 20
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it
must have been promised by the employer and expressly agreed upon by the parties. 21 Given that the
bonus in this case is integrated in the CBA, the same partakes the nature of a demandable obligation.
Verily, by virtue of its incorporation in the CBA, the Christmas bonus due to respondent Association has
become more than just an act of generosity on the part of the petitioner but a contractual obligation it has
undertaken.22

A CBA 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.
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.23

It is a familiar and fundamental doctrine in labor law that the

CBA is the law between the parties and they are obliged to
comply with its provisions.24 This principle stands strong and
true in the case at bar.1avvphi1
A reading of the provision of the CBA reveals that the same provides for the giving of a "Christmas gift
package/bonus" without qualification. Terse and clear, the said provision did not state that the Christmas
package shall be made to depend on the petitioners financial standing. The records are also bereft of any
showing that the petitioner made it clear during CBA negotiations that the bonus was dependent on any
condition. Indeed, if the petitioner and respondent Association intended that the P3,000.00 bonus would
be dependent on the company earnings, such intention should have been expressed in the CBA.
It is noteworthy that in petitioners 1998 and 1999 Financial Statements, it took note that "the 1997
financial crisis in the Asian region adversely affected the Philippine economy." 25
From the foregoing, petitioner cannot insist on business losses as a basis for disregarding its undertaking.
It is manifestly clear that petitioner was very much aware of the imminence and possibility of business
losses owing to the 1997 financial crisis. In 1998, petitioner suffered a net loss of P14,347,548.00.26 Yet it
gave a P3,000.00 bonus to the members of the respondent Association. In 1999, when petitioners very
own financial statement reflected that "the positive developments in the economy have yet to favorably
affect the operations of the company,"27 and reported a loss of P346,025,733.00,28 it entered into the CBA
with the respondent Association whereby it contracted to grant a Christmas gift package/bonus to the
latter. Petitioner supposedly continued to incur losses in the years 2000 29 and 2001. Still and all, this did
not deter it from honoring the CBA provision on Christmas bonus as it continued to give P3,000.00 each
to the members of the respondent Association in the years 1999, 2000 and 2001.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. 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.30
Hence, absent any proof that petitioners consent was vitiated by fraud, mistake or duress, it is presumed
that it entered into the CBA voluntarily and had full knowledge of the contents thereof and was aware of
its commitments under the contract.
The Court is fully aware that implementation to the letter of the subject CBA provision may further deplete
petitioners resources. Petitioners remedy though lies not in the Courts invalidation of the provision but in
the parties clarification of the same in subsequent CBA negotiations. Article 253 of the Labor Code is
relevant:

Duty to bargain
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 and conditions of
the existing agreement during the sixty (60)-day period and/or until a new agreement is reached by the
parties.
WHEREFORE, Premises considered, the petition is DENIED for lack of merit. The Decision of the Court
of Appeals dated 5 April 2006 and the Resolution of the same court dated 13 December 2007 in CA-G.R.
SP No. 78334 are AFFIRMED.
SO ORDERED.
---------------------------------103. FVC Union v SamaSamahang Nagkakaisang Manggagawa
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 176249

November 27, 2009

FVC LABOR UNION-PHILIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION

(FVCLU-PTGWO), Petitioner,
vs.
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 Court 1 filed by FVC Labor
UnionPhilippine Transport and General Workers Organization (FVCLU-PTGWO) to challenge the Court
of Appeals (CA) decision of July 25, 20062 and its resolution rendered on January 15, 2007 3 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 rankand-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, FVCLUPTGWO and the company entered into the renegotiation of the CBA and modified, among other
provisions, the CBAs duration. Article XXV, Section 2 of the renegotiated CBA provides that "this renegotiation 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 fiveyear 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 SANAMASIGLO appealed the Med-Arbiters 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-SIGLOs position, thereby setting aside the
decision of the Med-Arbiter.7 She ordered the conduct of a certification election in the company. FVCLUPTGWO moved for the reconsideration of the Secretarys 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-Arbiters Order of June 17, 2003
did.8 The Acting Secretary held that the amended CBA (which extended the representation 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 SANAMASIGLO 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 Secretarys 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 Secretarys new
ruling is patently contrary to the express provision of the law and established jurisprudence.
THE CA DECISION

The CA found SANAMA-SIGLOs 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 fiveyear 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 CBAs remaining term from February 1, 2001 to May 31, 2003. To FVCLUPTGWO, this extension of the CBA term also changed the unions 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 SANAMASIGLO 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. 151avvphi1
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.18Under these circumstances, SANAMASIGLO 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 COURTS 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
Code21which states:
Sec. 14. Denial of the petition; grounds. The Med-Arbiter may dismiss the petition on any of the
following grounds:
xxxx
(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 shall
not be affected by any amendment, extension or renewal of the collective bargaining
agreement (underscoring supplied).
xxxx
The root of the controversy can be traced to a misunderstanding of the interaction between a unions
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 unions exclusive bargaining representation
status. While the parties may agree to extend the CBAs 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
unions 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 unions exclusive
bargaining status is effective only for five years and can be challenged within sixty (60) days prior to the
expiration of the CBAs first five years. As we said in San Miguel Corp. Employees UnionPTGWO, 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 CBAs 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 FVCLUPTGWOs 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-PTGWOs exclusive bargaining
status, was seasonably filed.
We thus find no error in the appellate courts 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-SIGLOs 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. This
recognition is fully in accord with the Labor Codes 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.
SO ORDERED.
--------------------------104. Standard Chartered Bank Union v Confesor
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 114974

June 16, 2004

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), petitioner,

vs.
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 provisions5and thirty-four (34) economic provisions.6 Included therein was a
list of the names of the members of the Unions negotiating panel. 7
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.13Even 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
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 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
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:
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

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-proposal20 as follows:
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
Dental Retainer Original offer remains the same21
The Union, for its part, made the following counter-proposal:
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

The Unions original proposals, aside from the above-quoted, remained the same.
Another set of counter-offer followed:
Management

Union

Wage Increase
1st Year P1,050.00

40%

2nd Year - 850.00

19.0%23

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 move and make a list of items
it wanted to be included 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 deadlock25 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
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
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:
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. 00-0604191-93 is pending for his guidance and appropriate action. 29

The SOLE gave the following economic awards:

1. Wage Increase:
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 4th year adjusted salary
b) Additional fixed amount:
Fourth year : P600.00 per month
Fifth year : P400.00 per month
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
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.
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:
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
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
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
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 strikeno 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
The issues presented for resolution are the 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
labororganizations, 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 vs.
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
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 and activities and to formulate
their programs.43Article 2 of ILO Convention No. 98 pertaining to the Right to Organize and Collective
Bargaining, provides:
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:
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 selforganization 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

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 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
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 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, 196054
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 counterproposals on the noneconomic 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 counterproposal, 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 noneconomic 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;
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
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
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:
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
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 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.
SO ORDERED.
--------------------------------105. 1996 SMB Corp Union v Confesor

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 111262 September 19, 1996

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

KAPUNAN, J.:
This is a petition for certiorari assailing the Order of the Secretary of Labor rendered on February
15, 1993 involving a labor dispute at San Miguel Corporation.
The facts are as follows:
On June 28, 1990, petitioner-union San Miguel Corporation Employees Union PTGWO
entered into a Collective Bargaining Agreement (CBA) with private respondent San Miguel
Corporation (SMC) to take effect upon the expiration of the previous CBA or on June 30, 1989.
This CBA provided, among others, that:
ARTICLE XIV
DURATION OF AGREEMENT
Sec. 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and
effect until June 30, 1992.

Sec. 2. In accordance with Article 253-A of the Labor Code as amended, the term of this
Agreement insofar as the representation aspect is concerned, shall be for five (5) years
from July 1, 1989 to June 30, 1994. Hence, the freedom period for purposes of such
representation shall be sixty (60) days prior to June 30, 1994.
Sec. 3. Sixty (60) days prior to June 30, 1992 either party may initiate negotiations of all
provisions of this Agreement, except insofar as the representation aspect is concerned. If
no agreement is reached in such negotiations, this Agreement shall nevertheless remain
in force up to the time a subsequent agreement is reached by the parties. 1
In keeping with their vision and long term strategy for business expansion, SMC management
informed its employees in a letter dated August 13, 1991 2 that the company which was
composed of four operating divisions namely: (1) Beer, (2) Packaging, (3) Feeds and Livestocks,
(4) Magnolia and Agri-business would undergo a restructuring. 3
Effective October 1, 1991, Magnolia and Feeds and Livestock Division were spun-off and became
two separate and distinct corporations: Magnolia Corporation (Magnolia) and San Miguel Foods,
Inc. (SMFI). Notwithstanding the spin-offs, the CBA remained in force and effect.
After June 30, 1992, the CBA was renegotiated in accordance with the terms of the CBA and
Article 253-A of the Labor Code. Negotiations started sometime in July, 1992 with the two parties
submitting their respective proposals and counterproposals.
During the negotiations, the petitioner-union insisted that the bargaining unit of SMC should still
include the employees of the spun-off corporations: Magnolia and SMFI; and that the
renegotiated terms of the CBA shall be effective only for the remaining period of two years or until
June 30, 1994.
SMC, on the other hand, contended that the members/employees who had moved to Magnolia
and SMFI, automatically ceased to be part of the bargaining unit at the SMC. Furthermore, the
CBA should be effective for three years in accordance with Art. 253-A of the Labor Code.
Unable to agree on these issues with respect to the bargaining unit and duration of the CBA,
petitioner-union declared a deadlock on September 29, 1990.
On October 2, 1992, a Notice of Strike was filed against SMC.
In order to avert a strike, SMC requested the National Conciliation and Mediation Board (NCMB)
to conduct preventive mediation. No settlement was arrived at despite several meetings held
between the parties.
On November 3, 1992, a strike vote was conducted which resulted in a "yes vote" in favor of a
strike.
On November 4, 1992, private respondents SMC, Magnolia and SMFI filed a petition with the
Secretary of Labor praying that the latter assume jurisdiction over the labor dispute in a vital
industry.

As prayed for, the Secretary of Labor assumed jurisdiction over the labor dispute on November
10, 1992. 4Several conciliation meetings were held but still no agreement/settlement was arrived
at by both parties.
After the parties submitted their respective position papers, the Secretary of Labor issued the
assailed Order on February 15, 1993 directing, among others, that the renegotiated terms of the
CBA shall be effective for the period of three (3) years from June 30, 1992; and that such CBA
shall cover only the employees of SMC and not of Magnolia and SMFI.
Dissatisfied, petitioner-union now comes to this Court questioning this Order of the Secretary of
Labor.
Subsequently, on March 30, 1995, 5 petitioner-union filed a Motion for Issuance of a Temporary
Restraining Order or Writ of Preliminary Injunction to enjoin the holding of the certification
elections in the different companies, maintaining that the employees of Magnolia and SMFI fall
within the bargaining unit of SMC.
On March 29, 1995, the Court issued a resolution granting the temporary restraining order prayed
for. 6
Meanwhile, an urgent motion for leave to intervene 7 in the case was filed by the Samahan ng
Malayang Manggagawa-San Miguel Corporation-Federation of Free Workers (SMM-SMC-FFW)
through its authorized representative, Elmer S. Armando, alleging that it is one of the contending
parties adversely affected by the temporary restraining order.
The Intervenor cited the case of Daniel S.L. Borbon v. Hon. Bienvenido B. Laguesma, 8 G.R. No.
101766, March 5, 1993, where the Court recognized the separation of the employees of Magnolia
from the SMC bargaining unit. It then prayed for the lifting of the temporary restraining order.
Likewise, Efren Carreon, Acting President of the SMCEU-PTGWO, filed a petition for the
withdrawal/dismissal of the petition considering that the temporary restraining order jeopardized
the employees' right to conclude a new CBA. At the same time, he challenged the legal
personality of Mr. Raymundo Hipolito, Jr. to represent the Union as its president when the latter
was already officially dismissed from the company on October 4, 1994.
Amidst all these pleadings, the following primordial issues arise:
1) Whether or not the duration of the renegotiated terms of the CBA is to be effective for three
years of for only two years; and
2) Whether or not the bargaining unit of SMC includes also the employees of the Magnolia and
SMFI.
Petitioner-union contends that the duration for the non-representation provisions of the CBA
should be coterminous with the term of the bargaining agency which in effect shall be for the
remaining two years of the current CBA, citing a previous decision of the Secretary of Labor on
December 14, 1992 in the matter of the labor dispute at Philippine Refining Company.

However, the Secretary of Labor, in her questioned Order of February 15, 1993 ruled that the
renegotiated terms of the CBA at SMC should run for a period of three (3) years.
We agree with the Secretary of Labor.
Pertinent to the first issue is Art. 253-A of the Labor Code as amended which reads:
Art. 253-A. Terms of a Collective Bargaining Agreement. Any Collective Bargaining
Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of
the incumbent bargaining agent shall be entertained and no certification election shall be
conducted by the Department of Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five year term of the Collective Bargaining
Agreement. All other provisions of the Collective Bargaining Agreement shall be
renegotiated not later than three (3) years after its execution. Any agreement on such
other provisions of the Collective Bargaining Agreement entered into within six (6) months
from the date of expiry of the term of such other provisions as fixed in such Collective
Bargaining Agreement, shall retroact to the day immediately following such date. If any
such agreement is entered into beyond six months, the parties shall agree on the
duration of retroactivity thereof. In case of a deadlock in the renegotiation of the collective
bargaining agreement, the parties may exercise their rights under this Code. (Emphasis
supplied.)
Article 253-A is a new provision. This was incorporated by Section 21 of Republic Act No. 6715
(the Herrera-Veloso Law) which took effect on March 21, 1989. This new provision states that the
CBA has a term of five (5) years instead of three years, before the amendment of the law as far
as the representation aspect is concerned. All other provisions of the CBA shall be negotiated not
later than three (3) years after its execution. The "representation aspect" refers to the identity and
majority status of the union that negotiated the CBA as the exclusive bargaining representative of
the appropriate bargaining unit concerned. "All other provisions" simply refers to the rest of the
CBA, economic as well as non-economic provisions, except representation. 10
As the Secretary of Labor herself observed in the instant case, the law is clear and definite on the
duration of the CBA insofar as the representation aspect is concerned, but is quite ambiguous
with the terms of the other provisions of the CBA. It is a cardinal principle of statutory construction
that the Court must ascertain the legislative intent for the purpose of giving effect to any statute.
The history of the times and state of the things existing when the act was framed or adopted must
be followed and the conditions of the things at the time of the enactment of the law should be
considered to determine the legislative intent. 11 We look into the discussions leading to the
passage of the law:
THE CHAIRMAN (REP. VELASCO): . . .the CBA, insofar as the economic provisions are
concerned . . .
THE CHAIRMAN (SEN. HERRERA): Maximum of three years?
THE CHAIRMAN (SEN. VELOSO): Maximum of three years.

THE CHAIRMAN (SEN. HERRERA): Present practice?

THE CHAIRMAN (REP. VELOSO): In other words, after three years pwede nang
magnegotiate in the CBA for the remaining two years.
THE CHAIRMAN (REP. HERRERA): You can negotiate for one year, two years or three
years but assuming three years which, I think, that's the likelihood. . .
THE CHAIRMAN (REP. VELOSO): Yes.
THE CHAIRMAN (SEN. HERRERA): Three years, the new union, assuming there will be
a change of agent, at least he has one year to administer and to adjust, to develop
rapport with the management. Yan ang importante.
You know, for us na nagne-negotiate, ang hazard talaga sa negotiation, when we
negotiate with somebody na hindi natin kilala, then, we are governed by our biases na ito
ay destroyer ng Labor; ang mga employer, ito bayaran ko lang ito okay na.
'Yan ang nangyayari, but let us give that allowance for the one year to let them know.
Actually, ang thrust natin ay industrial peace, and there can be no industrial peace if you
encourage union to fight each other. 'Yan ang problema. 12
xxx xxx xxx
HON. ISIDRO: Madali iyan, kasi these two periods that are mentioned in the CBA seem
to provide some doubts later on in the implementation. Sabi kasi rito, insofar as
representation issue is concerned, seven years and lifetime. . .
HON. CHAIRMAN HERRERA: Five years.
HON. ISIDRO: Five years, all the others three years.
HON. CHAIRMAN HERRERA: No. Ang three years duon sa terms and conditions, not
later than three years.
HON. ISIDRO: Not later than three years, so within three years you have to make a new
CBA.
HON. CHAIRMAN HERRERA: Yes.
HON. ISIDRO: That is again for purposes of renewing the terms, three years na naman
iyan then, seven years. . .
HON. CHAIRMAN HERRERA: Not later than three years.
HON. ISIDRO: Assuming that they usually follow the period three years nang three
years, but under this law with respect to representation five years, ano? Now, after

three years, nagkaroon ng bagong terms, tapos na iyong term, renewed na iyong terms,
ang karapatan noon sa representation issue mayroon pang two years left.
HON. CHAIRMAN HERRERA: One year na lang because six years nang lahat, three
plus three.
HON. ISIDRO: Hindi, two years pa rin ang natitira, eh. Three years pa lang ang
natatapos. So, another CBA was formed and this CBA mayroon na naman siyang bagong
five years with respect to representation issue.
HON. CHAIRMAN HERRERA: Hindi. Hindi na. Ganito iyan. Iyong terms and conditions
for three years.
HON. ISIDRO: Yes.
HON. CHAIRMAN HERRERA: One the third year you can start negotiating to change the
terms and conditions.
HON. ISIDRO: Yes.
HON. CHAIRMAN HERRERA: Assuming you will follow the practice . . .
HON. ISIDRO: Oo.
HON. CHAIRMAN HERRERA: But on the fifth year, ang representation status now can
be questioned, so baka puwedeng magkaroon ng certification election. If the incumbent
union loses, then the new union administers the contract for one year to give him time to
know his counterpart the employer, before he can negotiate for a new term. Iyan ang
advantage.
HON. ISIDRO: Kasi, when the CBA has only a three-year lifetime with respect to the
terms and conditions and then, so you have to renew that in three years you renew for
another three years, mayroon na naman another five years iyong ano . . .
HON. ANIAG: Hindi, ang natitira duon sa representation two years na lang.
HON. CHAIRMAN HERRERA: Two years na lang sa representation.
HON. ANIAG: So that if they changed the union, iyong last year . . .
HON. CHAIRMAN HERRERA: Iyon lang, that you have to administer the contract. Then,
voluntary arbitration na kayo and then mayroon ka nang probisyon "retroact on the date
of the expiry date". Pagnatalo ang incumbent unyon, mag-aassume ang new union,
administer the contract. As far as the term and condition, for one year, and that will give
him time and the employer to know each other.
HON. JABAR: Boy, let us be realistic. I think if a new union wins a certification election, it
would not want to administer a CBA which has not been negotiated by the union itself.

HON. CHAIRMAN HERRERA: That is not true, Hon. This is true because what is
happening now in the country is that the term ng contract natin, duon din mage-expire
ang representation. Iyon ang nangyari. That is where you have the gulo. Ganoon ang
nangyari. So, ang nangyari diyan, pag-mayroon certification election, expire ang contract,
ano ang usual issue company union. I can you (sic) give you more what the incumbent
union is giving. So ang mangyayari diyan, pag-negotiate mo hardline na agad.
HON. CHAIRMAN VELOSO : Mon, for four years?
HON. ISIDRO: Ang tingin ko lang dito, iyong distinction between the terms and the
representation aspect why do we have to distinguish between three and five? What's
wrong with having a uniform expiration period?
HON. CHAIRMAN HERRERA: Five years.
HON. ISIDRO: Puro three years.
HON. CHAIRMAN HERRERA: That is what we are trying to avoid because ang reality
diyan, Mart, pagpasok mo sa kumpanya, mag-ne-negotiate ka ng six months, that's the
average, aabot pa minsan ng one year. Pagktapos ng negotiation mo, signing kayo.
There will be an allowed period of one year. Third year na, uumpisahan naman ang
organizations, papasok na ang ibang unyon because the reality in Trade Union
committee, they organize, we organize. So, actually, you have only industrial peace for
one year, effective industrial peace. That is what we are trying to change. Otherwise, we
will continue to discourage the investors and the union will never grow because every
other year it has to use its money for the certification election. Ang grabe pang practice
diyan, mag-a-advance ang federation for three years union dues para panggastos lang
sa certification election. That is what we are trying to avoid.
HON. JABAR: Although there are unions which really get advances.
HON. CHAIRMAN HERRERA: Pag nag-survey tayo sa mga unyon, ganoon ang
mangyayari. And I think our responsibility here is to create a legal framework to promote
industrial peace and to develop responsible and fair labor movement.
HON. CHAIRMAN VELOSO: In other words, the longer the period of the effectivity . . .
xxx xxx xxx
HON CHAIRMAN VELOSO. (continuing) . . . in other words, the longer the period of
effectivity of the CBA, the better for industrial peace.
HON. CHAIRMAN HERRERA: representation status.
HON. CHAIRMAN VELOSO: Only on
HON. CHAIRMAN HERRERA: the representations.

HON. CHAIRMAN VELOSO: But on the economic issues.

HON. CHAIRMAN HERRERA: You have to review that. The parties will have to review
that.
HON. CHAIRMAN VELOSO: At least on second year.
HON. CHAIRMAN HERRERA: Not later than 3 years, ang karamihan ng mga magnegotiate when the companyis (interrupted) 13
From the aforesaid discussions, the legislators were more inclined to have the period of effectivity
for three (3) years insofar as the economic as well as non-economic provisions are concerned,
except representation.
Obviously, the framers of the law wanted to maintain industrial peace and stability by having both
management and labor work harmoniously together without any disturbance. Thus, no outside
union can enter the establishment within five (5) years and challenge the status of the incumbent
union as the exclusive bargaining agent. Likewise, the terms and conditions of employment
(economic and non-economic) can not be questioned by the employers or employees during the
period of effectivity of the CBA. The CBA is a contract between the parties and the parties must
respect the terms and conditions of the agreement. 14 Notably, the framers of the law did not give a
fixed term as to the effectivity of the terms and conditions of employment. It can be gleaned from
their discussions that it was left to the parties to fix the period.
In the instant case, it is not difficult to determine the period of effectivity for the non-representation
provisions of the CBA. Taking it from the history of their CBAs, SMC intended to have the terms of
the CBA effective for three (3) years reckoned from the expiration of the old or previous CBA
which was on June 30, 1989, as it provides:
Sec. 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and
effect until June 30, 1992.
The argument that the PRC case is applicable is indeed misplaced. We quote with favor the
Order of the Secretary of Labor in the light of SMC's peculiar situation as compared with PRC's
company situation.
It is true that in the Philippine Refining Company case (OS-AJ-0031-91) (sic), Labor
Dispute at Philippine Refining Company), we ruled that the term of the renegotiated
provisions of the CBA should coincide with the remaining term of the agency. In doing so,
we placed premium on the fact that PRC has only two (2) unions and no other union had
yet executed a renewed term of 3 years. Nonetheless, in ruling for a shortened term, we
were guided by our considered perception that the said term would improve, rather than
ruin, the general welfare of both the workers and the company. It is equally true that once
the economic provisions of the CBA expire, the residual representative status of the union
is effective for only 2 more years. However, if circumstances warrant that the contract
duration which it is soliciting from the company for the benefit of the workers, shall be a
little bit longer than its lifespan, then this Office cannot stand in the way of a more ideal

situation. We must not lose sight of the fact that the primordial purpose of a collective
contract is to promote industrial harmony and stability in the terms and conditions of
employment. To our mind, this objective cannot be achieved without giving due
consideration to the peculiarities and unique characteristics of the employer. In the case
at bar, there is no dispute that the mother corporation (SMC) spun-off two of its divisions
and thereby gave birth to two (2) other entities now known as Magnolia Corporation and
San Miguel Foods, Inc. In order to effect a smooth transition, the companies concerned
continued to recognize the existing unions as the bargaining agents of their respective
bargaining units. In the meantime, the other unions in these companies eventually
concluded their CBA negotiations on the remaining term and all of them agreed on a 3year cycle. Notably, the following CBAs were forged incorporating a term of 3-years on
the renegotiated provisions, to wit:
1. SMC daily-paid employees union (IBM)
2. SMFI monthly-paid employees and daily-paid employees at the Cabuyao Plant.
There is a direct link between the voluntary recognition by the company of the continuing
representative status of the unions after the aforementioned spin-offs and the stand of the
company for a 3-year renegotiated cycle when the economic provisions of the existing
CBAs expired, i.e., the maintain stability and avoid confusion when the umbilical cord of
the two divisions were severed from their parent. These two cannot be considered
independently of each other for they were intended to reinforce one another. Precisely,
the company conceded to face the same union notwithstanding the spin-offs in order to
preserve industrial peace during the infancy of the two corporations. If the union would
insist on a shorter renegotiated term, then all the advantages gained by both parties in
this regard, would have gone to naught. With this in mind, this office feels that it will
betray its mandate should we order the parties to execute a 2-year renegotiated term for
then chaos and confusion, rather than tranquillity, would be the order of the day. Worse,
there is a strong likelihood that such a ruling might spawn discontent and possible mass
actions against the company coming from the other unions who had already agreed to a
3-year renegotiated terms. If this happens, the purpose of this Office's intervention into
the parties' controversy would have been defeated. 15
The issue as to the term of the non-representation provisions of the CBA need not belabored
especially when we take note of the Memorandum of the Secretary of Labor dated February 24,
1994 which was mentioned in the Resolution of Undersecretary Bienvenido Laguesma on
January 16, 1995 in the certification election case involving the SMC employees. 16 In said
memorandum, the Secretary of Labor had occasion to clarify the term of the renegotiated terms
of the CBA vis-a-vis the term of the bargaining agent, to wit:
As a matter of policy the parties are encourages (sic) to enter into a renegotiated CBA
with a term which would coincide (sic) with the aforesaid five (5) year term of the
bargaining representative.
In the event however, that the parties, by mutual agreement, enter into a renegotiated
contract with a term of three (3) years or one which does not coincide with the said 5-year
term, and said agreement is ratified by majority of the members in the bargaining unit, the

subject contract is valid and legal and therefore, binds the contracting parties. The same
will however not adversely affect the right of another union to challenge the majority
status of the incumbent bargaining agent within sixty (60) days before the lapse of the
original five (5) year term of the CBA.
Thus, we do not find any grave abuse of discretion on the part of the Secretary of Labor in ruling
that the effectivity of the renegotiated terms of the CBA shall be for three (3) years.
With respect to the second issue, there is, likewise, no merit in petitioner-union's assertion that
the employees of Magnolia and SMFI should still be considered part of the bargaining unit of
SMC.
Magnolia and SMFI were spun-off to operate as distinct companies on October 1, 1991.
Management saw the need for these transformations in keeping with its vision and long term
strategy as it explained in its letter addressed to the employees dated August 13, 1991:
. . . As early as 1986, we announced the decentralization program and spoke of the need
for structures that can react fast to competition, a changing environment, shorter product
life cycles and shifts in consumer preference. We further stated in the 1987 Annual
Report to Stockholders that San Miguel's businesses will be more autonomous and self
sufficient so as to better acquire and master new technologies, cope with a labor force
with different expertises and expectations, and master and satisfy the changing needs of
our customers and end-consumers. As subsidiaries, Magnolia and FLD will gain better
industry focus and flexibility, greater awareness of operating results, and speedier, more
responsive decision making.
xxx xxx xxx
We only have to look at the experience of Coca-Cola Bottlers Philippines, Inc., since this
company was organized about ten years ago, to see the benefits that arise from
restructuring a division of San Miguel into a more competitive organization. As a standalone enterprise, CCBPI engineered a dramatic turnaround and has sustained its sales
and market share leadership ever since.
We are confident that history will repeat itself, and the transformation of Magnolia and
FLD will be successful as that of CCBPI. 17
Undeniably, the transformation of the companies was a management prerogative and business
judgment which the courts can not look into unless it is contrary to law, public policy or morals.
Neither can we impute any bad faith on the part of SMC so as to justify the application of the
doctrine of piercing the corporate veil. 18 Ever mindful of the employees' interests, management
has assured the concerned employees that they will be absorbed by the new corporations without
loss of tenure and retaining their present pay and benefits according to the existing CBAs. 19 They
were advised that upon the expiration of the CBAs, new agreements will be negotiated between
the management of the new corporations and the bargaining representatives of the employees
concerned. As a result of the spin-offs:

1. Each of the companies are run by, supervised and controlled by different management
teams including separate human resource/personnel managers.
2. Each Company enforces its own administrative and operational rules and policies and
are not dependent on each other in their operations.
3. Each entity maintains separate financial statements and are audited separately from
each other. 20
Indubitably, therefore, Magnolia and SMFI became distinct entities with separate juridical
personalities. Thus, they can not belong to a single bargaining unit as held in the case
of Diatagon Labor Federation Local 110 of the ULGWP v. Ople. 21 We elucidate:
The fact that their businesses are related and that the 236 employees of the Georgia
Pacific International Corporation were originally employees of Lianga Bay Logging Co.,
Inc. is not a justification for disregarding their separate personalities. Hence, the 236
employees, who are now attached to Georgia Pacific International Corporation, should
not be allowed to vote in the certification election at the Lianga Bay Logging Co., Inc.
They should vote at a separate certification election to determine the collective
bargaining representative of the employees of Georgia Pacific International Corporation.
Petition-union's attempt to include the employees of Magnolia and SMFI in the SMC bargaining
unit so as to have a bigger mass base of employees has, therefore, no more valid ground.
Moreover, in determining an appropriate bargaining unit, the test of grouping is mutuality or
commonality of interests. The employees sought to be represented by the collective bargaining
agent must have substantial mutual interests in terms of employment and working conditions as
evinced by the type of work they performed. 22 Considering the spin-offs, the companies would
consequently have their respective and distinctive concerns in terms of the nature of work,
wages, hours of work and other conditions of employment. Interests of employees in the different
companies perforce differ. SMC is engaged in the business of the beer manufacturing. Magnolia
is involved in the manufacturing and processing of diary products 23 while SMFI is involved in the
production of feeds and the processing of chicken. 24 The nature of their products and scales of
business may require different skills which must necessarily be commensurated by different
compensation packages. The different companies may have different volumes of work and
different working conditions. For such reason, the employees of the different companies see the
need to group themselves together and organize themselves into distinctive and different groups.
It would then be best to have separate bargaining units for the different companies where the
employees can bargain separately according to their needs and according to their own working
conditions.
We reiterate what we have explained in the case of University of the Philippines v. FerrerCalleja 25 that:
[T]here are various factors which must be satisfied and considered in determining the
proper constituency of a bargaining unit. No one particular factor is itself decisive of the
determination. The weight accorded to any particular factor varies in accordance with the
particular question or questions that may arise in a given case. What are these factors?

Rothenberg mentions a good number, but the most pertinent to our case are: (1) will of
the employees (Globe Doctrine); (2) affinity and unit of employees' interest, such as
substantial similarity of work and duties, or similarity of compensation and working
conditions; (3) prior collective bargaining history; and (4) employment status, such as
temporary, seasonal and probationary employees. . . .
xxx xxx xxx
An enlightening appraisal of the problem of defining an appropriate bargaining unit is
given in the 10th Annual Report of the National Labor Relations Board wherein it is
emphasized that the factors which said board may consider and weigh in fixing
appropriate units are: the history, extent and type of organization of employees; the
history of their collective bargaining; the history, extent and type of organization of
employees in other plants of the same employer, or other employers in the same
industry; the skill, wages, work, and working conditions of the employees; the desires of
the employees; the eligibility of the employees for membership in the union or unions
involved; and the relationship between the unit or units proposed and the employer's
organization, management, and operation . . .
. . . In said report, it is likewise emphasized that the basic test in determining the
appropriate bargaining unit is that a unit, to be appropriate, must affect a grouping of
employees who have substantial, mutual interests in wages, hours, working conditions
and other subjects of collective bargaining (citing Smith on Labor Laws, 316-317;
Francisco, Labor Laws, 162). . .
Finally, we take note of the fact that the separate interests of the employees of Magnolia and
SMFI from those of SMC has been recognized in the case of Daniel Borbon v. Laguesma. 26 We
quote:
Even assuming in gratia argumenti that at the time of the election they were regular
employees of San Miguel, nonetheless, these workers are no longer connected with San
Miguel Corporation in any manner because Magnolia has ceased to be a division of San
Miguel Corporation and has been formed into a separate corporation with a personality of
its own (p. 305, Rollo). This development, which was brought to our attention by private
respondents, necessarily renders moot and academic any further discourse on the
propriety of the elections which petitioners impugn via the recourse (p. 319, Rollo).
In view of all the foregoing, we do not find any grave abuse of discretion on the part of the
Secretary of Labor in rendering the assailed Order.
WHEREFORE, the petition is DISMISSED for lack of merit. The Temporary Restraining Order
issued on March 29, 1995 is lifted.
SO ORDERED.
----------------------------------106. Tabigue v INTL COPRA EXPORT CORP

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 183335

December 23, 2009

JUANITO TABIGUE, ALEX BIBAT, JECHRIS DASALLA, ANTONIO TANGON, ROLANDO PEDRIGAL,
DANTE MAUL, ALFREDO IDUL, EDGAR RAMOS, RODERICK JAVIER, NOEL PONAYO, ROMEL
ORAPA, REY JONE, ALMA PATAY, JERIC BANDIGAN, DANILO JAYME, ELENITA S. BELLEZA,
JOSEPHINE COTANDA, RENE DEL MUNDO, PONCIANO ROBUCA, and MARLON
MADICLUM, Petitioners,
vs.
INTERNATIONAL COPRA EXPORT CORPORATION (INTERCO), Respondent.
DECISION
CARPIO MORALES, J.:
Petitioner Juanito Tabigue and his 19 co-petitioners, all employees of respondent International Copra
Export Corp-oration (INTERCO), filed a Notice of Preventive Mediation with the Department of Labor and
Employment National Conciliation and Mediation Board (NCMB), Regional Branch No. XI, Davao City
against respondent, for violation of Collective Bargaining Agreement (CBA) and failure to sit on the
grievance conference/meeting.1
As the parties failed to reach a settlement before the NCMB, petitioners requested to elevate the case to
voluntary arbitration. The NCMB thus set a date for the parties to agree on a Voluntary Arbitrator.
Before the parties could finally meet, respondent presented before the NCMB a letter 2 of Genaro Tan
(Tan), president of the INTERCO Employees/Laborers Union (the union) of which petitioners are
members, addressed to respondents plant manager Engr. Paterno C. Tangente (Tangente), stating that
petitioners "are not duly authorized by [the] board or the officers to represent the union, [hence] . . . all
actions, representations or agreements made by these people with the management will not be honored
or recognized by the union." Respondent thus moved to dismiss petitioners complaint for lack of
jurisdiction.3
Petitioners soon sent union president Tan and respondents plant manager Tangente a Notice to Arbitrate,
citing the "Revised Guidelines" in the Conduct of Voluntary Arbitration Procedure vis a vis Section 3,
Article XII of the CBA, furnishing the NCMB with a copy 4 thereof, which notice respondent opposed.5
The parties having failed to arrive at a settlement, 6 NCMB Director Teodorico O. Yosores wrote petitioner
Alex Bibat and respondents plant manager Tangente of the lack of willingness of both parties to submit to
voluntary arbitration, which willingness is a pre-requisite to submit the case thereto; and that under the
CBA forged by the parties, the union is an indispensable party to a voluntary arbitration but that since Tan
informed respondent that the union had not authorized petitioners to represent it, it would be absurd to
bring the case to voluntary arbitration.

The NCMB Director thus concluded that "the demand of [petitioners] to submit the issues . . . to voluntary
arbitration CAN NOT BE GRANTED." He thus advised petitioners to avail of the compulsory arbitration
process to enforce their rights.7
On petitioners Motion for Reconsideration,8 the NCMB Director, by letter of April 11, 2007 to petitioners
counsel, stated that the NCMB "has no rule-making power to decide on issues [as it] only facilitates
settlement among the parties to . . . labor disputes."
Petitioners thus assailed the NCMB Directors decision via Petition for Review before the Court of
Appeals9 which dismissed it by Resolution10 of October 24, 2007 in this wise:
xxxx
Considering that NCMB is not a quasi-judicial agency exercising quasi-judicial functions but merely a
conciliatory body for the purpose of facilitating settlement of disputes between parties, its decisions or that
of its authorized officer cannot be appealed either through a petition for review under Rule 43 or under
Rule 65 of the Revised Rules of Court.
Further perusal of the petition reveals the following infirmities:
1. Payment of the docket fees and other legal fees is short by One Thousand Pesos (Php
1,000.00);
2. Copy of the assailed "Decision" of the Regional Director of the National Conciliation and
Mediation Board has not been properly certified as the name and designation of the certifying
officer thereto are not indicated; and
3. Not all of the petitioners named in the petition signed the verification and non-forum
shopping.11(emphasis and underscoring supplied)
Their Motion for Reconsideration12 having been denied,13 petitioners filed the present Petition for Review
on Certiorari,14 raising the following arguments:
THIS PARTICULAR CASE XXX FALLS SQUARELY WITHIN THE PURVIEW OF SECTION 6, RULE IV,
IN RELATION TO PARAGRAPH 3, SUB-PARAGRAPH 3.2, SECTION 4, RULE IV, ALL OF THE
REVISED PROCEDURAL GUIDELINES IN THE CONDUCT OF VOLUNTARY ARBITRATION
PROCEEDINGS.15
THE NCMB, WHEN EXERCISING ADJUDICATIVE POWERS, ACTS AS A QUASI-JUDICIAL AGENCY.16
FINAL JUDGMENTS, DECISIONS, RESOLUTIONS, ORDERS, OR AWARDS OF REGIONAL TRIAL
COURTS AND QUASI-JUDICIAL BOARDS, LIKE THE NCMB, COMMISSIONS, AGENCIES,
INSTRUMENTALITIES, ARE APPEALABLE BY PETITION FOR REVIEW TO THE COURT OF
APPEALS.17 (emphasis in the original)
LABOR CASES, AS A GENERAL RULE, ARE NEVER RESOLVED ON THE BASIS OF
TECHNICALITY ESPECIALLY SO WHEN SUBSTANTIAL RIGHTS OF EMPLOYEES ARE
AFFECTED.18 (emphasis and underscoring supplied)

The petition fails.

Section 7 of Rule 43 of the Rules of Court provides that
[t]he failure of the petitioner to comply with any of the foregoing requirements regarding the payment of
the docket and other lawful fees, the deposit for costs, proof of service of the petition, and the contents of
and the documents which should accompany the petition shall be sufficient ground for the dismissal
thereof. (underscoring and emphasis supplied)
Petitioners claim that they had completed the payment of the appellate docket fee and other legal fees
when they filed their motion for reconsideration before the Court of Appeals. 19 While the Court has, in the
interest of justice, given due course to appeals despite the belated payment of those fees, 20 petitioners
have not proffered any reason to call for a relaxation of the above-quoted rule. On this score alone, the
dismissal by the appellate court of petitioners petition is in order.
But even if the above-quoted rule were relaxed, the appellate courts dismissal would just the same be
sustained. Under Section 9 (3) of the Judiciary Reorganization Act of 1980, 21 the Court of Appeals
exercises exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards
of Regional Trial Courts and quasi-judicial agencies, instrumentalities, boards or commissions.

Rule 43
Rule 43 of the Rules of Court under which petitioners filed their petition before the Court of
Appeals22 applies to awards, judgments, final orders or resolutions of or authorized by any quasi-judicial
agency in the exercise of its quasi-judicial functions.23
A[n agency] is said to be exercising judicial function where [it] has the power to determine what the law is
and what the legal rights of the parties are, and then undertakes to determine these questions and
adjudicate upon the rights of the parties. Quasi-judicial function is a term which applies to the action,
discretion, etc. of public administrative officers or bodies, who are required to investigate facts or
ascertain the existence of facts, hold hearings, and draw conclusions from them as a basis for their official
action and to exercise discretion of a judicial nature.24 (underscoring supplied)
Given NCMBs following functions, as enumerated in Section 22 of Executive Order No. 126 (the
Reorganization Act of the Ministry of Labor and Employment), viz:
(a) Formulate policies, programs, standards, procedures, manuals of operation and guidelines
pertaining to effective mediation and conciliation of labor disputes;
(b) Perform preventive mediation and conciliation functions;
(c) Coordinate and maintain linkages with other sectors or institutions, and other government
authorities concerned with matters relative to the prevention and settlement of labor disputes;
(d) Formulate policies, plans, programs, standards, procedures, manuals of operation and
guidelines pertaining to the promotion of cooperative and non-adversarial schemes, grievance
handling, voluntary arbitration and other voluntary modes of dispute settlement;

(e) Administer the voluntary arbitration program; maintain/update a list of voluntary arbitrations;
compile arbitration awards and decisions;
(f) Provide counseling and preventive mediation assistance particularly in the administration of
collective agreements;
(g) Monitor and exercise technical supervision over the Board programs being implemented in the
regional offices; and
(h) Perform such other functions as may be provided by law or assigned by the Minister,
it can not be considered a quasi-judicial agency.
Respecting petitioners thesis that unsettled grievances should be referred to voluntary arbitration as
called for in the CBA, the same does not lie. The pertinent portion of the CBA reads:
In case of any dispute arising from the interpretation or implementation of this Agreement or any matter
affecting the relations of Labor and Management, the UNION and the COMPANY agree to exhaust all
possibilities of conciliation through the grievance machinery. The committee shall resolve all problems
submitted to it within fifteen (15) days after the problems ha[ve] been discussed by the members. If the
dispute or grievance cannot be settled by the Committee, or if the committee failed to act on the matter
within the period of fifteen (15) days herein stipulated, the UNION and the COMPANY agree to submit the
issue to Voluntary Arbitration. Selection of the arbitrator shall be made within seven (7) days from the date
of notification by the aggrieved party. The Arbitrator shall be selected by lottery from four (4) qualified
individuals nominated by in equal numbers by both parties taken from the list of Arbitrators prepared by
the National Conciliation and Mediation Board (NCMB). If the Company and the Union
representatives within ten (10) days fail to agree on the Arbitrator, the NCMB shall name the Arbitrator.
The decision of the Arbitrator shall be final and binding upon the parties. However, the Arbitrator shall not
have the authority to change any provisions of the Agreement. The cost of arbitration shall be borne
equally by the parties.25 (capitalization in the original, underscoring supplied)1avvphi1
Petitioners have not, however, been duly authorized to represent the union. Apropos is this Courts
pronouncement in Atlas Farms, Inc. v. National Labor Relations Commission, 26 viz:
x x x Pursuant to Article 260 of the Labor Code, the parties to a CBA shall name or designate their
respective representatives to the grievance machinery and if the grievance is unsettled in that level, it
shall automatically be referred to the voluntary arbitrators designated in advance by parties to a CBA.
Consequently only disputes involving the union and the company shall be referred to the grievance
machinery or voluntary arbitrators.27(emphasis and underscoring supplied)
Clutching at straws, petitioners invoke the first paragraph of Article 255 of the Labor Code which states:
Art. 255. The labor organization designated or selected by the majority of the employees in an appropriate
collective bargaining unit shall be the exclusive representative of the employees in such unit for the
purpose of collective bargaining. However, an individual employee or group of employees shall have the
right at any time to present grievances to their employer.
x x x x (emphasis and underscoring supplied)

To petitioners, the immediately quoted provision "is meant to be an exception to the exclusiveness of the
representative role of the labor organization/union." 28
This Court is not persuaded. The right of any employee or group of employees to, at any time, present
grievancesto the employer does not imply the right to submit the same to voluntary arbitration.
WHEREFORE, the petition is DENIED.
SO ORDERED.
-----------------------------------

107. Continental Steel Manufacturing v Montano

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 182836

October 13, 2009

CONTINENTAL STEEL MANUFACTURING CORPORATION, Petitioner,

vs.
HON. ACCREDITED VOLUNTARY ARBITRATOR ALLAN S. MONTAO and NAGKAKAISANG
MANGGAGAWA NG CENTRO STEEL CORPORATION-SOLIDARITY OF UNIONS IN THE
PHILIPPINES FOR EMPOWERMENT AND REFORMS (NMCSC-SUPER), Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision1dated 27 February 2008 and the Resolution2 dated 9 May 2008 of the Court of Appeals in CAG.R. SP No. 101697, affirming the Resolution3 dated 20 November 2007 of respondent Accredited
Voluntary Arbitrator Atty. Allan S. Montao (Montao) granting bereavement leave and other death
benefits to Rolando P. Hortillano (Hortillano), grounded on the death of his unborn child.
The antecedent facts of the case are as follows:
Hortillano, an employee of petitioner Continental Steel Manufacturing Corporation (Continental Steel) and
a member of respondent Nagkakaisang Manggagawa ng Centro Steel Corporation-Solidarity of Trade
Unions in the Philippines for Empowerment and Reforms (Union) filed on 9 January 2006, a claim for
Paternity Leave, Bereavement Leave and Death and Accident Insurance for dependent, pursuant to the
Collective Bargaining Agreement (CBA) concluded between Continental and the Union, which reads:
ARTICLE X: LEAVE OF ABSENCE

xxxx
Section 2. BEREAVEMENT LEAVEThe Company agrees to grant a bereavement leave with pay to any
employee in case of death of the employees legitimate dependent (parents, spouse, children, brothers
and sisters) based on the following:
2.1 Within Metro Manila up to Marilao, Bulacan - 7 days
2.2 Provincial/Outside Metro Manila - 11 days
xxxx
ARTICLE XVIII: OTHER BENEFITS
xxxx
Section 4. DEATH AND ACCIDENT INSURANCEThe Company shall grant death and accidental
insurance to the employee or his family in the following manner:
xxxx
4.3 DEPENDENTSEleven Thousand Five Hundred Fifty Pesos (Php11,550.00) in case of death of the
employees legitimate dependents (parents, spouse, and children). In case the employee is single, this
benefit covers the legitimate parents, brothers and sisters only with proper legal document to be
presented (e.g. death certificate).4
The claim was based on the death of Hortillanos unborn child. Hortillanos wife, Marife V. Hortillano, had
a premature delivery on 5 January 2006 while she was in the 38th week of pregnancy.5 According to the
Certificate of Fetal Death dated 7 January 2006, the female fetus died during labor due to fetal Anoxia
secondary to uteroplacental insufficiency.6
Continental Steel immediately granted Hortillanos claim for paternity leave but denied his claims for
bereavement leave and other death benefits, consisting of the death and accident insurance. 7
Seeking the reversal of the denial by Continental Steel of Hortillanos claims for bereavement and other
death benefits, the Union resorted to the grievance machinery provided in the CBA. Despite the series of
conferences held, the parties still failed to settle their dispute, 8 prompting the Union to file a Notice to
Arbitrate before the National Conciliation and Mediation Board (NCMB) of the Department of Labor and
Employment (DOLE), National Capital Region (NCR). 9 In a Submission Agreement dated 9 October 2006,
the Union and Continental Steel submitted for voluntary arbitration the sole issue of whether Hortillano
was entitled to bereavement leave and other death benefits pursuant to Article X, Section 2
and Article XVIII, Section 4.3 of the CBA.10 The parties mutually chose Atty. Montao, an Accredited
Voluntary Arbitrator, to resolve said issue.11
When the preliminary conferences again proved futile in amicably settling the dispute, the parties
proceeded to submit their respective Position Papers, 12 Replies,13 and Rejoinders14 to Atty. Montao.

The Union argued that Hortillano was entitled to bereavement leave and other death benefits pursuant to
the CBA. The Union maintained that Article X, Section 2 and Article XVIII, Section 4.3 of the CBA did not
specifically state that the dependent should have first been born alive or must have acquired juridical
personality so that his/her subsequent death could be covered by the CBA death benefits. The Union
cited cases wherein employees of MKK Steel Corporation (MKK Steel) and Mayer Steel Pipe Corporation
(Mayer Steel), sister companies of Continental Steel, in similar situations as Hortillano were able to
receive death benefits under similar provisions of their CBAs.
The Union mentioned in particular the case of Steve L. Dugan (Dugan), an employee of Mayer Steel,
whose wife also prematurely delivered a fetus, which had already died prior to the delivery. Dugan was
able to receive paternity leave, bereavement leave, and voluntary contribution under the CBA between his
union and Mayer Steel.15 Dugans child was only 24 weeks in the womb and died before labor, as
opposed to Hortillanos child who was already 37-38 weeks in the womb and only died during labor.
The Union called attention to the fact that MKK Steel and Mayer Steel are located in the same compound
as Continental Steel; and the representatives of MKK Steel and Mayer Steel who signed the CBA with
their respective employees unions were the same as the representatives of Continental Steel who signed
the existing CBA with the Union.
Finally, the Union invoked Article 1702 of the Civil Code, which provides that all doubts in labor
legislations and labor contracts shall be construed in favor of the safety of and decent living for the
laborer.
On the other hand, Continental Steel posited that the express provision of the CBA did not contemplate
the death of an unborn child, a fetus, without legal personality. It claimed that there are two elements for
the entitlement to the benefits, namely: (1) death and (2) status as legitimate dependent, none of which
existed in Hortillanos case. Continental Steel, relying on Articles 40, 41 and 42 16 of the Civil Code,
contended that only one with civil personality could die. Hence, the unborn child never died because it
never acquired juridical personality. Proceeding from the same line of thought, Continental Steel reasoned
that a fetus that was dead from the moment of delivery was not a person at all. Hence, the term
dependent could not be applied to a fetus that never acquired juridical personality. A fetus that was
delivered dead could not be considered a dependent, since it never needed any support, nor did it ever
acquire the right to be supported.
Continental Steel maintained that the wording of the CBA was clear and unambiguous. Since neither of
the parties qualified the terms used in the CBA, the legally accepted definitions thereof were deemed
automatically accepted by both parties. The failure of the Union to have unborn child included in the
definition of dependent, as used in the CBA the death of whom would have qualified the parentemployee for bereavement leave and other death benefits bound the Union to the legally accepted
definition of the latter term.
Continental Steel, lastly, averred that similar cases involving the employees of its sister companies, MKK
Steel and Mayer Steel, referred to by the Union, were irrelevant and incompetent evidence, given the
separate and distinct personalities of the companies. Neither could the Union sustain its claim that the
grant of bereavement leave and other death benefits to the parent-employee for the loss of an unborn
child constituted "company practice."

On 20 November 2007, Atty. Montao, the appointed Accredited Voluntary Arbitrator, issued a
Resolution17 ruling that Hortillano was entitled to bereavement leave with pay and death benefits.
Atty. Montao identified the elements for entitlement to said benefits, thus:
This Office declares that for the entitlement of the benefit of bereavement leave with pay by the covered
employees as provided under Article X, Section 2 of the parties CBA, three (3) indispensable elements
must be present: (1) there is "death"; (2) such death must be of employees "dependent"; and (3) such
dependent must be "legitimate".
On the otherhand, for the entitlement to benefit for death and accident insurance as provided under Article
XVIII, Section 4, paragraph (4.3) of the parties CBA, four (4) indispensable elements must be present: (a)
there is "death"; (b) such death must be of employees "dependent"; (c) such dependent must be
"legitimate"; and (d) proper legal document to be presented. 18
Atty. Montao found that there was no dispute that the death of an employees legitimate dependent
occurred. The fetus had the right to be supported by the parents from the very moment he/she was
conceived. The fetus had to rely on another for support; he/she could not have existed or sustained
himself/herself without the power or aid of someone else, specifically, his/her mother. Therefore, the fetus
was already a dependent, although he/she died during the labor or delivery. There was also no question
that Hortillano and his wife were lawfully married, making their dependent, unborn child, legitimate.
In the end, Atty. Montao decreed:
WHEREFORE, premises considered, a resolution is hereby rendered ORDERING [herein petitioner
Continental Steel] to pay Rolando P. Hortillano the amount of Four Thousand Nine Hundred Thirty-Nine
Pesos (P4,939.00), representing his bereavement leave pay and the amount of Eleven Thousand Five
Hundred Fifty Pesos (P11,550.00) representing death benefits, or a total amount of P16,489.00
The complaint against Manuel Sy, however, is ORDERED DISMISSED for lack of merit.
All other claims are DISMISSED for lack of merit.
Further, parties are hereby ORDERED to faithfully abide with the herein dispositions.
Aggrieved, Continental Steel filed with the Court of Appeals a Petition for Review on Certiorari, 19 under
Section 1, Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 101697.
Continental Steel claimed that Atty. Montao erred in granting Hortillanos claims for bereavement leave
with pay and other death benefits because no death of an employees dependent had occurred. The
death of a fetus, at whatever stage of pregnancy, was excluded from the coverage of the CBA since what
was contemplated by the CBA was the death of a legal person, and not that of a fetus, which did not
acquire any juridical personality. Continental Steel pointed out that its contention was bolstered by the fact
that the term death was qualified by the phrase legitimate dependent. It asserted that the status of a child
could only be determined upon said childs birth, otherwise, no such appellation can be had. Hence, the
conditions sine qua non for Hortillanos entitlement to bereavement leave and other death benefits under
the CBA were lacking.

The Court of Appeals, in its Decision dated 27 February 2008, affirmed Atty. Montaos Resolution dated
20 November 2007. The appellate court interpreted death to mean as follows:
[Herein petitioner Continental Steels] exposition on the legal sense in which the term "death" is used in
the CBA fails to impress the Court, and the same is irrelevant for ascertaining the purpose, which the
grant of bereavement leave and death benefits thereunder, is intended to serve. While there is no arguing
with [Continental Steel] that the acquisition of civil personality of a child or fetus is conditioned on being
born alive upon delivery, it does not follow that such event of premature delivery of a fetus could never be
contemplated as a "death" as to be covered by the CBA provision, undoubtedly an event causing loss and
grief to the affected employee, with whom the dead fetus stands in a legitimate relation. [Continental
Steel] has proposed a narrow and technical significance to the term "death of a legitimate dependent" as
condition for granting bereavement leave and death benefits under the CBA. Following [Continental
Steels] theory, there can be no experience of "death" to speak of. The Court, however, does not share
this view. A dead fetus simply cannot be equated with anything less than "loss of human life", especially
for the expectant parents. In this light, bereavement leave and death benefits are meant to assuage the
employee and the latters immediate family, extend to them solace and support, rather than an act
conferring legal status or personality upon the unborn child. [Continental Steels] insistence that the
certificate of fetal death is for statistical purposes only sadly misses this crucial point. 20
Accordingly, the fallo of the 27 February 2008 Decision of the Court of Appeals reads:
WHEREFORE, premises considered, the present petition is hereby DENIED for lack of merit. The
assailed Resolution dated November 20, 2007 of Accredited Voluntary Arbitrator Atty. Allan S. Montao is
hereby AFFIRMED and UPHELD.
With costs against [herein petitioner Continental Steel]. 21
In a Resolution22 dated 9 May 2008, the Court of Appeals denied the Motion for Reconsideration 23 of
Continental Steel.
Hence, this Petition, in which Continental Steel persistently argues that the CBA is clear and
unambiguous, so that the literal and legal meaning of death should be applied. Only one with juridical
personality can die and a dead fetus never acquired a juridical personality.
We are not persuaded.
As Atty. Montao identified, the elements for bereavement leave under Article X, Section 2 of the CBA
are: (1) death; (2) the death must be of a dependent, i.e., parent, spouse, child, brother, or sister, of an
employee; and (3) legitimate relations of the dependent to the employee. The requisites for death and
accident insurance under Article XVIII, Section 4(3) of the CBA are: (1) death; (2) the death must be of a
dependent, who could be a parent, spouse, or child of a married employee; or a parent, brother, or sister
of a single employee; and (4) presentation of the proper legal document to prove such death, e.g., death
certificate.
It is worthy to note that despite the repeated assertion of Continental Steel that the provisions of the CBA
are clear and unambiguous, its fundamental argument for denying Hortillanos claim for bereavement
leave and other death benefits rests on the purportedly proper interpretation of the terms "death" and
"dependent" as used in the CBA. If the provisions of the CBA are indeed clear and unambiguous, then

there is no need to resort to the interpretation or construction of the same. Moreover, Continental Steel
itself admitted that neither management nor the Union sought to define the pertinent terms for
bereavement leave and other death benefits during the negotiation of the CBA.
The reliance of Continental Steel on Articles 40, 41 and 42 of the Civil Code for the legal definition of
death is misplaced. Article 40 provides that a conceived child acquires personality only when it is born,
and Article 41 defines when a child is considered born. Article 42 plainly states that civil personality is
extinguished by death.
First, the issue of civil personality is not relevant herein. Articles 40, 41 and 42 of the Civil Code on natural
persons, must be applied in relation to Article 37 of the same Code, the very first of the general provisions
on civil personality, which reads:
Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in every
natural person and is lost only through death. Capacity to act, which is the power to do acts with legal
effect, is acquired and may be lost.
We need not establish civil personality of the unborn child herein since his/her juridical capacity and
capacity to act as a person are not in issue. It is not a question before us whether the unborn child
acquired any rights or incurred any obligations prior to his/her death that were passed on to or assumed
by the childs parents. The rights to bereavement leave and other death benefits in the instant case
pertain directly to the parents of the unborn child upon the latters death.
Second, Sections 40, 41 and 42 of the Civil Code do not provide at all a definition of death. Moreover,
while the Civil Code expressly provides that civil personality may be extinguished by death, it does not
explicitly state that only those who have acquired juridical personality could die.
And third, death has been defined as the cessation of life. 24 Life is not synonymous with civil personality.
One need not acquire civil personality first before he/she could die. Even a child inside the womb already
has life. No less than the Constitution recognizes the life of the unborn from conception, 25 that the State
must protect equally with the life of the mother. If the unborn already has life, then the cessation thereof
even prior to the child being delivered, qualifies as death.
Likewise, the unborn child can be considered a dependent under the CBA. As Continental Steel itself
defines, a dependent is "one who relies on another for support; one not able to exist or sustain oneself
without the power or aid of someone else." Under said general definition, 26 even an unborn child is a
dependent of its parents. Hortillanos child could not have reached 38-39 weeks of its gestational life
without depending upon its mother, Hortillanos wife, for sustenance. Additionally, it is explicit in the CBA
provisions in question that the dependent may be the parent, spouse, or child of a married employee; or
the parent, brother, or sister of a single employee. The CBA did not provide a qualification for the child
dependent, such that the child must have been born or must have acquired civil personality, as
Continental Steel avers. Without such qualification, then child shall be understood in its more general
sense, which includes the unborn fetus in the mothers womb.
The term legitimate merely addresses the dependent childs status in relation to his/her parents.
In Angeles v. Maglaya,27 we have expounded on who is a legitimate child, viz:

DEFINITION OF DEPENDENT
A legitimate child is a product of, and, therefore, implies a valid and lawful marriage. Remove the element
of lawful union and there is strictly no legitimate filiation between parents and child. Article 164 of the
Family Code cannot be more emphatic on the matter: "Children conceived or born during the marriage of
the parents are legitimate." (Emphasis ours.)
Conversely, in Briones v. Miguel,28 we identified an illegitimate child to be as follows:
The fine distinctions among the various types of illegitimate children have been eliminated in the Family
Code. Now, there are only two classes of children -- legitimate (and those who, like the legally adopted,
have the rights of legitimate children) and illegitimate. All children conceived and born outside a valid
marriage are illegitimate, unless the law itself gives them legitimate status. (Emphasis ours.)
It is apparent that according to the Family Code and the afore-cited jurisprudence, the legitimacy or
illegitimacy of a child attaches upon his/her conception. In the present case, it was not disputed that
Hortillano and his wife were validly married and that their child was conceived during said marriage,
hence, making said child legitimate upon her conception.1avvphi1
Also incontestable is the fact that Hortillano was able to comply with the fourth element entitling him to
death and accident insurance under the CBA, i.e., presentation of the death certificate of his unborn child.
Given the existence of all the requisites for bereavement leave and other death benefits under the CBA,
Hortillanos claims for the same should have been granted by Continental Steel.
We emphasize that bereavement leave and other death benefits are granted to an employee to give aid
to, and if possible, lessen the grief of, the said employee and his family who suffered the loss of a loved
one. It cannot be said that the parents grief and sense of loss arising from the death of their unborn child,
who, in this case, had a gestational life of 38-39 weeks but died during delivery, is any less than that of
parents whose child was born alive but died subsequently.

INTERPRETATION OF GRIEVANCE MACHINERY IN CASE OF

DOUBT
Being for the benefit of the employee, CBA provisions on bereavement leave and other death benefits
should be interpreted liberally to give life to the intentions thereof. Time and again, the Labor Code is
specific in enunciating that in case of doubt in the interpretation of any law or provision affecting labor,
such should be interpreted in favor of labor.29 In the same way, the CBA and CBA provisions should be
interpreted in favor of labor. In Marcopper Mining v. National Labor Relations Commission,30 we
pronounced:
Finally, petitioner misinterprets the declaration of the Labor Arbiter in the assailed decision that "when the
pendulum of judgment swings to and fro and the forces are equal on both sides, the same must be stilled
in favor of labor." While petitioner acknowledges that all doubts in the interpretation of the Labor Code
shall be resolved in favor of labor, it insists that what is involved-here is the amended CBA which is
essentially a contract between private persons. What petitioner has lost sight of is the avowed policy of

the State, enshrined in our Constitution, to accord utmost protection and justice to labor, a policy, we are,
likewise, sworn to uphold.
In Philippine Telegraph & Telephone Corporation v. NLRC [183 SCRA 451 (1990)], we categorically
stated that:
When conflicting interests of labor and capital are to be weighed on the scales of social justice, the
heavier influence of the latter should be counter-balanced by sympathy and compassion the law must
accord the underprivileged worker.
Likewise, in Terminal Facilities and Services Corporation v. NLRC [199 SCRA 265 (1991)], we declared:
Any doubt concerning the rights of labor should be resolved in its favor pursuant to the social justice
policy.
IN VIEW WHEREOF, the Petition is DENIED. The Decision dated 27 February 2008 and Resolution dated
9 May 2008 of the Court of Appeals in CA-G.R. SP No. 101697, affirming the Resolution dated 20
November 2007 of Accredited Voluntary Arbitrator Atty. Allan S. Montao, which granted to Rolando P.
Hortillano bereavement leave pay and other death benefits in the amounts of Four Thousand Nine
Hundred Thirty-Nine Pesos (P4,939.00) and Eleven Thousand Five Hundred Fifty Pesos (P11,550.00),
respectively, grounded on the death of his unborn child, are AFFIRMED. Costs against Continental Steel
Manufacturing Corporation.
SO ORDERED.
----------------------------108. Casiano Navarro v Damasco
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 101875 July 14, 1995

CASIANO A. NAVARRO III, petitioner,
vs.
HON. ISRAEL D. DAMASCO, in his capacity as VOLUNTARY ARBITRATOR, and BUSCO SUGAR
MILLING CO., INC., respondents.

QUIASON, J.:

This is a petition for certiorari to reverse the Decision dated August 16, 1991 of the Voluntary Arbitrator,
respondent Israel D. Damasco, declaring as valid the separation from employment of petitioner.
We dismiss the petition.
I
Petitioner was employed as typist of private respondent at its plant in Quezon, Bukidnon.
At about 5:00 P.M. of November 27, 1990, petitioner went to visit Mercy Baylas, a co-employee, at the
ladies' dormitory inside the compound of private respondent. Upon seeing petitioner, Baylas hid behind
the divider at the reception room. Rosemarie Basa and Isabel Beleno, co-boarders of Baylas, told
petitioner that Baylas was not at the dormitory and advised him to stop courting her because she had no
feelings towards him. Afterwards, the two left leaving petitioner alone in the room. When he peeped
behind the divider, he saw Baylas, who stood up without answering his greetings and ran towards her
room. He followed, and after taking hold of her left hand, pulled her towards him. The force caused her to
fall on the floor. He then placed himself on top of her. She resisted and futilely struggled to free herself
from his grasp. Sonia Armada, the dormitory housekeeper, responded to Baylas' shouts for help. Armada
saw petitioner embracing and kissing Baylas. She tried to separate petitioner from Baylas but to no avail.
So she went outside and asked Basa and Beleno to help Baylas. She also asked the help of Edmundo
Subong.
Basa and Beleno tried to pull petitioner away from Baylas, but it was Subong who was able to free Baylas
from petitioner.
According to the medical report issued by Dr. Letecia P. Maraat, Baylas complained of pains on her
shoulder and left foot.
On December 5, 1990, petitioner was informed of the complaint against him and was placed under
preventive suspension. Nolito S. Densing, Jr. was instructed to investigate the incident. In his report dated
December 26, 1990, Densing recommended that the maximum penalty be meted out against petitioner.
On January 5, 1991, petitioner was dismissed from the service for having violated paragraph 3.B
(Conduct and Behavior) of the Code of Employee Discipline, which provides:
1. Inflicting or attempting to inflict bodily injury, in any form, on fellow employee, with a
penalty of dismissal.
2. Immoral conduct within company premises, regardless of whether or not committed
during working time, punishable by reprimand to dismissal, depending on the prejudice
caused by such act to the company.
3. Improper conduct and acts of gross discourtesy or disrespect to fellow employees at
any time within the company premises punishable by reprimand to dismissal, depending
on the gravity of the offense.
4. Knowingly giving false or untruthful statements or concealing material facts in an
investigation conducted by authorized representative of the company, punishable by
dismissal ( Rollo, pp. 47-48).

On March 18, 1991, the President of the Mindanao Sugar Workers Union, for and in behalf of petitioner,
and Jaime J. Javier, Personnel Officer of private respondent, agreed to submit the case of petitioner to
voluntary arbitration.
At the initial conference on March 27, 1991, petitioner, represented by his counsel, agreed to limit the
issues to be submitted to the Voluntary Arbitrator to the following:
1. Whether or not the grievance procedure in the CBA for bringing a case before the
Voluntary Arbitrator had been followed;
2. Whether petitioner's dismissal was legal; and
3. Who was the complainant insofar as the grievance procedure under the CBA was
concerned (Rollo, p. 147).
The parties also agreed to submit the case for decision based on their position papers.
On August 16, 1991, a decision was rendered by the Voluntary Arbitrator dismissing petitioner from his
employment and holding that private respondent did not violate the provisions of the grievance procedure
under the Collective Bargaining Agreement.
Not satisfied with the decision, petitioner filed the instant petition.
II
According to petitioner's version, Baylas was his girlfriend, whom he visited at the ladies' dormitory in the
afternoon of November 27, 1990. At the dormitory, petitioner saw Rosemarie Basa who told him that
Baylas was not around. To prove that Basa was lying, he peeped behind the divider and saw Baylas
hiding there. When Baylas ran towards her room, petitioner followed her. While running, Baylas lost her
balance and fell down. However, petitioner got hold of her to prevent her from hitting the floor and to help
her to her feet. He denied having kissed and embraced her. He admitted that Subong arrived and pulled
him away from Baylas. He also admitted that he voluntarily surrendered to the security guards.
III
Petitioner contends that the grievance procedure provided for in the Collective Bargaining Agreement was
not followed; hence, the Voluntary Arbitrator exceeded his authority when he took cognizance of the labor
case.
Section 2, Article X of the Collective Bargaining Agreement specifies the instances when the grievance
machinery may be availed of, thus:
Any protest or misunderstanding concerning any ruling, practice or working conditions in
the Company, or any dispute arising as to the meaning, application or claim of violation of
any provision of this Agreement or any complaint that any employee may have against
the COMPANY shall constitute a grievance ( Rollo, p. 27).

The instant case is not a grievance that must be submitted to the grievance machinery. What are subject
of the grievance procedure for adjustment and resolution are grievances arising from the interpretation or
implementation of the collective bargaining agreement (Labor Code of the Philippines, as amended by
R.A. No. 6715, Art. 260).
The acts of petitioner involved a violation of the Code of Employee Discipline, particularly the provision
penalizing the immoral conduct of employees. Consequently, there was no justification for petitioner to
invoke the grievance machinery provisions of the Collective Bargaining Agreement (Auxilio, Jr. v. National
Labor Relations Commission, 188 SCRA 263 [1990]).
The case of petitioner was submitted to voluntary arbitration by agreement of the president of the labor
union to which petitioner belongs, and his employer, through its personnel officer. Petitioner himself
voluntarily submitted to the jurisdiction of the Voluntary Arbitrator when he, through his counsel, filed his
position paper with the Voluntary Arbitrator and even submitted additional documentary evidence. In
addition thereto, during the initial conference on March 27, 1991, the parties manifested that they were
not questioning the authority of the Voluntary Arbitrator.
It is the policy of the State to promote voluntary arbitration as a mode of settling labor disputes (Manguiat,
Mechanisms of Voluntary Arbitration in Labor Disputes 2-6 [1978]).
Petitioner claims that he was denied due process of law because no hearing was held and he was not
given an opportunity to cross-examine the witnesses.
We held in Stayfast Philippines Corp. v. National Labor Relation Commission, 218 SCRA 596 (1993) that:
The essence of due process is simply an opportunity to be heard, or as applied to
administrative proceedings, an opportunity to explain one's side or an opportunity to seek
a reconsideration of the action or ruling complained of.
A formal or trial-type hearing is not at all times and in all instances essential. The
requirements are satisfied where the parties are fair and reasonable opportunity to
explain their side of the controversy at hand. What is frowned upon is the absolute lack of
notice and hearing. . . .
(at p. 601).
Concerning the allegation that petitioner was not allowed to cross-examine the witnesses, the record
shows that the parties had agreed not to cross-examine their witnesses anymore.
Petitioner alleges that the quarrel between Baylas and him was a purely private affair. We do not agree
with this contention. It will be noted that not only did the incident happen within the company
premises, i.e. the ladies' dormitory which was located inside the plant site, but both of them are
employees of private respondent. Management would then be at the mercy of its employees if it cannot
enforce discipline within company premises solely because the quarrel is purely personal matter. The
harassment of an employee by a co-employee within the company premises even after office hours is a
work-related matter considering that the peace of the company is thereby affected. The Code of
Employee Discipline is very clear that immoral conduct "within the company premises regardless of
whether or not [it is] committed during working time" is punishable.

The pretext of petitioner that he was merely helping Baylas is belied by the eyewitnesses. Petitioner
admitted that it took Subong to pull him away from Baylas. His alleged act of chivalry is nothing more than
a chance to gratify his amorous feelings.
WHEREFORE, the Decision of the respondent Voluntary Arbitrator is AFFIRMED.
SO ORDERED.
-------------------------------

109. Sanyo Phils Union v Canizares

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

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 Caizares 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;
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. 3738, 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.
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.
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.
(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 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. 134135, 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.
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.
SO ORDERED.
-----------------------------------------------

110. Great Pacific Life Employee Union v Great Pacific

insurance
Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 126717 February 11, 1999

GREAT PACIFIC EMPLOYEES UNION and RODEL P. DE LA ROSA, petitioners,
vs.
GREAT PACIFIC LIFE ASSURANCE CORPORATION, LABOR ARBITER JOVENCIO LL. MAYOR JR.
and NATIONAL LABOR COMMISSION (THIRD DIVISION), respondents.

BELLOSILLO, J.:
GREAT PACIFIC LIFE EMPLOYEES UNION and Great Pacific Life Assurance Corporation entered
sometime in 1990 into a Collective Bargaining Agreement (CBA) to take effect 1 July 1990 until 30 June
1993.
On 18 May 1993, or about a month and a half before the expiration of the CBA, the parties submitted their
respective proposals and counter-proposals to serve as bases for their discussions on its projected
renewal. The ensuing series of negotiations however resulted in a deadlock prompting petitioner Great
Pacific Life Employees Union (UNION hereon) on 23 September 1993 to file a notice of strike with the
National Conciliation and Mediation Board (NCMB) of the Department of Labor. Despite several
conciliatory conferences before the Board, the impasse could not be resolved. Thus, on 3 November
1993 petitioner UNION led by its President Isidro Alan B. Domingo and Vice President Rodel P. de la
Rosa went on strike.
On 6 November 1993 respondent Great Pacific Life Assurance Corporation (GREPALIFE hereon)
required all striking employees to explain in writing within forty-eight (48) hours why no disciplinary action,
including possible dismissal from employment, should be taken against them for committing illegal acts
against the company in the course of the strike, particularly on 4 and 5 November. They were warned that
failure to submit their explanations within the prescribed period would be construed as waiver of their right
to be heard. The company directive was apparently triggered by some violent incidents that took place
while the strike was in progress. Strikers reportedly blocked all points of ingress and egress of the
company premises in Makati City thus preventing GREPALIFE employees reporting for work from
entering their respective offices. These employees and third persons doing business with the company,
including lessees of the GREPALIFE building, were allegedly forced by the strikers to submit their
cars/vehicles, bags and other belongings to illegal search. 1
Complying with the order, UNION President Alan B. Domingo and some strikers explained that they did
not violate any law as they were merely exercising their constitutional right to strike. Petitioner Rodel P. de
la Rosa and the rest of the strikers however ignored the management directive.
GREPALIFE found the explanation of Domingo totally unsatisfactory and considered de la Rosa as
having waived his right to be heard. Thus on 16 November 1993 both UNION officers were notified of the
termination of their services, effective immediately, as Senior Benefits Clerk and Senior Data Analyst,
respectively. 2 All other strikers whose explanations were found unacceptable or who failed to submit
written explanations were likewise dismissed. 3Notwithstanding their dismissal from employment,

Domingo and de la Rosa continued to lead the members of the striking union in their concerted action
against management.
In the meantime, the NCMB resumed conciliatory conferences between the disputants. On 11 February
1994 respondent GREPALIFE submitted a draft Agreement denominated by petitioner UNION as the "last
and final offer by Management," which proposed among others that
4. Employee/members of the Union subject of dismissal notices shall be reinstated under
the same terms and conditions prior to their dismissal.
5. The reinstatement of the employees mentioned in #4 shall be conditioned upon the
submission by Alan B. Domingo and Rodel P. de la Rosa . . . . of their voluntary
resignations to the Company upon the signing of this agreement.
6. It is agreed and understood that Messrs. Domingo's and de la Rosa's resignation while
being effective thirty (30) days after submission, shall mean that they need not report to
the Company any longer. For the duration of the thirty (30) day period, they shall be
considered on leave with pay if they still have any outstanding vacation leave credits for
1993 and 1994.
7. Messrs. Domingo and de la Rosa, as showing of the Company's magnanimity, shall be
extended/given separation pay at the rate of one(1) month basic pay per year of service
based on the new CBA
rates. 4
On 14 February 1994 petitioner UNION in assenting to the offers expressed that
. . . . Management will make a full and immediate implementation of all the terms and
conditions agreed upon.
On its part, the Union shall forthwith lift the picket lines at the premises of the Company.
All employees concerned shall terminate the strike and shall return to work promptly at
the start of working hours on February 16, 1994.
This acceptance should not be Interpreted to mean acquiescence by the Union to any
portion of the aforementioned "last and final offer of Management" which may be deemed
to be contrary to law or public policy, the said offer being the sole responsibility of
Management. Furthermore, it is understood that should any portion of said offer be held
invalid, the remainder of said offer which has been herein accepted shall not be affected
thereby. 5
On 15 February 1994 the UNION and GREPALIFE executed a Memorandum of Agreement (MOA) before
the NCMB which ended their dispute. The MOA provided in its Par 4 (on dismissals) that
(a) (Except for Domingo and de la Rosa) employees/members of the Union subject of
dismissal notices on account of illegal acts committed in the course of the strike shall be
given amnesty by the Company and he reinstated (under) the same terms and conditions
prior to their dismissals following the signing of this agreement; (b) Messrs. Domingo and

de la Rosa hereby reserve their right to question before the NLRC the validity or legality
of their dismissal from employment . . . . 6
On 15 February 1994 Domingo and de la Rosa filed a joint letter of resignation with respondent company
but emphasized therein that "(their) resignation is submitted only because the same is demanded by the
Company, and it should not be understood as a waiver as none is expressingly or impliedly made of
whatever rights (they) may have under existing contracts and labor and social legislation." 7 The MOA was
subsequently incorporated in a new CBA which was signed on 4 March 1994 but made effective on 1 July
1993 until 30 June 1996.
On 2 June 1994 Domingo and de la Rosa sue GREPALIFE for illegal dismissal, unfair labor practice and
damages.
The Labor Arbiter sustained the charge of illegal dismissal. He found that the evidence of respondent
company consisting of affidavits of its employees was self-serving and inadequate to prove the illegal acts
allegedly committed during the strike by Domingo and de la Rosa. Calling attention to the fifth. Paragraph
Of the "last and final offer" Of respondent company, he rationalized that if indeed there was justifiable
ground to terminate complaints' employment, there would have been no need for the company to demand
the resignation of the two union officers in exchange for the reinstatement of all the strikers. He branded
this "offer" as nothing more than a scheme to get rid the complainants, noting the undue haste with which
their services were terminated by the respondent company. This, he observed, constituted nothing less
than a deprivation of due process of law. Thus, on 25 July 1995 the Labor Arbiter ordered respondent
GREPALIFE to reinstate complaints to their former positions without loss of seniority rights, with one (1)
year back wages without qualification or deduction computed from 16 November 1993, the date of their
dismissal. The other claims were dismissed for insufficiency of evidence. 8
Both parties appealed to the National Labor Relations Commission (NLRC). Respondent NLRC rejected
the finding below that Domingo and de la Rosa. were illegally dismissed, contending that a just cause for
dismissal had been sufficiently established. However, it agreed that respondent company failed to comply
strictly with the requirements of due process prior to termination. In its decision dated 14 May 1996, it
modified the ruling of the Labor Arbiter by directing respondent GREPALIFE to pay complainants their one
(1) month salary 9 for non-observance of due process prior to their dismissal. Considering that at the final
negotiation for the settlement respondent company offered complainants separation pay of one (1) month
salary for every year of service based on the new CBA rates in exchange for their voluntary resignation,
the NLRC additionally ordered payment of such amount. 10
On 19 June 1996 respondent GREPALIFE's motion for reconsideration was denied. Pending finality
thereof, respondent company and Domingo entered into compromise agreement 11 which they submitted
to the NLRC for approval. On 10 July 1996 the NLRC considered the case against Domingo
terminated, 12 and denied on 16 August 1996 de la Rosa's motion for reconsideration. 13
Pleading before us, petitioner de la Rosa raises two (2) issues. He asserts that he was illegally dismissed
because his actual participation in the illegal acts during the strike in voked by GREPALIFE as basis for
his dismissal was not adequately established. He also complains that he was later on forced to resign by
management.
We hold that the NLRC did not commit grave abuse of discretion. The right to strike, while constitutionally
recognized, is not without legal constrictions. 14 The Labor Code is emphatic against the use of violence,

coercion and intimidation during a strike and to this end prohibits the obstruction of free passage to and
from the employer's premises for lawful purposes. The sanction provided in par. (a) of Art. 262 thereof is
so severe that "any worker or union officer who knowingly participates in the commission of illegal acts
during a strike may be declared to have lost his employment status." 15
GREPALIFE submitted before the Labor Arbiter several affidavits of its employees which de la Rosa did
not refute. Of these documents, two (2) specifically described the incidents that transpired during the
strike on 4 and 5 November 1993. Security guard Rodrigo S. Butalid deposed
(3) Since 3 November 1993, I have noticed that the striking employees have been doing
the following: (a) the striking employees are picketing at the entrance and exit gates. (b)
The striking employees would surround every vehicle including vehicles of lessees of the
Grepalife Building, that would enter the Grepalife premises, inspect the same and ask the
driver of the vehicle to open the trunk of the vehicle so that the striking employees can
see whether there are Grepalife business documents found therein. The vehicle which is
being inspected cannot enter the Grepalife premises as the striking employees would
place a wooden bench in front of the vehicle. This wooden bench is only removed to
enable the vehicle to enter the Grepalife premises once the signal has been given by the
striking employees, who stand at the sides and at the back of the vehicle, to the other
striking employees who stand in front of the vehicle that the vehicle has already been
inspected and cleared. (c) If the striking employees find Grepalife business documents in
the vehicle being inspected, the striking employees would prevent the vehicle from
entering the Grepalife premises. (d) The striking employees do not allow Grepalife,
employees to enter the Grepalife premises. Occasionally however, the striking employees
will allow a Grepalife employees to enter the Grepalife office but on the condition that
they will only get their personal belongings. (e) All persons who wish to enter the
Grepalife premises are frisked and their bags/brief cases inspected. If a person is found
to carry any Grepalife business document, he is not allowed to enter the Grepalife
premises. In the alternative, he would be allowed to enter but the Grepalife business
document in his possession will be confiscated from him before he is allowed to enter.
4. Among those who I have seen to have participated in the foregoing activities are the
following persons: (a) Alan B. Domingo who I know to be the President of the Union; (b)
Rodel P. dela Rosa who I know to be the Vice-President of the Union;
The affidavit of another security guard, Wilson S. Concha was of similar import.
Petitioner de la Rosa assails the inherent weakness of the sworn statements of these security guards. But
while it is true that affidavits may be regarded as infirm evidence 16 before the regular courts unless the
affiants are presented on the stand, such affidavits by themselves are acceptable in proceedings before
the Labor Arbiter. Under Sec. 7, Rule V, of the New Rules of Procedure of the NLRC, these proceedings,
save for the constitutional requirements of due process, are not to be strictly governed by the
technicalities of law and procedural rules. Section 3, par. 2, of the same Rule provides that verified
position papers are to be accompanied by all supporting documents including the affidavits of the parties'
respective witnesses in lieu of direct testimony. It is therefore a clear mandate that the Labor Arbiter may
employ all reasonable means to ascertain the facts of the controversy before him.

Since de la Rosa did not present countervailing evidence, the NLRC correctly appreciated the affidavits of
the two (2) security guards as having adequately established the charges leveled against de la Rosa thus
justifying his dismissal from employment.
We now turn to the claim of de la Rosa that he was forced to resign. It is true that the draft Agreement
submitted by respondent company before the NCMB expressly proposed that the reinstatement of its
dismissed employees should be conditioned on the voluntary resignations of Domingo and de la Rosa
upon the signing of the Agreements. It is also true that petitioner UNION was amenable to this
proposition. But the unalterable facts is that the MOA that was subsequently finalized and executed did
not carry this conditionally. Paragraph 4 (b) thereof merely expressed a reservation by Domingo and de la
Rosa of their right to question before the NLRC the legality. of their dismissal from employment. Obviously
they were referring to their dismissal on 16 November 1993 due to the illegal acts they allegedly
committed in the course of the strike, and not to the voluntary resignation they were supposed to tender to
management.
Significantly, the joint letter of resignation submitted by Domingo and de la Rosa a day after the MOA was
executed was never acted upon by respondent company. And rightly so for, having been earlier dismissed
(i.e., on 16 November 1993), these two (2) union officers had no more employment to resign from. To be
sure, under the MOA their resignations were no longer a condition imposed by respondent company for
the eventual reinstatement of the other strikers. This being the case, de la Rosa cannot now complain that
he was forced to resign. Did he not explicitly acknowledge in his complaint with the Labor Arbiter that his
cause of action was the Illegal termination of his services on 16 November 1993? 17
Petitioner de la Rosa also claims that respondent company unreasonably singled out the top officers of
the UNION, including himself as unfit for reinstatement. Insisting that this act constitutes unfair labor
practice, he demands entitlement to moral and exemplary damages.
We disagree. While an act or decision of an employer may be unfair, certainly not every unfair act or
decision constitutes unfair labor practice (ULP) as defined and enumerated under Art. 248 Of the Labor
Code. 18
There should be no dispute that all the prohibited acts instituting unfair labor practice in essence relate to
the workers' right to self-organization. Thus, an employer may be held liable under this provision if his
conduct affects in whatever manner the right of an employee to self-organize. The decision of respondent
GREPALIFE to consider the top officers of petitioner UNION as unfit for reinstatement is not essentially
discriminatory and constitutive of an unlawful labor practice of employers under the above-cited provision.
Discriminating in the context of the Code involves either encouraging membership in any labor
organization or is made on account of the employee's having given or being about to give testimony
under the Labor Code. These have not been proved in the case at bar.
To elucidate further, there can be no discrimination where the employees concerned are not similarly
situated. 19 A union officer has larger and heavier responsibilities than a union member. Union officers are
duty bound to respect the law and to exhort and guide their members to do the same; their position
mandates them to lead by example. By committing prohibited activities during the strike, de la Rosa as
Vice President of petitioner UNION demonstrated a high degree of imprudence and irresponsibility. Verily
this justifies his dismissal from employment. Since the objective of the Labor Code is to ensure a stable
but dynamic and just industrial peace, the dismissal of undesirable labor leaders should be upheld. 20

It bears emphasis that the employer is free to regulate all aspects of employment according to his own
discretion and judgment. This prerogative flaws from the established rule that labor laws do not authorize
substitution of judgment of the employer in the conduct of his business. Recall of workers clearly falls
within the ambit of management prerogative. 21 The employer can exercise this prerogative without fear of
liability so long as it is done in good faith for the advancement of his interest and not for the purpose of
defeating or circumventing the rights of the employees under special laws or valid agreements. It is valid
as long as it is not performed in a malicious, harsh, oppressive, vindictive or wanton manner or out of
malice or spite.
That respondent company opted to reinstate all the strikers except Domingo and de la Rosa is an option
taken in good faith for the just and lawful protection and advancement of its interest. Readmitting the
union members to the exclusion of Domingo and de la Rosa was nothing less than a sound exercise of
management prerogative, an act of selt-preservation in fact, designed to insure the maintenance of peace
and order in the company premises.22 The dismissal of de la Rosa who had shown his capacity for
unmitigated mischief was intended to avoid a recurrence of the violence that attended the fateful strike in
November.
WHEREFORE, the petition is DISMISSED. The decision of respondent National Labor Relations
Commission dated 14 May 1996 (a) finding that petitioner Rodel P. de la Rosa was legally dismissed,
and, (b) ordering respondent Great Pacific Life Assurance Corporation to pay petitioner his one (1) month
salary or its failure to comply strictly with due process prior to the latter's termination and his one (1)
month salary per year of service based on the new CBA rates as separation pay, as well as its Resolution
dated 16 August 1996 denying reconsideration, is AFFIRMED.
SO ORDERED.
-----------------------------------------

111. PhiLcom Union v PhiLCom

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 144315

July 17, 2006

PHILCOM EMPLOYEES UNION, petitioner,

vs.
PHILIPPINE GLOBAL COMMUNICATIONS and PHILCOM CORPORATION, respondents.
DECISION
CARPIO, J.:
The Case

This is a petition for review1 to annul the Decision2 dated 31 July 2000 of the Court of Appeals in CA-G.R.
SP No. 53989. The Court of Appeals affirmed the assailed portions of the 2 October 1998 and 27
November 1998 Orders of the Secretary of Labor and Employment in OS-AJ-0022-97.
The Facts
The facts, as summarized by the Court of Appeals, are as follows:
Upon the expiration of the Collective Bargaining Agreement (CBA) between petitioner Philcom
Employees Union (PEU or union, for brevity) and private respondent Philippine Global
Communications, Inc. (Philcom, Inc.) on June 30, 1997, the parties started negotiations for the
renewal of their CBA in July 1997. While negotiations were ongoing, PEU filed on October 21,
1997 with the National Conciliation and Mediation Board (NCMB) National Capital Region, a
Notice of Strike, docketed as NCMB-NCR-NS No. 10-435-97, due to perceived unfair labor
practice committed by the company (Annex "1", Comment, p. 565, ibid.). In view of the filing of
the Notice of Strike, the company suspended negotiations on the CBA which moved the union to
file on November 4, 1997 another Notice of Strike, docketed as NCMB-NCR-NS No. 11-465-97,
on the ground of bargaining deadlock (Annex "2", Comment, p. 566, ibid.)
On November 11, 1997, at a conciliation conference held at the NCMB-NCR office, the parties
agreed to consolidate the two (2) Notices of Strike filed by the union and to maintain the
status quo during the pendency of the proceedings (Annex "3", Comment, p. 567, ibid.).
On November 17, 1997, however, while the union and the company officers and representatives
were meeting, the remaining union officers and members staged a strike at the company
premises, barricading the entrances and egresses thereof and setting up a stationary picket at
the main entrance of the building. The following day, the company immediately filed a petition for
the Secretary of Labor and Employment to assume jurisdiction over the labor dispute in
accordance with Article 263(g) of the Labor Code.
On November 19, 1997, then Acting Labor Secretary Cresenciano B. Trajano issued an Order
assuming jurisdiction over the dispute, enjoining any strike or lockout, whether threatened or
actual, directing the parties to cease and desist from committing any act that may exacerbate the
situation, directing the striking workers to return to work within twenty-four (24) hours from receipt
of the Secretary's Order and for management to resume normal operations, as well as accept the
workers back under the same terms and conditions prior to the strike. The parties were likewise
required to submit their respective position papers and evidence within ten (10) days from receipt
of said order (Annex "4", Comment, pp. 610-611, ibid.). On November 28, 1997, a second order
was issued reiterating the previous directive to all striking employees to return to work
immediately.
On November 27, 1997, the union filed a Motion for Reconsideration assailing, among others, the
authority of then Acting Secretary Trajano to assume jurisdiction over the labor dispute. Said
motion was denied in an Order dated January 7, 1998.
As directed, the parties submitted their respective position papers. In its position paper, the union
raised the issue of the alleged unfair labor practice of the company hereunder enumerated as
follows:

"(a) PABX transfer and contractualization of PABX service and position;

"(b) Massive contractualization;
"(c) Flexible labor and additional work/function;
"(d) Disallowance of union leave intended for union seminar;
"(e) Misimplementation and/or non-implementation of employees' benefits like shoe
allowance, rainboots, raincoats, OIC shift allowance, P450.00 monthly allowance, driving
allowance, motorcycle award and full-time physician;
"(f) Non-payment, discrimination and/or deprivation of overtime, restday work,
waiting/stand by time and staff meetings;
"(g) Economic inducement by promotion during CBA negotiation;
"(h) Disinformation scheme, surveillance and interference with union affairs;
"(i) Issuance of memorandum/notice to employees without giving copy to union, change
in work schedule at Traffic Records Section and ITTO policies; and
"(j) Inadequate transportation allowance, water and facilities."
(Annex A, Petition; pp. 110-182, ibid.)
The company, on the other hand, raised in its position paper the sole issue of the illegality of the
strike staged by the union (Annex B, Petition; pp. 302-320, ibid.).
On the premise that public respondent Labor Secretary cannot rule on the issue of the strike
since there was no petition to declare the same illegal, petitioner union filed on March 4, 1998 a
Manifestation/Motion to Strike Out Portions of & Attachments in Philcom's Position Paper for
being irrelevant, immaterial and impertinent to the issues assumed for resolution (Annex C,
Petition; pp. 330-333, ibid.).
In opposition to PEU's Manifestation/Motion, the company argued that it was precisely due to the
strike suddenly staged by the union on November 17, 1997 that the dispute was assumed by the
Labor Secretary. Hence, the case would necessarily include the issue of the legality of the strike
(Opposition to PEU'S Motion to Strike Out; Annex F, Petition; pp. 389-393, ibid.).3
On 2 October 1998, the Secretary of Labor and Employment ("Secretary") issued the first assailed order.
The pertinent parts of the Order read:
Going now to the first issue at hand, a reading of the complaints charged by the Union as unfair
labor practices would reveal that these are not so within the legal connotation of Article 248 of the
Labor Code. On the contrary, these complaints are actually mere grievances which should have
been processed through the grievance machinery or voluntary arbitration outlined under the CBA.
The issues of flexible labor and additional functions, misimplementation or non-implementation of

employee benefits, non-payment of overtime and other monetary claims and inadequate
transportation allowance, are all a matter of implementation or interpretation of the economic
provisions of the CBA subject to the grievance procedure.
Neither do these complaints amount to gross violations which, thus, may be treated as unfair
labor practices outside of the coverage of Article 261. The Union failed to convincingly show that
there is flagrant and/or malicious refusal by the Company to comply with the economic provisions
stipulated in the CBA.
With respect to the charges of contractualization and economic inducement, this Office is
convinced that the acts of said company qualify as a valid exercise of management prerogative.
The act of the Company in contracting out work or certain services being performed by Union
members should not be seen as an unfair labor practice act per se. First, the charge of massive
contractualization has not been substantiated while the contractualization of the position of PABX
operator is an isolated instance. Secondly, in the latter case, there was no proof that such
contracting out interfered with, restrained or coerced the employees in the exercise of their right
to self-organization. Thus, it is not unfair labor practice to contract out work for reason of
reduction of labor cost through the acquisition of automatic machines.
Likewise, the promotion of certain employees, who are incidentally members of the Union, to
managerial positions is a prerogative of management. A promotion which is manifestly beneficial
to an employee should not give rise to a gratuitous speculation that such a promotion was made
simply to deprive the union of the membership of the promoted employee (Bulletin Publishing Co.
v. Sanchez, et. al., G.R. No. 74425, October 7, 1986).
There remains the issue on bargaining deadlock. The Company has denied the existence of any
impasse in its CBA negotiations with the Union and instead maintains that it has been negotiating
with the latter in good faith until the strike was initiated. The Union, on the other hand, contends
otherwise and further prays that the remaining CBA proposals of the Union be declared
reasonable and equitable and thus be ordered incorporated in the new CBA to be executed.
As pointed out by the Union, there are already thirty-seven (37) items agreed upon by the parties
during the CBA negotiations even before these were suspended. Prior to this Office's assumption
over the case, the Company furnished the Union its improved CBA counter-proposal on the
matter of promotional and wage increases which however was rejected by the Union as divisive.
Even as the Union has submitted its remaining CBA proposals for resolution, the Company
remains silent on the matter. In the absence of any basis, other than the Union's position paper,
on which this Office may make its determination of the reasonableness and equitableness of
these remaining CBA proposals, this Office finds it proper to defer deciding on the matter and first
allow the Company to submit its position thereon.
We now come to the question of whether or not the strike staged by the Union on November 17,
1997 is illegal. The Company claims it is, having been held on grounds which are non-strikeable,
during the pendency of preventive mediation proceedings in the NCMB, after this Office has
assumed jurisdiction over the dispute, and with the strikers committing prohibited and illegal acts.
The Company further prays for the termination of some 20 Union officers who were positively
identified to have initiated the alleged illegal strike. The Union, on the other hand, refuses to
submit this issue for resolution.

Considering the precipitous nature of the sanctions sought by the Company, i.e., declaration of
illegality of the strike and the corresponding termination of the errant Union officers, this Office
deems it wise to defer the summary resolution of the same until both parties have been afforded
due process. The non-compliance of the strikers with the return-to-work orders, while it may
warrant dismissal, is not by itself conclusive to hold the strikers liable. Moreover, the Union's
position on the alleged commission of illegal acts by the strikers during the strike is still to be
heard. Only after a full-blown hearing may the respective liabilities of Union officers and members
be determined. The case of Telefunken Semiconductors Employees Union-FFW v. Secretary of
Labor and Employment and Temic Telefunken Micro-Electronics (Phils.), Inc. (G.R. No. 122743
and 127215, December 12, 1997) is instructive on this point:
It may be true that the workers struck after the Secretary of Labor and Employment had
assumed jurisdiction over the case and that they may have failed to immediately return to
work even after the issuance of a return-to-work order, making their continued strike
illegal. For, a return-to-work order is immediately effective and executory notwithstanding
the filing of a motion for reconsideration. But, the liability of each of the union officers and
the workers, if any, has yet to be determined. xxx xxx xxx. 4
The dispositive portion of the Order reads:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered as follows:
The Union's Manifestation/Motion to Implead Philcom Corporation is hereby granted. Let
summons be issued to respondent Philcom Corporation to appear before any hearing that may
hereafter be scheduled and to submit its position paper as may be required.
The Union's Manifestation/Motion to Strike Out Portions of and Attachments in Philcom's Position
Paper is hereby denied for lack of merit.
The Union's charges of unfair labor practice against the Company are hereby dismissed.
Pending resolution of the issues of illegal strike and bargaining deadlock which are yet to be
heard, all the striking workers are directed to return to work within twenty-four (24) hours from
receipt of this Order and Philcom and/or Philcom Corporation are hereby directed to
unconditionally accept back to work all striking Union officers and members under the same
terms and conditions prior to the strike. The parties are directed to cease and desist from
committing any acts that may aggravate the situation.
Atty. Lita V. Aglibut, Officer-In-Charge of the Legal Service, this Department is hereby designated
as the Hearing Officer to hear and receive evidence on all matters and issues arising from the
present labor dispute and, thereafter, to submit a report/recommendation within twenty (20) days
from the termination of the proceedings.
The parties are further directed to file their respective position papers with Atty. Lita V. Aglibut
within ten (10) days from receipt of this Order.
SO ORDERED.5

Philcom Corporation ("Philcom") filed a motion for reconsideration. Philcom prayed for reconsideration of
the Order impleading it as party-litigant in the present case and directing it to accept back to work
unconditionally all the officers and members of the union who participated in the strike. 6 Philcom also filed
a Motion to Certify Labor Dispute to the National Labor Relations Commission for Compulsory
Arbitration.7
For its part, Philcom Employees Union (PEU) filed a Motion for Partial Reconsideration. PEU asked the
Secretary to "partially reconsider" the 2 October 1998 Order insofar as it dismissed the unfair labor
practices charges against Philcom and included the illegal strike issue in the labor dispute. 8
The Secretary denied both motions for reconsideration of Philcom and PEU in its assailed Order of 27
November 1998. The pertinent parts of the Order read:
The question of whether or not Philcom Corporation should be impleaded has been properly
disposed of in the assailed Order. We reiterate that neither the Company herein nor its
predecessor was able to convincingly establish that each is a separate entity in the absence of
any proof that there was indeed an actual closure and cessation of the operations of the
predecessor-company. We would have accommodated the Company for a hearing on the matter
had it been willing and prepared to submit evidence to controvert the finding that there was a
mere merger. As it now stands, nothing on record would prove that the two (2) companies are
separate and distinct from each other.
Having established that what took place was a mere merger, we correspondingly conclude that
the employer-employee relations between the Company and the Union officers and members
was never severed. And in merger, the employees of the merged companies or entities are
deemed absorbed by the new company (Filipinas Port Services, Inc. v. NLRC, et. al., G.R. No.
97237, August 16, 1991). Considering that the Company failed miserably to adduce any evidence
to provide a basis for a contrary ruling, allegations to the effect that employer-employee relations
and positions previously occupied by the workers no longer exist remain just that mere
allegations. Consequently, the Company cannot now exempt itself from compliance with the
Order. Neither can it successfully argue that the employees were validly dismissed. As held in
Telefunken Semiconductor Employees Union-FFW v. Secretary of Labor and Employment (G.R.
Nos. 122743 and 122715, December 12, 1997), to exclude the workers without first ascertaining
the extent of their individual participation in the strike or non-compliance with the return-to-work
orders will be tantamount to dismissal without due process of law.
With respect to the unfair labor practice charges against the Company, we have carefully
reviewed the records and found no reason to depart from the findings previously rendered. The
issues now being raised by the Union are the same issues discussed and passed upon in our
earlier Order.
Finally, it is our determination that the issue of the legality of the strike is well within the
jurisdiction of this Office. The same has been properly submitted and assumed jurisdiction by the
Office for resolution.9
The dispositive portion of the Order reads:

WHEREFORE, there being no merit in the remaining Motions for Reconsideration filed by both
parties, the same are hereby DENIED. Our 2 October 1998 Order STANDS. To expedite the
resolution of the Motion to Certify Labor Dispute to the NLRC for Compulsory Arbitration, Philcom
Employees Union is hereby directed to submit its Opposition thereto within ten (10) days from
receipt of the copy of this Order.
SO ORDERED.10
PEU filed with this Court a petition for certiorari and prohibition under Rule 65 of the Rules of Court
assailing the Secretary's Orders of 2 October 1998 and 27 November 1998. This Court, in accordance
with its Decision of 10 March 1999 in G.R. No. 123426 entitled National Federation of Labor (NFL) vs.
Hon. Bienvenido E. Laguesma, Undersecretary of the Department of Labor and Employment, and
Alliance of Nationalist Genuine Labor Organization, Kilusang Mayo Uno (ANGLO-KMU),11 referred the
case to the Court of Appeals.12
The Ruling of the Court of Appeals
On 31 July 2000, the Court of Appeals rendered judgment as follows:
WHEREFORE, PREMISES CONSIDERED, this petition is hereby DENIED. The assailed
portions of the Orders of the Secretary of Labor and Employment dated October 2, 1998 and
November 27, 1998 are AFFIRMED.
SO ORDERED.13
The Court of Appeals ruled that, contrary to PEU's view, the Secretary could take cognizance of an issue,
even only incidental to the labor dispute, provided the issue must be involved in the labor dispute itself or
otherwise submitted to him for resolution.
The Court of Appeals pointed out that the Secretary assumed jurisdiction over the labor dispute upon
Philcom's petition as a consequence of the strike that PEU had declared and not because of the notices
of strike that PEU filed with the National Conciliation and Mediation Board (NCMB).
The Court of Appeals stated that the reason of the Secretary's assumption of jurisdiction over the labor
dispute was the staging of the strike. Consequently, any issue regarding the strike is not merely incidental
to the labor dispute between PEU and Philcom, but also part of the labor dispute itself. Thus, the Court of
Appeals held that it was proper for the Secretary to take cognizance of the issue on the legality of the
strike.
The Court of Appeals also ruled that for an employee to claim an unfair labor practice by the employer,
the employee must show that the act charged as unfair labor practice falls under Article 248 of the Labor
Code. The Court of Appeals held that the acts enumerated in Article 248 relate to the workers' right to
self-organization. The Court of Appeals stated that if the act complained of has nothing to do with the acts
enumerated in Article 248, there is no unfair labor practice.
The Court of Appeals held that Philcom's acts, which PEU complained of as unfair labor practices, were
not in any way related to the workers' right to self-organization under Article 248 of the Labor Code. The
Court of Appeals held that PEU's complaint constitutes an enumeration of mere grievances which should

have been threshed out through the grievance machinery or voluntary arbitration outlined in the Collective
Bargaining Agreement (CBA).
The Court of Appeals also held that even if by Philcom's acts, Philcom had violated the provisions of the
CBA, still those acts do not constitute unfair labor practices under Article 248 of the Labor Code. The
Court of Appeals held that PEU failed to show that those violations were gross or that there was flagrant
or malicious refusal on the part of Philcom to comply with the economic provisions of the CBA.
The Court of Appeals stated that as of 21 March 1989, as held in PAL vs. NLRC, 14 violations of CBAs will
no longer be deemed unfair labor practices, except those gross in character. Violations of CBAs, except
those gross in character, are mere grievances resolvable through the appropriate grievance machinery or
voluntary arbitration as provided in the CBAs.
Hence, this petition.
The Issues
In assailing the Decision of the Court of Appeals, petitioner contends that:
1. The Honorable Court of Appeals has failed to faithfully adhere with the decisions of the
Supreme Court when it affirmed the order/resolution of the Secretary of Labor denying the
Union's Manifestation/Motion to Strike Out Portions of & Attachments in Philcom's Position Paper
and including the issue of illegal strike notwithstanding the absence of any petition to declare the
strike illegal.
2. The Honorable Court of Appeals has decided a question of substance in a way not in accord
with law and jurisprudence when it affirmed the order/resolution of the Secretary of Labor
dismissing the Union's charges of unfair labor practices.
3. The Honorable Court of Appeals has departed from the edict of applicable law and
jurisprudence when it failed to issue such order mandating/directing the issuance of a writ of
execution directing the Company to unconditionally accept back to work the Union officers and
members under the same terms and conditions prior to the strike and as well as to pay their
salaries/backwages and the monetary equivalent of their other benefits from October 6, 1998 to
date.15
The Ruling of the Court
The petition must fail.
PEU contends that the Secretary should not have taken cognizance of the issue on the alleged illegal
strike because it was not properly submitted to the Secretary for resolution. PEU asserts that after
Philcom submitted its position paper where it raised the issue of the legality of the strike, PEU
immediately opposed the same by filing its Manifestation/Motion to Strike Out Portions of and
Attachments in Philcom's Position Paper. PEU asserts that it stated in its Manifestation/Motion that
certain portions of Philcom's position paper and some of its attachments were "irrelevant, immaterial and
impertinent to the issues assumed for resolution." Thus, PEU asserts that the Court of Appeals should not
have affirmed the Secretary's order denying PEU's Manifestation/Motion.

PEU also contends that, contrary to the findings of the Court of Appeals, the Secretary's assumption of
jurisdiction over the labor dispute was based on the two notices of strike that PEU filed with the NCMB.
PEU asserts that only the issues on unfair labor practice and bargaining deadlock should be resolved in
the present case.
PEU insists that to include the issue on the legality of the strike despite its opposition would convert the
case into a petition to declare the strike illegal.
PEU's contentions are untenable.
The Secretary properly took cognizance of the issue on the legality of the strike. As the Court of Appeals
correctly pointed out, since the very reason of the Secretary's assumption of jurisdiction was PEU's
declaration of the strike, any issue regarding the strike is not merely incidental to, but is essentially
involved in, the labor dispute itself.
Article 263(g) of the Labor Code provides:
When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in
an industry indispensable to the national interest, the Secretary of Labor and Employment may
assume jurisdiction over the dispute and decide it or certify the same to the Commission for
compulsory arbitration. Such assumption or certification shall have the effect of automatically
enjoining the intended or impending strike or lockout as specified in the assumption or
certification order. If one has already taken place at the time of assumption or certification, all
striking or locked out employees shall immediately return to work and the employer shall
immediately resume operations and readmit all workers under the same terms and conditions
prevailing before the strike or lockout. The Secretary of Labor and Employment or the
Commission may seek the assistance of law enforcement agencies to ensure the compliance
with this provision as well as with such orders as he may issue to enforce the same.
x x x x.
The powers granted to the Secretary under Article 263(g) of the Labor Code have been characterized as
an exercise of the police power of the State, with the aim of promoting public good. 16 When the Secretary
exercises these powers, he is granted "great breadth of discretion" in order to find a solution to a
labor dispute. The most obvious of these powers is the automatic enjoining of an impending strike or
lockout or its lifting if one has already taken place. 17
In this case, the Secretary assumed jurisdiction over the dispute because it falls in an industry
indispensable to the national interest. As noted by the Secretary.
[T]he Company has been a vital part of the telecommunications industry for 73 years. It is
particularly noted for its expertise and dominance in the area of international telecommunications.
Thus, it performs a vital role in providing critical services indispensable to the national interest. It
is for this very reason that this Office strongly opines that any concerted action, particularly a
prolonged work stoppage is fraught with dire consequences. Surely, the on-going strike will
adversely affect not only the livelihood of workers and their dependents, but also the company's
suppliers and dealers, both in the public and private sectors who depend on the company's
facilities in the day-to-day operations of their businesses and commercial transactions. The

operational viability of the company is likewise adversely affected, especially its expansion
program for which it has incurred debts in the approximate amount of P2 Billion. Any prolonged
work stoppage will also bring about substantial losses in terms of lost tax revenue for the
government and would surely pose a serious set back in the company's modernization program.
At this critical time when government is working to sustain the economic gains already achieved,
it is the paramount concern of this Office to avert any unnecessary work stoppage and, if one has
already occurred, to minimize its deleterious effect on the workers, the company, the industry and
national economy as a whole.18
It is of no moment that PEU never acquiesced to the submission for resolution of the issue on the legality
of the strike. PEU cannot prevent resolution of the legality of the strike by merely refusing to submit the
issue for resolution. It is also immaterial that this issue, as PEU asserts, was not properly submitted for
resolution of the Secretary.
The authority of the Secretary 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 from such labor dispute. The power is plenary and discretionary in
nature to enable him to effectively and efficiently dispose of the dispute.19
Besides, it was upon Philcom's petition that the Secretary immediately assumed jurisdiction over the labor
dispute on 19 November 1997.20 If petitioner's notices of strike filed on 21 October and 4 November 1997
were what prompted the assumption of jurisdiction, the Secretary would have issued the assumption
order as early as those dates.
Moreover, after an examination of the position paper21 Philcom submitted to the Secretary, we see no
reason to strike out those portions which PEU seek to expunge from the records. A careful study of all the
facts alleged, issues raised, and arguments presented in the position paper leads us to hold that the
portions PEU seek to expunge are necessary in the resolution of the present case.
On the documents attached to Philcom's position paper, except for Annexes MM-2 to MM-22
inclusive22 which deal with the supposed consolidation of Philippine Global Communications, Inc. and
Philcom Corporation, we find the other annexes relevant and material in the resolution of the issues that
have emerged in this case.
PEU also claims that Philcom has committed several unfair labor practices. PEU asserts that there are
"factual and evidentiary bases" for the charge of unfair labor practices against Philcom.
On unfair labor practices of employers, Article 248 of the Labor Code provides:
Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of the
following unfair labor practice:
(a) To interfere with, restrain or coerce employees in the exercise of their right to selforganization;
(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 rights 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. x x x
(f) To dismiss, discharge, or otherwise prejudice or discriminate against an employee for having
given or being about to give testimony under this Code;
(g) To violate the duty to bargain collectively as prescribed by this Code;
(h) To pay negotiation or attorney's fees to the union or its officers or agents as part of the
settlement of any issue in collective bargaining or any other dispute; or
(i) To violate a collective bargaining agreement.
Unfair labor practice refers to acts that violate the workers' right to organize. The prohibited acts are
related to the workers' right to self-organization and to the observance of a CBA. Without that element,
the acts, no matter how unfair, are not unfair labor practices. 23 The only exception is Article 248(f), which
in any case is not one of the acts specified in PEU's charge of unfair labor practice.
A review of the acts complained of as unfair labor practices of Philcom convinces us that they do not fall
under any of the prohibited acts defined and enumerated in Article 248 of the Labor Code. The issues of
misimplementation or non-implementation of employee benefits, non-payment of overtime and other
monetary claims, inadequate transportation allowance, water, and other facilities, are all a matter of
implementation or interpretation of the economic provisions of the CBA between Philcom and PEU
subject to the grievance procedure.
We find it pertinent to quote certain portions of the assailed Decision, thus
A reading of private respondent's justification for the acts complained of would reveal that they
were actually legitimate reasons and not in anyway related to union busting. Hence, as to
compelling employees to render flexible labor and additional work without additional
compensation, it is the company's explanation that the employees themselves voluntarily took on
work pertaining to other assignments but closely related to their job description when there was
slack in the business which caused them to be idle. This was the case of the International
Telephone Operators who tried telemarketing when they found themselves with so much free time
due to the slowdown in the demand for international line services. With respect to the Senior
Combination Technician at the Cebu branch who was allegedly made to do all around work, the
same happened only once when the lineman was absent and the lineman's duty was his ultimate
concern. Moreover, the new assignment of the technicians at CTSS who were promoted to QCE
were based on the job description of QCE, while those of the other technicians were merely
temporary due to the promotion of several technicians to QCE (pars. 9-12, Philcom's Reply to
PEU's Position Paper; Annex "E", Petition; pp. 350-351, ibid.).

On the alleged misimplementation and/or non-implementation of employees' benefits, such as

shoe allowance, rainboots, raincoats, OIC shift allowance, P450.00 monthly allowance, driving
allowance, motorcycle award and full-time physician, the company gave the following explanation
which this Court finds plausible, to wit:
16. The employees at CTSS were given One Thousand Pesos (P1,000.00) cash or its
equivalent in purchase orders because it was their own demand that they be given the
option to buy the pair of leather boots they want. For the Cebu branch, the employees
themselves failed to include these benefits in the list of their demands during the
preparation of the budget for the year 1997 despite the instruction given to them by the
branch manager. According to the employees, they were not aware that they were
entitled to these benefits. They thought that because they have been provided with two
vans to get to their respective assignments, these benefits are available only to
collectors, messengers and technicians in motorcycles.
17. The P450.00 monthly allowance was provided by the CBA to be given to counter
clerks. However, the position of counter clerks had been abolished in accordance with the
reorganization plan undertaken by the company in April 1995, with the full knowledge of
the Union membership. As a result of the abolition of the position of counter clerks, there
was no more reason for granting the subject allowance.
18. The company more than satisfied the provision in the CBA to engage the services of
a physician and provided adequate medical services. Aside from a part time physician
who reports for duty everyday, the company has secured the services of Prolab
Diagnostics, which has complete medical facilities and personnel, to serve the medical
needs of the employees. x x x
19. The Union demands that a full-time physician to be assigned at the Head Office. This
practice, is not provided in the CBA and, moreover is too costly to maintain. The medical
services offered by Prolab [D]iagnostics are even better and more comprehensive than
any full time physician can give. It places at the employees' disposal numerous
specialists in various fields of medicine. It is beyond understanding why the Union would
insist on having a full-time physician when they could avail of better services from Prolab
Diagnostics.
(Philcom's Reply to PEU's Position Paper, pp.352, 354, ibid.)
On the issue of non-payment, discrimination and/or deprivation of overtime, restday work,
waiting/stand by time and staff meeting allowance, suffice it to state that there is nothing on
record to prove the same. Petitioner did not present evidence substantial enough to support its
claim.
As to the alleged inadequate transportation allowance and facilities, the company posits that:
30. The transportation allowances given to the Dasmarinas and Pinugay employees are
more than adequate to defray their daily transportation cost. Hence, there is absolutely
no justification for an increase in the said allowance. In fact, said employees at
Dasmarinas and Pinugay, who are only residing in areas near their place of work, are

more privileged as they receive transportation expenses while the rest of the company
workers do not.
31. As to the demand for clean drinking water, the company has installed sufficient and
potable water inside the Head Office even before the strike was staged by the Union. Any
person who visits the Makati Head Office can attest to this fact.
(Philcom's Reply to PEU's Position Paper, p. 357, ibid.)
Anent the allegation of PABX transfer and contractualization of PABX service and position, these
were done in anticipation of the company to switch to an automatic PABX machine which requires
no operator. This cannot be treated as ULP since management is at liberty, absent any malice on
its part, to abolish positions which it deems no longer necessary (Arrieta vs. National Labor
Relations Commission, 279 SCRA 326, 332). Besides, at the time the company hired a temporary
employee to man the machine during daytime, the subject position was vacant while the
assumption of the function by the company guard during nighttime was only for a brief period.
With respect to the perceived massive contractualization of the company, said charge cannot be
considered as ULP since the hiring of contractual workers did not threaten the security of tenure
of regular employees or union members. That only 160 employees out of 400 employees in the
company's payroll were considered rank and file does not of itself indicate unfair labor practice
since this is but a company prerogative in connection with its business concerns.
Likewise, the offer or promotions to a few union members is neither unlawful nor an economic
inducement. These offers were made in accordance with the legitimate need of the company for
the services of these employees to fill positions left vacant by either retirement or resignation of
other employees. Besides, a promotion is part of the career growth of employees found
competent in their work. Thus, in Bulletin Publishing Corporation vs. Sanchez (144 SCRA 628,
641), the Supreme Court held that "(T)he promotion of employees to managerial or executive
positions rests upon the discretion of management. Managerial positions are offices which can
only be held by persons who have the trust of the corporation and its officers. It is the prerogative
of management to promote any individual working within the company to a higher position. It
should not be inhibited or prevented from doing so. A promotion which is manifestly beneficial to
an employee should not give rise to a gratuitous speculation that such a promotion was made
simply to deprive the union of the membership of the promoted employee, who after all appears
to have accepted his promotion."
That the promotions were made near or around the time when CBA negotiations were about to be
held does not make the company's action an unfair labor practice. As explained by the company,
these promotions were based on the availability of the position and the qualification of the
employees promoted (p. 6, Annex "4", Philcom's Reply to PEU's Position Paper; p. 380, ibid.)
On the union's charge that management disallowed leave of union officers and members to
attend union seminar, this is belied by the evidence submitted by the union itself. In a letter to
PEU's President, the company granted the leave of several union officers and members to attend
a seminar notwithstanding that its request to be given more details about the affair was left
unheeded by the union (Annex "Y", PEU's Position Paper; p. 222, ibid.). Those who were denied
leave were urgently needed for the operation of the company.

On the ULP issue of disinformation scheme, surveillance and interference with union affairs,
these are mere allegations unsupported by facts. The charge of "black propaganda" allegedly
committed by the company when it supposedly posted two (2) letters addressed to the Union
President is totally baseless. Petitioner presents no proof that it was the company which was
behind the incident. On the purported disallowance of union members to observe the July 27,
1997 CBA meeting, the company explained that it only allowed one (1) employee from ITTO,
instead of two (2), as it would adversely affect the operation of the group. It also took into
consideration the fact that ITTO members represent only 20% of the union. Other union members
from other departments of the company should have equal representation (Annex "L", Position
Paper for the Union; pp. 205-206, ibid.). As to the alleged surveillance of the company guards
during a union seminar, We find the idea of sending guards to spy on a mere union seminar quite
preposterous. It is thus not likely for the company which can gain nothing from it to waste its
resources in such a scheme.
On the issuance of memorandum/notice to employees without giving copy to union, change in
work schedule at Traffic Records Section and ITTO policies, the company has sufficiently
rebutted the same, thus:
27. The Union also whines about the failure of the company to furnish copies of
memoranda or notices sent to employees and change of work schedules at the Traffic
Records Section and ITTO policies. The CBA, however, does not obligate the Company
to give the Union a copy of each and every memorandum or notice sent to employees.
This would be unreasonable and impractical. Neither did the Union demand that they be
furnished copies of the same. This is clearly a non-issue as copies of all memoranda or
notices issued by management are readily available upon request by any employee or
the Union.
28. Contrary to the allegations of the Union, the rationale and mechanics for the
abolishment of the midnight schedule at the Traffic Record Services had been thoroughly
and adequately discussed with the Union's President, Robert Benosa, and the staff of
Traffic Record Services in the meeting held on May 9, 1997. The midnight services were
abolished for purely economic reasons. The company realized that the midnight work can
be handled in the morning without hampering normal operations. At the same time, the
company will be able to save on cost. For this objective, the employees concerned
agreed to create a manning and shifting schedule starting at 6:00 a.m. up to 10:00 p.m.,
with each employee rendering only eight hours of work every day without violating any
provision of the labor laws or the CBA.24
The Court has always respected a company's exercise of its prerogative to devise means to improve its
operations. Thus, we have held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, supervision and transfer of
employees, working methods, time, place and manner of work. 25
This is so because the law on unfair labor practices is not intended to deprive employers of their
fundamental right to prescribe and enforce such rules as they honestly believe to be necessary to the
proper, productive and profitable operation of their business. 26

Even assuming arguendo that Philcom had violated some provisions in the CBA, there was no showing
that the same was a flagrant or malicious refusal to comply with its economic provisions. The law
mandates that such violations should not be treated as unfair labor practices. 27
PEU also asserts that the Court of Appeals should have issued an order directing the issuance of a writ of
execution ordering Philcom to accept back to work unconditionally the striking union officers and
members under the same terms and conditions prevailing before the strike. PEU asserts that the union
officers and members should be paid their salaries or backwages and monetary equivalent of other
benefits beginning 6 October 1998 when PEU received a copy of the Secretary's 2 October 1998 returnto-work order.
PEU claims that even if the "issue of illegal strike can be included in the assailed orders and that the
union officers and members have been terminated as a result of the alleged illegal strike, still, the
Secretary has to rule on the illegality of the strike and the liability of each striker." PEU asserts that the
union officers and members should first be accepted back to work because a return-to-work order is
immediately executory.28
We rule on the legality of the strike if only to put an end to this protracted labor dispute. The facts
necessary to resolve the legality of the strike are not in dispute.
The strike and the strike activities that PEU had undertaken were patently illegal for the following reasons:
1. Philcom is engaged in a vital industry protected by Presidential Decree No. 823 (PD 823), as amended
by Presidential Decree No. 849, from strikes and lockouts. PD 823, as amended, provides:
Sec. 1. It is the policy of the State to encourage free trade unionism and free collective bargaining
within the framework of compulsory and voluntary arbitration. Therefore, all forms of strikes,
picketings and lockouts are hereby strictly prohibited in vital industries, such as in public utilities,
including transportation and communications, x x x. (Emphasis supplied)
Enumerating the industries considered as vital, Letter of Instruction No. 368 provides:
For the guidance of workers and employers, some of whom have been led into filing notices of
strikes and lockouts even in vital industries, you are hereby instructed to consider the following as
vital industries and companies or firms under PD 823 as amended:
1. Public Utilities:
xxxx
B. Communications:
1) Wire or wireless telecommunications such as telephone, telegraph,
telex, and cable companies or firms; (Emphasis supplied)
xxxx

It is therefore clear that the striking employees violated the no-strike policy of the State in regard to vital
industries.
2. The Secretary had already assumed jurisdiction over the dispute. Despite the issuance of the returnto-work orders dated 19 November and 28 November 1997, the striking employees failed to return
to work and continued with their strike.
Regardless of their motives, or the validity of their claims, the striking employees should have ceased or
desisted from all acts that would undermine the authority given the Secretary under Article 263(g) of the
Labor Code. They could not defy the return-to-work orders by citing Philcom's alleged unfair labor
practices to justify such defiance.29
PEU could not have validly anchored its defiance to the return-to-work orders on the motion for
reconsideration that it had filed on the assumption of jurisdiction order. A return-to-work order is
immediately effective and executory despite the filing of a motion for reconsideration. It must be
strictly complied with even during the pendency of any petition questioning its validity.30
The records show that on 22 November 1997, Philcom published in the Philippine Daily Inquirer a notice
to striking employees to return to work.31 These employees did not report back to work but continued their
mass action. In fact, they lifted their picket lines only on 22 December 1997. 32 Philcom formally
notified twice these employees to explain in writing why they should not be dismissed for defying the
return-to-work order.33 Philcom held administrative hearings on these disciplinary cases. 34 Thereafter,
Philcom dismissed these employees for abandonment of work in defiance of the return-to-work order. 35
A return-to-work order imposes a duty that must be discharged more than it confers a right that may be
waived. While the workers may choose not to obey, they do so at the risk of severing their relationship
with their employer.36
The following provision of the Labor Code governs the effects of defying a return-to-work order:
ART. 264. Prohibited activities. (a) x x x x
No strike or lockout shall be declared after assumption of jurisdiction by the President or
the Minister or after certification or submission of the dispute to compulsory or voluntary
arbitration or during the pendency of cases involving the same grounds for the strike or lockout x
xxx
Any union officer who knowingly participates in illegal strike and any worker or union officer
who knowingly participates in the commission of illegal acts during a strike may be
declared to have lost his employment status: Provided, That mere participation of a worker in
a lawful strike, shall not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike. (Emphasis supplied)
A strike undertaken despite the Secretary's issuance of an assumption or certification order becomes
a prohibited activity, and thus, illegal, under Article 264(a) of the Labor Code. The union officers who
knowingly participate in the illegal strike are deemed to have lost their employment status. The union
members, including union officers, who commit specific illegal acts or who knowingly defy a return-towork order are also deemed to have lost their employment status. 37 Otherwise, the workers will simply

refuse to return to their work and cause a standstill in the company operations while retaining the
positions they refuse to discharge and preventing management to fill up their positions. 38
Hence, the failure of PEU's officers and members to comply immediately with the return-to-work orders
dated 19 November and 28 November 1997 cannot be condoned. Defiance of the return-to-work
orders of the Secretary constitutes a valid ground for dismissal.39
3. PEU staged the strike using unlawful means and methods.
Even if the strike in the present case was not illegal per se, the strike activities that PEU had undertaken,
especially the establishment of human barricades at all entrances to and egresses from the company
premises and the use of coercive methods to prevent company officials and other personnel from leaving
the company premises, were definitely illegal.40 PEU is deemed to have admitted that its officers and
members had committed these illegal acts, as it never disputed Philcom's assertions of PEU's unlawful
strike activities in all the pleadings that PEU submitted to the Secretary and to this Court.
PEU's picketing officers and members prohibited other tenants at the Philcom building from entering and
leaving the premises. Leonida S. Rabe, Country Manager of Societe Internationale De
Telecommunications Aeronautiques(SITA), a tenant at the Philcom building, wrote two letters addressed
to PEU President Roberto B. Benosa. She told Benosa that PEU's act of obstructing the free ingress to
and egress from the company premises "has badly disrupted normal operations of their organization." 41
The right to strike, while constitutionally recognized, is not without legal constrictions. Article 264(e) of the
Labor Code, on prohibited activities, provides:
No person engaged in picketing shall commit any act of violence, coercion or intimidation or
obstruct the free ingress to or egress from the employer's premises for lawful purposes, or
obstruct public thoroughfares.
The Labor Code is emphatic against the use of violence, coercion, and intimidation during a strike and to
this end prohibits the obstruction of free passage to and from the employer's premises for lawful
purposes. A picketing labor union has no right to prevent employees of another company from getting in
and out of its rented premises, otherwise, it will be held liable for damages for its acts against an innocent
by-stander.42
The sanction provided in Article 264(a) is so severe that any worker or union officer who knowingly
participates in the commission of illegal acts during a strike may be declared to have lost his employment
status.43
By insisting on staging the prohibited strike and defiantly picketing Philcom's premises to prevent the
resumption of company operations, the striking employees have forfeited their right to be readmitted. 44
4. PEU declared the strike during the pendency of preventive mediation proceedings at the NCMB.
On 17 November 1997, while a conciliation meeting was being held at the NCMB in NCMB-NCR-NS 10435-97, PEU went on strike. It should be noted that in their meeting on 11 November 1997, both Philcom
and PEU were even "advised to maintain the status quo." 45 Such disregard of the mediation proceedings
was a blatant violation of Section 6, Book V, Rule XXII of the Omnibus Rules Implementing the Labor

Code, which explicitly obliges the parties to bargain collectively in good faith and prohibits them from
impeding or disrupting the proceedings.46 The relevant provision of the Implementing Rules provides:
Section 6. Conciliation. x x x x
During the proceedings, the parties shall not do any act which may disrupt or impede the early
settlement of dispute. They are obliged, as part of their duty, to bargain collectively in good faith,
to participate fully and promptly in the conciliation meetings called by the regional branch of the
Board. x x x x
Article 264(a) of the Labor Code also considers it a prohibited activity to declare a strike "during the
pendency of cases involving the same grounds for the same strike."
Lamentably, PEU defiantly proceeded with their strike during the pendency of the conciliation
proceedings.
5. PEU staged the strike in utter disregard of the grievance procedure established in the CBA.
By PEU's own admission, "the Union's complaints to the management began in June 1997 even before
the start of the 1997 CBA renegotiations."47 Their CBA expired on 30 June 1997.48 PEU could have just
taken up their grievances in their negotiations for the new CBA. This is what a Philcom officer had
suggested to the Dasmarias staff when the latter requested on 16 June 1997 for an increase in
transportation allowance.49 In fact, when PEU declared the strike, Philcom and PEU had already agreed
on 37 items in their negotiations for the new CBA.50
The bottom line is that PEU should have immediately resorted to the grievance machinery provided for in
the CBA.51 In disregarding this procedure, the union leaders who knowingly participated in the strike have
acted unreasonably. The law cannot interpose its hand to protect them from the consequences of their
illegal acts.52
A strike declared on the basis of grievances which have not been submitted to the grievance committee
as stipulated in the CBA of the parties is premature and illegal. 53
Having held the strike illegal and having found that PEU's officers and members have committed illegal
acts during the strike, we hold that no writ of execution should issue for the return to work of PEU officers
who participated in the illegal strike, and PEU members who committed illegal acts or who defied the
return-to-work orders that the Secretary issued on 19 November 1997 and 28 November 1997. The issue
of who participated in the illegal strike, committed illegal acts, or defied the return-to-work orders is a
question of fact that must be resolved in the appropriate proceedings before the Secretary of Labor.
WHEREFORE, we DISMISS the petition and AFFIRM the Decision of the Court of Appeals in CA-G.R.
SP No. 53989, with the MODIFICATION that the Secretary of Labor is directed to determine who among
the Philcom Employees Union officers participated in the illegal strike, and who among the union
members committed illegal acts or defied the return-to-work orders of 19 November 1997 and 28
November 1997. No pronouncement as to costs.
SO ORDERED.

--------------------------------------

112. Culili v Eastern Communication

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165381

February 9, 2011

NELSON A. CULILI, Petitioner,

vs.
EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., SALVADOR HIZON (President and Chief
Executive Officer), EMILIANO JURADO (Chairman of the Board), VIRGILIO GARCIA (Vice
President) and STELLA GARCIA (Assistant Vice President), Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
Before Us is a petition for review on certiorari1 of the February 5, 2004 Decision2 and September 13, 2004
Resolution3 of the Court of Appeals in CA-G.R. SP No. 75001, wherein the Court of Appeals set aside the
March 1, 2002 Decision4 and September 24, 2002 Resolution5 of the National Labor Relations
Commission (NLRC), which affirmed the Labor Arbiters Decision 6 dated April 30, 2001.
Respondent Eastern Telecommunications Philippines, Inc. (ETPI) is a telecommunications company
engaged mainly in the business of establishing commercial telecommunications systems and leasing of
international datalines or circuits that pass through the international gateway facility (IGF). 7 The other
respondents are ETPIs officers: Salvador Hizon, President and Chief Executive Officer; Emiliano Jurado,
Chairman of the Board; Virgilio Garcia, Vice President; and Stella Garcia, Assistant Vice President.
Petitioner Nelson A. Culili (Culili) was employed by ETPI as a Technician in its Field Operations
Department on January 27, 1981. On December 12, 1996, Culili was promoted to Senior Technician in
the Customer Premises Equipment Management Unit of the Service Quality Department and his basic
salary was increased.8
As a telecommunications company and an authorized IGF operator, ETPI was required, under Republic
Act. No. 7925 and Executive Order No. 109, to establish landlines in Metro Manila and certain
provinces.9 However, due to interconnection problems with the Philippine Long Distance Telephone
Company (PLDT), poor subscription and cancellation of subscriptions, and other business difficulties,
ETPI was forced to halt its roll out of one hundred twenty-nine thousand (129,000) landlines already
allocated to a number of its employees.10
In 1998, due to business troubles and losses, ETPI was compelled to implement a Right-Sizing Program
which consisted of two phases: the first phase involved the reduction of ETPIs workforce to only those
employees that were necessary and which ETPI could sustain; the second phase entailed a companywide reorganization which would result in the transfer, merger, absorption or abolition of certain
departments of ETPI.11
As part of the first phase, ETPI, on December 10, 1998, offered to its employees who had rendered at
least fifteen years of service, the Special Retirement Program, which consisted of the option to voluntarily

retire at an earlier age and a retirement package equivalent to two and a half (2) months salary for
every year of service.12This offer was initially rejected by the Eastern Telecommunications Employees
Union (ETEU), ETPIs duly recognized bargaining agent, which threatened to stage a strike. ETPI
explained to ETEU the exact details of the Right-Sizing Program and the Special Retirement Program and
after consultations with ETEUs members, ETEU agreed to the implementation of both programs. 13 Thus,
on February 8, 1999, ETPI re-offered the Special Retirement Program and the corresponding retirement
package to the one hundred two (102) employees who qualified for the program. 14 Of all the employees
who qualified to avail of the program, only Culili rejected the offer.15
After the successful implementation of the first phase of the Right-Sizing Program, ETPI, on March 1,
1999 proceeded with the second phase which necessitated the abolition, transfer and merger of a number
of ETPIs departments.16
Among the departments abolished was the Service Quality Department. The functions of the Customer
Premises Equipment Management Unit, Culilis unit, were absorbed by the Business and Consumer
Accounts Department. The abolition of the Service Quality Department rendered the specialized functions
of a Senior Technician unnecessary. As a result, Culilis position was abolished due to redundancy and his
functions were absorbed by Andre Andrada, another employee already with the Business and Consumer
Accounts Department.17
On March 5, 1999, Culili discovered that his name was omitted in ETPIs New Table of Organization.
Culili, along with three of his co-employees who were similarly situated, wrote their union president to
protest such omission.18
In a letter dated March 8, 1999, ETPI, through its Assistant Vice President Stella Garcia, informed Culili of
his termination from employment effective April 8, 1999. The letter reads:
March 8, 1999
To: N. Culili
Thru: S. Dobbin/G. Ebue
From: AVP-HRD
-----------------------------------------------------------------------------------------As you are aware, the current economic crisis has adversely affected our operations and undermined our
earlier plans to put in place major work programs and activities. Because of this, we have to implement a
Rightsizing Program in order to cut administrative/operating costs and to avoid losses. In line with this
program, your employment with the company shall terminate effective at the close of business hours on
April 08, 1999. However, to give you ample time to look for other employment, provided you have amply
turned over your pending work and settled your accountabilities, you are no longer required to report to
work starting tomorrow. You will be considered on paid leave until April 08, 1999.
You will likewise be paid separation pay in compliance with legal requirements (see attached), as well as
other benefits accruing to you under the law, and the CBA. We take this opportunity to thank you for your
services and wish you well in your future endeavors.
(Signed)
Stella J. Garcia19

This letter was similar to the memo shown to Culili by the union president weeks before Culili was
dismissed. The memo was dated December 7, 1998, and was advising him of his dismissal effective
January 4, 1999 due to the Right-Sizing Program ETPI was going to implement to cut costs and avoid
losses.20
Culili alleged that neither he nor the Department of Labor and Employment (DOLE) were formally notified
of his termination. Culili claimed that he only found out about it sometime in March 1999 when Vice
President Virgilio Garcia handed him a copy of the March 8, 1999 letter, after he was barred from entering
ETPIs premises by its armed security personnel when he tried to report for work. 21 Culili believed that
ETPI had already decided to dismiss him even prior to the March 8, 1999 letter as evidenced by the
December 7, 1998 version of that letter. Moreover, Culili asserted that ETPI had contracted out the
services he used to perform to a labor-only contractor which not only proved that his functions had not
become unnecessary, but which also violated their Collective Bargaining Agreement (CBA) and the Labor
Code. Aside from these, Culili also alleged that he was discriminated against when ETPI offered some of
his co-employees an additional benefit in the form of motorcycles to induce them to avail of the Special
Retirement Program, while he was not.22
ETPI denied singling Culili out for termination. ETPI claimed that while it is true that they offered the
Special Retirement Package to reduce their workforce to a sustainable level, this was only the first phase
of the Right-Sizing Program to which ETEU agreed. The second phase intended to simplify and
streamline the functions of the departments and employees of ETPI. The abolition of Culilis department the Service Quality Department - and the absorption of its functions by the Business and Consumer
Accounts Department were in line with the programs goals as the Business and Consumer Accounts
Department was more economical and versatile and it was flexible enough to handle the limited functions
of the Service Quality Department. ETPI averred that since Culili did not avail of the Special Retirement
Program and his position was subsequently declared redundant, it had no choice but to terminate
Culili.23 Culili, however, continued to report for work. ETPI said that because there was no more work for
Culili, it was constrained to serve a final notice of termination 24 to Culili, which Culili ignored. ETPI alleged
that Culili informed his superiors that he would agree to his termination if ETPI would give him certain
special work tools in addition to the benefits he was already offered. ETPI claimed that Culilis counteroffer was unacceptable as the work tools Culili wanted were worth almost a million pesos. Thus, on March
26, 1999, ETPI tendered to Culili his final pay check of Eight Hundred Fifty-Nine Thousand Thirty-Three
and 99/100 Pesos (P859,033.99) consisting of his basic salary, leaves, 13th month pay and separation
pay.25 ETPI claimed that Culili refused to accept his termination and continued to report for work. 26 ETPI
denied hiring outside contractors to perform Culilis work and denied offering added incentives to its
employees to induce them to retire early. ETPI also explained that the December 7, 1998 letter was never
given to Culili in an official capacity. ETPI claimed that it really needed to reduce its workforce at that time
and that it had to prepare several letters in advance in the event that none of the employees avail of the
Special Retirement Program. However, ETPI decided to wait for a favorable response from its employees
regarding the Special Retirement Program instead of terminating them. 27
On February 8, 2000, Culili filed a complaint against ETPI and its officers for illegal dismissal, unfair labor
practice, and money claims before the Labor Arbiter.
On April 30, 2001, the Labor Arbiter rendered a decision finding ETPI guilty of illegal dismissal and unfair
labor practice, to wit:
WHEREFORE, decision is hereby rendered declaring the dismissal of complainant Nelson A. Culili illegal
for having been made through an arbitrary and malicious declaration of redundancy of his position and for
having been done without due process for failure of the respondent to give complainant and the DOLE
written notice of such termination prior to the effectivity thereof.
In view of the foregoing, respondents Eastern Telecommunications Philippines and the individual
respondents are hereby found guilty of unfair labor practice/discrimination and illegal dismissal and
ordered to pay complainant backwages and such other benefits due him if he were not illegally dismissed,

including moral and exemplary damages and 10% attorneys fees. Complainant likewise is to be
reinstated to his former position or to a substantially equivalent position in accordance with the pertinent
provisions of the Labor Code as interpreted in the case of Pioneer texturing [Pioneer Texturizing Corp. v.
National Labor Relations Commission], G.R. No. 11865[1], 16 October 1997. Hence, Complainant must
be paid the total amount of TWO MILLION SEVEN HUNDRED FORTY[-]FOUR THOUSAND THREE
[HUNDRED] SEVENTY[-] NINE and 41/100 (P2,744,379.41), computed as follows:
I. Backwages (from 16 March 1999 to 16 March 2001)
a. Basic Salary (P29,030 x 24 mos.)

P696,720.96

b. 13th Month Pay (P692,720.96/12)

58,060.88

c. Leave Benefits

d.

1. Vacation Leave (30 days/annum) P1,116.54 x 60 days

66,992.40

2. Sick Leave (30 days/annum) P1,116.54 x 60 days

66,992.40

3. Birthday Leave (1 day/annum) P1,116.54 x 2 days

2,233.08

Rice and Meal Subsidy 16 March 31 July 1999

(P1,750 x 4.5 mos. = P7,875.00)
01 August 1991 31 July 2000
(P1,850 x 12 mos = P22,200.00)
01 August 2000 16 March 2001
(P1,950 x 7.5 mos. = P14,625.00)

44,700.00

e. Uniform Allowance
P7,000/annum x 2 years

14,000.00
P949,699.72

II. Damages
a. Moral P500,000.00
b. Exemplary P250,000.00
III. Attorneys Fees (10% of award)
GRAND TOTAL:

94,969.97
P2,744,379.4128

The Labor Arbiter believed Culilis claim that ETPI intended to dismiss him even before his position was
declared redundant. He found the December 7, 1998 letter to be a telling sign of this intention. The Labor
Arbiter held that a reading of the termination letter shows that the ground ETPI was actually invoking was
retrenchment and not redundancy, but ETPI stuck to redundancy because it was easier to prove than
retrenchment. He also did not believe that Culilis functions were as limited as ETPI made it appear to be,
and held that ETPI failed to present any reasonable criteria to justify the declaration of Culilis position as
redundant. On the issue of unfair labor practice, the Labor Arbiter agreed that the contracting out of
Culilis functions to non-union members violated Culilis rights as a union member. Moreover, the Labor
Arbiter said that ETPI was not able to dispute Culilis claims of discrimination and subcontracting, hence,
ETPI was guilty of unfair labor practice.
On appeal, the NLRC affirmed the Labor Arbiters decision but modified the amount of moral and
exemplary damages awarded, viz:

WHEREFORE, the Decision appealed from is AFFIRMED granting complainant the money claims prayed
for including full backwages, allowances and other benefits or their monetary equivalent computed from
the time of his illegal dismissal on 16 March 1999 up to his actual reinstatement except the award of
moral and exemplary damages which is modified to P200,000.00 for moral and P100,000.00 for
exemplary damages. For this purpose, this case is REMANDED to the Labor Arbiter for computation of
backwages and other monetary awards to complainant. 29
ETPI filed a Petition for Certiorari under Rule 65 of the Rules of Civil Procedure before the Court of
Appeals on the ground of grave abuse of discretion. ETPI prayed that a Temporary Restraining Order be
issued against the NLRC from implementing its decision and that the NLRC decision and resolution be
set aside.
The Court of Appeals, on February 5, 2004, partially granted ETPIs petition. The dispositive portion of the
decision reads as follows:
WHEREFORE, all the foregoing considered, the petition is PARTIALLY GRANTED. The assailed Decision
of public respondent National Labor Relations Commission is MODIFIED in that petitioner Eastern
Telecommunications Philippines Inc. (ETPI) is hereby ORDERED to pay respondent Nelson Culili full
backwages from the time his salaries were not paid until the finality of this Decision plus separation pay in
an amount equivalent to one (1) month salary for every year of service. The awards for moral and
exemplary damages are DELETED. The Writ of Execution issued by the Labor Arbiter dated September
8, 2003 is DISSOLVED.30
The Court of Appeals found that Culilis position was validly abolished due to redundancy. The Court of
Appeals said that ETPI had been very candid with its employees in implementing its Right-Sizing
Program, and that it was highly unlikely that ETPI would effect a company-wide reorganization simply for
the purpose of getting rid of Culili. The Court of Appeals also held that ETPI cannot be held guilty of unfair
labor practice as mere contracting out of services being performed by union members does not per
se amount to unfair labor practice unless it interferes with the employees right to self-organization. The
Court of Appeals further held that ETPIs officers cannot be held liable absent a showing of bad faith or
malice. However, the Court of Appeals found that ETPI failed to observe the standards of due process as
required by our laws when it failed to properly notify both Culili and the DOLE of Culilis termination. The
Court of Appeals maintained its position in its September 13, 2004 Resolution when it denied Culilis
Motion for Reconsideration and Urgent Motion to Reinstate the Writ of Execution issued by the Labor
Arbiter, and ETPIs Motion for Partial Reconsideration.
Culili is now before this Court praying for the reversal of the Court of Appeals decision and the
reinstatement of the NLRCs decision based on the following grounds:
I
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH THE
APPLICABLE LAW AND JURISPRUDENCE WHEN IT REVERSED THE DECISIONS OF THE NLRC
AND THE LABOR ARBITER HOLDING THE DISMISSAL OF PETITIONER ILLEGAL IN THAT:
A. CONTRARY TO THE FINDINGS OF THE COURT OF APPEALS, RESPONDENTS
CHARACTERIZATION OF PETITIONERS POSITION AS REDUNDANT WAS TAINTED BY BAD FAITH.
B. THERE WAS NO ADEQUATE JUSTIFICATION TO DECLARE PETITIONERS POSITION AS
REDUNDANT.
II

THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN FINDING THAT NO UNFAIR LABOR PRACTICE ACTS WERE COMMITTED
AGAINST THE PETITIONER.
III
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN DELETING THE AWARD OF MORAL AND EXEMPLARY DAMAGES AND
ATTORNEYS FEES IN FAVOR OF PETITIONER AND IN DISSOLVING THE WRIT OF EXECUTION
DATED 8 SEPTEMBER 2003 ISSUED BY THE LABOR ARBITER.
IV
THE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE NOT IN ACCORD WITH LAW
AND JURISPRUDENCE IN ABSOLVING THE INDIVIDUAL RESPONDENTS OF PERSONAL LIABILITY.
V
CONTRARY TO APPLICABLE LAW AND JURISPRUDENCE, THE COURT OF APPEALS, IN A
CERTIORARI PROCEEDING, REVIEWED THE FACTUAL FINDINGS OF THE NLRC WHICH
AFFIRMED THAT OF THE LABOR ARBITER AND, THEREAFTER, ISSUED A WRIT OF CERTIORARI
REVERSING THE DECISIONS OF THE NLRC AND THE LABOR ARBITER EVEN IN THE ABSENCE
OF GRAVE ABUSE OF DISCRETION.31
Procedural Issue:

Court of Appeals'
Power to Review Facts in a Petition
For Certiorari under Rule 65

Culili argued that the Court of Appeals acted in contravention of applicable law and jurisprudence when it
reexamined the facts in this case and reversed the factual findings of the Labor Arbiter and the NLRC in a
special civil action for certiorari.
This Court has already confirmed the power of the Court of Appeals, even on a Petition
for Certiorari under Rule 65,32 to review the evidence on record, when necessary, to resolve factual
issues:
The power of the Court of Appeals to review NLRC decisions via Rule 65 or Petition for Certiorari has
been settled as early as in our decision in St. Martin Funeral Home v. National Labor Relations
Commission. This Court held that the proper vehicle for such review was a Special Civil Action for
Certiorari under Rule 65 of the Rules of Court, and that this action should be filed in the Court of Appeals
in strict observance of the doctrine of the hierarchy of courts. Moreover, it is already settled that under
Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902[10] (An Act Expanding the
Jurisdiction of the Court of Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg.
129 as amended, known as the Judiciary Reorganization Act of 1980), the Court of Appeals pursuant
to the exercise of its original jurisdiction over Petitions for Certiorari is specifically given the power to
pass upon the evidence, if and when necessary, to resolve factual issues. 33
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 committed34 or when the factual findings were arrived at arbitrarily or in disregard of the
evidence on record, these findings may be examined by the courts. 35

In the case at bench, the Court of Appeals found itself unable to completely sustain the findings of the
NLRC thus, it was compelled to review the facts and evidence and not limit itself to the issue of grave
abuse of discretion.
With the conflicting findings of facts by the tribunals below now before us, it behooves this Court to make
an independent evaluation of the facts in this case.
Main Issue: Legality of Dismissal
Culili asserted that he was illegally dismissed because there was no valid cause to terminate his
employment. He claimed that ETPI failed to prove that his position had become redundant and that ETPI
was indeed incurring losses. Culili further alleged that his functions as a Senior Technician could not be
considered a superfluity because his tasks were crucial and critical to ETPIs business.
Under our laws, an employee may be terminated for reasons involving measures taken by the employer
due to business necessities. Article 283 of the Labor Code provides:
Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the
employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the
workers and the Department of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at
least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.
There is redundancy when the service capability of the workforce is greater than what is reasonably
required to meet the demands of the business enterprise. A position becomes redundant when it is
rendered superfluous by any number of factors such as over-hiring of workers, decrease in volume of
business, or dropping a particular product line or service activity previously manufactured or undertaken
by the enterprise.36
This Court has been consistent in holding that the determination of whether or not an employees services
are still needed or sustainable properly belongs to the employer. Provided there is no violation of law or a
showing that the employer was prompted by an arbitrary or malicious act, the soundness or wisdom of
this exercise of business judgment is not subject to the discretionary review of the Labor Arbiter and the
NLRC.37
However, an employer cannot simply declare that it has become overmanned and dismiss its employees
without producing adequate proof to sustain its claim of redundancy.38 Among the requisites of a valid
redundancy program are: (1) the good faith of the employer in abolishing the redundant position; and (2)
fair and reasonable criteria in ascertaining what positions are to be declared redundant, 39 such as but not
limited to: preferred status, efficiency, and seniority.40
This Court also held that the following evidence may be proffered to substantiate redundancy: the new
staffing pattern, feasibility studies/ proposal on the viability of the newly created positions, job description
and the approval by the management of the restructuring. 41
In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-Sizing
Program. Even in the face of initial opposition from and rejection of the said program by ETEU, ETPI

patiently negotiated with ETEUs officers to make them understand ETPIs business dilemma and its need
to reduce its workforce and streamline its organization. This evidently rules out bad faith on the part of
ETPI.
In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency, economy,
versatility and flexibility. It needed to reduce its workforce to a sustainable level while maintaining
functions necessary to keep it operating. The records show that ETPI had sufficiently established not only
its need to reduce its workforce and streamline its organization, but also the existence of redundancy in
the position of a Senior Technician. ETPI explained how it failed to meet its business targets and the
factors that caused this, and how this necessitated it to reduce its workforce and streamline its
organization. ETPI also submitted its old and new tables of organization and sufficiently described how
limited the functions of the abolished position of a Senior Technician were and how it decided on whom to
absorb these functions.
In his affidavit dated April 10, 2000,42 Mr. Arnel D. Reyel, the Head of both the Business Services
Department and the Finance Department of ETPI, described how ETPI went about in reorganizing its
departments. Mr. Reyel said that in the course of ETPIs reorganization, new departments were created,
some were transferred, and two were abolished. Among the departments abolished was the Service
Quality Department. Mr. Reyel said that ETPI felt that the functions of the Service Quality Department,
which catered to both corporate and small and medium-sized clients, overlapped and were too large for a
single department, thus, the functions of this department were split and simplified into two smaller but
more focused and efficient departments. In arriving at the decision to abolish the position of Senior
Technician, Mr. Reyel explained:
11.3. Thus, in accordance with the reorganization of the different departments of ETPI, the Service Quality
Department was abolished and its functions were absorbed by the Business and Consumer Accounts
Department and the Corporate and Major Accounts Department.
11.4. With the abolition and resulting simplification of the Service Quality Department, one of the units
thereunder, the Customer Premises Equipment Maintenance ("CPEM") unit was transferred to the
Business and Consumer Accounts Department. Since the Business and Consumer Accounts Department
had to remain economical and focused yet versatile enough to meet all the needs of its small and medium
sized clients, it was decided that, in the judgment of ETPI management, the specialized functions of a
Senior Technician in the CPEM unit whose sole function was essentially the repair and servicing of ETPIs
telecommunications equipment was no longer needed since the Business and Consumer [Accounts]
Department had to remain economical and focused yet versatile enough to meet all the multifarious
needs of its small and medium sized clients.
11.5. The business reason for the abolition of the position of Senior Technician was because in ETPIs
judgment, what was needed in the Business and Consumer Accounts Department was a versatile, yet
economical position with functions which were not limited to the mere repair and servicing of
telecommunications equipment. It was determined that what was called for was a position that could also
perform varying functions such as the actual installation of telecommunications products for medium and
small scale clients, handle telecommunications equipment inventory monitoring, evaluation of
telecommunications equipment purchased and the preparation of reports on the daily and monthly
activation of telecommunications equipment by these small and medium scale clients.
11.6. Thus, for the foregoing reasons, ETPI decided that the position of Senior Technician was to be
abolished due to redundancy. The functions of a Senior Technician was to be abolished due to
redundancy. The functions of a Senior Technician would then be absorbed by an employee assigned to
the Business and Consumer Accounts Department who was already performing the functions of actual
installation of telecommunications products in the field and handling telecommunications equipment
inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of
reports on the daily and monthly activation of telecommunications equipment. This employee would then

simply add to his many other functions the duty of repairing and servicing telecommunications equipment
which had been previously performed by a Senior Technician.43
In the new table of organization that the management approved, one hundred twelve (112) employees
were redeployed and nine (9) positions were declared redundant. 44 It is inconceivable that ETPI would
effect a company-wide reorganization of this scale for the mere purpose of singling out Culili and
terminating him. If Culilis position were indeed indispensable to ETPI, then it would be absurd for ETPI,
which was then trying to save its operations, to abolish that one position which it needed the most.
Contrary to Culilis assertions that ETPI could not do away with his functions as long as it is in the
telecommunications industry, ETPI did not abolish the functions performed by Culili as a Senior
Technician. What ETPI did was to abolish the position itself for being too specialized and limited. The
functions of that position were then added to another employee whose functions were broad enough to
absorb the tasks of a Senior Technician.
Culili maintains that ETPI had already decided to dismiss him even before the second phase of the RightSizing Program was implemented as evidenced by the December 7, 1998 letter.
The December 7, 1998 termination letter signed by ETPIs AVP Stella Garcia hardly suffices to prove bad
faith on the part of the company. The fact remains that the said letter was never officially transmitted and
Culili was not terminated at the end of the first phase of ETPIs Right-Sizing Program. ETPI had given an
adequate explanation for the existence of the letter and considering that it had been transparent with its
employees, through their union ETEU, so much so that ETPI even gave ETEU this unofficial letter, there
is no reason to speculate and attach malice to such act. That Culili would be subsequently terminated
during the second phase of the Right-Sizing Program is not evidence of undue discrimination or "singling
out" since not only Culilis position, but his entire unit was abolished and absorbed by another department.
Unfair Labor Practice
Culili also alleged that ETPI is guilty of unfair labor practice for violating Article 248(c) and (e) of the Labor
Code, to wit:
Art. 248. Unfair labor practices of employers. - It shall be unlawful for an employer to commit any of
the following unfair labor practice:
xxxx
c. To contract out services or functions being performed by union members when such will interfere with,
restrain or coerce employees in the exercise of their rights to self-organization;
xxxx
e. To discriminate in regard to wages, hours of work, and other terms and conditions of employment in
order to encourage or discourage membership in any labor organization. Nothing in this Code or in any
other law shall stop the parties from requiring membership in a recognized collective bargaining agent as
a condition for employment, except those employees who are already members of another union at the
time of the signing of the collective bargaining agreement. Employees of an appropriate collective
bargaining unit who are not members of the recognized collective bargaining agent may be assessed a
reasonable fee equivalent to the dues and other fees paid by members of the recognized collective
bargaining agent, if such non-union members accept the benefits under the collective agreement:
Provided, that the individual authorization required under Article 242, paragraph (o) of this Code shall not
apply to the non-members of the recognized collective bargaining agent.

Culili asserted that ETPI is guilty of unfair labor practice because his functions were sourced out to laboronly contractors and he was discriminated against when his co-employees were treated differently when
they were each offered an additional motorcycle to induce them to avail of the Special Retirement
Program. ETPI denied hiring outside contractors and averred that the motorcycles were not given to his
co-employees but were purchased by them pursuant to their Collective Bargaining Agreement, which
allowed a retiring employee to purchase the motorcycle he was assigned during his employment.
The concept of unfair labor practice is provided in Article 247 of the Labor Code which states:
Article 247. Concept of unfair labor practice and procedure for prosecution thereof. -- Unfair labor
practices violate the constitutional right of workers and employees to self-organization, are inimical to the
legitimate interest of both labor and management, including their right to bargain collectively and
otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace
and hinder the promotion of healthy and stable labor-management relations.
In the past, we have ruled that "unfair labor practice refers to acts that violate the workers' right to
organize. The prohibited acts are related to the workers' right to self-organization and to the observance
of a CBA."45 We have likewise declared that "there should be no dispute that all the prohibited acts
constituting unfair labor practice in essence relate to the workers' right to self-organization." 46 Thus, an
employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever
manner the right of his employees to self-organize.47
There is no showing that ETPI, in implementing its Right-Sizing Program, was motivated by ill will, bad
faith or malice, or that it was aimed at interfering with its employees right to self-organize. In fact, ETPI
negotiated and consulted with ETEU before implementing its Right-Sizing Program.
Both the Labor Arbiter and the NLRC found ETPI guilty of unfair labor practice because of its failure to
dispute Culilis allegations.
According to jurisprudence, "basic is the principle that good faith is presumed and he who alleges bad
faith has the duty to prove the same."48 By imputing bad faith to the actuations of ETPI, Culili has the
burden of proof to present substantial evidence to support the allegation of unfair labor practice. Culili
failed to discharge this burden and his bare allegations deserve no credit.
Observance of Procedural Due Process
Although the Court finds Culilis dismissal was for a lawful cause and not an act of unfair labor practice,
ETPI, however, was remiss in its duty to observe procedural due process in effecting the termination of
Culili.
We have previously held that "there are two aspects which characterize the concept of due process under
the Labor Code: one is substantive whether the termination of employment was based on the provision
of the Labor Code or in accordance with the prevailing jurisprudence; the other is procedural the
manner in which the dismissal was effected."49
Section 2(d), Rule I, Book VI of the Rules Implementing the Labor Code provides:
(d) In all cases of termination of employment, the following standards of due process shall be substantially
observed:
xxxx

For termination of employment as defined in Article 283 of the Labor Code, the requirement of due
process shall be deemed complied with upon service of a written notice to the employee and the
appropriate Regional Office of the Department of Labor and Employment at least thirty days before
effectivity of the termination, specifying the ground or grounds for termination.
In Mayon Hotel & Restaurant v. Adana,50 we observed:
The requirement of law mandating the giving of notices was intended not only to enable the employees to
look for another employment and therefore ease the impact of the loss of their jobs and the corresponding
income, but more importantly, to give the Department of Labor and Employment (DOLE) the opportunity
to ascertain the verity of the alleged authorized cause of termination. 51
ETPI does not deny its failure to provide DOLE with a written notice regarding Culilis termination. It,
however, insists that it has complied with the requirement to serve a written notice to Culili as evidenced
by his admission of having received it and forwarding it to his union president.
In Serrano v. National Labor Relations Commission,52 we noted that "a job is more than the salary that it
carries." There is a psychological effect or a stigma in immediately finding ones self laid off from
work.53 This is exactly why our labor laws have provided for mandating procedural due process clauses.
Our laws, while recognizing the right of employers to terminate employees it cannot sustain, also
recognize the employees right to be properly informed of the impending severance of his ties with the
company he is working for. In the case at bar, ETPI, in effecting Culilis termination, simply asked one of
its guards to serve the required written notice on Culili. Culili, on one hand, claims in his petition that this
was handed to him by ETPIs vice president, but previously testified before the Labor Arbiter that this was
left on his table.54 Regardless of how this notice was served on Culili, this Court believes that ETPI failed
to properly notify Culili about his termination. Aside from the manner the written notice was served, a
reading of that notice shows that ETPI failed to properly inform Culili of the grounds for his termination.
The Court of Appeals, in finding that Culili was not afforded procedural due process, held that Culilis
dismissal was ineffectual, and required ETPI to pay Culili full backwages in accordance with our decision
in Serrano v. National Labor Relations Commission.55 Over the years, this Court has had the opportunity
to reexamine the sanctions imposed upon employers who fail to comply with the procedural due process
requirements in terminating its employees. In Agabon v. National Labor Relations Commission, 56 this
Court reverted back to the doctrine in Wenphil Corporation v. National Labor Relations Commission 57 and
held that where the dismissal is due to a just or authorized cause, but without observance of the due
process requirements, the dismissal may be upheld but the employer must pay an indemnity to the
employee. The sanctions to be imposed however, must be stiffer than those imposed in Wenphil to
achieve a result fair to both the employers and the employees. 58
In Jaka Food Processing Corporation v. Pacot,59 this Court, taking a cue from Agabon, held that since
there is a clear-cut distinction between a dismissal due to a just cause and a dismissal due to an
authorized cause, the legal implications for employers who fail to comply with the notice requirements
must also be treated differently:
Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the
employer failed to comply with the notice requirement, the sanction to be imposed upon him should be
tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and
(2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply
with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by
the employer's exercise of his management prerogative. 60
Hence, since it has been established that Culilis termination was due to an authorized cause and cannot
be considered unfair labor practice on the part of ETPI, his dismissal is valid. However, in view of ETPIs

failure to comply with the notice requirements under the Labor Code, Culili is entitled to nominal damages
in addition to his separation pay.1avvphi1
Personal Liability of ETPIs Officers
And Award of Damages
Culili asserts that the individual respondents, Salvador Hizon, Emiliano Jurado, Virgilio Garcia, and Stella
Garcia, as ETPIs officers, should be held personally liable for the acts of ETPI which were tainted with
bad faith and arbitrariness. Furthermore, Culili insists that he is entitled to damages because of the
sufferings he had to endure and the malicious manner he was terminated.
As a general rule, a corporate officer cannot be held liable for acts done in his official capacity because a
corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders, and
members. To pierce this fictional veil, it must be shown that the corporate personality was used to
perpetuate fraud or an illegal act, or to evade an existing obligation, or to confuse a legitimate issue. In
illegal dismissal cases, corporate officers may be held solidarily liable with the corporation if the
termination was done with malice or bad faith. 61
In illegal dismissal cases, moral damages are awarded only where the dismissal was attended by bad
faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good
customs or public policy.62 Exemplary damages may avail if the dismissal was effected in a wanton,
oppressive or malevolent manner to warrant an award for exemplary damages. 63
It is our considered view that Culili has failed to prove that his dismissal was orchestrated by the individual
respondents herein for the mere purpose of getting rid of him. In fact, most of them have not even dealt
with Culili personally. Moreover, it has been established that his termination was for an authorized cause,
and that there was no bad faith on the part of ETPI in implementing its Right-Sizing Program, which
involved abolishing certain positions and departments for redundancy. It is not enough that ETPI failed to
comply with the due process requirements to warrant an award of damages, there being no showing that
the companys and its officers acts were attended with bad faith or were done oppressively.
WHEREFORE, the instant petition is DENIED and the assailed February 5, 2004 Decision and
September 13, 2004 Resolution of the Court of Appeals in CA-G.R. SP No. 75001 are AFFIRMED with
the MODIFICATION that petitioner Nelson A. Culilis dismissal is declared valid but respondent Eastern
Telecommunications Philippines, Inc. is ordered to pay petitioner Nelson A. Culili the amount of Fifty
Thousand Pesos (P50,000.00) representing nominal damages for non-compliance with statutory due
process, in addition to the mandatory separation pay required under Article 283 of the Labor Code.
SO ORDERED.
------------------------------------

113. HSBC Union v NLRC

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 125038 November 6, 1997

THE HONGKONG AND SHANGHAI BANKING CORPORATION EMPLOYEES UNION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND THE HONGKONG AND SHANGHAI BANKING
CORPORATION, LTD., respondents.

REGALADO, J.:
In an Order dated November 27, 1995, 1 respondent National Labor Relations Commission (NLRC)
reversed and set aside the order issued by Labor Arbiter Felipe T. Garduque II which dismissed and
remanded for further proceedings the case for unfair labor practice filed by private respondent Hongkong
and Shanghai Banking Corporation, Ltd. (the "Bank") against petitioner Hongkong and Shanghai Banking
Corporation Employees Union (the "Union"), the recognized bargaining representative of the Bank's
regular rank and file employees. The petition for certiorari impugns the aforesaid Order of respondent
commission.
The case at bar arose from the issuance of a non-executive job evaluation program (JEP) lowering the
starting salaries of future employees, resulting from the changes made in the job grades and structures,
which was unilaterally implemented by the Bank retroactive to January 1, 1993. The program in question
was announced by the Bank on January 18, 1993.
In a letter dated January 20, 1993, 2 the Union, through its President, Peter Paul Gamelo, reiterated its
previous verbal objections to the Bank's unilateral decision to devise and put into effect the said program
because it allegedly was in violation of the existing collective bargaining agreement (CBA) between the
parties and thus constituted unfair labor practice. The Union demanded the suspension of the
implementation of the JEP and proposed that the same be instead taken up or included in their upcoming
CBA negotiations.
The Bank replied in a letter dated January 25, 1993 3 that the JEP was issued in compliance with its
obligation under the CBA, apparently referring to Article III, Section 18 thereof which provides that:
Within the lifetime of this Agreement the BANK shall conduct a job evaluation of employee
positions. The implementation timetable of the said exercise shall be furnished the UNION by the
BANK within two (2) months from the signing of this Agreement.
This prompted the Union to undertake concerted activities to protest the implementation of the JEP, such
as whistle blowing during office hours starting on March 15, 1993 up to the 23rd day, and writing to clients
of the Bank allegedly to inform them of the real situation then obtaining and of an imminent disastrous
showdown between the Bank and the Union.
The Union engaged in said activities despite the fact that as early as February 11, 1993, 4 it had already
initiated the renegotiation of the non-representational provisions of the CBA by submitting their proposal
to the Bank, to which the latter submitted a reply. As a matter of fact, negotiations on the CBA

commenced on March 5, 1993 and continued through March 24, 1993 when the Bank was forced to
declare a "recess" to last for as long as the Union kept up with its concerted activities. The Union refused
to concede to the demand of the Bank unless the latter agreed to suspend the implementation of the JEP.
Instead of acquiescing thereto, the Bank filed on April 5, 1993 5 with the Arbitration Branch of the NLRC a
complaint for unfair labor practice against the Union allegedly for engaging in the contrived activities
against the ongoing CBA negotiations between the Bank and the Union in an attempt to unduly coerce
and pressure the Bank into agreeing to the Union's demand for the suspension of the implementation of
the JEP. It averred that such concerted activities, despite the ongoing CBA negotiations, constitute unfair
labor practice (ULP) and a violation of the Union's duty to bargain collectively under Articles 249 (c) and
252 of the Labor Code.
The Union filed a Motion to Dismiss 6 on the ground that the complaint states no cause of action. It alleged
that its united activities were actually being waged to protest the Bank's arbitrary imposition of a job
evaluation program and its unjustifiable refusal to suspend the implementation thereof. It further claimed
that the unilateral implementation of the JEP was in violation of Article I, Section 3 of the CBA which
prohibits a diminution of existing rights, privileges and benefits already granted and enjoyed by the
employees. To be sure, so the Union contended, the object of the Bank in downgrading existing CBA
salary scales, despite its sanctimonious claim that the reduced rates will apply only to future employees,
is to torpedo the salary structure built by the Union through three long decades of periodic hard
bargaining with the Bank and to thereafter replace the relatively higher-paid unionized employees with
cheap newly hired personnel. In light of these circumstances, the Union insists that the right to engage in
these concerted activities is protected under Article 246 of the Labor Code regarding non-abridgment of
the right to self-organization and, hence, is not actionable in law.
In its Opposition, 7 the Bank stated that the Union was actually challenging merely that portion of the JEP
providing for a lower rate of salaries for future employees. Contrary to the Union's allegations in its motion
to dismiss that the JEP had resulted in diminution of existing rights, privileges and benefits, the program
has actually granted salary increases to, and in fact is already being availed of by, the rank and file staff.
The Union's objections are premised on the erroneous belief that the salary rates for future employees is
a matter which must be subject of collective bargaining negotiation. The Bank believes that the
implementation of the JEP and the resultant lowering of the starting salaries of future employees, as
along as there is no diminution of existing benefits and privileges being accorded to existing rank and file
staff, is entirely a management prerogative.
In an Order dated July 29, 1993, 8 the labor arbiter dismissed the complaint with prejudice and ordered the
parties to continue with the collective bargaining negotiations, there having been no showing that the
Union acted with criminal intent in refusing to comply with its duty to bargain but was motivated by the
refusal of management to suspend the implementation of its job evaluation program, and that it is not
evident that the concerted activities caused damage to the Bank. It concluded that, at any rate, the Bank
is not left without recourse, in case more aggressive and serious acts be committed in the future by the
Union, since it could institute a petition to declare illegal such acts which may constitute a strike or
picketing.
On appeal, respondent NLRC declared that based on the facts obtaining in this case, it becomes
necessary to resolve whether or not the Union's objections to the implementation of the JEP are valid
hand, if it is without basis, whether or not the concerted activities conducted by the Union constitute unfair
labor practice. It held that the labor arbiter exceeded his authority when he ordered the parties to return to

the bargaining table and continue with CBA negotiations, considering that his jurisdiction is limited only to
labor disputes arising from those cases provided for under Article 217 of the Labor Code, and that the
labor arbiter's participation in this instance only begins when the appropriate complaint for unfair labor
practice due to a party's refusal to bargain collectively is filed. Consequently, the case was ordered
remanded to the arbitration branch of origin for further proceedings in accordance with the guidelines
provided for therein.
Hence, this petition.
The Union asserts that respondent NLRC committed grave abuse of discretion in failing to decide that it is
not guilty of unfair labor practice considering that the concerted activities were actually directed against
the implementation of the JEP and not at before the start of negotiations. Hence, it cannot be deemed to
have engaged in bad-faith bargaining. It claims that respondent NLRC gravely erred in remanding the
case for further proceedings to determine whether the objections raised by the Union against the
implementation of the JEP are valid or not, for the simple reason that such is not the issue involved in the
complaint for ULP filed by the Bank but rather whether the Union is guilty of bargaining in bad faith in
violation of the Labor Code. It is likewise averred that Labor Arbiter Garduque cannot be considered to
have exceeded his authority in ordering the parties to proceed with the CBA negotiations because it was
precisely a complaint for ULP which the Bank filed against the Union.
We find no merit in the petition.
The main issue involved in the present case is whether or not the labor arbiter correctly ordered the
dismissal with prejudice of the complaint for unfair labor practice on the case merely of the Complaint, the
Motion to Dismiss as well as the Opposition thereto, filed by the parties. We agree with respondent NLRC
that there are several questions that need to be threshed out before there can be an intelligent and
complete determination of the propriety of the charges made by the Bank against the Union.
A perusal of the allegations and arguments raised by the parties in the Motion to Dismiss and the
Opposition thereto will readily reveal that there are several issues that must preliminarily be resolved and
which will require the presentation of evidence other than the bare allegations in the pleadings which have
been filed, in order to ascertain the propriety or impropriety of the ULP charge against the Union.
Foremost among the issues requiring resolution are:
1. Whether or not the unilateral implementation of the JEP constitutes a violation of the CBA provisions
requiring the Bank to furnish the Union with the job evaluation implementation timetable within two
months from the signing of the CBA on July 30, 1990, 9 and prohibiting the diminution of existing rights,
privileges and benefits already granted and enjoyed by the employees; 10
2. Whether or not the concerted acts committed by the Union were done with just cause and in good faith
in the lawful exercise of their alleged right under Article 246 of the Labor Code on non-abridgment of the
right to self-organization; and
3. Whether or not the fixing of salaries of future employees pursuant to a job evaluation program is an
exclusive management prerogative or should be subject of collective bargaining negotiation.

It does not fare petitioner any better that it had, wittingly or unwittingly, alleged in its Consolidated
Reply 11 that the concerted actions began on January 22, 1993 even before the commencement of CBA
negotiations which started in March, 1993. Apparently that was an attempt on the part of the Union to
rectify the incriminating pronouncement of the labor arbiter in his questioned order to the effect that the
challenged activities occurred from March 15 to 23, 1993 during the CBA negotiations. This seemingly
conflicting factual allegations are crucial in resolving the issue of whether or not the concerted activities
were committed in violation of the Union's duty to bargain collectively and would therefore constitute
unfair labor practice.
Likewise, the labor arbiter, in finding that the Union was not motivated by any criminal intent in resorting to
said concerted activities, merely gave a sweeping statement without bothering to explain the factual and
evidentiary bases therefor. The declaration that there was no damage caused to the Bank by reason of
such Union activities remains unsubstantiated. Nowhere is there any showing in the labor arbiter's order
of dismissal from which it can be fairly inferred that such a statement is supported by even a
preponderance of evidence. What purportedly is an adjudication on the merits is in truth and in fact a
short discourse devoid of evidentiary value but every liberal with generalities and hasty conclusions.
The fact that there is an alternative remedy available to the Bank, as the labor arbiter would suggest, will
not justify an otherwise erroneous order. It bears emphasizing that by the very nature of an unfair labor
practice, it is not only a violation of the civil rights of both labor and management but is also a criminal
offense against the State which is subject to prosecution and punishment. 12 Essentially, a complaint for
unfair labor practice is no ordinary labor dispute and therefore requires a more thorough analysis,
evaluation and appreciation of the factual and legal issues involved.
One further point. The need for a more than cursory disposition on the unfair labor practice issue is made
doubly exigent in view of the Bank's allegation in its Comment 13 that a strike has been launched by the
Union specifically to protest the implementation of the JEP. Although the strike incident is not an issue in
this case, this supervening event bespeaks the worsening situation between the parties that calls for a
more circumspect assessment of the actual issues herein involved.
Necessarily, a determination of the validity of the Bank's unilateral implementation of the JEP or the
Union's act of engaging in concerted activities involves an appraisal of their motives. In cases of this
nature, motivations are seldom expressly avowed, and avowals are not always candid. There must thus
be a measure of reliance on the administrative agency. It was incumbent upon the labor arbiter, in the first
instance, to weigh such expressed motives in determining the effect of an otherwise equivocal act. The
Labor Code does not undertake the impossible task of specifying in precise and unmistake language
each incident which constitutes an unfair labor practice. Rather, it leaves to the court the work of applying
the law's general prohibitory language in light
of infinite combinations of events which may be charged as violative of its terms. 14
It has been held that the crucial question whether or not a party has met his statutory duty to bargain in
good faith typically turns on the facts of the individual case. 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 actions
individually 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. 15

This, the court or the quasi-judicial agency concerned can do only after it has made a comprehensive
review of the allegations made in the pleadings filed and the evidence presented in support thereof by the
parties, but definitely not where, as in the present case, the accusation of unfair labor practice was
negated and subsequently discharged on a mere motion to dismiss.
It is a well-settled rule that labor laws do not authorize interference with the employer's judgment in the
conduct of his business. The Labor Code and its implementing rules do not vest in the labor arbiters nor
in the different divisions of the NLRC nor in the courts managerial authority. 16 The hiring, firing, transfer,
demotion, and promotion of employees has been traditionally identified as a management prerogative
subject to limitations found in the law, a collective bargaining agreement, or in general principles of fair
play and justice. This is a function associated with the employer's inherent right to control and manage
effectively its enterprise. Even as the law is solicitous of the welfare of employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives. The free will of management
to conduct its own business affairs to achieve its purpose cannot be denied. 17
Accordingly, this Court, in a number of cases, has recognized and affirmed the prerogative of
management to implement a job evaluation program or a reorganization for as long as it is not contrary to
law, morals or public policy.
Thus, in Batongbacal vs. Associated Bank, et al., 18 involving the dismissal of an assistant vice-president
for refusing to tender his courtesy resignation which the bank required in line with its reorganization plan,
the Court held, among others, that it is not prepared to preempt the employer's prerogative to grant salary
increases to its employees by virtue of the implementation of the reorganization plan which thereby
caused a distortion in salaries, notwithstanding that there is a semblance of discrimination in this aspect
of the bank's organizational setup.
In the case of National Sugar Refineries Corporation vs. National Labor Relations Commission, et
al., 19 the petitioner implemented a job evaluation program affecting all employees, from rank and file to
department heads. The JEP was designed to rationalize the duties and functions of all positions,
reestablish levels of responsibility, and reorganize both wage and operational structures. Jobs were
ranked according to effort, responsibility, training and working conditions and relative worth of the job. As
a result, all positions were re-evaluated, and all employees were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions. With the JEP, the supervisory
employees, who were members of the respondent Union therein and were formerly treated in the same
manner as rank and file employees, were considered no longer entitled to overtime, rest day and holiday
pay but their basic salaries increased by 50%. The respondents therein sued for recovery of those
benefits.
In upholding management's prerogative to implement the JEP, the Court held therein that:
In the case at bar, private respondent union has miserably failed to convince this Court that the
petitioner acted in bad faith in implementing the JE Program. There is no showing that the JE
Program was intended to circumvent the law and deprive the members of respondent union of the
benefits they used to receive.
. . . It is the prerogative of management to regulate, according to its discretion and judgment, all
aspects of employment. This flows from the established rule that labor laws does not authorize
the substitution of the judgment of the employer in the conduct of its business. Such management

prerogative may be availed of without fear of any liability so long as it is exercised in good faith for
the advancement of the employers' interest and not for the purpose of defeating or circumventing
the rights of employees under special laws or valid agreement and are not exercised in a
malicious, harsh, oppressive, vindictive or wanton manner or out of malice or spite.
Just recently, this Court had the occasion to reiterate and uphold the established and unequivocal right of
an employer to implement a reorganization in the valid exercise of its management prerogative, thus:
Being a regular employee, petitioner is of the view that she had already acquired a vested right to
the position of Executive Secretary, together with its corresponding grade, rank and salary, which
cannot be impaired by the 1991 reorganization of CENECO.
xxx xxx xxx
In Aurelio vs. National Labor Relations Commission, et al., we upheld the power of the board of
directors of a corporation to implement a reorganization, including the abolition of various
positions, as implied or incidental to its power to conduct the regular business affairs of the
corporation. In recognition of the right of management to conduct its own business affairs in
achieving its purpose, we declared that management is at liberty, absent any malice of its part, to
abolish positions which it deems no longer necessary.
This Court, absent any finding of bad faith on the part of management, will not deny it the right to
such initiative simply to protect the person holding that office. In other words, where there is
nothing that would indicate that an employee's position was abolished to ease him out of
employment, the deletion of that position should be accepted as a valid exercise of management
prerogative.
xxx xxx xxx
No ill will can be ascribed to private respondents as all the positions specified in the
old plantilla were abolished and all other employees were given new appointments. In short,
petitioner was not singled out. She was not the only employee affected by the reorganization. The
reorganization was fair to petitioner, if not to all of the employees of CENECO.
It should be remembered that petitioner's new appointment was made as a result of valid
organizational changes. A thorough review of both the indispensable and the unessential
positions was undertaken by a committee, specifically formed for this purpose, before the Board
of Directors abolished all the positions. Based on the qualifications and aptitude of petitioner, the
committee and, subsequently, private respondents, deemed it best to appoint petitioner as
Secretary of the Engineering Department. We cannot meddle in such a decision lest we interfere
with the private respondents' right to independently control and manage their operations absent
any unfair or inequitable acts.
If the purpose of a reorganization is to be achieved, changes in positions and ranking of
employees should be expected. To insist on one's old position and ranking after a reorganization
would render such endeavor ineffectual. Here, to compel private respondents to give petitioner
her old ranking would deprive them of their right to adopt changes in the cooperative's personnel
structure as proposed by the Steering Committee.

xxx xxx xxx

. . . As we have held, security of tenure, while constitutionally guaranteed, cannot be used to
deprive an employer of its prerogatives under the law. Even if the law is solicitous of the welfare
of the employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. 20
Notwithstanding the relevance of the foregoing disquisition, considering however the factual antecedents
in this case, or the lack of a complete presentation thereof, we are constrained to refrain from ruling
outright in favor of the Bank. While it would appear that remanding the case would mean a further delay in
its disposition, we are not inclined to sacrifice equity and justice for procedural technicalities or
expediency. The order dismissing the complaint for ULP with prejudice, to say the least, leaves much to
be desired.
Anent the question on whether or not the labor arbiter has jurisdiction to order the parties to return to and
continue with the collective bargaining negotiations, there is a commentary to the effect that, as one of the
reliefs which may be granted in ULP cases, the Court may, in addition to the usual cease and desist
orders, issue an affirmative order to the employer to "bargain" with the bargaining agent, as the exclusive
representative of its employees, with respect to the rate of pay, hours of work, and other conditions of
employment. 21 On this aspect, respondent NLRC stands to be reversed. Nevertheless, its directive on
this point is deemed vacated and ineffectual by our decision to remand the case for further proceedings.
WHEREFORE, subject to the foregoing observation, the challenged disposition of respondent National
Labor Relations Commission is hereby AFFIRMED.
SO ORDERED.
-------------------------------------------

114. General Milling v CA

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 146728

February 11, 2004

GENERAL MILLING CORPORATION, petitioner,

vs
HON. COURT OF APPEALS, GENERAL MILLING CORPORATION INDEPENDENT LABOR UNION
(GMC-ILU), and RITO MANGUBAT, respondents.
DECISION
QUISUMBING, J.:

Before us is a petition for certiorari assailing the decision1 dated July 19, 2000, of the Court of Appeals in
CA-G.R. SP No. 50383, which earlier reversed the 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:
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
Thus, the union filed, on July 2, 1992, a complaint against GMC with the NLRC, Arbitration Division, Cebu
City. The complaint alleged unfair labor practice on the part of GMC for: (1) refusal to bargain collectively;
(2) interference with the right to self-organization; and (3) discrimination. The labor arbiter dismissed the
case with the recommendation that a petition for certification election be held to determine if the union still
enjoyed the support of the workers.lawphi1.nt
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
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 GMCIndependent 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 certioraribefore 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:
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
A motion for reconsideration was seasonably filed by GMC, but in a resolution dated October 26, 2000,
the CA denied it for lack of merit.
Hence, the instant petition for certiorari alleging that:
I
THE COURT OF APPEALS DECISION VIOLATED THE CONSTITUTIONAL RULE THAT NO DECISION
SHALL BE RENDERED BY ANY COURT WITHOUT EXPRESSING THEREIN CLEARLY AND
DISTINCTLY THE FACTS AND THE LAW ON WHICH IT IS BASED.
II

THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE

DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION IN THE ABSENCE OF ANY
FINDING OF SUBSTANTIAL ERROR OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION.
III
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT APPRECIATING THAT THE NLRC
HAS NO JURISDICTION TO DETERMINE THE TERMS AND CONDITIONS OF A COLLECTIVE
BARGAINING AGREEMENT.7
Thus, in the instant case, the principal issue for our determination is whether or not the Court of Appeals
acted with grave abuse of discretion amounting to lack or excess of jurisdiction in (1) finding GMC guilty
of unfair labor practice for violating the duty to bargain collectively and/or interfering with the right of its
employees to self-organization, and (2) imposing upon GMC the draft CBA proposed by the union for two
years to begin from the expiration of the original CBA.lawphi1.nt
On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No. 6715, states:
ART. 253-A. Terms of a collective bargaining agreement. Any Collective Bargaining
Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of the
incumbent bargaining agent shall be entertained and no certification election shall be conducted
by the Department of Labor and Employment outside of the sixty-day period immediately before
the date of expiry of such five year term of the Collective Bargaining Agreement. All other
provisions of the Collective Bargaining Agreement shall be renegotiated not later than three (3)
years after its execution....
The law mandates that the representation provision of a CBA should last for five years. The relation
between labor and management should be undisturbed until the last 60 days of the fifth year. Hence, it is
indisputable that when the union requested for a renegotiation of the economic terms of the CBA on
November 29, 1991, it was still the certified collective bargaining agent of the workers, because it was
seeking said renegotiation within five (5) years from the date of effectivity of the CBA on December 1,
1988. The 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:
ART. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit
any of the following unfair labor practice:
...
(g) To violate the duty to bargain collectively as prescribed by this Code;
...

Article 252 of the Labor Code elucidates the meaning of the phrase "duty to bargain collectively,"
thus:
ART. 252. Meaning of duty to bargain collectively. The duty to bargain collectively
means the performance of a mutual obligation to meet and convene promptly and
expeditiously in good faith for the purpose of negotiating an agreement....
We have held that the crucial question whether or not a party has met his statutory duty to
bargain in good faith typically turn$ on the facts of the individual case. 8 There is no per se test of
good faith in bargaining.9Good faith or bad faith is an inference to be drawn from the facts. 10 The
effect of an 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
Under Article 252 abovecited, both parties are required to perform their mutual obligation to meet and
convene promptly and expeditiously in good faith for the purpose of negotiating an agreement. The union
lived up to this obligation when it presented proposals for a new CBA to GMC within three (3) years from
the effectivity of the original CBA. But GMC failed in its duty under Article 252. What it did was to devise a
flimsy excuse, by questioning the existence of the union and the status of its membership to prevent any
negotiation.
It bears stressing that the procedure in collective bargaining prescribed by the Code is mandatory
because of the basic interest of the state in ensuring lasting industrial peace. Thus:
ART. 250. Procedure in collective bargaining. The following procedures shall be observed in
collective bargaining:
(a) When a party desires to negotiate an agreement, it shall serve a written notice upon
the other party with a statement of its proposals. The other party shall make a reply
thereto not later than ten (10) calendar days from receipt of such notice. (Underscoring
supplied.)
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
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?
The Code provides:
ART. 253. Duty to bargain collectively when there exists a collective bargaining
agreement. .... It shall be the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement during the 60-day period
[prior to its expiration date] and/or until a new agreement is reached by the parties. (Underscoring
supplied.)
The provision mandates the parties to keep the status quo while they are still in the process of working
out their respective proposal and counter proposal. The general rule is that when a CBA already exists, its
provision shall continue to govern the relationship between the parties, until a new one is agreed upon.
The rule necessarily presupposes that all other things are equal. That is, that neither party is guilty of bad
faith. However, when one of the parties abuses this grace period by purposely delaying the bargaining
process, a departure from the general rule is warranted.
In Kiok Loy vs. NLRC,13 we found that petitioner therein, Sweden Ice Cream Plant, refused to submit any
counter proposal to the CBA proposed by its employees certified bargaining agent. We ruled that the
former had thereby lost its right to bargain the terms and conditions of the CBA. Thus, we did not hesitate
to impose on the erring company the CBA proposed by its employees union - lock, stock and barrel. Our
findings in Kiok Loy are similar to the facts in the present case, to wit:
petitioner 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
Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and Employment,15 petitioner
therein, Divine Word University of Tacloban, refused to perform its duty to bargain collectively. Thus, we
upheld the unilateral imposition on the university of the CBA proposed by the Divine Word University
Employees Union. We said further:
That being the said case, the petitioner may not validly assert that its consent should be a
primordial consideration in the bargaining process. By its acts, no less than its action which
bespeak its insincerity, it has forfeited whatever rights it could have asserted as an employer.16

Applying the principle in the foregoing cases to the instant case, it would be unfair to the union and its
members if the terms and conditions contained in the old CBA would continue to be imposed on 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 preexisting CBA between the parties in Kiok Loy and Divine Word University of Tacloban. Nonetheless, we
deem it proper to apply in this case the rationale of the doctrine in the said two cases. To rule otherwise
would be to allow GMC to have its cake and eat it too.
Under ordinary circumstances, it is not obligatory upon either side of a labor controversy to precipitately
accept or agree to the proposals of the other. But an erring party should not be allowed to resort with
impunity to schemes feigning negotiations by going through empty gestures. 17 Thus, by imposing on GMC
the provisions of the draft CBA proposed by the union, in our view, the interests of equity and fair play
were properly served and both parties regained equal footing, which was lost when GMC thwarted the
negotiations for new economic terms of the CBA.
The findings of fact by the CA, affirming those of the NLRC as to the reasonableness of the draft CBA
proposed by the union should not be disturbed since they are supported by substantial evidence. On this
score, we see no cogent reason to rule otherwise. Hence, we hold that the Court of Appeals did not
commit grave abuse of discretion amounting to lack or excess of jurisdiction when it imposed on GMC,
after it had committed unfair labor practice, the draft CBA proposed by the union for the remaining two (2)
years of the duration of the original CBA. Fairness, equity, and social justice are best served in this case
by sustaining the appellate 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.
SO ORDERED.
-------------------------------------

115. Hacienda Fatima v Natl Sugarcane Workers

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 149440

January 28, 2003

HACIENDA FATIMA and/or PATRICIO VILLEGAS, ALFONSO VILLEGAS and CRISTINE

SEGURA,petitioners,

vs.
NATIONAL FEDERATION OF SUGARCANE WORKERS-FOOD AND GENERAL TRADE, respondents.
PANGANIBAN, J.:
Although the employers have shown that respondents performed work that was seasonal in nature, they
failed to prove that the latter worked only for the duration of one particular season. In fact, petitioners do
not deny that these workers have served them for several years already. Hence, they are regular not
seasonal employees.
The Case
Before the Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set aside the
February 20, 2001 Decision of the Court of Appeals 1 (CA) in CA-GR SP No. 51033. The dispositive part
of the Decision reads:
"WHEREFORE, premises considered, the instant special civil action for certiorari is hereby
DENIED." 2
On the other hand, the National Labor Relations Commission (NLRC) Decision, 3 upheld by the
CA, disposed in this wise:
"WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and
VACATED and a new one entered declaring complainants to have been illegally dismissed.
Respondents are hereby ORDERED to reinstate complainants except Luisa Rombo, Ramona
Rombo, Bobong Abriga and Boboy Silva to their previous position and to pay full backwages from
September 1991 until reinstated. Respondents being guilty of unfair labor practice are further
ordered to pay complainant union the sum of P10,000.00 as moral damages and P5,000.00 as
exemplary damages." 4
The Facts
The facts are summarized in the NLRC Decision as follows:
"Contrary to the findings of the Labor Arbiter that complainants [herein respondents] refused to
work and/or were choosy in the kind of jobs they wanted to perform, the records is replete with
complainants' persistence and dogged determination in going back to work.
"Indeed, it would appear that respondents did not look with favor workers' having organized
themselves into a union. Thus, when complainant union was certified as the collective bargaining
representative in the certification elections, respondents under the pretext that the result was on
appeal, refused to sit down with the union for the purpose of entering into a collective bargaining
agreement. Moreover, the workers including complainants herein were not given work for more
than one month. In protest, complainants staged a strike which was however settled upon the
signing of a Memorandum of Agreement which stipulated among others that:
'a) The parties will initially meet for CBA negotiations on the 11th day of January 1991
and will endeavor to conclude the same within thirty (30) days.
'b) The management will give priority to the women workers who are members of the
union in case work relative . . . or amount[ing] to gahit and [dipol] arises.

'c) Ariston Eruela Jr. will be given back his normal work load which is six (6) days in a
week.
'd) The management will provide fifteen (15) wagons for the workers and that existing
workforce prior to the actual strike will be given priority. However, in case the said
workforce would not be enough, the management can hire additional workers to
supplement them.
'e) The management will not anymore allow the scabs, numbering about eighteen (18)
workers[,] to work in the hacienda; and
'f) The union will immediately lift the picket upon signing of this agreement.'
"However, alleging that complainants failed to load the fifteen wagons, respondents reneged on
its commitment to sit down and bargain collectively. Instead, respondent employed all means
including the use of private armed guards to prevent the organizers from entering the premises.
"Moreover, starting September 1991, respondents did not any more give work assignments to the
complainants forcing the union to stage a strike on January 2, 1992. But due to the conciliation
efforts by the DOLE, another Memorandum of Agreement was signed by the complainants and
respondents which provides:
'Whereas the union staged a strike against management on January 2, 1992 grounded on the
dismissal of the union officials and members;
'Whereas parties to the present dispute agree to settle the case amicably once and for all;
'Now therefore, in the interest of both labor and management, parties herein agree as
follows:
'1. That the list of the names of affected union members hereto attached and made part
of this agreement shall be referred to the Hacienda payroll of 1990 and determine
whether or not this concerned Union members are hacienda workers;
'2. That in addition to the payroll of 1990 as reference, herein parties will use as guide the
subjects of a Memorandum of Agreement entered into by and between the parties last
January 4, 1990;
'3. That herein parties can use other employment references in support of their respective
claims whether or not any or all of the listed 36 union members are employees or
hacienda workers or not as the case may be;
'4. That in case conflict or disagreement arises in the determination of the status of the
particular hacienda workers subject of this agreement herein parties further agree to
submit the same to voluntary arbitration;
'5. To effect the above, a Committee to be chaired by Rose Mengaling is hereby created
to be composed of three representatives each and is given five working days starting
Jan. 23, 1992 to resolve the status of the subject 36 hacienda workers. (Union
representatives: Bernardo Torres, Martin Alas-as, Ariston Arulea Jr.)"
"Pursuant thereto, the parties subsequently met and the Minutes of the Conciliation Meeting
showed as follows:

'The meeting started at 10:00 A.M. A list of employees was submitted by Atty. Tayko
based on who received their 13th month pay. The following are deemed not considered
employees:
1. Luisa Rombo
2. Ramona Rombo
3. Bobong Abrega
4. Boboy Silva
'The name Orencio Rombo shall be verified in the 1990 payroll.
'The following employees shall be reinstated immediately upon availability of work:
1. Jose Dagle

7. Alejandro Tejares

2. Rico Dagle

8. Gaudioso Rombo

3. Ricardo Dagle

9. Martin Alas-as Jr.

4. Jesus Silva

10. Cresensio Abrega

5. Fernando Silva

11. Ariston Eruela Sr.

6. Ernesto Tejares

12. Ariston Eruela Jr.'

"When respondents again reneged on its commitment; complainants filed the present complaint.
"But for all their persistence, the risk they had to undergo in conducting a strike in the face of
overwhelming odds, complainants in an ironic twist of fate now find themselves being accused of
'refusing to work and being choosy in the kind of work they have to perform'." 5 (Citations omitted)
Ruling of the Court of Appeals
The CA affirmed that while the work of respondents was seasonal in nature, they were considered to be
merely on leave during the off-season and were therefore still employed by petitioners. Moreover, the
workers enjoyed security of tenure. Any infringement upon this right was deemed by the CA to be
tantamount to illegal dismissal.
The appellate court found neither "rhyme nor reason in petitioner's argument that it was the workers
themselves who refused to or were choosy in their work." As found by the NLRC, the record of this case is
"replete with complainants' persistence and dogged determination in going back to work." 6
The CA likewise concurred with the NLRC's finding that petitioners were guilty of unfair labor practice.
Hence this Petition. 7

Issues
Petitioners raise the following issues for the Court's consideration:
"A. Whether or not the Court of Appeals erred in holding that respondents, admittedly seasonal
workers, were regular employees, contrary to the clear provisions of Article 280 of the Labor
Code, which categorically state that seasonal employees are not covered by the definition of
regular employees under paragraph 1, nor covered under paragraph 2 which refers exclusively to
casual employees who have served for at least one year.
"B. Whether or not the Court of Appeals erred in rejecting the ruling in Mercado, . . . and relying
instead on rulings which are not directly applicable to the case at bench, viz, Philippine Tobacco,
Bacolod-Murcia, and Gaco, . . .
"C Whether or not the Court of Appeals committed grave abuse of discretion in upholding the
NLRC's conclusion that private respondents were illegally dismissed, that petitioner[s were] guilty
of unfair labor practice, and that the union be awarded moral and exemplary damages." 8
Consistent with the discussion in petitioners' Memorandum, we shall take up Items A and B as the first
issue and Item C as the second.
The Court's Ruling
The Petition has no merit.
First Issue:
Regular Employment
At the outset, we must stress that only errors of law are generally reviewed by this Court in petitions for
review on certiorari of CA decisions. 9 Questions of fact are not entertained. 10 The Court is not a trier of
facts and, in labor cases, this doctrine applies with greater force. 11 Factual questions are for labor
tribunals to resolve. 12 In the present case, these have already been threshed out by the NLRC. Its
findings were affirmed by the appellate court.
Contrary to petitioners' contention, the CA did not err when it held that respondents were regular
employees.
Article 280 of the Labor Code, as amended, states:
"Art. 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 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 activity exist."
(Italics supplied)
For respondents to be excluded from those classified as regular employees, it is not enough that they
perform work or services that are seasonal in nature. They must have also been employed only for the
duration of one season. The evidence proves the existence of the first, but not of the second, condition.
The fact that respondents with the exception of Luisa Rombo, Ramona Rombo, Bobong Abriga and
Boboy Silva repeatedly worked as sugarcane workers for petitioners for several years is not denied by
the latter. Evidently, petitioners employed respondents for more than one season. Therefore, the general
rule of regular employment is applicable.
In Abasolo v. National Labor Relations Commission, 13 the Court issued this clarification:
"[T]he test of whether or not an employee is a regular employee has been laid down in De Leon v.
NLRC, in which this Court held:
"The primary standard, therefore, of determining regular employment is the reasonable
connection between the particular activity performed by the employee in relation to the usual
trade or business of the employer. The test is whether the former is usually necessary or
desirable in the usual trade or business 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 a
year, even if the performance is not continuous and merely intermittent, the law deems 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 considered regular, but
only with respect to such activity and while such activity exists.
xxx

xxx

xxx

". . . [T]he fact that [respondents] do not work continuously for one whole year but only for the
duration of the . . . season does not detract from considering them in regular employment since in
a litany of cases this Court has already settled that seasonal workers who are called to work from
time to time and are temporarily laid off during off-season are not separated from service in said
period, but merely considered on leave until re-employed." 14
The CA did not err when it ruled that Mercado v. NLRC 15 was not applicable to the case at bar. In the
earlier case, the workers were required to perform phases of agricultural work for a definite period of time,
after which their services would be available to any other farm owner. They were not hired regularly and
repeatedly for the same phase/s of agricultural work, but on and off for any single phase thereof. On the
other hand, herein respondents, having performed the same tasks for petitioners every season for several
years, are considered the latter's regular employees for their respective tasks. Petitioners' eventual
refusal to use their services even if they were ready, able and willing to perform their usual duties
whenever these were available and hiring of other workers to perform the tasks originally assigned to
respondents amounted to illegal dismissal of the latter.
The Court finds no reason to disturb the CA's dismissal of what petitioners claim was their valid exercise
of a management prerogative. The sudden changes in work assignments reeked of bad faith. These
changes were implemented immediately after respondents had organized themselves into a union and
started demanding collective bargaining. Those who were union members were effectively deprived of
their jobs. Petitioners' move actually amounted to unjustified dismissal of respondents, in violation of the
Labor Code.
"Where there is no showing of clear, valid and legal cause for the termination of employment, the law
considers the matter a case of illegal dismissal and the burden is on the employer to prove that the

termination was for a valid and authorized cause." 16 In the case at bar, petitioners failed to prove any
such cause for the dismissal of respondents who, as discussed above, are regular employees.
Second Issue:
Unfair Labor Practice
The NLRC also found herein petitioners guilty of unfair labor practice. It ruled as follows:
"Indeed, from respondents' refusal to bargain, to their acts of economic inducements resulting in
the promotion of those who withdrew from the union, the use of armed guards to prevent the
organizers to come in, and the dismissal of union officials and members, one cannot but conclude
that respondents did not want a union in their haciendaa clear interference in the right of the
workers to self-organization." 17
We uphold the CA's affirmation of the above findings. Indeed, factual findings of labor officials, who are
deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded
not only respect but even finality. Their findings are binding on the Supreme Court. 18 Verily, their
conclusions are accorded great weight upon appeal, especially when supported by substantial
evidence. 19 Consequently, the Court is not duty-bound to delve into the accuracy of their factual findings,
in the absence of a clear showing that these were arbitrary and bereft of any rational basis." 20
The finding of unfair labor practice done in bad faith carries with it the sanction of moral and exemplary
damages."21
WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against
petitioners.
SO ORDERED.
Puno, Sandova
-----------------------------------------

116. Samahan sa Bandolino v NLRC

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. 125195 July 17, 1997

SAMAHAN NG MGA MANGGAGAWA SA BANDOLINO-LMLC (represented by Lauro de Leon,
President) and ROMEO REYES, LAURO DE LEON, JAIME SIBUG, ROLANDO RAMOS, FREDDIE
ACAMPADO, REYNALDO DE LA PAZ, ELIAS CABRIA, JOHNNY FLORENCIO, EMELITA BATOON,

CORAZON REYES, DANIEL MARISCOTES, REGOLITO BANAGA, JOSELITO TAPAR, JOSE TUGAY,
MARCIAL B. FRANCO, SALVADOR LLABRES, LIGAYA FRANCO, AUREA B. BONON, ADORACION
C. BROZO, CAMILA TUGA, ROMULO G. ALMONITE, JACINTO RODRIGUEZ, JR., ROSALINDA
FLORENCIO, and EMMA BROZO,petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, BANDOLINO SHOE CORPORATION and/or
GERMAN ALCANTARA, AIDA ALCANTARA, and MIMI ALCANTARA, respondents.

MENDOZA, J.:
This is a petition for certiorari to set aside the decision of the National Labor Relations Commission
(NLRC), dated May 31, 1995, which reversed the decision of the labor arbiter, dated July 22, 1992, finding
petitioners to have been illegally dismissed and consequently ordering their reinstatement and the
payment to them of their monetary claims.
The facts are as follows:
Petitioners are former employees of private respondent Bandolino Shoe Corporation and members of
petitioner union, Samahan ng Manggagawa sa Bandolino-LMLC. Private respondents German Alcantara,
Aida Alcantara, and Mimi Alcantara are the owners and officers of Bandolino Shoe Corporation.
On June 4, 1990, petitioners Marcial Franco, Johnny Florencio, and Romeo Reyes were directed to take
a two-week leave because of a strike at the Shoemart, Bandolino's biggest customer. Apparently, the
strike adversely affected private respondents' business. Petitioners were told by management that, should
the circumstances improve, they would be recalled to work after two weeks.
Later that day, petitioner Marcial Franco and his wife were called to the personnel manager's office and
told that Ligaya Franco had been dismissed. Marcial Franco pleaded with German Alcantara not to
terminate his wife from employment, but his entreaties were rejected, allegedly because of his refusal to
divulge the names of the organizers and members of the petitioner union. Three other relatives, namely
Emma Brozo, Adoracion Brozo, and Aurea Bonon, were subsequently dismissed.
On June 9, 1990, the other petitioners were likewise informed by the personnel manager of the
termination of their employment and asked to turn in their identification cards.
The petitioners tried to return to work after two weeks on June 11, 1990, but they were refused entry into
the company premises. Subsequent efforts to return to work were likewise thwarted. The management
refused to allow them to return to work allegedly to prevent any untoward incident between the petitioner
union and the Bandolino Shoes Independent Labor Union.
On June 11, 1990, petitioners filed a notice of strike. A conciliation conference was held but it was
unsuccessful. Although petitioners did not strike, they stage a picket for one hour each on two successive
Saturdays to protest their dismissal.
On August 22, 1990, they filed a complaint for illegal dismissal, unfair labor practice, underpayment,
overtime pay, and holiday pay. At the initial conference, the labor arbiter issued a return to work order to

the private respondents based on the private respondents' claim that they had not dismissed petitioners.
But petitioners were not allowed to work by private respondents. The labor arbiter's efforts to get the
parties to settle their dispute amicably proved unavailing, as the private respondents imposed conditions
unacceptable to petitioners. As private respondents themselves stated in their position paper date
November 27, 1990, "management was willing to allow complainants to report for work immediately . . . if
complainants were willing to forego their strike and Petition for Certification and to recognize the majority
representation status of the existing Union (then uncertified)," but they were not.
On July 22, 1992, the Labor Arbiter, Potenciano S. Caizares, Jr., decided the case in favor of petitioners.
He found that petitioners had been illegally dismissed because of their union activities and that private
respondents had committed unfair labor practice. Although private respondents claimed to have merely
placed petitioners on "rotation" because of the Shoermart strike, the labor arbiter found that even after the
end of the strike, petitioners were still not allowed to return to work. Referring to private respondents'
position paper, the labor arbiter found that private respondents had imposed illegal conditions on
petitioners reinstatement by requiring them to forego their intended strike, withdraw their petition for
certification election, and instead recognize the existing union. On the basis and noting that during the
hearings private respondents' counsel subjected the petitioners to a barrage of questioning regarding
their union activities, the labor arbiter concluded that private respondents were guilty of unfair labor
practice for having restrained the petitioners' exercise of the right to self-organization. Accordingly, the
labor arbiter ordered:
WHEREFORE, judgment is hereby rendered:
1. Declaring the respondents guilty of unfair labor practice and ordering the respondents to cease
and desist from further committing the ULP acts as charged;
2. Ordering the respondents to reinstate the complainants in their previous jobs and to pay them
backwages for one (1) year without qualifications or deductions for earning elsewhere during their
illegal dismissal.
The aspect of reinstatement, either in the job or payroll at the option of the respondents, pursuant
to Article 223 of the Labor Code, being immediately executory, the respondents are hereby
directed to reinstate the complainants either way upon their presentation of themselves for work.
3. Ordering the respondents to pay the complainants salary differential and legal holiday pay.
The following are the monetary awards as computed by Ma. Cristina T. Paraoan of the
Commission's Research and Information Unit:
1. ROMULO ALMONTE P 43,087.76
2. REGOLITO BAAGA 53,953.93
3. EMELITA BATOON 43,533.46
4. ELIAS ECABRIA 42,229.72
5. LAURO DE LEON 45,499.32

6. NILDA DELGADO 32,625.72

7. JOHNNY FLORENCIO 45,499.72
8. MARCIAL FRANCO 43,147.72
9. SALVADOR LLABRES 44,915.32
10. ROSALINA FLORENCIO 37,564.85
11. DANIEL MARISCOTES 44,639.72
12. ROLANDO MATRE 44,713.52
13. VIRGINIA PEDRACIO 54,498.96
14. ROLANDO RAMOS 44,772.60
15. CORAZON REYES 58,868.46
16. ROMEO REYES 56,779.27
17. JACINTO RODRIGUEZ, JR. 37,674.12
18. CAROLINA SANTIAGO 35,257.14
19. JAIME SIBUG 32,453.72
20. MARITA SORIANO 37,900.72
21. CAMILA TUGAY 39,046.68
The claim for overtime pay is hereby dismissed for lack of sufficient evidence.
Pursuant to the decision of the labor arbiter, private respondents sent telegrams, dated August 29, 1992,
to the petitioners ordering them to
REPORT TO WORK IMMEDIATELY AT 131 LOPEZ JAENA ST. JESUS DELA PEA, MARIKINA.
FAILURE TO DO SO WITHIN TEN (10) DAYS SHALL BE INTERPRETED THAT YOU ARE NO
LONGER TO INTERESTED TO WORK HERE. 1
In a letter dated September 3, 1992, petitioners responded, thus:
While all the complainants are ready and willing to return to work at the soonest time possible and
while we do not in any way reject the scheduled reinstatement, it may not be possible within the
time frame stated by you in the telegram.

Inasmuch as there are more than four members of the union, in fact more than twenty (20), who
are entitled to reinstatement; and inasmuch as there are other aspects of the decision of the labor
arbiter covering the above-stated case which have to be discussed, we hereby propose that a
conference be held between the arbiter, the union leaders and managements' representatives in
order that all concerned will be able to thresh out these matters and prepare for a smooth and
amicable implementation of the decision in the above-mentioned case.
In this connection, a motion for immediate execution of the decision of the arbiter has been filed
in behalf of the complainant and a conference on the basis of this motion will be set by Arbiter
Caizares to be held before him at the NLRC. A copy of the motion has been sent you and your
office will be notified of the date of the conference. 2
In response, private respondents wrote:
We are of the considered opinion that, since you have already admitted in behalf of the
complainants that they are ready and willing to report for work and do not reject the scheduled
reinstatement, there is no justifiable reason why they should not immediately return to work and
cause unnecessary delay.
xxx xxx xxx
Considering that both parties have already appealed the decision and that respondent has
already posted a surety bond, nothing is left then to be done but to follow the legitimate order of
Bandolino's management for the return of the complainants. The request for a conference, to be
mediated by the Honorable Arbiter Caizares is not necessary since once an order has been
appealed, the Honorable Arbiter loses his jurisdiction.
And, considering further, that two (2) months have already lapsed from the time the decision was
promulgated and more than a month from the time the telegram was sent individually, the interest
and desire to return to work by your clients is surely doubtful and highly questionable. 3
Private respondents appealed to the NLRC, contending that the "rotation" of petitioners was not a
termination of employment; that petitioners did not report for work although they had been reinstated; and
that the labor arbiter's finding that the company imposed illegal conditions was based upon an "off the
record" offer which was privileged in nature and therefore could not be used in evidence against private
respondents. According to private respondents, petitioners' lay off because of the "rotation" scheme could
not be considered union busting because it was adopted in 1989, before the registration of petitioner
union as an affiliate of Lakas ng Manggagawa Labor Center (LMLC) on November 7, 1990. They
contended that the monetary awards had no basis.
In its decision dated May 31, 1995, the NLRC revised the labor arbiter. It ruled that except for Jaime
Sibug, petitioners were all piece-rate-workers entitled only to 13th month pay for three years. It held
further that there was no evidence showing specific instances of coercion or restraint committed by the
private respondents to justify finding of ULP. The NLRC gave credence instead to private respondents'
claim that, at the time the "rotation scheme" was implemented, they did not know that petitioner union was
registered or that the petitioners were the organizers; and that petitioners misrepresented that their union
was a member of the LMLC, when in fact it was only on November 7, 1990 that they affiliated with the
LMLC. The NLRC found that petitioners organized a union only after the implementation of the 1990

"rotation scheme." The NLRC agreed with the private respondents' claim that the "off the record" offer
made by them constitutes privileged communication and that under Art. 233 of the Labor Code it cannot
be taken in evidence against them. The NLRC therefore ruled that "There being no other evidence to
support the claim of ULP, such finding must be overturned." Hence, this petition.
Petitioners contend that the NLRC acted with grave abuse of discretion in reversing the labor arbiter's
findings. They contend that the labor arbiter's decision finding that they had been illegally dismissed is
supported by other evidence and not only the conditions attached to the offer, namely (1) that petitioners'
non-reinstatement even after the end of the Shoemart strike contradicts the claim of private respondents
that petitioners were merely put on "rotation" because business was poor on account of the Shoemart
strike and (2) that the order to petitioners to turn in their ID cards implied termination of their employment.
Petitioners also maintain that the offer of reinstatement made by private respondents at the hearing was
properly used as evidence of ULP because private respondents themselves adverted to the offer in their
position paper and therefore took the conditions attached to their offer out of the ambit of privileged
communication. They contend finally that it was error for the NLRC to rule that private respondents did not
commit unfair labor practice because, at that time, there was yet no union of petitioners. Petitioners
contend that under the ruling in Judric Canning Corp. vs. Inciong, 4 restraint or coercion may be employed
even prior to the registration of a union.
While generally speaking factual findings of administrative agencies are not subject to review by this
Court, it is equally established that the Court will not uphold erroneous conclusions which are contrary to
the evidence because then the agency would be guilty of a grave abuse of discretion. Nor is this Court
bound by conclusions which are not supported by substantial evidence. 5
The substantial evidence rule does not authorize any finding to be made just as long as there is any
evidence to support it. It does not excuse administrative agencies from considering contrary evidence
which fairly detracts from the evidence supporting a finding. In this case, the labor arbiter's finding of
illegal dismissal was based not only upon the private respondents' "off the record" offer containing illegal
conditions but also on facts of record found by the arbiter which the NLRC disregarded. These are: (1)
that following the order for "rotation," some of the petitioners were made to surrender their ID's and (2)
that although the "rotation scheme" was ostensibly implemented because of the Shoemart strike, even
after the strike had ended, petitioners' attempts to return to work were thwarted. In truth, private
respondents' claim that petitioners, who were regular employees, were put on rotation while the casual
workers were not because petitioners were skilled and it was much easier for them to find new jobs only
succeeds in revealing their real intention. Would it be necessary for petitioners to look for new jobs if the
"rotation" was merely temporary? The NLRC plainly ignored these facts which amply supported the labor
arbiter's decision.
It is untenable for the Solicitor General to contend, 6 that petitioners were dismissed for their refusal to
return to work. Petitioners did not refuse to work. They responded promptly to private respondents'
telegrams and expressed their intention to resume work immediately. This is clear from their letter to the
management on September 3, 1992 7 as quoted above. Moreover, it has been ruled that mere failure to
report for work after notice to return does not constitute abandonment or bar reinstatement. 8 Thus,
petitioners may even be considered dismissed without cause as a result of private respondents' refusal to
accept them, in addition to having been earlier dismissed by being put on "rotation."
To repeat, even disregarding evidence of the illegal conditions imposed by private respondents for
petitioners' return to work, there was substantial evidence remaining in the record to sustain the labor

arbiter's decision that private respondents were guilty of ULP. There was evidence to the effect that
Marcial Franco had been asked to disclose the names of the members of the union and that the
management had shown interest in the unionizing activities of the petitioners. This evidence has
remained unchallenged. 9 What is more, it appears that only alleged members of the petitioner union were
put on "rotation". 10 The labor arbiter's observation during the hearing that the private respondents had
shown hostility towards petitioners for their union activities is a determination of fact which is based on the
totality of private respondents' conduct, indicating anti-union bias. 11 Nor is it disputed that private
respondents opposed petitioners' petition for certification election when this matter should be the sole
concern of the workers. 12 Private respondents' interest belies their claim that they were not aware of
petitioners' organizational and union activities prior to the union's registration. An employer may be guilty
of ULP in interfering with the right to self-organization even before the union has been registered. 13
We therefore proceed to petitioners' prayer for monetary awards. Petitioners do not dispute the NLRC's
finding that, except for Jaime Sibug, the rest of petitioners are piece-rate workers. Consequently, all
petitioners are entitled to minimum wage and 13th-month pay, but only Jaime Sibug is entitled to an
additional award of holiday pay. All of the petitioners are entitled to salary differentials, as found by the
labor arbiter, and to 13th-month pay, as ruled by the NLRC. Pursuant to Art. 279 of the Labor Code, as
amended by Republic Act No. 6715, and our ruling in Bustamante v. National Labor Relations
Commission, 14 the petitioners are entitled to full backwages from the time their compensation was
withheld up to the time of their actual reinstatement or, where reinstatement is no longer possible, to full
backwages up to the time of finality of this decision.
WHEREFORE, in view of the foregoing, the decision of the NLRC dated May 31, 1995 is set aside and
the decision of the labor arbiter dated July 22, 1992 is reinstated, with the modification that only Jaime
Sibug should be given holiday pay, while all petitioners should be given 13th-month pay and full
backwages.
SO ORDERED.
-------------------------------------------

117. St John College v St John Union

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167892

October 27, 2006

ST. JOHN COLLEGES, INC., petitioner,

vs.
ST. JOHN ACADEMY FACULTY AND EMPLOYEES UNION, respondent.

DECISION

YNARES-SANTIAGO, J.:
This petition for review on certiorari assails the April 22, 2004 Decision1 of the Court of Appeals in CAG.R. SP No. 74519, which affirmed with modifications the June 28, 2002 Resolution 2 of the National
Labor Relations Commission (NLRC) in NLRC CN RAB IV 5-10035-98-1, and its April 15, 2005
Resolution3 denying petitioners motion for reconsideration.
Petitioner St. John Colleges, Inc. (SJCI) is a domestic corporation which owns and operates the St.
Johns Academy (later renamed St. John Colleges) in Calamba, Laguna. Prior to 1998, the Academy
offered a secondary course only. The high school then employed about 80 teaching and non-teaching
personnel who were members of the St. John Academy Faculty & Employees Union (Union).
The Collective Bargaining Agreement (CBA) between SJCI and the Union was set to expire on May 31,
1997. During the ensuing collective bargaining negotiations, SJCI rejected all the proposals of the Union
for an increase in workers benefits. This resulted to a bargaining deadlock which led to the holding of a
valid strike by the Union on November 10, 1997. In order to end the strike, on November 27, 1997, SJCI
and the Union, through the efforts of the National Conciliation and Mediation Board (NCMB), agreed to
refer the labor dispute to the Secretary of Labor and Employment (SOLE) for assumption of jurisdiction:
AGREEMENT AND JOINT PETITION FOR ASSUMPTION OF JURISDICTION
Both parties agree as follows:
1. That the issue raised by the Union shall be referred to the Honorable Secretary of Labor by
way of Assumption of Jurisdiction. Note this will serve as a joint petition for Assumption of
Jurisdiction.
2. Parties shall submit their respective position paper within 10 days upon the signing of this
agreement and to be decided within two months.
3. That management shall grant the employees cash advance of P1,800.00 each to be given on
or before December 5, 1997 deductible after two months payable in two installments starting
January 31, 1998. The decision re: assumption [of] jurisdiction has not been resolved.
4. Union shall lift the picket immediately and remove all obstruction and return to work on
Monday, December 1, 1997.
5. No retaliatory action shall be undertaken by either party against each other in relation to the
strike.4
After which, the strike ended and classes resumed. Subsequently, the SOLE issued an Order dated
January 19, 1998 assuming jurisdiction over the labor dispute pursuant to Article 263 of the Labor Code.
The parties were required to submit their respective position papers within ten (10) days from receipt of
said Order.
Pending resolution of the labor dispute before the SOLE, the Board of Directors of SJCI approved on
February 22, 1998 a resolution recommending the closure of the high school which was approved by the
stockholders on even date. The Minutes5 of the stockholders meeting stated the reasons therefor, to wit:
98-3 CLOSURE OF THE SCHOOL

The President, Mr. Rivera, informed the stockholders that the Board at its meeting on February
15, 1998 unanimously approved to recommend to the stockholders the closure of the school
because of the irreconcilable differences between the school management and the Academys
Union particularly the safety of our students and the financial aspect of the ongoing CBA
negotiations.
After due deliberations, and upon motion of Dr. Jose O. Juliano seconded by Miss Eva Escalano,
it was unanimously resolved, as it is hereby resolved, that the Board of St. John Colleges, Inc. be
authorized to decide on the terms and conditions of closure, if such decision is made, to the best
interest of the stockholders, parents and students. 6
Thereafter, SJCI informed the Department of Labor and Employment (DOLE), Department of Education,
Culture and Sports (DECS), parents, students and the Union of the impending closure of the high school
which took effect on March 31, 1998.
Subsequently, some teaching and non-teaching personnel of the high school agreed to the closure. On
April 2, 1998, SJCI informed the DOLE that as of March 31, 1998, 51 employees had received their
separation compensation package while 25 employees refused to accept the same.
On May 4, 1998, the aforementioned 25 employees conducted a protest action within the perimeter of the
high school. The Union filed a notice of strike with the NCMB only on May 7, 1998.
On May 19, 1998, SJCI filed a petition to declare the strike illegal before the NLRC which was docketed
as NLRC Case No. RAB-IV-5-10035-98-L. It claimed that the strike was conducted in violation of the
procedural requirements for holding a valid strike under the Labor Code.
On May 21, 1998, the 25 employees filed a complaint for unfair labor practice (ULP), illegal dismissal and
non-payment of monetary benefits against SJCI before the NLRC which was docketed as RAB-IV-510039-98-L. The Union members alleged that the closure of the high school was done in bad faith in
order to get rid of the Union and render useless any decision of the SOLE on the CBA deadlocked issues.
These two cases were then consolidated. On January 8, 1999, Labor Arbiter Antonio R. Macam rendered
a Decision7 dismissing the Unions complaint for ULP and illegal dismissal while granting SJCIs petition to
declare the strike illegal coupled with a declaration of loss of employment status of the 25 Union members
involved in the strike.
Meanwhile, in the proceedings before the SOLE, the Union filed a manifestation 8 to maintain the status
quo on March 30, 1998 praying that SJCI be enjoined from closing the high school. It claimed that the
decision of SJCI to close the high school violated the SOLEs assumption order and the agreement of the
parties not to take any retaliatory action against the other. For its part, SJCI filed a motion to dismiss with
entry of appearance9 on October 14, 1998 claiming that the closure of the high school rendered the CBA
deadlocked issues moot. Upon receipt of the Labor Arbiters decision in the aforesaid consolidated cases,
SJCI filed a second motion to dismiss10on February 1, 1999 arguing that the case had already been
resolved.
Moreover, after the favorable decision of the Labor Arbiter, SJCI resolved to reopen the high school for
school year 1999-2000. However, it did not restore the high school teaching and non-teaching employees
it earlier terminated. That same school year SJCI opened an elementary and college department.
On July 23, 1999, the SOLE denied SJCIs motions to dismiss and certified the CBA deadlock case to the
NLRC. It ordered the consolidation of the CBA deadlock case with the ULP, illegal dismissal, and illegal
strike cases which were then pending appeal before the NLRC.

On June 28, 2002, the NLRC rendered judgment reversing the decision of the Labor Arbiter. It found SJCI
guilty of ULP and illegal dismissal and ordered it to reinstate the 25 employees to their former positions
without loss of seniority rights and other benefits, and with full backwages. It also required SJCI to pay
moral and exemplary damages, attorneys fees, and two (2) months summer/vacation pay. Moreover, it
ruled that the mass actions conducted by the 25 employees on May 4, 1998 could not be considered as a
strike since, by then, the employer-employee relationship had already been terminated due to the closure
of the high school. Finally, it dismissed, without prejudice, the certified case on the CBA deadlocked
issues for failure of the parties to substantiate their respective positions.
On appeal, the Court of Appeals, in its Decision dated April 22, 2004, affirmed with modification the
decision of the NLRC:
WHEREFORE, in light of the preceding discussions, the decision subject of the instant petition is
hereby affirmed with a modification that in the computation of backwages, the two month
unworked summer vacation should excluded.
SO ORDERED.11
With the denial of its motion for reconsideration, SJCI interposed the instant petition essentially raising
two issues: (1) whether it is liable for ULP and illegal dismissal when it closed down the high school on
March 31, 1998 and (2) whether the Union is liable for illegal strike due to the protest actions which its 25
members undertook within the high schools perimeter on May 4, 1998.
The petition lacks merit.
Under Article 283 of the Labor Code, the following requisites must concur for a valid closure of the
business: (1) serving a written notice on the workers at least one (1) month before the intended date
thereof; (2) serving a notice with the DOLE one month before the taking effect of the closure; (3) payment
of separation pay equivalent to one (1) month or at least one half (1/2) month pay for every year of
service, whichever is higher, with a fraction of at least six (6) months to be considered as a whole year;
and (4) cessation of the operation must be bona fide.12 It is not disputed that the first two requisites were
satisfied. The third requisite would have been satisfied were it not for the refusal of the herein private
respondents to accept the separation compensation package. The instant case, thus, revolves around the
fourth requisite, i.e., whether SJCI closed the high school in good faith.
Whether or not the closure of the high school was done in good faith is a question of fact and is not
reviewable by this Court in a petition for review on certiorari save for exceptional circumstances. In fine,
the finding of the NLRC, which was affirmed by the Court of Appeals, that SJCI closed the high school in
bad faith is supported by substantial evidence and is, thus, binding on this Court. Consequently, SJCI is
liable for ULP and illegal dismissal.
The determination of whether SJCI acted in bad faith depends on the particular facts as established by
the evidence on record. Bad faith is, after all, an inference which must be drawn from the peculiar
circumstances of a case. The two decisive factors in determining whether SJCI acted in bad faith
are (1) the timing of, and reasons for the closure of the high school, and (2) the timing of, and the
reasons for the subsequent opening of a college and elementary department, and, ultimately, the
reopening of the high school department by SJCI after only one year from its closure.
Prior to the closure of the high school by SJCI, the parties agreed to refer the 1997 CBA deadlock to the
SOLE for assumption of jurisdiction under Article 263 of the Labor Code. As a result, the strike ended and
classes resumed. After the SOLE assumed jurisdiction, it required the parties to submit their respective
position papers. However, instead of filing its position paper, SJCI closed its high school, allegedly
because of the "irreconcilable differences between the school management and the Academys Union
particularly the safety of our students and the financial aspect of the ongoing CBA negotiations."

Thereafter, SJCI moved to dismiss the pending labor dispute with the SOLE contending that it had
become moot because of the closure. Nevertheless, a year after said closure, SJCI reopened its high
school and did not rehire the previously terminated employees.
Under these circumstances, it is not difficult to discern that the closure was done to defeat the parties
agreement to refer the labor dispute to the SOLE; to unilaterally end the bargaining deadlock; to render
nugatory any decision of the SOLE; and to circumvent the Unions right to collective bargaining and its
members right to security of tenure. By admitting that the closure was due to irreconcilable differences
between the Union and school management, specifically, the financial aspect of the ongoing CBA
negotiations, SJCI in effect admitted that it wanted to end the bargaining deadlock and eliminate the
problem of dealing with the demands of the Union. This is precisely what the Labor Code abhors and
punishes as unfair labor practice since the net effect is to defeat the Unions right to collective
bargaining.
However, SJCI contends that these circumstances do not establish its bad faith in closing down the high
school. Rather, it claims that it was forced to close down the high school due to alleged difficult labor
problems that it encountered while dealing with the Union since 1995, specifically, the Unions illegal
demands in violation of R.A. 6728 or the "Government Assistance to Students and Teachers in Private
Education Act." Under R.A. 6728, the income from tuition fee increase is to be used as follows: (a) 70% of
the tuition fee shall go to the payment of salaries, wages, allowances, and other benefits of teaching and
non-teaching personnel, and (b) 20% of the tuition fee increase shall go to the improvement or
modernization of the buildings, equipment, and other facilities as well as payment of the cost of
operations. However, sometime in 1995, SJCI claims that it was forced to give-in to the demands of the
Union by allocating 100% of the tuition fee increase for teachers benefits even though the same was in
violation of R.A. 6728 in order to end the on-going strike of the Union and avoid prolonged disturbances of
classes. Subsequently or during the school year 1996-1997, SJCI claims that it obtained an approval from
the DECS for a 30% tuition fee increase, however, only 10% was implemented. Despite this, the Union
persisted in making illegal demands by filing a complaint before the DOLE claiming that they were entitled
to the unimplemented 20% tuition fee increase. Finally, during the collective bargaining negotiations in
1997, the Union again made economic demands in excess of the 70% of the tuition fee increase under
R.A. 6728. As a result, SJCI claims it had no choice but to refuse the Unions demands which thereafter
led to the holding of a strike on November 10, 1998. It argues that the Unions alleged illegal demands
was a valid justification for the closure of the high school considering that it was financially incapable of
meeting said demands and that it would violate R.A. 6728 if it gave in to said demands which carried
corresponding penalties to be imposed by the DECS.
We are not persuaded.
These alleged difficult labor problems merely show that SJCI and the Union had disagreements regarding
workers benefits which is normal in any business establishment. That SJCI agreed to appropriate 100%
of the tuition fee increase to the workers benefits sometime in 1995 does not mean that it was helpless in
the face of the Unions demands because neither party is obligated to precipitately give in to the proposal
of the other party during collective bargaining.13 If SJCI found the Unions demands excessive, its remedy
under the law is to refer the matter for voluntary or compulsory dispute resolution. Besides, this incident
which occurred in 1995, could hardly establish the good faith of SJCI or justify the high schools closure in
1998.
Anent the Unions claim for the unimplemented 20% tuition fee increase in 1996, suffice it to say that it is
erroneous to rule on said issue since the same was submitted before the Voluntary Arbitrator 14 and is not
on appeal before this Court.15 Besides, by referring the labor dispute to the Voluntary Arbitrator, the
parties themselves acknowledged that there is a sufficient mechanism to resolve the said dispute. Again,
we fail to see how this alleged labor problem in 1996 shows the good faith of SJCI in closing the high
school in 1998.

With respect to SJCIs claim that during the 1997 CBA negotiations the Union made illegal demands
because they exceeded the 70% limitation set by R.A. No. 6728, it is important to note that the alleged
illegality or excessiveness of the Unions demands were the issues to be resolved by the SOLE after the
parties agreed to refer the said labor dispute to the latter for assumption of jurisdiction. As previously
mentioned, the SOLE certified the case to the NLRC, which on June 28, 2002, rendered a decision
finding that there was insufficient evidenceto determine the reasonableness of the Unions proposals.
The NLRC found that SJCI failed to establish that the Unions demands were illegal or excessive. A
review of the records clearly shows that the Union submitted a position paper detailing its demands in
actual monetary terms. However, SJCI failed to establish how and why these demands were in excess of
the limitation set by R.A. 6728. Up to this point in the proceedings, it has merely relied on its self-serving
statements that the Unions demands were illegal and excessive. There is no basis, therefore, to hold that
the Union ever made illegal or excessive demands.
At any rate, even assuming that the Unions demands were illegal or excessive, the important and crucial
point is that these alleged illegal or excessive demands did not justify the closure of the high school and
do not, in any way, establish SJCIs good faith. The employer cannot unilaterally close its establishment
on the pretext that the demands of its employees are excessive. As already discussed, neither party is
obliged to give-in to the others excessive or unreasonable demands during collective bargaining, and the
remedy in such case is to refer the dispute to the proper tribunal for resolution. This was what SJCI and
the Union did when they referred the 1997 CBA bargaining deadlock to the SOLE; however, SJCI preempted the resolution of the dispute by closing the high school. SJCI disregarded the whole dispute
resolution mechanism and undermined the Unions right to collective bargaining when it closed down the
high school while the dispute was still pending with the SOLE.
The Labor Code does not authorize the employer to close down the establishment on the ground of illegal
or excessive demands of the Union. Instead, aside from the remedy of submitting the dispute for
voluntary or compulsory arbitration, the employer may file a complaint for ULP against the Union for
bargaining in bad faith. If found guilty, this gives rise to civil and criminal liabilities and allows the employer
to implement a lock out, but not the closure of the establishment resulting to the permanent loss of
employment of the whole workforce.
In fine, SJCI undermined the Labor Codes system of dispute resolution by closing down the high school
while the 1997 CBA negotiations deadlock issues were pending resolution before the SOLE. The closure
was done in bad faith for the purpose of defeating the Unions right to collective bargaining. Besides, as
found by the NLRC, the alleged illegality and excessiveness of the Unions demands were not sufficiently
proved by SJCI. Even on the assumption that the Unions demands were illegal or excessive, SJCIs
remedy was to await the resolution by the SOLE and to file a ULP case against the Union. However, SJCI
did not have the power to take matters into its own hands by closing down the school in order to get rid of
the Union.
SJCI next argues that the Union unduly endangered the safety and well-being of the students who joined
the valid strike held on November 10, 1997, thus it closed down the high school on March 31, 1998. It
claims that the Union coerced the students to join the protest actions to pressure SJCI to give-in to the
demands of the Union.
However, SJCI provided no evidence to substantiate these claims except for its self-serving statements in
its position paper before the Labor Arbiter and pictures belatedly attached to the instant petition before
this Court. However, the pictures were never authenticated and, on its face, only show that some students
watched the Union members while they conducted their protest actions. More importantly, it is not true, as
SJCI claims, that the Union admitted that it coerced the students to join the protest actions and recklessly
placed the students in harms way. In its Reply16 to SJCIs position paper before the Labor Arbiter, the
Union categorically denied that it put the students in harms way or pressured them to join the protest
actions. Given this denial by the Union, it was incumbent upon SJCI to prove that the students were
actually harmed or put in harms way and that the Union coerced them to join the protest actions. The
reason for this is that the employer carries the burden of proof to establish that the closure of the

business was done in good faith. In the instant case, SJCI had the burden of proving that, indeed, the
closure of the school was necessary to uphold the safety and well-being of the students.
SJCI presented no evidence to show that the protest actions turned violent; that the parents did not give
their consent to their children who allegedly joined the protest actions; that the Union did not take the
necessary steps to protect some of the students who allegedly joined the same; or that the Union forced
or pressured the said students to join the protest actions. Moreover, if the problem was the endangerment
of the students well-being due to the protest actions by the Union, then the natural response would have
been to immediately go after the Union members who allegedly coerced the students to join the protest
actions and thereby endangered the students safety. But no such action appears to have been
undertaken by SJCI. There is even no showing that it prohibited its students from joining the protest
actions or informed the parents of the activities of the students who allegedly joined the protest actions.
This raises serious doubts as to whether SJCI was really looking after the welfare of its students or
merely using them as a scapegoat to justify the closure of the school and thereby get rid of the Union.
Even assuming arguendo that the safety and well-being of some of the students who allegedly joined the
protest actions were compromised, still, the closure was done in bad faith because it was done long after
the strike had ended. Thus, there is no more danger to the students well-being posed by the strike to
speak of. It bears stressing that the closure was implemented on March 31, 1998 but the risk to the safety
of the students had long ceased to exist as early as November 28, 1997 when the parties agreed to refer
the labor dispute to the SOLE, thus, betraying SJCIs claim that it wanted to safeguard the interest of the
students.
Furthermore, if SJCI was after the interests of the students, then it should not have closed the school
because the parents and the students were vehemently opposed to the same, as shown by the letter
dated March 9, 1998 written by Mr. Teofilo G. Mamplata, President of the Parents Association, and
addressed to the Secretary of DECS, to wit:
As per letters sent recently by the school Management to the teachers and parents, notifying of
its closure on March 31, 1998, as decided upon by its Board of Trustees and Stockholders on
February 22, 1998 no reasons were stated to justify said decision and action which will definitely
affect adversely and to the detriment of the plight of parents, teachers, students and other
personnel of the school.
In this connection and due to the urgency of the matter, we hereby reiterate our appeal with our
prayer that the management and Board of Trustees of St. John Academy of Calamba, Laguna, be
stopped from pursuing their most sudden, unfair, unfavorable and detrimental decision and
action, and if warranted, sanctions be imposed against the erring party.17 (Italics supplied)
Along the same vein, the parents voiced out their strong objections to the proposed closure of the school,
to wit:
PAHAYAG NG PAGTUTOL
Kami, mga magulang, mag-aaral, guro, propesyonal, manggagawa at iba pang sector ng
pamayanan sa bayan ng Calamba, Laguna ay nagpapahayag ng pagtutol sa hindi
makatarungang pagsasara ng paaralangSAINT JOHN ACADEMY. Ang kagyat na pagsasara nito
ay nagdulot ng malaking suliranin sa 2,300 estudyante (incoming 2 nd year 4th year), kagaya ng
mga sumusunod:
1. Kakaunti ang bilang ng paaralan sa Calamba;
2. Walang paaralan na basta tatanggap sa 700 incoming third year at 800 incoming fourth year;

3. Ang lahat ng "HONOR STUDENTS" ay mababaliwala ang kanilang pinagsikapan;

4. Negatibo ang epekto sa moral ng mga batang estudyante ang pagkakaroon ng physical and
moral displacement dahil sa biglaang pagsasara nito;
5. Hindi lahat ng magulang ay kakayaning bumayad ng mataas na tuition fee sa ibang paaralan;
6. Ang mataas na kalidad ng turo ng mga guro sa paaralang ito ay mahirap pantayan; at
7. HIGIT NA LIGTAS SA SAKUNA ANG AMING MGA ANAK sa nasabing paaralan.
Bilang pagtutol sa pagsasara ng SAINT JOHN ACADEMY ay inilalagda namin ang aming
pangalan sa libis nito. (56 signatures follow)18 [Italics supplied]
Worth noting is the belief of the parents that the safety of their children was properly secured in said high
school. This was obviously in response to the claim of SJCI that the school was being closed, inter alia,
for the safety and well-being of the students. As correctly observed by the CA:
The petitioner urges this Court to believe that they closed down the school out of their sheer
concern for the students, some of whom have started to sympathize and participate in the unions
cause.
As intimated by the private respondent, however, the petitioner itself said that the closing down of
the school was, inter alia, "because of irreconcilable differences between the school management
and the Academys Union." Indeed, this translates into an admission that the cessation of
business was neither due to any patrician nor noble objective of protecting the studentry but
because the administration no longer wished to deal with respondent Union.
We are further tempted to doubt the verity of the petitioners claim that in deciding to shut down
the school, it only had the welfare of its students in mind. There is evidence on record which hints
otherwise. Apparently, the parents of the students were vehemently against the idea of closing
down the academy as this would be, as it later did prove, more detrimental to the studentry. No
less than Mr. Teofilo Mamplata, President of St. John Academy Parents Association of Calamba
expressed the groups aversion against such move and even wrote a letter to the then Secretary
of the Department of Education seeking immediate intervention to enjoin the school from
closing. This is an indication that the parents were unanimous in their sentiment that the
shutdown would result in inconvenience and displacement of the students who had already been
halfway through elementary school and high school. It turned out some were even forced to pay
higher tuition fees just so they would be admitted in other academies.19 (Italics supplied)
To recapitulate, there is insufficient evidence to hold that the safety and well-being of the students were
endangered and/or compromised, and that the Union was responsible therefor. Even assuming arguendo
that the students safety and well-being were jeopardized by the said protest actions, the alleged threat to
the students safety and well-being had long ceased by the time the high school was closed. Moreover,
the parents were vehemently opposed to the closure of the school because there was no basis to claim
that the students safety was at risk. Taken together, these circumstances lead to the inescapable
conclusion that SJCI merely used the alleged safety and well-being of the students as a subterfuge to
justify its actions.
SJCI next contends that the subsequent reopening of the high school after only one year from its closure
did not show that the previous decision to close the high school was tainted with bad faith because the
reopening was done due to the clamor of the high schools former students and their parents. It claims
that its former students complained about the cramped classrooms in the schools where they transferred.

The contention is untenable.

First, the fact that after one year from the time it closed its high school, SJCI opened a college and
elementary department, and reopened its high school department showed that it never intended to cease
operating as an educational institution. Second, there is evidence on record contesting the alleged reason
of SJCI for reopening the high school, i.e., that its former students and their parents allegedly clamored
for the reopening of the high school. In a letter20 dated December 15, 2000 addressed to the NLRC, which
has never been rebutted by SJCI, Mr. Mamplata, stated that
Para po sa inyong kabatiran xxx isinara nila ang paaralang ito dahil sa mga nag-alsang guro.
Sa ganitong kalagayan kaming pamunuan at kasapi ng PTA ay nakipag-usap sa pamunuan ng
paaralang ito na huwag naming isara dahil malaking epekto ito sa aming mga anak dahil noon ay
kalagitnaan pa lamang ng pasukan. Sa kabila ng pakiusap naming ito ay hindi kami pinakinggan
at sa halip ay tuluyang isinara. Sa kanilang ginawang ito marami sa mga bata ang hindi
nakapasok sa ibang paaralan at ang iba naman ay nadoble ang pinagbayaran sa matrikula. Sa
kabuuan nito ay malaking paghirap ang ginawa nila sa aming mga magulang at anak na nagaaral sa paaralang ito dahil lamang sa panggigipit sa mga gurong walang tanging hangarin kundi
bayaran sila ng naaayon sa itinakda ng batas.
Sa taong 1999-2000 ay muling binuksan ang paaralang ito na sabi nila ay sa kahilingan ng PTA.
Alin kayang PTA ang tinutukoy nila. Paanong magkakaroon ng PTA samantalang ito ay nakasara
at kami ang PTA bago ito isinara.
Kaya po pinaabot naming sa inyong kaalaman na kaming PTA ng paaralang (St. John Academy)
ito ay hindi kailanman humiling sa kanila na pamuling buksan ito.21 (Italics supplied)
Finally, when SJCI reopened its high school, it did not rehire the Union members. Evidently, the closure
had achieved its purpose, that is, to get rid of the Union members.
Clearly, these pieces of evidence regarding the subsequent reopening of the high school after only one
year from its closure further show that the high schools closure was done in bad faith.
Lastly, SJCI asserts that the strike conducted by the 25 employees on May 4, 1998 was illegal for failure
to take the necessary strike vote and give a notice of strike. However, we agree with the findings of the
NLRC and CA that the protest actions of the Union cannot be considered a strike because, by then, the
employer-employee relationship has long ceased to exist because of the previous closure of the high
school on March 31, 1998.
In sum, the timing of, and the reasons for the closure of the high school and its reopening after only one
year from the time it was closed down, show that the closure was done in bad faith for the purpose of
circumventing the Unions right to collective bargaining and its members right to security of tenure.
Consequently, SJCI is liable for ULP and illegal dismissal.
WHEREFORE, the petition is DENIED. The April 22, 2004 Decision and April 15, 2005 Resolution of the
Court Appeals in CA-G.R. SP No. 74519 are AFFIRMED.
SO ORDERED.
----------------------------------------

118. Purefoods v Samahan ng Purefoods

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 150896

August 28, 2008

PUREFOODS CORPORATION, petitioner,

vs.
NAGKAKAISANG SAMAHANG MANGGAGAWA NG PUREFOODS RANK-AND-FILE, ST. THOMAS
FREE WORKERS UNION, PUREFOODS GRANDPARENT FARM WORKERS UNION and
PUREFOODS UNIFIED LABOR ORGANIZATION, respondents.
DECISION
NACHURA, J.:
The petitioner, Purefoods Corporation, in this Rule 45 petition seeks the reversal of the appellate courts
dismissal of its certiorari petition, and our consequent review of the labor commissions finding that it
committed unfair labor practice and illegally dismissed the concerned union members.
Three labor organizations and a federation are respondents in this caseNagkakaisang Samahang
Manggagawa Ng Purefoods Rank-And-File (NAGSAMA-Purefoods), the exclusive bargaining agent of the
rank-and-file workers of Purefoods meat division throughout Luzon; St. Thomas Free Workers Union
(STFWU), of those in the farm in Sto. Tomas, Batangas; and Purefoods Grandparent Farm Workers
Union (PGFWU), of those in the poultry farm in Sta. Rosa, Laguna. These organizations were affiliates of
the respondent federation, Purefoods Unified Labor Organization (PULO). 1
On February 8, 1995, NAGSAMA-Purefoods manifested to petitioner corporation its desire to re-negotiate
the collective bargaining agreement (CBA) then due to expire on the 28 th of the said month. Together with
its demands and proposal, the organization submitted to the company its January 28, 1995 General
Membership Resolution approving and supporting the unions affiliation with PULO, adopting the draft
CBA proposals of the federation, and authorizing a negotiating panel which included among others a
PULO representative. While Purefoods formally acknowledged receipt of the unions proposals, it refused
to recognize PULO and its participation, even as a mere observer, in the negotiation. Consequently,
notwithstanding the PULO representatives non-involvement, the negotiation of the terms of the CBA still
resulted in a deadlock. A notice of strike was then filed by NAGSAMA-Purefoods on May 15, 1995. In the
subsequent conciliation conference, the deadlock issues were settled except the matter of the companys
recognition of the unions affiliation with PULO.2
In the meantime, STFWU and PGFWU also submitted their respective proposals for CBA renewal, and
their general membership resolutions which, among others, affirmed the two organizations affiliation with
PULO. Consistent with its stance, Purefoods refused to negotiate with the unions should a PULO
representative be in the panel. The parties then agreed to postpone the negotiations indefinitely.3

On July 24, 1995, however, the petitioner company concluded a new CBA with another union in its farm in
Malvar, Batangas. Five days thereafter, or on July 29, 1995, at around 8:00 in the evening, four company
employees facilitated the transfer of around 23,000 chickens from the poultry farm in Sto. Tomas,
Batangas (where STFWU was the exclusive bargaining agent) to that in Malvar. The following day, the
regular rank-and-file workers in the Sto. Tomas farm were refused entry in the company premises; and on
July 31, 1995, 22 STFWU members were terminated from employment. The farm manager, supervisors
and electrical workers of the Sto. Tomas farm, who were members of another union, were nevertheless
retained by the company in its employ.4
Aggrieved by these developments, the four respondent labor organizations jointly instituted a complaint
for unfair labor practice (ULP), illegal lockout/dismissal and damages, docketed as NLRC Case No.
NLRC-NCR-00-07-05159-95, with the Labor Arbitration Branch of the National Labor Relations
Commission (NLRC).5
In the proceedings before the Labor Arbiter (LA), Purefoods interposed, among others, the defenses that
PULO was not a legitimate labor organization or federation for it did not have the required minimum
number of member unions; that the closure of the Sto. Tomas farm was not arbitrary but was the result of
the financial non-viability of the operations therein, or the consequence of the landowners pre-termination
of the lease agreement; that the other complainants had no cause of action considering that it was only
the Sto. Tomas farm which was closed; that the termination of the employees complied with the 30-day
notice requirement and that the said employees were paid 30-day advance salary in addition to
separation pay; and that the concerned union, STFWU, lost its status as bargaining representative when
the Sto. Tomas farm was closed.6
On August 17, 1999, the LA rendered a Decision7 dismissing the complaint, and declaring that the
company neither committed ULP nor illegally dismissed the employees.
On appeal, the NLRC reversed the ruling of the LA, ordered the payment of P500,000.00 as moral and
exemplary damages and the reinstatement with full backwages of the STFWU members. In its March 16,
2001 Decision (CA No. 022059-00), the labor commission ruled that the petitioner companys refusal to
recognize the labor organizations affiliation with PULO was unjustified considering that the latter had
been granted the status of a federation by the Bureau of Labor Relations; and that this refusal constituted
undue interference in, and restraint on the exercise of the employees right to self-organization and free
collective bargaining. The NLRC said that the real motive of the company in the sudden closure of the
Sto. Tomas farm and the mass dismissal of the STFWU members was union busting, as only the union
members were locked out, and the company subsequently resumed operations of the closed farm under
a new contract with the landowner. Because the requisites of a valid lockout were absent, the NLRC
concluded that the company committed ULP. The dispositive portion of the NLRC decision reads:
WHEREFORE, respondent Purefoods Corporation is hereby directed to reinstate effective
October 1, 2000 employees-members of the STFWU-PULO who were illegally locked out on July
30, 1995 and to pay them their full backwages.
SO ORDERED.
Its motion for reconsideration having been denied, 8 the petitioner corporation filed a Rule 65 petition
before the Court of Appeals (CA) docketed as CA-G.R. SP No. 66871.

In the assailed October 25, 2001 Resolution,9 the appellate court dismissed outright the companys
petition for certiorari on the ground that the verification and certification of non-forum shopping was
defective since no proof of authority to act for and on behalf of the corporation was submitted by the
corporations senior vice-president who signed the same; thus, the petition could not be deemed filed for
and on behalf of the real party-in-interest. Then, the CA, in its November 22, 2001 Resolution, 10denied
petitioners motion for reconsideration of the dismissal order.
Dissatisfied, petitioner instituted before us the instant petition for review on certiorari under Rule 45.
The petition is denied.
Section 1, Rule 65 of the Rules of Court explicitly mandates that the petition for certiorari shall be
accompanied by a sworn certification of non-forum shopping. 11 When the petitioner is a corporation,
inasmuch as corporate powers are exercised by the board, the certification shall be executed by a natural
person authorized by the corporations board of directors. 12 Absent any authority from the board, no
person, not even the corporate officers, can bind the corporation. 13 Only individuals who are vested with
authority by a valid board resolution may sign the certificate of non-forum shopping in behalf of the
corporation, and proof of such authority must be attached to the petition. 14 Failure to attach to the
certification any proof of the signatorys authority is a sufficient ground for the dismissal of the petition. 15
In the instant case, the senior vice-president of the petitioner corporation signed the certificate of nonforum shopping. No proof of his authority to sign the said certificate was, however, attached to the
petition. Thus, applying settled jurisprudence, we find that the CA committed no error when it dismissed
the petition.
The Court cannot even be liberal in the application of the rules because liberality is warranted only in
instances when there is substantial compliance with the technical requirements in pleading and practice,
and when there is sufficient explanation that the non-compliance is for a justifiable cause, such that the
outright dismissal of the case will defeat the administration of justice. 16 Here, the petitioner corporation, in
its motion for reconsideration before the appellate court and in its petition before us, did not present a
reasonable explanation for its non-compliance with the rules. Further, it cannot be said that petitioner
substantially complied therewith, because it did not attach to its motion for reconsideration any proof of
the authority of its signatory. It stands to reason, therefore, that this Court now refuses to condone
petitioners procedural transgression.
We must reiterate that the rules of procedure are mandatory, except only when, for the most persuasive of
reasons, they may be relaxed to relieve a litigant of an injustice not commensurate to the degree of his
thoughtlessness in not complying therewith.17 While technical rules of procedure are not designed to
frustrate the ends of justice, they are provided to effect the proper and orderly disposition of cases and
effectively prevent the clogging of court dockets.18
Be that as it may, this Court has examined the records if only to dispel any doubt on the propriety of the
dismissal of the case, and we found no abuse of discretion, much more a grave one, on the part of the
labor commission in reversing the ruling of the LA.
It is crystal clear that the closure of the Sto. Tomas farm was made in bad faith. Badges of bad faith are
evident from the following acts of the petitioner: it unjustifiably refused to recognize the STFWUs and the
other unions affiliation with PULO; it concluded a new CBA with another union in another farm during the

agreed indefinite suspension of the collective bargaining negotiations; it surreptitiously transferred and
continued its business in a less hostile environment; and it suddenly terminated the STFWU members,
but retained and brought the non-members to the Malvar farm. Petitioner presented no evidence to
support the contention that it was incurring losses or that the subject farms lease agreement was preterminated. Ineluctably, the closure of the Sto. Tomas farm circumvented the labor organizations right to
collective bargaining and violated the members right to security of tenure. 19
The Court reiterates that the petition for certiorari under Rule 65 of the Rules of Court filed with the CA will
prosper only if there is clear showing of grave abuse of discretion or an act without or in excess of
jurisdiction on the part of the NLRC.20 It was incumbent, then, for petitioner to prove before the appellate
court that the labor commission capriciously and whimsically exercised its judgment tantamount to lack of
jurisdiction, or that it exercised its power in an arbitrary or despotic manner by reason of passion or
personal hostility, and that its abuse of discretion is so patent and gross as to amount to an evasion of a
positive duty enjoined or to act at all in contemplation of law.21 Here, as aforesaid, no such proof was
adduced by petitioner. We, thus, declare that the NLRC ruling is not characterized by grave abuse of
discretion. Accordingly, the same is also affirmed.
However, this Court makes the following observations and modifications:

Moral and exemplary damages

We deem as proper the award of moral and exemplary damages. We hold that the sudden termination of
the STFWU members is tainted with ULP because it was done to interfere with, restrain or coerce
employees in the exercise of their right to self-organization. Thus, the petitioner company is liable for the
payment of the aforesaid damages.22 Notable, though, is that this award, while stated in the body of the
NLRC decision, was omitted in the dispositive portion of the said ruling. To prevent any further confusion
in the implementation of the said decision, we correct the dispositive portion of the ruling to include the
payment of P500,000.00 as moral and exemplary damages to the illegally dismissed STFWU members.
As to the order of reinstatement, the Court modifies the same in that if it is no longer feasible considering
the length of time that the employees have been out of petitioners employ,23 the company is ordered to
pay the illegally dismissed STFWU members separation pay equivalent to one (1) month pay, or one-half
(1/2) month pay for every year of service, whichever is higher.24
The releases and quitclaims, as well as the affidavits of desistance, 25 signed by the concerned
employees, who were then necessitous men at the time of execution of the documents, are declared
invalid and ineffective. They will not bar the workers from claiming the full measure of benefits flowing
from their legal rights.26
WHEREFORE, premises considered, the petition for review on certiorari is DENIED. The October 25,
2001 and the November 22, 2001 Resolutions of the Court of Appeals in CA-G.R. SP No. 66871
areAFFIRMED. The March 16, 2001 Decision of the National Labor Relations Commission in NLRCNCR-00-07-05159-95 (CA No. 022059-00) is AFFIRMED with the MODIFICATION that petitioner
company is ordered to: (1) reinstate the illegally dismissed STFWU members and pay them full
backwages from the time of illegal termination up to actual reinstatement; (2) if reinstatement is no longer
feasible, pay the illegally dismissed STFWU members their separation pay equivalent to one month pay,
or one-half month pay for every year of service, whichever is higher; and (3) pay moral and exemplary
damages in the aggregate amount of P500,000.00 to the said illegally dismissed STFWU members.

SO ORDERED
-------------------------

119. Isagani Ecal v NLRC

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. Nos. 92777-78

March 13, 1991

ISAGANI ECAL, CRISOLOGO ECAL, NELSON BUENAOBRA, NARDING BANDOGELIO, WILMER

ECHAGUE, ROGELIO CASTILLO, ALFREDO FERNANDO, OLIGARIO BIGATA, ROBERTO FERRER
AND HONESTO TANAEL, Represented by ISAGANI ECAL, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION), JIMMY MATCHUKA AND HI-LINE
TIMBER, INC., respondents.
Armando A. San Antonio for petitioners.
Chicote Abad & Macaisip Law Offices for private respondents.
GANCAYCO, J.:
Is there an employer-employee relationship between petitioners and private respondent Hi-Line Timber,
Inc. or merely an employer-independent contractor relationship between said private respondent and
petitioner Isagani Ecal with the other petitioners being mere contract workers of Ecal? In the case of the
latter, is Ecal engaged in "job" contracting or "labor-only" contracting? What then is the extent of the
liability of private respondent? These are the questions raised in this petition.
This case traces its origin from two consolidated complaints for illegal dismissal and money claims filed by
petitioners Isagani Ecal, Crisologo Ecal, Nelson Buenaobra, Narding Bandogelio, Wilmer Echague,
Rogelio Castillo, Alfredo Fernando, Oligario Bigata, Roberto Ferrer and Honesto Tanael against private
respondents Hi-Line Timber, Inc. (hereinafter referred to as Hi-Line) and Jimmy Matchuka, the company
foreman, with the Department of Labor and Employment docketed as NLRC case No. RAB-03-09-010787 and No. RAB III-09-0116-87.

FACTS
In their complaints/position papers, petitioners alleged, among others, that they have been employed by
Hi-Line as follows: Isagani Ecal, from February, 1986; Crisologo Ecal, Buenaobra, Bandogelio, Fernando,
Bigata, Ferrer and Tanael, from March 3, 1986; and Castillo and Echague, from May 1, 1986; that except
for Isagani Ecal, they were all receiving a salary of P 35.00 a day; that they were required to report for
work 7 days a week including rest days, legal holidays, except Christmas and Good Friday from 7:00 A.M.

to 7:00 P.M.; that they were not given living allowance, overtime pay, premium pay for rest days and legal
holidays, 13th month pay and service incentive leave pay; and, that on June 6, 1987, they were not
allowed to work and instead were informed that their services were no longer needed.
Private respondents, on the other hand, denied the existence of an employer-employee relationship
between the company and the petitioners claiming that the latter are under the employ of an independent
contractor, petitioner Isagani Ecal, an employee of the company until his resignation on February 4, 1987.
After submission of the supplemental position papers and other evidence by the parties, the labor arbiter
rendered his decision dated June 10, 1988 finding no employer-employee relationship between the
parties. Thus, he dismissed the two cases for lack of merit. 1
On appeal, public respondent National Labor Relations Commission (NLRC) affirmed the aforesaid
decision of the labor arbiter in a resolution dated October 2, 1989. 2
The motion for reconsideration of petitioners was denied in a resolution dated March 12, 1990. 3
In this petition for certiorari, petitioners primarily question the finding of the public respondent NLRC that
no employer-employee relationship existed between them and Hi-Line Timber, Inc. They contend that
petitioner Isagani Ecal is not an independent contractor but a mere employee of Hi-Line Line.
In response, the Solicitor General points out that the issue of whether or not an employer-employee
relationship exists between the parties is a question of fact and the findings of the labor arbiter and the
NLRC on this issue are conclusive upon this Court if they are supported by substantial evidence 4 as in
this case.
The NLRC ruled
We have carefully examined and evaluated the basis of the decision of the Labor Arbiter and to
Our mind his factual findings are indeed supported by substantial evidence. Thus, we cite a few
of the clear and convincing evidence and record which compelled the Labor Arbiter to disregard
the claim of the complainants that there was (an) employer-employee relationship between the
contending parties. Firstly, the affidavit of respondents' personnel officer, Elizabeth Natividad,
dated 22 April 1988, clearly attesting to the fact that complainants, except Isagani Ecal, who
worked at their plant at Bocaue, Bulacan, from 24 April 1986 up to 4 February 1987 and who
tendered his resignation on the latter date, were not at all employees of respondents; secondly,
the payrolls of the respondents do not indicate that said complainants were employees of the
respondents; thirdly, the Sinumpaang Salaysay of Jose Mendoza, the Secretary-Treasurer of the
Hi-Line Workers Union-Confederation of Free Laborers (CFL), a registered labor Union under
Reg. Cert. No. (FED-425)-6756-11, issued March, 1987, to the effect that none of the
complainants, except Isagani Ecal, were listed as members of the union and/or employees of
respondents; and lastly, two (2) Sinumpaang Salaysay dated 22 April 1988 executed by
respondents' company guard Honorio T. Battung and Foreman Clemente S. Sales, respectively,
attesting that it was only Isagani Ecal who worked with respondents but resigned on 4 February
1987 to work as (an) independent contractor. 5
Petitioners claim that the NLRC based its decision solely on the evidence aforestated and completely
ignored the evidence they presented thus denying them due process. The Court carefully examined the

records of the case and finds that the NLRC limited itself to a superficial evaluation of the relationship of
the parties based mainly on the aforestated documents with emphasis on the company payrolls without
regard to the particular circumstances of the case.
The finding of the NLRC that Isagani Ecal is no longer an employee of Hi-Line line is amply supported by
the evidence on record. His resignation letter dated February 4, 1987 stating "ako po ay magreresign na
sa aking trabaho bilang "laborer" sapagka't nakita ko na mas malaki ang kikitain kung mangongontrata na
lamang " 6 speaks for itself. This was unsuccessfully rebutted by petitioners.

FOUR FOLD
To determine whether there exists an employer-employee relationship, the four-way test should be
applied, namely: (1) selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control the employee's conductthe last being the most important
element. 7 Neither the NLRC nor the labor arbiter utilized these guides in their disposition of the
complaint.
The records show that Hi-Line does not choose the workers but merely accepts whoever may be selected
by petitioner Isagani Ecal. Petitioners are not included in the payroll. Instead a lump sum of P1,400.00 is
given to Isagani Ecal or his representative Solomon de los Santos, every four days, to cover their wages
for the period which the petitioners divide among themselves.
Private respondents allege that Isagani Ecal customarily removes some of his laborers at the Hi-Line
sawmill and assigns them to other sawmills; however, there was no evidence adduced to show that
indeed Ecal regularly or even once transferred some of his workers to other sawmills. Petitioners worked
at the company compound at Wakas, Bocaue, Bulacan, at least eight hours a day, for seven days a week
so that it would be impossible for them to find time to work in some other sawmill. On June 6, 1987, the
company unilaterally terminated the services of petitioners without notice allegedly on the ground that its
contract with Isagani Ecal has already expired.
As to the matter of control, it would seem that petitioners were mostly left on their own to devise the most
expeditious way of segregating lumber materials as to sizes and of loading and unloading the same in the
chamber for drying. However, their task is performed within the work premises of Hi-Line, specifically at its
Kiln Drying Section, so it cannot be said that no amount of control and supervision is exerted upon them
by the company through their foremen, private respondent Matchuka and Clemente S. Sales. Moreover,
the very nature of the task performed by petitioners requires very limited supervision as there are only so
many ways of segregating lumber according to their sizes and of loading and unloading them in the dryer
so that all that the company has to do is to check on the results of their work.
The foregoing observation suggests that there is a certain relationship existing between the parties
although a clear-cut characterization of such relationship whether it is an employer-employee
relationship or an employer-independent contractor relationship is unavailing. Hence, a closer scrutiny
of said relationship is in order.
Petitioners urge that even assuming arguendo that Isagani Ecal is an independent contractor, he should
be considered only a labor supplier who is deemed an agent of the company so that petitioners should
enjoy the status of being its employees; therefore, Hi-Line should be held liable for illegally dismissing

petitioners and for the non-payment of benefits due them. Private respondents, however, maintain that
Isagani Ecal is an independent contractor or a job contractor.
The Solicitor General adopts the theory that Ecal is an independent contractor. However, he faults the
labor arbiter for his failure to determine the benefits due petitioners, an issue raised by the latter, on the
ground that Hi-Line, being an indirect employer, is jointly and severally liable with Isagani Ecal to the
extent of the work performed by the employees as if they were directly employed by it. He, therefore,
seeks the remand of the case to the labor arbiter for determination of the unpaid benefits of petitioners.
The pertinent provisions of the Labor Code, as amended, are:

Art. 106. Contractor or subcontractor.

Whenever an employer enters into a contract with another person for the performance of the
former's work, the employees of the contractor and of the latter's subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the
same manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting,
he may make appropriate distinctions between labor-only contracting and job contracting as well
as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed.
Art. 107. Indirect Employer. The provisions of the immediately preceding Article shall likewise
apply to any person, partnership, association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work, task, job or project.
Under the provisions of Article 106, paragraphs 1 and 2, an employer who enters into a contract with a
contractor for the performance of work for the employer does not thereby establish an employeremployee relationship between himself and the employees of the contractor. The law itself, however,
creates such a relationship when a contractor fails to pay the wages of his employees in accordance with
the Labor Code, and only for this limited purpose, i.e. to ensure that the latter will be paid the wages due
them.8

On the other hand, the legal effect of a finding that a contractor is merely a "labor only" contractor was
explained in Philippine Bank of Communications vs. National Labor Relations Commission, et al., 9

. . . The "labor-only" contractor

i.e., "the person or intermediary" is considered "merely as an agent of the employer." The
employer is made by the statute responsible to the employees of the "labor only" contractor as if
such employee had been directly employed by the employer. Thus, where "labor-only" contracting
exists in a given case, the statute itself implies or establishes an employer-employee relationship
between the employer (the owner of the project) and the employees of the "labor-only" contractor,
this time for a comprehensive purpose: "employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code." The law in effect holds both the
employer and the 'labor-only' contractor responsible to the latter's employees for the more
effective safeguarding of the employees' rights under the Labor Code.
Sections 8 and 9, Rule VIII, Book III of the Omnibus Rules implementing the Labor Code set forth the
distinctions between "job" contracting and "labor-only" contracting

Sec. 8. Job contracting.

There is job contracting permissible under the Code if the following conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method, free from
control and direction of his employer or principal in all matters connected with the performance of
the work except as to the results thereof, and
(2) The contractor has substantial capital or investment in the form of tools, equipments,
machineries, work premises, and other materials which are necessary in the conduct of his
business.

Sec. 9. Labor-only contracting

(a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged
in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipments,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are
directly related to the principal business or operations of the employer in which workers
are habitually employed.
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed
by him.

xxx

xxx

xxx

Applying the foregoing provisions, the Court finds petitioner Isagani Ecal to be a "labor-only" contractor, a
mere supplier of manpower to Hi-Line. Isagani Ecal was only poor laborer at the time of his resignation on
February 4, 1987 who cannot even afford to have his daughter treated for malnutrition. He resigned and
became a supplier of laborers for Hi-Line, because he saw an opportunity for him to earn more than what
he was earning while still in the payroll of the company. At the same time, he continued working for the
company as a laborer at the kiln drying section. He definitely does not have sufficient capital to invest in
tools and machineries. Private respondents, however, claim that the business contracted by Ecal did not
require the use of tools, equipment and machineries and the contracted task had to be executed in the
premises of Hi-Line. Precisely, the job assigned to petitioners has to be executed within the work
premises of Hi-Line where they use the machineries and equipment of the company for the drying of
lumber materials. Even the company's personnel officer Elizabeth Natividad admitted that Ecal resigned
in order to supply manpower to the company on a task basis. 10 By the very allegations of private
respondents, it is quite clear that Isagani Ecal only supplies manpower to Hi-Line within the context of
"labor-only" contracting as defined by law.
There is also no question that the task performed by petitioners is directly related to the business of HiLine.1wphi1Petitioners were assigned to sort out the lumber materials whether wet or fresh kiln as to
sizes and to carry them from the stockpile to the dryer where they are loaded for drying after which they
are unloaded. The work of petitioners is an integral part of the operation of the sawmill of Hi-Line without
which production and company sales will suffer.
A finding that Isagani Ecal is a "labor-only" contractor is equivalent to a finding that an employeremployee relationship exists between the company and Ecal including the latter's "contract workers"
herein petitioners, the relationship being such as provided by the law itself. 11
Indeed, the law prohibits "labor-only" contracting and creates an employer- employee relationship for the
protection of the laborers. The Court had in fact observed that businessmen, with the aid of lawyers, have
tried to avoid the bringing about of an employer-employee relationship in some of their enterprises
because that juridical relation spawns obligations connected with workmen's compensation, social
security, medicare, minimum wage, termination pay and unionism. 12
This unscrupulous practice is quite evident in the case at bar. It is company policy that once an employee
is assigned to the kiln drying section, he is no longer included in the payroll and is then paid on a task
basis, even if he had long been employed with the company. Since the employee will no longer be
included in the payroll, it becomes easy for the company to deny the regular employment of such a
worker and is able to avoid whatever obligations it may have under an employer-employee relationship.
Moreover, Hi-Line limits the period of undertaking to only four days presumably to make termination of the
services of petitioners easier and to prevent them from attaining regular status. The company had no
doubt taken advantage of these laborers in order to escape liability for benefits and privileges accruing to
one holding a regular employment. Without a law prohibiting "labor-only" contracting to protect the rights
of labor, these poor workers will always be at the mercy of the employer.
Since petitioners perform tasks which are usually necessary or desirable in the main business of Hi-Line,
they should be deemed regular employees of the latter 13 and as such are entitled to all the benefits and
rights appurtenant to regular employment.

Being regular employees, they should have been afforded due process prior to their dismissal. 14 Instead
they were unceremoniously dismissed on June 6, 1987 when they were not allowed to enter the
company's premises by the security guards. The argument of private respondents that the contract of
Ecal with the company expired cannot be sustained. Petitioners may only be dismissed for an authorized
or just cause and after due process.
At this juncture, We note that petitioners and private respondents allege conflicting dates of employment
of the former. Petitioners claim that as early as March or May, 1986, they have already been working with
Hi-Line Line, while private respondents contend that it was only in April, 1987 that they had been engaged
by the company. This Court is not a trier of facts and there is not enough basis in the records to enable Us
to come up with definite dates of employment. However, whatever be the date of their employment,
petitioners will still be considered employees of the company. If petitioners had started their employment
in 1986, they would have rendered more than 1 year of service at the time of their dismissal and,
therefore, should be considered regular employees. Even if they have been engaged only in April of 1987,
they will still be deemed regular employees for as earlier indicated, Isagani Ecal is a "labor-only"
contractor and petitioners perform activities directly related to the principal business of Hi-Line Line.
Petitioners, having been illegally dismissed on June 6, 1987, are entitled to backwages equivalent to
three years without qualifications and deductions in line with prevailing jurisprudence.
WHEREFORE, the decision of public respondent NLRC is hereby REVERSED and SET ASIDE. Private
respondent Hi-Line Timber, Inc. is hereby ordered to reinstate petitioners to their former positions with
backwages equivalent to three (3) years without deductions and qualifications. The records of the case
are remanded to the labor arbiter for determination of the unpaid benefits due petitioners. No costs.
SO ORDERED.
-----------------------------

120. Kimberly inde Union v Hon Drilon

Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION

G.R. No. L-77629 May 9, 1990

KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVISM AND NATIONALISMORGANIZED LABOR ASSOCIATION IN LINE INDUSTRIES AND AGRICULTURE (KILUSAN-OLALIA),
ROQUE JIMENEZ, MARIO C. RONGALEROS and OTHERS, petitioners,
vs.
HON. FRANKLIN M. DRILON, KIMBERLY-CLARK PHILIPPINES, INC., RODOLFO POLOTAN, doing
business under the firm name "Rank Manpower Co." and UNITED KIMBERLY-CLARK EMPLOYEES

UNION-PHILLIPPINE TRANSPORT AND GENERAL WORKERS ORGANIZATION (UKCEUPTGWO), respondents.

KIMBERLY INDEPENDENT LABOR UNION FOR SOLIDARITY, ACTIVITISM AND NATIONALISMOLALIA (KILUSAN-OLALIA), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MANUEL AGUILAR, MA. ESTRELLA ALDA, CAPT.
REY L. LANADA, COL. VIVENCIO MANAIG and KIMBERLY-CLARK PHILIPPINES, INC., respondents.

REGALADO, J.:
Before us are two consolidated petitions for certiorari filed by the above-named petitioner union
(hereinafter referred to as KILUSAN-OLALIA, for conciseness) and individual complainants therein, to wit
(a) G.R. 77629, which seeks to reverse and set aside the decision, dated November 13, 1986, 1 and the
resolution, dated January 9, 1987, 2 respectively handed down by the two former Ministers of Labor, both
rendered in BLR Case No. NS-5-164-86; and (b) G.R. No. 78791, which prays for the reversal of the
resolutions of the National Labor Relations Commission, dated May 25, 1987 3 and June 19,1987 4 issued
in Injunction Case No. 1442 thereof.
Kimberly-Clark Philippines, Inc. (KIMBERLY, for brevity) executed a three-year collective bargaining
agreement (CBA) with United Kimberly-Clark Employees Union-Philippine Transport and General
Workers' Organization (UKCEU-PTGWO) which expired on June 30, 1986.
Within the 60-day freedom period prior to the expiration of and during the negotiations for the renewal of
the aforementioned CBA, some members of the bargaining unit formed another union called "Kimberly
Independent Labor Union for Solidarity, Activism and Nationalism-Organized Labor Association in Line
Industries and Agriculture (KILUSAN-OLALIA)."
On April 21, 1986, KILUSAN-OLALIA filed a petition for certification election in Regional Office No. IV,
Ministry of Labor and Employment (MOLE), docketed as Case No. RO4-OD-M-415-86. 5 KIMBERLY and
(UKCEU-PTGWO) did not object to the holding of a certification election but objected to the inclusion of
the so-called contractual workers whose employment with KIMBERLY was coursed through an
independent contractor, Rank Manpower Company (RANK for short), as among the qualified voters.
Pending resolution of the petition for certification election by the med-arbiter, KILUSAN-OLALIA filed a
notice of strike on May 7, 1986 with the Bureau of Labor Relations, docketed as BLR Case No. NS-5-16486, 6 charging KIMBERLY with unfair labor practices based on the following alleged acts: (1) dismissal of
union members (KILUSAN-OLALIA); (2) non-regularization of casuals/contractuals with over six months
service; (3) non-implementation of appreciation bonus for 1982 and 1983; (4) non-payment of minimum
wages; (5) coercion of employees; and (6) engaging in CBA negotiations despite the pendency of a
petition for certification election. This was later amended to withdraw the charge of coercion but to add, as
new charges, the dismissal of Roque Jimenez and the non-payment of backwages of the reinstated
Emerito Fuentes . 7
Conciliation proceedings conducted by the bureau proved futile, and KILUSAN-OLALIA declared a strike
at KIMBERLY's premises in San Pedro, Laguna on May 23, 1986.

On May 26, 1986, KIMBERLY petitioned MOLE to assume jurisdiction over the labor dispute. On May 30,
1986, finding that the labor dispute would adversely affect national interest, then Minister Augusto S.
Sanchez issued an assumption order, the dispositive portion whereof reads:
Wherefore, premises considered, immediately upon receipt of this order, the striking
union and its members are hereby enjoined to lift the picket and remove all obstacles to
the free ingress to and egress from the company premises and to return to work,
including the 28 contractual workers who were dismissed; likewise, the company is
directed to resume its operations immediately thereafter and to accept all the employees
back under the same terms and conditions of employment prevailing prior to the industrial
action. Further, all issues in the notice of strike, as amended, are hereby assumed in this
assumption order, except for the representation issue pending in Region IV in which the
Med-Arbiter is also enjoined to decide the same the soonest possible time. 8
In obedience to said assumption order, KILUSAN-OLALIA terminated its strike and picketing activities
effective June 1, 1986 after a compliance agreement was entered into by it with KIMBERLY. 9
On June 2, 1986, Med-Arbiter Bonifacio 1. Marasigan, who was handling the certification election case
(RO4-OD-M-4-1586), issued an order 10 declaring the following as eligible to vote in the certification
election, thus:
1. The regular rank-and-file laborers/employees of the respondent company consisting of
537 as of May 14, 1986 should be considered qualified to vote;
2. Those casuals who have worked at least six (6) months as appearing in the payroll
months prior to the filing of the instant petition on April 21, 1986; and
3. Those contractual employees who are allegedly in the employ of an independent
contractor and who have also worked for at least six (6) months as appearing in the
payroll month prior to the filing of the instant petition on April 21, 1986.
During the pre-election conference, 64 casual workers were challenged by KIMBERLY and (UKCEUPTGWO) on the ground that they are not employees, of KIMBERLY but of RANK. It was agreed by all the
parties that the 64 voters shall be allowed to cast their votes but that their ballots shall be segregated and
subject to challenge proceedings. The certification election was conducted on July I., 1986, with the
following results: 11
1. KILUSAN-OLALIA = 246 votes
2. (UKCEU-PTGWO) = 266 votes
3. NO UNION = 1 vote
4. SPOILED BALLOTS = 4 votes
5. CHALLENGED BALLOTS = 64 votes

TOTAL 581 votes

On July 2, 1986, KILUSAN-OLALIA filed with the med-arbiter a "Protest and Motion to Open and Count
Challenged Votes" 12 on the ground that the 64 workers are employees of KIMBERLY within the meaning
of Article 212(e) of the Labor Code. On July 7, 1986, KIMBERLY filed an opposition to the protest and
motion, asserting that there is no employer-employee relationship between the casual workers and the
company, and that the med-arbiter has no jurisdiction to rule on the issue of the status of the challenged
workers which is one of the issues covered by the assumption order. The med-arbiter opted not to rule on
the protest until the issue of regularization has been resolved by
MOLE. 13
On November 13, 1986, then Minister Sanchez rendered a decision in BLR Case No. NS-5-164-86,
disposition wherein is summarized as follows:

14

the

1. The service contract for janitorial and yard maintenance service between KIMBERLY
and RANK was declared legal;
2. The other casual employees not performing janitorial and yard maintenance services
were deemed labor-only contractual and since labor-only contracting is prohibited, such
employees were held to have attained the status of regular employees, the regularization
being effective as of the date of the decision;
3. UKCEU-PTGWO having garnered more votes than KILUSAN-OLALIA was certified as
the exclusive bargaining representative of KIMBERLY's employees;
4. The reinstatement of 28 dismissed KILUSAN-OLALIA members was ordered;
5. Roque Jimenez was ordered reinstated without backwages, the period when he was
out of work being considered as penalty for his misdemeanor;
6. The decision of the voluntary arbitrator ordering the reinstatement of Ermilo Fuentes
with backwages was declared as already final and unappealable; and
7. KIMBERLY was ordered to pay appreciation bonus for 1982 and 1983.
On November 25, 1986, KIMBERLY flied a motion for reconsideration with respect to the regularization of
contractual workers, the appreciation bonus and the reinstatement of Roque Jimenez. 15 In a letter dated
November 24, 1986, counsel for KILUSAN-OLALIA demanded from KIMBERLY the implementation of the
November 13, 1986 decision but only with respect to the regularization of the casual workers. 16
On December 11, 1986, KILUSAN-OLALIA filed a motion for reconsideration questioning the authority of
the Minister of Labor to assume jurisdiction over the representation issue. In the meantime, KIMBERLY
and UKCEU-PTGWO continued with the negotiations on the new collective bargaining agreement (CBA),
no restraining order or junctive writ having been issued, and on December 18, 1986, a new CBA was
concluded and ratified by 440 out of 517 members of the bargaining unit. 17

In an order dated January 9, 1987, former Labor Minister Franklin Drilon denied both motions for
reconsideration filed by KIMBERLY and KILUSAN-OLALIA. 18 On March 10, 1987, the new CBA executed
between KIMBERLY and UKCEU-PTGWO was signed.
On March 16, 1987, KILUSAN-OLALIA filed a petition for certiorari in this Court docketed as G.R. No.
77629, seeking to set aside the aforesaid decision, dated November 13, 1986, and the order, dated
January 9, 1987, rendered by the aforesaid labor ministers.
On March 25, 1987, this Court issued in G.R. No. 77629 a temporary restraining order, enjoining
respondents from enforcing and/or carrying out the decision and order above stated, particularly that
portion (1) recognizing respondent UKCEU-PTGWO as the exclusive bargaining representative of all
regular rank-and-file employees in the establishment of respondent company, (2) enforcing and/or
implementing the alleged CBA which is detrimental to the interests of the members of the petitioner union,
and (3) stopping respondent company from deducting monthly dues and other union assessments from
the wages of all regular rank-and-file employees of respondent company and from remitting the said
collection to respondent UKCEU-PTGWO issued in BLR Case No. NS-5-164-86, entitled, "In Re: Labor
Dispute at Kimberly-Clark Philippines, Inc.," of the Department of Labor and Employment, Manila, 19
In its comment, 20 respondent company pointed out certain events which took place prior to the filing of
the petition in G.R. No. 77629, to wit:
1. The company and UKCEU-PTGWO have concluded a new collective bargaining
agreement which had been ratified by 440 out of 517 members of the bargaining unit;
2. The company has already granted the new benefits under the new CBA to all its
regular employees, including members of petitioner union who, while refusing to ratify the
CBA nevertheless readily accepted the benefits arising therefrom;
3. The company has been complying with the check-off provision of the CBA and has
been remitting the union dues to UKCEU-PTGWO
4. The company has already implement the decision of November 13, 1986 insofar as the
regularization of contractual employees who have rendered more than one (1) year of
service as of the filing of the Notice of Strike on May 7, 1986 and are not engaged in
janitorial and yard maintenance work, are concerned
5. Rank Manpower Company had already pulled out, reassigned or replaced the
contractual employees engaged in janitorial and yard maintenance work, as well as those
with less than one year service; and
6. The company has reinstated Roque Jimenez as of January 11, 1987.
In G.R. No. 78791, the records 21 disclose that on May 4, 1987, KILUSAN-OLALIA filed another notice of
strike with the Bureau of Labor Relations charging respondent company with unfair labor practices. On
May 8, 1987, the bureau dismissed and considered the said notice as not filed by reason of the pendency
of the representation issue before this Court in G.R. No. 77629. KILUSAN-OLALIA moved to reconsider
said order, but before the bureau could act on said motion, KILUSAN-OLALIA declared a strike and
established a picket on respondent company's premises in San Pedro, Laguna on May 17, 1987.

On May 18, 1987, KIMBERLY filed a petition for injunction with the National Labor Relations Commission
(NLRC), docketed as Injunction Case No. 1442. A supplement to said petition was filed on May 19, 1987.
On May 26, 1987, the commission en banc issued a temporary restraining order (TRO) on the basis of
the ocular inspection report submitted by the commission's agent, the testimonies of KIMBERLY's
witnesses, and pictures of the barricade. KILUSAN-OLALIA moved to dissolve the TRO on the ground of
lack of jurisdiction.
Immediately after the expiration of the first TRO on June 9, 1987, the striking employees returned to their
picket lines and reestablished their barricades at the gate. On June 19, 1987, the commission en
banc issued a second TRO.
On June 25, 1987, KILUSAN-OLALIA filed another petition for certiorari and prohibition with this Court,
docketed as G.R. No. 78791, questioning the validity of the temporary restraining orders issued by the
NLRC on May 26, 1987 and June 19, 1987. On June 29, 1987, KILUSAN-OLALIA filed in said case an
urgent motion for a TRO to restrain NLRC from implementing the questioned orders. An opposition, as
well as a reply thereto, were filed by the parties.
Meanwhile, on July 3, 1987, KIMBERLY filed in the NLRC an urgent motion for the issuance of a writ of
preliminary injunction when the strikers returned to the strike area after the second TRO expired. After
due hearing, the commission issued a writ of preliminary injunction on July 14, 1987, after requiring
KIMBERLY to post a bond in the amount of P20,000.00.
Consequently, on July 17, 1987, KILUSAN-OLALIA filed in G.R. No. 78791 a second urgent motion for the
issuance of a TRO by reason of the issuance of said writ of preliminary injunction, which motion was
opposed by KIMBERLY.
Thereafter, in its memorandum 22 filed on December 28, 1989 and in its motion for early resolution 23 filed
on February 28, 1990, both in G.R. No. 78791, KILUSAN-OLALIA alleged that it had terminated its strike
and picketing activities and that the striking employees had unconditionally offered to return to work,
although they were refused admission by KIMBERLY. By reason of this supervening development, the
petition in G.R. No. 78791, questioning the propriety of the issuance of the two temporary restraining
orders and the writ of injunction therein, has been rendered moot and academic.
In G.R. No. 77629, the petition of KILUSAN-OLALIA avers that the respondent Secretary of Labor and/or
the former Minister of Labor have acted with grave abuse of discretion and/or without jurisdiction in (1)
ruling on the issue of bargaining representation and declaring respondent UKCEU-PTGWO as the
collective bargaining representative of all regular rank-and-file employees of the respondent company; (2)
holding that petitioners are not entitled to vote in the certification election; (3) considering the
regularization of petitioners (who are not janitors and maintenance employees) to be effective only on the
date of the disputed decision; (4) declaring petitioners who are assigned janitorial and yard maintenance
work to be employees of respondent RANK and not entitled to be regularized; (5) not awarding to
petitioners differential pay arising out of such illegal work scheme; and (6) ordering the mere
reinstatement of petitioner Jimenez.
The issue of jurisdiction actually involves a question of whether or not former Minister Sanchez committed
a grave abuse of discretion amounting to lack of jurisdiction in declaring respondent UKCEU-PTGWO as
the certified bargaining representative of the regular employees of KIMBERLY, after ruling that the 64
casual workers, whose votes are being challenged, were not entitled to vote in the certification election.

KILUSAN-OLALIA contends that after finding that the 64 workers are regular employees of KIMBERLY,
Minister Sanchez should have remanded the representation case to the med-arbiter instead of declaring
UKCEU-PTGWO as the winner in the certification election and setting aside the med-arbiter's order which
allowed the 64 casual workers to cast their votes.
Respondents argue that since the issues of regularization and representation are closely interrelated and
that a resolution of the former inevitably affects the latter, it was necessary for the former labor minister to
take cognizance of the representation issue; that no timely motion for reconsideration or appeal was
made from his decision of November 13, 1986 which has become final and executory; and that the
aforesaid decision was impliedly accepted by KILUSAN-OLALIA when it demanded from KIMBERLY the
issuance of regular appointments to its affected members in compliance with said decision, hence
petitioner employees are now stopped from questioning the legality thereof.
We uphold the authority of former Minister Sanchez to assume jurisdiction over the issue of the
regularization of the 64 casual workers, which fact is not even disputed by KILUSAN-OLALIA as may be
gleaned from its request for an interim order in the notice of strike case (BLR-NS-5-164-86), asking that
the regularization issue be immediately resolved. Furthermore, even the med-arbiter who ordered the
holding of the certification election refused to resolve the protest on the ground that the issue raised
therein correctly pertains to the jurisdiction of the then labor minister. No opposition was offered by
KILUSAN-OLALIA. We hold that the issue of regularization was properly addressed to the discretion of
said former minister.
However, the matter of the controverted pronouncement by former Minister Sanchez, as reaffirmed by
respondent secretary, regarding the winner in the certification election presents a different situation.
It will be recalled that in the certification election, UKCEU-PTGWO came out as the winner, by garnering a
majority of the votes cast therein with the exception of 64 ballots which were subject to challenge. In the
protest filed for the opening and counting of the challenged ballots, KILUSAN-OLALIA raised the main
and sole question of regularization of the 64 casual workers. The med-arbiter refused to act on the protest
on the ground that the issue involved is within the jurisdiction of the then Minister of Labor. KILUSANOLALIA then sought an interim order for an early resolution on the employment status of the casual
workers, which was one of the issues included in the notice of strike filed by KILUSAN-OLALIA in BLR
Case No. NS-5-164-86. Consequently, Minister Sanchez rendered the questioned decision finding that
the workers not engaged in janitorial and yard maintenance service are regular employees but that they
became regular only on the date of his decision, that is, on November 13, 1986, and, therefore, they were
not entitled to vote in the certification election. On the basis of the results obtained in the certification
election, Minister Sanchez declared UKCEU-PTGWO as the winner.
The pivotal issue, therefore, is when said workers, not performing janitorial or yard maintenance service,
became regular employees of KIMBERLY.
We find and so hold that the former labor minister gravely abused his discretion in holding that those
workers not engaged in janitorial or yard maintenance service attained the status of regular employees
only on November 13, 1986, which thus deprived them of their constitutionally protected right to vote in
the certification election and choose their rightful bargaining representative.
The Labor Code defines who are regular employees, as follows:

Art. 280. Regular and Casual Employment. The provisions of written agreement to the
contrary not withstanding and regardless of the oral agreements 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
under the completion or termination of which has been 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 activity exists.
The law thus provides for two. kinds of regular employees, namely: (1) those who are engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the employer; and (2)
those who have rendered at least one year of service, whether continuous or broken, with respect to the
activity in which they are employed. The individual petitioners herein who have been adjudged to be
regular employees fall under the second category. These are the mechanics, electricians, machinists
machine shop helpers, warehouse helpers, painters, carpenters, pipefitters and masons It is not disputed
that these workers have been in the employ of KIMBERLY for more than one year at the time of the filing
of the Petition for certification election by KILUSAN-OLALIA.
Owing to their length of service with the company, these workers became regular employees, by
operation of law, one year after they were employed by KIMBERLY through RANK. While the actual
regularization of these employees entails the mechanical act of issuing regular appointment papers and
compliance with such other operating procedures as may be adopted by the employer, it is more in
keeping with the intent and spirit of the law to rule that the status of regular employment attaches to the
casual worker on the day immediately after the end of his first year of service. To rule otherwise, and to
instead make their regularization dependent on the happening of some contingency or the fulfillment of
certain requirements, is to impose a burden on the employee which is not sanctioned by law.
That the first stated position is the situation contemplated and sanctioned by law is further enhanced by
the absence of a statutory limitation before regular status can be acquired by a casual employee. The law
is explicit. As long as the employee has rendered at least one year of service, he becomes a regular
employee with respect to the activity in which he is employed. The law does not provide the qualification
that the employee must first be issued a regular appointment or must first be formally declared as such
before he can acquire a regular status. Obviously, where the law does not distinguish, no distinction
should be drawn.
The submission that the decision of November 13, 1986 has become final and executory, on the grounds
that no timely appeal has been made therefrom and that KILUSAN-OLALIA has impliedly acceded
thereto, is untenable.
Rule 65 of the Rules of Court allows original petitions for certiorari from decisions or orders of public
respondents provided they are filed within a reasonable time. We believe that the period from January 9,
1987, when the motions for reconsideration separately filed by KILUSAN-OLALIA and KIMBERLY were

denied, to March 16, 1987, when the petition in G.R. No. 77629 was filed, constitutes a reasonable time
for availing of such recourse.
We likewise do not subscribe to the claim of respondents that KILUSAN-OLALIA has impliedly accepted
the questioned decision by demanding compliance therewith. In the letter of KILUSAN-OLALIA dated
November 24, 1986 24 addressed to the legal counsel of KIMBERLY, it is there expressly and specifically
pointed out that KILUSAN-OLALIA intends to file a motion for reconsideration of the questioned decision
but that, in the meantime, it was demanding the issuance of regular appointments to the casual workers
who had been declared to be regular employees. The filing of said motion for reconsideration of the
questioned decision by KILUSAN-OLALIA, which was later denied, sustains our position on this issue and
denies the theory of estoppel postulated by respondents.
On the basis of the foregoing circumstances, and as a consequence of their status as regular employees,
those workers not perforce janitorial and yard maintenance service were performance entitled to the
payment of salary differential, cost of living allowance, 13th month pay, and such other benefits extended
to regular employees under the CBA, from the day immediately following their first year of service in the
company. These regular employees are likewise entitled to vote in the certification election held in July 1,
1986. Consequently, the votes cast by those employees not performing janitorial and yard maintenance
service, which form part of the 64 challenged votes, should be opened, counted and considered for the
purpose of determining the certified bargaining representative.
We do not find it necessary to disturb the finding of then Minister Sanchez holding as legal the service
contract executed between KIMBERLY and RANK, with respect to the workers performing janitorial and
yard maintenance service, which is supported by substantial and convincing evidence. Besides, we take
judicial notice of the general practice adopted in several government and private institutions and
industries of hiring a janitorial service on an independent contractor basis. Furthermore, the occasional
directives and suggestions of KIMBERLY are insufficient to erode primary and continuous control over the
employees of the independent contractor. 25 Lastly, the duties performed by these workers are not
independent and integral steps in or aspects of the essential operations of KIMBERLY which is engaged
in the manufacture of consumer paper products and cigarette paper, hence said workers cannot be
considered regular employees.
The reinstatement of Roque Jimenez without backwages involves a question of fact best addressed to the
discretion of respondent secretary whose finding thereon is binding and conclusive upon this Court,
absent a showing that he committed a grave abuse in the exercise thereof.
WHEREFORE, judgment is hereby rendered in G.R. No. 77629:
1. Ordering the med-arbiter in Case No. R04-OD-M-4-15-86 to open and count the 64 challenged votes,
and that the union with the highest number of votes be thereafter declared as the duly elected certified
bargaining representative of the regular employees of KIMBERLY;
2. Ordering KIMBERLY to pay the workers who have been regularized their differential pay with respect to
minimum wage, cost of living allowance, 13th month pay, and benefits provided for under the applicable
collective bargaining agreement from the time they became regular employees.
All other aspects of the decision appealed from, which are not so modified or affected thereby, are hereby
AFFIRMED. The temporary restraining order issued in G.R. No. 77629 is hereby made permanent.

The petition filed in G.R. No. 78791 is hereby DISMISSED.

SO ORDERED.
-------------------------------

121. Virginia Neri v NLRC

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. Nos. 97008-09 July 23, 1993

VIRGINIA G. NERI and JOSE CABELIN, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION FAR EAST BANK & TRUST COMPANY (FEBTC) and
BUILDING CARE CORPORATION, respondents.
R.L. Salcedo & Improso Law Office for petitioners.
Bengzon, Zarnaga, Narciso, Cudala, Pecson, Bengzon & Jimenez for Bldg. Care Corp.
Bautista, Picaso, Buyco, Tan & Fider for respondent FEBTC.

BELLOSILLO, J.:
Respondents are sued by two employees of Building Care Corporation, which provides janitorial and
other specific services to various firms, to compel Far Bast Bank and Trust Company to recognize them
as its regular employees and be paid the same wages which its employees receive.
Building Care Corporation (BCC, for brevity), in the proceedings below, established that it had substantial
capitalization of P1 Million or a stockholders equity of P1.5 Million. Thus the Labor Arbiter ruled that BCC
was only job contracting and that consequently its employees were not employees of Far East Bank and
Trust Company (FEBTC, for brevity). on appeal, this factual finding was affirmed by respondent National
Labor Relations Commission (NLRC, for brevity). Nevertheless, petitioners insist before us that BCC is
engaged in "labor-only" contracting hence, they conclude, they are employees of respondent FEBTC.
Petitioners Virginia G. Neri and Jose Cabelin applied for positions with, and were hired by, respondent
BCC, a corporation engaged in providing technical, maintenance, engineering, housekeeping, security

and other specific services to its clientele. They were assigned to work in the Cagayan de Oro City
Branch of respondent FEBTC on 1 May 1979 and 1 August 1980, respectively, Neri an radio/telex
operator and Cabelin as janitor, before being promoted to messenger on 1 April 1989.
On 28 June 1989, petitioners instituted complaints against FEBTC and BCC before Regional Arbitration
Branch No. 10 of the Department of Labor and Employment to compel the bank to accept them as regular
employees and for it to pay the differential between the wages being paid them by BCC and those
received by FEBTC employees with similar length of service.
On 16 November 1989, the Labor Arbiter dismissed the complaint for lack of merit. 1 Respondent BCC
was considered an independent contractor because it proved it had substantial capital. Thus, petitioners
were held to be regular employees of BCC, not FEBTC. The dismissal was appealed to NLRC which on
28 September 1990 affirmed the decision on appeal. 2 On 22 October 1990, NLRC denied reconsideration
of its affirmance, 3 prompting petitioners to seek redress from this Court.
Petitioners vehemently contend that BCC in engaged in "labor-only" contracting because it failed to
adduce evidence purporting to show that it invested in the form of tools, equipment, machineries, work
premises and other materials which are necessary in the conduct of its business. Moreover, petitioners
argue that they perform duties which are directly related to the principal business or operation of FEBTC.
If the definition of "labor-only" contracting 4 is to be read in conjunction with job contracting, 5 then the only
logical conclusion is that BCC is a "labor only" contractor. Consequently, they must be deemed
employees of respondent bank by operation of law since BCC is merely an agent of FEBTC following the
doctrine laid down in Philippine Bank of Communications v. National Labor Relations Commission 6 where
we ruled that where "labor-only" contracting exists, the Labor Code itself establishes an employeremployee relationship between the employer and the employees of the "labor-only" contractor; hence,
FEBTC should be considered the employer of petitioners who are deemed its employees through its
agent, "labor-only" contractor BCC.
We cannot sustain the petition.
Respondent BCC need not prove that it made investments in the form of tools, equipment, machineries,
work premises, among others, because it has established that it has sufficient capitalization. The Labor
Arbiter and the NLRC both determined that BCC had a capital stock of P1 million fully subscribed and
paid for. 7 BCC is therefore a highly capitalized venture and cannot be deemed engaged in "labor-only"
contracting.
It is well-settled that there is "labor-only" contracting where: (a) the person supplying workers to an
employer does not have substantial capital or investment in the form of tools, equipment, machineries,
work premises, among others; and, (b) the workers recruited and placed by such person are performing
activities which are directly related to the principal business of the employer. 8
Article 106 of the Labor Code defines "labor-only" contracting thus
Art. 106. Contractor or subcontractor. . . . . There is "labor-only" contracting where the
person supplying workers to an employer does not have substantial capital or investment
in the form of tools, equipment, machineries, work premises, among others, and the
workers recruited by such persons are performing activities which are directly related to
the principal business of such employer . . . . (emphasis supplied).

Based on the foregoing, BCC cannot be considered a "labor-only" contractor because it has substantial
capital. While there may be no evidence that it has investment in the form of tools, equipment,
machineries, work premises, among others, it is enough that it has substantial capital, as was established
before the Labor Arbiter as well as the NLRC. In other words, the law does not require both substantial
capital and investment in the form of tools, equipment, machineries, etc. This is clear from the use of the
conjunction "or". If the intention was to require the contractor to prove that he has both capital and the
requisite investment, then the conjunction "and" should have been used. But, having established that it
has substantial capital, it was no longer necessary for BCC to further adduce evidence to prove that it
does not fall within the purview of "labor-only" contracting. There is even no need for it to refute
petitioners' contention that the activities they perform are directly related to the principal business of
respondent bank.
Be that as it may, the Court has already taken judicial notice of the general practice adopted in several
government and private institutions and industries of hiring independent contractors to perform special
services. 9These services range from janitorial, 10 security 11 and even technical or other specific services
such as those performed by petitioners Neri and Cabelin. While these services may be considered
directly related to the principal business of the employer, 12 nevertheless, they are not necessary in the
conduct of the principal business of the employer.
In fact, the status of BCC as an independent contractor was previously confirmed by this Court
in Associated Labor Unions-TUCP v. National Labor Relations Commission, 13 where we held thus
The public respondent ruled that the complainants are not employees of the bank but of
the company contracted to serve the bank. Building Care Corporation is a big firm which
services, among others, a university, an international bank, a big local bank, a hospital
center, government agencies, etc. It is a qualified independent contractor. The public
respondent correctly ruled against petitioner's contentions . . . . (Emphasis supplied).
Even assuming ex argumenti that petitioners were performing activities directly related to the principal
business of the bank, under the "right of control" test they must still be considered employees of BCC. In
the case of petitioner Neri, it is admitted that FEBTC issued a job description which detailed her functions
as a radio/telex operator. However, a cursory reading of the job description shows that what was sought
to be controlled by FEBTC was actually the end-result of the task, e.g., that the daily incoming and
outgoing telegraphic transfer of funds received and relayed by her, respectively, tallies with that of the
register. The guidelines were laid down merely to ensure that the desired end-result was achieved. It did
not, however, tell Neri how the radio/telex machine should be operated. In the Shipside case, 14 we ruled

. . . . If in the course of private respondents' work (referring to the workers), SHIPSIDE

occasionally issued instructions to them, that alone does not in the least detract from the
fact that only STEVEDORES is the employer of the private respondents, for in legal
contemplation, such instructions carry no more weight than mere requests, the privity of
contract being between SHIPSIDE and STEVEDORES . . . .
Besides, petitioners do not deny that they were selected and hired by BCC before being assigned to work
in the Cagayan de Oro Branch of FFBTC. BCC likewise acknowledges that petitioners are its employees.
The record is replete with evidence disclosing that BCC maintained supervision and control over
petitioners through its Housekeeping and Special Services Division: petitioners reported for work wearing

the prescribed uniform of BCC; leaves

of absence were filed directly with BCC; and, salaries were drawn only from BCC.

15

As a matter of fact, Neri even secured a certification from BCC on 16 May 1986 that she was employed
by the latter. On the other hand, on 24 May 1988, Cabelin filed a complaint for underpayment of wages,
non-integration of salary adjustments mandated by Wage Orders Nos. 5 & 6 and R.A. 6640 as well as for
illegal deduction 16against BCC alone which was provisionally dismissed on 19 August 1988 upon
Cabelin's manifestation that his money claim was negligible. 17
More importantly, under the terms and conditions of the contract, it was BCC alone which had the power
to reassign petitioners. Their deployment to FEBTC was not subject to the bank's acceptance. Cabelin
was promoted to messenger because the FEBTC branch manager promised BCC that two (2) additional
janitors would be hired from the company if the promotion was to be effected. 18 Furthermore, BCC was to
be paid in lump sum unlike in the situation in Philippine Bank of Communications 19 where the contractor,
CESI, was to be paid at a daily rate on a per person basis. And, the contract therein stipulated that the
CESI was merely to provide manpower that would render temporary services. In the case at bar, Neri and
Cabelin were to perform specific special services. Consequently, petitioners cannot be held to be
employees of FEBTC as BCC "carries an independent business" and undertaken the performance of its
contract with various clients according to its "own manner and method, free from the control and
supervision" of its principals in all matters "except as to the results thereof." 20
Indeed, the facts in Philippine Bank of Communications do not square with those of the instant case.
Therein, the Court ruled that CESI was a "labor-only" contractor because upholding the contract between
the contractor and the bank would in effect permit employers to avoid the necessity of hiring regular or
permanent employees and would enable them to keep their employees indefinitely on a temporary or
casual basis, thus denying them security of tenure in their jobs. This of course violates the Labor Code.
BCC has not committed any violation. Also, the former case was for illegal dismissal; this case, on the
other hand, is for conversion of employment status so that petitioners can receive the same salary being
given to regular employees of FEBTC. But, as herein determined, petitioners are not regular employees
of FEBTC but of BCC. At any rate, the finding that BCC in a qualified independent contractor precludes us
from applying the Philippine Bank of Communications doctrine to the instant petition.
The determination of employer-employee relationship involves factual findings. 21 Absent any grave abuse
of discretion, and we find none in the case before us, we are bound by the findings of the Labor Arbiter as
affirmed by respondent NLRC.
IN VIEW OF THE FOREGOING, the Petition for Certiorari is DISMISSED.
SO ORDERED.
------------------------------------

122. Asian Alcohol Corp v NLRC

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 131108 March 25, 1999

ASIAN ALCOHOL CORPORATION, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY and ERNESTO A.
CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A. AMACIO, LEANDRO O.
VERAYO and ERENEO S. TORMO, respondents.

PUNO, J.:
Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C. Martinez, Rafael H.
Sendon, Carlos A. Amacio, Leandro O. Verayo and Ereneo S. Tormo, was valid on the twin grounds of
redundancy and retrenchment to prevent business losses, petitioner Asian Alcohol Corporation
(hereinafter referred to as Asian Alcohol) filed this petition for certiorari. Asian Alcohol ascribes grave
abuse of discretion to public respondent National Labor Relations Commission 1 (hereinafter referred to
as NLRC) when, on May 30, 1997, it set aside 2 the decision 3 of the Executive Labor Arbiter dismissing
the illegal termination complaints filed by private respondents.
We first unfurl the facts.
In September, 1991, the Parsons family, who originally owned the controlling stocks in Asian Alcohol,
were driven by mounting business losses to sell their majority rights to Prior Holdings, Inc. (hereinafter
referred to as Prior Holdings). The next month, Prior Holdings took over its management and operation.

To thwart further losses, Prior Holding implemented are organizational plan and other cost-saving
measures. Some one hundred seventeen (117) employees out of a total workforce of three hundred sixty
(360) were separated. Seventy two (72) of them occupied redundant positions that were abolished. Of
these positions, twenty one (21) held by union members and fifty one (51) by non-union members.
The six (6) private respondents are among those union members 5 whose positions were abolished due to
redundancy. Private respondents Carias, Martinez, and Sendon were water pump tenders; Amacio was a
machine shop mechanic; Verayo was a briquetting plant operator while Tormo was a plant helper under
him. They were all assigned at the Repair and Maintenance Section of the Pulupandan plant. 6
In October, 1992, they received individual notices of termination effective November 30, 1992. 7 They
were paid the equivalent of one month salary for every year of service as separation pay, the money
value of their unused sick, vacation, emergency and seniority leave credits, thirteenth (13th) month pay
for the year 1992, medicine allowance, tax refunds, and goodwill cash bonuses for those with at least ten
(10) years of service. 8 All of them executed sworn releases, waivers and quitclaims. 9 Except for Verayo
and Tormo, they all signed sworn statements of conformity to the company retrenchment program. 10 And
except for Martinez, they all tendered letters of resignation. 11

On December 18, 1992 the six (6) private respondents filed with the NLRC Regional Arbitration Branch
VI, Bacolod City, complaints for illegal dismissal with a prayer for reinstatement with backwages, moral
damages and attorney's fees. They alleged that Asian Alcohol used the retrenchment program as a
subterfuge for union busting. They claimed threduncat they were singled out for separation by reason of
their active participation in the union. They also asseverated that Asian Alcohol was not bankrupt as it has
engaged in an aggressive scheme of contractual hiring.
The executive Labor Arbiter dismissed the complainants. He explained, thus:
The fact that respondent AAC incurred losses in its business operations was not seriously
challenged by the complainants. The fact that it incurred losses in its business operations
prior to the implementation of its retrenchment program is amply supported by the
documents on records, (sic) namely: (1) Balance Sheet of AAC as December 31,
1991 . . . , (2) Statement of Income and Deficit for the year ended December 31, 1991 . . .
, (3) Income Tax for Fiscal Year ending September 30, 1989 . . . , (4) Income Tax Return
for Fiscal Year ending December 31, 1989 . . . , (5) Income Tax Return for Fiscal Year
ending December 31, 1990 . . . , and (6) Income Tax Return for Fiscal Year ending
December 31, 1991 . . . , indicating an accumulated deficit of P26,117,889.00.
It has to be emphasized that the law allows an employer to retrench some of its
employees to prevent of its employees to prevent losses. In the case of respondent AAC,
it implemented its retrenchment program not only to prevent losses but to prevent further
losses as it was then incurring huge losses in it operations.
Complainants would want us to believe that their positions were abolished because they
are union members, and that they were replaced by casual employees. Complainants'
pretense is rather untenable. For one thing, the retrenchment program of AAC affected
not only union members but also the non-union members. As earlier said, there were 117
employees of AAC who were affected by the reorganization. Of the 117 positions, 72
positions were abolished due to redundancy, 21 of which were occupied by unions
members, while 51 were held by non-union members. Thus, the theory of complainants
that they were terminated from work on ground of their union membership is far from the
truth.
On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and Rafael
Sendon who were all Water Pump Tenders assigned to AAC's water wells in Ubay,
Pulupandan, Negros Occidental which were drilled and operated before under the old
management by virtue of a right-of-way with the landowner, were retrenchment as an
offshoot to the termination of the lease agreement as the water thereunder had become
salty due to extensive prawn farming nearby, so that AAC could no longer use the water
for its purpose. As a consequence, the services of Ernesto Carias, Roberto Martinez and
Rafael Sendon had become unnecessary, redundant and superfluous.
As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by
respondent AAC in support of its decision to retrench them are too convincing to be
ignored. According to respondent AAC, its boiler before was 100% coal fired. The boiler
was manned by a briquetting plant operator in the person of Leandro Verago and three
(3) briquetting helpers, namely, Ereneo Tormo, Eriberto Songaling, Jr. and Rudy Javier,

Jr. Since AAC had shifted to the use of bunker fuel by about 70% to fire its boiler, its
usage of coal had been drastically reduced to only 30% of its total fuel usage in its
production plant, thereby saving on fuel cost. For this reason, there was no more need for
the position of briquetting plant operator and the services of only two briquetting helpers
were determined to be adequate for the job of briquetting coal. Of the three (3) briquetting
helpers, Ereneo Tormo was the oldest, being already 41 years old, the other two, Javier
and Songaling, being only 28 and 35, respectively. Considering the manual nature of the
work of coal briquetting, younger workers are always preferred for reasons of efficiency
[sic]. Hence the abolition of the position of Ereneo Tormo. We have to stress that Eriberto
Songaling, Jr. and Rudy Javier, Jr. are also union member. . . .
With respect to Carlos Amacio, he was retrenched not because of his being a union
member but because of his poor health condition which greatly affect[ed] his work
efficiency. Records show that Carlos Amacio was among the ten machine shop
mechanics employed by respondent AAC. Under AAC's reorganization plan, it needs only
nine mechanics.
xxx xxx xxx
On the whole, therefore, the dismissal of complainants on ground of redundancy /
retrenchment was perfectly valid or legal. 12
Private respondents appealed to the NLRC.
On May 30,1997, the NLRC rendered the challenged decision. It rejected the evidence proffered by
Asian Alcohol to prove its business reversals. It ruled that the positions of private respondents were not
redundant for the simple reason that they were replaced by casuals. The NLRC essayed this explanation:
In this case, [that] the respondent terminated complainants "to protect the company from
future losses," does not create an impression of imminent loss. The company at the time
of retrenchment was not then in the state of business reverses. There is therefore no
reason to retrench. . . .
The alleged deficits of the corporation did not prove anything for the respondent. The
financial status as shown in the Statement of Income and Deficits and Income Tax
Returns from 1989 to 1991, submitted by respondent was before the respondent, new
management of Prior Holdings, Inc., took over the operation and management of the
corporation in October, 199[1]. This is no proof that on November 30, 1992 when the
termination of complainant[s] took effect the company was experiencing losses or at least
imminent losses. Possible future losses do not authorize retrenchment.
Secondly in the case of REDUNDANCY.
Redundancy exists where the service[s] of . . . employee[s] are in excess of what is
reasonably demanded by the actual requirements of the enterprise. The evidence,
however, proved that, in truth and in fact, the positions of the complainants were not
redundant for the simple reason that they were replaced by casuals.

xxx xxx xxx

Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were
operated by contractors. Otherwise stated, complainant[s] who are regular workers of the
respondent, performing jobs necessary and desirable to the business or redundancy [so
that] their jobs [will be performed by workers belonging to a contractor.
In summation, retrenchment and/or redundancy not having been proved, complainants,
therefore, were illegally dismissed. 13
The dispositive portion of the decision of the NLRC provides as follows:
WHEREFORE, premises considered, the Decision appealed from is hereby ordered SET
ASIDE and VACATED and in lieu thereof, the respondent Asian Alcohol Corporation is
hereby ordered to reinstate complainants with full backwages from the time they were
dismissed on November 30, 1992 and up to actual reinstatement. Plus 10% attorney's
fees.
SO ORDERED. 14
On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing decision. On September 25,
1997, the NLRC denied the motion. 15
On January 12 l998, Asian Alcohol filed in this Court a petition for certiorari assailing both the decision of
the NLRC and the resolution denying its reconsideration. It invoked the following grounds:
6. GROUNDS FOR PETITION
6.1 Public respondent has committed as hereinafter shown, a manifest grave abuse of
discretion amounting to lack or excess of jurisdiction in declaring in its assailed Decision .
. . and Resolution . . . that the termination of the employment of private respondents by
the petitioner herein is illegal and ordering their reinstatement with full backwages from
the time they were dismissed on November 30, 1992 up to their actual reinstatement,
plus 10% attorney's fees, said Decision and Resolution of the public respondent being
contrary to the established facts of the case, well settled jurisprudence and the law on the
matter.
6.2 Public respondent has likewise committed, as hereinafter shown, a manifest grave
abuse of discretion amounting to lack or excess of jurisdiction by totally disregarding and
refusing to consider the factual findings of the Executive Labor Arbiter with respect to the
circumstances which rendered the positions of the private respondents unnecessary
redundant and superfluous, thereby justifying the termination of their employment.
6.3 Public respondent has furthermore committed, as hereinafter shown, a manifest
grave abuse of discretion amounting to lack or excess of jurisdiction in giving full credit to
the oral testimonies quoted in its assailed Decision . . . and taking them as conclusive
proof of the alleged replacement of the private respondents with casual workers despite

the fact that said quoted testimonies clearly amount to nothing but speculations, surmises
and conjectures. 16
On March 25, 1998 we issued a Temporary Restraining Order 17 enjoining the NLRC from enjoining its
Decision and Resolution dated May 30, 1997 and September 25, 1997, respectively.
We find the petition meritorious.
Out of its concern for those with less privilege in life, this Court has inclined towards the worker and
upheld his cause in his conflicts with the employer. 18 This favored treatment is directed by the social
justice policy of the Constitution. 19 But while tilting the scales of justice in favor of workers, the
fundamental law also guarantees the right of the employer to reasonable returns from his
investment. 20 Corollarily, the law allows an employer to downsize his business to meet clear and
continuing economic threats. 21 Thus, this Court has upheld reductions in the work force to forestall
business losses or stop the hemorrhaging of capital. 22
The right of management to dismiss workers during periods of business recession and to install labor
saving devices to prevent losses is governed by Art. 283 of the labor Code, as amended. It provides, viz.:
Art. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment, to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice on the workers and
the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in case of closures or
cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to one (1) month pay
at least one-half (1/2), month pay for every year of service, whichever is higher. A fraction
of at least six (6) month shall be considered one (1) whole year. [emphasis ours]
Under the foregoing provision, retrenchment and redundancy are just causes for the employer to
terminate the services of workers to preserve the viability of the business. In exercising its right, however,
management must faithfully comply with the substantive and procedural requirements laid down law and
jurisprudence. 23
The requirements for valid retrenchment which must be proved by clear and convincing evidence are: (1)
that the retrenchment is reasonably necessary and likely to prevent business losses, which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the
employer; 24 (2) that the employer served written notice both to the employees and to the Department of
Labor and Employment at least one month prior to the intend date of retrenchment; 25 (3) that the
employer pays the retrenched employees separation pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is higher; 26 (4) that the employer exercises its prerogative
to retrench employees in good faith for the advancement of its interest of its interest and not to defeat or

circumvent the employees' right to security of tenure; 27 and (5) that the employer used fair and
reasonable
criteria 28 in ascertaining who would be dismissed and who would be retained among the employees, such
as status (i.e., whether they are temporary, casual, regular or managerial employees), efficiency,
seniority, 29 physical fitness, age, and financial hardship for certain workers. 30
The condition of business losses is normally shown by audited financial documents like yearly balance
sheets and profit and loss statements as well as annual income tax returns. 31 It is our ruling that financial
statements must be prepared and signed by independent auditors. 32 Unless duly audited, they can be
assailed as self-serving documents.33 But it is not enough that only the financial statements for the year
during which retrenchment was undertaken, are, presented in evidence. For it may happen that while the
company has indeed been losing, its losses may be on a downward trend, indicating that business is
picking up and retrenchment, being a drastic move, should no longer be resorted to. 34 Thus, the failure of
the employer to show its income or loss for the immediately preceding year or to prove that it expected no
abatement of such losses in the coming years, may be speak the weakness of its cause. 35 It is necessary
that the employer also show that its losses increased through a period of time and that the condition of
the company is not likely to improve in the near future. 36
In the instant case, private respondents never contested the veracity of the audited financial documents
proffered by Asian Alcohol before the Executive Labor Arbiter. Neither did they object to their admissibility.
They show that petitioner has accumulated losses amounting to P306,764,349.00 and showing nary a
sign of abating in the near future. The allegation of union busting is bereft of proof. Union and non-union
members were treated alike. The records show that the positions of fifty one (51) other non-union
members were abolished due to business losses.
In rejecting petitioner's claim of business losses, the NLRC stated that "the alleged deficits, of the
corporation did not prove anything for the [petitioner]" 37 since they were incurred before the take over of
Prior Holdings. Theorizing that proof of losses before the take over is no proof of losses after the take
over, it faulted Asian Alcohol for retrenching private respondents on the ground of mere "possible future
losses." 38
We do not agree. It should be observed that Article 283 of the Labor Code uses the phrase "retrenchment
to prevent losses". In its ordinary connotation, this phrase means that retrenchment must be undertaken
by the employer before losses are actually sustained. 39 We have, however, interpreted the law to mean
that the employer need not keep all his employees until after his losses shall have
materialized. 40 Otherwise, the law could be vulnerable of attack as undue taking of property for the
benefit of another. 41
In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain to see,
the last quarter losses in 1991 were already incurred under the new management. There were no signs
that these losses would abate. Irrefutable was the fact that losses have bled Asian Alcohol incessantly
over a span of several years. They were incurred under the management of the Parsons family and
continued to be suffered under the new management of Prior Holdings. Ultimately, it is Prior Holdings that
will absorb all the losses, including those incurred under the former owners of the company. The law gives
the new management every right to undertake measures to save the company from bankruptcy.
We find that the reorganizational plan and comprehensive cost-saving program to turn the business
around were not designed to bust the union of the private respondents. Retrenched were one hundred

seventeen (117) employees. Seventy two (72) of them including private respondents were separated
because their positions had become redundant. In this context, what may technically be considered as
redundancy may verily be considered as retrenchment
measures. 42 Their positions had to be declared redundant to cut losses.
Redundancy exists when the service capability of the work force is in excess of what is reasonably
needed to meet the demands on the enterprise. A redundant position is one rendered superfluous by any
number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular
product line previously manufactured by the company or phasing out of a service activity priorly
undertaken by the business. 43 Under these conditions, the employer has no legal obligation to keep in its
payroll more employees than are necessary for the operation of its business. 44
For the implementation of a redundancy program to be valid, the employer must comply with the following
requisites: (1) written notice served on both the employees and the Department of Labor and Employment
at least one month prior to the intended date of retrenchment; 45 (2) payment of separation pay equivalent
to at least one month pay or at least one month pay for every year of service, whichever is higher; (3)
good faith in abolishing the redundant
positions; 46 and (4) fair and reasonable criteria in ascertaining what positions are to be declared
redundant and accordingly abolished. 47
In the case at bar, private respondents Carias, Martinez and Sendon were water pump tenders. They
tended the water wells of Asian Alcohol located in Ubay, Pulupanban, Negros Occidental. However, Asian
Alcohol did not own the land where the wells stood. It only leased them.
In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was
terminated. Also, the water from the wells had become salty due to extensive prawn farming nearby and
could no longer be used by Asian Alcohol for its purpose. The wells had to be closed and needless to say,
the services of Carias, Martinez and Sendon had to be terminated on the twin grounds of redundancy and
retrenchment.
Private respondent Verayo was the briquetting plant operator in charge of the coal-fired boiler. Private
respondent Tormo was one of the three briquetting helpers. To enhance production efficiency, the new
management team shifted to the use of bunker fuel by about seventy percent (70%) to fire its boiler. The
shift meant substantial fuel cost savings. In the process, however, the need for a briquetting plant
operator ceased as the services of only two (2) helpers were all that was necessary to attend to the much
lesser amount of coal required to run the boiler. Thus, the position of private respondent Verayo had to be
abolished. Of the three (3) briquetting helpers, Tormo was the oldest, being already 41 years old. The
other two, Rudy Javier, Jr. and Eriberto Songaling, Jr., were younger, being only 28 and 35, respectively.
Age, with the physical strength that comes with it, was particularly taken into consideration by the
management team in deciding whom to separate. Hence, it was private respondent Tormo who was
separated from service. The management choice rested on a rational basis.
Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the
plant site. At their current production level, the new management found that it was more cost efficient to
maintain only nine (9) mechanics. In choosing whom to separate among the ten (10) mechanics, the
management examined employment records and reports to determine the least efficient among them. It
was private respondent Amacio who appeared the least efficient because of his poor health condition.

Not one of the private respondents refuted the foregoing facts. They only contend that the new
management should have followed the policy of "first in, last out" in choosing which positions to declare
as redundant or whom to retrench to prevent further business losses. No law mandates such a policy. And
the reason is simple enough. A host of relevant factors come into play in determining cost efficient
measures and in choosing the employees who will be retained or separated to save the company from
closing shop. In determining these issues, management has to enjoy a pre-eminent role. The
characterization of positions as redundant is an exercise of business judgment on the part of the
employers. 48 It will be upheld as long as it passes the test of arbitrariness. 49
Private respondents call our attention to their allegation that casuals were hired to replace Carias,
Martinez and Sendon as water pump tenders at the Ubay wells. They rely on the testimony of Engr.
Federico Palmares, Jr., the head of the Mechanical Engineering Services Department who admitted the
engagement of independent contractors to operate the wells. A reading of the testimony of Engr.
Palmares, however, will reveal that he referred not to the Ubay wells which were tended by private
respondent Carias, Martinez and sendon, but to the Laura wells. Thus, he declared in cross examination:
ATTY. YMBALLA: (cross-examination of respondent witness, Federico
Palmares)
Q But in the Laura well?
WITNESS:
A Mansteel was hired as contractor.
ATTY. YMBALLA:
Q In other words, the persons mentioned are all workers of independent
contractors?
WITNESS:
A I am not sure, maybe. 50
In any event, we have held that an employer's good faith in implementing a redundancy program is not
necessarily destroyed by availment of the services of an independent contractor to replace the services of
the terminated employees. We have previously ruled that the reduction of the number of workers in a
company made necessary by the introduction of an independent contractor is justified when the latter is
undertaken in order to effectuate more economic and efficient methods of production. 51 In the case at bar,
private respondents failed to proffer any proof that the management acted in a malicious or arbitrary
manner in engaging the services of an independent contractor to operate the Laura wells. Absent such
proof, the Court has no basis to interfere with the bona fide decision of management to effect more
economic and efficient methods of production.
Finally, private respondent now claim that they signed the quitclaims, waivers and voluntary resignation
letters only to get their separation package. They maintain that in principle, they did not believe that their
dismissal was valid.

It is true that this Court has generally held that quit claims and releases are contrary to public policy and
therefore, void. Nonetheless, voluntary agreements that represent a reasonable settlement are binding on
the parties and should not later be disowned. It is only where there is clear proof that the waiver was
wangled from an unsuspecting or gullible person, or the terms of the settlement are unconscionable, that
the law will step in to bail out the employee. While it is our duty to prevent the exploitation of employees, it
also behooves us to protect the sanctity of contracts that do not contravene our laws.
In the case at bar, there is no showing that the quitclaims, waivers and voluntary resignation letters were
executed by the private respondents under force or duress. In truth, the documents embodied separation
benefits that were well beyond what the company was legally required to give private respondents. We
note that out of the more than one hundred workers that were retrenched by Asian Alcohol, only these six
(6) private respondents were not impressed by the generosity of their employer. Their late complainants
have no basis and deserves our scant consideration.
In VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor Relations Commission
dated May 30, 1997 and its Resolution dated September 25, 1997 are ANNULLED AND SET ASIDE. The
Decision of the Executive Labor Arbiter dated January 10, 1996 in RAB Case No. 06-12-10893-92 is
ORDERED REINSTATED. The complainants for illegal dismissal filed by private respondents against
Asian Alcohol Corporation are hereby ORDERED DISMISSED FOR LACK OF MERIT. No costs.
SO ORDERED.
----------------------

123. de Ocampo v NLRC

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION

G.R. No. 101539 September 4, 1992

CECILE DE OCAMPO, WILFREDO SAN PEDRO, REYNALDO DOVICAR, BIEN MEDINA, CESAR
ABRIOL, ARTEMIO CASTRO, LARRY ALCANTARA, MICHAEL NOCUM, JESUS DEO JR., PUBLEO
DARAG, EDUARDO BINO, EDUARDO VELES, ERVIN DAVID, PROTACIO PEREZ, NOEL VICTOR,
ELENO DACATIMBAN, ANTONIO BERNARDO, CARLITO VICTORIA, TIMOTEO MIJARES, ALEX
RAMOS, REYNALDO CRUZ, MODESTO MAMESIA, DOMINGO SILARDE, RENATO PUENTAS, RENE
VILLANUEVA, MARCELO DELA CRUZ and HERNANDO LEGASPI, petitioners
vs.
NATIONAL LABOR RELATIONS COMMISSION and BALIWAG MAHOGANY
CORPORATION, respondents.

MEDIALDEA, J.:
This Petition for certiorari seeks to annul and set aside the resolution issued by the respondent National
Labor Relations Commission on July 8, 1991, in Certified Case No. 0548 entitled "In Re: Labor Dispute at
Baliwag Mahogany Corporation," affirming with modification its previous decision dated October 23, 1990,
declaring the union officers and/or members who participated in the illegal strike staged on February 6,
1990 to have lost their status of employment; and directing private respondent Baliwag Mahogany
Corporation to pay separation pay to certain employees and to reinstate without backwages all union
Members not found to have committed prohibited acts.
The antecedent facts are as follows:
Petitioners Cecile de Ocampo, Wilfredo San Pedro, Reynaldo Dovicar, Bien Medina, Cesar Abriol,
Artemio Castro, Larry Alcantara, Michael Nocum, Jesus Deo, Jr., Publeo Darag, Eduardo Bino, Eduardo
Veles, Ervin David, Prostacio Perez, Noel Victor, Eleno Dacatimban, Antonio Bernardo, Carlito Victoria,
Timoteo Mijares, Alex Ramos, Reynaldo Cruz, Modesto Mamesia, Domingo Silarde, Renato Puertas,
Rene Villanueva, Marcelo dela Cruz and Hernando Legaspi are employees of private respondent Baliwag
Mahogany Corporation. They are either officers or members of the Baliwag Mahogany Corporation UnionCFW, the existing collective bargaining agent of the rank and file employees in the company. Private
respondent Baliwag Mahogany Corporation is an enterprise engaged in the production of wooden doors
and furniture and has a total workforce of about 900 employees.
In 1988, private respondent Baliwag Mahogany Corporation (company) and Baliwag Mahogany
Corporation Union-CFW (union) entered into a collective bargaining agreement containing, among other
things, provisions on conversion into cash of unused vacation and sick leaves; grievance machinery
procedure; and the right of the company to schedule work on Sundays and holidays.
In November, 1989, the union made several requests from the company, one of which was the cash
conversion of unused vacation and sick leave for 1987-1988 and 1988-1989.
Acting on the matter, the company ruled to allow payment of unused vacation and sick leaves for the
period of 1987-1988 but disallowed cash conversion of the 1988-1989 unused leaves.
On January 3, 1990, the company issued suspension orders affecting twenty (20) employees for failure to
render overtime work on December 30, 1989. The suspension was for a period of three (3) days effective
January 3, 1996 to January 5, 1990.
On the same day, the union filed a notice of strike on the grounds of unfair labor practice particularly the
violation of the CBA provisions on non-payment of unused leaves and illegal dismissal of seven (7)
employees in November, 1989.
On January 13, 1990, the company issued a notice of termination to three (3) employees or union
members, namely, Cecile de Ocampo, Rene Villanueva and Marcelo dela Cruz, of the machinery
department, allegedly to effect cost reduction and redundancy.
The members of the union conducted a picket at the main gate of the company on January 18, 1990.

On the same day, the company filed a petition to declare the strike illegal with prayer for injunction against
the union, Cecile de Ocampo, Wilfredo San Pedro and Rene Aguilar.
An election of officers was conducted by the union on January 19, 1990. Consequently, Cecile de
Ocampo was elected as president.
During the conciliation meeting held at National Conciliation and Mediation Board (NCMB) on January 22,
1990 relative to the notice of strike filed by the union on January 3, 1990, the issue pertaining to the
legality of the termination of three (3) union members was raised by the union. However, both parties
agreed to discuss it separately.
Subsequently, in a letter dated January 28, 1990, the union requested for the presence of a NCMB
representative during a strike vote held by the union. The strike vote resulted to 388 votes out of 415 total
votes in favor of the strike.
Consequently, the union staged a strike on February 6, 1990.
On February 7, 1990, the company filed a petition to assume jurisdiction with the Department of Labor
and Employment.
On February 16, 1990, the company filed an amended petition, praying among other things, that the strike
staged by the union on February 6, 1990 be declared illegal, there being no genuine strikeable issue and
the violation of the no-strike clause of the existing CBA between the parties.
The Secretary of Labor in an order dated February 15, 1990, certified the entire labor dispute to the
respondent Commission for compulsory arbitration and directed all striking workers including the
dismissed employees to return to work and the management to accept them back.
The company filed an urgent motion for assignment of a sheriff to enforce the order of the Secretary.
In an order dated February 22, 1990, the Secretary of Labor directed Sheriff Alfredo Antonio, Jr., to
implement the order.
On February 23, 1990, the sheriff, with the assistance of the PC/INP of San Rafael, removed the
barricades and opened the main gate of the company.
Criminal complaints for illegal assembly, grave threats, and grave coercion were filed against Cecile de
Ocampo, Timoteo Mijares, Modesto Mamesia and Domingo Silarde by the local police authorities on
February 24, 1990.
On February 25, 1990, the company caused the publication of his return to work order in two (2)
newspapers, namely NGAYON and ABANTE.
In its letter dated February 27, 1990, the union, through its President Cecile de Ocampo, requested the
Regional Director of DOLE, Region III to intervene in the existing dispute with management.
Meanwhile, the company extended the February 26, 1990 deadline for the workers to return to work until
March 15, 1990.

The respondent Commission rendered a decision on October 23, 1990, declaring the strikes staged on
January 18, 1990 and February 6, 1990 illegal, the dispositive portion of which provides as follows, to wit:
WHEREFORE, judgment is hereby rendered as follows:
1. The strike staged on January 18, 1990 is hereby declared illegal and all employees
who participated therein are reprimanded therefor or an further warned that future similar
acts shall be dealt more severely;
2. The strike staged on February 6, 1990 is hereby declared illegal and the Union
officers/members are deemed suspended from March 15, 1990 the last deadline of the
company for them to report to the date of promulgation of this Decision. In short, the
Union officers/members are ordered reinstated to their positions but without backwages;.
3. Baliwag Mahogany Corporation is hereby directed to immediately reinstate Cecile de
Ocampo, Rene Villanueva and Marcelo dela Cruz to their former positions without loss of
seniority rights to pay them full backwages for the period from January 17, 1990 to March
15, 1990 only;
4. The Baliwag Mahogany Corporation is hereby directed to immediately reinstate Alex
Ramos, Ronaldo Cruz, Fernando Hernandez, Renato Puertas, Hernando Legaspi to their
former positions and to pay them backwages from date of dismissal to March 15, 1990
only;
5. The Baliwag Mahogany Corporation is hereby exonerated of the charge of unfair labor
practice;
6. The Baliwag Mahogany Corporation is directed to pay its employment the cash
equivalent of unused sick leaves for year 1989;
7. The Baliwag Mahogany Corporation is directed to remit to the Union the dues for the
month of January 1990.
SO ORDERED. (Rollo, pp. 68-69)
Such decision prompted the company to file a motion for reconsideration substantially on the ground that
public respondent seriously erred in not dismissing the employees particularly the union officers, who
participated in the illegal strike.
In its supplemental motion for reconsideration, the company contended that as a result of the strike, it
failed to meet the purchase orders for the quarter valued at fifteen million pesos.
Petitioners filed an opposition to the company's motion for reconsideration and subsequently a
supplemental comment/opposition to motion for reconsideration.
On December 13, 1990, the respondent Commission directed the Labor Arbiter to receive evidence on
the issues raised in the motion for reconsideration and additional evidence on the issues already passed
upon and to submit a report thereon.

On July 8, 1991, the respondent Commission rendered a resolution affirming with modification the
decision dated October 23, 1990, the dispositive portion of which provides as follows:
WHEREFORE, premises considered, the Decision of October 23, 1990 is hereby
MODIFIED, to wit:
1. The strike staged on February 6, 1990 is hereby declared illegal and the Union
officers/members who participated in said strike committed prohibited acts are deemed to
have lost their status of employment, to wit:
1. Cecile de Ocampo
2. Wilfredo San Pedro
3. Reynaldo Aguilar
4. Bren Medina (Bien Medina)
5. Cesar Abriol
6. Artemio Castro
7. Larry Alcantara
8. Melie Nocum (Michael Nocum)
9. Jesus Deo, Jr.
10. Publeo Darag
11. Eduardo Bino
12. Eduardo Vices (Eduardo Veles)
13. Abroin David (Ervin David)
14. Protacio Perez (Prostacio Perez)
15. Celso Sarmiento
16. Neol Vicbon (Noel Victor)
17. Alano Dacatimban (Eleno Dacatimban)
18. Antonio Bernardo
19. Carlito Victoria
20. Timoteo Mijares
21. Alex Ramos
22. Reynaldo Cruz
23. Modesto Manesia
24. Domingo Silarde
25. Renato Puertas
26. Hernando Legaspi
2. The Baliwag Mahogany Corporation is directed to pay Cecile de Ocampo, Rene
Villanueva and Marcelo Cruz separation pay computed at one month per year of service
in addition to one month pay as indemnification pay for lack of notice (Art. 283, Labor
Code).
3. The Baliwag Mahogany Corporation is directed to pay Alex Ramos, Reynaldo Cruz,
Renato Puertas, Hernando Legaspi separation pay computed at one (1) month per year
of service in addition to backwages limited to six (6) months.
4. The Baliwag Mahogany Corporation is directed to reinstate but without backwages all
Union members not found herein to have committed prohibited acts nor found to have

accepted settlement from it nor have voluntarily left the Company for reasons of their
own.
5. All other findings in the questioned Decision are affirmed.
SO ORDERED. (Rollo, pp. 45-47)
Hence, this present petition raising three (3) issues, to wit:
1. Whether or not there is legal basis for declaring the loss of employment status by
petitioners on account of the strike in respondent Company.
2. Whether or not the dismissals of petitioners Cecile de Ocampo, Rene Villanueva, and
Marcelo dela Cruz from their positions by the company on the ground of redundancy was
done in good faith.
3. Whether or not respondent NLRC acted correctly in allowing respondent company to
submit additional evidence in support of its Motion for Reconsideration and in giving
credence to the said evidence despite the fact that the same were not newly-discovered
evidence as defined under the Rules of Court. (Rollo, p. 11)
After a careful review of the records of this case, the Court finds the petition devoid of merit.
Petitioners insist that there is no specific finding by the respondent commision regarding the particular
participation of the individual petitioners in the supposed acts of violence or commission of prohibited acts
during the strike such as denial of free ingress to the premises of the company and egress therefrom as
well as illegal acts of coercion during the February, 1990 strike.
The Solicitor General disagrees and claims that it is undisputed that the union resorted to illegal acts
during the strike arguing that private respondent's personnel manager specifically identified the union
officers and members who committed the prohibited acts and actively participated therein.
Moreover, the Solicitor General maintains that the illegality of the strike likewise stems from the failure of
the petitioners to honor the certification order and heed the return-to-work order issued by the Secretary
of Labor.
Answering this contention, the petitioners argued that their failure to immediately return to work was not
impelled by any malicious or malevolent motive but rather, by their apprehension regarding their physical
safety due to the presence of military men in the factory who might cause them harm.
The law on the matter is Article 264 (a) of the Labor Code, to wit:
Article 264. (a) Prohibited activities. (a)
No strike or lockout shall be declared after assumption of jurisdiction by the President or
the Minister or after certification or submission of the dispute to compulsory or voluntary
arbitration or during the pendency of cases involving the same grounds for the strike or
lockout.

Any worker whose employment has been terminated as a consequence of an unlawful

lockout shall be entitled to reinstatement with full backwages. Any union officer who
knowingly participates in an illegal strike and any worker or union officer who knowingly
participates in the commission of illegal acts during a strike may be declared to have lost
his employment status: Provided, That mere participation of a worker in a lawful strike
shall not constitute sufficient ground for termination of his employment, even if a
replacement had been hired by the employer during such lawful strike.
The clear mandate of the aforequoted article was stressed in the case of Union of Filipro Employees v.
Nestle Philippines, Inc. (G.R. Nos. 88710-13, December 19, 1990, 192 SCRA 396, 411) where it was held
that a strike that is undertaken despite the issuance by the Secretary of Labor of an assumption or
certification order becomes a prohibited activity and thus illegal, pursuant to the second paragraph of Art.
264 of the Labor Code as Amended and the Union officers and members, as a result, are deemed to have
lost their employment status for having knowingly participated in an illegal act.
Unrebutted evidence shows that the individual petitioners defied the return-to-work order of the Secretary
of Labor issued on February 15, 1990. As a matter of fact, it was only on February 23, 1990 when the
barricades were removed and the main gate of the company was opened. Hence, the termination of the
services of the individual petitioners is justified on this ground alone.
Anent the contention that the respondent Commission gravely abused its discretion when it allowed the
presentation of additional evidence to prove the loss suffered by the company despite the fact that they
were mere afterthoughts and just concocted by the company, time and again, We emphasize that
"technical rules of evidence are not binding in labor cases. Labor officials should use every and
reasonable means to ascertain the facts in each case speedily and objectively, without regard to
technicalities of law or procedure, all in the interest of due process" (Philippine Telegraph and Telephone
Corporation v. National Labor Relations Commission, G.R. No. 80600, March 21, 1990, 183 SCRA 451,
457).
Turning to the legality of the termination of three (3) of the individual petitioners, petitioners contend that
the company acted in bad faith when it terminated the services of the three mechanics because the
positions held by them were not at all abolished but merely given to Gemac Machineries.
On the contrary, the company stresses that when it contracted the services of Gemac Machineries for the
maintenance and repair of its industrial machinery, it only adopted a cost saving and cost-consciousness
program in order to improve production efficiency.
We sustain respondent Commission's finding that petitioners' dismissal was justified by redundancy due
to superfluity and hence legal.
We believe that redundancy, for purposes of our Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirement of the enterprise. Succinctly put,
a position is redundant where it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as over hiring of workers, decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or undertaken by the
enterprise. The employer had no legal obligation to keep in its payroll more employees, than are
necessary for the operation of its business. (Wiltshire File Co., Inc. v. National Labor Relations
Commission, G.R. No. 82249, February 7, 1991; 193 SCRA 665,672).

The reduction of the number of workers in a company made necessary by the introduction of the services
of Gemac Machineries in the maintenance and repair of its industrial machinery is justified. There can be
no question as to the right of the company to contract the services of Gemac Machineries to replace the
services rendered by the terminated mechanics with a view to effecting more economic and efficient
methods of production.
In the same case, We ruled that "(t)he characterization of (petitioners') services as no longer necessary or
sustainable, and therefore properly terminable, was an exercise of business judgment on the part of
(private respondent) company. The wisdom or soundness of such characterization or decision was not
subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as
violation of law or merely arbitrary and malicious action is not shown" (ibid, p. 673).
In contracting the services of Gemac Machineries, as part of the company's cost-saving program, the
services rendered by the mechanics became redundant and superfluous, and therefore properly
terminable. The company merely exercised its business judgment or management prerogative. And in the
absence of any proof that the management abused its discretion or acted in a malicious or arbitrary
manner, the court will not interfere with the exercise of such prerogative.
Well-settled is the rule that the factual findings of administrative bodies are entitled to great weight, and
these findings are accorded not only respect but even finality when supported by substantial evidence
(Family Planning Organization of the Philippines, Inc. v. National Labor Relations Commission, G.R. No.
75987, March 23, 1992, p. 7 citing Asian Construction and Development Corporation v. National Labor
Relations Commission, G.R. No. 85866, July 24, 1998, 187 SCRA 784, 787). Hence, the truth or the
falsehood of alleged facts is not for this Court now to re-examine.
In the light of the foregoing considerations, it is clear that the assailed resolution of the respondent
Commission is not tainted with arbitrariness nor grave abuse of discretion.
ACCORDINGLY, the petition is DISMISSED for lack of merit and the resolution of the respondent
Commission dated July 8, 1991 is hereby AFFIRMED.
SO ORDERED.
----------------------------

124. PhiL Bank of Comm. v NLRC

Republic of the Philippines
SUPREME COURT
Manila
G.R. No. L-66598 December 19, 1986
PHILIPPINE BANK OF COMMUNICATIONS, petitioner,
vs.

THE NATIONAL LABOR RELATIONS COMMISSION, HONORABLE ARBITER TEODORICO L.

DOGELIO and RICARDO ORPIADA respondents.
Marcelino Lontok, Jr. for respondents.

FELICIANO, J.:
Petitioner Philippine Bank of Communications and the Corporate Executive Search Inc. (CESI) entered
into a letter agreement dated January 1976 under which (CESI) undertook to provide "Tempo[rary]
Services" to petitioner Consisting of the "temporary services" of eleven (11) messengers. The contract
period is described as being "from January 1976." The petitioner in truth undertook to pay a "daily
service rate of P18, " on a per person basis.
Attached to the letter agreement was a "List of Messengers assigned at Philippine Bank of
Communications" which list included, as item No. 5 thereof, the name of private respondent Ricardo
Orpiada.
Ricardo Orpiada was thus assigned to work with the petitioner bank. As such, he rendered services to the
bank, within the premises of the bank and alongside other people also rendering services to the bank.
There was some question as to when Ricardo Orpiada commenced rendering services to the bank. As
noted above, the letter agreement was dated January 1976. However, the position paper submitted by
(CESI) to the National Labor Relations Commission stated that (CESI) hired Ricardo Orpiada on 25 June
1975 as a Tempo Service employee, and assigned him to work with the petitioner bank "as evidenced by
the appointment memo issued to him on 25 June 1975. " Be that as it may, on or about October 1976, the
petitioner requested (CESI) to withdraw Orpiada's assignment because, in the allegation of the bank,
Orpiada's services "were no longer needed."
On 29 October 1976, Orpiada instituted a complaint in the Department of Labor (now Ministry of Labor
and Employment) against the petitioner for illegal dismissal and failure to pay the 13th month pay
provided for in Presidential Decree No. 851. This complaint was docketed as Case No. R04-1010184-76E. After investigation, the Office of the Regional Director, Regional Office No. IV of the Department of
Labor, issued an order dismissing Orpiada's complaint for failure of Mr. Orpiada to show the existence of
an employer-employee relationship between the bank and himself.
Despite the foregoing order, Orpiada succeeded in having his complaint certified for compulsory
arbitration in Case No. RB-IV-11187-77 entitled "Ricardo Orpiada, complaint vs. Philippine Bank of
Communications, respondent."During the compulsory arbitration proceedings, CE SI was brought into the
picture as an additional respondent by the bank. Both the bank and (CESI) stoutly maintained that (CESI)
(and not the bank) was the employer of Orpiada.
On 12 September 1977, respondent Labor Arbiter Dogelio rendered a decision in Case No. RB-IV-1118777, the dispositive portion of which read as follows:
WHEREFORE, premises considered, respondent bank is hereby ordered to reinstate
complainant to the same or equivalent position with full back wages and to pay the latter's 13th
month pay for the year 1976.

On 26 October 1977, the bank appealed the decision of the Labor Arbiter to the respondent NLRC. More
than six years laterand the record is silent on why the proceeding in the NLRC should have taken more
than six years to resolve the NLRC promulgated its decision affirming the award of the Labor Arbiter and
stating as follows:
WHEREFORE, except for the modification reducing the complainant's back wages to two (2)
years without qualification, the Decision appealed from is hereby AFFIRMED in an other respects.
Accordingly, on 2 April 1984, the bank filed the present petition for certiorari with this Court seeking to
annul and set aside (a) the decision of respondent Labor Arbiter Dogelio dated 12 September 1977 in
Labor Case No. RB-IV-1118-77 and (b) the decision of the NLRC promulgated on 29 December 1983
affirming with some modifications the decision of the Labor Arbiter. This Court granted a temporary
restraining order on 11 April 1984. The main issue as litigated by the parties in this case relates to
whether or not an employer-employee relationship existed between the petitioner bank and private
respondent Ricardo Orpiada. The petitioner bank maintains that no employer-employee relationship was
established between itself and Ricardo Orpiada and that Ricardo Orpiada was an employee of (CESI) and
not of the bank. The bank documents its position by pointing to the following provisions of its letter
agreement with CE SI
1. The individual/s you i.e. (CESI) will assign to us i.e. petitioner) will be subject to our acceptance
and will observe work-days, hours, and methods of work (sic); on the other hand, they will not be
asked to perform job (sic) not normally related to the position/s for which Tempo Services were
contracted.
2. Such individuals will nevertheless remain your own employees and you will therefore, retain all
liabilities arising from the new Labor Code as amended Social Security Act and other applicable
Governmental decrees, rules and regulations, provided that, on our part, we shaIl
a. Require your employers assigned to us to properly accomplish your daily time record,
to faithfully reflect all hours worked in our behalf whether such work be within or beyond
eight hours of any day.
b. Notify you of any change in the work assignment or contract period affecting any of
your employers assigned to us within 24 hours, after such change is made.
(Emphasis supplied)
The above language of the agreement between the bank and CE SI is of course relevant and important
as manifesting an intent to refrain from constituting an employer-employee relationship between the bank
and the persons assigned or seconded to the bank by (CESI) That extent to which the parties were
successful in realizing their intent is another matter, one that is dependent upon applicable law and not
merely upon the terms of their contract.
In the case of Viana vs. AI-Lagdan and Pica, 99 Phil. 408 (1956), this Court listed certain factors to be
taken into account in determining the existence of an employer-employee relationship. These factors are:
1) The selection and engagement of the putative employee;

2) The payment of wages;

3) The power of dismissal- and
4) The power to control the putative employees' conduct, although the latter is the most important
element. ... (99 Phil. at 411- 412; Emphasis supplied)
In the present case, Orpiada was not previously selected by the bank. Rather, Orpiada was assigned to
work in the bank by (CESI) Orpiada could not have found his way to the bank's offices had he not been
first hired by (CESI) and later assigned to work in the bank's offices. The selection of Orpiada by (CESI)
was, however, subject to the acceptance of the bank and the bank did accept him As will be seen shortly,
(CESI) had hired Orpiada from the outside world precisely for the purpose of assigning or seconding him
to the bank.
With respect to the payment of Orpiada's wages, the bank remitted to CE SI amounts corresponding to
the "daily service rate" of Orpiada and the others similarly assigned by (CESI) to the bank, and (CESI)
paid to Orpiada and the others the wages pertaining to to them. It is not clear from the record whether the
amounts remitted to (CESI) included some factor for CESIs fees; it seems safe to assume that (CESI)
had required some amount in excess of the wages paid by (CESI) to Orpiada and the others to cover its
own overhead expenses and provide some contribution to profit. The bank alleged that Orpiada did not
appear in its payroll and this allegation was not denied by Orpiada. Indeed, the Labor Arbiter in Case No.
R04-184-76-B found that Orpiada was listed in the payroll of (CESI) with (CESI) deducting amounts
representing his Medicare and Social Security System premiums. A copy of the (CESI) payroll was
presented, strangely enough, by Orpiada himself to Regional Office No. IV.
In respect of the power of dismissal we note that the bank requested (CESI) to withdraw Orpiada's
assignment and that (CESI) did, in fact, withdraw such assignment. Upon such withdrawal from his
assignment with the bank, Orpiada was also terminated by (CESI) Indeed, it appears clear that Orpiada
was hired by (CESI) specifically for assignment with the bank and that upon his withdrawal from such
assignment upon request of the bank, Orpiada's employment with (CESI) was also severed, until some
other client of (CESI) showed up in the horizon to which Orpiada could once more be assigned. In the
position paper dated August 5, 1977 submitted by (CESI) before the NLRC, (CESI) explained the
relationship between itself and Orpiada in lucid terms:
5. That as Petitioner herein was very well aware of from the very beginning, he was hired by
Corporate Executive Search, Inc. as a temporary employee and as such, was being assigned to
work with the latter's client Respondent herein that the rationale behind his hiring was the
existence of a service contract between Corporate Executive Search Inc. and its client-company,
the Philippine Bank of Communications, the herein Respondent, and that when this service
contract was 0terminated, then the reason for his employment with Corporate Executive Search,
Inc., ceased to exist and that therefore Corporate Executive Search Inc. had no alternative but to
discontinue his employment until another opportune time for his hiring would present itself;
6. That Petitioner was not given his 13th-month pay under P.D. 851, because Corporate
Executive Search Inc. gave the 13th month pay for 1976 to its employees in December 1976, and
since the company had lost contact with the Petitioner by reason of his having ceased to be
connected with it as of 22 October 1976, he was not among those given the 13th-month pay.
(Emphasis supplied)

Turning to the power to control Orpiada's conduct, it should be noted immediately that Orpiada performed
his sections within the bank's premises, and not within the office premises of (CESI) As such, Orpiada
must have been subject to at least the same control and supervision that the bank exercises over any
other person physically within its premises and rendering services to or for the bank, in other words, any
employee or staff member of the bank. It seems unreasonable to suppose that the bank would have
allowed Orpiada and the other persons assigned to the bank by CE SI to remain within the bank's
premises and there render services to the bank, without subjecting them to a substantial measure of
control and supervision, whether in respect of the manner in which they discharged their functions, or in
respect of the end results of their functions or activities, or both.
Application of the above factors in the specific context of this case appears to yield mixed results so far as
concerns the existence of an employer- employer relationship between the bank and Orpiada. The
second ("payment of wages") and third ("power of dismissal") factors suggest that the relevant
relationship was that subsisting between (CESI) and Orpiada, a relationship conceded by (CESI) to be
one between employer and employee. Upon the other hand, the first ("selection and engagement") and
fourth ("control of employee's conduct") factors indicate that some direct relationship did exist between
Orpiada and the bank and that such relationship may be assimilated to employment. Perhaps the most
important circumstance which emerges from an examination of the facts of the tri-lateral relationship
between the bank, (CESI) and Orpiada is that the employer-employee relationship between (CESI) and
Orpiada was established precisely in anticipation of, and for the very purpose of making possible, the
secondment of Orpiada to the bank. It is therefore necessary to confront the task of determining the
appropriate characterization of the relationship between the bank and (CESI) was that relationship one of
employer and job (independent) contractor or one of employer and "labor-only" contractor?
Articles 106 and 107 of the Labor Code of the Philippines (Presidential Decree No. 442, as amended)
provides as follows:
ART. 106. Contractor or sub-contractor.Whenever an employer enters into a contract with
another person for the performance of the former's work, the employees of the contractor and of
the latter's subcontractor, if any, shall be paid in accordance with the provisions in this Code.
In the event that the contractor or sub-contractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
sub-contructor to such employees to the extent of the work performed under the contract in the
same manner and extent that he is liable to employees directly employed by him
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting,
he may make appropriate distinctions between labor-only contracting and job contracting as well
as differentiations within these types of contracting and determine who among the parties
involved shall be considered the employer for purposes of this Code, to prevent any violation or
circumvention of any provisions of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not
have substantial capital or investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by such person are performing
activities which are directly related to the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of the employer who shall be

responsible to the workers in the same manner and extent as if the latter were directly employed
by him.
ART. 107. Indirect employer. The provisions of the immediately preceding Article shall likewise
apply to any person, part, nership association or corporation which, not being an employer,
contracts with an independent contractor for the performance of any work, task, job or project.
(Emphasis supplied)
Under the general rule set out in the first and second paragraphs of Article 106, an employer who enters
into a contract with a contractor for the performance of work for the employer, does not thereby create an
employer-employes relationship between himself and the employees of the contractor. Thus, the
employees of the contractor remain the contractor's employees and his alone. Nonetheless when a
contractor fails to pay the wages of his employees in accordance with the Labor Code, the employer who
contracted out the job to the contractor becomes jointly and severally liable with his contractor to the
employees of the latter "to the extent of the work performed under the contract" as such employer were
the employer of the contractor's employees. The law itself, in other words, establishes an employeremployee relationship between the employer and the job contractor's employees for a limited purpose,
i.e., in order to ensure that the latter get paid the wages due to them.
A similar situation obtains where there is "labor only" contracting. The "labor-only" contractor-i.e "the
person or intermediary" is considered "merely as an agent of the employer. " The employer is made by
the statute responsible to the employees of the "labor only" contractor as if such employees had been
directly employed by the employer. Thus, where "labor only" contracting exists in a given case, the statute
itself implies or establishes an employer-employee relationship between the employer (the owner of the
project) and the employees of the "labor only" contractor, this time for a comprehensive purpose:
"employer for purposes of this Code, to prevent any violation or circumvention of any provision of this
Code. " The law in effect holds both the employer and the "labor-only" contractor responsible to the
latter's employees for the more effective safeguarding of the employees' rights under the Labor Code.
Both the petitioner bank and (CESI) have insisted that (CESI) was not a "labor only" contractor. Section 9
of Rule VIII of Book III entitled "Conditions of Employment," of the Omnibus Rules Implementing the
Labor Code provides as follows:
Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an
employer shag be deemed to be engaged in labor-only contracting where such person:
(1) Does not have substantial capital or investment in the form of tools, equipment,
machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities which are
to the principal business or operations of the c workers are habitually employed,
(b) Labor-only contracting as defined herein is hereby prohibited and the person acting as
contractor shall be considered merely as an agent or intermediary of the employer who shall be
responsible to the workers in the same manner and extent as if the latter were directly employed
by him

(c) For cases not file under this Article, the Secretary of Labor shall determine through
appropriate orders whether or not the contracting out of labor is permissible in the light of the
circumstances of each case and after considering the operating needs of the employer and the
rights of the workers involved. In such case, he may prescribe conditions and restrictions to
insure the protection and welfare of the workers. (Emphasis supplied)
In contrast, job contracting-contracting out a particular job to an independent contractor is defined by the
Implementing Rules as follows:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following
conditions are met:
(1) The contractor carries on an independent business and undertakes the contract work on his
own account under his own responsibility according to his own manner and method free from the
control and direction of his employer or principal in all matters connected with the performance of
the work except as to the results thereof; and
(2) The contractor has substantial capital or investment in the form of tools, equipment,
machineries, work premises, and other materials which are necessary in the conduct of his
business. (Emphasis supplied)
The bank and (CESI) urge that (CESI) is not properly regarded as a "labor-only" contractor upon n the
ground that (CESI) is possessed of substantial capital or investment in the form of office equipment, tools
and trained service personnel.
We are unable to agree with the bank and (CESI) on this score. The definition of "labor-only" contracting
in Rule VIII, Book III of the Implementing Rules must be read in conjunction with the definition of job
contracting given in Section 8 of the same Rules. The undertaking given by CESI in favor of the bank was
not the performance of a specific job for instance, the carriage and delivery of documents and parcels
to the addresses thereof. There appear to be many companies today which perform this discrete service,
companies with their own personnel who pick up documents and packages from the offices of a client or
customer, and who deliver such materials utilizing their own delivery vans or motorcycles to the
addresses. In the present case, the undertaking of (CESI) was toprovide its client-thebank-with a certain
number of persons able to carry out the work of messengers. Such undertaking of CESI was complied
with when the requisite number of persons were assigned or seconded to the petitioner bank. Orpiada
utilized the premises and office equipment of the bank and not those of (CESI) Messengerial work-the
delivery of documents to designated persons whether within or without the bank premises is of course
directly related to the day-to-day operations of the bank. Section 9(2) quoted above does notrequire for its
applicability that the petitioner must be engaged in the delivery of items as a distinct and separate line of
business.
Succinctly put, CESI is not a parcel delivery company: as its name indicates, it is a recruitment and
placement corporation placing bodies, as it were, in d ifferent client companies for longer or shorter
periods of time. It is this factor that, to our mind, distinguishes this case from American President v. Clave
et al, 114 SCRA 826 (1982) if indeed distinguishing way is needed.
The bank urged that the letter agreement entered into with CESI was designed to enable the bank to
obtain the temporary services of people necessary to enable the bank to cope with peak loads, to replace

temporary workers who were out on vacation or sick leave, and to handle specialized work. There is, of
course, nothing illegal about hiring persons to carry out "a specific project or undertaking the completion
or termination of which [was] determined at the time of the engagement of [the] employee, or where the
work or service to be performed is seasonal in nature and the employment is for the duration of the
season" (Article 281, Labor Code).<re||an1w> The letter agreement itself, however, merely required
(CESI) to furnish the bank with eleven 11) messengers for " a contract period from January 19, 1976 ."
The eleven (11) messengers were thus supposed to render "temporary" services for an indefinite or
unstated period of time. Ricardo Orpiada himself was assigned to the bank's offices from 25 June 1975
and rendered services to the bank until sometime in October 1976, or a period of about sixteen months.
Under the Labor Code, however, any employee who has rendered at least one year of service, whether
such service is continuous or not, shall be considered a regular employee (Article 281, Second
paragraph). Assuming, therefore, that Orpiada could properly be regarded as a casual (as distinguished
from a regular) employee of the bank, he became entitled to be regarded as a regular employee of the
bank as soon as he had completed one year of service to the bank. Employers may not terminate the
service of a regular employee except for a just cause or when authorized under the Labor Code (Article
280, Labor Code). It is not difficult to see that to uphold the contractual arrangement between the bank
and (CESI) would in effect be to permit employers to avoid the necessity of hiring regular or permanent
employees and to enable them to keep their employees indefinitely on a temporary or casual status, thus
to deny them security of tenure in their jobs. Article 106 of the Labor Code is precisely designed to
prevent such a result.
We hold that, in the circumstances 'instances of this case, (CESI) was engaged in "labor-only" or
attracting vis-a-vis the petitioner and in respect c Ricardo Orpiada, and that consequently, the petitioner
bank is liable to Orpiada as if Orpiada had been directly, employed not only by (CESI) but also by the
bank. It may well be that the bank may in turn proceed against (CESI) to obtain reimbursement of, or
some contribution to, the amounts which the bank will have to pay to Orpiada; but this it is not necessary
to determine here.
WHEREFORE, the petition for certiorari is DENIED and the decision promulgated on 29 December 1983
of the National Labor Relations Commission is AFFIRMED. The Temporary Restraining Order issued by
this Court on 11 April 1984 is hereby lifted. Costs against petitioner.
SO ORDERED.