G.R. No.

85750 September 28, 1990

INTERNATIONAL CATHOLIC IMMIGRATION COMMISSION, petitioner

vs
HON. PURA CALLEJA IN HER CAPACITY AS DIRECTOR OF THE BUREAU OF LABOR
RELATIONS AND TRADE UNIONS OF THE PHILIPPINES AND ALLIED SERVICES (TUPAS)
WFTU respondents.

G.R. No. 89331 September 28, 1990

KAPISANAN NG MANGGAGAWA AT TAC SA IRRI-ORGANIZED LABOR ASSOCIATION IN

LINE INDUSTRIES AND AGRICULTURE, petitioner,
vs
SECRETARY OF LABOR AND EMPLOYMENT AND INTERNATIONAL RICE RESEARCH
INSTITUTE, INC., respondents.

Araullo, Zambrano, Gruba, Chua Law Firm for petitioner in 85750.

Dominguez, Armamento, Cabana & Associates for petitioner in G.R. No. 89331.

Jimenez & Associates for IRRI.

Alfredo L. Bentulan for private respondent in 85750.

MELENCIO-HERRERA, J.:

Consolidated on 11 December 1989, these two cases involve the validity of the claim of immunity by the International Catholic Migration
Commission (ICMC) and the International Rice Research Institute, Inc. (IRRI) from the application of Philippine labor laws.

Facts and Issues

A. G.R. No. 85750 — the International Catholic Migration Commission (ICMC) Case.

As an aftermath of the Vietnam War, the plight of Vietnamese refugees fleeing from South Vietnam's
communist rule confronted the international community.

In response to this crisis, on 23 February 1981, an Agreement was forged between the Philippine
Government and the United Nations High Commissioner for Refugees whereby an operating center
for processing Indo-Chinese refugees for eventual resettlement to other countries was to be
established in Bataan (Annex "A", Rollo, pp. 22-32).

ICMC was one of those accredited by the Philippine Government to operate the refugee processing
center in Morong, Bataan. It was incorporated in New York, USA, at the request of the Holy See, as
a non-profit agency involved in international humanitarian and voluntary work. It is duly registered
with the United Nations Economic and Social Council (ECOSOC) and enjoys Consultative Status,
Category II. As an international organization rendering voluntary and humanitarian services in the
Philippines, its activities are parallel to those of the International Committee for Migration (ICM) and
the International Committee of the Red Cross (ICRC) [DOLE Records of BLR Case No. A-2-62-
87, ICMC v. Calleja, Vol. 1].

On 14 July 1986, Trade Unions of the Philippines and Allied Services (TUPAS) filed with the then
Ministry of Labor and Employment a Petition for Certification Election among the rank and file
members employed by ICMC The latter opposed the petition on the ground that it is an international
organization registered with the United Nations and, hence, enjoys diplomatic immunity.

On 5 February 1987, Med-Arbiter Anastacio L. Bactin sustained ICMC and dismissed the petition for
lack of jurisdiction.

On appeal by TUPAS, Director Pura Calleja of the Bureau of Labor Relations (BLR), reversed the
Med-Arbiter's Decision and ordered the immediate conduct of a certification election. At that time,
ICMC's request for recognition as a specialized agency was still pending with the Department of
Foreign Affairs (DEFORAF).

Subsequently, however, on 15 July 1988, the Philippine Government, through the DEFORAF,
granted ICMC the status of a specialized agency with corresponding diplomatic privileges and
immunities, as evidenced by a Memorandum of Agreement between the Government and ICMC
(Annex "E", Petition, Rollo, pp. 41-43), infra.

ICMC then sought the immediate dismissal of the TUPAS Petition for Certification Election invoking
the immunity expressly granted but the same was denied by respondent BLR Director who, again,
ordered the immediate conduct of a pre-election conference. ICMC's two Motions for
Reconsideration were denied despite an opinion rendered by DEFORAF on 17 October 1988 that
said BLR Order violated ICMC's diplomatic immunity.

Thus, on 24 November 1988, ICMC filed the present Petition for Certiorari with Preliminary Injunction
assailing the BLR Order.

On 28 November 1988, the Court issued a Temporary Restraining Order enjoining the holding of the
certification election.

On 10 January 1989, the DEFORAF, through its Legal Adviser, retired Justice Jorge C. Coquia of
the Court of Appeals, filed a Motion for Intervention alleging that, as the highest executive
department with the competence and authority to act on matters involving diplomatic immunity and
privileges, and tasked with the conduct of Philippine diplomatic and consular relations with foreign
governments and UN organizations, it has a legal interest in the outcome of this case.

Over the opposition of the Solicitor General, the Court allowed DEFORAF intervention.

On 12 July 1989, the Second Division gave due course to the ICMC Petition and required the
submittal of memoranda by the parties, which has been complied with.

As initially stated, the issue is whether or not the grant of diplomatic privileges and immunites to
ICMC extends to immunity from the application of Philippine labor laws.

ICMC sustains the affirmative of the proposition citing (1) its Memorandum of Agreement with the
Philippine Government giving it the status of a specialized agency, (infra); (2) the Convention on the
Privileges and Immunities of Specialized Agencies, adopted by the UN General Assembly on 21
November 1947 and concurred in by the Philippine Senate through Resolution No. 91 on 17 May
1949 (the Philippine Instrument of Ratification was signed by the President on 30 August 1949 and
deposited with the UN on 20 March 1950) infra; and (3) Article II, Section 2 of the 1987 Constitution,
which declares that the Philippines adopts the generally accepted principles of international law as
part of the law of the land.

Intervenor DEFORAF upholds ICMC'S claim of diplomatic immunity and seeks an affirmance of the
DEFORAF determination that the BLR Order for a certification election among the ICMC employees
is violative of the diplomatic immunity of said organization.

Respondent BLR Director, on the other hand, with whom the Solicitor General agrees, cites State
policy and Philippine labor laws to justify its assailed Order, particularly, Article II, Section 18 and
Article III, Section 8 of the 1987 Constitution, infra; and Articles 243 and 246 of the Labor Code, as
amended, ibid. In addition, she contends that a certification election is not a litigation but a mere
investigation of a non-adversary, fact-finding character. It is not a suit against ICMC its property,
funds or assets, but is the sole concern of the workers themselves.

B. G.R. No. 89331 — (The International Rice Research Institute [IRRI] Case).

Before a Decision could be rendered in the ICMC Case, the Third Division, on 11 December 1989,
resolved to consolidate G.R. No. 89331 pending before it with G.R. No. 85750, the lower-numbered
case pending with the Second Division, upon manifestation by the Solicitor General that both cases
involve similar issues.

The facts disclose that on 9 December 1959, the Philippine Government and the Ford and
Rockefeller Foundations signed a Memorandum of Understanding establishing the International Rice
Research Institute (IRRI) at Los Baños, Laguna. It was intended to be an autonomous, philanthropic,
tax-free, non-profit, non-stock organization designed to carry out the principal objective of conducting
"basic research on the rice plant, on all phases of rice production, management, distribution and
utilization with a view to attaining nutritive and economic advantage or benefit for the people of Asia
and other major rice-growing areas through improvement in quality and quantity of rice."

Initially, IRRI was organized and registered with the Securities and Exchange Commission as a
private corporation subject to all laws and regulations. However, by virtue of Pres. Decree No. 1620,
promulgated on 19 April 1979, IRRI was granted the status, prerogatives, privileges and immunities
of an international organization.

The Organized Labor Association in Line Industries and Agriculture (OLALIA), is a legitimate labor
organization with an existing local union, the Kapisanan ng Manggagawa at TAC sa IRRI
(Kapisanan, for short) in respondent IRRI.

On 20 April 1987, the Kapisanan filed a Petition for Direct Certification Election with Region IV,
Regional Office of the Department of Labor and Employment (DOLE).

IRRI opposed the petition invoking Pres. Decree No. 1620 conferring upon it the status of an
international organization and granting it immunity from all civil, criminal and administrative
proceedings under Philippine laws.

On 7 July 1987, Med-Arbiter Leonardo M. Garcia, upheld the opposition on the basis of Pres.
Decree No. 1620 and dismissed the Petition for Direct Certification.
On appeal, the BLR Director, who is the public respondent in the ICMC Case, set aside the Med-
Arbiter's Order and authorized the calling of a certification election among the rank-and-file
employees of IRRI. Said Director relied on Article 243 of the Labor Code, as amended, infra and
Article XIII, Section 3 of the 1987 Constitution, 1 and held that "the immunities and privileges granted
to IRRI do not include exemption from coverage of our Labor Laws." Reconsideration sought by IRRI
was denied.

On appeal, the Secretary of Labor, in a Resolution of 5 July 1989, set aside the BLR Director's
Order, dismissed the Petition for Certification Election, and held that the grant of specialized agency
status by the Philippine Government to the IRRI bars DOLE from assuming and exercising
jurisdiction over IRRI Said Resolution reads in part as follows:

Presidential Decree No. 1620 which grants to the IRRI the status, prerogatives,
privileges and immunities of an international organization is clear and explicit. It
provides in categorical terms that:

Art. 3 — The Institute shall enjoy immunity from any penal, civil and administrative
proceedings, except insofar as immunity has been expressly waived by the Director-
General of the Institution or his authorized representative.

Verily, unless and until the Institute expressly waives its immunity, no summons,
subpoena, orders, decisions or proceedings ordered by any court or administrative
or quasi-judicial agency are enforceable as against the Institute. In the case at bar
there was no such waiver made by the Director-General of the Institute. Indeed, the
Institute, at the very first opportunity already vehemently questioned the jurisdiction
of this Department by filing an ex-parte motion to dismiss the case.

Hence, the present Petition for Certiorari filed by Kapisanan alleging grave abuse of discretion by
respondent Secretary of Labor in upholding IRRI's diplomatic immunity.

The Third Division, to which the case was originally assigned, required the respondents to comment
on the petition. In a Manifestation filed on 4 August 1990, the Secretary of Labor declared that it
was "not adopting as his own" the decision of the BLR Director in the ICMC Case as well as the
Comment of the Solicitor General sustaining said Director. The last pleading was filed by IRRI on 14
August 1990.

Instead of a Comment, the Solicitor General filed a Manifestation and Motion praying that he be
excused from filing a comment "it appearing that in the earlier case of International Catholic
Migration Commission v. Hon. Pura Calleja, G.R. No. 85750. the Office of the Solicitor General had
sustained the stand of Director Calleja on the very same issue now before it, which position has
been superseded by respondent Secretary of Labor in G.R. No. 89331," the present case. The Court
acceded to the Solicitor General's prayer.

The Court is now asked to rule upon whether or not the Secretary of Labor committed grave abuse
of discretion in dismissing the Petition for Certification Election filed by Kapisanan.

Kapisanan contends that Article 3 of Pres. Decree No. 1620 granting IRRI the status, privileges,
prerogatives and immunities of an international organization, invoked by the Secretary of Labor, is
unconstitutional in so far as it deprives the Filipino workers of their fundamental and constitutional
right to form trade unions for the purpose of collective bargaining as enshrined in the 1987
Constitution.
A procedural issue is also raised. Kapisanan faults respondent Secretary of Labor for entertaining
IRRI'S appeal from the Order of the Director of the Bureau of Labor Relations directing the holding of
a certification election. Kapisanan contends that pursuant to Sections 7, 8, 9 and 10 of Rule V 2 of
the Omnibus Rules Implementing the Labor Code, the Order of the BLR Director had become final
and unappeable and that, therefore, the Secretary of Labor had no more jurisdiction over the said
appeal.

On the other hand, in entertaining the appeal, the Secretary of Labor relied on Section 25 of Rep.
Act. No. 6715, which took effect on 21 March 1989, providing for the direct filing of appeal from the
Med-Arbiter to the Office of the Secretary of Labor and Employment instead of to the Director of the
Bureau of Labor Relations in cases involving certification election orders.

III

Findings in Both Cases.

There can be no question that diplomatic immunity has, in fact, been granted ICMC and IRRI.

Article II of the Memorandum of Agreement between the Philippine Government and ICMC provides
that ICMC shall have a status "similar to that of a specialized agency." Article III, Sections 4 and 5 of
the Convention on the Privileges and Immunities of Specialized Agencies, adopted by the UN
General Assembly on 21 November 1947 and concurred in by the Philippine Senate through
Resolution No. 19 on 17 May 1949, explicitly provides:

Art. III, Section 4. The specialized agencies, their property and assets, wherever
located and by whomsoever held, shall enjoy immunity from every form of legal
process except insofar as in any particular case they have expressly waived their
immunity. It is, however, understood that no waiver of immunity shall extend to any
measure of execution.

Sec. 5. — The premises of the specialized agencies shall be inviolable. The property
and assets of the specialized agencies, wherever located and by whomsoever held
shall be immune from search, requisition, confiscation, expropriation and any other
form of interference, whether by executive, administrative, judicial or legislative
action. (Emphasis supplied).

IRRI is similarly situated, Pres. Decree No. 1620, Article 3, is explicit in its grant of immunity, thus:

Art. 3. Immunity from Legal Process. — The Institute shall enjoy immunity from any
penal, civil and administrative proceedings, except insofar as that immunity has been
expressly waived by the Director-General of the Institute or his authorized
representatives.

Thus it is that the DEFORAF, through its Legal Adviser, sustained ICMC'S invocation of immunity
when in a Memorandum, dated 17 October 1988, it expressed the view that "the Order of the
Director of the Bureau of Labor Relations dated 21 September 1988 for the conduct of Certification
Election within ICMC violates the diplomatic immunity of the organization." Similarly, in respect of
IRRI, the DEFORAF speaking through The Acting Secretary of Foreign Affairs, Jose D. Ingles, in a
letter, dated 17 June 1987, to the Secretary of Labor, maintained that "IRRI enjoys immunity from
the jurisdiction of DOLE in this particular instance."
The foregoing opinions constitute a categorical recognition by the Executive Branch of the
Government that ICMC and IRRI enjoy immunities accorded to international organizations, which
determination has been held to be a political question conclusive upon the Courts in order not to
embarrass a political department of Government.

It is a recognized principle of international law and under our system of separation of

powers that diplomatic immunity is essentially a political question and courts should
refuse to look beyond a determination by the executive branch of the government,
and where the plea of diplomatic immunity is recognized and affirmed by the
executive branch of the government as in the case at bar, it is then the duty of the
courts to accept the claim of immunity upon appropriate suggestion by the principal
law officer of the government . . . or other officer acting under his direction. Hence, in
adherence to the settled principle that courts may not so exercise their jurisdiction . .
. as to embarrass the executive arm of the government in conducting foreign
relations, it is accepted doctrine that in such cases the judicial department of (this)
government follows the action of the political branch and will not embarrass the latter
by assuming an antagonistic jurisdiction. 3

A brief look into the nature of international organizations and specialized agencies is in order. The
term "international organization" is generally used to describe an organization set up by agreement
between two or more states. 4 Under contemporary international law, such organizations are
endowed with some degree of international legal personality 5 such that they are capable of
exercising specific rights, duties and powers. 6 They are organized mainly as a means for conducting
general international business in which the member states have an interest. 7 The United Nations, for
instance, is an international organization dedicated to the propagation of world peace.

"Specialized agencies" are international organizations having functions in particular fields. The term
appears in Articles 57 8 and 63 9 of the Charter of the United Nations:

The Charter, while it invests the United Nations with the general task of promoting
progress and international cooperation in economic, social, health, cultural,
educational and related matters, contemplates that these tasks will be mainly fulfilled
not by organs of the United Nations itself but by autonomous international
organizations established by inter-governmental agreements outside the United
Nations. There are now many such international agencies having functions in many
different fields, e.g. in posts, telecommunications, railways, canals, rivers, sea
transport, civil aviation, meteorology, atomic energy, finance, trade, education and
culture, health and refugees. Some are virtually world-wide in their membership,
some are regional or otherwise limited in their membership. The Charter provides
that those agencies which have "wide international responsibilities" are to be brought
into relationship with the United Nations by agreements entered into between them
and the Economic and Social Council, are then to be known as "specialized
agencies." 10

The rapid growth of international organizations under contemporary international law has paved the
way for the development of the concept of international immunities.

It is now usual for the constitutions of international organizations to contain

provisions conferring certain immunities on the organizations themselves,
representatives of their member states and persons acting on behalf of the
organizations. A series of conventions, agreements and protocols defining the
 immunities of various international organizations in relation to their members
generally are now widely in force; . . . 11

There are basically three propositions underlying the grant of international immunities to international
organizations. These principles, contained in the ILO Memorandum are stated thus: 1) international
institutions should have a status which protects them against control or interference by any one
government in the performance of functions for the effective discharge of which they are responsible
to democratically constituted international bodies in which all the nations concerned are represented;
2) no country should derive any national financial advantage by levying fiscal charges on common
international funds; and 3) the international organization should, as a collectivity of States members,
be accorded the facilities for the conduct of its official business customarily extended to each other
by its individual member States. 12 The theory behind all three propositions is said to be essentially
institutional in character. "It is not concerned with the status, dignity or privileges of individuals, but
with the elements of functional independence necessary to free international institutions from
national control and to enable them to discharge their responsibilities impartially on behalf of all their
members. 13 The raison d'etre for these immunities is the assurance of unimpeded performance of
their functions by the agencies concerned.

The grant of immunity from local jurisdiction to ICMC and IRRI is clearly necessitated by their
international character and respective purposes. The objective is to avoid the danger of partiality and
interference by the host country in their internal workings. The exercise of jurisdiction by the
Department of Labor in these instances would defeat the very purpose of immunity, which is to
shield the affairs of international organizations, in accordance with international practice, from
political pressure or control by the host country to the prejudice of member States of the
organization, and to ensure the unhampered performance of their functions.

ICMC's and IRRI's immunity from local jurisdiction by no means deprives labor of its basic rights,
which are guaranteed by Article II, Section 18, 14 Article III, Section 8, 15 and Article XIII, Section 3
(supra), of the 1987 Constitution; and implemented by Articles 243 and 246 of the Labor
Code, 16 relied on by the BLR Director and by Kapisanan.

For, ICMC employees are not without recourse whenever there are disputes to be settled. Section
31 of the Convention on the Privileges and Immunities of the Specialized Agencies of the United
Nations 17 provides that "each specialized agency shall make provision for appropriate modes of
settlement of: (a) disputes arising out of contracts or other disputes of private character to which the
specialized agency is a party." Moreover, pursuant to Article IV of the Memorandum of Agreement
between ICMC the the Philippine Government, whenever there is any abuse of privilege by ICMC,
the Government is free to withdraw the privileges and immunities accorded. Thus:

Art. IV. Cooperation with Government Authorities. — 1. The Commission shall

cooperate at all times with the appropriate authorities of the Government to ensure
the observance of Philippine laws, rules and regulations, facilitate the proper
administration of justice and prevent the occurrences of any abuse of the privileges
and immunities granted its officials and alien employees in Article III of this
Agreement to the Commission.

2. In the event that the Government determines that there has been an abuse of the
privileges and immunities granted under this Agreement, consultations shall be held
between the Government and the Commission to determine whether any such abuse
has occurred and, if so, the Government shall withdraw the privileges and immunities
granted the Commission and its officials.
Neither are the employees of IRRI without remedy in case of dispute with management as, in fact,
there had been organized a forum for better management-employee relationship as evidenced by
the formation of the Council of IRRI Employees and Management (CIEM) wherein "both
management and employees were and still are represented for purposes of maintaining mutual and
beneficial cooperation between IRRI and its employees." The existence of this Union factually and
tellingly belies the argument that Pres. Decree No. 1620, which grants to IRRI the status, privileges
and immunities of an international organization, deprives its employees of the right to self-
organization.

The immunity granted being "from every form of legal process except in so far as in any particular
case they have expressly waived their immunity," it is inaccurate to state that a certification election
is beyond the scope of that immunity for the reason that it is not a suit against ICMC. A certification
election cannot be viewed as an independent or isolated process. It could tugger off a series of
events in the collective bargaining process together with related incidents and/or concerted activities,
which could inevitably involve ICMC in the "legal process," which includes "any penal, civil and
administrative proceedings." The eventuality of Court litigation is neither remote and from which
international organizations are precisely shielded to safeguard them from the disruption of their
functions. Clauses on jurisdictional immunity are said to be standard provisions in the constitutions
of international Organizations. "The immunity covers the organization concerned, its property and its
assets. It is equally applicable to proceedings in personam and proceedings in rem." 18

We take note of a Manifestation, dated 28 September 1989, in the ICMC Case (p. 161, Rollo),
wherein TUPAS calls attention to the case entitled "International Catholic Migration Commission v.
NLRC, et als., (G.R. No. 72222, 30 January 1989, 169 SCRA 606), and claims that, having taken
cognizance of that dispute (on the issue of payment of salary for the unexpired portion of a six-
month probationary employment), the Court is now estopped from passing upon the question of
DOLE jurisdiction petition over ICMC.

We find no merit to said submission. Not only did the facts of said controversy occur between 1983-
1985, or before the grant to ICMC on 15 July 1988 of the status of a specialized agency with
corresponding immunities, but also because ICMC in that case did not invoke its immunity and,
therefore, may be deemed to have waived it, assuming that during that period (1983-1985) it was
tacitly recognized as enjoying such immunity.

Anent the procedural issue raised in the IRRI Case, suffice it to state that the Decision of the BLR
Director, dated 15 February 1989, had not become final because of a Motion for Reconsideration
filed by IRRI Said Motion was acted upon only on 30 March 1989 when Rep. Act No. 6715, which
provides for direct appeals from the Orders of the Med-Arbiter to the Secretary of Labor in
certification election cases either from the order or the results of the election itself, was already in
effect, specifically since 21 March 1989. Hence, no grave abuse of discretion may be imputed to
respondent Secretary of Labor in his assumption of appellate jurisdiction, contrary to Kapisanan's
allegations. The pertinent portion of that law provides:

Art. 259. — Any party to an election may appeal the order or results of the election
as determined by the Med-Arbiter directly to the Secretary of Labor and Employment
on the ground that the rules and regulations or parts thereof established by the
Secretary of Labor and Employment for the conduct of the election have been
violated. Such appeal shall be decided within 15 calendar days (Emphasis supplied).

En passant, the Court is gratified to note that the heretofore antagonistic positions assumed by two
departments of the executive branch of government have been rectified and the resultant
embarrassment to the Philippine Government in the eyes of the international community now,
hopefully, effaced.

WHEREFORE, in G.R. No. 85750 (the ICMC Case), the Petition is GRANTED, the Order of the
Bureau of Labor Relations for certification election is SET ASIDE, and the Temporary Restraining
Order earlier issued is made PERMANENT.

In G.R. No. 89331 (the IRRI Case), the Petition is Dismissed, no grave abuse of discretion having
been committed by the Secretary of Labor and Employment in dismissing the Petition for
Certification Election.

No pronouncement as to costs.

SO ORDERED.

[G.R. No. 108855. February 28, 1996]

METROLAB INDUSTRIES, INC., petitioner, vs. HONORABLE MA.

NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of the
Department of Labor and Employment and METRO DRUG
CORPORATION EMPLOYEES ASSOCIATION-FEDERATION OF
FREE WORKERS, respondents.
SYLLABUS
1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF ADMINISTRATIVE
AGENCIES; RULE; CASE AT BAR. - We reaffirm the doctrine that
considering their expertise in their respective fields, factual findings of
administrative agencies supported by substantial evidence are accorded
great respect and binds this Court. The Secretary of Labor ruled, thus: x x
x Any act committed during the pendency of the dispute that tends to give
rise to further contentious issues or increase the tensions between the
parties should be considered an act of exacerbation. One must look at the
act itself, not on speculative reactions. A misplaced recourse is not needed
to prove that a dispute has been exacerbated. For instance, the Union could
not be expected to file another notice of strike. For this would depart from
its theory of the case that the layoff is subsumed under the instant dispute,
for which a notice of strike had already been filed. On the other hand, to
expect violent reactions, unruly behavior, and any other chaotic or drastic
action from the Union is to expect it to commit acts disruptive of public order
or acts that may be illegal. Under a regime of laws, legal remedies take the
place of violent ones. x xx Protest against the subject layoffs need not be in
 the form of violent action or any other drastic measure. In the instant case
the Union registered their dissent by swiftly filing a motion for a cease and
desist order. Contrary to petitioners allegations, the Union strongly
condemned the layoffs and threatened mass action if the Secretary of Labor
fails to timely intervene: x x x 3. This unilateral action of management is a
blatant violation of the injunction of this Office against committing acts which
would exacerbate the dispute. Unless such act is enjoined the Union will be
compelled to resort to its legal right to mass actions and concerted activities
to protest and stop the said management action. This mass layoff is clearly
one which would result in a very serious dispute unless this Office swiftly
intervenes. x x x Metrolab and the Union were still in the process of resolving
their CBA deadlock when petitioner implemented the subject layoffs. As a
result, motions and oppositions were filed diverting the parties attention,
delaying resolution of the bargaining deadlock and postponing the signing
of their new CBA, thereby aggravating the whole conflict.
2. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT;
EXERCISE OF MANAGEMENT PREROGATIVES; NOT ABSOLUTE;
SUBJECT TO EXCEPTIONS IMPOSED BY LAW. - This Court recognizes
the exercise of management prerogatives and often declines to interfere
with the legitimate business decisions of the employer. However, this
privilege is not absolute but subject to limitations imposed by law. In PAL
vs. NLRC, (225 SCRA 301 [1993]), we issued this reminder: ... the exercise
of management prerogatives was never considered boundless. Thus,
in Cruz vs. Medina (177 SCRA 565 [1989]), it was held that managements
prerogatives must be without abuse of discretion ...All this points to the
conclusion that the exercise of managerial prerogatives is not unlimited. It
is circumscribed by limi(ations found in law, a collective bargaining
agreement, or the general principles of fair play and justice (University of
Sto. Tomas v. NLRC, 190 SCRA 758 [1990]).
3. ID.; ID.; ID.; ID.; ID.; CASE AT BAR AN EXCEPTION. - The case at bench
constitutes one of the exceptions. The Secretary of Labor is expressly given
the power under the Labor Code to assume jurisdiction and resolve labor
disputes involving industries indispensable to national interest. The
disputed injunction is subsumed under this special grant of authority. Art.
263 (g) of the Labor Code specifically provides that: x x x (g) When, in his
opinion, there exists a labor dispute causing or likely to cause a strike or
lockout in an industry indispensable to the national interest, the Secretary
of Labor and Employment may assume jurisdiction over the dispute and
decide it or certify the same to the Commission for compulsory arbitration.
Such assumption or certification shall have the effect of automatically
 enjoining the intended or impending strike or lockout as specified in the
assumption or certification order. If one has already taken place at the time
of assumption or certification, all striking or locked out employees shall
immediately return to work and the employer shall immediately resume
operations and readmit all workers under the same terms and conditions
prevailing before the strike or lockout. The Secretary of Labor and
Employment or the Commission may seek the assistance of law
enforcement agencies to ensure compliance with this provision as well as
with such orders as he may issue to enforce the same. . . . That Metrolabs
business is of national interest is not disputed. Metrolab is one of the leading
manufacturers and suppliers of medical and pharmaceutical products to the
country. Metrolabs management prerogatives, therefore, are not being
unjustly curtailed but duly balanced with and tempered by the limitations set
by law, taking into account its special character and the particular
circumstances in the case at bench.
4. ID.; LABOR RELATIONS; INELIGIBILITY OF MANAGERIAL
EMPLOYEES TO JOIN, FORM AND ASSIST ANY LABOR
ORGANIZATION; PROHIBITION EXTENDED TO CONFIDENTIAL
EMPLOYEES. - Although Article 245 of the Labor Code limits the ineligibility
to join, form and assist any labor organization to managerial employees,
jurisprudence has extended this prohibition to confidential employees or
those who by reason of their positions or nature of work are required to
assist or act in a fiduciary manner to managerial employees and hence, are
likewise privy to sensitive and highly confidential records.
5. ID.; ID.; EXCLUSION OF CONFIDENTIAL EMPLOYEES FROM THE
RANK AND FILE BARGAINING UNIT; NOT TANTAMOUNT TO
DISCRIMINATION. - Confidential employees cannot be classified as rank
and file. As previously discussed, the nature of employment of confidential
employees is quite distinct from the rank and file, thus, warranting a
separate category. Excluding confidential employees from the rank and file
bargaining unit, therefore, is not tantamount to discrimination.
APPEARANCES OF COUNSEL
Bautista Picazo Buyco Tan & Fider for petitioner.
The Solicitor General for public respondent.
Perfecto V. Fernandez, Jose P. Fernandez & Cristobal P. Fernandez for
Metro Drug Corporation.

DECISION
KAPUNAN, J.:
 This is a petition for certiorari under Rule 65 of the Revised Rules of Court
seeking the annulment of the Resolution and Omnibus Resolution of the
Secretary of Labor and Employment dated 14 April 1992 and 25 January 1993,
respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-9 1; NCMB-NCR-
NS-09-678-91) on grounds that these were issued with grave abuse of
discretion and in excess of jurisdiction.
Private respondent Metro Drug Corporation Employees Association-
Federation of Free Workers (hereinafter referred to as the Union) is a labor
organization representing the rank and file employees of petitioner Metrolab
Industries, Inc. (hereinafter referred to as Metrolab/MII) and also of Metro Drug,
Inc.
On 31 December 1990, the Collective Bargaining Agreement (CBA)
between Metrolab and the Union expired. The negotiations for a new CBA,
however, ended in a deadlock.
Consequently, on 23 August 1991, the Union filed a notice of strike against
Metrolab and Metro Drug Inc. The parties failed to settle their dispute despite
the conciliation efforts of the National Conciliation and Mediation Board.
To contain the escalating dispute, the then Secretary of Labor and
Employment, Ruben D. Torres, issued an assumption order dated 20
September 1991, the dispositive portion of which reads, thus:

WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the

Labor Code, as amended, this Office hereby assumes jurisdiction over the entire labor
dispute at Metro Drug, Inc. - Metro Drug Distribution Division and Metrolab
Industries Inc.

Accordingly, any strike or lockout is hereby strictly enjoined. The Companies and the
Metro Drug Corp. Employees Association - FFW are likewise directed to cease and
desist from committing any and all acts that might exacerbate the situation.

Finally, the parties are directed to submit their position papers and evidence on the
aforequoted deadlocked issues to this office within twenty (20) days from receipt
hereof.

SO ORDERED. (Italics ours.)

[1]

On 27 December 1991, then Labor Secretary Torres issued an order

resolving all the disputed items in the CBA and ordered the parties involved to
execute a new CBA.
 Thereafter, the Union filed a motion for reconsideration.
On 27 January 1992, during the pendency of the abovementioned motion
for reconsideration, Metrolab laid off 94 of its rank and file employees.
On the same date, the Union filed a motion for a cease and desist order to
enjoin Metrolab from implementing the mass layoff, alleging that such act
violated the prohibition against committing acts that would exacerbate the
dispute as specifically directed in the assumption order. [2]

On the other hand, Metrolab contended that the layoff was temporary and
in the exercise of its management prerogative. It maintained that the company
would suffer a yearly gross revenue loss of approximately sixty-six (66) million
pesos due to the withdrawal of its principals in the Toll and Contract
Manufacturing Department. Metrolab further asserted that with the automation
of the manufacture of its product Eskinol, the number of workers required its
production is significantly reduced. [3]

Thereafter, on various dates, Metrolab recalled some of the laid off workers
on a temporary basis due to availability of work in the production lines.
On 14 April 1992, Acting Labor Secretary Nieves Confesor issued a
resolution declaring the layoff of Metrolabs 94 rank and file workers illegal and
ordered their reinstatement with full backwages. The dispositive portion reads
as follows:

WHEREFORE, the Unions motion for reconsideration is granted in part, and our
order of 28 December 1991 is affirmed subject to the modifications in allowances and
in the close shop provision. The layoff of the 94 employees at MII is hereby declared
illegal for the failure of the latter to comply with our injunction against committing
any act which may exacerbate the dispute and with the 30-day notice
requirement. Accordingly, MII is hereby ordered to reinstate the 94 employees, except
those who have already been recalled, to their former positions or substantially
equivalent, positions with full backwages from the date they were illegally laid off on
27 January 1992 until actually reinstated without loss of seniority rights and other
benefits. Issues relative to the CBA agreed upon by the parties and not embodied in
our earlier order are hereby ordered adopted for incorporation in the CBA. Further,
the dispositions and directives contained in all previous orders and resolutions relative
to the instant dispute, insofar as not inconsistent herein, are reiterated. Finally, the
parties are enjoined to cease and desist from committing any act which may tend to
circumvent this resolution.

SO RESOLVED. [4]
 On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration
alleging that the layoff did not aggravate the dispute since no untoward incident
occurred as a result thereof. It, likewise, filed a motion for clarification regarding
the constitution of the bargaining unit covered by the CBA.
On 29 June 1992, after exhaustive negotiations, the parties entered into a
new CBA. The execution, however, was without prejudice to the outcome of the
issues raised in the reconsideration and clarification motions submitted for
decision to the Secretary of Labor. [5]

Pending the resolution of the aforestated motions, on 2 October 1992,

Metrolab laid off 73 of its employees on grounds of redundancy due to lack of
work which the Union again promptly opposed on 5 October 1992.
On 15 October 1992, Labor Secretary Confesor again issued a cease and
desist order. Metrolab moved for a reconsideration. [6]

On 25 January 1993, Labor Secretary Confesor issued the assailed

Omnibus Resolution containing the following orders:
xxx xxx xxx.

1. MIIs motion for partial reconsideration of our 14 April 1992 resolution specifically
that portion thereof assailing our ruling that the layoff of the 94 employees is illegal,
is hereby denied. MII is hereby ordered to pay such employees their full backwages
computed from the time of actual layoff to the time of actual recall;

2. For the parties to incorporate in their respective collective bargaining agreements

the clarifications herein contained; and

3. MIIs motion for reconsideration with respect to the consequences of the second
wave of layoff affecting 73 employees, to the extent of assailing our ruling that such
layoff tended to exacerbate the dispute, is hereby denied. But inasmuch as the legality
of the layoff was not submitted for our resolution and no evidence had been adduced
upon which a categorical finding thereon can be based, the same is hereby referred to
the NLRC for its appropriate action.

Finally, all prohibitory injunctions issued as a result of our assumption of jurisdiction

over this dispute are hereby lifted.

SO RESOLVED. [7]

Labor Secretary Confesor also ruled that executive secretaries are excluded
from the closed-shop provision of the CBA, not from the bargaining unit.
 On 4 February 1993, the Union filed a motion for execution. Metrolab
opposed. Hence, the present petition for certiorari with application for issuance
of a Temporary Restraining Order.
On 4 March 1993, we issued a Temporary Restraining Order enjoining the
Secretary of Labor from enforcing and implementing the assailed Resolution
and Omnibus Resolution dated 14 April 1992 and 25 January 1993,
respectively.
In its petition, Metrolab assigns the following errors:
A

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND

EMPLOYMENT COMMITTED GRAVE ABUSE OF DISCRETION AND
EXCEEDED HER JURISDICTION IN DECLARING THE TEMPORARY LAYOFF
ILLEGAL AND ORDERING THE REINSTATEMENT AND PAYMENT OF
BACKWAGES TO THE AFFECTED EMPLOYEES. *

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND

EMPLOYMENT GRAVELY ABUSED HER DISCRETION IN INCLUDING
EXECUTIVE SECRETARIES AS PART OF THE BARGAINING UNIT OF RANK
AND FILE EMPLOYEES. [8]

Anent the first issue, we are asked to determine whether or not public
respondent Labor Secretary committed grave abuse of discretion and
exceeded her jurisdiction in declaring the subject layoffs instituted by Metrolab
illegal on grounds that these unilateral actions aggravated the conflict between
Metrolab and the Union who were, then, locked in a stalemate in CBA
negotiations.
Metrolab argues that the Labor Secretarys order enjoining the parties from
committing any act that might exacerbate the dispute is overly broad, sweeping
and vague and should not be used to curtail the employers right to manage his
business and ensure its viability.
We cannot give credence to Metrolabs contention.
This Court recognizes the exercise of management prerogatives and often
declines to interfere with the legitimate business decisions of the
employer. However, this privilege is not absolute but subject to limitations
imposed by law. [9]

In PAL v. NLRC, we issued this reminder:

[10]
 xxx xxx xxx

. . .the exercise of management prerogatives was never considered boundless. Thus,

in Cruz vs. Medina ( 177 SCRA 565 [1989]), it was held that managements
prerogatives must be without abuse of discretion....

xxx xxx xxx

All this points to the conclusion that the exercise of managerial prerogatives is not
unlimited. It is circumscribed by limitations found in law, a collective bargaining
agreement, or the general principles of fair play and justice (University of Sto. Tomas
v. NLRC, 190 SCRA 758 [1990]). . . . (Italics ours.)

xxx xxx xxx.

The case at bench constitutes one of the exceptions. The Secretary of

Labor is expressly given the power under the Labor Code to assume jurisdiction
and resolve labor disputes involving industries indispensable to national
interest. The disputed injunction is subsumed under this special grant of
authority. Art. 263 (g) of the Labor Code specifically provides that:
xxx xxx xxx

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike
or lockout in an industry indispensable to the national interest, the Secretary of Labor
and Employment may assume jurisdiction over the dispute and decide it or certify the
same to the Commission for compulsory arbitration. Such assumption or certification
shall have the effect of automatically enjoining the intended or impending strike or
lockout as specified in the assumption or certification order. If one has already taken
place at the time of assumption or certification, all striking or locked out employees
shall immediately return to work and the employer shall immediately resume
operations and readmit all workers under the same terms and conditions prevailing
before the strike or lockout. The Secretary of Labor and Employment or the
Commission may seek the assistance of law enforcement agencies to ensure
compliance with this provision as well as with such orders as he may issue to enforce
the same. . . (Italics ours.)

xxx xxx xxx.

That Metrolabs business is of national interest is not disputed. Metrolab is
one of the leading manufacturers and suppliers of medical and pharmaceutical
products to the country.
Metro labs management prerogatives, therefore, are not being unjustly
curtailed but duly balanced with and tempered by the limitations set by law,
taking into account its special character and the particular circumstances in the
case at bench.
As aptly declared by public respondent Secretary of Labor in its assailed
resolution:
xxx xxx xxx.

MII is right to the extent that as a rule, we may not interfere with the legitimate
exercise of management prerogatives such as layoffs. But it may nevertheless be
appropriate to mention here that one of the substantive evils which Article 263 (g) of
the Labor Code seeks to curb is the exacerbation of a labor dispute to the further
detriment of the national interest. When a labor dispute has in fact occurred and a
general injunction has been issued restraining the commission of disruptive acts,
management prerogatives must always be exercised consistently with the statutory
objective.
[11]

xxx xxx xxx.

Metrolab insists that the subject layoffs did not exacerbate their dispute with
the Union since no untoward incident occurred after the layoffs were
implemented. There were no work disruptions or stoppages and no mass
actions were threatened or undertaken. Instead, petitioner asserts, the affected
employees calmly accepted their fate as this was a matter which they had been
previously advised would be inevitable. [12]

After a judicious review of the record, we find no compelling reason to

overturn the findings of the Secretary of Labor.
We reaffirm the doctrine that considering their expertise in their respective
fields, factual findings of administrative agencies supported by substantial
evidence are accorded great respect and binds this Court. [13]

The Secretary of Labor ruled, thus:

xxx xxx xxx.

Any act committed during the pendency of the dispute that tends to give rise to further
contentious issues or increase the tensions between the parties should be considered
an act of exacerbation. One must look at the act itself, not on speculative reactions. A
misplaced recourse is not needed to prove that a dispute has been exacerbated. For
instance, the Union could not be expected to file another notice of strike. For this
would depart from its theory of the case that the layoff is subsumed under the instant
dispute, for which a notice of strike had already been filed. On the other hand, to
expect violent reactions, unruly behavior, and any other chaotic or drastic action from
the Union is to expect it to commit acts disruptive of public order or acts that may be
illegal. Under a regime of laws, legal remedies take the place of violent ones.[14]

xxx xxx xxx.

Protest against the subject layoffs need not be in the form of violent action or any
other drastic measure. In the instant case the Union registered their dissent by swiftly
filing a motion for a cease and desist order. Contrary to petitioners allegations, the
Union strongly condemned the layoffs and threatened mass action if the Secretary of
Labor fails to timely intervene:

xxx xxx xxx.

3. This unilateral action of management is a blatant violation of the injunction of this

Office against committing acts which would exacerbate the dispute. Unless such act is
enjoined the Union will be compelled to resort to its legal right to mass actions and
concerted activities to protest and stop the said management action. This mass layoff
is clearly one which would result in a very serious labor dispute unless this Office
swiftly intervenes.[15]

xxx xxx xxx.

Metrolab and the Union were still in the process of resolving their CBA
deadlock when petitioner implemented the subject layoffs. As a result, motions
and oppositions were filed diverting the parties attention, delaying resolution of
the bargaining deadlock and postponing the signing of their new CBA, thereby
aggravating the whole conflict.
We, likewise, find untenable Metrolabs contention that the layoff of the 94
rank-and-file employees was temporary, despite the recall of some of the laid
off workers.
If Metrolab intended the layoff of the 94 workers to be temporary, it should
have plainly stated so in the notices it sent to the affected employees and the
Department of Labor and Employment. Consider the tenor of the pertinent
portions of the layoff notice to the affected employees:
xxx xxx xxx.

Dahil sa mga bagay na ito, napilitan ang ating kumpanya na magsagawa ng lay-off ng
mga empleyado sa Rank & File dahil nabawasan ang trabaho at puwesto para sa
kanila. Marami sa atin ang kasama sa lay-off dahil wala nang trabaho para sa
kanila. Mahirap tanggapin ang mga bagay na ito subalit kailangan nating gawin dahil
hindi kaya ng kumpanya ang magbayad ng suweldo kung ang empleyado ay walang
trabaho. Kung tayo ay patuloy na magbabayad ng suweldo, mas hihina ang ating
kumpanya at mas marami ang maaring maapektuhan.

Sa pagpapatupad ng lay-off susundin natin ang LAST IN-FIRST OUT policy. Ang
mga empleyadong may pinakamaikling serbisyo sa kumpanya ang unang
maaapektuhan. Ito ay batay na rin sa nakasaad sa ating CBA na ang mga huling
pumasok sa kumpanya ang unang masasama sa lay-off kapag nagkaroon ng ganitong
mga kalagayan.

Ang mga empleyado na kasama sa lay-off ay nakalista sa sulat na ito. Ang umpisa ng
lay-off ay sa Lunes, Enero 27. Hindi na muna sila papasok sa kumpanya. Makukuha
nila ang suweldo nila sa Enero 30, 1992.

Hindi po natin matitiyak kung gaano katagal ang lay-off ngunit ang aming tingin ay
matatagalan bago magkaroon ng dagdag na trabaho. Dahil dito, sinimulan na namin
ang isang Redundancy Program sa mga supervisors. Nabawasan ang mga puwesto
para sa kanila, kaya sila ay mawawalan ng trabaho at bibigyan na ng redundancy
pay. (Italics ours.)
[16]

xxx xxx xxx.

We agree with the ruling of the Secretary of Labor, thus:
xxx xxx xxx.

. . .MII insists that the layoff in question is temporary not permanent. It then
cites International Hardware, Inc. vs. NLRC, 176 SCRA 256, in which the Supreme
Court held that the 30-day notice required under Article 283 of the Labor Code need
not be complied with if the employer has no intention to permanently severe (sic) the
employment relationship.

We are not convinced by this argument. International Hardware involves a case

where there had been a reduction of workload. Precisely to avoid laying off the
employees, the employer therein opted to give them work on a rotating basis. Though
on a limited scale, work was available. This was the Supreme Courts basis for holding
that there was no intention to permanently severe (sic) the employment relationship.

Here, there is no circumstance at all from which we can infer an intention from MII
not to sever the employment relationship permanently. If there was such an intention,
MII could have made it very clear in the notices of layoff. But as it were, the notices
are couched in a language so uncertain that the only conclusion possible is the
permanent termination, not the continuation, of the employment relationship.
MII also seeks to excuse itself from compliance with the 30-day notice with a
tautology. While insisting that there is really no best time to announce a bad news,
(sic) it also claims that it broke the bad news only on 27 January 1992 because had it
complied with the 30-day notice, it could have broken the bad news on 02 January
1992, the first working day of the year. If there is really no best time to announce a
bad news (sic), it wouldnt have mattered if the same was announced at the first
working day of the year. That way, MII could have at least complied with the
requirement of the law.[17]

The second issue raised by petitioner merits our consideration.

In the assailed Omnibus Resolution, Labor Secretary Confesor clarified the
CBA provisions on closed-shop and the scope of the bargaining unit in this wise:
xxx xxx xxx.
Appropriateness of the bargaining unit.
xxx xxx xxx.
Exclusions. In our 14 April 1992 resolution, we ruled on the issue of
exclusion as follows:

These aside, we reconsider our denial of the modifications which the Union proposes
to introduce on the close shop provision. While we note that the provision as presently
worded has served the relationship of the parties well under previous CBAs, the shift
in constitutional policy toward expanding the right of all workers to self-organization
should now be formally recognized by the parties, subject to the following exclusions
only:

1. Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, Vice-

President, Vice President for Sales, Personnel Manager, and Director for Corporate
Planning who may have access to vital labor relations information or who may
otherwise act in a confidential capacity to persons who determine or formulate
management policies.

The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall thus be
modified consistently with the foregoing.

Article I (b) of the 1988-1990 CBA provides:

b)Close Shop. - All Qualified Employees must join the Association immediately upon
regularization as a condition for continued employment. This provision shall not apply
to: (i) managerial employees who are excluded from the scope of the bargaining unit;
(ii) the auditors and executive secretaries of senior executive officers, such as, the
President, Executive Vice-President, Vice-President for Finance, Head of Legal, Vice-
President for Sales, who are excluded from membership in the Association; and (iii)
those employees who are referred to in Attachment I hereof, subject, however, to the
application of the provision of Article II, par. (b) hereof. Consequently, the above-
specified employees are not required to join the Association as a condition for their
continued employment.

On the other hand, Attachment I provides:

Exclusion from the Scope of the Close Shop Provision
The following positions in the Bargaining Unit are not covered by the Close
Shop provision of the CBA (Article I, par. b):

1. Executive Secretaries of Vice-Presidents, or equivalent positions.

2. Executive Secretary of the Personnel Manager, or equivalent positions.

3. Executive Secretary of the Director for Corporate Planning, or equivalent positions.

4. Some personnel in the Personnel Department, EDP Staff at Head Office, Payroll
Staff at Head Office, Accounting Department at Head Office, and Budget Staff, who
because of the nature of their duties and responsibilities need not join the Association
as a condition for their employment.

5. Newly-hired secretaries of Branch Managers and Regional Managers.

Both MDD and MII read the exclusion of managerial employees and
executive secretaries in our 14 April 1992 resolution as exclusion from the
bargaining unit. They point out that managerial employees are lumped under
one classification with executive secretaries, so that since the former are
excluded from the bargaining unit, so must the latter be likewise excluded.
This reading is obviously contrary to the intent of our 14 April 1992
resolution. By recognizing the expanded scope of the right to self-organization,
our intent was to delimit the types of employees excluded from the close shop
provision, not from the bargaining unit, to executive secretaries only. Otherwise,
the conversion of the exclusionary provision to one that refers to the bargaining
unit from one that merely refers to the close shop provision would effectively
curtail all the organizational rights of executive secretaries.
 The exclusion of managerial employees, in accordance with law, must
therefore still carry the qualifying phrase from the bargaining unit in Article I
(b)(i) of the 1988-1990 CBA. In the same manner, the exclusion of executive
secretaries should be read together with the qualifying phrase are excluded
from membership in the Association of the same Article and with the heading
of Attachment I. The latter refers to Exclusions from Scope of Close Shop
Provision and provides that [t]he following positions in Bargaining Unit are not
covered by the close shop provision of the CBA.
The issue of exclusion has different dimension in the case of MII. In an
earlier motion for clarification, MII points out that it has done away with the
positions of Executive Vice-President, Vice-President for Sales, and Director for
Corporate Planning. Thus, the foregoing group of exclusions is no longer
appropriate in its present organizational structure. Nevertheless, there remain
MII officer positions for which there may be executive secretaries. These
include the General Manager and members of the Management Committee,
specifically i) the Quality Assurance Manager; ii) the Product Development
Manager; iii) the Finance Director; iv) the Management System Manager; v) the
Human Resources Manager; vi) the Marketing Director; vii) the Engineering
Manager; viii) the Materials Manager; and ix) the Production Manager.
xxx xxx xxx
The basis for the questioned exclusions, it should be noted, is no other than
the previous CBA between MII and the Union. If MII had undergone an
organizational restructuring since then, this is a fact to which we have never
been made privy. In any event, had this been otherwise the result would have
been the same. To repeat, we limited the exclusions to recognize the expanded
scope of the right to self-organization as embodied in the Constitution.[18]

Metrolab, however, maintains that executive secretaries of the General

Manager and the executive secretaries of the Quality Assurance Manager,
Product Development Manager, Finance Director, Management System
Manager, Human Resources Manager, Marketing Director, Engineering
Manager, Materials Manager and Production Manager, who are all members of
the companys Management Committee should not only be exempted from the
closed-shop provision but should be excluded from membership in the
bargaining unit of the rank and file employees as well on grounds that their
executive secretaries are confidential employees, having access to vital labor
information.[19]

We concur with Metrolab.

 Although Article 245 of the Labor Code limits the ineligibility to join, form
[20]

and assist any labor organization to managerial employees, jurisprudence has

extended this prohibition to confidential employees or those who by reason of
their positions or nature of work are required to assist or act in a fiduciary
manner to managerial employees and hence, are likewise privy to sensitive and
highly confidential records.
The rationale behind the exclusion of confidential employees from the
bargaining unit of the rank and file employees and their disqualification to join
any labor organization was succinctly discussed in Philips Industrial
Development v. NLRC: [21]

xxx xxx xxx.

On the main issue raised before Us, it is quite obvious that respondent NLRC
committed grave abuse of discretion in reversing the decision of the Executive Labor
Arbiter and in decreeing that PIDIs Service Engineers, Sales Force, division
secretaries, all Staff of General Management, Personnel and Industrial Relations
Department, Secretaries of Audit, EDP and Financial Systems are included within the
rank and file bargaining unit.

In the first place, all these employees, with the exception of the service engineers and
the sales force personnel, are confidential employees. Their classification as such is
not seriously disputed by PEO-FFW; the five (5) previous CBAs between PIDI and
PEO-FFW explicitly considered them as confidential employees. By the very nature
of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of
labor relations. As such, the rationale behind the ineligibility of managerial employees
to form, assist or join a labor union equally applies to them.

In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this Court
elaborated on this rationale, thus:

x x x The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the latter might
not be assured of their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the presence of
managerial employees in Union membership.

In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this
rationale applicable to confidential employees:
This rationale holds true also for confidential employees such as accounting
personnel, radio and telegraph operators, who having access to confidential
information, may become the source of undue advantage. Said employee(s) may act as
a spy or spies of either party to a collective bargaining agreement. This is specially
true in the present case where the petitioning Union is already the bargaining agent of
the rank-and-file employees in the establishment. To allow the confidential employees
to join the existing Union of the rank-and-file would be in violation of the terms of the
Collective Bargaining Agreement wherein this kind of employees by the nature of
their functions/positions are expressly excluded.

xxx xxx xxx.

Similarly, in National Association of Trade Union - Republic Planters Bank
Supervisors Chapter v. Torres we declared:
[22]

xxx xxx xxx.

. . . As regards the other claim of respondent Bank that Branch Managers/OICs,

Cashiers and Controllers are confidential employees, having control, custody and/ or
access to confidential matters, e.g., the branchs cash position, statements of financial
condition, vault combination, cash codes for telegraphic transfers, demand drafts and
other negotiable instruments, pursuant to Sec. 1166.4 of the Central Bank Manual
regarding joint custody, this claim is not even disputed by petitioner. A confidential
employee is one entrusted with confidence on delicate matters, or with the custody,
handling, or care and protection of the employers property. While Art. 245 of the
Labor Code singles out managerial employees as ineligible to join, assist or form any
labor organization, under the doctrine of necessary, implication, confidential
employees are similarly disqualified. . . .

xxx xxx xxx.

. . .(I)n the collective bargaining process, managerial employees are supposed to be on

the side of the employer, to act as its representatives, and to see to it that its interest
are well protected. The employer is not assured of such protection if these employees
themselves are union members. Collective bargaining in such a situation can become
one-sided. It is the same reason that impelled this Court to consider the position of
confidential employees as included in the disqualification found in Art. 245 as if the
disqualification of confidential employees were written in the provision. If
confidential employees could unionize in order to bargain for advantages for
themselves, then they could be governed by their own motives rather than the interest
of the employers. Moreover, unionization of confidential employees for the purpose
of collective bargaining would mean the extension of the law to persons or individuals
who are supposed to act in the interest of the employers. It is not farfetched that in the
course of collective bargaining, they might jeopardize that interest which they are
duty-bound to protect. . . .

xxx xxx xxx.

And in the latest case of Pier 8 Arrastre & Stevedoring Services, Inc. vs.
Roldan-Confesor, we ruled that:
[23]

xxx xxx xxx.

Upon the other hand, legal secretaries are neither managers nor supervisors. Their
work is basically routinary and clerical. However, they should be differentiated from
rank-and-file employees because they are tasked with, among others, the typing of
legal documents, memoranda and correspondence, the keeping of records and files,
the giving of and receiving notices, and such other duties as required by the legal
personnel of the corporation. Legal secretaries therefore fall under the category of
confidential employees. . . .

xxx xxx xxx.

We thus hold that public respondent acted with grave abuse of discretion in not
excluding the four foremen and legal secretary from the bargaining unit composed of
rank-and-file employees.

xxx xxx xxx.

In the case at bench, the Union does not disagree with petitioner that the executive
secretaries are confidential employees. It however, makes the following contentions:

xxx xxx xxx.

There would be no danger of company domination of the Union since the confidential
employees would not be members of and would not participate in the decision making
processes of the Union.

Neither would there be a danger of espionage since the confidential employees would
not have any conflict of interest, not being members of the Union. In any case, there is
always the danger that any employee would leak management secrets to the Union out
of sympathy for his fellow rank and filer even if he were not a member of the union
nor the bargaining unit.

Confidential employees are rank and file employees and they, like all the other rank
and file employees, should be granted the benefits of the Collective Bargaining
Agreement. There is no valid basis for discriminating against them. The mandate of
the Constitution and the Labor Code, primarily of protection to Labor, compels such
conclusion. [24]

xxx xxx xxx.

The Unions assurances fail to convince. The dangers sought to be
prevented, particularly the threat of conflict of interest and espionage, are not
eliminated by non-membership of Metrolabs executive secretaries or
confidential employees in the Union. Forming part of the bargaining unit, the
executive secretaries stand to benefit from any agreement executed between
the Union and Metrolab. Such a scenario, thus, gives rise to a potential conflict
between personal interests and their duty as confidential employees to act for
and in behalf of Metrolab. They do not have to be union members to affect or
influence either side.
Finally, confidential employees cannot be classified as rank and file. As
previously discussed, the nature of employment of confidential employees is
quite distinct from the rank and file, thus, warranting a separate
category. Excluding confidential employees from the rank and file bargaining
unit, therefore, is not tantamount to discrimination.
WHEREFORE, premises considered, the petition is partially
GRANTED. The resolutions of public respondent Secretary of Labor dated 14
April 1992 and 25 January 1993 are hereby MODIFIED to the extent that
executive secretaries of petitioner Metrolabs General Manager and the
executive secretaries of the members of its Management Committee are
excluded from the bargaining unit of petitioners rank and file employees.
SO ORDERED.

G.R. No. 79025. December 29, 1989.

BENGUET ELECTRIC COOPERATIVE, INC., petitioner,

vs.
HON. PURA FERRER-CALLEJA, Director of the Bureau of Labor Relations, and BENECO
EMPLOYEES LABOR UNION, respondents.

E.L. Gayo & Associates for petitioner.

CORTES, J.:
On June 21, 1985 Beneco Worker's Labor Union-Association of Democratic Labor Organizations
(hereinafter referred to as BWLU- ADLO) filed a petition for direct certification as the sole and
exclusive bargaining representative of all the rank and file employees of Benguet Electric
Cooperative, Inc. (hereinafter referred to as BENECO) at Alapang, La Trinidad, Benguet alleging,
inter alia, that BENECO has in its employ two hundred and fourteen (214) rank and file employees;
that one hundred and ninety-eight (198) or 92.5% of these employees have supported the filing of
the petition; that no certification election has been conducted for the last 12 months; that there is no
existing collective bargaining representative of the rank and file employees sought to represented by
BWLU- ADLO; and, that there is no collective bargaining agreement in the cooperative.

An opposition to the petition was filed by the Beneco Employees Labor Union (hereinafter referred to
as BELU) contending that it was certified as the sole and exclusive bargaining representative of the
subject workers pursuant to an order issued by the med-arbiter on October 20,1980; that pending
resolution by the National Labor Relations Commission are two cases it filed against BENECO
involving bargaining deadlock and unfair labor practice; and, that the pendency of these cases bars
any representation question.

BENECO, on the other hand, filed a motion to dismiss the petition claiming that it is a non-profit
electric cooperative engaged in providing electric services to its members and patron-consumers in
the City of Baguio and Benguet Province; and, that the employees sought to be represented by
BWLU-ADLO are not eligible to form, join or assist labor organizations of their own choosing
because they are members and joint owners of the cooperative.

On September 2, 1985 the med-arbiter issued an order giving due course to the petition for
certification election. However, the med-arbiter limited the election among the rank and file
employees of petitioner who are non-members thereof and without any involvement in the actual
ownership of the cooperative. Based on the evidence during the hearing the med-arbiter found that
there are thirty-seven (37) employees who are not members and without any involvement in the
actual ownership of the cooperative. The dispositive portion of the med-arbiter's order is as follows:

WHEREFORE, premises considered, a certification election should be as it is hereby

ordered to be conducted at the premises of Benguet, Electric Cooperative, Inc., at
Alapang, La Trinidad, Benguet within twenty (20) days from receipt hereof among all
the rank and file employees (non-members/consumers and without any involvement
in the actual ownership of the cooperative) with the following choices:

1. BENECO WORKERS LABOR UNION-ADLO

2. BENECO EMPLOYEES LABOR UNION

3. NO UNION

The payroll for the month of June 1985 shall be the basis in determining the qualified
voters who may participate in the certification election to be conducted.

SO ORDERED. [Rollo, pp. 22-23.]

BELU and BENECO appealed from this order but the same was dismissed for lack of merit on
March 25,1986. Whereupon BENECO filed with this Court a petition for certiorari with prayer for
preliminary injunction and /or restraining order, docketed as G.R. No. 74209, which the Supreme
Court dismissed for lack of merit in a minute resolution dated April 28, 1986.
The ordered certification election was held on October 1, 1986. Prior to the conduct thereof
BENECO's counsel verbally manifested that "the cooperative is protesting that employees who are
members-consumers are being allowed to vote when . . . they are not eligible to be members of any
labor union for purposes of collective bargaining; much less, to vote in this certification election."
[Rollo, p. 28]. Petitioner submitted a certification showing that only four (4) employees are not
members of BENECO and insisted that only these employees are eligible to vote in the certification
election. Canvass of the votes showed that BELU garnered forty-nine (49) of the eighty-three (83)
"valid" votes cast.

Thereafter BENECO formalized its verbal manifestation by filing a Protest. Finding, among others,
that the issue as to whether or not member-consumers who are employees of BENECO could form,
assist or join a labor union has been answered in the affirmative by the Supreme Court in G.R. No.
74209, the med-arbiter dismissed the protest on February 17, 1987. On June 23, 1987, Bureau of
Labor Relations (BLR) director Pura Ferrer-Calleja affirmed the med-arbiter's order and certified
BELU as the sole and exclusive bargaining agent of all the rank and file employees of BENECO.

Alleging that the BLR director committed grave abuse of discretion amounting to lack or excess of
jurisdiction BENECO filed the instant petition for certiorari. In his Comment the Solicitor General
agreed with BENECO's stance and prayed that the petition be given due course. In view of this
respondent director herself was required by the Court to file a Comment. On April 19, 1989 the Court
gave due course to the petition and required the parties to submit their respective memoranda.

The main issue in this case is whether or not respondent director committed grave abuse of
discretion in certifying respondent BELU as the sole and exclusive bargaining representtative of the
rank and file employees of BENECO.

Under Article 256 of the Labor Code [Pres. Decree 442] to have a valid certification 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 workers in
the unit." Petitioner BENECO asserts that the certification election held on October 1, 1986 was null
and void since members-employees of petitioner cooperative who are not eligible to form and join a
labor union for purposes of collective bargaining were allowed to vote therein.

Respondent director and private respondent BELU on the other hand submit that members of a
cooperative who are also rank and file employees are eligible to form, assist or join a labor union
[Comment of Respondent Director, p. 4; Rollo, p. 125; Comment of BELU, pp. 9-10; Rollo pp. 99-
100].

The Court finds the present petition meritorious.

The issue of whether or not employees of a cooperative are qualified to form or join a labor
organization for purposes of collective bargaining has already been resolved and clarified in the case
of Cooperative Rural Bank of Davao City, Inc. vs. Ferrer Calleja, et al. [G.R. No. 7795, September
26,1988] and reiterated in the cases of Batangas-Electric Cooperative Labor Union v. Young, et
al. [G.R. Nos. 62386, 70880 and 74560 November 9, 1988] and San Jose City Electric Service
Cooperative, Inc. v. Ministry of Labor and Employment, et al. [G.R. No. 77231, May 31, 1989]
wherein the Court had stated that the right to collective bargaining is not available to an employee of
a cooperative who at the same time is a member and co-owner thereof. With respect, however, to
employees who are neither members nor co-owners of the cooperative they are entitled to exercise
the rights to self-organization, collective bargaining and negotiation as mandated by the 1987
Constitution and applicable statutes.
Respondent director argues that to deny the members of petitioner cooperative the right to form,
assist or join a labor union of their own choice for purposes of collective bargaining would amount to
a patent violation of their right to self-organization. She points out that:

Albeit a person assumes a dual capacity as rank and file employee and as member
of a certain cooperative does not militate, as in the instant case, against his/her
exercise of the right to self-organization and to collective bargaining guaranteed by
the Constitution and Labor Code because, while so doing, he/she is acting in his/her
capacity as rank and file employee thereof. It may be added that while the
employees concerned became members of petitioner cooperative, their status
employment as rank and filers who are hired for fixed compensation had not
changed. They still do not actually participate in the management of the cooperative
as said function is entrusted to the Board of Directors and to the elected or appointed
officers thereof. They are not vested with the powers and prerogatives to lay down
and execute managerial policies; to hire, transfer, suspend, lay-off, recall, discharge,
assign or discipline employees; and/or to effectively recommend such managerial
functions [Comment of Respondent Director, p. 4; Rollo, p. 125.]

Private respondent BELU concurs with the above contention of respondent director and, additionally,
claims that since membership in petitioner cooperative is only nominal, the rank and file employees
who are members thereof should not be deprived of their right to self-organization.

The above contentions are untenable. Contrary to respondents' claim, the fact that the members-
employees of petitioner do not participate in the actual management of the cooperative does not
make them eligible to form, assist or join a labor organization for the purpose of collective bargaining
with petitioner. The Court's ruling in the Davao City case that members of cooperative cannot join a
labor union for purposes of collective bargaining was based on the fact that as members of the
cooperative they are co-owners thereof. As such, they cannot invoke the right to collective
bargaining for "certainly an owner cannot bargain with himself or his co-owners." [Cooperative Rural
Bank of Davao City, Inc. v. Ferrer-Calleja, et al., supra]. It is the fact of ownership of the cooperative,
and not involvement in the management thereof, which disqualifies a member from joining any labor
organization within the cooperative. Thus, irrespective of the degree of their participation in the
actual management of the cooperative, all members thereof cannot form, assist or join a labor
organization for the purpose of collective bargaining.

Respondent union further claims that if nominal ownership in a cooperative is "enough to take away
the constitutional protections afforded to labor, then there would be no hindrance for employers to
grant, on a scheme of generous profit sharing, stock bonuses to their employees and thereafter
claim that since their employees are not stockholders [of the corporation], albeit in a minimal and
involuntary manner, they are now also co-owners and thus disqualified to form unions." To allow this,
BELU argues, would be "to allow the floodgates of destruction to be opened upon the rights of labor
which the Constitution endeavors to protect and which welfare it promises to promote." [Comment of
BELU, p. 10; Rollo, p. 100].

The above contention of respondent union is based on the erroneous presumption that membership
in a cooperative is the same as ownership of stocks in ordinary corporations. While cooperatives
may exercise some of the rights and privileges given to ordinary corporations provided under
existing laws, such cooperatives enjoy other privileges not granted to the latter [See Sections 4, 5, 6,
and 8, Pres. Decree No. 175; Cooperative Rural Bank of Davao City v. Ferrer-Calleja, supra].
Similarly, members of cooperatives have rights and obligations different from those of stockholders
of ordinary corporations. It was precisely because of the special nature of cooperatives, that the
Court held in the Davao City case that members-employees thereof cannot form or join a labor union
for purposes of collective bargaining. The Court held that:

A cooperative ... is by its nature different from an ordinary business concern being
run either by persons, partnerships, or corporations. Its owners and/or members are
the ones who run and operate the business while the others are its employees. As
above stated, irrespective of the number of shares owned by each member they are
entitled to cast one vote each in deciding upon the affairs of the cooperative. Their
share capital earn limited interest. They enjoy special privileges as-exemption from
income tax and sales taxes, preferential right to supply their products to State
agencies and even exemption from the minimum wage laws.

An employee therefore of such a cooperative who is a member and co-owner thereof

cannot invoke the right to collective bargaining for certainly an owner cannot bargain
with himself or his co-owners.

It is important to note that, in her order dated September 2, 1985, med-arbiter Elnora V. Balleras
made a specific finding that there are only thirty-seven (37) employees of petitioner who are not
members of the cooperative and who are, therefore, the only employees of petitioner cooperative
eligible to form or join a labor union for purposes of collective bargaining [Annex "A" of the Petition,
p. 12; Rollo, p. 22]. However, the minutes of the certification election [Annex "C" of the Petition:
Rollo, p. 28] show that a total of eighty-three (83) employees were allowed to vote and of these,
forty-nine (49) voted for respondent union. Thus, even if We agree with respondent union's
contention that the thirty seven (37) employees who were originally non-members of the cooperative
can still vote in the certification election since they were only "forced and compelled to join the
cooperative on pain of disciplinary action," the certification election held on October 1, 1986 is still
null and void since even those who were already members of the cooperative at the time of the
issuance of the med-arbiter's order, and therefore cannot claim that they were forced to join the
union were allowed to vote in the election.

Article 256 of the Labor Code provides, among others, that:

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 workers in the unit . . . [Italics
supplied.]

In this case it cannot be determined whether or not respondent union was duly elected by the eligible
voters of the bargaining unit since even employees who are ineligible to join a labor union within the
cooperative because of their membership therein were allowed to vote in the certification election.
Considering the foregoing, the Court finds that respondent director committed grave abuse of
discretion in certifying respondent union as the sole and exclusive bargaining representative of the
rank and file employees of petitioner cooperative.

WHEREFORE, the petition is hereby GRANTED and the assailed resolution of respondent director
is ANNULLED. The certification election conducted on October 1, 1986, is SET ASIDE. The
Regional Office No. 1 of San Fernando, La Union is hereby directed to immediately conduct new
certification election proceedings among the rank and file employees of the petitioner who are not
members of the cooperative.

SO ORDERED.
 [G.R. No. 116066. January 24, 2000]

NUEVA ECIJA I ELECTRIC COOPERATIVE, INC., (NEECO I)

EMPLOYEES ASSOCIATION, PRESIDENT RODOLFO JIMENEZ, and
members, REYNALDO FAJARDO, ERNESTO MARIN, EVER GUEVARRA,
PETRONILO BAGUISA, VICTORINO CARILLO, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION, NUEVA ECIJA I ELECTRIC
COOPERATIVE, INC., (NEECO I) and PATRICIO DELA
PEA, respondents.

DECISION

QUISUMBING, J.:

Petitioners assail the decision of the National Labor Relations Commission in NLRC
[1]

RAB-III-03-2673-92, which modified the ruling of the Labor Arbiter, by deleting the
award of moral and exemplary damages, as well as attorneys fees and costs of
litigation.

The facts, as found a quo, are as follows:

Petitioners Reynaldo Fajardo, Ernesto Marin, Ever Guevarra, Petronilo Baguisa,

Victorino Carillo, and Erdie Javate were permanent employees of respondent Nueva
Ecija I Electric Cooperative (NEECO I). They were members of petitioner NEECO I
Employees Association, a labor organization established for the mutual aid and
protection of its members. Petitioner Rodolfo Jimenez was the president of the
association.

Respondent NEECO I is an electric cooperative under the general supervision and

control of the National Electrification Administration (NEA). The management of
NEECO I is vested on the Board of Directors. Respondent Patricio dela Pea was
NEECOs general manager on detail from NEA.

On February 7, 1987, the Board of Directors adopted Policy No. 3-33, which set the
guidelines for NEECO Is retirement benefits. On October 28, 1987, all regular
employees were ordered by NEECO I to accomplish Form 87, which were
applications for either retirement, resignation, or separation from service.

On October 5, 1991 and February 28, 1992, the applications of Petronilo Baguisa and
Ever Guevarra, respectively, were approved. They were paid the appropriate
separation pay.
These successive events, followed by the promotion of certain union officers to
supervisory rank, caused apprehension in the labor association. They were considered
as harassment threatening the union members, and circumventing the employees
security of tenure. On February 29, 1992, to strengthen and neutralize managements
arbitrary moves, the union held a "snap election" of officers. Reynaldo Fajardo was
[2]

elected Treasurer, while Evaristo Guevarra, Victorino Carillo and Ernesto Marin were
elected Public Relations Officers for Jaen, Gapan A and Gapan B, respectively.

On March 3, 1992, petitioner labor association passed a resolution withdrawing the

applications for retirement of all its members, thus:

"Upon popular request of all members and officers of the association

their manifestation of willingness to retire on optional basis is hereby
WITHDRAWN by the ASSOCIATION for and in behalf of all its
members, EXCEPT those who are willing to avail their retirement
benefits with all their hearts and mind. To avoid what had happened to
EVARISTO GUEVARRA. The union officers and its members, claimed
their right to be protected under the security of tenure clause under the
Labor Code of the Philippines. No employee shall be retired without
his/her consent or approval of the union.

On motion and duly seconded. Approved unanimously. Let copies of the

resolution be furnished NEECO I PS/AGM Patricio S. dela Pea, for his
information and appropriate action." 
[3]

On March 4, March 17, and April 7, 1992, petitioners Ernesto Marin, Reynaldo
Fajardo and Victorino Carillo were compulsorily retired by management. They
received their separation pay under protest on March 16, March 18, and April 15,
1992, respectively.

On August 21, 1991, Erdie Javate was terminated from employment allegedly due to
misappropriation of funds and dishonesty. He was not paid separation or retirement
benefits.

On March 29, 1992, petitioners and Erdie Javate instituted a complaint for illegal
dismissal and damages with the NLRC Regional Arbitration Branch in San Fernando.
They alleged they were purposely singled out for retirement from a listing of
employees who were made to submit retirement forms, even if they were not on top of
the list because they were union officers, past officers or active members of the
association. Further, petitioners claimed that their acceptance of the money offered by
NEECO I did not constitute estoppel nor waiver, since their acceptances were with
vehement objections and without prejudice to all their rights resulting from an illegal
dismissal.

Additionally, Javate averred he was framed up and dismissed without due process.

On December 21, 1992, the labor arbiter decided the case as follows:

"WHEREFORE, in view of all the foregoing considerations, judgment is

hereby rendered, as follows:

1. Declaring respondents NEECO I and PS/AGM Engr. Patricio dela Pea

guilty of illegal dismissal and unfair labor practice act, as charged;

2. Ordering respondents to reinstate individual complainants Reynaldo

Fajardo, Ernesto Marin, Ever Guevarra, Petronilo Baguisa, Victorino
Carillo, and Erdie Javate of their former positions under the same terms
and conditions of work obtaining at the time of dismissal, without loss of
seniority rights and other privileges, either physically or in the payroll, at
the option of the respondents, with payment of full backwages, including
all benefits and privileges that they should have received if they were not
illegally dismissed, computed as follows:

1. Reynaldo Fajardo-

a.) Backwages as of Dec. 31, 1992 P 36,306.55

b.) Bonus 1,000.00

c.) Medical Allowance 1,000.00

d.) Clothing Allowance 750.00

e.) Hospitalization allowance since 1988 2,000.00

Total P 41,056.55

2. Ernesto Marin -

a.) Backwages as of Dec. 31, 1992 P 37,783.60

b.) Bonus 1,000.00

c.) Medical Allowance 1,000.00

 d.) Clothing Allowance 750.00

e.) Hospitalization allowance since 1988 2,000.00

Total P 42,533.60

3. Ever Guevarra -

a.) Backwages as of Dec. 31,

1992 P 37,783.60

b.) Bonus 1,000.00

c.) Medical Allowance 1,000.00

d.) Clothing Allowance 750.00

e.) Hospitalization allowance since

1988 2,000.00

Total P 42,533.60

4. Petronilo Baguisa -

a.) Backwages as of Dec. 31, 1992 P 56,675.40

b.) Bonus 1,000.00

c.) Medical Allowance 1,000.00

d.) Clothing Allowance 750.00

e.) Hospitalization allowance since 1988 2,000.00

Total P 61,425.40

5. Victorino Carillo -

a.) Backwages as of Dec. 31, 1992 P 32,162.78

b.) Bonus 1,000.00

c.) Medical Allowance 1,000.00

 d.) Clothing Allowance 750.00

e.) Hospitalization allowance since 1988 2,000.00

Total P 36, 912.78

6. Erdie Javate -

a.) Backwages as of Dec. 31, 1992 P 15,680.00

b.) Bonus 1,000.00

c.) Medical Allowance 1,000.00

d.) Clothing Allowance 750.00

e.) Hospitalization allowance since 1999 2,000.00

Total P 20,430.00

GRAND TOTAL P244,891.93

3. Ordering respondents to pay complainants moral damages in the

amount of P30,000.00 each or in the total amount of P180,000.00 and
exemplary damages in the amount of P120,000.00;

4. Ordering respondents to pay complainants their attorneys fees

equivalent to ten (10%) percent of their monetary claims in the sum
of P54,489.20;

5. Ordering respondents to pay complainants their cost of litigation in the

amount of P30,000.00

SO ORDERED." [4]

Thereafter, herein private respondents elevated the case to respondent NLRC. They
filed their appeal on December 28, 1992, and posted a surety bond on January 5,
1993, in the amount of two hundred forty-four thousand, eight hundred ninety one
pesos and ninety three centavos (P244,891.93). But herein petitioners filed an
omnibus motion to dismiss on the ground of late appeal, claiming that insufficient
bond was filed by NEECO I only on January 5, 1993. The bond excluded the award of
moral and exemplary damages, attorneys fees and costs of litigation.
Respondent NLRC denied the motion and instead gave due course to the appeal. On
July 16, 1993, the NLRC modified the decision, as follows:

"WHEREFORE, premises considered, the appealed Decision is modified

by deleting the awards of moral and exemplary damages, attorneys fees
and cost of litigation. The amounts of retirement benefits received by the
individual complainants are to be applied to the backwages that may be
due to the herein complainants. All other dispositions stand.

SO ORDERED." [5]

Meanwhile, on March 16, 1993, petitioners were reinstated by NEECO I pending

appeal.

On April 22, 1993, Erdie Javate withdrew his complaint and opted to receive his
retirement benefits amounting to forty-two thousand, one hundred fourteen pesos and
nine centavos (P42,114.09).

Herein petitioners filed a motion for reconsideration, which the NLRC denied on
August 31, 1993. Likewise, herein private respondents filed a motion for
reconsideration but the same was also denied on September 28, 1993.

Petitioners are now before us, via this special civil action under Rule 65 of the
Revised Rules of Court, raising three issues:

"I. WHETHER OR NOT THE APPEAL TAKEN BY THE

RESPONDENT NEECO I FROM THE DECISION OF NLRC-RAB-III
DOLE TO NLRC THIRD DIVISION, MANILA, WAS NOT
PERFECTED WITHIN THE TEN (10) CALENDAR DAYS
REGLEMENTARY PERIOD; HENCE THE APPEAL SHOULD NOT
BE GIVEN DUE COURSE;

II. WHETHER OR NOT PUBLIC RESPONDENT NLRC ACTED

WITHOUT OR IN EXCESS OF JURISDICTION WHEN IT
RESOLVED TO DELETE EN TOTO MORAL DAMAGES,
EXEMPLARY DAMAGES, ATTORNEYS FEES AND COSTS OF
LITIGATION. FACTUAL BASIS OF WHICH WERE
ASCERTAINED BY THE HONORABLE LABOR ARBITER
BELOW;
 III. WHETHER OR NOT THE ORDER TO APPLY AND DEDUCT
RECEIVABLE BACKWAGES FROM RECEIVED BENEFITS MAY
BE REASONABLE BUT UNREALISTIC AND ARBITRARY."

Petitioners contend that although respondent NEECO I filed its appeal on December
28, 1992, such appeal was not completed for failure to file the necessary supersedeas
bond, during the period prescribed by law, or until January 4, 1993. Hence, no appeal
was perfected.

Indisputable is the legal doctrine that the appeal of a decision involving a monetary
award in labor cases may be perfected "only upon the posting of a cash or surety
bond."[6]

The Labor Code, as amended by Republic Act No. 6715, clearly provides:

"Art. 223. Appeal - Decisions, awards or orders of the Labor Arbiter are
final and executory unless appealed to the Commission by any or both
parties within ten (10) calendar days from receipt of such decisions,
awards, or orders. . .

xxx

In case of a judgment involving a monetary award, an appeal by the

employer may be perfected only upon the posting of a cash or surety
bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the
judgment appealed from.

xxx

Also, the perfection of an appeal within the reglementary period and in the manner
prescribed by law is jurisdictional, and noncompliance with such legal requirement is
fatal and effectively renders the judgment final and executory. 
[7]

However, in a number of cases, this Court relaxed the rule to resolve controversies
[8]

on the merits, specifically, when there are special meritorious circumstances and
[9]

issues. We relaxed the requirement of posting a supersedeas bond for the perfection
[10]

of an appeal, when there was substantial compliance with the rule, so that on balance,
we made technical considerations to give way to equity and justice. [11]

In the case before us, the decision of the labor arbiter was issued on December 21,
1992. Private respondents filed their appeal on December 28, 1992, barely seven days
from receipt thereof. The bonding company issued the bond dated January 4, 1993,
the last day for filing an appeal. However, it was forwarded to respondent NLRC only
on the following day, January 5, 1993. Considering these circumstances and the
holiday season, we find it equitable to ease the rules and consider that there was
substantial compliance with the requirements of the law.

As to the amount of bond, we note that there had been changes in the Rules
promulgated by the NLRC. Previously the computation of the cash or surety bond to
be posted by an employer who wishes to appeal contained in the original rules was
"exclusive of moral and exemplary damages and attorneys fees." It was later deleted
[12]

sometime in 1991 and 1992, then restored on November 20, 1993. [13]

It may be noted that while respondent NLRC in its Resolution No. 11-01-91 dated
November 7, 1991 deleted the phrase "exclusive of moral and exemplary damages as
well as attorneys fees" in the determination of the amount of the bond, it provided a
safeguard against the imposition of excessive bonds providing "(T)he Commission
may, in meritorious cases and upon Motion of the Appellant, reduce the amount of the
bond." 
[14]

In the case of Cosico, Jr. vs. NLRC, 272 SCRA 583, we ruled:

"In the case at bar, the backwages and thirteenth month pay awarded to
petitioner amounted only to P270,000.00, but the moral and exemplary
damages, plus 10% attorneys fees, totalled P2,497,000.00. In other
words, the moral and exemplary damages and attorneys fees are almost
ten (10) times greater than the basic monetary judgment. Private
respondents posted a supersedeas bond of P270,000.00, obviously, on
the honest belief that the amount was sufficient. At the very least,
therefore, there was substantial compliance with the requirement of
appeal bond. For to rule otherwise would negate the interest of justice
and deviate from the mandate of the Labor Code that the rules of
procedure should be liberally construed, . . .

xxx

Since private respondents filed a bond which they honestly believed

sufficient for purposes of their appeal, respondent NLRC should have
called their attention that the bond was inadequate, which it did not." [15]

The unreasonable and excessive amount of bond would be oppressive and unjust and
would have the effect of depriving a party of his right to appeal. Besides, private
respondents stress that the petitioners were paid their retirement benefits and that the
[16]
cooperative has sufficient assets from which the other claims for damages and
attorneys fees may be obtained.

We come next to the issue of the propriety of the award of moral and exemplary
damages.

To warrant an award of moral damages, it must be shown that the dismissal of the
employee was attended to by bad faith, or constituted an act oppressive to labor, or
was done in a manner contrary to morals, good customs or public policy. The Labor
[17]

Arbiter ruled that there was unfair labor practice:

"As a backdrop, complainants alleged, and this is supported by

documentary evidence, that on 7 February 1987, the then NEECO I
Board of Directors adopted their own Policy No. 3-33 under Resolution
No. 47, series of 1987 requiring all employees to avail of the retirement
benefits. All regular employees, including the complainants were
ordered to file their application for retirement/resignation and/or
separation from the service under NEECO I Form 87. All NEECO I
employees have no choice but to manifest their willingness to
retire.

However, the complainants pointed out that the approval of the

employees application for retirement was not done in succession
according to the list, but according to the choice of the respondents, and
for which, complainants were singled out from the list because they were
union officers, past officers and active members of the complainant
Association."[18]

xxx

"Clearly, therefore, complainants have established the fact that they were
illegally dismissed by the respondents and their illegal dismissal was
even tainted with unfair labor practice act. ..."
[19]

Unfair labor practices violate the constitutional rights of workers and employees to
self-organization, are inimical to the legitimate interests of both labor and
management, including their right to bargain collectively and otherwise deal with each
other in an atmosphere of freedom and mutual respect; and disrupt industrial peace
and hinder the promotion of healthy and stable labor-management relations. As the
[20]

conscience of the government, it is the Courts sworn duty to ensure that none trifles
with labor rights.
[21]
For this reason, we find it proper in this case to impose moral and exemplary damages
on private respondent. However, the damages awarded by the labor arbiter, to our
mind, are excessive. In determining the amount of damages recoverable, the business,
social and financial position of the offended parties and the business and financial
position of the offender are taken into account. It is our view that herein private
[22]

respondents had not fully acted in good faith. However, we are cognizant that a
cooperative promotes the welfare of its own members. The economic benefits filter to
the cooperative members. Either equally or proportionally, they are distributed among
members in correlation with the resources of the association utilized. Cooperatives
help promote economic democracy and support community development. Under these
circumstances, we deem it proper to reduce moral damages to only P10,000.00
payable by private respondent NEECO I to each individual petitioner. We also deem it
sufficient for private respondent NEECO I to pay each individual petitioner P5,000.00
to answer for exemplary damages, based on the provisions of Articles 2229 and 2232
of the Civil Code. 
[23]

Having been illegally dismissed, individual petitioners are entitled to reinstatement

from the time they were illegally dismissed, until they were reinstated on March 16,
1993. For that period they are likewise entitled to backwages minus the amount
petitioners were forced to receive as "retirement" pay. It must be noted that the
[24]

backwages computed by the labor arbiter covered only until December 22, 1992 but
did not include backwages from January 1, 1993 to March 15, 1993, which should
[25]

now be computed and included for payment. In the event that the amount of
"retirement" pay received by an individual petitioner exceeds the amount of his
backwages, then the excess should be deemed as advances of salary which should be
refundable until fully repaid by him.

WHEREFORE, the petition is PARTIALLY GRANTED. The assailed decision of

the NLRC is AFFIRMED with MODIFICATION. Private respondent Nueva Ecija 1
Electric Cooperative is hereby ORDERED through its executive officers:

1. to pay individual petitioners their full backwages from the time they were illegally
dismissed until the date of their reinstatement on March 13, 1992, minus the amount
they received as "retirement" pay. In the event that the computed backwages of a
concerned petitioner is less than the amount of so-called "retirement" pay already
received, the difference should be treated as advances refundable from his salary until
fully repaid;

2. to pay moral and exemplary damages in the amount of ten thousand (P10,000.00)
pesos and five thousand (P5,000.00) pesos, respectively, to each of the petitioners
who were illegally terminated and/or compulsorily retired;
3. to pay ten (10%) of the total amount due to petitioners as attorneys fees; and

4. to pay the cost of suits.

Respondent NLRC is ORDERED to RECOMPUTE the total monetary benefits

awarded and due to the employees concerned in accordance with the decision and to
submit its compliance thereon within thirty (30) days from notice of this decision,
with copies furnished to the parties.

SO ORDERED.
G.R. No. L-53590 July 31, 1984

ROSARIO BROTHERS INC. (MANILA COD DEPARTMENT STORE), petitioner,

vs.
HON. BLAS F. OPLE, THE NATIONAL LABOR RELATIONS COMMISSION, and LEONARDO
LOVERIA, MARIETTA GALUT, LINDA TAPICERIA, JESUS S. OLIVER, CLARITA SANGLE,
RICARDO ROXAS, ANTONIO MABUTOL, LUZ BAYNO, NESTOR SANCHEZ, TITO
CASTALEDA, EDDIE RODRIGUEZ, MANUEL MEJES, FRANCISCA TAPICERIA, EDITHA
BAYNO, ET AL., respondents.

Bueno & Primicias Law Office for petitioner.

The Solicitor General for respondents.

RELOVA, J.:

The issue raised in this case is whether an employer-employee relationship exists between the
petitioner and the private respondents. It is the submission of petitioner that no such relationship
exists or has been created because the "series of memoranda" issued by petitioner to the private
respondents from 1973 to 1977 would reveal that it had no control and/or supervision over the work
of the private respondents.

Private respondents are tailors, pressers, stitchers and similar workers hired by the petitioner in its
tailoring department (Modes Suburbia). Some had worked there since 1969 until their separation on
January 2, 1978. For their services, they were paid weekly wages on piece-work basis, minus the
withholding tax per Bureau of Internal Revenue (BIR) rules. Further, they were registered with the
Social Security System (SSS) as employees of petitioner and premiums were deducted from their
wages; they were also members of the Avenida-Cubao Manila COD Department Store Labor Union
which has a Collective Bargaining Agreement with the company and; they were required to report for
work from Monday through Saturday and to stay in the tailoring shop for no less than eight (8) hours
a day, unless no job order was given them after waiting for two to three hours, in which case, they
may leave and may come back in the afternoon. Their attendance was recorded through a bundy
clock just like the other employees of petitioner. A master cutter distributes job orders equally,
supervises the work and sees to it that they were finished as soon as possible. Quoting from the
comment of the Solicitor General, petitioner, in its memorandum, said —
 Once the job orders and the corresponding materials were distributed to them,
private respondents were on their own. They were free to do their jobs either in the
petitioner's shop or elsewhere at their option, without observing the regular working
time of the company provided that they finished their work on time and in accordance
with the specifications. As a matter of fact, they were allowed to contract other
persons to do the job for them; and also to accept tailoring jobs from other
establishments. (p. 202, Rollo)

On September 7, 1977, the private respondents filed with the Regional Office of the Department
(now Ministry) of Labor a complaint for violation of Presidential Decree 851 (13th month pay) and
Presidential Decree 525, as amended by Presidential Decree 1123 (Emergency Living Allowance)
against herein petitioner.

After petitioner had filed its answer, the case was certified for compulsory arbitration to the Labor
Arbiter who, after due hearing, rendered a decision on December 29, 1977 dismissing "private
respondents" claims for unpaid emergency living allowance and 13th month pay, for lack of merit,
upon finding that the complainants (herein private respondents) are not employees of the
respondent (herein petitioner) within the meaning of Article 267(b) of the Labor Code. As a
consequence, the private respondents were dismissed on January 2, 1978 and this prompted them
to file a complaint for illegal dismissal with the Ministry of Labor. Meanwhile, the National Labor
Relations Commission (NLRC) affirmed the decision of the Labor Arbiter and dismissed private
respondents' appeal for lack of merit. However, upon appeal to the Minister of Labor, the latter
reversed the resolution of the NLRC in a decision, dated March 27, 1979, holding that —

The decision appealed from must be reversed. It is clearly erronious. Ccmplainants

and respondent are correct (sic) in considering their relationship as one between
employees and employer. The labor arbiter should not have made a different finding.

Complainants were employed as tailors, pressers, stitchers and coatmakers in the

tailoring department of the respondent. They are hired through a master cutter and
the department head and upon the approval of the personnel department and the
management. They report to the shop from Monday to Saturday and record their
attendance with a bundy clock. They are required to stay in the shop premises "for
no less than 8 hours a day" unless no job is given them "after waiting for two or three
hours" in which case, they are "allowed to leave."

The employees (tailors, pressers and stitchers) are paid by piece per week according
to the rates established by the company. They are registered as employees with the
Social Security System for which premiums are deducted from their wages. Taxes
are also witheld from their wages pursuant to BIR rules. Moreover, they enjoy the
benefits due to employees under their collective agreement with the company.

The tailors are given deadlines on their assigned jobs. They are required to work on
job orders as soon as these are given to them. The master cutter is ordered "to
watch out for tailors who postponed their assigned job up to the last few days of the
deadline" and to report violators "for proper action." Tailors are also required to follow
the company code of discipline and the rules and regulations of the tailoring
department. Outright dismissal is meted on anyone who brings out company
patterns.
 Under these facts, the existence of the employment relations can not be disputed.
The respondent itself, in its very first position papers, accepts this fact. The labor
arbiter certainly erred in making a different finding.

However, respondent contends that the employees are excluded from the coverage
of PD 525, 851 and 1123 because of the nature of their employment, there being 'no
fixed number with regards to entry and exit and no fixed number of days of work, with
respect to said employees. We have, however, examined carefully the decrees and
find absolutely no indication therein that the employees are indeed excluded. Nor are
the rules implementing the decrees supportive of the respondent's contention. On the
contrary, the rules argue for the contrary view.

Section 2 of the rules implementing PD 525 provides: "The Decree shall apply to all
employees of covered employers, regardless of their position, designation or
employment status, and irrespective of the method by which their wages are paid,
including temporary, casual, probationary, and seasonal employees and workers."
And Section 3, of the rules implementing PD 851 provides that "all employees of
covered employers shall be entitled to benefits provided under the Decree ...
regardless of their position, designation or employment status, and irrespective of the
method by which their wages are paid." Section 2 of the same rules explicitly
provides that the rules apply to "workers paid on piece-rate basis" or "those who are
paid a standard amount for every piece or unit of work produced that is more or less
regularly replicated, without regard to the time spent in producing the same."

WHEREFORE, respondent is hereby ordered to pay the emergency allowances

under PD 525 and 1123 and the 13th month pay under PD 851 from the date of the
effectivity of said decrees but not earlier than September 7, 1974 to the following
complainants: Leonardo Loveria, Editha Bayno, Fe Bonita, Ricardo Roxas, Marietta
Galut, Mercedes Oliver, Antonio Mabutol, Clarita Sangle and Jesus Oliver; and the
emergency allowances and 13th month pay under said decrees from the date of the
effectivity of said decrees but not earlier than the date of the date of the start of their
employment, as indicated in the parenthesis after their names, to the following
complainants: Linda Tapiceria (July 14, 1975), Luz Bayno, (September 22, 1975),
Tito Castañeda (October 20, 1976), Francisco Tapiceria (February 14, 1977), Manuel
Mejes (February 20, 1977), Eddie Rodriguez (July 4, 1977) and Nestor Sanchez
(July 22, 1977). The Socio-Economic Analyst of the National Labor Relations
Commission is hereby directed to compute the amount of the awards stated in this
order and to submit a report thereon within 20 calendar days from receipt of this
order. (pp. 37-40, Rollo)

Thereafter, private respondents filed a motion for issuance of a writ of execution of the aforesaid
decision of the Minister of Labor which was granted and, partially implemented.

On February 28, 1980, the Labor Arbiter, issued an order directing the Chief of the Research and
Information Department of the Commission to designate a Socio-Economic Analyst to compute the
balance of private respondents' claims for the 13th month pay and emergency living allowance in
accordance with respondent Minister's decision of March 27, 1979. Pursuant thereto, a report, dated
March 4, 1980, was submitted computing the balance of private respondents' claims for emergency
living allowance and 13th month pay up to February 29,1980 in the total amount of P71,131.14. A
writ of execution was issued for the satisfaction of said amount.
Hence, the filing of this petition for certiorari, praying, among others, to annul and set aside the
decision of public respondent Minister of Labor and to dismiss the claims of private respondents.

We cannot sustain the petition. It was filed on April 1, 1980 which was too late because the Labor
Minister's decision of March 27, 1979, subject of this judicial review, had already become final. And,
not only that. The questioned decision has already been partially implemented by the sheriff as
shown by his return, dated July 17, 1979 (p. 96, Rollo). What is left for execution is the balance of
private respondents' claim.

Further, the petition is devoid of merit. As held in Mafinco Trading Corporation vs. Ople, 70 SCRA
139, the existence of employer-employee relationship is determined by the following elements,
namely: (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power
of dismissal; and (4) the power to control employees' conduct although the latter is the most
important element. On the other hand, an independent contractor is one who exercises independent
employment and contracts to do a piece of work according to his own methods and without being
subjected to control of his employer except as to the result of his work.

1. In the case at bar, as found by the public respondent, the selection and hiring of private
respondents were done by the petitioner, through the master cutter of its tailoring department who
was a regular employee. The procedure was modified when the employment of personnel in the
tailoring department was made by the management itself after the applicants' qualifications had been
passed upon by a committee of four. Later, further approval by the Personnel Department was
required.

2. Private respondents received their weekly wages from petitioner on piece-work basis which is
within the scope and meaning of the term "wage" as defined under Article 97(f) of the New Labor
Code (PD 442), thus —

(f) "Wage" paid to any employee shag mean the remuneration or earnings, however,
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done or for
services rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging or other facilities customarily
furnished by the employer to the employee. ...

3. Petitioner had the power to dismiss private respondents, as shown by the various memoranda
issued for strict compliance by private respondents, violations of which, in extreme cases, are
grounds for outright dismissal. In fact, they were dismissed on January 2, 1978, although, the
dismissal was declared illegal by the Labor Arbiter. The case is pending appeal with the National
Labor Relations Commission.

4. Private respondents' conduct in the performance of their work was controlled by petitioner, such
as: (1) they were required to work from Monday through Saturday; (2) they worked on job orders
without waiting for the deadline; (3) they were to observe cleanliness in their place of work and were
not allowed to bring out tailoring shop patterns; and (4) they were subject to quality control by
petitioner.

5. Private respondents were allowed to register with the Social Security System (SSS) as employees
of petitioner and premiums were deducted from their wages just like its other employees. And,
withholding taxes were also deducted from their wages for transmittal to the Bureau of Internal
Revenue (BIR).

6. Well-established is the principle that "findings of administrative agencies which have acquired
expertise because their jurisdiction is confined to specific matters are generally accorded not only
respect but even finality. Judicial review by this Court on labor cases do not go so far as to evaluate
the sufficiency of the evidence upon which the Deputy Minister and the Regional Director based their
determinations but are limited to issues of jurisdiction or grave abuse of discretion (Special Events &
Central Shipping Office Workers Union vs. San Miguel Corporation, 122 SCRA 557)." In the case at
bar, the questioned decision and order of execution of public respondents are not tainted with
unfairness or arbitrariness that would amount to abuse of discretion or lack of jurisdiction and,
therefore, this Court finds no necessity to disturb, much less, reverse the same.

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

SO ORDERED.

G.R. No. 85279 July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T. BAYLON,

RAMON MODESTO, JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE ALDAY, SERGIO
ARANETA, PLACIDO AGUSTIN, VIRGILIO MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C. PERALEJO,
RTC, BRANCH 98, QUEZON CITY, respondents.

Vicente T. Ocampo & Associates for petitioners.

CORTES, J:

Primarily, the issue raised in this petition is whether or not the Regional Trial Court can enjoin the
Social Security System Employees Association (SSSEA) from striking and order the striking
employees to return to work. Collaterally, it is whether or not employees of the Social Security
System (SSS) have the right to strike.

The antecedents are as follows:

On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a complaint for
damages with a prayer for a writ of preliminary injunction against petitioners, alleging that on June 9,
1987, the officers and members of SSSEA staged an illegal strike and baricaded the entrances to
the SSS Building, preventing non-striking employees from reporting for work and SSS members
from transacting business with the SSS; that the strike was reported to the Public Sector Labor -
Management Council, which ordered the strikers to return to work; that the strikers refused to return
to work; and that the SSS suffered damages as a result of the strike. The complaint prayed that a
writ of preliminary injunction be issued to enjoin the strike and that the strikers be ordered to return
to work; that the defendants (petitioners herein) be ordered to pay damages; and that the strike be
declared illegal.
It appears that the SSSEA went on strike after the SSS failed to act on the union's demands, which
included: implementation of the provisions of the old SSS-SSSEA collective bargaining agreement
(CBA) on check-off of union dues; payment of accrued overtime pay, night differential pay and
holiday pay; conversion of temporary or contractual employees with six (6) months or more of
service into regular and permanent employees and their entitlement to the same salaries,
allowances and benefits given to other regular employees of the SSS; and payment of the children's
allowance of P30.00, and after the SSS deducted certain amounts from the salaries of the
employees and allegedly committed acts of discrimination and unfair labor practices [Rollo, pp. 21-
241].

The court a quo, on June 11, 1987, issued a temporary restraining order pending resolution of the
application for a writ of preliminary injunction [Rollo, p. 71.] In the meantime, petitioners filed a
motion to dismiss alleging the trial court's lack of jurisdiction over the subject matter [Rollo, pp. 72-
82.] To this motion, the SSS filed an opposition, reiterating its prayer for the issuance of a writ of
injunction [Rollo, pp. 209-222]. On July 22,1987, in a four-page order, the court a quo denied the
motion to dismiss and converted the restraining order into an injunction upon posting of a bond, after
finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners' motion for the reconsideration of
the aforesaid order was also denied on August 14, 1988 [Rollo, p. 94], petitioners filed a petition
for certiorari and prohibition with preliminary injunction before this Court. Their petition was docketed
as G.R. No. 79577. In a resolution dated October 21, 1987, the Court, through the Third Division,
resolved to refer the case to the Court of Appeals. Petitioners filed a motion for reconsideration
thereof, but during its pendency the Court of Appeals on March 9,1988 promulgated its decision on
the referred case [Rollo, pp. 130-137]. Petitioners moved to recall the Court of Appeals' decision. In
the meantime, the Court on June 29,1988 denied the motion for reconsideration in G.R. No. 97577
for being moot and academic. Petitioners' motion to recall the decision of the Court of Appeals was
also denied in view of this Court's denial of the motion for reconsideration [Rollo, pp. 141- 143].
Hence, the instant petition to review the decision of the Court of Appeals [Rollo, pp. 12-37].

Upon motion of the SSS on February 6,1989, the Court issued a temporary restraining order
enjoining the petitioners from staging another strike or from pursuing the notice of strike they filed
with the Department of Labor and Employment on January 25, 1989 and to maintain the status
quo [Rollo, pp. 151-152].

The Court, taking the comment as answer, and noting the reply and supplemental reply filed by
petitioners, considered the issues joined and the case submitted for decision.

The position of the petitioners is that the Regional Trial Court had no jurisdiction to hear the case
initiated by the SSS and to issue the restraining order and the writ of preliminary injunction, as
jurisdiction lay with the Department of Labor and Employment or the National Labor Relations
Commission, since the case involves a labor dispute.

On the other hand, the SSS advances the contrary view, on the ground that the employees of the
SSS are covered by civil service laws and rules and regulations, not the Labor Code, therefore they
do not have the right to strike. Since neither the DOLE nor the NLRC has jurisdiction over the
dispute, the Regional Trial Court may enjoin the employees from striking.

In dismissing the petition for certiorari and prohibition with preliminary injunction filed by petitioners,
the Court of Appeals held that since the employees of the SSS, are government employees, they are
not allowed to strike, and may be enjoined by the Regional Trial Court, which had jurisdiction over
the SSS' complaint for damages, from continuing with their strike.
Thus, the sequential questions to be resolved by the Court in deciding whether or not the Court of
Appeals erred in finding that the Regional Trial Court did not act without or in excess of jurisdiction
when it took cognizance of the case and enjoined the strike are as follows:

1. Do the employees of the SSS have the right to strike?

2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the SSS and to enjoin
the strikers from continuing with the strike and to order them to return to work?

These shall be discussed and resolved seriatim

The 1987 Constitution, in the Article on Social Justice and Human Rights, provides that the State
"shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law" [Art. XIII, Sec.
31].

By itself, this provision would seem to recognize the right of all workers and employees, including
those in the public sector, to strike. But the Constitution itself fails to expressly confirm this
impression, for in the Sub-Article on the Civil Service Commission, it provides, after defining the
scope of the civil service as "all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters," that
"[t]he right to self-organization shall not be denied to government employees" [Art. IX(B), Sec. 2(l)
and (50)]. Parenthetically, the Bill of Rights also provides that "[tlhe right of the people, including
those employed in the public and private sectors, to form unions, associations, or societies for
purposes not contrary to law shall not abridged" [Art. III, Sec. 8]. Thus, while there is no question that
the Constitution recognizes the right of government employees to organize, it is silent as to whether
such recognition also includes the right to strike.

Resort to the intent of the framers of the organic law becomes helpful in understanding the meaning
of these provisions. A reading of the proceedings of the Constitutional Commission that drafted the
1987 Constitution would show that in recognizing the right of government employees to organize, the
commissioners intended to limit the right to the formation of unions or associations only, without
including the right to strike.

Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that "[tlhe right to self-
organization shall not be denied to government employees" [Art. IX(B), Sec. 2(5)], in answer to the
apprehensions expressed by Commissioner Ambrosio B. Padilla, Vice-President of the Commission,
explained:

MR. LERUM. I think what I will try to say will not take that long. When we proposed
this amendment providing for self-organization of government employees, it does not
mean that because they have the right to organize, they also have the right to strike.
That is a different matter. We are only talking about organizing, uniting as a union.
With regard to the right to strike, everyone will remember that in the Bill of Rights,
there is a provision that the right to form associations or societies whose purpose is
not contrary to law shall not be abridged. Now then, if the purpose of the state is to
prohibit the strikes coming from employees exercising government functions, that
could be done because the moment that is prohibited, then the union which will go on
strike will be an illegal union. And that provision is carried in Republic Act 875. In
Republic Act 875, workers, including those from the government-owned and
 controlled, are allowed to organize but they are prohibited from striking. So, the fear
of our honorable Vice- President is unfounded. It does not mean that because we
approve this resolution, it carries with it the right to strike. That is a different matter.
As a matter of fact, that subject is now being discussed in the Committee on Social
Justice because we are trying to find a solution to this problem. We know that this
problem exist; that the moment we allow anybody in the government to strike, then
what will happen if the members of the Armed Forces will go on strike? What will
happen to those people trying to protect us? So that is a matter of discussion in the
Committee on Social Justice. But, I repeat, the right to form an organization does not
carry with it the right to strike. [Record of the Constitutional Commission, vol. 1, p.
569].

It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by the Labor
Code (P.D. 442) in 1974, expressly banned strikes by employees in the Government, including
instrumentalities exercising governmental functions, but excluding entities entrusted with proprietary
functions:

.Sec. 11. Prohibition Against Strikes in the Government. — The terms and conditions
of employment in the Government, including any political subdivision or
instrumentality thereof, are governed by law and it is declared to be the policy of this
Act that employees therein shall not strike for the purpose of securing changes or
modification in their terms and conditions of employment. Such employees may
belong to any labor organization which does not impose the obligation to strike or to
join in strike: Provided, however, That this section shall apply only to employees
employed in governmental functions and not those employed in proprietary functions
of the Government including but not limited to governmental corporations.

No similar provision is found in the Labor Code, although at one time it recognized the right of
employees of government corporations established under the Corporation Code to organize and
bargain collectively and those in the civil service to "form organizations for purposes not contrary to
law" [Art. 244, before its amendment by B.P. Blg. 70 in 1980], in the same breath it provided that
"[t]he terms and conditions of employment of all government employees, including employees of
government owned and controlled corporations, shall be governed by the Civil Service Law, rules
and regulations" [now Art. 276]. Understandably, the Labor Code is silent as to whether or not
government employees may strike, for such are excluded from its coverage [Ibid]. But then the Civil
Service Decree [P.D. No. 807], is equally silent on the matter.

On June 1, 1987, to implement the constitutional guarantee of the right of government employees to
organize, the President issued E.O. No. 180 which provides guidelines for the exercise of the right to
organize of government employees. In Section 14 thereof, it is provided that "[t]he Civil Service law
and rules governing concerted activities and strikes in the government service shall be observed,
subject to any legislation that may be enacted by Congress." The President was apparently referring
to Memorandum Circular No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987
which, "prior to the enactment by Congress of applicable laws concerning strike by government
employees ... enjoins under pain of administrative sanctions, all government officers and employees
from staging strikes, demonstrations, mass leaves, walk-outs and other forms of mass action which
will result in temporary stoppage or disruption of public service." The air was thus cleared of the
confusion. At present, in the absence of any legislation allowing government employees to strike,
recognizing their right to do so, or regulating the exercise of the right, they are prohibited from
striking, by express provision of Memorandum Circular No. 6 and as implied in E.O. No. 180. [At this
juncture, it must be stated that the validity of Memorandum Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition against strikes?

The Court is of the considered view that they are. Considering that under the 1987 Constitution "[t]he
civil service embraces all branches, subdivisions, instrumentalities, and agencies of the
Government, including government-owned or controlled corporations with original charters" [Art.
IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180 where the employees in the civil service are
denominated as "government employees"] and that the SSS is one such government-controlled
corporation with an original charter, having been created under R.A. No. 1161, its employees are
part of the civil service [NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and are
covered by the Civil Service Commission's memorandum prohibiting strikes. This being the case, the
strike staged by the employees of the SSS was illegal.

The statement of the Court in Alliance of Government Workers v. Minister of Labor and
Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is relevant as it furnishes the rationale
for distinguishing between workers in the private sector and government employees with regard to
the right to strike:

The general rule in the past and up to the present is that 'the terms and conditions of
employment in the Government, including any political subdivision or instrumentality
thereof are governed by law" (Section 11, the Industrial Peace Act, R.A. No. 875, as
amended and Article 277, the Labor Code, P.D. No. 442, as amended). Since the
terms and conditions of government employment are fixed by law, government
workers cannot use the same weapons employed by workers in the private sector to
secure concessions from their employers. The principle behind labor unionism in
private industry is that industrial peace cannot be secured through compulsion by
law. Relations between private employers and their employees rest on an essentially
voluntary basis. Subject to the minimum requirements of wage laws and other labor
and welfare legislation, the terms and conditions of employment in the unionized
private sector are settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given delegated
power, the administrative heads of government which fix the terms and conditions of
employment. And this is effected through statutes or administrative circulars, rules,
and regulations, not through collective bargaining agreements. [At p. 13; Emphasis
supplied].

Apropos is the observation of the Acting Commissioner of Civil Service, in his position paper
submitted to the 1971 Constitutional Convention, and quoted with approval by the Court in Alliance,
to wit:

It is the stand, therefore, of this Commission that by reason of the nature of the public
employer and the peculiar character of the public service, it must necessarily regard
the right to strike given to unions in private industry as not applying to public
employees and civil service employees. It has been stated that the Government, in
contrast to the private employer, protects the interest of all people in the public
service, and that accordingly, such conflicting interests as are present in private labor
relations could not exist in the relations between government and those whom they
employ. [At pp. 16-17; also quoted in National Housing Corporation v. Juco, G.R. No.
64313, January 17,1985,134 SCRA 172,178-179].

E.O. No. 180, which provides guidelines for the exercise of the right to organize of government
employees, while clinging to the same philosophy, has, however, relaxed the rule to allow
negotiation where the terms and conditions of employment involved are not among those fixed by
law. Thus:

.SECTION 13. Terms and conditions of employment or improvements thereof, except

those that are fixed by law, may be the subject of negotiations between duly
recognized employees' organizations and appropriate government authorities.

The same executive order has also provided for the general mechanism for the settlement of labor
disputes in the public sector to wit:

.SECTION 16. The Civil Service and labor laws and procedures, whenever
applicable, shall be followed in the resolution of complaints, grievances and cases
involving government employees. In case any dispute remains unresolved after
exhausting all the available remedies under existing laws and procedures, the parties
may jointly refer the dispute to the [Public Sector Labor- Management] Council for
appropriate action.

Government employees may, therefore, through their unions or associations, either petition the
Congress for the betterment of the terms and conditions of employment which are within the ambit of
legislation or negotiate with the appropriate government agencies for the improvement of those
which are not fixed by law. If there be any unresolved grievances, the dispute may be referred to the
Public Sector Labor - Management Council for appropriate action. But employees in the civil service
may not resort to strikes, walk-outs and other temporary work stoppages, like workers in the private
sector, to pressure the Govemment to accede to their demands. As now provided under Sec. 4, Rule
III of the Rules and Regulations to Govern the Exercise of the Right of Government- Employees to
Self- Organization, which took effect after the instant dispute arose, "[t]he terms and conditions of
employment in the government, including any political subdivision or instrumentality thereof and
government- owned and controlled corporations with original charters are governed by law and
employees therein shall not strike for the purpose of securing changes thereof."

II

The strike staged by the employees of the SSS belonging to petitioner union being prohibited by law,
an injunction may be issued to restrain it.

It is futile for the petitioners to assert that the subject labor dispute falls within the exclusive
jurisdiction of the NLRC and, hence, the Regional Trial Court had no jurisdiction to issue a writ of
injunction enjoining the continuance of the strike. The Labor Code itself provides that terms and
conditions of employment of government employees shall be governed by the Civil Service Law,
rules and regulations [Art. 276]. More importantly, E.O. No. 180 vests the Public Sector Labor -
Management Council with jurisdiction over unresolved labor disputes involving government
employees [Sec. 16]. Clearly, the NLRC has no jurisdiction over the dispute.

This being the case, the Regional Trial Court was not precluded, in the exercise of its general
jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction over the SSS's complaint
for damages and issuing the injunctive writ prayed for therein. Unlike the NLRC, the Public Sector
Labor - Management Council has not been granted by law authority to issue writs of injunction in
labor disputes within its jurisdiction. Thus, since it is the Council, and not the NLRC, that has
jurisdiction over the instant labor dispute, resort to the general courts of law for the issuance of a writ
of injunction to enjoin the strike is appropriate.
Neither could the court a quo be accused of imprudence or overzealousness, for in fact it had
proceeded with caution. Thus, after issuing a writ of injunction enjoining the continuance of the strike
to prevent any further disruption of public service, the respondent judge, in the same order,
admonished the parties to refer the unresolved controversies emanating from their employer-
employee relationship to the Public Sector Labor - Management Council for appropriate action
[Rollo, p. 86].

III

In their "Petition/Application for Preliminary and Mandatory Injunction," and reiterated in their reply
and supplemental reply, petitioners allege that the SSS unlawfully withheld bonuses and benefits
due the individual petitioners and they pray that the Court issue a writ of preliminary prohibitive and
mandatory injunction to restrain the SSS and its agents from withholding payment thereof and to
compel the SSS to pay them. In their supplemental reply, petitioners annexed an order of the Civil
Service Commission, dated May 5, 1989, which ruled that the officers of the SSSEA who are not
preventively suspended and who are reporting for work pending the resolution of the administrative
cases against them are entitled to their salaries, year-end bonuses and other fringe benefits and
affirmed the previous order of the Merit Systems Promotion Board.

The matter being extraneous to the issues elevated to this Court, it is Our view that petitioners'
remedy is not to petition this Court to issue an injunction, but to cause the execution of the aforesaid
order, if it has already become final.

WHEREFORE, no reversible error having been committed by the Court of Appeals, the instant
petition for review is hereby DENIED and the decision of the appellate court dated March 9, 1988 in
CA-G.R. SP No. 13192 is AFFIRMED. Petitioners' "Petition/Application for Preliminary and
Mandatory Injunction" dated December 13,1988 is DENIED.

SO ORDERED.

[G.R. No. 121084. February 19, 1997]

TOYOTA MOTOR PHILIPPINES CORPORATION, petitioner,

vs. TOYOTA MOTOR PHILIPPINES CORPORATION LABOR
UNION AND THE SECRETARY OF LABOR AND
EMPLOYMENT, respondents.

DECISION
KAPUNAN, J.:

On November 26, 1992, the Toyota Motor Philippines Corporation Labor

Union (TMPCLU) filed a petition for certification election with the Department of
Labor, National Capital Region, for all rank-and-file employees of the Toyota
Motor Corporation. [1]
 In response, petitioner filed a Position Paper on February 23, 1993 seeking
the denial of the issuance of an Order directing the holding of a certification
election on two grounds: first, that the respondent union, being "in the process
of registration" had no legal personality to file the same as it was not a legitimate
labor organization as of the date of the filing of the petition; and second, that
the union was composed of both rank-and-file and supervisory employees in
violation of law. Attached to the position paper was a list of union members
[2]

and their respective job classifications, indicating that many of the signatories
to the petition for certification election occupied supervisory positions and were
not in fact rank-and-file employees. [3]

The Med-Arbiter, Paterno D. Adap, dismissed respondent union's petition

for certification election for lack of merit. In his March 8, 1993 Order, the Med-
Arbiter found that the labor organization's membership was composed of
supervisory and rank-and-file employees in violation of Article 245 of the Labor
Code, and that at the time of the filing of its petition, respondent union had not
[4]

even acquired legal personality yet. [5]

On appeal, the Office of the Secretary of Labor, in a Resolution dated [6]

November 9, 1993 signed by Undersecretary Bienvenido E. Laguesma, set

aside the Med-Arbiter's Order of March 3, 1993, and directed the holding of a
certification election among the regular rank-and-file employees of Toyota
Motor Corporation. In setting aside the questioned Order, the Office of the
Secretary contended that:

Contrary to the allegation of herein respondent-appellee, petitioner-appellant was

already a legitimate labor organization at the time of the filing of the petition on 26
November 1992. Records show that on 24 November 1992 or two (2) days before the
filing of the said petition, it was issued a certificate of registration.

We also agree with petitioner-appellant that the Med-Arbiter should have not
dismissed the petition for certification election based on the ground that the proposed
bargaining unit is a mixture of supervisory and rank-and-file employees, hence,
violative of Article 245 of the Labor Code as amended.

A perusal of the petition and the other documents submitted by petitioner-appellant

will readily show that what the former really seeks to represent are the regular rank-
and-file employees in the company numbering about 1,800 more or less, a unit which
is obviously appropriate for bargaining purposes. This being the case, the mere
allegation of respondent-appellee that there are about 42 supervisory employees in the
proposed bargaining unit should have not caused the dismissal of the instant petition.
Said issue could very well be taken cared of during the pre-election conference where
inclusion/exclusion proceedings will be conducted to determine the list of eligible
voters.[7]

Not satisfied with the decision of the Office of the Secretary of Labor,
petitioner filed a Motion for Reconsideration of the Resolution of March 3, 1993,
reiterating its claim that as of the date of filing of petition for certification election,
respondent TMPCLU had not yet acquired the status of a legitimate labor
organization as required by the Labor Code, and that the proposed bargaining
unit was inappropriate.
Acting on petitioner's motion for reconsideration, the public respondent, on
July 13, 1994 set aside its earlier resolution and remanded the case to the Med-
Arbiter concluding that the issues raised by petitioner both on appeal and in its
motion for reconsideration were factual issues requiring further hearing and
production of evidence. The Order stated:
[8]

We carefully re-examined the records vis-a-vis the arguments raised by the movant,
and we note that movant correctly pointed out that petitioner submitted a copy of its
certificate of registration for the first time on appeal and that in its petition, petitioner
alleges that it is an independent organization which is in the process of registration."
Movant strongly argues that the foregoing only confirms what it has been pointing out
all along, that at the time the petition was filed petitioner is (sic) not yet the holder of
a registration certificate; that what was actually issued on 24 November 1992 or two
(2) days before the filing of the petition was an official receipt of payment for the
application fee; and, that the date appearing in the Registration certificate which is
November 24, 1992 is not the date when petitioner was actually registered, but the
date when the registration certificate was prepared by the processor. Movant also
ratiocinates that if indeed petitioner has been in possession of the registration
certificate at the time this petition was filed on November 26, 1992, it would have
attached the same to the petition.

The foregoing issues are factual ones, the resolution of which is crucial to the petition.
For if indeed it is true that at the time of filing of the petition, the said registration
certificate has not been approved yet, then, petitioner lacks the legal personality to file
the petition and the dismissal order is proper. Sadly, we can not resolve the said
questions by merely perusing the records. Further hearing and introduction of
evidence are required. Thus, there is a need to remand the case to the Med-Arbiter
solely for the purpose.

WHEREFORE, the motion is hereby granted and our Resolution is hereby set aside.
Let the case be remanded to the Med-Arbiter for the purpose aforestated.
SO ORDERED. [9]

Pursuant to the Order, quoted above, Med-Arbiter Brigida C. Fodrigon

submitted her findings on September 28, 1994, stating the following: [10]

[T]he controvertible fact is that petitioner could not have been issued its Certificate of
Registration on November 24, 1992 when it applied for registration only on
November 23, 1992 as shown by the official receipt of payment of filing fee. As
Enrique Nalus, Chief LEO, this office, would attest in his letter dated September 8,
1994 addressed to Mr. Porfirio T. Reyes, Industrial Relations Officer of Respondent
company, in response to a query posed by the latter, "It is unlikely that an application
for registration is approved on the date that it is filed or the day thereafter as the
processing course has to pass thought routing, screening, and assignment, evaluation,
review and initialing, and approval/disapproval procedure, among others, so that a 30-
day period is provided for under the Labor Code for this purpose, let alone opposition
thereto by interested parties which must be also given due course."

Another evidence which petitioner presented . . . is the "Union Registration 1992

Logbook of IRD" . . . and the entry date November 25, 1992 as allegedly the date of
the release of the registration certificate . . . On the other hand, respondent company
presented . . . a certified true copy of an entry on page 265 of the Union Registration
Logbook showing the pertinent facts about petitioner but which do not show the
petitioner's registration was issued on or before November 26, 1992. [11]

Further citing other pieces of evidence presented before her, the Med-
Arbiter concluded that respondent TMPCLU could not have "acquire[d] legal
personality at the time of the filing of (its) petition."[12]

On April 20, 1996, the public respondent issued a new Resolution, "directing
the conduct of a certification election among the regular rank-and-file
employees of the Toyota Motor Philippines Corporation. Petitioner's motion
[13]

for reconsideration was denied by public respondent in his Order dated July 14,
1995. [14]

Hence, this special civil action for certiorari under Rule 65 of the Revised
Rules of Court, where petitioner contends that "the Secretary of Labor and
Employment committed grave abuse of discretion amounting to lack or excess
of jurisdiction in reversing, contrary to law and facts the findings of the Med-
Arbiters to the effect that: 1) the inclusion of the prohibited mix of rank-and file
and supervisory employees in the roster of members and officers of the union
cannot be cured by a simple inclusion-exclusion proceeding; and that 2) the
respondent union had no legal standing at the time of the filing of its petition for
certification election.[15]
 We grant the petition.
The purpose of every certification election is to determine the exclusive
representative of employees in an appropriate bargaining unit for the purpose
of collective bargaining. A certification election for the collective bargaining
process is one of the fairest and most effective ways of determining which labor
organization can truly represent the working force. In determining the labor
[16]

organization which represents the interests of the workforce, those interests

must be, as far as reasonably possible, homogeneous, so as to genuinely reach
the concerns of the individual members of a labor organization.
According to Rothenberg, an appropriate bargaining unit is a group of
[17]

employees of a given employer, composed of all or less than the entire body of
employees, which the collective interests of all the employees, consistent with
equity to the employer indicate to be best suited to serve reciprocal rights and
duties of the parties under the collective bargaining provisions of law. In Belyca
Corporation v. Ferrer Calleja, we defined the bargaining unit as "the legal
[18]

collectivity for collective bargaining purposes whose members have

substantially mutual bargaining interests in terms and conditions of employment
as will assure to all employees their collective bargaining rights." This in mind,
the Labor Code has made it a clear statutory policy to prevent supervisory
employees from joining labor organizations consisting of rank-and-file
employees as the concerns which involve members of either group are normally
disparate and contradictory. Article 245 provides:

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

Clearly, based on this provision, a labor organization composed of both

rank-and-file and supervisory employees is no labor organization at all. It
cannot, for any guise or purpose, be a legitimate labor organization. Not being
one, an organization which carries a mixture of rank-and-file and supervisory
employees cannot possess any of the rights of a legitimate labor organization,
including the right to file a petition for certification election for the purpose of
collective bargaining. It becomes necessary, therefore, anterior to the granting
of an order allowing a certification election, to inquire into the composition of
any labor organization whenever the status of the labor organization is
challenged on the basis of Article 245 of the Labor Code.
 It is the petitioner's contention that forty-two (42) of the respondent union's
members, including three of its officers, occupy supervisory positions. In its [19]

position paper dated February 22, 1993, petitioner identified fourteen (14) union
members occupying the position of Junior Group Chief II and twenty-seven
[20]

(27) members in level five positions. Their respective job-descriptions are

quoted below:

LEVEL 4 (JUNIOR GROUP CHIEF II) He is responsible for all operators and
assigned stations, prepares production reports related to daily production output. He
oversees smooth flow of production, quality of production, availability of manpower,
parts and equipments. He also coordinates with other sections in the Production
Department.

LEVEL 5 He is responsible for overseeing initial production of new models, prepares

and monitors construction schedules for new models, identifies manpower
requirements for production, facilities and equipment, and lay-out processes. He also
oversees other sections in the production process (e.g. assembly, welding, painting)."
(Annex "V" of Respondent TMP's Position Paper, which is the Job Description for an
Engineer holding Level 5 position in the Production Engineering Section of the
Production Planning and Control Department).

While there may be a genuine divergence of opinion as to whether or not

union members occupying Level 4 positions are supervisory employees, it is
fairly obvious, from a reading of the Labor Code's definition of the term that
those occupying Level 5 positions are unquestionably supervisory employees.
Supervisory employees, as defined above, are those who, in the interest of the
employer, effectively recommend managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but require the use of
independent judgment. Under the job description for level five employees,
[21]

such personnel all engineers having a number of personnel under them, not
only oversee production of new models but also determine manpower
requirements, thereby influencing important hiring decisions at the highest
levels. This determination is neither routine nor clerical but involves the
independent assessment of factors affecting production, which in turn affect
decisions to hire or transfer workers. The use of independent judgment in
making the decision to hire, fire or transfer in the identification of manpower
requirements would be greatly impaired if the employee's loyalties are torn
between the interests of the union and the interests of management. A
supervisory employee occupying a level five position would therefore find it
difficult to objectively identify the exact manpower requirements dictated by
production demands.
 This is precisely what the Labor Code, in requiring separate unions among
rank-and-file employees on one hand, and supervisory employees on the other,
seeks to avoid. The rationale behind the Code's exclusion of supervisors from
unions of rank-and-file employees is that such employees, while in the
performance of supervisory functions, become the alter ego of management in
the making and the implementing of key decisions at the sub-managerial level.
Certainly, it would be difficult to find unity or mutuality of interests in a bargaining
unit consisting of a mixture of rank-and-file and supervisory employees. And
this is so because the fundamental test of a bargaining unit's acceptability is
whether or not such a unit will best advance to all employees within the unit the
proper exercise of their collective bargaining rights. The Code itself has
[22]

recognized this, in preventing supervisory employees from joining unions of

rank-and-file employees.
In the case at bar, as respondent union's membership list contains the
names of at least twenty-seven (27) supervisory employees in Level Five
positions, the union could not, prior to purging itself of its supervisory employee
members, attain the status of a legitimate labor organization. Not being one, it
cannot possess the requisite personality to file a petition for certification
election.
The foregoing discussion, therefore, renders entirely irrelevant, the
technical issue raised as to whether or not respondent union was in possession
of the status of a legitimate labor organization at the time of filing, when, as
petitioner vigorously claims, the former was still at the stage of processing of its
application for recognition as a legitimate labor organization. The union's
composition being in violation of the Labor Code's prohibition of unions
composed of supervisory and rank-and-file employees, it could not possess the
requisite personality to file for recognition as a legitimate labor organization. In
any case, the factual issue, albeit ignored by the public respondent's assailed
Resolution, was adequately threshed out in the Med-Arbiter's September 28,
1994 Order.
The holding of a certification election is based on clear statutory policy which
cannot be circumvented. Its rules, strictly construed by this Court, are
[23]

designed to eliminate fraud and manipulation. As we emphasized

in Progressive Development Corporation v. Secretary, Department of Labor
and Employment, the Court's conclusion should not be interpreted as
[24]

impairing any union's right to be certified as the employees' bargaining agent in

the petitioner's establishment. Workers of an appropriate bargaining unit must
be allowed to freely express their choice in an election where everything is open
to sound judgment and the possibility for fraud and misrepresentation is
absent. [25]
 WHEREFORE, the petition is GRANTED. The assailed Resolution dated
April 20, 1995 and Order dated July 14, 1995 of respondent Secretary of Labor
are hereby SET ASIDE. The Order dated September 28, 1994 of the Med-
Arbiter is REINSTATED.
SO ORDERED.
G.R. No. 96566 January 6, 1992

ATLAS LITHOGRAPHIC SERVICES, INC., petitioner,

vs.
UNDERSECRETARY BIENVENIDO E. LAGUESMA (Department of Labor and Employment)
and ATLAS LITHOGRAPHIC SERVICES, INC. SUPERVISORY, ADMINISTRATIVE,
PERSONNEL, PRODUCTION, ACCOUNTING AND CONFIDENTIAL EMPLOYEES
ASSOCIATION-KAISAHAN NG MANGGAWANG PILIPINO (KAMPIL-KATIPUNAN), respondents.

Romero, Lagman, Valdecantos & Arreza Law Offices for petitioner.

Esteban M. Mendoza for private respondent.

GUTIERREZ, JR., J.:p

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the modification of the Order dated 14 December 1990 and the
Resolution dated 21 November 1990 issued by the public respondents.

The antecedent facts of the case as gathered from the records are as follows:

On July 16, 1990, the supervisory, administrative personnel, production, accounting and confidential
employees of the petitioner Atlas Lithographic Services, Inc. (ALSI) affiliated with private respondent
Kaisahan ng Manggagawang Pilipino, a national labor organization. The local union adopted the
name Atlas Lithographic Services, Inc. Supervisory, Administrative, Personnel, Production,
Accounting and Confidential Employees Association or ALSI-SAPPACEA-KAMPIL in short and
which we shall hereafter refer to as the "supervisors" union.

Shortly thereafter, private respondent Kampil-Katipunan filed on behalf of the "supervisors" union a
petition for certification election so that it could be the sole and exclusive bargaining agent of the
supervisory employees.

The petitioners opposed the private respondent's petition claiming that under Article 245 of the Labor
bode the private respondent cannot represent the supervisory employees for collective bargaining
purposeless because the private respondent also represents the rank-and-file employees' union.

On September 18, 1990, the Med-Arbiter issued an order in favor of the private respondent, the
dispositive portion of which provides:

WHEREFORE, premises considered, a certification election among the supervisory

employees belonging to the Administrative, Personnel, Production, Accounting
Departments as well as confidential employees performing supervisory functions of
Atlas Lithographic Services, Incorporated is hereby ordered conducted within 20
 days from receipt hereof, subject to usual pre-election conference, with the following
choices:

1. KAMPIL (KATIPUNAN);

2. No union.

SO ORDERED. (Rollo, pp. 39-40)

The petitioners, as expected, appealed for the reversal of the above order. The public respondent,
however, issued a resolution affirming the Med-Arbiter's order.

The petitioners, in turn, filed a motion for reconsideration but the same was denied. Hence, this
petition for certiorari.

The sole issue to be resolved in this case is whether or not, under Article 245 of the Labor Code, a
local union of supervisory employees may be allowed to affiliate with a national federation of labor
organizations of rank-and-file employees and which national federation actively represents its
affiliates in collective bargaining negotiations with the same employer of the supervisors and in the
implementation of resulting collective bargaining agreements.

The petitioner argues that KAMPIL-KATIPUNAN already represents its rank-and-file employees and,
therefore, to allow the supervisors of those employees to affiliate with the private respondent is
tantamount to allowing the circumvention of the principle of the separation of unions under Article
245 of the Labor Code.

It further argues that the intent of the law is to prevent a single labor organization from representing
different classes of employees with conflicting interests.

The public respondent, on the other hand, contends that despite affiliation with a national federation,
the local union does not lose its personality which is separate, and distinct from the national
federation. It cites as its legal basis the case of Adamson & Adamson, Inc. v. CIR (127 SCRA 268
[1984]).

It maintains that Rep. Act No. 6715 contemplates the principle laid down by this Court in
the Adamson case interpreting Section 3 of Rep. Act No. 875 (the Industrial Peace Act) on the right
of a supervisor's union to affiliate. The private respondent asserts that the legislature must have
noted the Adamson ruling then prevailing when it conceived the reinstatement in the present Labor
Code of a similar provision on the right of supervisors to organize.

Under the Industrial Peace Act of 1953, employees were classified into three groups, namely: (1)
managerial employees; (2) supervisors; and (3) rank-and file employees. Supervisors, who were
considered employees in relation to their employer could join a union but not a union of rank-and-file
employees.

With the enactment in 1974 of the Labor Code (Pres Decree No. 442), employees were classified
into managerial and rank-and-file employees. Neither the category of supervisors nor their right to
organize under the old statute were recognized. So that, in Bulletin Publishing Corporation
v. Sanchez (144 SCRA 628 [1986]), the Court interpreted the superseding labor law to have
removed from supervisors the right to unionize among themselves. The Court ruled:
 In the light of the factual background of this case, We are constrained to hold that the
supervisory employees of petitioner firm may not, under the law, form a supervisors
union, separate and distinct from the existing bargaining unit (BEU), composed of the
rank-and-file employees of the Bulletin Publishing Corporation. It is evident that most
of the private respondents are considered managerial employees. Also, it is distinctly
stated in Section 11, Rule II, of the Omnibus Rules Implementing the Labor Code,
that supervisory unions are presently no longer recognized nor allowed to exist and
operate as such. (pp. 633, 634)

In Section 11, Rule II, Book V of the Omnibus Rules implementing Pres. Decree No. 442, the
supervisory unions existing since the effectivity of the New Code in January 1, 1975 ceased to
operate as such and the members who did not qualify as managerial employees under this definition
in Article 212 (k) therein became eligible to form, to join or assist a rank-and-file union.

A revision of the Labor Code undertaken by the bicameral Congress brought about the enactment of
Rep. Act No. 6715 in March 1989 in which employees were reclassified into three groups, namely:
(1) the managerial employees; (2) supervisors; and (3) the rank and file employees. Under the
present law, the category of supervisory employees is once again recognized. Hence, Art. 212 (m)
states:

(m) . . . Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is
not merely routinary or clerical in nature but requires the use of independent
judgment. . . .

The rationale for the amendment is the government's recognition of the right of supervisors to
organize with the qualification that they shall not join or assist in the organization of rank-and-file
employees. The reason behind the Industrial Peace Act provision on the same subject matter has
been adopted in the present statute. The interests of supervisors on the one hand, and the rank-and-
file employees on the other, are separate and distinct. The functions of supervisors,
being recommendatory in nature, are more identified with the interests of the employer. The
performance of those functions may, thus, run counter to the interests of the rank-and-file.

This intent of the law is made clear in the deliberations of the legislators on then Senate Bill 530 now
enacted as Rep. Act No. 6715.

The definition of managerial employees was limited to those having authority to hire and fire while
those who only recommend effectively the hiring or firing or transfers of personnel would be
considered as closer to rank-and-file employees. The exclusion, therefore, of middle level executives
from the category of managers brought about a third classification, the supervisory employees.
These supervisory employees are allowed to form their own union but they are not allowed to join
the rank-and-file union because of conflict of interest (Journal of the Senate, First Regular Session,
1987, 1988, Volume 3,
p. 2245).

In terms of classification, however, while they are more closely identified with the rank-and-file they
are still not allowed to join the union of rank-and-file employees. To quote the Senate Journal:

In reply to Sen. Guingona's query whether "supervisors" are included in the term
"employee", Sen. Herrera stated that while they are considered as rank-and-file
employees, they cannot join the union and they would have to form their own
supervisors' union pursuant to Rep. Act 875. (supra, p. 2288)
The peculiar role of supervisors is such that while they are not managers, when they recommend
action implementing management policy or ask for the discipline or dismissal of subordinates, they
identify with the interests of the employer and may act contrary to the interests of the rank-and-file.

We agree with the petitioner's contention that a conflict of interest may arise in the areas of
discipline, collective bargaining and strikes.

Members of the supervisory union might refuse to carry out disciplinary measures against their co-
member rank-and-file employees.

In the area of bargaining, their interests cannot be considered identical. The needs of one are
different from those of the other. Moreover, in the event of a strike, the national federation might
influence the supervisors' union to conduct a sympathy strike on the sole basis of affiliation.

More important, the factual issues in the Adamson case are different from the present case. First,
the rank-and-file employees in the Adamson case are not directly under the supervisors who
comprise the supervisors' union. In the case at bar, the rank-and file employees are directly under
the supervisors organized by one and the same federation.

The contemplation of the law in Sec. 3 of the Industrial Peace Act is to prohibit supervisors from
joining a labor organization of employees under their supervision. Sec. 3 of the Industrial Peace Act
provides:

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

This was not the consideration in the Adamson case because as mentioned earlier, the rank-and-file
employees in the Adamson case were not under the supervision of the supervisors involved.

Meanwhile, Article 245 of the Labor Code as amended by Rep. Act No. 6715 provides:

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

The Court construes Article 245 to mean that, as in Section 3 of the Industrial Peace Act,
supervisors shall not be given an occasion to bargain together with the rank-and-file against the
interests of the employer regarding terms and conditions of work

Second, the national union in the Adamson case did not actively represent its local chapters. In the
present case, the local union is actively represented by the national federation. In fact, it was the
national federation, the KAMPIL-KATIPUNAN, which initially filed a petition for certification in behalf
of the respondent union.
Thus, if the intent of the law is to avoid a situation where supervisors would merge with the rank and-
file or where the supervisors' labor organization would represent conflicting interests, then a local
supervisors' union should not be allowed to affiliate with the national federation of union of rank-and-
file employees where that federation actively participates in union activity in the company.

The petitioner further contends that the term labor organization includes a federation considering
that Art. 212 (g) mentions "any union or association of employees."

The respondent, however, argues that the phrase refers to a local union only in which case, the
prohibition in Art. 245 is inapplicable to the case at bar.

The prohibition against a supervisors' union joining a local union of rank-and-file is replete with
jurisprudence. The Court emphasizes that the limitation is not confined to a case of supervisors
wanting to join a rank-and-file local union. The prohibition extends to a supervisors' local union
applying for membership in a national federation the members of which include local unions of rank-
and-file employees. The intent of the law is clear especially where, as in the case at bar, the
supervisors will be co-mingling with those employees whom they directly supervise in their own
bargaining unit.

Technicalities should not be allowed to stand in the way of equitably and completely resolving the
rights and obligations of the parties. (Rapid Manpower Consultants, Inc. v. NLRC, 190 SCRA 747
[1990]) What should be paramount is the intent behind the law, not its literal construction. Where one
interpretation would result in mischievous consequences while another would bring about equity,
justice, and the promotion of labor peace, there can be no doubt as to what interpretation shall
prevail.

Finally, the respondent contends that the law prohibits the employer from interfering with the
employees' right to self-organization.

There is no question about this intendment of the law. There is, however, in the present case, no
violation of such a guarantee to the employee. Supervisors are not prohibited from forming their own
union. What the law prohibits is their membership in a labor organization of rank-and-file employees
(Art. 245, Labor Code) or their joining a national federation of rank-and-file employees that includes
the very local union which they are not allowed to directly join.

In a motion dated November 15, 1991 it appears that the petitioner has knuckled under to the
respondents' pressures and agreed to let the national federation KAMPIL-KATIPUNAN represent its
supervisors in negotiating a collective bargaining agreement. Against the advise of its own counsel
and on the basis of alleged "industrial peace", the petitioner expressed a loss of interest in pursuing
this action. The petitioner is, of course, free to grant whatever concessions it wishes to give to its
employees unilaterally or through negotiations but we cannot allow the resulting validation of an
erroneous ruling and policy of the Department of Labor and Employment (DOLE) to remain on the
basis of the petitioner's loss of interest. The December 14, 1990 order and the November 21, 1990
resolution of DOLE are contrary to law and must be declared as such.

WHEREFORE, the petition is hereby GRANTED. The private respondent is disqualified from
affiliating with a national federation of labor organizations which includes the petitioner's rank-and-file
employees.

SO ORDERED.
 [G.R. No. 102084. August 12, 1998]

DE LA SALLE UNIVERSITY MEDICAL CENTER AND COLLEGE OF

MEDICINE, petitioner, vs. HON. BIENVENIDO E. LAGUESMA,
Undersecretary of Labor and Employment; ROLANDO S. DE LA
CRUZ, Med-Arbiter Regional Office No. IV, DE LA SALLE
UNIVERSITY MEDICAL CENTER AND COLLEGE OF MEDICINE
SUPERVISORY UNION-FEDERATION OF FREE
WORKERS, respondents.

DECISION
MENDOZA, J.:

Petitioner De La Salle University Medical Center and College of Medicine

(DLSUMCCM) is a hospital and medical school at Dasmarias, Cavite. Private respondent
Federation of Free WorkersDe La Salle University Medical Center and College of
Medicine Supervisory Union Chapter (FFW-DLSUMCCMSUC), on the other hand, is a
labor organization composed of the supervisory employees of petitioner DLSUMCCM.
On April 17, 1991, the Federation of Free Workers (FFW), a national federation of
labor unions, issued a certificate to private respondent FFW-DLSUMCCMSUC
recognizing it as a local chapter. On the same day, it filed on behalf of private respondent
FFW-DLSUMCCMSUC a petition for certification election among the supervisory
employees of petitioner DLSUMCCM. Its petition was opposed by petitioner DLSUMCCM
on the grounds that several employees who signed the petition for certification election
were managerial employees and that the FFW-DLSUMCCMSUC was composed of both
supervisory and rank-and-file employees in the company.[1]
In its reply dated May 22, 1991, private respondent FFW-DLSUMCCMSUC denied
petitioners allegations. It contended that
2. Herein petition seeks for the holding of a certification election among the
supervisory employees of herein respondent. It does not intend to include managerial
employees.

....

6. It is not true that supervisory employees are joining the rank-and-file

employees union. While it is true that both regular rank-and-file employees
and supervisory employees of herein respondent have affiliated with FFW, yet
there are two separate unions organized by FFW. The supervisory employees
have a separate charter certificate issued by FFW.[2]
 On July 5, 1991, respondent Rolando S. de la Cruz, med-arbiter of the Department
of Labor and Employment Regional Office No. IV, issued an order granting respondent
unions petition for certification election. He said:

. . . . [petitioner] . . . claims that based on the job descriptions which will be

presented at the hearing, the covered employees who are considered
managers occupy the positions of purchasing officers, personnel officers,
property officers, cashiers, heads of various sections and the like.

[Petitioner] also argues that assuming that some of the employees concerned
are not managerial but mere supervisory employees, the Federation of Free
Workers (FFW) cannot extend a charter certificate to this group of employees
without violating the express provision of Article 245 which provides that
supervisory employees shall not be eligible for membership in a labor
organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own because the FFW had similarly
issued a charter certificate to its rank-and-file employees.

....

In its position paper, [petitioner] stated that most, if not all, of the employees
listed in . . . the petition are considered managerial employees, thereby
admitting that it has supervisory employees who are undoubtedly qualified to
join or form a labor organization of their own. The record likewise shows that
[petitioner] promised to present the job descriptions of the concerned
employees during the hearing but failed to do so. Thus, this office has no
basis in determining at this point in time who among them are considered
managerial or supervisory employees. At any rate, there is now no question
that [petitioner] has in its employ supervisory employees who are qualified to
join or form a labor union. Consequently, this office is left with no alternative
but to order the holding of certification election pursuant to Article 257 of the
Labor Code, as amended, which mandates the holding of certification election
if a petition is filed by a legitimate labor organization involving an unorganized
establishment, as in the case of herein respondent.

As to the allegation of [petitioner] that the act of the supervisory employees in

affiliating with FFW to whom the rank-and-file employees are also affiliated is
violative of Article 245 of the Labor Code, suffice it to state that the two groups
are considered separate bargaining units and local chapters of FFW. They
are, for all intents and purposes, separate with each other and their affiliation
with FFW would not make them members of the same labor union. This must
be the case because it is settled that the locals are considered the basic unit
or principal with the labor federation assuming the role of an agent. The mere
fact, therefore, that they are represented by or under the same agent is of no
moment. They are still considered separate with each other.[3]

On July 30, 1991, petitioner DLSUMCCM appealed to the Secretary of Labor and
Employment, citing substantially the same arguments it had raised before the med-
arbiter. However, its appeal was dismissed. In his resolution, dated August 30, 1991,
respondent Undersecretary of Labor and Employment Bienvenido E. Laguesma found
the evidence presented by petitioner DLSUMCCM concerning the alleged managerial
status of several employees to be insufficient. He also held that, following the ruling of
this Court in Adamson & Adamson, Inc. v. CIR,[4] unions formed independently by
supervisory and rank-and-file employees of a company may legally affiliate with the same
national federation.
Petitioner moved for a reconsideration but its motion was denied. In his order dated
September 19, 1991, respondent Laguesma stated:

We reviewed the records once more, and find that the issues and arguments
adduced by movant have been squarely passed upon in the Resolution
sought to be reconsidered.Accordingly, we find no legal justification to alter,
much less set aside, the aforesaid resolution. Perforce, the motion for
reconsideration must fail.

WHEREFORE, the instant motion for reconsideration is hereby denied for lack
of merit and the resolution of this office dated 30 August 1991 STANDS.

No further motions of a similar nature shall hereinafter be entertained.[5]

Hence, this petition for certiorari.

Petitioner DLSUMCCM contends that respondent Laguesma gravely abused his
discretion. While it does not anymore insist that several of those who joined the petition
for certification election are holding managerial positions in the company, petitioner
nonetheless pursues the question whether unions formed independently by supervisory
and rank-and-file employees of a company may validly affiliate with the same national
federation. With respect to this question, it argues:

THE PUBLIC RESPONDENT, HONORABLE BIENVENIDO E. LAGUESMA,

UNDERSECRETARY OF LABOR AND EMPLOYMENT, IN A CAPRICIOUS,
ARBITRARY AND WHIMSICAL EXERCISE OF POWER ERRED AND
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO ACTING
WITHOUT OR IN EXCESS OF JURISDICTION WHEN HE DENIED THE
PETITIONERS APPEAL AND ORDERED THE HOLDING OF A CERTIFICATION
ELECTION AMONG THE MEMBERS OF THE SUPERVISORY UNION EMPLOYED
IN PETITIONERS COMPANY DESPITE THE FACT THAT SAID SUPERVISORY
UNION WAS AFFILIATED WITH THE FEDERATION OF FREE WORKERS TO
 WHICH THE RANK-AND-FILE EMPLOYEES OF THE SAME COMPANY ARE
LIKEWISE AFFILIATED, CONTRARY TO THE EXPRESS PROVISIONS OF
ARTICLE 245 OF THE LABOR CODE, AS AMENDED.[6]

The contention has no merit.

Supervisory employees have the right to self-organization as do other classes of
employees save only managerial ones. The Constitution states that the right of the
people, including those employed in the public and private sectors, to form unions,
associations or societies for purposes not contrary to law, shall not be abridged. [7] As we
recently held in UnitedPepsi-Cola Supervisory Union v. Laguesma,[8] the framers of the
Constitution intended, by this provision, to restore the right of supervisory employees to
self-organization which had been withdrawn from them during the period of martial
law. Thus:

Commissioner Lerum sought to amend the draft of what was later to become
Art. III, 8 of the present Constitution:

....

MR. LERUM. . . . Also, we have unions of supervisory employees and of

security guards. But what is tragic about this is that after the 1973 Constitution
was approved and in spite of an express recognition of the right to organize in
P.D. No. 442, known as the Labor Code, the right of government workers,
supervisory employees and security guards to form unions was abolished.

....

We are afraid that without any corresponding provision covering the private
sector, the security guards, the supervisory employees ... will still be excluded
and that is the purpose of this amendment.

....

In sum, Lerums proposal to amend Art. III, 8 of the draft Constitution by

including labor unions in the guarantee of organizational right should be taken
in the context of statements that his aim was the removal of the statutory ban
against security guards and supervisory employees joining labor
organizations. The approval by the Constitutional Commission of his proposal
can only mean, therefore, that the Commission intended the absolute right to
organize of government workers, supervisory employees, and security guards
to be constitutionally guaranteed.[9]
 Conformably with the constitutional mandate, Art. 245 of the Labor Code now
provides for the right of supervisory employees to self-organization, subject to the
limitation that they cannot join an organization of rank-and-file employees:

Supervisory employees shall not be eligible for membership in a labor

organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own.

The reason for the segregation of supervisory and rank-and-file employees of a

company with respect to the exercise of the right to self-organization is the difference in
their interests.Supervisory employees are more closely identified with the employer than
with the rank-and-file employees. If supervisory and rank-and-file employees in a
company are allowed to form a single union, the conflicting interests of these groups
impair their relationship and adversely affect discipline, collective bargaining, and
strikes.[10] These consequences can obtain not only in cases where supervisory and rank-
and-file employees in the same company belong to a single union but also where unions
formed independently by supervisory and rank-andfile employees of a company are
allowed to affiliate with the same national federation. Consequently, this Court has held
in Atlas Lithographic Services Inc. v. Laguesma[11] that -

To avoid a situation where supervisors would merge with the rank-and-file or

where the supervisors labor organization would represent conflicting interests,
then a local supervisors union should not be allowed to affiliate with a national
federation of unions of rank-and-file employees where that federation actively
participates in union activities in the company.

As we explained in that case, however, such a situation would obtain only where two
conditions concur: First, the rank-and-file employees are directly under the authority of
supervisory employees.[12] Second, the national federation is actively involved in union
activities in the company.[13] Indeed, it is the presence of these two conditions which
distinguished Atlas Lithographic Services, Inc. v. Laguesma from Adamson & Adamson,
Inc. v. CIR[14] where a different conclusion was reached.
The affiliation of two local unions in a company with the same national federation is
not by itself a negation of their independence since in relation to the employer, the local
unions are considered as the principals, while the federation is deemed to be merely their
agent. This conclusion is in accord with the policy that any limitation on the exercise by
employees of the right to self-organization guaranteed in the Constitution must be
construed strictly. Workers should be allowed the practice of this freedom to the extent
recognized in the fundamental law. As held in Liberty Cotton Mills Workers Union v.
Liberty Cotton Mills, Inc.:[15]

The locals are separate and distinct units primarily designed to secure and maintain an
equality of bargaining power between the employer and their employee members in the
economic struggle for the fruits of the joint productive effort of labor and capital; and the
association of locals into the national unionwas in furtherance of the same end. These
associations are consensual entities capable of entering into such legal relations with
their members. The essential purpose was the affiliation of the local unions into a
common enterprise to increase by collective action the common bargaining power in
respect of the terms and conditions of labor. Yet the locals remained the basic units of
association, free to serve their own and the common interest of all, and free also to
renounce the affiliation for mutual welfare upon the terms laid down in the agreement
which brought it to existence.[16]

The questions in this case, therefore, are whether the rank-and-file employees of
petitioner DLSUMCCM who compose a labor union are directly under the supervisory
employees whose own union is affiliated with the same national federation (Federation of
Free Workers) and whether such national federation is actively involved in union activities
in the company so as to make the two unions in the same company, in reality, just one
union.
Although private respondent FFW-DLSUMCCMSUC and another union composed of
rank-and-file employees of petitioner DLSUMCCM are indeed affiliated with the same
national federation, the FFW, petitioner DLSUMCCM has not presented any evidence
showing that the rank-and-file employees composing the other union are directly under
the authority of the supervisory employees. As held in Adamson & Adamson, Inc. v.
CIR,[17] the fact that the two groups of workers are employed by the same company and
the fact that they are affiliated with a common national federation are not sufficient to
justify the conclusion that their organizations are actually just one. Their immediate
professional relationship must be established. To borrow the language of Adamson &
Adamson, Inc. v. CIR:[18]

We find without merit the contention of petitioner that if affiliation will be

allowed, only one union will in fact represent both supervisors and rank-and-
file employees of the petitioner; that there would be an indirect affiliation of
supervisors and rank-andfile employees with one labor organization; that
there would be a merging of the two bargaining units; and that the respondent
union will lose its independence because it becomes an alter ego of the
federation.[19]

Mention has already been made of the fact that the petition for certification election
in this case was filed by the FFW on behalf of the local union. This circumstance, while
showing active involvement by the FFW in union activities at the company, is by itself
insufficient to justify a finding of violation of Art. 245 since there is no proof that the
supervisors who compose the local union have direct authority over the rank-and-file
employees composing the other local union which is also affiliated with the FFW. This
fact differentiates the case from Atlas Lithographic Services, Inc. v. Laguesma,[20] in
which, in addition to the fact that the petition for certification election had been filed by the
national federation, it was shown that the rank-and-file employees were directly under the
supervisors organized by the same federation.
It follows that respondent labor officials did not gravely abuse their discretion.
 WHEREFORE, the petition is DISMISSED.
SO ORDERED.

[G.R. No. 122226. March 25, 1998]

UNITED PEPSI-COLA SUPERVISORY UNION (UPSU), petitioner, vs.

HON. BIENVENIDO E. LAGUESMA and PEPSI-COLA PRODUCTS,
PHILIPPINES, INC. respondents.

DECISION
MENDOZA, J.:

Petitioner is a union of supervisory employees. It appears that on March 20, 1995 the
union filed a petition for certification election on behalf of the route managers at Pepsi-
Cola Products Philippines, Inc. However, its petition was denied by the med-arbiter and,
on appeal, by the Secretary of Labor and Employment, on the ground that the route
managers are managerial employees and, therefore, ineligible for union membership
under the first sentence of Art. 245 of the Labor Code, which provides:

Ineligibility of managerial employees to join any labor organization; right of

supervisory employees. Managerial employees are not eligible to join, assist
or form any labor organization.Supervisory employees shall not be eligible for
membership in a labor organization of the rank-and-file employees but may
join, assist or form separate labor organizations of their own.

Petitioner brought this suit challenging the validity of the order dated August 31, 1995,
as reiterated in the order dated September 22, 1995, of the Secretary of Labor and
Employment.Its petition was dismissed by the Third Division for lack of showing that
respondent committed grave abuse of discretion. But petitioner filed a motion for
reconsideration, pressing for resolution its contention that the first sentence of Art. 245 of
the Labor Code, so far as it declares managerial employees to be ineligible to form, assist
or join unions, contravenes Art. III 8 of the Constitution which provides:

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

For this reason, the petition was referred to the Court en banc.
The Issues in this Case

Two question are presented by the petition: (1) whether the route managers at Pepsi-
Cola Products Philippines, Inc. are managerial employees and (2) whether Art. 245,
insofar as it prohibits managerial employees from forming, joining or assisting labor
unions, violates Art. III, 8 of the Constitution.
In resolving these issues it would be useful to begin by defining who are managerial
employees and considering the types of managerial employees.

Types of Managerial Employees

The term manager generally refers to anyone who is responsible for subordinates
and other organization resources.[1] As a class, managers constitute three levels of a
pyramid:

Top Management

_________________

Middle Management

_________________

First Line

Management

(also called Supervisor)

____________________

____________________

Operatives

Or Operating Employees

FIRST-LINE MANAGERS The lowest level in an organization at which

individuals are responsible for the work of others is called first-line or first-level
management. First-line managers direct operating employees only; they do
not supervise other managers. Example of first-line managers are the foreman
or production supervisor in a manufacturing plant, the technical supervisor in a
research department, and the clerical supervisor in a large office. First-level
managers are often called supervisors.

MIDDLE MANAGERS The term middle management can refer to more than
one level in an organization. Middle managers direct the activities of other
managers and sometimes also those of operating employees. Middle
managers principal responsibilities are to direct the activities that implement
their organizations policies and to balance the demands of their superiors with
the capacities of their subordinates. A plant manager in an electronics firm is
an example of a middle manager.

TOP MANAGERS Composed of a comparatively small group of

executives, top management is responsible for the overall management of the
organization. It establishes operating policies and guides the organizations
interactions with its environment. Typical titles of top managers are chief
executive officer, president, and senior vice-president. Actual titles vary from
one organization to another and are not always a reliable guide to
membership in the highest management classification.[2]

As can be seen from this description, a distinction exist between those who have the
authority to devise, implement and control strategic and operational policies (top and
middle managers) and those whose task is simply to ensure that such polices are carried
out by the rank-and-file employees of an organization (first-level
managers/supervisors). What distinguishes them from the rank-and file employees is that
they act in the interest of the employer in supervising such rank-and-file employees.
Managerial employees may therefore be said to fall into two distinct categories: the
managers per se, who compose the former group described above, and the supervisors
who form the latter group. Whether they belong to the first or second category, managers,
vis--vis employers, are, likewise, employees.[3]
The first question is whether route managers are managers are managerial
employees or supervisors.

Previous Administrative Determinations of the Question Whether Route Managers are Managerial Employees

It appears that this question was the subject of two previous determinations by the
Secretary of Labor and Employment, in accordance with which this case was decided by
the med-arbiter.
In Case No. OS-MA-10318-91, entitled Workerss Alliance Trade Union (WATU) v.
Pepsi-Cola Products Philippines, Inc., decided on November 13, 1991, the Secretary of
Labor found:
We examined carefully the pertinent job description of the subject employees
and other documentary evidence on record vis--vis paragraph (m), Article 212
of the Labor Code, as amended, and we find that only those employees
occupying the position of route manager and accounting manager are
managerial employees. The rest i.e. quality control manager, yard/transport
manager and warehouse operations manager are supervisory employees.

To qualify as managerial employee, there must be a clear showing of the

exercise of managerial attributes under paragraph (m), Article 212 of the
Labor Code as amended. Designations or titles of positions are not
controlling. In the instant case, nothing on record will support the claim that
the quality control manager, yard/transport manager and warehouse
operations manager are vested with said attributes. The warehouse
operations manager, for example, merely assists the plant finance manager in
planning, organizing, directing and controlling all activities relative to
development and implementation of an effective management control
information system at the sale offices. The exercise of authority of the quality
control manager, on the other hand, needs the concurrence of the
manufacturing manager

As to the route managers and accounting manager, we are convinced that

they are managerial employees. Their job descriptions clearly reveal so.

On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92, entitled In
Re: Petition for Direct Certification and/or Certification Election-Route
Managers/Supervisory Employees of Pepsi-Cola Products Phils. Inc., as follows:

The issue brought before us is not of first impression. At one time, we had the
occasion to rule upon the status of route manager in the same company vis a
vis the issue as to whether or not it is supervisory employee or a managerial
employee. In the case of Workers Alliance Trade Unions (NATU) vs. Pepsi
Cola Products, Phils., Inc. (OS-MA-A-10-318-91), 15 November 1991, we
ruled that a route manager is a managerial employee within the context of the
definition of the law, and hence, ineligible to join, form or assist a union. We
have once more passed upon the logic of our Decision aforecited in the light
of the issues raised in the instant appeal, as well as the available
documentary evidence on hand, and have come to the view that there is no
cogent reason to depart from our earlier holding. Route Managers are, by the
very nature of their functions and the authority they wield over their
subordinates, managerial employees.The prescription found in Art. 245 of the
Labor Code, as amended therefore, clearly applies to them.[4]4
 Citing our ruling in Nasipit Lumber Co. v. National Labor Relations Commission,[5]5
however, petitioner argues that these previous administrative determinations do not have
the effect of res judicata in this case, because "labor relations proceedings" are "non-
litigious and summary in nature without regard to legal technicalities." [6] Nasipit Lumber
Co. involved a clearance to dismiss an employee issued by the Department of Labor. The
question was whether in a subsequent proceeding for illegal dismissal, the clearance
was res judicata. In holding it was not, this Court made it clear that it was referring to labor
relations proceedings of a non-adversary character, thus:

The requirement of a clearance to terminate employment was a creation of

the Department of labor to carry out the Labor Code provisions on security of
tenure and termination of employment. The proceeding subsequent to the
filing of an application for clearance to terminate employment was outlined in
Book V, Rule XIV of the Rules and Regulations Implementing the Labor
Code. The fact that said rule allowed a procedure for the approval of the
clearance with or without the opposition of the employee concerned (Secs. 7
& 8), demonstrates the non-litigious and summary nature of the
proceeding. The clearance requirement was therefore necessary only as an
expeditious shield against arbitrary dismissal without the knowledge and
supervision of the Department of Labor. Hence, a duly approved clearance
implied that the dismissal was legal or for cause (Sec. 2).[7]v. National Labor
Relations Commission, 177 SCRA 93, 100 (1989).7

But the doctrine of res judicata certainly applies to adversary administrative

proceedings. As early as 1956, in Brillantes v. Castro,[8]8 we sustained the dismissal of
an action by a trial court on the basis of a prior administrative determination of the same
case by the Wage Administration Service, applying the principle of res judicata. Recently,
in Abad v. NLRC[9]9 we applied the related doctrine of stare decisis in holding that the
prior determination that certain jobs at the Atlantic Gulf and Pacific Co. were project
employments was binding in another case involving another group of employees of the
same company. Indeed, in Nasipit Lumber Co., this Court clarified toward the end of its
opinion that "the doctrine of res judicata applies . . . to judicial or quasi judicial
proceedings and not to the exercise of administrative powers." [10]v. National Labor
Relations Commission, supra note 7.10 Now proceedings for certification election, such
as those involved in Case No. OS-M-A-10-318-91 and Case No. OS-A-3-71-92, are quasi
judicial in nature and, therefore, decisions rendered in such proceedings can attain
finality.[11]v. B.F. Goodrich (Marikina Factory) Confidential and Salaries Employees Union-
NATU, 49 SCRA 532 (1973).11
Thus, we have in this case an expert's view that the employees concerned are
managerial employees within the purview of Art. 212 which provides:

(m) "managerial employee" is one who is vested with powers or prerogatives

to lay down and execute management policies and/or to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use
of independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.

At the very least, the principle of finality of administrative determination compels respect
for the finding of the Secretary of Labor that route managers are managerial employees
as defined by law in the absence of anything to show that such determination is without
substantial evidence to support it. Nonetheless, the Court, concerned that employees who
are otherwise supervisors may wittingly or unwittingly be classified as managerial
personnel and thus denied the right of self- organization, has decided to review the record
of this case.

DOLE's Finding that Route Managers are Managerial Employees Supported by Substantial Evidence in the Record

The Court now finds that the job evaluation made by the Secretary of Labor is indeed
supported by substantial evidence. The nature of the job of route managers is given in a
four-page pamphlet, prepared by the company, called "Route Manager Position
Description," the pertinent parts of which read:

A. BASIC PURPOSE

A Manager achieves objectives through others.

As a Route Manager, your purpose is to meet the sales plan; and you
achieve this objective through the skillful MANAGEMENT OF YOUR
JOB AND THE MANAGEMENT OF YOUR PEOPLE.

These then are your functions as Pepsi-Cola Route Manager. Within

these functions - managing your job and managing your people - you
are accountable to your District Manager for the execution and
completion of various tasks and activities which will make it possible
for you to achieve your sales objectives.

B. PRINCIPAL ACCOUNTABILITIES

1.0 MANAGING YOUR JOB

The Route Manager is accountable for the following:

1.1 SALES DEVELOPMENT

 1.1.1 Achieve the sales plan.

1.1.2 Achieve all distribution and new account objectives.

1.1.3 Develop new business opportunities thru personal contacts

with dealers.

1.1.4 Inspect and ensure that all merchandizing [sic] objectives are
achieved in all outlets.

1.1.5 maintain and improve productivity of all cooling equipment

and kiosks.

1.1.6 Execute and control all authorized promotions.

1.1.7 Develop and maintain dealer goodwill.

1.1.8 Ensure all accounts comply with company suggested retail

pricing.

1.1.9 Study from time to time individual route coverage and

productivity for possible adjustments to maximize utilization
of resources.

1.2 Administration

1.2.1 Ensure the proper loading of route trucks before check-out

and the proper sorting of bottles before check-in.

1.2.2 Ensure the upkeep of all route sales reports and all other
related reports and forms required on an accurate and
timely basis.

1.2.3 Ensure proper implementation of the various company

policies and procedures incl. but not limited to shakedown;
route shortage; progressive discipline; sorting; spoilages;
credit/collection; accident; attendance.

1.2.4 Ensure collection of receivables and delinquent accounts.

2.0 MANAGING YOUR PEOPLE

The Route Manager is accountable for the following:

2.1 Route Sales Team Development

2.1.1 Conduct route rides to train, evaluate and develop all

assigned route salesmen and helpers at least 3 days a
week, to be supported by required route ride
documents/reports & back check/spot check at least 2 days
a week to be supported by required documents/reports.

2.1.2 Conduct sales meetings and morning huddles. Training

should focus on the enhancement of effective sales and
merchandizing [sic] techniques of the salesmen and
helpers. Conduct group training at least 1 hour each week
on a designated day and of specific topic.

2.2 Code of Conduct

2.2.1 Maintain the company's reputation through strict adherence

to PCPPI's code of conduct and the universal standards of
unquestioned business ethics.[12]12

Earlier in this opinion, reference was made to the distinction between managers per
se (top managers and middle managers) and supervisors (first-line managers). That
distinction is evident in the work of the route managers which sets them apart from
supervisors in general. Unlike supervisors who basically merely direct operating
employees in line with set tasks assigned to them, route managers are responsible for
the success of the company's main line of business through management of their
respective sales teams. Such management necessarily involves the planning, direction,
operation and evaluation of their individual teams and areas which the work of
supervisors does not entail.
The route managers cannot thus possibly be classified as mere supervisors because
their work does not only involve, but goes far beyond, the simple direction or supervision
of operating employees to accomplish objectives set by those above them. They are not
mere functionaries with simple oversight functions but business administrators in their
own right. An idea of the role of route managers as managers per se can be gotten from
a memo sent by the director of metro sales operations of respondent company to one of
the route managers. It reads:[13]

03 April 1995

To : CESAR T. REOLADA

From : REGGIE M. SANTOS

Subj : SALARY INCREASE

Effective 01 April 1995, your basic monthly salary of P11,710 will be

increased to P12,881 or an increase of 10%. This represents the added
managerial responsibilities you will assume due to the recent restructuring
and streamlining of Metro Sales Operations brought about by the
continuous losses for the last nine (9) months.

Let me remind you that for our operations to be profitable, we have to

sustain the intensity and momentum that your group and yourself have
shown last March. You just have to deliver the desired volume targets,
better negotiated concessions, rationalized sustaining deals,
eliminate or reduced overdues, improved collections, more cash
accounts, controlled operating expenses, etc. Also, based on the
agreed set targets, your monthly performance will be closely monitored.

You have proven in the past that your capable of achieving your
targets thru better planning, managing your group as a fighting team,
and thru aggressive selling. I am looking forward to your success
and I expect that you just have to exert your doubly best in turning
around our operations from a losing to a profitable one!

Happy Selling!!

(Sgd.) R.M. SANTOS

The plasticized card given to route managers, quoted in the separate opinion
of Justice Vitug, although entitled "RM's Job Description," is only a summary of
performance standards. It does not show whether route managers are managers per
se or supervisors. Obviously, these performance standards have to be related to the
specific tasks given to route managers in the four-page "Route Manager Position
Description," and, when this is done, the managerial nature of their jobs is fully
revealed. Indeed, if any, the card indicates the great latitude and discretion given to route
managers - from servicing and enhancing company goodwill to supervising and auditing
accounts, from trade (new business) development to the discipline, training and
monitoring of performance of their respective sales teams, and so forth, - if they are to
fulfill the company's expectations in the "key result areas."
Article 212(m) says that "supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of such
authority is not merely routinary or clerical in nature but requires the use of independent
judgment." Thus, their only power is to recommend. Certainly, the route managers in this
case more than merely recommend effective management action. They perform
operational, human resource, financial and marketing functions for the company, all of
which involve the laying down of operating policies for themselves and their teams. For
example, with respect to marketing, route managers, in accordance with B.1.1.1 to
B.1.1.9 of the Route Managers Job Description, are charged, among other things, with
expanding the dealership base of their respective sales areas, maintaining the goodwill
of current dealers, and distributing the company's various promotional items as they see
fit. It is difficult to see how supervisors can be given such responsibility when this involves
not just the routine supervision of operating employees but the protection and expansion
of the company's business vis-a-vis its competitors.
While route managers do not appear to have the power to hire and fire people (the
evidence shows that they only "recommended" or "endorsed" the taking of disciplinary
action against certain employees), this is because this is a function of the Human
Resources or Personnel Department of the company.[14]14 And neither should it be
presumed that just because they are given set benchmarks to observe, they are ipso
facto supervisors. Adequate control methods (as embodied in such concepts as
"Management by Objectives [MBO]" and "performance appraisals") which require
a delineation of the functions and responsibilities of managers by means of ready
reference cards as here, have long been recognized in management as effective tools for
keeping businesses competitive.
This brings us to the second question, whether the first sentence of Art. 245 of the
Labor Code, prohibiting managerial employees from forming, assisting or joining any
labor organization, is constitutional in light of Art. III, 8 of the Constitution which provides:

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

As already stated, whether they belong to the first category (managers per se) or the
second category (supervisors), managers are employees. Nonetheless, in the United
States, as Justice Puno's separate opinion notes, supervisors have no right to form
unions. They are excluded from the definition of the term "employee" in 2(3) of the Labor-
Management Relations Act of 1947.[15]v. Bell Aerospace Co., 416 U.S. 281, n 11, 40
L.Ed.2d 134, 147, n. 11 (1974), thus:
Supervisors are management people. They have distinguished themselves in their work. They have
demonstrated their ability to take care of themselves without depending upon the pressure of collective
action. No one forced them to become supervisors. They abandoned the "collective security" of the rank
and file voluntarily, because they believed the opportunities thus opened to them to be more valuable to
them than such "security". It seems wrong, and it is wrong, to subject people of this kind, who have
demonstrated their initiative, their ambition and their ability to get ahead, to the leveling processes of
seniority, uniformity and standardization that the Supreme Court recognizes as being fundamental
principles of unionism. (J.I. Case Co. v. National Labor Relations Board, 321 U.S. 332, 88 L.Ed. 762, 64 S.
Ct. 576 (1994). It is wrong for the foremen, for it discourages the things in them that made them foremen in
the first place. For the same reason, that it discourages those best qualified to get ahead, it is wrong for
industry, and particularly for the future strength and productivity of our country. 15 In the Philippines,
the question whether managerial employees have a right of self-organization has arisen
with respect to first-level managers or supervisors, as shown by a review of the course of
labor legislation in this country.
Right of Self-Organization of Managerial Employees under Pre-Labor Code Laws

Before the promulgation of the Labor Code in 1974, the field of labor relations was
governed by the Industrial Peace Act (R.A. No. 875).
In accordance with the general definition above, this law defined "supervisor" as
follows:

SECTION 2. . . .

(k) "Supervisor" means any person having authority in the interest of an

employer, to hire, transfer, suspend, lay-off, recall, discharge, assign,
recommend, or discipline other employees, or responsibly to direct them, and
to adjust their grievances, or effectively to recommend such acts, if, in
connection with the foregoing, the exercise of such authority is not of a merely
routinary or clerical nature but requires the use of independent judgment.[16]16

The right of supervisors to form their own organizations was affirmed:

SEC. 3. Employees' Right to Self-Organization. -- Employees shall have the

right to self-organization and to form, join or assist labor organizations of their
own choosing for the purpose of collective bargaining through representatives
of their own choosing and to engage in concerted activities for the purpose of
collective bargaining and other mutual aid and protection. Individuals
employed as supervisors shall not be eligible for membership in a labor
organization of employees under their supervision but may form separate
organizations of their own.[17]

For its part, the Supreme Court upheld in several of its decisions the right of supervisors
to organize for purposes of labor relations.[18]v. Filoil Supervisory and Confidential
Employees Association, 6 SCRA 522 (1972); Kapisanan ng mga Manggagawa sa Manila
Railroad Co. v. CIR, 106 Phil 607 (1959).18
Although it had a definition of the term "supervisor," the Industrial Peace Act did not
define the term "manager." But, using the commonly-understood concept of "manager,"
as above stated, it is apparent that the law used the term "supervisors" to refer to the sub-
group of "managerial employees" known as front-line managers. The other sub-group of
"managerial employees," known as managers per se, was not covered.
However, in Caltex Filipino Managers and Supervisors Association v. Court of
Industrial Relations,[19]J.)19 the right of all managerial employees to self-organization was
upheld as a general proposition, thus:

It would be going too far to dismiss summarily the point raised by respondent
Company - that of the alleged identity of interest between the managerial staff
and the employing firm. That should ordinarily be the case, especially so
where the dispute is between management and the rank and file. It does not
necessarily follow though that what binds the managerial staff to the
corporation forecloses the possibility of conflict between them. There could be
a real difference between what the welfare of such group requires and the
concessions the firm is willing to grant. Their needs might not be attended to
then in the absence of any organization of their own. Nor is this to indulge in
empty theorizing. The record of respondent Company, even the very case
cited by it, is proof enough of their uneasy and troubled relationship. Certainly
the impression is difficult to erase that an alien firm failed to manifest
sympathy for the claims of its Filipino executives. To predicate under such
circumstances that agreement inevitably marks their relationship, ignoring that
discord would not be unusual, is to fly in the face of reality.

. . . The basic question is whether the managerial personnel can

organize. What respondent Company failed to take into account is that the
right to self-organization is not merely a statutory creation. It is fortified by our
Constitution. All are free to exercise such right unless their purpose is contrary
to law. Certainly it would be to attach unorthodoxy to, not to say an
emasculation of, the concept of law if managers as such were precluded from
organizing. Having done so and having been duly registered, as did occur in
this case, their union is entitled to all the rights under Republic Act
No. 875. Considering what is denominated as unfair labor practice under
Section 4 of such Act and the facts set forth in our decision, there can be only
one answer to the objection raised that no unfair labor practice could be
committed by respondent Company insofar as managerial personnel is
concerned. It is, as is quite obvious, in the negative.[20]20

Actually, the case involved front-line managers or supervisors only, as the plantilla of
employees, quoted in the main opinion,[21]J.) (emphasis added).21 clearly indicates:

CAFIMSA members holding the following Supervisory Payroll Position

Title are Recognized by the Company

Payroll Position Title

Assistant to Mgr. - National Acct. Sales

Jr. Sales Engineer

Retail Development Asst.

Staff Asst. - 0 Marketing

Sales Supervisor

Supervisory Assistant

Jr. Supervisory Assistant

Credit Assistant

Lab. Supvr. - Pandacan

Jr. Sales Engineer B

Operations Assistant B

Field Engineer

Sr. Opers. Supvr. - MIA A/S

Purchasing Assistant

Jr. Construction Engineer

St. Sales Supervisor

Deport Supervisor A

Terminal Accountant B

Merchandiser

Dist. Sales Prom. Supvr.

Instr. - Merchandising

Asst. Dist. Accountant B

Sr. Opers. Supervisor

Jr. Sales Engineer A

Asst. Bulk Ter. Supt.

Sr. Opers. Supvr.

Credit Supervisor A

Asst. Stores Supvr. A

Ref. Supervisory Draftsman

Refinery Shift Supvr. B

Asst. Supvr. A - Operations (Refinery)

Refinery Shift Supvr. B

Asst. Lab. Supvr. A (Refinery)

St. Process Engineer B (Refinery)

Asst. Supvr. A - Maintenance (Refinery)

Asst. Supvr. B - Maintenance (Refinery)

Supervisory Accountant (Refinery)

Communications Supervisor (Refinery)

Finally, also deemed included are all other employees excluded from the
rank and file unions but not classified as managerial or otherwise
excludable by law or applicable judicial precedents.

Right of Self-Organization of Managerial Employees under the Labor Code

Thus, the dictum in the Caltex case which allowed at least for the theoretical
unionization of top and middle managers by assimilating them with the supervisory group
under the broad phrase "managerial personnel," provided the lynchpin for later laws
denying the right of self-organization not only to top and middle management employees
but to front line managers or supervisors as well. Following the Caltex case, the Labor
Code, promulgated in 1974 under martial law, dropped the distinction between the first
and second sub-groups of managerial employees. Instead of treating the terms
"supervisor" and "manager" separately, the law lumped them together and called them
"managerial employees," as follows:
ART. 212. Definitions . . . .

(k) "Managerial Employee" is one who is vested with powers or prerogatives

to lay down and execute management policies and/or to hire, transfer,
suspend, lay off, recall, discharge, assign or discipline employees, or to
effectively recommend such managerial actions. All employees not falling
within this definition are considered rank and file employees for purposes of
this Book.[22]22

The definition shows that it is actually a combination of the commonly understood

definitions of both groups of managerial employees, grammatically joined by the phrase
"and/or."
This general definition was perhaps legally necessary at that time for two reasons.
First, the 1974 Code denied supervisors their right to self-organize as theretofore
guaranteed to them by the Industrial Peace Act. Second, it stood the dictum in the Caltex
case on its head by prohibiting all types of managers from forming unions. The explicit
general prohibition was contained in the then Art. 246 of the Labor Code.
The practical effect of this synthesis of legal concepts was made apparent in the
Omnibus Rules Implementing the Labor Code which the Department of Labor
promulgated on January 19, 1975. Book V, Rule II, 11 of the Rules provided:

Supervisory unions and unions of security guards to cease operation. - All

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

Members of supervisory unions who do not fall within the definition of

managerial employees shall become eligible to join or assist the rank and file
labor organization, and if none exists, to form or assist in the forming of such
rank and file organization. The determination of who are managerial
employees and who are not shall be the subject of negotiation between
representatives of the supervisory union and the employer. If no agreement is
reached between the parties, either or both of them may bring the issue to the
nearest Regional Office for determination.

The Department of Labor continued to use the term "supervisory unions" despite the
demise of the legal definition of "supervisor" apparently because these were the unions
of front line managers which were then allowed as a result of the statutory grant of the
right of self-organization under the Industrial Peace Act. Had the Department of Labor
seen fit to similarly ban unions of top and middle managers which may have been formed
following the dictum in Caltex, it obviously would have done so. Yet it did not, apparently
because no such unions of top and middle managers really then existed.

Real Intent of the 1986 Constitutional Commission

This was the law as it stood at the time the Constitutional Commission considered
the draft of Art. III, 8. Commissioner Lerum sought to amend the draft of what was later
to become Art. III, 8 of the present Constitution:

MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to

insert between the words "people" and "to" the following: WHETHER
EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS. In other
words, the section will now read as follows: "The right of the people
WHETHER EMPLOYED BY THE STATE OR PRIVATE ESTABLISHMENTS
to form associations, unions, or societies for purposes not contrary to law shall
not be abridged."[23]23

Explaining his proposed amendment, he stated:

MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is
granted to all persons whether or not they are employed in the
government. Under that provision, we allow unions in the government, in
government-owned and controlled corporations and in other industries in the
private sector, such as the Philippine Government Employees' Association,
unions in the GSIS, the SSS, the DBP and other government-owned and
controlled corporations. Also, we have unions of supervisory employees and
of security guards. But what is tragic about this is that after the 1973
Constitution was approved and in spite of an express recognition of the right
to organize in P.D. No. 442, known as the Labor Code, the right of
government workers, supervisory employees and security guards to form
unions was abolished.

And we have been fighting against this abolition. In every tripartite conference
attended by the government, management and workers, we have always
been insisting on the return of these rights. However, both the government
and employers opposed our proposal, so nothing came out of this until this
week when we approved a provision which states:

Notwithstanding any provision of this article, the right to self-organization shall

not be denied to government employees.
We are afraid that without any corresponding provision covering the private
sector, the security guards, the supervisory employees or majority employees
[sic] will still be excluded, and that is the purpose of this amendment.

I will be very glad to accept any kind of wording as long as it will amount to
absolute recognition of private sector employees, without exception, to
organize.

THE PRESIDENT. What does the Committee say?

FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by
Commissioner Rodrigo is well-taken. Perhaps, we can lengthen this a little bit
more to read: "The right of the people WHETHER UNEMPLOYED OR
EMPLOYED BY STATE OR PRIVATE ESTABLISHMENTS."

I want to avoid also the possibility of having this interpreted as applicable only
to the employed.

MR. DE LOS REYES. Will the proponent accept an amendment to the

amendment, Madam President?

MR. LERUM. Yes, as long as it will carry the idea that the right of the
employees in the private sector is recognized.[24]

Lerum thus anchored his proposal on the fact that (1) government employees,
supervisory employees, and security guards, who had the right to organize under the
Industrial Peace Act, had been denied this right by the Labor Code, and (2) there was a
need to reinstate the right of these employees. In consonance with his objective to
reinstate the right of government, security, and supervisory employees to organize,
Lerum then made his proposal:

MR. LERUM. Mr. Presiding Officer, after a consultation with several Members
of this Commission, my amendment will now read as follows: "The right of the
people INCLUDING THOSE EMPLOYED IN THE PUBLIC AND PRIVATE
SECTORS to form associations, unions, or societies for purposes not contrary
to law shall not be abridged. In proposing that amendment I ask to make of
record that I want the following provisions of the Labor Code to be
automatically abolished, which read:

ART. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall not
be eligible for membership in a labor organization.
ART. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.

THE PRESIDING OFFICER (Mr. Bengzon). What does the Committee say?

FR. BERNAS. The Committee accepts.

THE PRESIDING OFFICER. (Mr. Bengzon) The Committee has accepted the
amendment, as amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as
amended, is approved.[25]

The question is what Commissioner Lerum meant in seeking to "automatically

abolish" the then Art. 246 of the Labor Code. Did he simply want "any kind of wording as
long as it will amount to absolute recognition of private sector employees, without
exception, to organize"?[26] Or, did he instead intend to have his words taken in the context
of the cause which moved him to propose the amendment in the first place, namely, the
denial of the right of supervisory employees to organize, because he said, "We are afraid
that without any corresponding provision covering the private sector, security guards,
supervisory employees or majority [of] employees will still be excluded, and that is the
purpose of this amendment"?[27]
It would seem that Commissioner Lerum simply meant to restore the right of
supervisory employees to organize. For even though he spoke of the need to "abolish"
Art. 246 of the Labor Code which, as already stated, prohibited "managerial employees"
in general from forming unions, the fact was that in explaining his proposal, he repeatedly
referred to "supervisory employees" whose right under the Industrial Peace Act to
organize had been taken away by Art. 246. It is noteworthy that Commissioner Lerum
never referred to the then definition of "managerial employees" in Art. 212(m) of the Labor
Code which put together, under the broad phrase "managerial employees," top and
middle managers and supervisors. Instead, his repeated use of the term "supervisory
employees," when such term then was no longer in the statute books, suggests a frame
of mind that remained grounded in the language of the Industrial Peace Act.
Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial
employees to organize, despite the fact that the Industrial Peace Act did not expressly
provide for the right of top and middle managers to organize. If Lerum was aware of the
Caltex dictum, then his insistence on the use of the term "supervisory employees" could
only mean that he was excluding other managerial employees from his proposal. If, on
the other hand, he was not aware of the Caltex statement sustaining the right to organize
to top and middle managers, then the more should his repeated use of the term
"supervisory employees" be taken at face value, as it had been defined in the then
Industrial Peace Act.
 At all events, that the rest of the Commissioners understood his proposal to refer
solely to supervisors and not to other managerial employees is clear from the following
account of Commissioner Joaquin G. Bernas, who writes:

In presenting the modification on the 1935 and 1973 texts, Commissioner

Eulogio R. Lerum explained that the modification included three categories of
workers: (1) government employees, (2) supervisory employees, and (3)
security guards. Lerum made of record the explicit intent to repeal provisions
of P.D. 442, the Labor Code. The provisions referred to were:

ART. 245. Security guards and other personnel employed for the protection
and security of the person, properties and premises of the employers shall not
be eligible for membership in a labor organization.

ART. 246. Managerial employees are not eligible to join, assist, and form any
labor organization.[28]28

Implications of the Lerum Proposal

In sum, Lerum's proposal to amend Art. III, 8 of the draft Constitution by including
labor unions in the guarantee of organizational right should be taken in the context of
statements that his aim was the removal of the statutory ban against security guards and
supervisory employees joining labor organizations. The approval by the Constitutional
Commission of his proposal can only mean, therefore, that the Commission intended the
absolute right to organize of government workers, supervisory employees, and security
guards to be constitutionally guaranteed. By implication, no similar absolute constitutional
right to organize for labor purposes should be deemed to have been granted to top-level
and middle managers. As to them the right of self-organization may be regulated and
even abridged conformably to Art. III, 8.

Constitutionality of Art. 245

Finally, the question is whether the present ban against managerial employees, as
embodied in Art. 245 (which superseded Art. 246) of the Labor Code, is valid. This
provision reads:

ART. 245. Ineligibility of managerial employees to join any labor organization;

right of supervisory employees. - Managerial employees are not eligible to
join, assist or form any labor organization. Supervisory employees shall not be
eligible for membership in a labor organization of the rank-and-file employees
but may join, assist or form separate labor organizations of their own.[29]29
 This provision is the result of the amendment of the Labor Code in 1989 by R.A. No.
6715, otherwise known as the Herrera-Veloso Law. Unlike the Industrial Peace Act or the
provisions of the Labor Code which it superseded, R.A. No. 6715 provides separate
definitions of the terms "managerial" and "supervisory employees," as follows:

ART. 212. Definitions. . . .

(m) "managerial employee" is one who is vested with powers or prerogatives

to lay down and execute management policies and/or to hire transfer,
suspend, lay off, recall, discharge, assign or discipline
employees. Supervisory employees are those who, in the interest of the
employer, effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use
of independent judgment. All employees not falling within any of the above
definitions are considered rank-and-file employees for purposes of this Book.

Although the definition of "supervisory employees" seems to have been unduly

restricted to the last phrase of the definition in the Industrial Peace Act, the legal
significance given to the phrase "effectively recommends" remains the same. In fact, the
distinction between top and middle managers, who set management policy, and front-line
supervisors, who are merely responsible for ensuring that such policies are carried out by
the rank and file, is articulated in the present definition.[30]30 When read in relation to this
definition in Art. 212(m), it will be seen that Art. 245 faithfully carries out the intent of the
Constitutional Commission in framing Art. III, 8 of the fundamental law.
Nor is the guarantee of organizational right in Art. III, 8 infringed by a ban against
managerial employees forming a union. The right guaranteed in Art. III, 8 is subject to the
condition that its exercise should be for purposes "not contrary to law." In the case of Art.
245, there is a rational basis for prohibiting managerial employees from forming or joining
labor organizations. As Justice Davide, Jr., himself a constitutional commissioner, said in
his ponencia in Philips Industrial Development, Inc. v. NLRC:[31]31

In the first place, all these employees, with the exception of the service
engineers and the sales force personnel, are confidential employees. Their
classification as such is not seriously disputed by PEO-FFW; the five (5)
previous CBAs between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions, they assist and
act in a confidential capacity to, or have access to confidential matters of,
persons who exercise managerial functions in the field of labor relations. As
such, the rationale behind the ineligibility of managerial employees to form,
assist or joint a labor union equally applies to them.

In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez, this Court

elaborated on this rationale, thus:
". . . The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the latter
might not be assured of their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the presence
of managerial employees in Union membership."[32]

To be sure, the Court in Philips Industrial was dealing with the right of confidential
employees to organize. But the same reason for denying them the right to organize
justifies even more the ban on managerial employees from forming unions. After all, those
who qualify as top or middle managers are executives who receive from their employers
information that not only is confidential but also is not generally available to the public, or
to their competitors, or to other employees. It is hardly necessary to point out that to say
that the first sentence of Art. 245 is unconstitutional would be to contradict the decision in
that case.
WHEREFORE, the petition is DISMISSED.
SO ORDERED.