SECOND DIVISION

[G.R. No. 95449. August 18, 1997]

PHILIPPINE-SINGAPORE TRANSPORT SERVICES, INC., petitioner,

vs. NATIONAL LABOR RELATIONS COMMISSION and Capt.
WENEFREDO N. ESTRADA, respondents.

DECISION
TORRES, JR., J.:

The instant case basically revolves around the issue of whether or not private
respondent Wenefredo N. Estrada, the complainant in POEA Case No. M-88-02-102
entitled Capt. Wenefredo N. Estrada vs. Philippine Singapore Transport Services, Inc.,
et. al., is validly dismissed from the service on account of his alleged incompetence as
the master/captain of the vessel Sea Carrier I.
It appears that on November 24, 1987, herein petitioner Philippine-Singapore
Transport Services, Inc. (PSTS, for brevity), a manning agency, hired private
respondent Estrada as master of the vessel Sea Carrier I for its foreign principal, Intra-
Oil Supplies Sbn Bhd (Intra-Oil, for brevity). Intra-Oil had a charter agreement, then,
with a company which was engaged in a project of oil drilling in the high seas of
Bombay, India.
On January 21, 1988 or barely two months following his employment, private
respondent Estrada was informed by a representative of Modest Shipping, an agent of
Intra-Oil, that he would be relieved from his employment and repatriated back to the
Philippines. He was not given any explanation or reason for his relief. On that same
day, someone took over as captain of Sea Carrier I, which prompted Estrada to
relinquish his post. On account of this unfortunate incident, he decided to return to
Manila the following day. Upon his arrival, he readily went to petitioner PSTS to ask
about his dismissal from employment and to claim for his unpaid salary and the sum
corresponding to his plane fare which was deducted from his salary. Petitioner PSTS
informed him that his service was terminated due to his incompetence. It also denied his
claim for the sum of money.
On February 10, 1988, private respondent Estrada filed with the POEA Adjudication
Department a complaint against PSTS and Intra-Oil for illegal dismissal, docketed as
POEA Case No. M-88-02-102. He asked for the reimbursement of his plane fare and
payment of his leave pay and of the remaining salaries for the unexpired portion of his
six-month contractual period.
 In its answer, PSTS alleged that the dismissal of private respondent Estrada was
due to a valid cause, which is incompetency. It asserted that his incompetency is
evidenced by the telexes of the charterer to PSTS complaining about the private
respondents incompetency in handling the vessel for any tow or even approaching the
oil drilling platforms, and informing about its (charterers) decision to terminate the
services of private respondent as master of the vessel and to off-hire the Sea Carrier I
due to private respondents incompetence. According to PSTS, it had no choice but to
give its consent to the dismissal of private respondent by the charterer because the
latter was in a best position to determine the qualification of the private respondent.
In his position paper, private respondent revealed that his termination from service
was an offshoot of his justified refusal to obey the order of the charterer to tow another
of its vessel.He explained that during the voyage from Singapore to Bombay, in the
course of maneuvering the charterers barge, specifically alongside jetties, quays and in
navigational channels, all the ropes on board the Sea Carrier I suffered extreme wear
and tear, that when the charterer ordered him to tow its barge, he refused to do so since
the ropes were worn out and inadequate to maneuver a barge in close water situation
and, in his professional opinion, damage would result from using inadequate ropes. This
shortage of ropes was made known to Mr. Bala of Essar Shipping, who was asked by
the private respondent to supply additional mooring ropes. According to the private
respondent, the relationship between him and the charterer degenerated rapidly
following this particular incident.
On June 7, 1989, the POEA Adjudication Department ruled in favor of the private
respondent by holding that his dismissal from service was illegal, the dispositive portion
of its decision states:

WHEREFORE, in view of all the foregoing circumstances, judgment is hereby

rendered ordering respondent Philippine-Singapore Transport Services, its principal
Intra Oil Supplies SBN BND and Fortune Life and General Insurance Co., Inc.
(PSTSIs surety) to pay complainant (Estrada) jointly and severally the sum of
THIRTEEN THOUSAND FIVE HUNDRED THIRTY MALAYSIAN DOLLARS
(M$13,530.00) or its peso equivalent at the time of payment (representing Estradas
salaries covering the unexpired portion of his contract of employment) plus the sum of
TEN THOUSAND PESOS (P10,000.00) as refund of airplane expenses. [1]

Dissatisfied, PSTS appealed to the NLRC on July 12, 1989. The NLRC, however,
through its questioned Resolution dated August 17, 1990,[2] held that the charge of
private respondents incompetency was unmeritorious. The real reason for private
respondents repatriation was not due to his incompetence but due to his refusal to tow
another barge belonging to the charterer and which refusal had been shown to be
justified and fully explained by the private respondent. Thus, the NLRC affirmed the
decision of the POEA and dismissed the appeal of petitioner for lack of merit.
A motion for reconsideration dated September 14, 1990 was filed by petitioner, but
the same was denied in a Resolution dated September 25, 1990. [3]
 Hence, this petition.[4]
Petitioner argued that the private respondents inability to foresee and anticipate the
quantity of ropes to be used during the voyage could only be attributed to his
incompetency. As master of the vessel, he was required to see to it that the ship was
fitted with all the things necessary for its smooth operation. The fact that the shortage of
ropes was made known by private respondent to Mr. Bala did not cure his
incompetency. The request for fresh ropes should have been directed to his principal,
and not to a third person (Mr. Bala) who was not even connected with the petitioner nor
with its principal.
Petitioner likewise asserted that in defying the charterers request to tow its barge,
the private respondent failed to comply with his duty to maintain good relationship and
cooperate with the charterer as laid down on his employment contract, an incident
which led to the off-hiring of Sea Carrier I and the consequent cancellation of the charter
agreement. And the cancellation of the charter agreement carried with it the dismissal
from service of private respondent because he was a project employee whose
employment was coterminous with the charter of Sea Carrier I. It could not therefore be
said that the dismissal was not valid.
As to the procedural aspect of private respondents dismissal, petitioner alleged that
his termination was done pursuant to the terms of the employment contract, hence, with
due regard to due process of law.
We are not persuaded by the foregoing arguments of petitioner.
It is noteworthy to state that an employer is free to manage and regulate, according
to his own discretion and judgment, all phases of employment, which includes hiring,
work assignments, working methods, time, place and manner of work, supervision of
workers, working regulations, transfer of employees, lay-off of workers, and the
discipline, dismissal and recall of work.[5] While the law recognizes[6] and safeguards[7] this
right of an employer to exercise what are clearly management prerogatives, such right
should not be abused and used as a tool of oppression against labor. The companys
prerogatives must be exercised in good faith and with due regard to the rights of
labor. A priori, they are not absolute prerogatives but are subject to legal limits,
collective bargaining agreements and the general principles of fair play and justice. [8]
The power to dismiss an employee is a recognized prerogative that is inherent in
the employers right to freely manage and regulate his business. Corollarily, an employer
can not rationally be expected to retain the employment of a person whose lack of
morals, respect and loyalty to his employer, regard for his employers rules and
appreciation of the dignity and responsibility of his office, has so plainly and completely
been bared.[9] He may not be compelled to continue to employ such person whose
continuance in the service will patently be inimical to his employers interest. [10] The right
of the company to dismiss an employee is a measure of self-protection.[11] Such right,
however, is subject to regulation by the State, basically in the exercise of its paramount
police power.[12] Thus, the dismissal of employees must be made within the parameters
of the law and pursuant to the basic tenets of equity, justice and fairplay. It must not be
done arbitrarily and without just cause.[13]
 Due process must be observed because the dismissal affects not only the
employees position but also his means of livelihood. Truly, unemployment brings untold
misery and hardship not only to the workingmen but also to those who are dependent
on the wage earners. When a person has no property, his job may possibly be his only
possession or means of livelihood.Therefore he should be protected against arbitrary
deprivation of his job.[14]
No less than the Constitution recognizes and guarantees the labors right to security
of tenure.[15] Under the Labor Code of the Philippines, as amended, specifically, Article
279 of the said Code, the security of tenure has been construed to mean as that the
employer shall not terminate the services of an employee except for a just cause or
when authorized by the Code.[16] The two facets of this legal provision are: (a) the legality
of the act of dismissal; and (b) the legality in the manner of dismissal. The illegality of
the act of dismissal constitutes discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process.[17] If an employee is dismissed
without just cause, he is entitled to reinstatement with backwages up to the time of his
actual reinstatement, if the contract of employment is not for a definite period; or to the
payment of his salaries corresponding to the unexpired portion of the employment
contract, if the contract is for the definite period. If the dismissal is for a just cause but it
was made without due process, the employee is entitled to the payment of an
indemnity.[18]
Guided by the foregoing rules and principles, this Court holds that the dismissal of
private respondent from service is done without just cause, in apparent violation of
Article 279 in relation to Article 282 of the Labor Code of the Philippines, as amended,
and without due process, in obvious contravention of Article 277 (b) of the said Code.
Petitioners imputation of incompetence on the part of the private respondent due to
his lack of foresight to anticipate the number of mooring ropes to be used is unworthy of
being given credence. As explained by private respondent, the Sea Carrier I was
sufficiently furnished with mooring ropes prior to the voyage. It so happened that the
ropes would later on suffer(ed) extreme wear and tear during its voyage from Singapore
to Bombay especially along jetties and quays, and in navigational channels. Faced by
such problem, he immediately reported the situation to, and at the same time, requested
for new mooring ropes from, Mr. Bala of Essar Shipping, a person whom the private
respondent alleged to be connected with the petitioner and its principal. No new ropes
came, however. So, when the charterer ordered private respondent to tow its barge, he
explained that the ropes were worn out and, in his professional opinion, inadequate for
maneuvering a barge in close water situation, hence, damage would result if towing of
the barge would proceed. Evidently, as called for by the circumstances of the situation,
the private respondent complied with his responsibility as master of the vessel. To ask
for more from him is to require an undertaking that is beyond or in excess of the scope
of his duty as master of the vessel. Even the NLRC belied the claim of petitioner that
private respondent was incompetent, thus:

To our mind, respondents charge of incompetence is rather sweeping

xxx. Complainants refusal to carry out the towing order on the basis of his
professional opinion that there was a shortage in towing ropes, a situation which was
known to a certain Mr. Bala of Essar Shipping, or that they were inadequate and that it
might result in an accident or cause damage certainly does not prove that he was
incompetent. On the other hand, it would even show that he was very professional in
his job as master, regardless of the intrusions of the charterer into his area of
responsibility. It would have been a different story had complainant refused the
towing order simply because he didnt know how to, in which case he could be said to
be incompetent in that area of expertise. [19]

The contention of petitioner that Mr. Bala was not in any way connected with it or to
its principal deserves scant consideration. Suffice it to say that during the proceedings
below, petitioner did not raise this issue. It is only now when petitioner elevated the case
to this Court that it is challenging the claim of private respondent that Mr. Bala was
connected with the petitioner and its principal. Settled is the rule that issues not raised
in the proceedings below can not be ventilated for the first time before this Court. [20]
Petitioner argued that private respondent is a project employee whose term of
service depends upon the charter of Sea Carrier I, hence, the cancellation of the charter
agreement carries with it the termination from service of the private respondent. This
argument has no leg to stand on because the cancellation of the charter agreement,
which was the very basis for terminating the services of the private respondent, was
unjustifiable. It must be pointed out that the charter decided to off-hire the Sea Carrier I
and eventually canceled the charter agreement because of the alleged incompetence of
the master of the vessel. But as discussed earlier, the imputation of incompetence on
the part of the private respondent is bereft of any basis. Thus, the alleged incompetence
can not be utilized as a valid and justifiable reason to dismiss the private respondent
from employment, much less, to cancel the charter agreement.In like manner, the
procedural aspect of private respondents termination from employment leaves much to
be desired.
Before an employee can be dismissed, the Labor Code, as amended, requires the
employer to furnish the employee a written notice containing a statement of the causes
for termination and to afford said employee ample opportunity to be heard and to defend
himself with the assistance of his representative if he so desires. If the employer
decides to terminate the services of the employee, the employer mush notify the worker
in writing of the decision to dismiss him, stating clearly the reasons therefor.[21] The
record of the instant case clearly shows that the foregoing requirements are not
complied with. Private respondent Estrada was caught by surprise when on January 21,
1988 he was told by the agent of the principal that he would be replaced as master of
the vessel and would be repatriated to the Philippines. He was not given any
explanation or reason for his dismissal. His replacement as master of the vessel came
in the afternoon of the same day he was informed of his repatriation. He was thus
forced to disembarked from the vessel. Obviously, the dismissal of private respondent
was impetuously made without the benefit of the required notice and hearing.
Petitioner seeks to justify the absence of the said notice and hearing by invoking a
provision in the contract of employment which authorizes the company to terminate
employment without notice. The pertinent provision of the said employment contract
reads as follows:

However, in the event of serious misconduct or neglect of duty or breach by you of

any rules or regulations imposed by the Company, the Company may without notice
or payment in lieu of notice terminated your employment and all expenses for your
repatriation will be borne by you. [22]

The foregoing contractual provision is inapplicable in the situation of private

respondent. The said provision applies only when the employee is liable for serious
misconduct, neglect of duty or violation of company rules and regulations. Apparently,
private respondent Estrada was not found guilty of any of these offenses. The allegation
of petitioner that the private respondent committed neglect of duty or serious
misconduct for refusing to obey the order of the charterer to tow the barge is
unmeritorious. It was the professional opinion of private respondent that the mooring
ropes which had been worn out during the vessels voyage were inadequate for
maneuvering in close water situations and that an accident might result from using the
said ropes. Thus, the private respondent, in refusing to tow the other vessel, wanted to
secure the vessel of its safety and to save it from an impending peril. He simply did
what a prudent and careful master of the vessel ought to do under the
circumstances. By faithfully complying with his duty as master of the vessel, it would not
be justified to punish him by terminating his employment for reasons not sanctioned by
law and maritime usage.
ACCORDINGLY, the instant petition is hereby DISMISSED for lack of merit. The
resolution of the NLRC dated August 17, 1990 and its Resolution dated September 25,
1990 are hereby AFFIRMED.
SO ORDERED.
Regalado, (Chairman), Romero, Puno, and Mendoza, JJ., concur.

[1]
Rollo, p. 14.
[2]
Rollo, pp. 14-24.
[3]
Rollo, p. 29.
[4]
Rollo, pp. 2-11.
[5]
San Miguel Brewery Sales vs. Ople, G.R. No. 53615, February 8, 1989.
[6]
Caltex Refinery Employees Association vs. NLRC, et. al., G.R. No. 102993, July 14, 1995, 246 SCRA
271.
[7]
San Miguel Brewery Sales vs. Ople, supra.
[8]
Businessday Information System and Services, Inc. vs. NLRC, et. al., G.R. No. 103575, April 5, 1993,
221 SCRA 9.
[9]
Makati Haberdashery, Inc. vs. NLRC, et. al., G.R. No. 83380-81, November 15, 1989.
[10]
GT Printers vs. NLRC, et. al., G.R. No. 100749, April 24, 1992, 208 SCRA 321.
[11]
Reyes vs. Minister of Labor, et. al., G.R. No. 48705, February 9, 1989.
[12]
Manila Electric Company vs. NLRC, et. al., G.R. No. 78763, July 12, 1989.
[13]
Ilocos Sur Electric Cooperative, Inc. vs. NLRC, et. al., G.R. No. 106161, February 1, 1995, 241 SCRA
36.
[14]
Century Textile Mills, Inc. vs. NLRC, et. al., G.R. No. 77859, May 25, 1988.
[15]
Section 3, Article XIII.
[16]
Philippine Geothermal, Inc. vs. NLRC, et. al., G.R. No. 82643-67, August 30, 1990, 189 SCRA 211.
[17]
Shoemart, Inc. vs. NLRC, et. al., G.R. No. 74225, August 11, 1989.
[18]
JGB and Associates, Inc. vs. NLRC, et. al., G.R. No. 109390, March 7, 1996, 254 SCRA 457.
Rollo, pp. 22-23; Resolution dated August 17, 1990, pp. 9-10.[19]
[20]
Manila Bay Club Corporation vs. Court of Appeals, et. al., G.R. No. 110015, July 11, 1995, 245 SCRA
715.
[21]
Pizza Hut/Progressive Development Corp. vs. NLRC, et. al., G.R. No. 117059, January 29, 1996.
[22]
Rollo p. 13.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-53515 February 8, 1989

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,

vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.

Lorenzo F. Miravite for petitioner.

Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRIO-AQUINO, J.:

This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor
Case No. AJML-069-79, approving the private respondent's marketing scheme, known as the
"Complementary Distribution System" (CDS) and dismissing the petitioner labor union's complaint
for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31,
1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the
private respondent, San Miguel Corporation, Section 1, of Article IV of which provided as follows:

Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled
to a basic monthly compensation plus commission based on their respective sales.
(p. 6, Annex A; p. 113, Rollo.)

In September 1979, the company introduced a marketing scheme known as the "Complementary
Distribution System" (CDS) whereby its beer products were offered for sale directly to wholesalers
through San Miguel's sales offices.

The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor,
with a notice of strike on the ground that the CDS was contrary to the existing marketing scheme
whereby the Route Salesmen were assigned specific territories within which to sell their stocks of
beer, and wholesalers had to buy beer products from them, not from the company. It was alleged
that the new marketing scheme violates Section 1, Article IV of the collective bargaining agreement
because the introduction of the CDS would reduce the take-home pay of the salesmen and their
truck helpers for the company would be unfairly competing with them.

The complaint filed by the petitioner against the respondent company raised two issues: (1) whether
the CDS violates the collective bargaining agreement, and (2) whether it is an indirect way of busting
the union.

In its order of February 28, 1980, the Minister of Labor found:

... We see nothing in the record as to suggest that the unilateral action of the
employer in inaugurating the new sales scheme was designed to discourage union
organization or diminish its influence, but rather it is undisputable that the
establishment of such scheme was part of its overall plan to improve efficiency and
economy and at the same time gain profit to the highest. While it may be admitted
that the introduction of new sales plan somewhat disturbed the present set-up, the
change however was too insignificant as to convince this Office to interpret that the
innovation interferred with the worker's right to self-organization.

Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is
already a prejudgment of the plan's viability and effectiveness. It is like saying that
the plan will not work out to the workers' [benefit] and therefore management must
adopt a new system of marketing. But what the petitioner failed to consider is the fact
that corollary to the adoption of the assailed marketing technique is the effort of the
company to compensate whatever loss the workers may suffer because of the new
plan over and above than what has been provided in the collective bargaining
agreement. To us, this is one indication that the action of the management is devoid
of any anti-union hues. (pp. 24-25, Rollo.)

The dispositive part of the Minister's Order reads:

WHEREFORE, premises considered, the notice of strike filed by the petitioner, San
Miguel Brewery Sales Force Union-PTGWO is hereby dismissed. Management
however is hereby ordered to pay an additional three (3) months back adjustment
commissions over and above the adjusted commission under the complementary
distribution system. (p. 26, Rollo.)
The petition has no merit.

Public respondent was correct in holding that the CDS is a valid exercise of management
prerogatives:

Except as limited by special laws, an employer is free to regulate, according to his

own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations, transfer
of employees, work supervision, lay-off of workers and the discipline, dismissal and
recall of work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings
Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations Law,
1985 Ed., p. 44.) (Emphasis ours.)

Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise
means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:

... Even as the law is solicitous of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.

So long as a company's management prerogatives are exercised in good faith for the advancement
of the employer's interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this Court will uphold them (LVN Pictures
Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and Garment
Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer
to compensate the members of its sales force who will be adversely affected by the implementation
of the CDS by paying them a so-called "back adjustment commission" to make up for the
commissions they might lose as a result of the CDS proves the company's good faith and lack of
intention to bust their union.

WHEREFORE, the petition for certiorari is dismissed for lack of merit.

SO ORDERED.

Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

FIRST DIVISION

[ G.R. No. L-39575, August 31, 1978 ]

GOVERNMENT SERVICE INSURANCE SYSTEM, PETITIONER, VS.

GOVERNMENT SERVICE INSURANCE SYSTEM SUPERVISORS' UNION,
THE COURT OF INDUSTRIAL RELATIONS AND/OR THE NATIONAL
LABOR RELATIONS COMMISSION, RESPONDENTS.

DECISION
GUERRERO, J.:
This is a petition for review on certiorari of the Order dated October 8,
1974 of the Court of Industrial Relations in CIR Case No. 87-IPA, entitled
"Government Service Insurance System Supervisors' Union (GSISSU),
Petitioner, vs. Government Service Insurance System,Respondent," which
Order was affirmed by the CIR en banc in its Resolution of October 25,
1974 directing the Government Service Insurance System to appoint Dr.
Andrea Moral as Acting Assistant Medical Director in place of Dr. Orlando
Misa, the present incumbent.
On February 27, 1969, a strike was called and staged by the Government
Service Insurance System Supervisors' Union (GSISSU) in protest against
the discriminatory acts constituting unfair labor practices in matters of
promotion, among others, committed by the management of the
Government Service Insurance System against the GSISSU and its
members.
The labor dispute was certified by the President of the Philippines to the
Court of Industrial Relations for compulsory arbitration. On March 5, 1969,
the Court of Industrial Relations issued a return-to-work order which,
among others, required the General Manager of the GSIS and the President
of the GSISSU to sit down together and amicably settle the disputes relative
to questioned appointments and promotions complained of by the GSISSU
as discriminatory. The General Manager thereafter met and rectified many
of the demands of the Union but the dispute continued.
On March 8, 1969, the Government Service Insurance System Supervisors'
Union filed a petition with the Court of Industrial Relations stating the
stand of the GSISSU on the strike and the causes thereof as follows: (1)
consistent refusal of the GSIS to bargain with the petitioner and (2) union
busting activities of the GSIS and its continuing commission of unfair labor
practices on 11 specific and separate counts. It alleged that promotions are
based on union affiliation and that to further discourage membership in the
GSISSU, the GSIS bargained with a rank and file union in the GSIS on the
terms and conditions of employment of employees who pertain to the
certified supervisory bargaining unit, such that promotions to positions in
Pay Classes 7 to 13 were processed by a CBA Personnel Pool composed of
rank and file employees.
The GSIS through the Government Corporate Counsel answered on March
29, 1969 the petition and denied the imputed acts of discrimination; the
GSIS alleged that it did not interfere in the employees' right to self-
organization and never considered union affiliation as a ground for
promotion; that promotions are made on the basis of competence, merit
and qualification to hold the position and on the basis of appropriate civil
service eligibility; that promotions to position in Pay Classes 7 to 13 are not
processed by the CBA Personnel Pool composed of rank and file employees;
and it finally prayed that the strike be declared illegal.
Thereafter, the GSISSU filed a supplemental petition dated January 13,
1970 specifying, among others, that the GSIS had failed and refused to
revoke or amend several questionable office orders so as to enable the
substitution of personnel, as in the case of Orlando Misa as Acting Assistant
Manager, Medical Department, to be replaced by Demetrio Lopez or
Andrea Moral (par. 6(e) of the Supplemental Petition).
Answering the supplemental petition, the GSIS averred in its answer under
par. 6(e) dated February 26, 1970 that in point of qualification, Dr. Orlando
Misa had the highest points over the other aspirants and that in the
judgment of the GSIS, Dr. Misa was best qualified to occupy the position of
Acting Assistant Manager, Medical Department, GSIS, as shown below:

"(e) Re: Case of Dr. Orlando Misa, Actg. Assistant Manager, Medical
Department vs. Demetrio Lopez or Andrea Moral.

An evaluation of the qualifications of these officials, based on (1) rank or

salary; (2) efficiency rating; (3) education and training; (4) seniority in the
GSIS; (5) seniority in the same department; and (6) civil service eligibility
and in-service training, shows the following:

Name Points

Orlando Misa
64.68
........................................
Demetrio Lopez
63.17
....................................
Andrea Moral
63.97
........................................
It is clear that Dr. Misa has the highest points. He had undergone a special
training in Madrid where he participated in a course "La Especialization
Medico de la Seguridad Social" of the Central Internacional de Formacion
de Technicos" of the Organizacion Ibero-Americano de Seguridad Social."
Before a designation was made, the qualifications of Dr. Misa and those of
Drs. Demetrio Lopez, Andrea Moral and other all medical supervisors in
the Medical Department, were carefully scrutinized and evaluated. As a
matter of fact even only a cursory glance at their respective efficiency
ratings for the last three rating periods ending June 30, 1968 as appearing
below will reveal that Dr. Misa always had a better efficiency rating than
any of them except only as of June 30, 1968 when Dr. Lopez had the same
rating:

As of June 30, As of December As of June 30,

Name
1967 31, 1967 1968

Orlando Misa 91.6 91.6 88.9

Andrea Moral 90.1 90.1 88.6
Demetrio
88.3 88.3 88.9
Lopez

In the selection of officials for such a high position in the supervisory level,
it is always part of the objective to choose one among prospective
appointees who has demonstrated some qualities of leadership. This is
obviously an essential element because a supervisor accomplishes things
not only by himself but mostly thru others. A supervisor should be a good
leader. Believe that the Office Order designating Dr. Misa is justified.

Furthermore, the following information is relevant:

DR. ORLANDO MISA

Appointed Clinic Supervisor ............ July 1, 1960

December 16,
Appointed Medical Supervisor ..........
1962

DR. DEMETRIO LOPEZ

Appointed Medical Officer which is below the rank 1960

 of Clinic Supervisor .....................
Appointed Medical Supervisor December 16,
.................................................... 1962

DR. ANDREA MORAL

Appointed Medical Officer

1960
............................................
Appointed Clinic
1961
Supervisor..........................................
Appointed Medical Supervisor December 16,
...................................... 1962"
(Records, pp. 114-115)
The Court of Industrial Relations thereupon commissioned Atty. Francisco
de los Reyes as Hearing Officer to receive the evidence and submit his
report on the specification, among others, "x x x (5) that the respondent
(GSIS) to discourage membership in the petitioning union discriminated
against its members by said respondent's failure and refusal to upgrade
and/or convert the position of x x x (e) Dr. Orlando Misa as Acting
Assistant Manager, Medical Department, to be replaced by Demetrio Lopez
or Andrea Moral."
After receiving the evidence, the Hearing Officer submitted his report, and
recommended that "it would seem to be equitable that Dra. Andrea Moral
should have been appointed Acting Assistant Medical Director rather than
Dr. Orlando Misa." Accordingly, the Court thru Acting Associate Judge
Pedro F. Perez in his Order dated October 8, 1974 approved the Report and
adopted it as the Court's Order in the case, for the GSIS to appoint Dra.
Andrea Moral as Acting Assistant Medical Director in place of Dr. Orlando
Misa, present incumbent.
The GSIS and the private respondent, Dr. Orlando Misa, moved for
reconsideration of the Order above-cited which the GSISSU opposed. On
October 25, 1974, the Court en banc denied the motions for reconsideration
and affirmed the Order of October 8, 1974. The GSIS now comes to Us on
appeal assailing the legality and/or validity of the aforementioned Order
and the Resolution en banc of the Court of Industrial Relations.
Petitioner lists the following assignment of errors:

I
The defunct Court of Industrial Relations, hereinafter merely referred to as
CIR, now the National Labor Relations Commission, hereinafter merely
referred to as NLRC, committed a grave abuse of discretion amounting to
lack of and/or in excess of jurisdiction in substituting the judgment or
discretion of your petitioner Government Service Insurance System,
hereinafter merely referred to as GSIS, as to who is best qualified to occupy
the position of the Assistant Medical Director in the GSIS;

II

The defunct CIR or the NLRC committed a grave abuse of discretion

amounting to lack of and/or in excess of jurisdiction when it issued the
orders substituting the judgment or discretion of GSIS contrary to CIR's
own findings;

III

The defunct CIR now the NLRC committed a grave abuse of discretion
amounting to lack of and/or in excess of jurisdiction in holding that the
person claiming a right to an office may still bring an action one year and
three months after another person had been appointed to the same
position;

IV

The defunct CIR now the NLRC committed a grave abuse of discretion
amounting to lack of and/or in excess of jurisdiction in not holding that the
instant case has now become moot and academic.
The contention of the petitioner that the Court of Industrial Relations, in
ordering the GSIS to appoint Dr. Andrea Moral as Acting Assistant Medical
Director, replacing the present incumbent, Dr. Orlando Misa, substituted
the judgment or discretion of management and thereby committed a grave
abuse of discretion amounting to lack and/or excess of jurisdiction, is
meritorious. The right to select and appoint employees is the prerogative of
the employer, the privilege of management because such right inheres in
the conduct and operation of the business by the employer. Labor may not
impose nor demand who is to be appointed or designated by management.
This discretion or judgment lodged in management may not, therefore, be
controlled, interfered with or substituted by the Court of Industrial
Relations upon petition or representation of the striking labor union.
In the case of National Labor Union, petitioner, vs. Insular-Yebana
Tobacco Corporation, respondent, 2 SCRA 924, 931, the Supreme Court,
speaking thru Justice Labrador, said:

"A similar or parallel case is that of the National Labor Relations Board vs.
Union Pacific Stages, 99 F (2d) pp. 153, 177-179, in which the following
principles are laid down.

"x x x The National Labor Relations Act was not intended to empower the
National Labor Relations Board to substitute its judgment for that of the
employer in the conduct of his business, and did not deprive the employer
of the right to select or dismiss his employees for any cause except where
the employee was actually discriminated against because of his union
activities or affiliation. It did not authorize the Board to absolve employees
from compliance with reasonable regulations for their government and
guidance. The Act does not vest in the Board managerial authority x x x ."
In American labor jurisprudence, Rothenberg on Labor Relations,
commenting on the provisions of the Labor Management Relations Act
prohibiting an employer from discriminating against an employee or
prospective employee because of the latter's union activities, the following
principles are held: "(I)t must not be supposed that the Act is intended to or
permits usurpation of the employer's normal prerogatives in hiring or firing
employees. The prohibition of the Act is not a synonym for deprivation of
those basic rights of an employer, but is merely an injunction against the
use of the right to employ or discharge as an instrument of discrimination,
interference or oppression because of one's labor activities."
"In absence of the use of the right of 'hiring' and 'firing' as a vehicle for
discrimination, the exercise of these rights by the employer are unimpaired
by the Act. They may not be usurped by the National Labor Relations Board
in an effort by that agency to dictate to an employer, who has not violated
the Act, who shall be employed or discharged."
"In absence of the use of these rights for the purpose of interfering with the
rights guaranteed by the Act to employees or applicants to employment, an
employer's right to 'hire and fire' remains inviolate and unabridged.
Presupposing that such action is not intended to interfere with or
discourage the employees' union or labor activities or affiliations in
violation of the Act and further, assuming that no breach of an existing
contract is entailed, an employer is free to hire, demote, reprimand,
suspend, discipline, transfer, or discharge his employees or any of them
even as he would in absence of the Act. The employer may exercise these
rights at will and for any cause or reason, good or bad, just or unjust or for
no reason at all. The sole prohibition prescribed by the Act is directed
against the use of these rights to disturb or impede the exercise by
employees or applicants for employment of the rights assured to them by
the Act. Whether or not a given exercise by an employer of his rights
constitutes a violation of the Act, depends on whether or not the evidence
discloses that his conduct was calculated to or did interfere with employees'
rights under the Act. It is clear, however, that an employer's exercise of his
prerogatives with or without reason, does not, per se, constitute proof of
'coercion' or similar interference with the employee's rights or of the
commission of an 'unfair labor practice.'" (Rothenberg on Labor Relations,
pp. 398-400).
In the case at bar, petitioner exercising the privilege, prerogative or right of
management had appointed Dr. Orlando Misa as Acting Assistant Medical
Director as of October 1, 1968, after considering and evaluating the rank or
salary, efficiency rating, education and training, seniority in the GSIS,
seniority in the same department and civil service eligibility, and in-service
training of the qualified personnel at its Medical Department, namely Dr.
Orlando Misa, Dr. Andrea Moral and Dr. Demetrio Lopez. The GSIS found
that based on the "CPA Evaluation Sheet on Promotion" Dr. Misa was the
best qualified for the position after an evaluation of their respective
qualifications.
The evaluation, which has been quoted earlier, appears to be factual, fair
and made in good faith. It has not been shown by any credible proof
submitted to the Hearing Officer or to the Court of Industrial Rela-tions
that such selection was whimsical, unfair or arbitrary. The claim of the
respondent Union that the designation of Dr. Misa and not Dr. Moral is
discriminatory on account of the latter's being a member of the union has
not been sufficiently proved for there is nothing in the Report submitted by
the Hearing Officer clearly indicating that the GSIS preferred Dr. Misa
instead of Dr. Moral in order to bust the GSISSU or to discourage
membership in said union. The Report made no finding if the protagonists
belong to different camps or even slightly that for union considerations, the
GSIS favored one or the other. This is evident in the Report which We
quote:

"Atty. Francisco de los Reyes, Hearing Examiner commissioned to receive

the evidence, submitted his report in the above-entitled case which is
quoted hereunder, to wit:

"Among the issues raised in the above-entitled case which was certified by
the President of the Philippines as embodied in Supplementary Petition
filed in behalf of the Government Service Insurance System Supervisors
Union, GSISSU, in short (pp. 180 to 199 of records), particularly in relation
to the present incident, the following are the specifications:

" xxx xxx xxx."

"5. That the respondent, to discourage membership in petitioner union,

discriminated against its members by said respondent's failure and refusal
to upgrade and/or convert the position of:

" L. x x x x x x x x."

"(e) Dr. Orlando Misa as Acting Assistant Manager, Medical Department, to

be replaced by Demetrio Lopez or Andrea Moral."

"The Office Order appears to have been questioned by petitioner GSISSU.

The GSIS in its Answer filed in February 27, 1970 with respect to the
designation of Orlando Misa as Acting Assistant Manager, Medical
Department answered, by way of denying the material averments of the
said Supplemental Petition, and in relation to Orlando Misa stated that an
evaluation of the qualifications of those officials, based on (1) rank or
salary; (2) efficiency rating; (3) education and training; (4) seniority in the
GSIS; (5) seniority in the same department; and (6) civil service eligibility
and in-service training, claimed that Dr. Misa has the highest points. The
records of this case do not show that Dr. Demetrio Lopez, the other person
who supposedly is now protesting the appointment in an acting capacity of
Dr. Misa has ever made any steps by way of pursuing his claim. So that
what remains here is the GSISSU Supplemental Petition in behalf of Dra.
Andrea Moral.

Necessarily, the determination of the above-named specifications as

embodied in the said supplemental petition of the GSISSU would revolve
on the different qualifications of both Dr. Misa and Dra. Moral, since it is
evident that the discrimination will primarily be based on their respective
qualifications.

This must be so, considering the background of the instant case where it is
a matter of judicial as well as common knowledge that during the period or
years wherein these occurences or circumstances happened, the union
rivalry was so intense between what is known as the GSIS Employees
Association (GSISEA) and the GSIS Supervisors Union (GSISSU). And as
found in the records of the different cases in this Court, the rivalry involved
the classification of positions with which these unions sought to represent
in the bargaining table, particularly those positions involving Pay Classes 6
to 8. We should, therefore, proceed in accor-dance with the foregoing
consideration, on a comparative inquiry into the respective qualifications of
both Dra. Moral and Dr. Misa.

xxx xxx xxx

On the basis of the foregoing testimony, together with the different exhibits
of both parties submitted in this case, it would seem to be equitable that
Dra. Andrea Moral should have been appointed Acting Assistant Medical
Director rather than Dr. Orlando Misa.

WHEREFORE, it is respectfully recommended that this particular incident

in the Supplemental Petition of 1970 be decided in favor of the petitioner
GSISSU, and the GSIS should be directed to appoint Dra. Andrea Moral as
Acting Assistant Medical Director."

(Records, pp. 203-209)

The findings of the Hearing Officer that "the determination of the above-
named specifications as embodied in the said supplemental petition of the
GSISSU would revolve on the different qualifications of both Dr. Misa and
Dra. Moral, since it is evident that the discrimination will primarily be
based on their res-pective qualifications," do not support the contention of
the respondent union that the GSIS discriminated against its members by
the latter's refusal and failure to up-grade and/or convert the position of
Demetrio Lopez or Andrea Moral as Acting Assistant Medical Director,
Medical Department. It cannot be logically maintained that simply because
Dr. Misa was preferred over the recommendees of the union that the
preference constituted an act of discrimination against the union on
account of alleged union activities of either Dr. Moral or Dr. Lopez, of
which none was cited or hinted, to say the least, in the Report of the
Hearing Officer. If the choice of management did not fall on either of the
two union candidates, it was so by reason of their respective professional
qualifications as admitted in the Report. The fact that Dr. Misa was
designated as Acting Assistant Medical Director at a time when there was
intense rivalry between the two unions is no proof that there was
discrimination on the part of GSIS management to discourage membership
in the respondent union. We also note that even the criterion used in the
Report as equitable basis of the recommendation submitted to the CIR,
although favoring the union recommendee, centered on the professional
efficiency, performance and standing of the aspirants concerned which
cannot, by any stretch of imagination, constitute an unfair labor practice. In
the last analysis, in choosing the appointee or making the designation,
there must necessarily be a selection, which cannot be avoided, among
different contenders of varying personal circumstances and capabilities,
including dissimilar professional skills, talents and faculties such that We
cannot accept that the final selection was primarily motivated by union
considerations or affiliation in the absence of clear proof to the contrary.
Moreover, We cannot lose sight of the fact that the GSIS is a governmental
agency, although performing a proprietary function (GSISEA vs. Alvendia,
108 Phil. 505; Boys Scouts of the Phils. vs. Araos, 102 Phil. 1080) and that
the officers and personnel therein while entitled to the same rights and
privileges under the Industrial Peace Act are still governmental personnel
covered by and subject to civil service rules and regulations. Hence, in
matters of appointment, discipline, suspension and removal, the general
principles of public administration must govern their conduct, the terms
and conditions of their employment. Thus, that the power of appointment
is largely discretional; that the appointing power has the right of choice
which he may exercise freely according to his judgment, deciding for
himself who is best qualified for any competitive position in the civil service
(Jimenez vs. Francisco, 100 Phil. 1025); and that the appointing power is
not restricted by a rigid, straight, and hard-and-fast rule in the choice of
personnel, particularly of a supervisory character as in the case at bar, are
rules that hold strong and pertinent governance here, considering that in so
exercising such power, the overriding consideration is the promotion of the
public welfare and the exigencies of the public service (Reyes vs. Abeleda,
22 SCRA 825; Aguilar vs. Nieva, Jr., 40 SCRA 113).
Furthermore, it is to be noted that the position to which the candidates are
contending involves medical duties of supervision over the regional offices
of the GSIS and if Dr. Orlando Misa was designated to the position,
according to the Report because of "(t)he most important factor that we
have to take into account is the nature of the job because that was the time
that the Assistant General Manager in charge of the regional offices of the
GSIS requested me to appoint someone who could easily be picked up
without any question and that he could easily be told right away for
supervision in the regional offices. Another thing is that the Assistant
General Manager wanted somebody to be appointed who could accompany
him in going around the different regional offices and of course before that
he was already going out along with Dr. Misa and he told me that it should
be Dr. Misa so that he will not have a hard time in taking somebody who
could go with him around the different regional offices. He wants somebody
who could just be called up at any time to go with him or to be requested to
go around the different regional offices for inspection. I have that also in
mind and so I made my recommendation because I believe that Dr.
Orlando Misa who is a male physician can do the job better so that
prompted me to recommend him to that position as Acting Assistant
Medical Director. x x x," it stands to reason that the principal consideration
for such designation was a choice of who can do the job better, Dr. Misa or
Dr. Moral, and not by reason of any union affiliation, activity, sentiment or
sympathy manifested by one or the other.
Assuming that Dr. Moral was next in rank and entitled to the designation as
Acting Assistant Medical Director in two of the six categories considered in
the promotion to a higher position, that is, education and training, and
seniority, whereas Dr. Misa outranks her in the other four departments and
that is, (1) rank or salary; (2) efficiency rating; (3) seniority in the same
department; and (4) civil service eligibility and in-service training, the basic
consideration that must rule the exercise of discretion by the appointing
power is to effect efficiency and responsibility in public service, even to the
disappointment of those aspirants longer in the service. The
pronouncement of the Court in Aguilar vs. Nieva, Jr., 40 SCRA 113, gives
the rationale for such rule and We quote:

"Whatever sympathy might be elicited for public officials who had stayed
long in the public service and who, for some reason or another, did not
receive the promotion to which they felt they should be entitled, cannot
obscure the discretion that the law leaves in the hands of the appointing
official. x x x . The basic intent of the law itself is to foster a more efficient
public service. It is ever timely to keep in mind the public trust character of
any governmental office. Its creation is justifiable only if it serves to assure
that the functions of government, whether through the traditional public
offices or government-owned or controlled corporations, be attended to
with dispatch and competence. Necessarily then, the appointing official,
especially so where his position is a constitutional creation, as in this case,
must be left that neces-sary latitude of choice as to who can best discharge
the responsibilities of the office where the vacancy occurs. This is what
happened here, and no legal infirmity can validly be said to have vitiated
such an appointment."
The respondent maintains that the rule advanced by the petitioner "that the
CIR or NLRC cannot substitute the judgment or discretion of the GSIS as to
who is best qualified or fitted to the position," citing Reyes vs. Abeleda, 22
SCRA 825; Aguilar vs. Nieva, 40 SCRA 113; Pineda vs. Claudio, 28 SCRA
34; del Rosario vs. Subido, 31 SCRA 382 and the cases cited therein, is not
applicable to the present case considering that this is a certified labor
dispute, and that the correct point of inquiry is the extent of the powers of
the Court of Industrial Relations in certified labor disputes. Respondent
further contends that "When a case is certified to the CIR by the President
of the Philippines pursuant to Sec. 10 of R.A. 875, the CIR is granted
authority to find a solution to the industrial dispute; and the solution which
the CIR has found under the authority of the presidential certification and
conformable thereto cannot be questioned." (Radio Operators Association
of the Philippines vs. Philippine Marine Officers Association, et al., 102
Phil. 526; Feati University vs. Bautista, 18 SCRA 1191).
We disagree with respondent's position in the light of the specific facts
established in the case at bar which clearly sustain the basic right of
management in hiring and firing employees, in regulating according to its
own discretion and judgment, all aspects of employment which include
work assignments, working methods, time, place and manner of work, tools
to be used, processes to be followed, supervision of workers, working
regulations, transfer of employees, work supervision, lay-off of workers and
the discipline, dismissal and recall of workers. These prerogatives of
management may be availed of without liability provided they are exercised
in good faith for the advancement of the employer's interest, and not for the
purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, and provided further that such
prerogatives are not exercised in a malicious, harsh, oppressive, vindictive,
or wanton manner, or out of malice or spite. (Labor and Social Legislation,
Fernandez and Quiazon, pp. 19, 21). Admittedly, the CIR has the power and
authority to find the solution to this particular dispute when the case was
certified to it by the President pursuant to Sec. 10 of the Industrial Peace
Act and generally, such solution may not be questioned as the said solution
may be considered to be within the broad discretion of the court. However,
where, as in the case at bar, there is no factual basis of the solution ordered,
where We find no substantial evidence to support the Order and the
Resolution now being assailed by the petitioner, We hold that the CIR
gravely abused its discretion and committed a reversible error. The
Presidential certification is no authority for the CIR to exceed its discretion
which amounted to lack and/ or in excess of jurisdiction.
We have discussed and resolved petitioner's first and second assigned
errors, sustaining the contention of the petitioner, thereby rendering
superfluous and unnecessary further consideration and resolution of the
remaining assigned errors.
WHEREFORE, IN VIEW OF THE FOREGOING, the Order appealed
from and the Resolution en banc of the defunct Court of Industrial
Relations (now the National Labor Relations Commission) are hereby
vacated and the same set aside. No pronouncement as to costs.
Petition granted.
SO ORDERED.
Teehankee, (Chairman), Makasiar, Muoz Palma, and Fernandez, JJ.,
concur.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 76645 July 23, 1991

PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, petitioner,

vs.
ALICIA LAPLANA, Hon. RICARDO ENCARNACION, and NATIONAL LABOR RELATIONS
COMMISSION, respondents.

D.P. Mercado & Associates for petitioner.

NARVASA, J.:p

Alicia Laplana was the cashier of the Baguio City Branch Office of the Philippine Telegraph and
Telephone Corporation (hereafter, simply PT & T). Sometime in March 1984, PT & T's treasurer,
Mrs. Alicia A. Arogo, directed Laplana to transfer to the company's branch office at Laoag City.
Laplana refused the reassignment and proposed instead that qualified clerks in the Baguio Branch
be trained for the purpose. She set out her reasons therefor in her letter to Mrs. Arogo dated March
27, 1984, viz.:

1. I have established Baguio City as my permanent residence. Working in Laoag will

involve additional expenses like for my board and lodgingly, fare, and other
miscellaneous expenses. My salary alone will not be enough there will be no
savings and my family will spend more on account of my transfer.

2. I will be away from my family. A far assignment would be a big sacrifice on my part
keeping me away from my husband and family which might affect my efficiency.

3. Since I have been with PT & T for more than six years already, I have learned to
work with my co-employees here more effectively. Working in another place with
entirely different environment will require long adjustment period, thereby affecting
performance of my job.

On April 12, 1984, Mrs. Arogo reiterated her directive for Laplana's transfer to the Laoag Branch, this
time in the form of a written Memorandum, informing Laplana that "effective April 16, 1984, you will
be reassigned to Laoag branch assuming the same position of branch cashier," and ordering her "to
turn over your accountabilities such as PCF, undeposited collections, used and unused official
receipts, other accountable forms and files to Rose Caysido who will be in charge of cashiering in
Baguio."

Apparently Laplana was not allowed to resume her work as Cashier of the Baguio Branch when April
16, 1984 came. She thereupon wrote again to Mrs. Arogo advising that the directed transfer was
unacceptable, reiterating the reasons already given by her in her first letter dated March 27, 1984.
On April 30, 1984, Laplana received a telegram from Mrs. Arogo reading as follows:

PLEASE REPORT TO MANILA ON MAY 2, 1984 FOR NEW JOB ASSIGNMENT

 IF YOU DON'T REPORT ON MAY 2, 1984, WE WILL CONSIDER THIS AS
ABANDONMENT OF YOUR JOB AND THIS MIGHT CONSTRAIN US TO IMPOSE
DISCIPLINARY ACTION AGAINST YOU

YOU CAN GET YOUR CASH ADVANCE FOR TRANSPORTATION PETITION

FROM MRS. BAUTISTA TODAY.

On May 8, 1984, Laplana in turn sent a telex message to Mrs. Arogo which reads as follows:

I LOVE WORKING FOR OUR COMPANY HOWEVER I AM SORRY I CANNOT

ACCEPT YOUR JOB OFFER IN MANIIA THANK YOU AND RETRENCH ME
INSTEAD. MY BEST REGARDS.

Thereafter, Laplana sent a letter to Mrs. Arogo on May 15, 1984, expatiating on her telex message
and reiterating her request to be retrenched, as follows:

Dear Mrs. Arogo:

Thank you for the job in Manila. However, I cannot accept the said offer because I
have established Baguio City as my permanent residence. Considering the high cost
of living in Manila it will surely involve additional expenses on my part. My salary
alone will not be enough to sustain my expenses. Furthermore, a far assignment will
be a big sacrifice on my part keeping me away from my husband which might affect
my health due to an entirely new environment and climate, thereby affecting my
efficiency.

In view of the above reasons, I hereby request management to retrench me.

xxx xxx xxx

Termination of Laplana's employment on account of retrenchment thereupon followed. On May 19,

1984, PT & T issued an "Employees's Service Report" which contained the following remarks
regarding Laplana: "Services terminated due to retrenchment with corresponding termination pay
effective May 16, 1984. " And on June 30, 1984, Mrs. Arogo sent a Memorandum to the company's
Baguio Branch Manager embodying the computation of the separation and 13th month pay due to
Laplana, together with a check for the amount thereof, P2,512.50 and a quitclaim deed, and
instructing said manager to "have the quitclaim signed by Alicia Laplana before releasing the check
and return all copies of said form . . . immediately." On July 4, 1984, Laplana signed the quitclaim
and received the check representing her 13th month and separation pay.

On October 9, 1984, Laplana filed with the Labor Arbiters' Office at Baguio City, thru the CLAO, a
complaint against PT & T its "Baguio Northwestern Luzon Branch, Baguio City," and Paraluman
Bautista, Area Manager. In her complaint, she set forth substantially the facts just narrated, and
alleged, as right of action, that "when she insisted on her right of refusing to be transferred, the
Defendants made good its warning by terminating her services on May 16, 1984 on alleged ground
of "retrenchment," although the truth is, she was forced to be terminated and that there was no
ground at all for the retrenchment;" that the company's "act of transferring is not only without any
valid ground but also arbitrary and without any purpose but to harass and force . . . (her) to
eventually resign."

In answer, the defendants alleged that

 1) Laplana "was being transferred to Laoag City because of increase in sales due to
the additional installations of vodex line;"

2) in connection with her transfer, Laplana had been informed "that she would be
given ten (10) days. relocation allowance and transportation expense from Baguio to
Laoag City;"

3) the company "was exercising management prerogatives in transferring

complainant . . . and there is no showing that this exercise was arbitrarily and
whimsically done;"

4) Laplana's services were terminated on her explicit declaration that "she was willing
to be retrenched rather than be assigned to Laoag City or Manila;"

5) in any event, the company had been actually suffering losses; in fact, in June,
1984, several employees "were retrenched because of losses incurred due to rising
costs in wages, rentals, production supplies and other operational costs."

Upon the issues thus raised, judgment was rendered on March 28, 1985 by the Labor Arbiter in
Laplana's favor. 1The Arbiter's verdict was made to rest essentially on the following pronouncements
(made avowedly in reliance on the doctrine laid down by this Court in Helmut Dosch v. NLRC and
Northwest Airlines, Inc., G.R. No. 51182, July 5, 1983 2), to wit:

Transferring an employee from one place to another is not by itself unlawful. It is

within the inherent right of an employer to transfer or assign an employee in the
pursuit of its legitimate business interests. However, this right is not absolute.

Transfer becomes unlawful where it is motivated by discrimination or in bad faith, or

is effected as a form of punishment or demonition without sufficient cause.

The transfer of the complainant from Baguio City to Laoag City or to Manila is
patently a demotion and a form of punishment without just cause and would cause
untold suffering on the part of the complainant. . . .

With these premises in mind, the Arbiter ruled "that the complainant was illegally dismissed . . . (and
her) acceptance of separation pay . . . cannot cure the illegality of her dismissed because it was
forced upon her she was compelled to accept the lesser evil," and that there was "no evidence to
show that the complainant was retrenched to prevent losses," but that on the contrary, "it is
continuously expanding and improving its facilities, and hiring new employees." Accordingly, he
ordered

1) PT & T "to reinstate immediately the complainant, Alicia R. Laplana, to her former
position or equivalent position without loss of seniority rights and benefits earned with
full backwages and benefits less P2,512.50, the amount she received as separation,
from the time her compensation was suspended until reinstated;"

2) the dismissal of the claim for moral and exemplary damages for lack of merit; and

3) the dismissal of the case against Mrs. Paraluman Bautista also for lack of merit.
The National Labor Relations Commission affirmed the Arbiter's judgment and dismissed the
respondents' appeal, by Resolution dated August 5, 1986. 3

There can be no quarrel with the Arbiter's formulation of the general principle governing an
employer's prerogative to transfer his employees from place to place or from one position to another.
The Arbiter acknowledges "the inherent right of an employer to transfer or assign an employee in the
pursuit of its legitimate business interests" subject only to the condition that it be not "motivated by
discrimination or (made) in bad faith, or . . . effected as a form of punishment or demotion without
sufficient cause." This is a principle uniformly adhered to by this Court. 4

The case law on the matter is succinctly set out by a noted commentator on Labor Relations Law as
follows: 5

. . . Except as limited by special laws, the employer is free to regulate, according to

his own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, tools to be used,
processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers, and the discipline, dismissal and
recall of workers. This flows from the established rule that labor law does not
authorize the substitution of the judgment of the employer in the conduct of his
business and does not deprive the employer of the right to select or dismiss his
employees for any cause, except in cases of unlawful discrimination (NLU v. Insular-
Yebana Tobacco Corp., 2 SCRA 924, 931; Republic Savings Bank v. CIR, 21 SCRA
226, 235).

. . . The employer has the prerogative of making transfers and reassignment of

employees to meet the requirements of the business. Thus, where the rotation of
employees from the day shift to the night shift was a standard operating procedure of
management, an employee who had been on the day shift for some time may be
transferred to the night shift (Castillo v. CIR, 39 SCRA 81). Similarly, transfers
effected pursuant to a company policy to transfer employees from one theater to
other theaters operated by the employer, in order to prevent connivance among
them, was sustained (Cinema, Stage and Radio Entertainment Free Workers v. CIR,
18 SCRA 1071). Similar transfers and re-assignments of employees have been
upheld such as the re-assignment of one from a position of supervisor to that of
engineer at the power house (Interwood Employees Assn. v. Interwood, 99 Phil. 82),
or the transfer of the union president from his position of messenger clerk in a hotel
to purely office work and two other unionists from the position of hotel guard to line
and elevator men, without diminution of pay or other employee's rights (Bay View
Hotel Employees Union v. Bay View Hotel, L-10393, March 30, 1960), or the
temporary assignment of a sales clerk to another section of the store (Marcaida v.
PECO, 63 O.G. 8559).

Subsequent decisions of this Court have made no deviation from the doctrine. In Philippine Japan
Active Carbon Corp. v. NLRC, promulgated on March 8, 1989 6 this Court made the following
pronouncement, to wit:

It is the employer's prerogative, based on its assessment and perception of its

employees' qualifications, aptitudes, and competence, to move them around in the
various areas of its business operations in order to ascertain where they will function
with maximum benefit to the company. An employee's right to security of tenure does
not give him such a vested right in his position as would deprive the company of its
 prerogative to change his assignment or transfer him where he will be most useful.
When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it
does not involve a demotion in rank or diminution of his salaries, benefits, and other
privileges, the employee may not complain that it amounts to a constructive
dismissal.

In Yuco Chemical Industries, Inc. v. MOLE et al. (judgment promulgated on May 28, 1990) 7 the
same "general principles on transfer" were re-stated. The Court said:

. . . In a number of cases, the Court has recognized and upheld the prerogative of
management to transfer an employee from one office to another within the business
establishment provided that there is no demotion in rank or diminution of his salary,
benefits and other privileges. This is a privilege inherent in the employer's right to
control and manage its enterprise effectively. Even as the law is solicitous of the
employees' welfare, it cannot ignore the right of the employer to exercise what are
clearly and obviously management prerogatives. The freedom of management to
conduct its business operations to achieve its purpose cannot be denied.

But like all other rights, there are limits. The managerial prerogative to transfer
personnel must be exercised without grave abuse of discretion and putting to mind
the basic elements of justice and fair play. Having the right should not be confused
with the manner in which that right must be exercised. Thus it cannot be used as a
subterfuge by the employer to rid himself of an undesirable worker. Nor when the
real reason is to penalize an employee for his union activities and thereby defeat his
right to self-organization. But the transfer can be upheld when there is no showing
that it is unnecessary, inconvenient and prejudicial to the displaced employee.

The acceptability of the proposition that transfers made by an employer for an illicit or underhanded
purpose e.g., to evade the duty to bargain collectively, or to defeat the welfare, right of collective
bargaining, or discriminate against one or some of them on account of their union activities is self-
evident and cannot be gainsaid. The difficulty lies in the situation where no such illicit, improper or
underhanded purpose can be ascribed to the employer, the objection to the transfer being ground
solely upon the, personal inconvenience or hardship that will be caused to the employee by reason
of the transfer. What then?

In Dosch v. NLRC, supra, this Court found itself unable to agree with the NLRC that the petitioner
employee was guilty of disobedience and insubordination in refuse to accept his transfer from the
Philippines to an overseas post. Said the Court:

. . . The only piece of evidence on which (respondent employer) Northwest bases the
charge of contumacious refusal is petitioner's letter dated August 28, 1975 to R.C.
Jenkins wherein petitioner acknowledged receipt of the former's memorandum dated
August 18, 1975, appreciated his promotion to Director of International Sales but at
the same time regretted "that at this time for personal reasons and reasons of my
family, I am unable to accept the transfer from the Philippines' and thereafter
expressed his preference to remain in my Position of Manager-Philippines until such
time that my services in that capacity are no longer required by Northwest Airlines."
From this evidence, We cannot discern even the slightest hint of defiance, much less
imply insubordination on the part of petitioner.

Withal, it is evident that the courteous tone of the employee's letter did not alter the actuality
of his refusal to accept the transfer decreed by his employer in the exercise of its sound
 business judgment and discretion; and that the transfer of an employee to an overseas post
cannot be likened to a transfer from a city to another within the country, as in the case at bar.

In this case, the employee (Laplana) had to all intents and purposes resigned from her position. She
had unequivocally asked that she be considered dismissed, herself suggesting the reason therefor
retrenchment. When so dismissed, she accepted separation pay. On the other hand, the employer
has not been shown to be acting otherwise than in good faith, and in the legitimate pursuit of what it
considered its best interests, in deciding to transfer her to another office. There is no showing
whatever that the employer was transferring Laplana to another work place, not because she would
be more useful there, but merely "as a subterfuge to rid . . . (itself) of an undesirable worker," or "to
penalize an employee for . . . union activities. . . ." The employer was moreover not unmindful of
Laplana's initial plea for reconsideration of the directive for her transfer to Laoag; in fact, in response
to that plea not to be moved to the Laoag Office, the employer opted instead to transfer her to
Manila, the main office, offering at the same time the normal benefits attendant upon transfers from
an office to another.

The situation here presented is of an employer transferring an employee to another office in the
exercise of what it took to be sound business judgment and in accordance with pre-determined and
established office policy and practice, and of the latter having what was believed to be legitimate
reasons for declining that transfer, rooted in considerations of personal convenience and difficulties
for the family. Under these circumstances, the solution proposed by the employee herself, of her
voluntary termination of her employment and the delivery to her of corresponding separation pay,
would appear to be the most equitable. Certainly, the Court cannot accept the proposition that when
an employee opposes his employer's decision to transfer him to another work place, there being no
bad faith or underhanded motives on the part of either party, it is the employee's wishes that should
be made to prevail. In adopting that proposition by way of resolving the controversy, the respondent
NLRC gravely abused its discretion.

WHEREFORE, the writ of certiorari prayed for is GRANTED and the Resolution of August 5, 1986 of
respondent NLRC is thereby nullified and set aside, and the termination of services of private
respondent is declared legal and proper. No costs.

SO ORDERED.

Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Footnotes

1 Rollo, pp. 44-45. The decision was written by Labor Arbiter Ricardo Q.
Encarnacion.

2 123 SCRA 296.

3 Rollo, pp. 74-79. The resolution was promulgated by the Third Division, composed
of Presiding Commissioner Guillermo C. Medina, Commissioner Miguel B. Varela,
and Commissioner Gabriel M. Gatchalian, the first two concurring "IN THE
RESULTS."
 4 The rule is the same in American Law: 51A CJS, 225-226; 48 Am Jur 2d, 745-746:
e.g., while it is "the normal right of an employer to transfer employees in the course
of business, the transfer of an employee, or the change in status of an employee
from permanent to temporary, traceable to membership or nonmembership in a labor
union, or to activities on behalf of a bargaining agency, constitutes discrimination
within the interdiction of the statute. . . ."

5 Fernandez, P.V., Labor Relations Law, 1985 ed., pp. 44, 45.

6 By the First Division, Grio-Aquino, J., ponente: 171 SCRA 164.

7 By the Third Division, Fernan, C.J., ponente: 185 SCRA 727.

FIRST DIVISION

[G.R. No. 155421. July 7, 2004]

ELMER M. MENDOZA, petitioner, vs. RURAL BANK OF

LUCBAN, respondent.

DECISION
PANGANIBAN, J.:

The law protects both the welfare of employees and the prerogatives of
management. Courts will not interfere with business judgments of employers, provided
they do not violate the law, collective bargaining agreements, and general principles of
fair play and justice. The transfer of personnel from one area of operation to another is
inherently a managerial prerogative that shall be upheld if exercised in good faith -- for
the purpose of advancing business interests, not of defeating or circumventing the rights
of employees.

The Case

The Court applies these principles in resolving the instant Petition for
Review[1] under Rule 45 of the Rules of Court, assailing the June 14, 2002
Decision[2] and September 25, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR
SP No. 68030. The assailed Decision disposed as follows:

WHEREFORE, the petition for certiorari is hereby DISMISSED for lack of merit. [4]

The challenged Resolution denied petitioners Motion for Reconsideration.

 The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban, Inc., issued
Board Resolution Nos. 99-52 and 99-53, which read:

Board Res. No. 99-52

RESOLVED AS IT IS HEREBY RESOLVED that in line with the policy of the bank
to familiarize bank employees with the various phases of bank operations and further
strengthen the existing internal control system[,] all officers and employees are
subject to reshuffle of assignments. Moreover, this resolution does not preclude the
transfer of assignment of bank officers and employees from the branch office to the
head office and vice-versa.

Board Res. No. 95-53

Pursuant to Resolution No. 99-52, the following branch employees are hereby
reshuffled to their new assignments without changes in their compensation and other
benefits.

NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A Teller

CLODUALDO ZAGALA C/A Clerk Actg. Appraiser
ELMER L. MENDOZA Appraiser Clerk-Meralco Collection
CHONA R. MENDOZA Clerk-Meralco Bank Teller [5]

Collection

In a letter dated April 30, 1999, Alejo B. Daya, the banks board chairman, directed
Briccio V. Cada, the manager of the banks Tayabas branch, to implement the
reshuffle.[6] The new assignments were to be effective on May 1, 1999 without changes
in salary, allowances, and other benefits received by the aforementioned employees.[7]
On May 3, 1999, in an undated letter addressed to Daya, Petitioner
Elmer Mendoza expressed his opinion on the reshuffle, as follows:

RE: The recent reshuffle of employees as per

Board Resolution dated April 25, 1999

Dear Sir:
This is in connection with the aforementioned subject matter and which the
undersigned received on April 25, 1999.

Needless to state, the reshuffling of the undersigned from the present position as
Appraiser to Clerk-Meralco Collection is deemed to be a demotion without any legal
basis. Before this action on your part[,] the undersigned has been besieged by
intrigues due to [the] malicious machination of a certain public official who is bruited
to be your good friend. These malicious insinuations were baseless and despite the
fact that I have been on my job as Appraiser for the past six (6) years in good standing
and never involved in any anomalous conduct, my being reshuffled to [C]lerk-
[M]eralco [C]ollection is a blatant harassment on your part as a prelude to my
termination in due time. This will constitute an unfair labor practice.

Meanwhile, may I beseech your good office that I may remain in my position as
Appraiser until the reason [for] my being reshuffled is made clear.

Your kind consideration on this request will be highly appreciated. [8]

On May 10, 1999, Daya replied:

Dear Mr. Mendoza,

Anent your undated letter expressing your resentment/comments on the recent

managements decision to reshuffle the duties of bank employees, please be informed
that it was never the intention (of management) to downgrade your position in the
bank considering that your due compensation as Bank Appraiser is maintained and no
future reduction was intended.

Aside from giving bank employees a wider experience in various banking operations,
the reshuffle will also afford management an effective tool in providing the bank a
sound internal control system/check and balance and a basis in evaluating the
performance of each employee. A continuing bankwide reshuffle of employees shall
be made at the discretion of management which may include bank officers, if
necessary as expressed in Board Resolution No. 99-53, dated April 25,
1999. Management merely shifted the duties of employees, their position title [may
be] retained if requested formally.

Being a standard procedure in maintaining an effective internal control system

recommended by the Bangko Sentral ng Pilipinas, we believe that the conduct of
reshuffle is also a prerogative of bank management. [9]
 On June 7, 1999, petitioner submitted to the banks Tayabas branch manager a
letter in which he applied for a leave of absence from work:

Dear Sir:

I wish I could continue working but due to the ailment that I always feel every now
and then, I have the honor to apply for at least ten (10) days sick leave effective June
7, 1999.

Hoping that this request [merits] your favorable and kind consideration and
understanding. [10]

On June 21, 1999, petitioner again submitted a letter asking for another leave of
absence for twenty days effective on the same date.[11]
On June 24, 1999, while on his second leave of absence, petitioner filed a
Complaint before Arbitration Branch No. IV of the National Labor Relations Commission
(NLRC). The Complaint -- for illegal dismissal, underpayment, separation pay and
damages -- was filed against the Rural Bank of Lucban and/or its president, Alejo B.
Daya; and its Tayabas branch manager, Briccio V. Cada. The case was docketed as
NLRC Case SRAB-IV-6-5862-99-Q.[12]
The labor arbiters June 14, 2000 Decision upheld petitioners claims as follows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position without loss of

seniority rights with full backwages from date of dismissal to actual reinstatement in
the amount of P55,000.00 as of June 30, 2000.

3. Ordering the payment of separation pay if reinstatement is not possible in the

amount of P30,000.00 in addition to 13th month pay of P5,000.00 and the
usual P10,000.00 annual bonus afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30, 1999 in
the amount of P5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

7. Ordering the payment of Attorneys fees in the amount of P18,000.00 which is 10%
of the monetary award. [13]
 On appeal, the NLRC reversed the labor arbiter.[14] In its July 18, 2001 Resolution, it
held:

We can conceive of no reason to ascribe bad faith or malice to the respondent bank for
its implementation of its Board Resolution directing the reshuffle of employees at its
Tayabas branch to positions other than those they were occupying. While at first the
employees thereby affected would experience difficulty in adjusting to their new jobs,
it cannot be gainsaid that the objective for the reshuffle is noble, as not only would the
employees obtain additional knowledge, they would also be more well-rounded in the
operations of the bank and thus help the latter further strengthen its already existing
internal control system.

The only inconvenience, as [w]e see it, that the [petitioner] may have experienced is
that from an appraiser he was made to perform the work of a clerk in the collection of
Meralco payments, which he may have considered as beneath him and his experience,
being a pioneer employee. But it cannot be discounted either that other employees at
the Tayabas branch were similarly reshuffled. The only logical conclusion therefore is
that the Board Resolution was not aimed solely at the [petitioner], but for all the other
employees of the x x x bank as well. Besides, the complainant has not shown by clear,
competent and convincing evidence that he holds a vested right to the position of
Appraiser. x x x.

How and by what manner a business concern conducts its affairs is not for this
Commission to interfere with, especially so if there is no showing, as in the case at
bar, that the reshuffle was motivated by bad faith or ill-will. x x x.
[15]

After the NLRC denied his Motion for Reconsideration,[16] petitioner brought before
the CA a Petition for Certiorari[17] assailing the foregoing Resolution.

Ruling of the Court of Appeals

Finding that no grave abuse of discretion could be attributed to the NLRC, the CA
Decision ruled thus:

The so-called harassment which Mendoza allegedly experienced in the aftermath of

the reshuffling of employees at the bank is but a figment of his imagination as there is
no evidence extant on record which substantiates the same. His alleged demotion, the
cold shoulder stance, the things about his chair and table, and the alleged reason for
the harassment are but allegations bereft of proof and are perforce inadmissible as
self-serving statements and can never be considered repositories of truth nor serve as
foundations of court decisions anent the resolution of the litigants rights.
When Mendoza was reshuffled to the position of clerk at the bank, he was not
demoted as there was no [diminution] of his salary benefits and rank. He could even
retain his position title, had he only requested for it pursuant to the reply of the
Chairman of the banks board of directors to Mendozas letter protesting the
reshuffle. There is, therefore, no cause to doubt the reasons which the bank
propounded in support of its move to reshuffle its employees, viz:

1. to familiarize bank employees with the various phases of bank operations, and

2. to further strengthen the existing internal control system of the bank.

The reshuffling of its employees was done in good faith and cannot be made the basis
of a finding of constructive dismissal.

The fact that Mendoza was no longer included in the banks payroll for July 1 to 15,
1999 does not signify that the bank has dismissed the former from its
employ. Mendoza separated himself from the banks employ when, on June 24, 1999,
while on leave, he filed the illegal dismissal case against his employer for no apparent
reason at all.[18]

Hence, this Petition.[19]

The Issues

Petitioner raises the following issues for our consideration:

I. Whether or not the petitioner is deemed to have voluntarily separated himself from
the service and/or abandoned his job when he filed his Complaint for constructive and
consequently illegal dismissal;

II. Whether or not the reshuffling of private respondent[s] employees was done in
good faith and cannot be made as the basis of a finding of constructive dismissal, even
as the [petitioners] demotion in rank is admitted by both parties;

III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and
Isetann Department Store (323 SCRA 445)] is applicable to the case at bar;

IV. Whether or not the Court of Appeals erred in dismissing the petitioners money
claims, damages, and unpaid salaries for the period July 1-30, 1999, although this was
not disputed by the private respondent; and
V. Whether or not the entire proceedings before the Honorable Court of Appeals and
the NLRC are a nullity since the appeal filed by private respondent before the NLRC
on August 5, 2000 was on the 15thday or five (5) days beyond the reglem[e]ntary
period of ten (10) days as provided for by law and the NLRC Rules of Procedure. [20]

In short, the main issue is whether petitioner was constructively dismissed from his
employment.

The Courts Ruling

The Petition has no merit.

Main Issue:
Constructive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted to when

continued employment is rendered impossible, unreasonable or unlikely; when there is
a demotion in rank or a diminution of pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee. [21] Petitioner argues that
he was compelled to file an action for constructive dismissal, because he had been
demoted from appraiser to clerk and not given any work to do, while his table had been
placed near the toilet and eventually removed. [22] He adds that the reshuffling of
employees was done in bad faith, because it was designed primarily to force him to
resign.[23]

Management Prerogative
to Transfer Employees

Jurisprudence recognizes the exercise of management prerogatives. For this

reason, courts often decline to interfere in legitimate business decisions of
employers.[24] Indeed, labor laws discourage interference in employers judgments
concerning the conduct of their business.[25] The law must protect not only the welfare of
employees, but also the right of employers.
In the pursuit of its legitimate business interest, management has the prerogative to
transfer or assign employees from one office or area of operation to another -- provided
there is no demotion in rank or diminution of salary, benefits, and other privileges; and
the action is not motivated by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause.[26] This privilege is inherent in the right
of employers to control and manage their enterprise effectively. [27] The right of
employees to security of tenure does not give them vested rights to their positions to the
extent of depriving management of its prerogative to change their assignments or to
transfer them.[28]
Managerial prerogatives, however, are subject to limitations provided by law,
collective bargaining agreements, and general principles of fair play and justice. [29] The
test for determining the validity of the transfer of employees was explained in Blue Dairy
Corporation v. NLRC[30] as follows:

[L]ike other rights, there are limits thereto. The managerial prerogative to transfer
personnel must be exercised without grave abuse of discretion, bearing in mind the
basic elements of justice and fair play.Having the right should not be confused with
the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by
the employer to rid himself of an undesirable worker. In particular, the employer must
be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the
employee; nor does it involve a demotion in rank or a diminution of his salaries,
privileges and other benefits. Should the employer fail to overcome this burden of
proof, the employees transfer shall be tantamount to constructive dismissal, which has
been defined as a quitting because continued employment is rendered impossible,
unreasonable or unlikely; as an offer involving a demotion in rank and diminution in
pay. Likewise, constructive dismissal exists when an act of clear discrimination,
insensibility or disdain by an employer has become so unbearable to the employee
leaving him with no option but to forego with his continued employment. [31]

Petitioners Transfer Lawful

The employer bears the burden of proving that the transfer of the employee has
complied with the foregoing test. In the instant case, we find no reason to disturb the
conclusion of the NLRC and the CA that there was no constructive dismissal. Their
finding is supported by substantial evidence -- that amount of relevant evidence that a
reasonable mind might accept as justification for a conclusion.[32]
Petitioners transfer was made in pursuit of respondents policy to familiarize bank
employees with the various phases of bank operations and further strengthen the
existing internal control system[33] of all officers and employees. We have previously held
that employees may be transferred -- based on their qualifications, aptitudes and
competencies -- to positions in which they can function with maximum benefit to the
company.[34] There appears no justification for denying an employer the right to transfer
employees to expand their competence and maximize their full potential for the
advancement of the establishment. Petitioner was not singled out; other employees
were also reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of his
salary, privileges and other benefits. This fact is clear in respondents Board
Resolutions, the April 30, 1999 letter of Bank President Daya to Branch Manager Cada,
and the May 10, 1999 letter of Daya to petitioner.
On the other hand, petitioner has offered no sufficient proof to support his
allegations. Given no credence by both lower tribunals was his bare and self-serving
statement that he had been positioned near the comfort room, made to work without a
table, and given no work assignment.[35] Purely conjectural is his claim that the reshuffle
of personnel was a harassment in retaliation for an alleged falsification case filed by his
relatives against a public official.[36] While the rules of evidence prevailing in courts of law
are not controlling in proceedings before the NLRC,[37] parties must nonetheless submit
evidence to support their contentions.

Secondary Issues:

Serrano v. NLRC Inapplicable

Serrano v. NLRC[38] does not apply to the present factual milieu. The Court ruled
therein that the lack of notice and hearing made the dismissal of the employee
ineffectual, but not necessarily illegal.[39] Thus, the procedural infirmity was remedied by
ordering payment of his full back wages from the time of his dismissal.[40] The absence of
constructive dismissal in the instant case precludes the application of Serrano. Because
herein petitioner was not dismissed, then he is not entitled to his claimed monetary
benefits.

Alleged Nullity of NLRC

and CA Proceedings

Petitioner argues that the proceedings before the NLRC and the CA were void,
since respondents appeal before the NLRC had allegedly been filed beyond the
reglementary period.[41]A careful scrutiny of his Petition for Review[42] with the appellate
court shows that this issue was not raised there. Inasmuch as the instant Petition
challenges the Decision of the CA, we cannot rule on arguments that were not brought
before it. This ruling is consistent with the due-process requirement that no question
shall be entertained on appeal, unless it has been raised in the court below. [43]
WHEREFORE, this Petition is DENIED, and the June 14, 2002 Decision and the
September 25, 2002 Resolution of the Court of Appeals are AFFIRMED. Costs against
petitioner.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.
[1]
Rollo, pp. 3-31.
[2]
Id., pp. 33-48. Fifteenth Division. Penned by Justice Oswaldo D. Agcaoili (chairman), with the
concurrence of Justices Eriberto U. Rosario Jr. and Danilo B. Pine (members).
[3]
Id., p. 50.
[4]
Assailed Decision, p. 15; rollo, p. 47.
[5]
Rollo, p. 119.
[6]
Assailed Decision, pp. 2-3; rollo, pp. 34-35.
[7]
Letter of Alejo B. Daya dated April 30, 1999; rollo, p. 120.
[8]
Rollo, p. 121.
[9]
Letter of Daya dated May 10, 1999; rollo, p. 122.
[10]
Letter of petitioner dated June 7, 1999; rollo, p. 123.
[11]
Letter of petitioner dated June 21, 1999; rollo, p. 124.
[12]
Assailed Decision, p. 6; rollo, p. 38.
[13]
Decision of Labor Arbiter Waldo Emerson R. Gan dated June 14, 2000, p. 5-6; rollo, pp. 145-146.
[14]
CA Decision dated June 14, 2002, pp. 11-12; rollo, pp. 43-44.
[15]
NLRC Resolution dated July 18, 2001, pp. 4-5; rollo, pp. 79-80.
[16]
Assailed Decision, p. 12; rollo, p. 44.
[17]
Rollo, pp. 51-74.
[18]
Assailed Decision, pp. 14-15; rollo, pp. 46-47.
[19]
This case was deemed submitted for resolution on June 9, 2003, upon this Courts receipt of
respondents Memorandum, signed by Atty. Carlos Mayorico E. Caliwara. Petitioners
Memorandum, signed by Atty. Manuel M. Maramba, was received by this Court on April 23, 2003.
[20]
Petitioners Memorandum, p. 10; rollo, p. 220. Original in upper case.
[21]
Blue Dairy Corporation v. NLRC, 373 Phil. 179, 186, September 14, 1999; Escobin v. NLRC, 351 Phil.
973, 999, April 15, 1998; Philippine Japan Active Carbon Corporation v. NLRC, 171 SCRA 164,
168, March 8, 1989.
[22]
Petitioners Memorandum, pp. 11, 14; rollo, pp. 221, 224.
[23]
Id., p. 14; id., p. 224.
[24]
Metrolab Industries, Inc. v. Roldan-Confesor, 324 Phil. 416, 429, February 28, 1996.
[25]
Bontia v. NLRC, 325 Phil. 443, 452, March 18, 1996.
[26]
Lanzaderas v. Amethyst Security and General Services, Inc., 404 SCRA 505, June 20, 2003; Jarcia
Machine Shop and Auto Supply, Inc. v. NLRC, 334 Phil. 84, 93, January 2, 1997; Escobin v.
NLRC, supra.
[27]
Ibid.
[28]
See Antonio H. Abad Jr., Compendium on Labor Law (2004), p. 55.
[29]
Philippine Airlines, Inc. v. NLRC, 225 SCRA 301, 308, August 13, 1993; University of Sto. Tomas v.
NLRC, 190 SCRA 758, 771, October 18, 1990.
[30]
Supra.
[31]
Id., p. 186, per Bellosillo, J.
[32]
Tan v. NLRC, 359 Phil. 499, 512, November 24, 1998. Substantial evidence is the quantum of
evidence required to establish a fact in cases before administrative and quasi-judicial bodies like
the NLRC (Equitable Banking Corporation v. NLRC, 273 SCRA 352, 373-374, June 13, 1997).
[33]
Board Resolution No. 99-52; rollo, p. 119.
[34]
Allied Banking Corporation v. Court of Appeals, GR No. 144412, November 18, 2003; Blue Dairy
Corporation v. NLRC, supra, p. 186; Philippine Japan Active Carbon Corporation v. NLRC, supra.
[35]
Petitioners Memorandum, p. 3; rollo, p. 213.
[36]
Ibid.
[37]
Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, supra, p. 92.
[38]
380 Phil. 416, January 27, 2000.
[39]
Id, p. 449. See herein ponentes Separate Opinion in Serrano. See also Dayan v. Bank of Philippine
Islands, 421 Phil. 620, 633, November 20, 2001.
[40]
Id, p. 451.
[41]
Petitioners Memorandum, p. 20; rollo, p. 230.
[42]
Rollo, pp. 51-74.
[43]
Del Rosario v. Bonga, 350 SCRA 101, 108, January 23, 2001.

SECOND DIVISION

[G.R. No. 152057. September 29, 2003]

PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION, petitioner,

vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS
COMMISSION, PT&T PROGRESSIVE WORKERS UNION-NAFLU-
KMU, CRISTINA RODIEL, JESUS PARACALE, ROMEO TEE,
BENJAMIN LAKANDULA, AVELINO ACHA, IGNACIO DELA
CERNA and GUILLLERMO DOMEGILLO, respondents.

DECISION
CALLEJO, SR., J.:

This is a petition for review filed by petitioner Philippine Telegraph and Telephone
Corporation (PT&T) of the Decision[1] of the Court of Appeals in CA-G.R. SP No. 54346
promulgated on June 15, 2001 affirming the resolution of the National Labor Relations
Commission (NLRC) promulgated on May 31, 1999 reversing the decision of the Labor
Arbiter, and its Resolution dated February 6, 2002 denying the petitioners motion for
reconsideration.
The petitioner is a domestic corporation engaged in the business of providing
telegraph and communication services thru its branches all over the country. It
employed various employees, among whom were the following:
1. Cristina Rodiel, initially as a Probationary Junior Counter- Clerk on July 1, 1995 at
the Cabanatuan Branch, regularized on November 28, 1995;
2. Jesus Paracale as a Probationary Junior CW Operator in Padada, Davao del Sur on
November 16, 1988, regularized on April 15, 1990, transferred to Malita, Davao
Branch on November 16, 1990, to Makar, South Cotabato Branch on September 1,
1994 and to Kiamba, South Cotabato Branch on April 1, 1995;
3. Romeo Tee as Counter-Clerk at the Zamboanga Branch on January 16, 1982, as a
TTY Operator on November 16, 1986, promoted as TTY Operator General on
November 1, 1989 and designated as TRITY Operator Regions on July 1, 1997;
4. Benjamin Lakandula as a Counter-Clerk at the Iligan City Branch on January 16,
1982;
5. Avelino Acha as Probationary Junior Counter at the Naga City Branch, regularized
on June 10, 1983, transferred to Legaspi City Branch on November 16, 1989;
6. Ignacio Dela Cerna as a Probationary Junior CW-Operator in at the Pagadian City
Branch regularized on March 15, 1986 and designated as TR/TTY Operator
Regions on July 1, 1993 at the Pagadian City Branch, and
7. Guillermo Demigillo as Clerk.[2]
Sometime in 1997, after conducting a series of studies regarding the profitability of
its retail operations, its existing branches and the number of employees, the petitioner
came up with a Relocation and Restructuring Program designed to (a) sustain its
(PT&Ts) retail operations; (b) decongest surplus workforce in some branches, to
promote efficiency and productivity; (c) lower expenses incidental to hiring and training
new personnel; and (d) avoid retrenchment of employees occupying redundant
positions.[3]
On August 11, 1997, private respondents Cristina Rodiel, Jesus Paracale, Romeo
Tee, Benjamin Lakandula, Avelino Acha, Ignacio Dela Cerna and Guillermo Demigillo
received separate letters from the petitioner, giving them the option to choose the
branch to which they could be transferred. Thereafter through HRAG Bulletin No. 97-06-
16, the private respondents and other petitioners employees were directed to relocate to
their new PT&T Branches. The affected employees were directed to report to their
respective relocation assignments in a Letter dated September 16, 1997.
The petitioner offered benefits/allowances to those employees who would agree to
be transferred under its new program, thus:
EXISTING SPECIAL FLAT MOVING
RELOCATION RELOCATION RELOCATION EXPENSES
ALLOWANCE ALLOWANCE ALLOWANCE (FREIGHT)
 1. Temporary 2.1 Married employee
relocation per bringing along his
P17,500.00 P15,000
diem of family
P260.00/day

2. Permanent 2.2 Married employee

relocation a flat not bringing along
P10,000.00 N/A
monthly his family
allowance of
P5,100.00

2.3 Single employee

bringing along his
qualified
dependent/s
P10,000.00 P15,000
2.4 Single employee
not bringing along
P7,000.00 N/A[4]
his dependent/s

Moreover, the employees who would agree to the transfers would be considered
promoted, thus:
FROM TO
NAME
POSITION/JG* WORK POSITION WORK
LOCATION LOCATION

1. ACHA, Jr. Counter-JG2 Legaspi (Br) Courier JG3 Romblon/

AVELINO Odiongan
(SL)

2. RODIEL, Jr. Counter Cabanatuan Clerk-JG4 Baguio

CRISTINA Clerk-JG2 (CL) (NWL)

3. DELA Jr. CW Cotabato Clerk-JG4 Kidapawan

CERNA, Operator-JG2 City (CM) (CM)
IGNACIO

4. DEMIGILLO Jr. CW Midsayap Courier-JG3 Lebak (CM)

GUILLERMO Operator-JG2 North

5. Counter-JG3 Iligan (NM) Clerk JG4 Butuan

LAKANDULA, (EM)
BENJAMIN
 6. PARACALE, Jr. CW Makar, Gen. Clerk JG4 Butuan
JESUS Operator-JG2 Santos (SM) (EM)

7. TEE, ROMEO TTY Operator- Zamboanga Clerk JG4 Jolo (WM)[5]

Gen. JG4 City (WM)

The private respondents rejected the petitioners offer. On October 2, 1997, the
petitioner sent letters to the private respondents requiring them to explain in writing why
no disciplinary action should be taken against them for their refusal to be
transferred/relocated.[6]
In their respective replies to the petitioners letters, the private respondents
explained that:

The transfers imposed by the management would cause enormous difficulties on the
individual complainants. For one, their new assignment involve distant places which
would require their separation from their respective families. For instance, in the case
of Avelino Acha who would be coming from Bicol Region, he would have to take a
boat in going to his new assignment in Odiongan, Romblon. The voyage would take a
considerable period of time and it would be imperative for him to relocate to Romblon
to be able to attend to his new assignment.

The same holds true with the other complainants. Romeo Tee for instance, will have
to take an overnight boat trip from his previous assignment in Zamboanga to his new
assignment in Jolo, Sulu. He would have to part with his family and resettle to Jolo in
connection with his transfer. Cristina Rodiel on the other hand, would be transferred
to Baguio City which is quite distant from her previous workbase and residence at
Cabanatuan. Jesus Paracale finds himself in the same difficult situation as he would be
transferred from General Santos City at the Southern tip of Mindanao to Butuan City,
almost a days travel by bus and located at the northernmost tip of the island. Benjamin
Lakandula and Guillermo Demigillo, are also in the same situation as their new
assignments are quite distant from their previous places of work. [7]

Dissatisfied with this explanation, the petitioner considered the private respondents
refusal as insubordination and willful disobedience to a lawful order; hence, the private
respondents were dismissed from work.[8] They forthwith filed their respective complaints
against the petitioner before the appropriate sub-regional branches of the NLRC.[9]
Subsequently, the private respondents bargaining agent, PT&T Workers Union-
NAFLU-KMU, filed a complaint against the petitioner for illegal dismissal and unfair
labor practice for and in behalf of the private respondents, including Ignacio Dela Cerna,
before the arbitration branch of the NLRC.[10]
In their position paper, the complainants (herein private respondents) declared that
their refusal to transfer could not possibly give rise to a valid dismissal on the ground of
willful disobedience, as their transfer was prejudicial and inconvenient; thus
unreasonable. The complainants further asserted that since they were active union
members, the petitioner was clearly guilty of unfair labor practice[11] especially
considering their new work stations:
1. Jesus Paracale, from General Santos Branch to Butuan City Branch;
2. Romeo Tee, from Zamboanga Branch to Jolo Branch;
3. Benjamin Lakandula, from Iligan City to Butuan City;
4. Avelino Acha, from Legaspi City Branch to Odiongan Branch;
5. Ignacio Dela Cerna, from Pagadian City Branch to Butuan Branch; and
6. Guillermo Demigillo, from Midsayap to Lebak Cotabato Branch.[12]
For its part, the petitioner (respondent therein) alleged that the private respondents
transfers were made in the lawful exercise of its management prerogative and were
done in good faith. The transfers were aimed at decongesting surplus employees and
detailing them to a more demanding branch.
In their reply to the petitioners position paper, the private respondents opined that
since their respective transfers resulted in their promotion, they had the right to refuse
or decline the positions being offered to them. Resultantly, the refusal to accept the
transfer could not have amounted to insubordination or willful disobedience to the lawful
orders of the employer.
After the parties filed their respective pleadings, the Honorable Labor Arbiter
Celenito N. Daing rendered a Decision on September 25, 1998 dismissing the complaint
for lack of merit.[13]
The labor arbiter ratiocinated that an employer, in the exercise of his management
prerogative, may cause the transfer of his employees provided that the same is not
attended by bad faith nor would result in the demotion of the transferred
employees. The labor arbiter ruled in favor of the petitioner, finding that the aforesaid
transfers indeed resulted in the private respondents promotion, and that the complaint
for unfair labor practice was not fully substantiated and supported by evidence.
Aggrieved, the private respondents appealed that aforesaid decision to the NLRC.
On May 31, 1999, the NLRC issued a Resolution which reversed and set aside the
decision of the labor arbiter. The NLRC ruled that the petitioner illegally dismissed the
private respondents, thus:

WHEREFORE, premises considered, the Appeal is hereby GRANTED. Accordingly,

the Decision appealed from is REVERSED and SET ASIDE and a new one entered
declaring respondent-appellee guilty of illegal dismissal and ordering Philippine
Telegraph and Telephone Corporation to reinstate individual complainants-appellants
to their former positions without loss of seniority rights and other privileges and to
pay them full backwages from the date of their dismissal up to the date of their actual
reinstatement, computed as follows [14]
 The NLRC interpreted the said transfers of the respondents as a promotion; that the
movement was not merely lateral but of scalar ascent, considering the movement of the
job grades, and the corresponding increase in salaries. As such, the respondents had
the right to accept or refuse the said promotions. The NLRC concluded that in the
exercise of their right to refuse the promotion given them, they could not be dismissed.
Without filing a motion for reconsideration, the petitioner filed a petition
for certiorari under Rule 65 of the 1997 Rules of Civil Procedure before the Court of
Appeals, assailing the May 31, 1999 Resolution of the NLRC. The petitioner raised the
following errors:
4.1
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT RULED AGAINST PRIVATE
RESPONDENTS DISMISSAL ON THE GROUND OF INSUBORDINATION FOR
REFUSING TO HEED TO THE TRANSFER ORDER OR THE PETITIONER.
4.2
PUBLIC RESPONDENT COMMITTEE GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT SUSTAINED PRIVATE
RESPONDENTS CONTENTION THAT THEY WERE IN FAC BEING PROMOTED
AND NOT TRANSFERRED, THUS RENDERING THE LATTERS DISOBEDIENCE
JUSTIFIED.
PUBLIC RESPONDENTS (SIC) COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION WHEN IT RULED THAT PRIVATE
RESPONDENTS ARE ENTITLED TO REINSTATEMENT WITHOUT LOSS OF
SENIORITY RIGHTS AND OTHER PRIVILEGES, AS WELL AS PAYMENT OF FULL
BACKWAGES FROM DATE OF DISMISSAL UP TO DATE OF ACTUAL
REINSTATEMENT.[15]
On June 15, 2001, the Court of Appeals rendered a Decision affirming the
resolution of the NLRC, the dispositive portion of which reads:

WHEREFORE, finding no grave abuse of discretion on the part of the respondent

commission, the petition is hereby DISMISSED for lack of merit. The assailed May
31, 1999 Resolution of the National Labor Relations Commission, Third Division is
hereby AFFIRMED IN TOTO. [16]

The petitioner filed a motion for reconsideration. On February 6, 2002, the CA

issued a Resolution denying the motion.[17]
Dissatisfied, the petitioner filed its petition for review assailing the decision and
resolution of the CA, insisting that:
I

PUBLIC RESPONDENT COURT OF APPEALS COMMITTED GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION
 WHEN IT ISSUED THE ORDERS DATED JUNE 15, 2001 AND FEBRUAR
6, 2002 AFFIRMING THE ORDER DATED MAY 31, 1999 OF THE THIRD
DIVISION OF THE NATIONAL LABOR RELATIONS COMMISSION,
CONSIDERING THAT:

a. THE ORDER DATED MAY 31, 1999 OF THE NATIONAL LABOR

RELATIONS COMMISSION IS NOT SUPPORTED BY SUBSTANTIAL
EVIDENCE;

b. THE PETITIONER DID NOT ADMIT IN ITS POSITION PAPER FILED

BEFORE THE LABOR ARBITER THAT THE PRIVATE RESPONDENTS
WERE BEING PROMOTED. ON THE CONTRARY, IT HAS ALWAYS
BEEN THE CONTENTION OF THE PETITIONER THAT THE PRIVATE
RESPONDENTS WERE SIMPLY ORDERED TRANSFERRED TO OTHER
WORK STATIONS WITHOUT DEMOTION IN RANK AND DIMINUTION
IN SALARY;

c. THE PRIVATE RESPONDENTS WERE LEGALLY TERMINATED FOR

JUST AND AUTHORIZED CAUSE FOR WILFULL DISOBEDIENCE TO
THE LAWFUL ORDERS OF THE PETITIONER (TRANSFER ORDER
PURSUANT TO ITS RELOCATION AND RESTRUCTURING PROGRAM),
AFTER AFFORDING THEM DUE PROCESS OF LAW AND THUS NOT
ENTITLED TO REINSTATEMENT; AND

d. PETITIONER ACTED IN GOOD FAITH IN IMPLEMENTING ITS

RELOCATION AND RESTRUCTUTING PROGRAM WHICH RESULTED
IN THE TERMINATION OF THE PRIVATE RESPONDENTS. AND AS
SUCH, THE PRIVATE RESPONDENTS ARE NOT ENTITLED TO THE
PAYMENT OF ANY BACKWAGES. [18]

In their Comment, the private respondents argue that the petition should be
dismissed for the following reasons: (a) that a petition for review under Ruler 45 is
limited to questions of law; (b) the private respondents were promoted and not only
transferred as established by the evidence on record; and (b) private respondents could
not be penalized with dismissal for declining their promotions.
The petition is denied due course.
As has been enunciated in numerous cases, the issues that can be delved into a
petition for review under Rule 45 are limited to questions of law. Thus, the Court is not
tasked to calibrate and assess the probative weight of evidence adduced by the parties
during trial all over again.[19] The test of whether the question is one of law or of fact is
whether the appellate court can determine the issue raised without reviewing or
evaluating the evidence, in which case, it is a question of law; otherwise, it is a question
of fact.[20]
In the case at bar, the petitioner would want this Court to ascertain whether or not
the findings of NLRC, as affirmed by the CA, are substantiated by the evidence on
record; hence, requiring a review involving questions of facts. For this reason alone, this
case should be dismissed.
Even if the Court were to review the instant case on its merits, the dismissal of the
petition is inevitable.
Section 3, Rule V of the NLRC provides that:

Section 3. Submission of Position Papers/Memorandum Should the parties fail to

agree upon an amicable settlement, either in whole or in part, during the conferences,
the Labor Arbiter shall issue an order stating therein the matters taken up and agree
upon during the conferences and directing the parties to simultaneously file their
respective verified position papers.

These verified position papers shall cover only those claims and causes of action
raised in the complaint excluding those that may have been amicably settled, and shall
be accompanied by all supporting documents including the affidavits of their
respective witnesses which shall take the place of the latters direct testimony. The
parties shall thereafter not be allowed to allege facts, or present evidence to prove
facts, not referred to and any cause or causes of action not included in the complaint
or position papers. Without prejudice to the provisions of Section 2 of this Rule, the
Labor Arbiter shall direct both parties to submit simultaneously their position papers
with supporting documents and affidavits within an inextendible period of ten (10)
days from notice of termination of the mandatory conciliation. mediation conference.

In its position with the labor arbiter, the petitioner adverted that when the private
respondents were transferred, they were also promoted, thus:

Clearly, the transfer of the complainants is not unreasonable nor does it involve
demotion in rank. They are being moved to branches where the complainants will
function with maximum benefit to the company and they were in fact promoted not
demoted from a lower job-grade to a higher job-grade and receive even higher salaries
than before. Thus, transfer of the complainants would not also result in diminution in
pay benefit and privilege since the salaries of the complainant would be receiving a
bigger salary if not the same salary plus additional special relocation
package. Although the increase in the pay is not significant this however would be
translated into an increase rather than decrease in their salary because the
complainants who were transferred from the city to the province would greatly benefit
because it is of judicial notice that the cost of living in the province is much lower
than in the city. This would mean a higher purchasing power of the same salary
previously being received by the complainants. [21]

Indeed, the increase in the respondents responsibility can be ascertained from the
scalar ascent of their job grades. With or without a corresponding increase in salary, the
respective transfer of the private respondents were in fact promotions, following the
ruling enunciated in Homeowners Savings and Loan Association, Inc. v. NLRC:[22]

[P]romotion, as we defined in Millares v, Subido, is the advancement from one

position to another with an increase in duties and responsibilities as authorized by law,
and usually accompanied by an increase in salary. Apparently, the indispensable
element for there to be a promotion is that there must be an advancement from one
position to another or an upward vertical movement of the employees rank or
position. Any increase in salary should only be considered incidental but never
determinative of whether or not a promotion is bestowed upon an employee. This can
be likened to the upgrading of salaries of government employees without conferring
upon the, the concomitant elevation to the higher positions. [23]

The admissions of the petitioner are conclusive on it. An employee cannot be

promoted, even if merely as a result of a transfer, without his consent. A transfer that
results in promotion or demotion, advancement or reduction or a transfer that aims to
lure the employee away from his permanent position cannot be done without the
employees consent.[24]
There is no law that compels an employee to accept a promotion for the reason that
a promotion is in the nature of a gift or reward, which a person has a right to
refuse.[25] Hence, the exercise by the private respondents of their right cannot be
considered in law as insubordination, or willful disobedience of a lawful order of the
employer. As such, there was no valid cause for the private respondents dismissal.
As the questioned dismissal is not based on any of the just or valid grounds under
Article 282 of the Labor Code, the NLRC correctly ordered the private respondents
reinstatement without loss of seniority rights and the payment of backwages from the
time of their dismissal up to their actual reinstatement.
IN LIGHT OF THE ALL THE FOREGOING, the Decision of the Court of Appeals
dated June 15, 2001 is hereby AFFIRMED.
SO ORDERED.
Bellosillo, (Chairman), Quisumbing, Austria-Martinez and Tinga, JJ., concur.

[1]
Penned by Associate Justice Perlita J. Tria Tirona with Associate Justices Eugenio S. Labitoria and
Eloy R. Bello, Jr., concurring.
[2]
Rollo, pp. 13-14.
[3]
Id. at 14.
[4]
Id. at 105.
[5]
Id. at 104.
[6]
Id. at 69-74.
[7]
Id. at 88-89.
[8]
Id. at 80-86.
[9]
Cristina Rodiel filed a complaint for illegal dismissal on October 21, 1997; Jesus Paracale, on October
20, 1997, Romeo Tee, on October 29, 1997. Benjamin Lakandula also filed a complaint for illegal
dismissal. Avelino Acha filed his complaint for illegal dismissal on November 18, 1997, while
Guillermo Demigillo filed his complaint on November 20, 1997. Ignacio Dela Cerna accepted the
transfer order and was thus reinstated (Rollo, p. 101).
[10]
Docketed as NLRC-NCR Case No. 00-11-08339-97.
[11]
Id. at 89-90.
[12]
Id. at 15.
[13]
Id. at 130.
[14]
Id. at 57.
[15]
Id. at 148-149.
[16]
Id. at 52.
[17]
Id. at 55.
[18]
Id. at 20.
[19]
Superlines Transportation Company, Inc. and Manolet Lavides v. ICC Leasing and Financing
Corporation, G.R. No. 150673, February 28, 2003.
[20]
Pilar Y. Goyena v. Amparo Ledesma-Gustilo, G.R. No. 147148, January 13, 2003.
[21]
Rollo, pp. 104-105.
[22]
262 SCRA 406 (1996).
[23]
Id. at 416.
[24]
Editha H. Canonigo v. Court of Appeals, et al., G.R. No. 111144, July 18, 2002.
[25]
Ma. Erly P. Erasmo v. Home Insurance & Guaranty Corporation, G.R. No. 139251, August 29, 2002.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-75656 May 28, 1990

YUCO CHEMICAL INDUSTRIES, INC., petitioner,

vs.
MINISTRY OF LABOR AND EMPLOYMENT thru HONORABLE VICENTE LEOGARDO, JR.,
DEPUTY MINISTER, GEORGE HALILI and AMADO MAGNO, respondents.
Ricardo C. Atienza for petitioner.

Bienvenido B. Balot for private respondents.

FERNAN, C.J.:

Assailed in this petition for certiorari is the order dated April 8, 1986 of Deputy Minister Leogardo, Jr.
of the then Ministry of Labor and Employment (MOLE) which reversed the order of the officer-in-
charge of the Tarlac provincial labor office and directed petitioner "to reinstate complainants with
backwages fixed at two years without deduction or qualification." 1

In 1978, private respondents (complainants) George Halili and Amado Magno were employed by
petitioner company which is engaged in the manufacture/assembly of ice boxes in Barangay
Matatalaib, Tarlac, Tarlac. They were assigned to make aluminum handles for the ice boxes.

On August 12,1981, after obtaining a favorable legal opinion from the Tarlac provincial office of
MOLE concerning the legality of moving the production of aluminum handles from Tarlac to Manila,
petitioner addressed a memorandum to private respondents directing them to report for work within
one week from notice at their new place of work at Felix Huertas Street, Sta. Cruz, Manila. The
memorandum further stated that private respondents would be paid with a salary of P27.00 and an
additional allowance of P2.00 "to meet the higher cost of living in Manila. 2

A day after or on August 13, 1981, instead of complying with the memorandum, private respondents
filed a complaint with the provincial labor office for illegal dismissal, 13th month pay and service
incentive leave pay. 3

As a countermove, on August 21, 1981, petitioner filed an application for clearance to terminate the
two employees on the ground of abandonment. On September 25,1981, the OIC of the Tarlac labor
office issued an order directing petitioner to give private respondents their separation pay within ten
(10) days from receipt of notice.

Private respondents appealed to the Office of the Minister of MOLE through Deputy Minister
Leogardo, Jr. who rendered the order in question with the following reasons cited:

1. At the time of acceptance of the employment relation between the parties, it was assumed that the
place of work was in Matatalaib, Tarlac, Tarlac. Thus, to transfer the place of work at such a distant
place as Manila without the consent of the employees concerned can no longer be construed as a
reasonable exercise of management prerogative in the assignment of personnel dictated by
business exigencies;

2. If petitioner company had indeed relocated its operations from Tarlac to Manila, it is puzzling why
out of the 50 employees, it singled out the two (2) plain laborers to man the Manila operations. Such
actuation tended to support the allegation that private respondents were discriminated against
because of their union activities and their refusal to disaffiliate from the union.

A motion for reconsideration subsequently filed by the petitioner was denied.

Hence this present petition.

First, some general principles on transfer. In a number of cases, the Court has recognized and
upheld the prerogative of management to transfer an employee from one office to another within the
business establishment provided that there is no demotion in rank or a diminution of his salary,
benefits and other privileges. This is a privilege inherent in the employer's right to control and
manage its enterprise effectively. Even as the law is solicitous of the employees' welfare, it cannot
ignore the right of the employer to exercise what are clearly and obviously management
prerogatives. The freedom of management to conduct its business operations to achieve its purpose
cannot be denied . 4

But like all other rights, there are limits. The managerial prerogative to transfer personnel must be
exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair
play. 5 Having the right should not be confused with the manner in which that right must be exercised.
Thus it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. Nor when
the real reason is to penalize an employee for his union activities and thereby defeat his right to self-
organization. But the transfer can be upheld when there is no showing that it is unnecessary,
inconvenient and prejudicial to the displaced employee . 6

The reassignment of Halili and Magno to Manila is legally indefensible on several grounds. Firstly, it
was grossly inconvenient to private respondents. They are working students. When they received
the transfer memorandum directing their relocation to Manila within seven days from notice, classes
had already started. The move from Tarlac to Manila at such time would mean a disruption of their
studies. Secondly, there appears to be no genuine business urgency that necessitated their transfer.
As well pointed out by private respondents' counsel, the fabrication of aluminum handles for ice
boxes does not require special dexterity. Many workers could be contracted right in Manila to
perform that particular line of work.

Altogether, there is a strong basis for public respondent's conclusion that the controversial transfer
was not prompted by legitimate reasons. Petitioner company had indeed discriminated against
Magno and Halili when the duo was selected for reassignment to Manila. The transfer was timed at
the height of union concerted activities in the firm, deliberately calculated to demoralize the other
union members. Under such questionable circumstances, private respondents had a valid reason to
refuse the Manila re-assignment. 7 Public respondent did not err or abuse his discretion in upholding the
employees' cause.

WHEREFORE, the questioned order dated April 8, 1986 of Deputy Minister Leogardo, Jr. is hereby
AFFIRMED. Assuming that the positions of private respondents have been filled up, they should be
reinstated to substantially equivalent position without loss of seniority rights, privileges and benefits
due them. Costs against petitioner.

SO ORDERED.

Gutierrez, Jr. and Bidin, JJ., concur.

Feliciano and Cortes, JJ., are on leave.

Footnotes

1 Rollo, pp. 21, 23-24.

2 Rollo, p. 18.
 3 Annex F, Rollo, p. 73.

4 Dosch vs. NLRC, G.R. No. L-51182, July 5, 1982, 123 SCRA 296; Petrophil vs.
NLRC, G.R. No. 64048, August 29,1986,143 SCRA 700; Abbott Laboratories Inc. vs.
NLRC, G.R. No. 76959, October 12,1987, 154 SCRA 713.

5 International Harvester Macleod vs. Intermediate Appellate Court, G.R. No. 73287,
May 18,1987,149 SCRA 641.

6 Phil. Japan Active Carbon Corp., et al. vs. NLRC and Quinanola, G.R. No. 83239,
March 8,1989.

7 See Bataan Shipyard and Engineering Co. Inc. vs. NLRC, G.R. No. 78604, May
9,1988,161 SCRA 271.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. NO. 41314 November 13, 1992

UNION CARBIDE LABOR UNION (NLU), petitioner,

vs.
UNION CARBIDE PHILIPPINES, INC. AND THE HON. SECRETARY OF LABOR, respondents.

MELO, J.:

This refers to a petition for review of the decision of the then Secretary of Labor Blas Ople handed
down on February 7, 1975 which set aside the decision of the Arbitrator ordering reinstatement with
backwages, and instead adjudged the payment of separation pay; and the resolution dated July 24,
1975 denying petitioner's motion for reconsideration for lack of merit.

The undisputed facts as found by the Secretary of Labor are as follows:

. . . Complainants Agapito Duro, Alfredo Torio, and Rustico Javillonar, were

dismissed from their employment after an application for clearance to terminate them
was approved by the Secretary of Labor on December 19, 1972. Respondent's
application for clearance was premised on "willful violation of Company regulations,
gross insubordination and refusal to submit to a Company investigation . . . ."

Prior events leading to the dismissal of complainants are recited in the Arbitrator's
decision, which we quote:

It appears that the Company is operating on three (3) shifts namely:

morning, afternoon and night shifts. The workers in the third shift
 normally work from Monday to Saturday, the last working day being
Friday or forty (40) hours a week or from Monday to Friday.

Sometime in July 1972, there seems to be a change in the working

schedule from Monday to Friday as contained in the collective
bargaining agreement aforecited to Sunday thru Thursday. The
change became effective July 5, 1972. The third shift employees
were required to start the new work schedule from Sunday thru
Thursday.

On November 6, 1972, the night shift employees filed a demand to

maintain the old working schedule from Monday thru Friday. (Letter of
November 6, 1972 addressed to the Committee on Labor Relation,
UCLU). The demand was referred to the Labor Management Relation
Committee and discussed from November 15, up to November 24,
1972. In the discussions had, it was arrived at that all night shift
operating personnel were allowed to start their work Monday and on
Saturday. This excepted the employees in the maintenance and
preparation crews whose work schedule is presumed to be
maintained from Sunday to Thursday. The work schedule between
management representatives and the alleged officers of the Union
(Varias group) was approved and disseminated to take effect
November 26, 1972. (Exh. "2" Respondent).

In manifestation of their dissention to the new work schedule, the

three respondents Duro, Torio, and Javillonar did not report for work
on November 26, 1972 which was a Sunday since it was not a
working day according to the provisions of the Collecrtive Bargaining
Agreement. (Exh. "A" Complainant). Their absence caused their
suspension for fourteen (14) days. (pp. 29-30, Rollo).

On May 4, 1973, the Arbitrator rendered a decision ordering the reinstatement with backwages of
the complainants. On June 8, 1973, the National Labor Relations Commission dismissed respondent
company's appeal for having been filed out of time. A motion for reconsideration which was treated
as an appeal was then filed by respondent company before the Secretary of Labor, resulting in the
modification of the Arbitrator's decision by awarding complainants separation pay. A motion for
reconsideration subsequently filed by the petitioner was denied for lack of merit.

Hence, this petition.

The main issue in this case is whether or not the complainants could be validly dismissed from their
employment on the ground of insubordination for refusing to comply with the new work schedule.

Petitioner alleges that the change in the company's working schedule violated the existing Collective
Bargaining Agreement of the parties. Hence, complainants cannot be dismissed since their refusal to
comply with the re-scheduled working hours was based on a provision of the Collective Bargaining
Agreement. Petitioner further contends that the dismissal of the complainants violated Section 9,
Article II of the 1973 Constitution which provides "the right of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work."

The petition has no merit.

Although Article XIX of the CBA provides for the duration of the agreement, which We quote:

This agreement shall become effective on September 1, 1971 and shall remain in full
force and effect without change until August 31, 1974. Unless the parties hereto
agree otherwise, negotiation for renewal, or renewal and modification, or a new
agreement may not be initiated before July 1, 1974.

this does not necessarily mean that the company can no longer change its working schedule,
for Section 2, Article II of the same CBA expressly provides that:

Sec. 2. In the exercise of its functions of management, the COMPANY shall have the
sole and exclusive right and power, among other things, to direct the operations and
the working force of its business in all respects; to be the sole judge in determining
the capacity or fitness of an employee for the position or job to which he has been
assigned; to schedule the hours of work, shifts and work schedules; to require work
to be done in excess of eight hours or Sundays or holidays as the exigencies of the
service may require; to plan, schedule, direct, curtail and control factory operations
and schedules of production; to introduce and install new or improved methods or
facilities; to designate the work and the employees to perform it; to select and hire
new employees; to train new employees and improve the skill and ability of
employees from one job to another or form one shift to another; to classify or
reclassify employees; and to make such changes in the duties of its employees as
the COMPANY may see fit or convenient for the proper conduct of its business.

Verily and wisely, management retained the prerogative, whenever exigencies of the service so
require, to change the working hours of its employees. And as long as such prerogative is exercised
in good faith for the advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this Court
will uphold such exercise (San Miguel Brewery Sales Force Union (PTGWO) vs. Ople, 170 SCRA 25
[1989]).

Thus, in the case of Abbott Laboratories (Phil.), Inc. vs. NLRC (154 SCRA 713 [1987]), We ruled:

. . . Even as the law is solicitous of the welfare of employees, it must also protect the
right of an employer to exercise what are clearly management prerogatives. The free
will of management to conduct its own business affairs to achieve its purpose cannot
be denied. (p.717)

Further, the incident complained of took place sometime in 1972, so there is no violation of the 1973
Constitution to speak of because the guarantee of security of tenure embodied under Section 9,
Article II may not be given a retroactive effect. It is the basic norm that provisions of the fundamental
law should be given prospective application only, unless legislative intent for its retroactive
application is so provided.

As pointed out by Justice Isagani Cruz, to wit:

Finally, it should be observed that the provisions of the Constitution should be given
only a prospective application unless the contrary is clearly intended. Were the rule
otherwise, rights already acquired or vested might be unduly disturbed or withdrawn
even in the absence of an unmistakable intention to place them within the scope of
the Constitution.
 (p.10, Constitutional Law, Isagani Cruz, 1991 Edition)

We agree with the findings arrived at by both Arbitrator and the Secretary of Labor that there is no
unfair labor practice in this case. Neither was there gross and habitual neglect of complainants'
duties. Nor did the act of complainants in refusing to follow the new working hours amount to serious
misconduct or willful disobedience to the orders of respondent company.

Although no serious objections may be offered to the Arbitrator's conclusion to order reinstatement
with backwages of the complainants, We now refrain from doing so considering that reinstatement is
no longer feasible due to the fact that the controversy started more than 20 years ago aside from the
obviously strained relations between the parties.

WHEREFORE, the decision appealed from is hereby AFFIRMED.

SO ORDERED.

Gutierrez, Jr., Bidin, Davide, Jr. and Romero, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 106107 June 2, 1994

AGUSTIN CHU, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and VICTORIAS MILLING COMPANY,
INC. respondents.

Legaspi, Rufon, Necesario & Asso. Law Office for petitioner.

Decena, Tabat, Jardaleza & Taoso Law Office for private respondent.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse and set aside
the Decision of the Fourth Division of the National Labor Relations Commission (NLRC) in Case No.
06-02-10081-89 which dismissed petitioners appeal and its Resolution dated March 20, 1992, which
denied petitioners motion for reconsideration.

We dismiss the petition.

I
Petitioner retired from the service of private respondent upon reaching the age of sixty under its
regular retirement program. He was granted an extention of service by the Board of Directors of
private respondent under a "Special Contract of Employment." The contract provided, inter alia, that
its term was for a period of one year commencing on August 1, 1988; that petitioner was employed
as Head of the Warehousing, Sugar, Shipping and Marine Department; and that he was to receive a
basic salary of P6,941.00 per month.

Private respondent issued Memorandum No. 1012-PS dated December 12, 1988 and Memorandum
No. 1028-PS dated January 16, 1989, both providing for a rotation of the personnel and other
organizational changes. Pursuant to the memoranda, petitioner was transferred to the Sugar Sales
Department.

Petitioner protested his transfer and requested a reconsideration thereof, which was denied.
Consequently, on February 27, 1989, petitioner filed a complaint for illegal dismissal, contending that
he was constructively dismissed from his employment (RAB IV Case No. 06-02-10081-89).

In support of his decision holding that there was no constructive dismissal of petitioner, the Labor
Arbiter said that: (1) petitioner was transferred to the Sugar Sales Department from the
Warehousing, Sugar, Shipping and Marine Department, both of which are under the Sugar Sales
Area; (2) petitioners transfer was without change in rank or salary; (3) petitioners designation in
either department was the same; (4) the personnel rotation was pursuant to organizational changes
done in the valid exercise of management prerogatives; (5) there was no bad faith in the transfer of
petitioner, as other employees similarly situated as he were likewise affected; and (6) petitioner
failed to show that he was prejudiced by the changes or transferred to a demeaning or humiliating
position.

Petitioner appealed to the NLRC which, in a resolution dated January 13, 1992, affirmed the Labor
Arbiters decision. In a resolution dated March 20, 1992, the NLRC denied petitioners motion for
reconsideration.

II

In this petition, petitioner contends that there was no valid exercise of management prerogative
because: (1) his transfer violated the "Special Contract of Employment" which was the law between
the parties; and (2) said transfer was unreasonable and caused inconvenience to him.

Petitioner argues that private respondents prerogative to transfer him was limited by the "Special
Contract of Employment," which was the "law" between the parties. Thus, petitioner urges that
private respondent, by employing him specifically as Head of the Warehousing, Sugar, Shipping,
and Marine Department, waived its prerogative to reassign him within the term of the contract to
another department.

We disagree.

An owner of a business enterprise is given considerable leeway in managing his business because it
is deemed important to society as a whole that he should succeed. Our law, therefore, recognizes
certain rights as inherent in the management of business enterprises. These rights are collectively
called management prerogatives or acts by which one directing a business is able to control the
variables thereof so as to enhance the chances of making a profit. "Together, they may be taken as
the freedom to administer the affairs of a business enterprise such that the costs of running it would
be below the expected earnings or receipts. In short, the elbow room in the quest for profits"
(Fernandez and Quiason, The Law on Labor Relations, 1963 ed., p. 43).
One of the prerogatives of management, and a very important one at that, is the right to transfer
employees in their work station. In Philippine Japan Active Carbon Corporation v. National Labor
Relations Commission, 171 SCRA 164 (1989), we held:

It is the employers prerogative, based on its assessment and perception of its

employees qualifications, aptitudes, and competence to move them around in the
various areas of its business operations in order to ascertain where they will function
with maximum benefit to the company. An employees right to security of tenure does
not give him such a vested right in his position as would deprive the company of its
prerogative to change his assignment or transfer him where he will be most useful.
When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it
does not involve a demotion in rank or a diminution of his salaries, benefits, and
other privileges, the employee may not complain that it amounts to a constructive
dismissal.

In Abbot Laboratories (Phils.) Inc. v. NLRC, 154 SCRA 713 (1987), we also held in referring to the
prerogative of transfer of employees, that:

This is a function associated with the employers inherent right to control and
manage effectively its enterprise. Even as the law is solicitous of the welfare of
employees, it must also protect the right of an employer to exercise what are clearly
management prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied.

Of course, like other prerogatives, the right to transfer or re-assign is subject to limitations arising
under the law, contract or general principles of fair play and justice (Abbot Laboratories (Phil.) Inc. v.
NLRC, 154 SCRA 713 [1987]). Jurisprudence proscribes transfers or re-assignments of employees
when such acts are unreasonable and cause inconvenience or prejudice to them (Philippine Japan
Active Carbon Corporation v. NLRC, supra).

We find nothing in the "Special Contract of Employment" invoked by petitioner wherein private
respondent had waived its right to transfer or re-assign petitioner to any other position in the
company. Before such right can be deemed to have been waived or contracted away, the stipulation
to that effect must be clearly stated so as to leave no room to doubt the intentions of the parties. The
mere specification in the employment contract of the position to be held by the employee is not such
stipulation.

As held in Philippine Japan Active Carbon Corporation v. National Labor Relations Commission,
supra:

An employees right to security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogatives to change his assignment
or transfer him where he will be most useful.

Petitioners bare assertion that the transfer was unreasonable and caused him inconvenience cannot
override the fact, as found by the Labor Arbiter and respondent Commission, that the rotation was
made in good faith and was not discriminatory, and that there was no demotion in rank or a
diminution of his salary, benefits and privileges.

WHEREFORE, the petition for certiorari is DISMISSED.

SO ORDERED.
 Davide, Jr., Bellosillo and Kapunan, JJ., concur.

Cruz, J., is on leave.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 102993 July 14, 1995

CALTEX REFINERY EMPLOYEES ASSOCIATION (CREA) and ARNELIO M.

CLARETE, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (Third Division), CALTEX PHILIPPINES, INC.
and/or EDGARDO C. CATAQUIS, respondents.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court to reverse the Resolution
dated August 30, 1991 of the National Labor Relations Commission (NLRC) in NLRC Case No. L-
000063 and its Resolution dated October 15, 1991 denying the motion for reconsideration of the
decision.

Petitioner Arnelio M. Clarete was hired by respondent Caltex Philippines, Inc. (Caltex) as Mechanic
C on November 3, 1981. He was later promoted to the position of Mechanic B and assigned to the
Mechanical/Metal Grades Section of respondent Caltex's refinery in San Pascual, Batangas.

According to Clarete, at about 4:00 p.m. on April 13, 1989, on his way to the refinery's main gate
after completing a day's work at the Maintenance Area IV, he saw on a pile of rubbish a bottle of
lighter fluid, which mechanics use to remove grease from their hands. He picked up the bottle and
placed it in the basket attached to the handlebar of his bicycle with the intention of asking the
security guard at the gate to allow him to bring it home.

Upon reaching the gate, he took the bottle of lighter fluid from the basket, punched out his time card
at the bundy clock and then asked Juan de Villa, the security guard on duty, permission to take
home the bottle. Replying that he was not authorized to grant the permission sought, de Villa
referred Clarete to Dominador Castillo, the security supervisor. When so approached, however,
Castillo told Clarete to leave the bottle in his office. Clarete complied and left for home.

Respondent Caltex gave a different version of the incident: On said date, de Villa noticed a black
bag which Clarete did not submit for inspection. When requested by de Villa to open the same for
inspection, Clarete retorted that it was not necessary to inspect the bag as it contained only dirty
clothes. Unconvinced, de Villa opened the bag and found a one-liter sample bottle filled with lighter
fluid surreptitiously hidden inside in the sleeves of Clarete's working clothes, which, in turn, were
covered by other clothes. When asked if he had a gate pass to bring the bottle out of the premises,
Clarete replied that he did not secure a gate pass as the lighter fluid was for his personal use.

On April 18, 1989, Clarete received a letter from his immediate supervisor, requiring him to explain in
writing why he should not be subjected to disciplinary action for violation of company rules and
regulations. In his written explanation of April 20, 1989, Clarete stated: (1) that he had no intention of
bringing the bottle of lighter fluid out of the company premises without the guard's permission; (2)
that he did seek permission but was denied; and (3) that he left the bottle behind with the guard
when told to do so.

On August 16, 1989, Clarete was charged with the crime of theft before the Municipal Trial Court of
San Pascual, Batangas (Criminal Case No. 3331). On October 19, 1989, he received a letter from
Antonio Z. Palad, Section Head, Mechanical/Metal Section, requiring him to explain why his services
should not be terminated for cause in view of Criminal Case No. 3331 and his violation of the "policy
on disciplinary action per G.M. Circular No. 484 of August 28, 1974, specifically '(f) Removing or
attempting to remove Company property from the Refinery without authorization.'" (Rollo, p. 58).

In reply, Clarete requested time to consult his lawyer, which request respondent Caltex granted on
November 14, 1989. Clarete was given up to November 30, 1989 to submit his explanation.
However, instead of submitting a written explanation, petitioner served a letter on Palad, requesting
a formal investigation of the allegations against him, at the same time, invoking his right to be
represented by the Union and his legal counsel. The request was granted and a hearing was
scheduled on January 5, 1990. Said hearing, as well as a subsequent one, was however deferred
upon the request of Clarete.

Believing that Clarete has been given enough time to consult his lawyer and to prepare his
explanation, a final meeting was scheduled on February 27, 1990. At the said meeting, Clarete,
through counsel, requested a formal trial-type investigation of the case. A letter reiterating that
request was addressed by Clarete's counsel to Palad on March 12, 1990. In his letter dated April 26,
1990, Palad denied the request on the ground that a trial-type hearing and confrontation of
witnesses were not applicable to the company's administrative fact-finding investigation. Clarete was
then given only up to May 4, 1990 to submit his written explanation. He finally did so on May 3,
1990.

In the meantime, on April 19, 1990, a decision was rendered in Criminal Case No. 3331, acquitting
Clarete of the crime charged based on the insufficiency of the evidence to establish his guilt beyond
reasonable doubt.

On August 20, 1990, Clarete was informed that his services were being terminated effective August
24, 1990 for "serious misconduct and loss of trust and confidence resulting from your having violated
a lawful order of the Company, i.e., GM Circular No. 484 of 8-28-74 which gave notice that the
Company considers 'removing or attempting to remove Company property from the Refinery without
authorization' to be sufficiently serious that the erring employee be dismissed." (Rollo, p. 63). Clarete
was placed under preventive suspension with pay upon notice up to the termination of his services
on August 24, 1990.

On August 27, 1990, Clarete filed a complaint for illegal dismissal against private respondents Caltex
and/or Edgardo C. Cataquio, in his capacity as Vice President of the Company with the Regional
Arbitration Branch IV of the National Labor Relations Commission. On January 15, 1991, Labor
Arbiter Joaquin A. Tanodra rendered a decision, finding Clarete neither culpable of theft nor of
violating GM Circular No. 484 of August 28, 1974 as "his purpose in going to security guard de Villa
was precisely to ask the latter's permission to bring out the lighter fluid from the Refinery
Compound." (Rollo, p. 27). He, therefore, directed the reinstatement of Clarete with full back wages
which then totaled P40,081.60, without loss of seniority rights and other privileges.

On appeal by private respondents, NLRC rendered judgment on August 20, 1991, vacating the
decision of the Labor Arbiter and entering a new one dismissing the complaint for lack of merit.
NLRC gave credence to the version of respondent Caltex of the incident. It found no reason to doubt
the veracity of the narration of the security guard, who was simply doing his job of protecting the
property of private respondent and who was not shown to hold a personal grudge or ill motive to
testify falsely against Clarete. Nonetheless, NLRC awarded Clarete financial assistance equivalent
to one month salary for every year of service in the amount of P76,752.00.

Both parties moved for reconsideration Clarete, on the ground that his dismissal was without valid
cause as there was no violation of company rules, and private respondents on the ground that
Clarete was not entitled to the award of financial assistance pursuant to the ruling in Philippine Long
Distance Telephone Company v. National Labor Relations Commission, 164 SCRA 671 (1988).

Hence, this petition filed by Clarete and The Caltex Refinery Employees Association, the exclusive
bargaining representative of all rank and file employees of respondent Caltex.

II

Petitioners contend that NLRC acted with grave abuse of discretion calling for the exercise of this
Court's corrective power. They maintain that Clarete's version of the incident is more in accord with
logic and common experience. They further allege that loss of confidence, to be valid ground for
dismissal, must be based on just and duly substantiated causes. Since Clarete's position as
mechanic is not one of trust and does not involve the production, safekeeping or even the handling
of lighter fluid, his act of picking up the bottle of lighter fluid with the intention of asking permission to
bring it home, cannot serve as basis for loss of confidence.

Respondent Caltex, on the other hand, asserts that G.M. Circular No. 484 was issued pursuant to its
management prerogative to prescribe rules and regulations necessary for the conduct of its business
and specifically to put a stop to rampant pilferages of company property by its employees, which has
resulted not only in substantial losses in its operations but also in the perceptible breakdown in
employee discipline. The findings of fact of NLRC, which are supported by evidence on record, show
that petitioner Clarete attempted to remove a bottle of lighter fluid owned by respondent Caltex from
the company premises; therefore, Clarete committed not only a serious misconduct but also a willful
breach of trust and confidence reposed upon him in the performance of his duties. The loss of trust
and confidence is not precluded by the fact that Clarete's position does not require the safekeeping
or handling a lighter fluid. If this were the rule, an employee may then help himself to his employer's
property without fear of disciplinary action as long as the property taken was not entrusted to his
care or is not related to his function.

III

The prerogative of employers to regulate all aspects of employment subject to the limitation of
special laws is recognized. A valid exercise of management prerogative encompasses hiring, work
assignments, working methods, time, place and manner of work, tools to be used, procedure to be
followed, supervision of workers, working regulations, transfer of employees, discipline, dismissal
and recall of workers. (San Miguel Corporation v. Ubaldo, 218 SCRA 293 [1993]). This prerogative
must, however, be exercised in good faith for the advancement of the employer's interest and not for
the purpose of defeating the rights of the employees granted by law or contract. (Garcia v. Manila
Times, 224 SCRA 399 [1993]). There are restrictions to guide the employers in the exercise of
management prerogatives, particularly the right to discipline or dismiss employees, for both the
Constitution and the law guarantee employees' security of tenure. Thus, employees may be
dismissed only in the manner provided by law. (Radio Communications of the Phil., Inc. v. National
Labor Relations Commission, 223 SCRA 656 [1993]). The right of the employer must not be
exercised arbitrarily and without just cause. Otherwise, the constitutional mandate of security of
tenure of the workers would be rendered nugatory. (China City Restaurant Corporation v. National
Labor Relations Commission, 217 SCRA 443 [1993]).

We concur in NLRC's conclusion that the version of respondent Caltex of the incident under
consideration is more credible. As correctly pointed out by NLRC, there is no reason to doubt the
veracity of the Report of Security Guard Juan de Villa dated April 14, 1989 and his Sinumpaang
Salaysay dated April 21, 1989 as "he simply did what he was primarily tasked to do to protect the
company property and to apprehend misdeeds committed thereat neither ill motive nor personal
grudge against complainant-appellee (Clarete) was attributed to him to falsely testify against the
former" (Rollo, p. 36). Undoubtedly, the lighter fluid is a property of private respondent and to take
the same out of its premises without the corresponding gate pass is a violation of company rules on
theft and pilferage of company property.

But while Clarete may be guilty of violation of company rules, we find the penalty of dismissal
imposed upon him by respondent Caltex too harsh and unreasonable. As enunciated in Radio
Communications of the Philippines, Inc. v.National Labor Relations Commission, supra, "such a
penalty (of dismissal) must be commensurate with the act, conduct or omission imputed to the
employee and imposed in connection with the employer's disciplinary authority" (at p. 667). Even
when there exist some rules agreed upon between the employer and employee on the subject of
dismissal, we have ruled in Gelmart Industries Phils., Inc. v. National Labor Relations
Commission, 176 SCRA 295 (1989), that the same cannot preclude the State from inquiring on
whether its rigid application would work too harshly on the employee.

Of the same mind is the Solicitor General who, invoking Gelmart Industries, prayed in his
Manifestation, in lieu of Comment, that the assailed decision of NLRC be set aside and
reinstatement of petitioner Clarete be ordered.

Indeed, considering that Clarete has no previous record in his eight years of service; that the value
of the lighter fluid, placed at P8.00, is very minimal compared to his salary of P325.00 a day; that
after his dismissal, he has undergone mental torture; that respondent Caltex did not lose anything as
the bottle of lighter fluid was retrieved on time; and that there was no showing that Clarete's retention
in the service would work undue prejudice to the viability of employer's operations or is patently
inimical to its interest, we hold that the penalty of dismissal imposed on Clarete is unduly harsh and
grossly disproportionate to the reason for terminating his employment. Hence, we find that the
preventive suspension imposed upon private respondent is a sufficient penalty for the misdemeanor
committed by petitioner. (Gelmart Industries Phils., Inc. v. National Labor Relations
Commission, supra).

Since the dismissal took place on August 24, 1990, or after the passage of R.A. No. 6715, Clarete is
entitled to reinstatement without loss of seniority rights and other privileges and his full back wages
inclusive of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement. (Maranaw
Hotels and Resorts Corporation v. Court of Appeals, 215 SCRA 501 [1992]). As in the case of Pines
City v. National Labor Relations Commission, 224 SCRA 110 (1993) and Pines City Educational
Center v. National Labor Relations Commission, 227 SCRA 655 (1993), the Court stated that in
ascertaining the total amount of back wages payable to them, we go back to the rule prior to
the Mercury Drugrule that the total amount derived from employment elsewhere by the employee
from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom.
(Itogon-Suyoc Mines, Inc. v. Sangilo-Itogon Workers' Union, et al., 24 SCRA 873 [1968]). Inasmuch
as petitioner received pay during his preventive suspension, the same must also be deducted from
the monetary awards to be received by him.

WHEREFORE, the Resolution of National Labor Relations Commission dated August 30, 1991 is
REVERSED and SET ASIDE. Respondent Caltex Phil., Inc. is ORDERED to reinstate petitioner
Clarete to his former position of Mechanic B without loss of seniority rights and to pay him his full
back wages inclusive of allowances, and other benefits or their monetary equivalent pursuant to Art.
279 of the Labor Code, as amended by Section 34 of R.A. No. 6715, computed from the time his
compensation was withheld from him up to the time of his actual reinstatement deducting therefrom
the amount received by petitioner during his preventive suspension and any income earned
elsewhere during the period of dismissal if any. No pronouncement as to costs.

SO ORDERED.

Davide, Jr. and Kapunan, JJ., concur.

Bellosillo, J., is on leave.

Separate Opinions

PADILLA, J., separate opinion:

I reiterate my separate opinion in Pines City Educational Center, etc. vs. NLRC, et al., G.R. No.
96779, 10 November 1993, 227 SCRA 665, that after the passage of R.A. 6715, reinstatement of an
employee unjustly dismissed from employment entitles him to full backwages (from date of actual
dismissal to date of actual reinstatement) without deducting therefrom salary or income received
elsewhere during said period.

Separate Opinions

PADILLA, J., separate opinion:

I reiterate my separate opinion in Pines City Educational Center, etc. vs. NLRC, et al., G.R. No.
96779, 10 November 1993, 227 SCRA 665, that after the passage of R.A. 6715, reinstatement of an
employee unjustly dismissed from employment entitles him to full backwages (from date of actual
dismissal to date of actual reinstatement) without deducting therefrom salary or income received
elsewhere during said period.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 70479 February 27, 1987

FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES, petitioner,

vs.
CARLOS LARIOSA and NATIONAL LABOR RELATIONS COMMISSION, respondents.

FERNAN, J:

In this petition for certiorari, petitioner Firestone Tire and Rubber Company of the Philippines
[Firestone for brevity] assails the decision of public respondent National Labor Relations
Commission which ordered the reinstatement without backwages of Carlos Lariosa, a dismissed tire
builder of petitioner, as having been rendered with grave abuse of discretion amounting to lack of
jurisdiction.

The facts are as follows:

Carlos Lariosa started working with Firestone on January 3, 1972 as a factory worker. At the time of
his dismissal, he was a tire builder.

At around 2:00 o'clock in the afternoon of July 27, 1983, as he was about to leave the company
premises Lariosa submitted himself to a routine check by the security guards at the west gate. He
was frisked by Security Guard Ambrosio Liso [Lizo] while his personal bag was inspected by
Security Guard Virgilio Olvez. In the course of the inspection, sixteen [16] wool flannel swabs, all
belonging to the company, were found inside his bag, tucked underneath his soiled clothes.

As a result of the incident, Firestone terminated Lariosa's services on August 2, 1983, citing as
grounds therefor: "stealing company property and loss of trust." 1 Firestone also filed a criminal
complaint against him with the Rizal provincial fiscal for attempted theft [IS No. 83-436-M]. 2

Lariosa, on the other hand, sued Firestone before the Ministry of Labor and Employment for illegal
dismissal, violation of Batas Pambansa Blg. 130 and its related rules and regulations, and damages.
The Labor Arbiter, in his decision dated May 8, 1984, found Lariosa's dismissal justified. 3 However,
on appeal, the National Labor Relations Commission on December 28, 1984 reversed the decision of the
Labor Arbiter [with one commissioner voting for affirmance] and held that the dismissal of Lariosa was too
severe a penalty. It therefore ordered Lariosa's reinstatement but without backwages, the period when he
was out of work to be considered a suspension. 4

Petitioner Firestone, in this special civil action for certiorari, contends that the NLRC erred in not
dismissing Lariosa's appeal for being late, in finding that Lariosa was not accorded due process and
in reversing the Labor Arbiter.

We shall deal first with the timeliness of the appeal. It is admitted that Lariosa filed his appeal on
June 7, 1984 or after the lapse of fourteen days from notice of the decision of the Labor Arbiter.
Article 223 of the Labor Code clearly provides for a reglementary period of ten days within which to
appeal decision of the Labor Arbiter to the NLRC. The ten-day period has been interpreted by this
Court in the case of Vir-jen Shipping and Marine Services, Inc. vs. NLRC, G.R. No. 58011-12, July
20, 1982, 115 SCRA 347, 361, to mean ten "calendar" days and not ten "working" days. However,
the "Notice of Decision" which Lariosa's lawyer received together with a copy of the arbiter's decision
advised them that an appeal could be taken to the NLRC within ten "working" days from receipt of
the said decision. 5

Mindful of the fact that Lariosa's counsel must have been misled by the implementing rules of the
labor commission and considering that the shortened period for appeal is principally intended more
for the employees' benefit, rather than that of the employer, We are inclined to overlook this
particular procedural lapse and to proceed with the resolution of the instant case.

A review of the record shows that Lariosa was indubitably involved in the attempted theft of the
flannel swabs. During the investigation called by the company's industrial relations manager Ms.
Villavicencio on July 28, 1983, or one day after the incident, Security Guards Liso and Olvez
contradicted Lariosa's bare claim that he had no intention to bring home the swabs and that he had
simply overlooked that he had earlier placed them inside his bag after they were given to him by his
shift supervisor while he was busy at work. Guard Olvez stated that when he confronted Lariosa with
the swabs, the latter replied that they were for "home use." And when he requested Lariosa to stay
behind while he reported the matter to the authorities, Lariosa refused and hurriedly left the premises
and boarded a passing jeepney. 6

From the records, it is likewise clear that Firestone did not act arbitrarily in terminating Lariosa's
services. On the contrary, there are transcripts to prove that an investigation of the incident was
promptly conducted in the presence of the employee concerned, the union president and the
security guards who witnessed the attempted asportation. Records also belie the allegation that
Lariosa was shown his walking papers on the very day of the incident. The letter of Ms. Villavicencio
to Lariosa dated August 1, 1983 informing the latter of his dismissal effective August 2, 1983
conclusively shows that he was discharged only on August 2, 1983, after an investigation was held
to ventilate the truth about the July 27 incident. 7 Thus, we cannot agree with the NLRC's conclusion
that even if Firestone had found substantial proof of Lariosa's misconduct, it did not observe the statutory
requirements of due process.

There is no gainsaying that theft committed by an employee constitutes a valid reason for his
dismissal by the employer. Although as a rule this Court leans over backwards to help workers and
employees continue with their employment or to mitigate the penalties imposed on them, acts of
dishonesty in the handling of company property are a different matter. 8

Thus, under Article 283 of the Labor Code, an employer may terminate an employment for "serious
misconduct" or for "fraud or willful breach by the employee of the trust reposed in him by his
employer or representative."

If there is sufficient evidence that an employee has been guilty of a breach of trust or that his
employer has ample reasons to distrust him, the labor tribunal cannot justly deny to the employer the
authority to dismiss such an employee. 9

As a tire builder, Lariosa was entrusted with certain materials for use in his job. On the day in
question, he was given two bundles of wool flannel swabs [ten pieces per bundle] for cleaning disks.
He used four swabs from one pack and kept the rest [sixteen pieces] in his "blue travelling
bag." 10 Why he placed the swabs in his personal bag, which is not the usual receptacle for company
property, has not been satisfactorily explained.
If Lariosa, by his own wrong-doing, could no longer be trusted, it would be an act of oppression to
compel the company to retain him, fully aware that such an employee could, in the long run,
endanger its very viability.

The employer's obligation to give his workers just compensation and treatment carries with it the
corollary right to expect from the workers adequate work, diligence and good conduct. 11

In view of the foregoing, We rule that Firestone had valid grounds to dispense with the services of
Lariosa and that the NLRC acted with grave abuse of discretion in ordering his reinstatement.
However, considering that Lariosa had worked with the company for eleven years with no known
previous bad record, the ends of social and compassionate justice would be served if he is paid full
separation pay but not reinstatement without backages as decreed by the NLRC. 12

WHEREFORE, the petition is granted. The decision of the National Labor Relations Commission
dated December 28, 1984 is reversed and set aside. Petitioner Firestone Tire and Rubber Company
of the Philippines is directed to pay its dismissed worker Carlos Lariosa the separation pay to which
he may be entitled under the law, or any collective bargaining agreement or company rules or
practice, whichever is higher.

SO ORDERED.

Alampay, Gutierrez, Jr., Paras, Padilla and Bidin JJ., concur.

Cortes, J., took no part.

Footnotes

1 Rollo, P. 43.

2 Rollo, p. 82.

3 Rollo, p. 27.

4 Rollo, pp. 20-21.

5 Rollo, p. 88.

6 Rollo p. 43.

7 Rollo, pp. 42-43.

8 Metro Drug Corporation vs. NLRC, G.R. No. 72248, July 22, 1986, 143 SCRA 132,
citing Dole Philippines, Inc. vs. NLRC, G.R. 55413, July 25, 1983, 123 SCRA 673.

9 Philippine Geothermal Inc. vs. NLRC, G.R. Nos. 55249-50, October 19, 1982, 117
SCRA 692, 695; Reynolds Philippines Corp. vs. Eslava, G.R. No. L-48814, June 27,
1985, 137 SCRA 259.

10 Rollo, p. 93.
 11 Jacinto vs. Standard-Vacuum Oil Co., 70 Phil. 501; San Miguel Corporation vs.
NLRC, G.R. No. 56554, July 20, 1982, 115 SCRA 329.

12 Engineering Equipment Inc. vs. NLRC, G.R. No. 59221, December 26, 1984, 133
SCRA 752; National Service Corporation vs. Leogardo, Jr., G.R. No. 64296, July 20,
1984, 130 SCRA 502.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 70479 February 27, 1987

FIRESTONE TIRE AND RUBBER COMPANY OF THE PHILIPPINES, petitioner,

vs.
CARLOS LARIOSA and NATIONAL LABOR RELATIONS COMMISSION, respondents.

FERNAN, J:

In this petition for certiorari, petitioner Firestone Tire and Rubber Company of the Philippines
[Firestone for brevity] assails the decision of public respondent National Labor Relations
Commission which ordered the reinstatement without backwages of Carlos Lariosa, a dismissed tire
builder of petitioner, as having been rendered with grave abuse of discretion amounting to lack of
jurisdiction.

The facts are as follows:

Carlos Lariosa started working with Firestone on January 3, 1972 as a factory worker. At the time of
his dismissal, he was a tire builder.

At around 2:00 o'clock in the afternoon of July 27, 1983, as he was about to leave the company
premises Lariosa submitted himself to a routine check by the security guards at the west gate. He
was frisked by Security Guard Ambrosio Liso [Lizo] while his personal bag was inspected by
Security Guard Virgilio Olvez. In the course of the inspection, sixteen [16] wool flannel swabs, all
belonging to the company, were found inside his bag, tucked underneath his soiled clothes.

As a result of the incident, Firestone terminated Lariosa's services on August 2, 1983, citing as
grounds therefor: "stealing company property and loss of trust." 1 Firestone also filed a criminal
complaint against him with the Rizal provincial fiscal for attempted theft [IS No. 83-436-M]. 2

Lariosa, on the other hand, sued Firestone before the Ministry of Labor and Employment for illegal
dismissal, violation of Batas Pambansa Blg. 130 and its related rules and regulations, and damages.
The Labor Arbiter, in his decision dated May 8, 1984, found Lariosa's dismissal justified. 3 However,
on appeal, the National Labor Relations Commission on December 28, 1984 reversed the decision of the
Labor Arbiter [with one commissioner voting for affirmance] and held that the dismissal of Lariosa was too
severe a penalty. It therefore ordered Lariosa's reinstatement but without backwages, the period when he
was out of work to be considered a suspension. 4
Petitioner Firestone, in this special civil action for certiorari, contends that the NLRC erred in not
dismissing Lariosa's appeal for being late, in finding that Lariosa was not accorded due process and
in reversing the Labor Arbiter.

We shall deal first with the timeliness of the appeal. It is admitted that Lariosa filed his appeal on
June 7, 1984 or after the lapse of fourteen days from notice of the decision of the Labor Arbiter.
Article 223 of the Labor Code clearly provides for a reglementary period of ten days within which to
appeal decision of the Labor Arbiter to the NLRC. The ten-day period has been interpreted by this
Court in the case of Vir-jen Shipping and Marine Services, Inc. vs. NLRC, G.R. No. 58011-12, July
20, 1982, 115 SCRA 347, 361, to mean ten "calendar" days and not ten "working" days. However,
the "Notice of Decision" which Lariosa's lawyer received together with a copy of the arbiter's decision
advised them that an appeal could be taken to the NLRC within ten "working" days from receipt of
the said decision. 5

Mindful of the fact that Lariosa's counsel must have been misled by the implementing rules of the
labor commission and considering that the shortened period for appeal is principally intended more
for the employees' benefit, rather than that of the employer, We are inclined to overlook this
particular procedural lapse and to proceed with the resolution of the instant case.

A review of the record shows that Lariosa was indubitably involved in the attempted theft of the
flannel swabs. During the investigation called by the company's industrial relations manager Ms.
Villavicencio on July 28, 1983, or one day after the incident, Security Guards Liso and Olvez
contradicted Lariosa's bare claim that he had no intention to bring home the swabs and that he had
simply overlooked that he had earlier placed them inside his bag after they were given to him by his
shift supervisor while he was busy at work. Guard Olvez stated that when he confronted Lariosa with
the swabs, the latter replied that they were for "home use." And when he requested Lariosa to stay
behind while he reported the matter to the authorities, Lariosa refused and hurriedly left the premises
and boarded a passing jeepney. 6

From the records, it is likewise clear that Firestone did not act arbitrarily in terminating Lariosa's
services. On the contrary, there are transcripts to prove that an investigation of the incident was
promptly conducted in the presence of the employee concerned, the union president and the
security guards who witnessed the attempted asportation. Records also belie the allegation that
Lariosa was shown his walking papers on the very day of the incident. The letter of Ms. Villavicencio
to Lariosa dated August 1, 1983 informing the latter of his dismissal effective August 2, 1983
conclusively shows that he was discharged only on August 2, 1983, after an investigation was held
to ventilate the truth about the July 27 incident. 7 Thus, we cannot agree with the NLRC's conclusion
that even if Firestone had found substantial proof of Lariosa's misconduct, it did not observe the statutory
requirements of due process.

There is no gainsaying that theft committed by an employee constitutes a valid reason for his
dismissal by the employer. Although as a rule this Court leans over backwards to help workers and
employees continue with their employment or to mitigate the penalties imposed on them, acts of
dishonesty in the handling of company property are a different matter. 8

Thus, under Article 283 of the Labor Code, an employer may terminate an employment for "serious
misconduct" or for "fraud or willful breach by the employee of the trust reposed in him by his
employer or representative."

If there is sufficient evidence that an employee has been guilty of a breach of trust or that his
employer has ample reasons to distrust him, the labor tribunal cannot justly deny to the employer the
authority to dismiss such an employee. 9
As a tire builder, Lariosa was entrusted with certain materials for use in his job. On the day in
question, he was given two bundles of wool flannel swabs [ten pieces per bundle] for cleaning disks.
He used four swabs from one pack and kept the rest [sixteen pieces] in his "blue travelling
bag." 10 Why he placed the swabs in his personal bag, which is not the usual receptacle for company
property, has not been satisfactorily explained.

If Lariosa, by his own wrong-doing, could no longer be trusted, it would be an act of oppression to
compel the company to retain him, fully aware that such an employee could, in the long run,
endanger its very viability.

The employer's obligation to give his workers just compensation and treatment carries with it the
corollary right to expect from the workers adequate work, diligence and good conduct. 11

In view of the foregoing, We rule that Firestone had valid grounds to dispense with the services of
Lariosa and that the NLRC acted with grave abuse of discretion in ordering his reinstatement.
However, considering that Lariosa had worked with the company for eleven years with no known
previous bad record, the ends of social and compassionate justice would be served if he is paid full
separation pay but not reinstatement without backages as decreed by the NLRC. 12

WHEREFORE, the petition is granted. The decision of the National Labor Relations Commission
dated December 28, 1984 is reversed and set aside. Petitioner Firestone Tire and Rubber Company
of the Philippines is directed to pay its dismissed worker Carlos Lariosa the separation pay to which
he may be entitled under the law, or any collective bargaining agreement or company rules or
practice, whichever is higher.

SO ORDERED.

Alampay, Gutierrez, Jr., Paras, Padilla and Bidin JJ., concur.

Cortes, J., took no part.

Footnotes

1 Rollo, P. 43.

2 Rollo, p. 82.

3 Rollo, p. 27.

4 Rollo, pp. 20-21.

5 Rollo, p. 88.

6 Rollo p. 43.

7 Rollo, pp. 42-43.

8 Metro Drug Corporation vs. NLRC, G.R. No. 72248, July 22, 1986, 143 SCRA 132,
citing Dole Philippines, Inc. vs. NLRC, G.R. 55413, July 25, 1983, 123 SCRA 673.
 9 Philippine Geothermal Inc. vs. NLRC, G.R. Nos. 55249-50, October 19, 1982, 117
SCRA 692, 695; Reynolds Philippines Corp. vs. Eslava, G.R. No. L-48814, June 27,
1985, 137 SCRA 259.

10 Rollo, p. 93.

11 Jacinto vs. Standard-Vacuum Oil Co., 70 Phil. 501; San Miguel Corporation vs.
NLRC, G.R. No. 56554, July 20, 1982, 115 SCRA 329.

12 Engineering Equipment Inc. vs. NLRC, G.R. No. 59221, December 26, 1984, 133
SCRA 752; National Service Corporation vs. Leogardo, Jr., G.R. No. 64296, July 20,
1984, 130 SCRA 502.

FIRST DIVISION

UNION OF FILIPRO G.R. No. 158930-31

EMPLOYEES - DRUG, FOOD
AND ALLIED INDUSTRIES
UNIONS - KILUSANG MAYO
UNO (UFE-DFA-KMU),
Petitioner,

- versus -

NESTL PHILIPPINES,
INCORPORATED,

Respondent.

x-----------------------------------x

NESTL PHILIPPINES,
INCORPORATED
Petitioner,

- versus -
G.R. No. 158944-45

UNION OF FILIPRO
EMPLOYEES - DRUG, FOOD
AND ALLIED INDUSTRIES
UNIONS - KILUSANG MAYO
UNO (UFE-DFA-KMU),
Respondent. Present:

PANGANIBAN, C.J.
Chairperson,
YNARES - SANTIAGO

AUSTRIA-MARTINEZ,

CALLEJO, SR., and

CHICO-NAZARIO, JJ.

Promulgated:

August 22, 2006

x-------------------------------------------------------------------------x
 DECISION

CHICO-NAZARIO, J.:

The Case

Before the Court are two (2) petitions for review

on certiorari under Rule 45 of the Rules of Court, as amended. Both
seek to annul and set aside the joint: (1) Decision [ 1 ] dated 27 February
2003, and (2) Resolution [ 2 ] dated 27 June 2003, of the Court of
Appeals in CA-G.R. SP No. 69805 [ 3] and No. 71540. [ 4]
G.R. No. 158930-31 was filed by Union of Filipro Employees
Drug, Food and Allied Industries Unions Kilusang Mayo Uno (UFE-
DFA-KMU) against Nestl Philippines, Incorporated (Nestl) seeking
the reverse of the Court of Appeals Decision in so far as the latters
failure to adjudge Nestl guilty of unfair labor practice is concerned, as
well as the Resolution of 27 June 2003 denying its Partial M otion for
Reconsideration; G.R. No. 158944 -45 was instituted by Nestl against
UFE-DFA-KMU similarly seeking to annul and set aside the Decision
and Resolution of the Court of Appeals declaring 1) the Retirement
Plan a valid collective bargaining issue; and 2) the scope of
assumption of jurisdiction power of the Secretary of the DOLE to be
limited to the resolution of questions and matters pertaining merely to
the ground rules of the collective bargaining negotiations to be
conducted between the parties.
 In as much as the cases involve the same set of parties; arose
from the same set of circumstances, i.e., from several Orders issued by
then Secretary of the Department of Labor and Employment (DOLE),
Hon. Patricia A. Sto. Tomas, respecting her assumption of jurisdiction
over the labor dispute between Nestl and UFE -DFA-KMU, Alabang
and Cabuyao Divisions; [ 5 ] and likewise assail the same Decision and
Resolution of the Court of Appeals, the Court ordered the
consolidation of the two petitions. [ 6]

The Facts

From the record and the pleadings f iled by the parties, we cull
the following material facts in this case:

On 4 April 2001, in consideration of the impending expiration of

the existing collective bargaining agreement (CBA) between Nestl and
UFE-DFA-KMU [ 7 ] on 5 June 2001, [ 8 ] in a letter denominated as
a Letter of Intent, the Presidents of
the Alabang and Cabuyao Divisions of UFE-DFA-KMU, Ernesto Pasco
and Diosdado Fortuna, respectively, informed Nestl of their intent to
open our new Collective Bargaining Negotiation for the year 2001 -
2004 x x x as early as June 2001. [ 9]

In a letter [ 1 0 ] dated 10 April 2001, Nestl acknowledged receipt of

the aforementioned letter. It also informed UFE -DFA-KMU that it was
preparing its own counter-proposal and proposed ground rules that
shall govern the conduct of the collective bargaining negotiations.
 On 29 May 2001, in another letter addressed to the UFE -DFA-
KMU (Cabuyao Division), Nestl underscored its position
that unilateral grants, one-time company grants, company-initiated
policies and programs, which include, but are not limited t o the
Retirement Plan, Incidental Straight Duty Pay and Calling Pay
Premium, are by their very nature not proper subjects of CBA
negotiations and therefore shall be excluded therefrom. [ 1 1 ] In addition,
it clarified that with the closure of the Alabang Plant, the CBA
negotiations will only be applicable to the covered employees of
the CabuyaoPlant; hence, the Cabuyao Division of UFE-DFA-KMU
became the sole bargaining unit involved in the subject CBA
negotiations.

Thereafter, dialogue between the company and the union ensued.

In a letter dated 14 August 2001, Nestl, claiming to have reached

an impasse in said dialogue, requested [ 12 ] the National Conciliation
and Mediation Board (NCMB), Regional Office No. IV, Imus, Cavite,
to conduct preventive mediation proceedings betwe en it and UFE-
DFA-KMU. Nestl alleged that despite fifteen (15) meetings between
them, the parties failed to reach any agreement on the proposed CBA.
The request was docketed as NCMB-RBIV-CAB-PM-08-035-01.

Conciliation proceedings nevertheless proved inef fective.

Complaining, in essence, of bargaining deadlock pertaining to
economic issues, i.e., retirement (plan), panel composition, costs and
attendance, and CBA, [ 1 3 ] UFE-DFA-KMU filed a Notice of
Strike [ 1 4] on 31 October 2001 with the NCMB docketed as NCMB-
RBIV-LAG-NS-10-037-01. One week later, or on 07 November 2001,
another Notice of Strike [ 1 5 ] was filed by the UFE-DFA-KMU docketed
as NCMB-RBIV-LAG-NS-11-10-039-01, this time predicated on Nestls
alleged unfair labor practices i.e., bargaining in bad faith in that it
was setting pre-conditions in the ground rules by refusing to include
the issue of the Retirement Plan in the CBA negotiations. A strike vote
was then conducted by UFE-DFA-KMU on 22 November 2001. The
result was an overwhelming approval of the decision to hold a
strike. [ 1 6]

On 26 November 2001, in view of the looming strike, Nestl filed

with the DOLE a Petition for Assumption of Jurisdiction, [ 1 7 ] docketed
as OS-AJ-0023-01, fundamentally praying that the Secretary of the
DOLE, Hon. Patricia A. Sto. Tomas, assume jurisdiction over the
current labor dispute as mandated by Article 263 (g) of the Labor
Code, as amended, thereby effectively enjoining any impending strike
at the Nestl Cabuyao Plant in Laguna.

On 29 November 2001, Sec. Sto. Tomas issued an Order [ 1 8] in

OS-AJ-0023-01, NCMB-RBIV-CAV-PM-08-035-01, NCMB-RBIV-
LAG-NS-10-037-01 & NCMB-RBIV-LAG-NS-11-10-039-01 assuming
jurisdiction over the subject labor dispute between the parties,
the fallo thereof stating that:

CONSIDERING THE FOREGOING, this

Office hereby assumes jurisdiction over the labor
dispute at the Nestl Philippines, Inc.
(Cabuyao Plant) pursuant to Article 263 (g) of the
Labor Code, as amended.

Accordingly, any strike or lockout is hereb y

enjoined. The parties are directed to cease and
desist from committing any act that might lead to
the further deterioration of the current labor
relations situation.
 The parties are further directed to meet and
convene for the discussion of the union proposals
and company counter-proposals before the National
Conciliation and Mediation Board (NCMB) who is
hereby designated as the de legate/facilitator of this
Office for this purpose. The NCMB shall report to
this Office the results of this attempt at conciliation
and delimitation of the issues within thirty (30)
days from the parties receipt of this Order, in no
case later than December 31, 2001. If no settlement
of all the issues is reached, this Office shall
thereafter define the outstanding issues and order
the filing of position papers for a ruling on the
merits.

UFE-DFA-KMU sought reconsideration [ 1 9] of

the abovequoted Assumption of Jurisdiction Order on the assertion
that:

i. Article 263 (g) of the Labor Code, as amended, is invalid

and unconstitutional as it is in derogation of the provisions
dealing on protection to labor, social justice, the bill of
rights, and, generally accepted principle of international law;

ii. compulsory arbitration as a mode of dispute settlement

provided for in the Labor Code and sourced from the 1935
and 1973 constitutions has been discarded and deleted by the
New Charter which instituted in its stead free collective
bargaining;

iii. that ILO condemns the continuous exercise by the Secretary

of Labor of the power of compulsory arbitration;

iv. granting that the law is valid, the Secretary has

unconstitutionall y applied the law;

v. that the company is a business enterprise not belonging to

an industry indispensable to the national interest considering
that it is onl y one among a number of companies in the
country producing milk and nutritional products; that
 the Cabuyao plant is only one of the six (6) Nestle plants in
the country and could rel y on its highly
automated Cagayan de Oro plant for buffer stocks;

vi. that the Secretary acted with grave abuse of discretion in

issuing the assailed order without the benefit of a p rior notice
and inquiry.

In the interregnum, the union interposed a motion for extension

of time [ 2 0 ] to file its position paper as directed by the Assumption of
Jurisdiction Order of 29 November 2001.

In an Order [ 2 1] dated 14 January 2002, Sec. Sto. Tomas denied

the aforequoted motion for reconsideration in this wise:

This is not the first time that this Office had occasion to
resolve the grounds and arguments now being raised x x x. In a
more recent case In re: labor dispute at Toyota Motor Philippines
Corporation x x x this Office ruled:

The constitutionality of the power of the

Secretary of Labor under Article 263 (g) of the Labor
Code to assume jurisdiction over a labor dispute in an
industry indispensable to the national interest has been
upheld as an exercise of police power of the
constitution. x x x.

x x x x

As ruled by the Supreme Court in the Philtread case:

Article 263 (g) of the Labor Code does not

violate the workers constitutional right to
strike.

x x x x x x

The foregoing article clearl y does not

interfere with the workers right to strike
but merel y regulates it, when in the
 exercise of such right, national interests
will be affected.

On 15 January 2002, despite the injunction [ 22 ] contained in

Sec. Sto. Tomas Assumption of Jurisdiction Order and conciliation
efforts by the NCMB, the employee members of UFE -DFA-KMU at
the Nestl Cabuyao Plant went on strike.

On 16 January 2002, in consideration of the above,

Sec. Sto. Tomas issued yet another Order [ 2 3 ] directing: (1) the
members of UFE-DFA-KMU to return-to-work within twenty-four (24)
hours from receipt of such Order; (2) Nestl to accept back all
returning workers under the same terms and conditions existing
preceding to the strike; (3) both parties to cease and desist from
committing acts inimical to the on -going conciliation proceedings
leading to the further deterioration of the situation; and (4)
the submission of their respective position papers within ten (10) days
from receipt thereof.

Notwithstanding the Return-To-Work Order, the members of

UFE-DFA-KMU continued with their strike and refused to go back to
work as instructed. Thus, Sec. Sto. Tomas sought the assistance of the
Philippine National Police (PNP) for the enforcement of said order.

At the hearing called on 7 February 2002, Nestl and UFE -DFA-

KMU filed their respective position papers. In its position
paper, [ 2 4 ] Nestl addressed several issues allegedly pertaining to the
current labor dispute, i.e., economic provisions of the CBA as well as
the non-inclusion of the issue of the Retirement Plan in the collective
bargaining negotiations. UFE-DFA-KMU, in contrast, limited itself to
tackling the solitary issue of whether or not the retirement plan was a
mandatory subject in its CBA negotiations with the company on the
contention that the Order of Assumption of Jurisdiction covers only
the issue of Retirement Plan. [ 2 5 ]

On 8 February 2002, Nestl moved that UFE -DFA-KMU be

declared to have waived its right to present arguments respecting the
other issues raised by the company on the ground that the latter chose
to limit itself to discussing only one (1) issue. Sec. Sto. Tomas, in
an Order [ 2 6 ] dated 11 February 2002, however, did not see fit to grant
said motion. She instead allowed UFE -DFA-KMU the chance to tender
its stand on the other issues raised by Nestl but not covered by its
initial position paper paper by way of a Supplemental Position Paper.

UFE-DFA-KMU afterward filed several pleadings: (1) an Urgent

Motion to File a Reply dated 13 February 2002; (2) a Motion for Time
to File Supplemental Position Paper dated 22 February 2002; and (3)
a Manifestation with Motion for Reconsideration of the Order
dated February 11, 2002dated 27 February 2002. The latter pleading
was an absolute contradiction of the second one praying for additional
time to file the subject supplemental position paper. In
said Manifestation, UFE-DFA-KMU explained that it realized that the
Order of February 11, 2002 appears to be contrary to law and
jurisprudence and is not in conformity with existing laws and the
evidence on record, [ 2 7 ] as the Secretary of the DOLE could only
assume jurisdiction over the issues mentioned in the notice of strike
subject of the current dispute. [ 2 8] UFE-DFA-KMU then went on to
clarify that the Amended Notice of Strike did not cite, as one of the
grounds, the CBA deadlock.
On 8 March 2002, Sec. Sto. Tomas denied the motion for
reconsideration of UFE-DFA-KMU.
 Frustrated with the foregoing turn of eve nts, UFE-DFA-KMU
filed a petition for certiorari [ 2 9 ] with application for the issuance of a
temporary restraining order or a writ of preliminary injunction before
the Court of Appeals. The petition was predicated on the question of
whether or not the DOLE Secretary committed grave abuse of
discretion in issuing the Orders of 11 February 2002 and 8 March
2002.

Meanwhile, in an attempt to finally resolve the crippling labor

dispute between the parties, then Acting Secretary of the DOLE, Hon.
Arturo D. Brion, came out with an Order [ 3 0 ] dated 02 April 2002, in
the main, ruling that:

a. we hereby recognize that the present Retirement Plan at the

Nestl Cabuyao Plant is a unilateral grant that the parties have
expressl y so recognized subsequent to the Supreme Courts ruling
in Nestl, Phils. Inc. vs. NLRC, G.R. No. 90231, February 4,
1991, and is therefore not a mandatory subject for bargaining;

b. the Unions charge of unfair labor practice against the

Company is hereby dismissed for lack of merit;

c. the parties are directed to secure the best applicable terms

of the recentl y concluded CBs between Nestl Phils. Inc. and it eight
(8) other bargaining units, and to adopt these as the terms and
conditions of the Nestl Cabuyao Plant CBA;

d. all union demands that are not covered by the provis ions of
the CBAs of the other eight (8) bargaining units in the Company are
hereby denied;

e. all existing provisions of the expired Nestl Cabuyao Plant

CBA without any counterpart in the CBAs of the other eight
bargaining units in the Company are hereby ordered maintained as
part of the new Nestl Cabuyao Plant CBA;

f. the parties shall execute their CBA within thirt y (30)

days from receipt of this Order, furnishing this Office a copy of the
signed Agreement;
 g. this CBA shall, in so far as representation is concerned, be
for a term of five (5) years; all other provisions shall be
renegotiated not later than three (3) years after its effective date
which shall be December 5, 2001 (or on the first day six months
after the expiration on June 4, 2001 of t he superceded CBA).

Not surprisingly, UFE-DFA-KMU moved to reconsider

the aforequoted position of the DOLE.

On 6 May 2002, the Secretary of the DOLE,

Hon. Sto. Tomas, issued the last of the assailed Orders. [ 3 1] This order
resolved to deny the preceding motion for reconsideration of UFE -
DFA-KMU.

Undaunted still, UFE-DFA-KMU, for the second time, went to the

Court of Appeals likewise via a petition for certiorari seeking to
annul, on the ground of grave abuse of discretion, the Orders of 02
April 2002 and 06 May 2002 of the Secretary of the DOLE.

The Court of Appeals, acting on the twin petitions fo r certiorari,

determined the issues in favor of UFE -DFA-KMU in a joint Decision
dated 27 February 2003. The dispositive part thereof states that:

WHEREFORE, in view of the foregoing, there being grave

abuse on the part of the public respondent in issuing all the
assailed Orders, both petitions are hereby GRANTED. The
assailed Orders dated February 11, 2001, and March 8, 2001
(CA-G.R. SP No. 69805), as well as the Orders dated April 2,
2002 and May 6, 2002 (CA -G.R. SP No. 71540) of the Secretary
of Labor and Employment in the case entitled: IN RE: LABOR
DISPUTE AT NESTLE PHILIPPINES INC. (CABUYAO FACTORY)
 under OS-AJ-0023-01 (NCMB-RBIV-CAV-PM-08-035-01, NCMB-
RBIV-LAG-NS-10-037-01, NCMB-RBIV-LAG-NS-11-10-03901) are
hereby ANNULLED and SET ASIDE. Private respondent is hereby
directed to resume the CBA negotiations with the
petitioner. [ 3 2 ]

Dissatisfied, both parties separately moved for the

reconsideration of the abovequoted decision with Nestl basically
assailing that part of the decision finding the DOLE Secretary to have
gravely abused her discretion when she ruled that the Retirement
Plan is not a valid issue for collective bargaining negotiations; while
UFE-DFA-KMU questions, in essence, the appellate courts decision in
absolving Nestl of the charge of unfair labor practice.

The parties efforts were all for naught as the Court of Appeals
stood pat in its earlier pronouncements and denied the motions for
reconsideration in a joint Resolution dated 27 June 2003.

Hence, these petitions for review on certiorari separately filed

by the parties. Said petitions were ordered consolidated in a Supreme
Court Resolution dated 29 March 2004.

The Issues

UFE-DFA-KMUs petition for review docketed as G.R. No. 158930 -

31, is predicated on the following alleged errors:
 I.

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF

LAW IN NOT HOLDING THAT RESPONDENT IS GUILTY OF
UNFAIR LABOR PRACTICE IN REFUSING TO PROCEED WITH
THE CBA NEGOTIATIONS UNLESS PETITIONER FIRST ADMITS
THAT THE RETIREMENT PLAN IN THE COMPANY IS A NON -
CBA MATTER; and

II.

THE CONTENTION THAT THERE IS NO EVIDENCE OF UNFAIR

LABOR PRACTICE ON RESPONDENT NESTLS PART AND
THAT PETITIONER DID NOT RAISE THE ISSUE OF ULP IN ITS
ARGUMENTS BEFORE THE COURT OF APPEALS IS GROSSLY
ERRONEOUS. [ 3 3 ]

Whereas in G.R. No. 158944-45, petitioner Nestl challenges the

conclusion of the Court of Appeals on the basis of the following
issues:

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED

SERIOUS ERROR IN HOLDING THAT THE POWERS GRANTED
TO THE SECRETARY OF LABOR TO RESOLVE NATIONAL
INTEREST DISPUTES UNDER ARTICLE 263 (G) OF THE LABOR
 CODE MAY BE LIMITED BY A (SECOND) NOTICE OF STRIKE;
and

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED

SERIOUS ERROR IN ANNULING THE SECRETARY OF
LABORS JUDGMENT ON THE RETIREMENT PLAN ISSUE
WHICH WAS MERELY A PART OF THE COMPLETE
RESOLUTION OF THE LABOR DISPUTE. [ 3 4 ]

On the whole, the consolidated cases only raise three (3)

fundamental issues for deliberation by this Court, that is, whether or
not the Court of Appeals committed reversible error, first, in finding
the Secretary of Labor and Employment to have gravely abused her
discretion in her pronouncement that the Retirement Plan was not a
proper subject to be included in the CBA negotiations between the
parties; hence, non-negotiable; second, in holding that the
assumption powers of the Secretary of Labor and Employment should
have been limited merely to the grounds alleged in the second Notice
of Strike; and third, in not ruling that Nestl was guilty of unfair labor
practice despite allegedly setting a pre-condition to bargaining the
non-inclusion of the Retirement Plan as an issue in the collective
bargaining negotiations.

The Courts Ruling

 Foremost for our resolution is the matter of the non -inclusion of
the Retirement Plan in the CBA neg otiations between Nestl and UFE-
DFA-KMU (Cabuyao Division).

In finding the Secretary of the DOLE to have gravely abused her

discretion in holding that the Retirement Plan is not a valid CBA issue,
the Court of Appeals explained that:

Although the Unio n, thru its President Diosdado Fortuna, signed a

Memorandum of Agreement dated Octo ber 8, 1998 together with the
private respondent which clearly states that the Company agree to
extend the following unilateral grants which shall not form part of the
CBA (citatio n omitted) however, the same document made a proviso
that reference on the Retirement Plan in the CBA signed on July 4, 1995,
shall be maintained, x x x thus, this Court is of the belief and so holds
that the Retirement Plan is still a valid CBA issue, hence, it co uld not be
argued that the true intention of the parties is that the Retirement
Plan, although referred in the CBA, would not in any way form part of
the CBA (citation omitted) as it could be clearly inferred by this Court
that it is to be used as an integral part of the CBA and to be used as a
topic for future bargaining, in consonance with the ruling of the
Supreme Court in the previous Nestl Case that the Retirement Plan was
a collective bargaining issue right from the start. [ 3 5 ]

In filing the present petition, Nestle is of the view that after the
1991 Supreme Court Decision was promulgated, there was obviously
an agreement by the parties to no longer consider the Retirement
Plan as a negotiable item subject to bargaining. Rather, said benefit
would be regarded as a unilateral grant outside the ambit of
negotiation. Nestl justifies such contention by directing the Courts
attention to the Ground Rules for 1998 Alabang/Cabuyao Factories
CBA Negotiation (citation omitted) signed by it and the
representatives of UFE-DFA-KMU where both
sides expresslyrecognized Nestls prerogative to initiate unilateral
grants which are not negotiable. It likewise cited the Memorandum of
Agreement [ 3 6 ] entered into by the parties on 08 October 1998, which
also categorically referred to the Retirement Plan as one of the
unilateral grants alluded to in the aforementioned Ground Rules.
Nestle then concluded that:

Indeed, the foregoing uncontroverted documents very clearly

established the clear agreement of the parties, after the 1991 Supr eme
Court Decision, to remove the Retirement Plan from the scope of
bargaining negotiatio n, and leave the matter upon the sole initiative
and discretion of Nestl. [ 3 7 ]

In contrast, UFE-DFA-KMU posits that there is nothing in either

of the documents aboveclaimed that proves that it agreed to treat
the Retirement Plan as a unilateral grant of the company which is
outside the scope of the CBA and hence, not a proper subject of
bargaining. It explained that the MOA alluded to by Nestl merely
speaks of the improvement [ 3 8 ] or the review for the improvement [ 3 9 ] of
the current Retirement Plan and nothing else. UFE -DFA-KMU
rationalizes that:

Had the objective of the parties been to c o nsider the Retirement

Plan as not a subject for collective bargaining, they would have stated
so in categorical terms. Or, they could have deleted the said benefit
from the CBA.
 Unfortunately for petitioner, the documents relied upon by it do
not state that the Retirement Plan is no longer a bargainable item. The
said benefit was not also removed or deleted from the CBA.

If ever, what was unilaterally granted by petitioner company as

appearing o n the above -stated letter and MOA were the improv ements
on the Retirement P lan. The Retirement Plan could not have been
unilaterally granted by the said letter and MOA since the said Plan
predates the said letter and MOA by over two decades.

UFE-DFA-KMU concludes that [s]ince the Retirement Plan did

not derive its existence from the letter and MOA x x x, the nature of
the Retirement Plan was not altered or changed by the subsequent
issuance by petitioner company of the said letter and MOA. The
Retirement Plan remained a CBA item which is a proper subject of
collective bargaining pursuant to the 1991 ruling of this Honorable
Court. [ 4 0 ]

We agree.

The present issue is not one of first impression. In Nestl

Philippines, Inc. v. NLRC, [ 4 1 ] ironically involving the same parties
herein, this Court has had the occasion to affirm that a retirement
plan is consensual in nature.

By way of background, the parties therein resorted to a

slowdown and walked out of the factory prompting the management
to shut down its operations. Collective bargaining negotiations were
conducted but a deadlock was subsequ ently declared. The Secretary
of Labor assumed jurisdiction over the labor dispute and issued a
return-to-work order. The NLRC thereafter issued its resolution
modifying Nestls existing non-contributory Retirement Plan. The
company filed a petition for certiorari alleging grave abuse of
discretion on the part of the NLRC as Nestl was arguing that since its
Retirement Plan is non-contributory, it should be a non-issue in CBA
negotiations. Nestl had the sole and exclusive prerogative to define
the terms of the plan as the employees had no vested and
demandable rights thereon the grant of such not being a contractual
obligation but simply gratuitous. In a ruling contrary to Nestls
position, this Court, through Madame Justice Grio -Aquino, declared
that:

The companys [Nestl] contention that its retirement plan is non -

negotiable, is not well -taken. The NLRC correctly observed that the
inclusion of the retirement plan in the collective bargaining agreement
as part of the packag e of economic benefits extended by the company
to its employees to provide them a measure of financial security after
they shall have ceased to be employed in the company, reward their
loyalty, boost their morale and efficiency and promote industrial
peace, gives a consen sual character to t he plan so that it may not be
terminated or modified at will by either party (citation omitted).

The fact that the reti rement plan is non -contributory, i.e., that
the employees contribute nothing to the operation of the plan, d oes not
make it a non -issue in the CBA negotiations. As a matter of fact, almost
all of the benefits that the petitioner has granted to its employees
under the CBA salary increases, rice allowances, midyear bonuses,
13 t h and 14 t h month pay, seniority pay, medical and hospitalization
plans, health and dental services, vacation, sick & other leaves with pay
are non-contributory benefits. Since the retirement plan has been an
integral part of the CBA since 1972, the Unions demand to increase the
benefits due the empl oyees under said plan, is a valid CBA issue . x x x

x x x x
 x x x [E]mployees do have a vested and demandable right over
existing benefits vol untarily granted to them by their employer. The
latter may not unilaterally withdraw, eliminate or diminish such
benefits (Art. 100 , L abor Co de; other citation omitted). [Em phases
supplied.] [ 4 2 ]

In the case at bar, it cannot be denied that the CBA that was
about to expire at that time contained provisions respecting the
Retirement Plan. As the latter benefit was already subject of the
existing CBA, the members of UFE -DFA-KMU were only exercising
their prerogative to bargain or renegotiate for the improvement of
the terms of the Retirement Plan just like they would for all the other
economic, as well as non-economic benefits previously enjoyed by
them. Precisely, the purpose of collective bargaining is the
acquisition or attainment of the best possible covenants or terms
relating to economic and non-economic benefits granted by
employers and due the employees. The Labor Code has actually
imposed as a mutual obligation of both parties, this duty to bargain
collectively. The duty to bargain collectively is categorically
prescribed by Article 252 of the said code. It states:

ART. 252. MEANING OF DUTY TO BARGAIN COLLECTIVELY. The duty to

bargain collectively means the performance of a mutual obligation to
meet and confer pro mptly and expeditio usly and in good faith for the
purpose of negotiating an agreement with respect to wages, hours of
work, and all other terms and conditio ns of employment including
proposals for adjusting any grievances or questions arising under such
agreement and executing a contract incorporating such agre ement if
requested by either party, but such duty does not compel any party to
agree to a proposal or to make any concession.

Further, Article 253, also of the Labor Code, defines the

parameter of said obligation when there already exists a CBA, viz:
 ART. 253. DUTY TO BARGAIN COLLECTIVELY WHEN THERE EXISTS A
COLLECTIVE BARGAINING AGREEMENT. The duty to bargain collectively
shall also mean that either party shall not terminate nor modify such
agreement during its lifetime. However, either party can ser ve a written
notice to terminate or modify the agreement at least sixty (60) days
prior to its expiration date. It shall be the duty of both parties to keep
the status quo and to continue in full force and effect the terms and
conditions of the existing ag reement during the sixty day period and/or
until a new agreement is reached by the parties.

And, in demanding that the terms of the Retirement Plan be

opened for renegotiation, the members of UFE -DFA-KMU are acting
well within their rights as we have, indeed, declared that the
Retirement Plan is consensual in character; and so, negotiable.

Contrary to the claim of Nestl that the categorical mention of

the terms unilateral agreement in the letter and the MOA signed by
the representatives of UFE-DFA-KMU, had, for all intents and
purposes worked to estop UFE-DFA-KMU from raising it as an issue in
the CBA negotiations, our reading of the same, specifically Paragraph
6 and subparagraph 6.2:

6. Additionally, the COMPANY agree to extend the following unilateral

grants which shall not form part of the Collective Bargaining Agreement
(CBA):

x x x x
 6.2. Review for improvement of the COMPANYs Retirement
Plan and the reference on the Retirement Plan in the
Collective Bargaining Agreement signed on 4 July
1995 shall be maintained. [ 4 3 ]

hardly persuades us that the members of UFE -DFA-KMU have agreed

to treat the Retirement Plan as a benefit th e terms of which are
solely dependent on the inclination of the Nestl and remove the
subject benefit from the ambit of the CBA. The characterization
unilaterally imposed by Nestl on the Retirement Plan cannot operate
to divest the employees of their vested and demandable right over
existing benefits voluntarily granted by their employer. [ 4 4 ] Besides,
the contention that UFE-DFA-KMU has abandoned or forsaken our
earlier pronouncement vis--vis the consensual nature of a retirement
plan is quite inconsistent with, nay, is negated by its conduct in
doggedly asking for a renegotiation of said benefit.

Worth noting, at this point, is the fact that

the aforequoted paragraph 6 and its subparagraphs, particularly
subparagraph 6.2, highlights an undeniable fact that Nestl recognizes
that the Retirement Plan is part of the existing Collective Bargaining
Agreement.

Nestl further rationalizes that a ruling declaring the Retirement

Plan a valid CBA negotiation issue will inspire other bargaining units
to demand for greater benefits in accordance with their respective
appetites. Suffice it to say that the consensual nature of the
Retirement Plan neither gives the union members the unfettered
right nor the unbridled prerogative to demand more than what the
company can viably give.
 As regards the scope of the assumption powers of the Secretary
of the DOLE, the appellate court ruled that Sec. Sto. Tomas
assumption of jurisdiction powers should have been limited to the
disagreement on the ground rules of the collective bargaining
negotiations. The Court of Appeals referred to the minutes of the
meeting held on 30 October 2001. That the representative Nestl was
recorded to have stated that we are still discussing ground rules and
not yet on the CBA negotiations proper, a deadlock cannot be
declared, [ 4 5 ] was a telling fact. The Court of Appeals, thus, declared
that the Secretary should not have ruled on the questions and issues
relative to the substantive aspect of the CBA simply because there
was no conflict on the CBA yet. [ 4 6 ]

UFE-DFA-KMU agrees in the above and contends that the

requisites of judicial inquiry require, first and foremost the presence
of an actual case controversy. It then concludes that [i]f the courts of
law cannot act and decide in the absence of an actual case or
controversy, so should be (sic) also the Honorable DOLE Secretary. [ 4 7 ]

Nestle, however, contradicts the preceding disquisitions on the

ground that such referral to the minutes of the meeting was
erroneous and misleading. It avers that the Court of Appeals failed to
consider the circumstance surrounding said utterance that the
statement was made during the preventive mediation proceedings
and the UFE-DFA-KMU had not yet filed any notice of strike. It further
emphasizes that it was UFE-DFA-KMU who first alleged bargaining
deadlock as the basis for the filing of its Notice of Strike. Finally,
Nestl clarifies that before the first Notice of Strike was filed, several
conciliation conferences had already been undertaken where both
parties had exchanges of their respective CBA proposals.
 In this, we agree with Nestl. Declaring the Secretary of the DOLE
to have acted with grave abuse of discretion for ruling on substantial
matters or issues and not restricting itself merely on the ground
rules, the appellate court and UFE -DFA-KMU would have us treat the
subject labor dispute in a piecemeal fashion.

The power granted to the Secretary of the DOLE by Paragraph

(g) of Article 263 of the Labor Code, to wit:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS.

x 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 L abor 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 tim e 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.

x x x x
authorizes her to assume jurisdiction over a labor dispute, causing or
likely to cause a strike or lockout in an industry indispensable to the
national interest, and correlatively, to decide the same.

In the case at bar, the Secretary of the DOLE simply relied on

the Notices of Strike that were filed by UFE -DFA-KMU as stated in her
Order of 08 March 2002, to wit:

x x x The records disclose that the Union filed two Notices of

Strike. The First is dated October 31, 2001 whose grounds are cited
verbatim hereunder:

A. Bargaining Deadlock
1. Economic issues (specify)
1. Retirement
2. Panel Composition
3. Costs and Attendance
4. CBA

The second Notice of Strike is dated November 7, 2001 and the

cited ground is like quoted verbatim below:

B. Unfair Labor Practices (specify)

Bargaining in bad faith
Setting pre-condition in the ground rules (Retirement
issue)

Nowhere in the second Notice of Strike is it indicated that this

Notice is an amendment to and took the place of the first Notice of
Strike. In fact, our Assumption of Jurisdiction Order dated
November 29, 2001 specificall y cited the two (2) Notices of Strike
without any objection on the part of the Union x x x. [ 4 8 ]

Thus, based on the Notices of Strike filed by UFE -DFA-KMU, the

Secretary of the DOLE rightly decided on matters of substance.
Further, it is a fact that during the conciliation meetings before the
NCMB, but prior to the filing of the notices of strike, the parties had
already delved into matters affecting the meat of the collective
bargaining agreement. The appellate courts reliance on the
statement [ 4 9] of the representative of Nestl in ruling that the labor
dispute had yet to progress from the discussion of the ground rules of
the CBA negotiations is clearly misleading; hence, erroneous.

Nevertheless, granting for the sake of argument that the

meetings undertaken by the parties had not gone beyond the
discussion of the ground rules, the issue of whether or not the
Secretary of the DOLE could decide issues incidental to the subject
labor dispute had already been answere d in the affirmative. The
Secretarys assumption of jurisdiction power necessarily includes
matters incidental to the labor dispute, that is, issues that are
necessarily involved in the dispute itself, not just to those ascribed in
the Notice of Strike; or, otherwise submitted to him for resolution. As
held in the case of International Pharmaceuticals, Inc. v. Sec. of Labor
and Employment, [ 5 0 ] x x x [t]he Secretary was explicitly granted by
Article 263 (g) of the Labor Code the authority to assume jurisdiction
over a labor dispute causing or likely to cause a strike or lockout in an
industry indispensable to the national interest, and decide t he same
accordingly. Necessarily, this authority to assume jurisdiction over the
said labor dispute must include and extend to all questions and
controversies arising therefrom , including cases over which the Labor
Arbiter has exclusive jurisdiction. [ 5 1 ] Accordingly, even if not exactly
on the ground upon which the Notice of Strike is based, the fact that
the issue is incidental to the resol ution of the subject labor dispute
or that a specific issue had been submitted to the Secretary of the
DOLE for her resolution, validly empowers the latter to take
cognizance of and resolve the same.

Secretary Sto. Tomas correctly assumed jurisdiction over the

questions incidental to the current labor dispute and those matters
raised by the parties. In any event, the query as to whether or not the
Retirement Plan is to be included in the CBA negotiatio ns between
the parties ineluctably dictates upon the Secretary of the DOLE to go
into the substantive matter of the CBA negotiations.

Lastly, the third issue pertains to the alleged reversible error

committed by the Court of Appeals in holding, albeit im pliedly, Nestl
free and clear from any unfair labor practice. UFE -DFA-KMU argues
that Nestls refusal to bargain on a very important CBA economic
provision constitutes unfair labor practice. [ 5 2 ] It explained that Nestl
set as a precondition for the holding of collective bargaining
negotiations the non-inclusion of the issue of Retirement Plan. In its
words, respondent Nestl Phils., Inc. insis ted that the Union should
first agree that the retirement plan is not a bargaining issue before
respondent Nestl would agree to discuss other issues in the CBA. [ 5 3 ] It
then concluded that the Court of Appeals committed a legal error in
not ruling that respondent company is guilty of unfair labor practice.
It also committed a legal error in failing to award damages to the
petitioner for the ULP committed by the respondent. [ 5 4 ]

Nestl refutes the above argument and asserts that it was only
before the Court of Appeals, and in the second Petition
for Certiorari at that, did UFE-DFA-KMU raise the matter of unfair
labor practice. It reasoned that the subject of unfair labor practice
should have been threshed out with the appropriate labor tribunal. In
justifying the failure of the Court of Appeals to find it guilty of unfair
labor practice, it stated that:

Under the circumstances, therefore, there was no way for the

Court of Appeals to make a ruling on the issues of unfair labor practice
and damages, simply because there was nothin g to support or justify
such action. Although petitioner was afforded by the Secretary the
 opportunity to be heard and more, it simply chose to omit the said
issues in the proceedings below. [ 5 5 ]

We are persuaded.

The concept of unfair labor practice is defined by the Labor

Code as:

ART. 247. CONCEPT OF UNFAIR LABOR PRACTICE AND PROCEDURE

FOR PROSECUTION THEREOF . Unfair labor practices violate the
constitutional right of workers and employees to self -organization, are
inimical to the legitimate interests of both labor and management,
including their right to bargain collectively and otherwise deal with
each other in an atm osphere of free dom and mutual respect, disrupt
industrial peace and hinder the promotion of healthy and stable labor -
management relatio ns.

x x x x.

The same code likewise provides the acts constituting unfair

labor practices committed by employers, to wit:

ART. 248. UNFAIR LABOR PRACTICES OF EMPLOYERS . It shall be

unlawful for an employer to commit any of the following unfair labor
practices:

(a) To interfere with, restrain or coerce employees in the

exercise of their right to self -organization;
 (b) To require as a condition of employment that a perso n or
an employee shall not join a labor organization or shall withdraw from
one to which he belongs;

(c) To contract out services or functions being performed by

unio n members when such will interfere with, restrain or coerce
employees in the exercise of their right to self -organization;

(d) To initiate, do minate, assist or otherwise interfere with

the formation or administration of any labo r organization, including the
giving o f financial or o ther support to it or its organizers or supporters;

(e) To discriminate in regard to wages, hours of work, and

other terms and conditions of employment in order to encourage or
discourage membership in any labor organization. Not hing in this Code
or in any other law shall stop the parties from requiring membership in
a recognized collective bargaining agent as a conditio n for emplo yment,
except those employees who are already members of another union at
the time of the signing of the collective bargaining agreement.

Employees of an appropriate collective bargaining unit who are

not members of the recognized collectiv e bargaining agent may be
assessed a reasonable fee equivalent to the dues and other fees paid by
members of the re cognized collective bargaining agent, if such non -
unio n members accept the benefits under the collective
agreement. Provided, That the individual authorization required under
Article 242, paragraph (o) of this Code shall not apply to the
nonmembers of the recognized collective bargaining agent; [The article
referred to is 241, not 242. CAA]

(f) To dismiss, discharge, or otherwise prejudice or

discriminate against an employee for hav ing given or being about to
give testimony under this Co de;
 (g) To violate the duty to bargain collectively as prescribed
by this Code;

(h) To pay negotiation or attorneys fees to the union or its

officers or agents as part of the settlement of any issue in collective
bargaining or any other dis pute; or

(i) To violate a co llective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only

the officers and agents of corporatio ns asso ciations or partnerships who
have actually participated, authorized or rati fied unfair labor practices
shall be held criminally liable. [Emphasis supplied.]

Herein, Nestl is accused of violating its duty to bargain

collectively when it purportedly imposed a pre -condition to its
agreement to discuss and engage in collective ba rgaining negotiations
with UFE-DFA-KMU.

A meticulous review of the record and pleadings of the cases at

bar shows that, of the two notices of strike filed by UFE -DFA-KMU
before the NCMB, it was only on the second that the ground of unfair
labor practice was alleged. Worse, the 7 November 2001 Notice of
Strike merely contained a general allegation that Nestl committed
unfair labor practice by bargaining in bad faith for supposedly setting
pre-condition in the ground rules (Retirement issue). [ 5 6 ] On the
contrary, Nestl, in its Position Paper, did not confine itself to the
issue of the non-inclusion of the Retirement Plan but extensively
discussed its stance on other economic matters pertaining to the CBA.
 Basic is the principle that good faith is presumed and he who
alleges bad faith has the duty to prove the same. [ 5 7 ] By imputing bad
faith unto the actuations of Nestl, it was UFE -DFA-KMU, therefore,
who had the burden of proof to present substantial evidence to
support the allegation of unfair labor practice. A perusal of the
allegations and arguments raised by UFE -DFA-KMU in the
Memorandum (in G.R. Nos. 158930-31) will readily disclose that it
failed to discharge said onus probandi as there is still a need for the
presentation of evidence other than its bare contention of unfair
labor practice in order to make certain the propriety or impropriety
of the unfair labor practice charge hurled against Nestl. Under Rule
XIII, Sec. 4, Book V of the Implementing Rules of the Labor Code:

x x x. In cases of unfair labor practices, the notice of strike shall

as far as p racticable, state the acts complained of and the effo rts to
resolve the dispute amicably. [Emphasis supplied.]

Except for the assertion put forth by UFE -DFA-KMU, neither the
second Notice of Strike nor the records of these cases substantiate a
finding of unfair labor practice. It is not enough that the union
believed that the employer committed acts of unfair labor practice
when the circumstances clearly negate even a prima facie showing to
warrant such a belief. [ 5 8 ] In its letter [ 5 9 ] to UFE-DFA-KMU of 29 May
2001, though Nestl underscored its position that unilateral grants,
one-time company grants, company-initiated policies and programs,
which include, but are not limited to the Retirement Plan, Incidental
Straight Duty Pay and Calling Pay Premium, are by their very nature
not proper subjects of CBA negotiations and therefore shall be
excluded therefrom, such attitude is not tantamount to refusal to
bargain. This is especially true when it is viewed in the light of the
fact that eight out of nine bargaining units have allegedly agreed to
treat the Retirement Plan as a unilateral grant. Nestl, therefore,
cannot be faulted for considering the same benefit as unilaterally
granted. To be sure, it must be shown that Nestl was motivated by ill
will, bad faith, or fraud, or was oppressive to labor, or done in a
manner contrary to morals, good customs, or public policy, and, of
course, that social humiliation, wounded feelings, or grave anxiety
resulted x x x [ 6 0 ] in disclaiming unilateral grants as proper subjects in
their collective bargaining negotiations.

There is no per se test of good faith in bargaining. [ 6 1 ] Good faith

or bad faith is an inference to be drawn from the facts, [ 6 2 ] to
be precise, the crucial question of whether or not a party has met his
statutory duty to bargain in good faith typically turns on the facts of
the individual case. Necessarily, a determination of the validity of the
Nestls proposition involves an appraisal of the exercise of its
management prerogative.

Employers are accorded rights and privileges to assure their

self-determination and independence and reasonable return of
capital. [ 6 3 ] This mass of privileges comprises the so -called
management prerogatives. [ 6 4 ] In this connection, the rule is that good
faith is always presumed. As long as the companys exercise of the
same is in good faith to advance its interest and not for purpose of
defeating or circumventing the rights of employees under the law or a
valid agreement, such exercise will be upheld. [ 6 5 ]

Construing arguendo that the content of the aforequoted letter

of 29 May 2001 laid down a pre-condition to its agreement to bargain
with UFE-DFA-KMU, Nestls inclusion in its Position Paper of its
proposals affecting other matters covered by the CBA contradicts the
claim of refusal to bargain or bargaining in bad faith. Accordingly,
since UFE-DFA-KMU failed to proffer substantial evidence that would
overcome the legal presumption of good faith on the part of Nestl,
the award of moral and exemplary damages is unavailing.

It must be remembered at all times that the Philippine

Constitution, while inexorably committed towards the protection of
the working class from exploitation and unfair treatment,
nevertheless mandates the policy of social justice so as to strike a
balance between an avowed predilection for labor, on the one hand,
and the maintenance of the legal rights of capital, the proverbial hen
that lays the golden egg, on the other. Indeed, we should not be
unmindful of the legal norm that justice is in every case for the
deserving, to be dispensed with in the light of established facts, the
applicable law, and existing jurisprudence. [ 6 6 ]

In sum, from the facts and evidence extant in the records of

these consolidated petitions, this Court finds that 1) the Retirement
Plan is still a valid issue for herein parties collective bargaining
negotiations; 2) the Court of Appeals committed reversible error in
limiting to the issue of the ground rules the scope of the power of the
Secretary of Labor to assume jurisdiction over the subject labor
dispute; and 3) Nestl is not guilty of unfair labor practice. As no other
issues are availing, this ponencia writes finis to the protracted labor
dispute between Nestl and UFE-DFA-KMU (CabuyaoDivision).

WHEREFORE, in view of the foregoing, the Petition in G.R. No.

158930-31 seeking that Nestl be declared to have committed unfair
labor practice in allegedly setting a precondition to bargaining is
DENIED. The Petition in G.R. No. 158944 -45, however, is PARTLY
GRANTED in that we REVERSE the ruling of the Court of Appeals in
CA G.R. SP No. 69805 in so far as it ruled that the Secretary of the
DOLE gravely abused her discretion in failing to confine her
assumption of jurisdiction power over the ground rules of the CBA
negotiations; but the ruling of the Court of Appeals on the inclusion of
the Retirement Plan as a valid issue in the collective bargaining
negotiations between UFE-DFA-KMU and Nestl is AFFIRMED. The
parties are directed to resume negotiations respe cting the Retirement
Plan and to take action consistent with the discussions hereinabove set
forth. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIO
Associate Justice

WE CONCUR:
 ARTEMIO V. PANGANIBAN
Chief Justice

Chairperson

CONSUELO YNARES- MA. ALICIA AUSTRIA-MARTINEZ

SANTIAGO
Associate Justice Associate Justice

ROMEO J. CALLEJO, SR.

Associate Justice

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the

Division Chairmans Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of th e
Courts Division.

ARTEMIO V. PANGANIBAN
Chief Justice

[1]
P e n n ed b y As so ci ate J u st ic e B . A. Ad e fui n - De la Cr u z, wi t h As so c iat e J u sti ce s Merc ed e s
Go zo -D ad o l e a nd M ar i ano C. De l Ca st il lo co nc ur ri n g; ro llo (G. R. N o . 1 5 8 9 3 0 -3 1 ,
Vo l. I ) , p p . 3 5 -4 4 , An n ex A o f t he P e ti tio n ; ro llo ( G. R. No . 1 5 8 9 4 4 -4 5 ), p p . 4 8 -5 8 ,
An n e x A o f t h e P et it io n.
[2]
Ro l lo (G .R . No . 1 5 8 9 3 0 -3 1 , Vo l . I), p p . 4 7 - 4 8 , An ne x B o f t h e P et itio n ; ro l lo ( G. R. No .
1 5 8 9 4 4 -4 5 ) , p p . 6 0 -6 1 , An n e x B o f t he P e ti tio n.
[3]
E nt it led Un io n o f F il i p ro E mp lo yee s Dru g , Fo o d and All ied In d u st r ie s
Un io n s Ki lu sa n g Ma yo Un o (U FE - D FA - K MU ) v. Ho n . Pa tr ic ia A. S to . To ma s a n d
Ne s tl Ph il ip p in es , I n c. ( Ca b u ya o Pla n t ).
[4]
E nt it led Un io n o f F il i p ro E mp lo yee s - DFA - K M U v. O ff ic e o f th e DO LE S ec re ta r y a n d Ne st l
Ph il ip p i n es, I n c.
[5]
Co n cer ni n g e mp lo yee s a t N e st ls Al ab a n g a nd Cab u ya o fac to r ie s.
[6]
S C Re so l ut io n d a ted 2 9 Mar c h 2 0 0 4 ; ro l lo ( G .R. No . 1 5 8 9 3 0 -3 1 , Vo l. II), p p . 1 2 4 7 -1 2 4 8 .
[7]
Al ab a n g a n d Cab u yao Di v is io n s.
[8]
An n e x B o f t h e P et it i o n; ro llo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p . 2 8 1 .
[9]
An n e x B o f t h e P et it i o n ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I); ro llo , p . 2 8 1 .
[10]
An n e x 3 o f t he Co m me n t to t h e P et it io n; ro l lo (G. R . No . 1 5 8 9 3 0 -3 1 , Vo l. II), p . 1 3 1 6 .
[11]
An n e x F - 1 o f t h e P et itio n ; ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p . 4 6 0 .
[12]
I n a l et ter ad d r e s sed to At t y. J o se Ve la sco , Dire cto r, N at io nal Co nc ili at io n a nd M ed ia tio n
B o ar d , Re g io na l O f f ic e No . I V, I mu s Ca v ite ; A n ne x F o f t he P et it io n; r o llo ( G. R. No .
1 5 8 9 4 4 -4 5 ) , p . 1 0 4 .
[13]
Or i gi n al r eco r d s, Vo l. I V , p . 1 .
[14]
Id .
[15]
Or i gi n al r eco r d s, Vo l. I I , p . 1 4 6 .
[16]
Of the 7 8 9 r egular r ank -and -file emp lo yees o f Nestl (Cab uyao Facto ry, Laguna), o nly 7 2 4
e mp lo ye es vo ted ; t h e YES b a llo t g ar ner ed 7 0 8 vo te s, wh i le o n l y 1 3 e mp lo yee s
d ecid ed a ga i n st t he p la n to sta g e a s tri k e; Re co r d s, Vo l. II, p . 1 5 0 .
[17]
D ated 2 3 No v e mb er 2 0 0 1 ; ro llo ( G. R. No . 1 5 8 9 4 4 -4 5 ) p p . 1 1 2 -1 2 9 .
[18]
I d . at p p . 1 3 0 -1 3 5 .
[19]
D ated 2 9 No ve mb er 2 0 0 1 ; An n e x L o f t he P eti tio n ; ro l lo (G . R. No . 1 5 8 9 4 4 -4 5 ), p p . 1 3 6 -
182.
[20]
D e no mi n ated a s Mo t io n fo r T i me.
[21]
An n e x F o f t h e P et it io n ; ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p p . 3 1 7 -3 2 1 .
[22]
x x x x

Acco rd i n gl y, a n y s tr i ke o r lo c ko ut i s hereb y e n j o ined . T h e p ar ti es ar e d irec ted to cea s e a nd

d es is t fr o m co m mi tt i n g an y act t ha t mi g h t le ad to t he fu rt her d et eri o ratio n o f t he
cur r e nt lab o r r el at io n s s it ua tio n.
x x x x
[23]
Ro l lo ( G. R. No . 1 5 8 9 4 4 -4 5 ) , p p . 1 9 2 -1 9 3 .
[24]
P o s it io n P ap e r o f N es tl ; An n e x O o f t h e P eti tio n ; ro l lo (G . R. No . 1 5 8 9 4 4 -4 5 ), p p . 1 9 4 -
310.
[25]
An n e x P & Q o f t h e P etit io n; ro llo (G. R. No . 1 5 8 9 4 4 -4 5 ) , p p . 3 1 1 -3 3 6 a nd p p . 3 3 7 -3 3 9 .
[26]
Ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p p 3 2 3 -3 2 4 .
[27]
Ro l lo ( G. R. No . 1 5 8 9 4 4 -4 5 ) , p . 4 2 8 .
[28]
Id.
[29]
C A r o llo ( C A- G. R. S P No . 6 9 8 0 5 ).
[30]
An n e x B B o f t he P e t itio n ; ro l lo ( G. R. No . 1 5 8 9 4 4 -4 5 ), p p . 5 0 8 -5 2 0 .
[31]
An n e x L o f t he P e ti t io n ; ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p p . 8 0 2 -8 0 6 .
[32]
Id . at p . 4 3 .
[33]
Ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . II), p . 1 6 6 9 .
[34]
I d . at p . 1 7 3 5 .
[35]
Ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p p . 4 2 - 4 3 .
[36]
An n e x 2 o f N es tl s Co m me n t i n C A - G .R . S P No . 7 1 5 4 0 , p p . 6 1 4 -6 1 9 ; An n e x E o f Ne st l s
Me mo r a nd u m; ro l lo ( G. R. No . 1 5 8 9 4 4 -4 5 ), p p . 1 2 7 0 -1 2 7 5 .
[37]
Ro l lo ( G. R. No . 1 5 8 9 4 4 -4 5 ) , p . 1 2 3 5 .
[38]
Re sp o nd e n ts Me mo r and u m i n G. R. No . 1 5 8 9 4 4 -4 5 , p . 1 2 ; ro llo (G. R . No . 1 5 8 9 3 0 -3 1 , Vo l .
II), p . 1 7 0 3 .
[39]
Id .
[40]
Ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . II), p . 1 7 0 4 .
[41]
G. R . No . 9 1 2 3 1 , 4 F eb r u ar y 1 9 9 1 , 1 9 3 S C R A 5 0 4 .
[42]
Id . at p p . 5 0 8 -5 0 9 .
[43]
Ro l lo ( G. R. No . 1 5 8 9 4 4 -4 5 ) , p . 1 2 7 3 .
[44]
Ar t. 1 0 0 o f t he Lab o r Co d e.
[45]
C A ro llo ( C A G . R. - SP No . 6 9 8 0 5 ), p . 5 0 3 .
[46]
Ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p . 4 1 .
[47]
Ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . II), p . 1 6 9 9 .
[48]
Ro l lo ( G. R. No . 1 5 8 9 3 0 -3 1 , Vo l . I), p p . 3 3 3 -3 3 4 .
[49]
we ar e s ti ll d is c us s in g g r o u nd r ule s a nd no t ye t o n t he CB A n ego ti at io ns p ro p er, a
d ead lo c k ca n no t b e d ec l ar ed .
[50]
G. R . No s. 9 2 9 8 1 -8 3 , 9 J an u ar y 1 9 9 2 , 2 0 5 S C R A 5 9 .
[51]
Id . at p p . 6 5 -6 6 .
[52]
P et it io ner s Me mo r a n d u m, p p 1 0 -1 1 ; ro llo ( G .R. No . 1 5 8 9 3 0 -3 1 ) , p p . 1 6 7 2 -1 6 7 3 .
[53]
Id .
[54]
Id . at p p . 1 6 7 1 -1 6 7 2 .
[55]
Re sp o nd e n ts M e mo r and u m, p p . 2 2 -2 3 ; ro ll o (G. R. No . 1 5 8 9 3 0 -3 1 , Vo l. II), p p . 1 6 2 7 -
1628.
[56]
No ti ce o f S tr i ke o f 7 No ve mb er 2 0 0 1 ; An ne x C o f U FE - DF A- K MU P o si tio n P ap er ;
Re co r d s , p . 1 4 6 .
[57]
Ch u a v. Co u rt o f Ap p ea ls , 3 1 2 P hil. 4 0 5 , 4 1 1 (1 9 9 5 ).
[58]
T iu v . Na t io n a l La b o r R ela t io n s Co m mi s sio n , 3 4 3 P h il. 4 7 8 ,4 8 6 -4 8 7 ( 1 9 9 7 ).
[59]
x x x [ U] ni la ter a l gr an t s, o ne - ti me co mp a n y gr a nt s, co mp a n y - i ni ti at ed p o l ici e s a nd
p ro gr a ms , wh i c h i n cl u d e, b ut ar e no t li mi t e d to t he R et ire me n t P la n, I nc id e n ta l
Str ai g h t D u t y P a y a nd C al li n g P a y P re mi u m, are b y t h eir ver y n at ure no t p ro p er
s ub j ect s o f CB A ne go ti a tio n s a nd t her e fo re s ha ll b e e xc l ud ed t her e fro m .
[60]
S a n M ig u e l Co rp o ra tio n v. D el Ro sa rio , G. R . No s. 1 6 8 1 9 4 & 1 6 8 6 0 3 , 1 3 Dece mb er 2 0 0 5 ,
477 SCRA 604, 619.
[61]
Th e Ho n g ko n g a n d S h a n g h a i Ba n kin g Co r p o ra t io n E mp lo yee s Un i o n v. Na tio n a l La b o r
Rela tio n s Co m mi s sio n , 3 4 6 P hi l. 5 2 4 , 5 3 4 (1 9 9 7 ) .
[62]
Id .
[63]
Ca p i to l Med i ca l Ce n te r, I n c. v. Me r is , G. R . No . 1 5 5 0 9 8 , 1 6 Sep te mb e r 2 0 0 5 , 4 7 0 S C R A
125, 136.
[64]
Id .
[65]
Id .
[66]
Ph i lip p in e Na tio n a l Oi l Co mp a n y - En e rg y Dev elo p men t Co rp o ra t io n (P NO C - ED C )
v. Ab e lla , G. R. 1 5 3 9 0 4 , 1 7 J an u ar y 2 0 0 5 , 4 4 8 S C R A 5 4 9 , 5 7 4 .

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 76219 May 27, 1991

GTE DIRECTORIES CORPORATION, petitioner,

vs.
HON. AUGUSTO S. SANCHEZ and GTE DIRECTORIES CORPORATION EMPLOYEES
UNION, respondents.

Siguion Reyna, Montecillo & Ongsiako for petitioner.

Ignacio P. Lacsina for respondent Union.

NARVASA, J.:

GTE Directories Corporation (hereafter, simply GTE) is a foreign corporation engaged in the
Philippines in the business of publishing the PLDT (Philippine Long Distance Telephone Company)
telephone directories for Metro Manila and several provinces.

The record shows that initially, the practice was for its sales representatives to be given work
assignments within specific territories by the so-called "draw method." These sales territories were
so plotted or mapped out as to have "an equal number of advertisers as well as . . . revenue. . ."
Within these territories, the sales representatives therein assigned were given quotas; i.e., they had
to "achieve a certain amount of revenue or advertisements sold, decreased, increased or cancelled
within a given period of time."

A territory was not fully released to the salesperson for handling at one time, but assigned in
increments or partial releases of account. Now, increments were given by the so-called "Grid
System," grids (divisions or sections) within each territory usually numbering five (i.e., Grids I to V).
Each grid was assigned a fixed closing dated. At such closing date, a salesperson should have
achieved a certain amount of the revenue target designated for his grid; otherwise, he loses the
forthcoming grid or forfeits the remaining grids not yet received. The Grid System was installed for
the following reasons: (1) to give all salespersons an opportunity to contact advertisers within a
reasonable period; (2) to assure GTE that it will get its share of advertising budget from clients as
early as possible; and (3) to ensure an even flow of work throughout the company.

This practice was observed from 1980 until sometime in June, 1984 when GTE realized that
competition among media for a share of the advertising revenue had become so keen as to require
quick reaction. GTE therefore launched an aggressive campaign to get what it considered to be its
rightful share of the advertising budget of its clientele before it could be allocated to other media
(newspaper, television, radio, etc.) It adopted a new strategy by which:

(1) all its sales representatives were required, as in the past, to achieve specified revenue
targets (advertisements sold) within pre-determined periods;

(2) in cases of cancelled revenue accounts or advertisements, it required all its salespersons
to re-establish contact and renew the same within a fixed period;

(3) if the cancelled revenue accounts were not renewed within the assigned period, said
accounts were declared, for a set period, OPEN TERRITORY to all sales representatives
including the one who reported the cancellation;

(4) if not renewed during said open territory period, said cancelled accounts were deemed no
longer "open territory," and the same could be referred for handling to contractual
salespersons and/or outside agencies.

A new "Sales Evaluation and Production Policy" was thereafter drawn up. GTE informed all its sales
representatives of the new policy in a Memorandum dated October 12, 1984. The new policy was
regarded as an improvement over the previous Sales Production Policy, which solely considered
quota attainment and handling in the Sales Report for the purpose of evaluating performance.

It appears that the new policy did not sit well with the union. It demanded that it be given 15 days "to
raise questions or objections to or to seek reconsideration of the sales and administrative practices
issued by the Company on June 14, 1984." This, GTE granted, and by letter dated October 26,
1984, the union submitted its proposals for "revisions, corrections and deletions of some policies
incorporated in the Sales Administrative Practices issued on June 14, 1984 including the new
policies recently promulgated by Management."

GTE next formulated a new set of "Sales Administrative Practices," pursuant to which it issued on
July 9, 1985, a memorandum requiring all Premise Sales Representatives (PSRs) to submit
individual reports reflecting target revenues as of deadlines, set at August 2, 1985. This was
superseded by another memorandum dated July 16, 1985, revising the previous schedules on the
basis of "the consensus reached after several discussions with your DSMs, as well as, most of you,"
and pointing out that "the amount required on the 1st deadline (P30,000) . . . has been reduced
further (to P20,000) having taken into consideration that most of your accounts you have already on
hand are with your respective "prep artists""

On August 5, 1985, GTE's Sales Manager sent another Memorandum to "all premise sales
personnel." That memorandum observed that most of them had omitted to submit reports regarding
"the target of P20,000.00 revenue handled on . . . (the) first Grid deadline of August 2, 1985"
notwithstanding that "several consultations/discussions . . . (had) been held with your DSMs, as well
as yourselves in different and separate occasions," and "these schedules/targets were drawn up by
no less than you, collectively," and notwithstanding that "this has been a practice of several years." It
closed with the expressed expectation that the sales reports would be submitted "no later than 2:00
P.M. reflecting P20,000.00 revenue handled, as per memo re: Grid Deadlines dated July 16, 1985."

But as before, the sales representatives did not submit the reports. Instead their union, GTE
Directories Corporation Employees Union (hereafter, simply the union), sent a letter to the Sales
Manager dated August 5, 1985.1 The letter stated that in fact "only one out of nineteen sales
representatives met the P20,000 revenue handled on our first grid deadline of August 2;" that the
schedule was not "drawn (up) as a result of an agreement of all concerned" since GTE had failed to
get "affirmative responses" from "clustered groups of SRs;" that the union could not "Comprehend
how cancelling non-cancelling accounts help production;" and that its members would fail
"expectations of cancelling . . . non-cancelling accounts" since it "would result to further reduction of
our pay which (they) believe is the purpose of your discriminate and whimsical memo."

The following day, on August 6, 1985, the union filed in behalf of the sales representatives, a notice
of strike grounded on alleged unfair labor practices of GTE consisting of the following:

1. Refusal to bargain on unjust sales policies particularly on the failure to meet the 75% of
the average sales production for two consecutive years;

2. Open territory of accounts;

3. Illegal suspension of Brian Pineda, a union officer; and

4. Non-payment of eight days' suspension pay increase.

In due course, the Bureau of Labor Relations undertook to conciliate the dispute.

On the same day, August 6, 1985, GTE sent still another memorandum to sixteen (16) of its premise
sales representatives, this time through its Director for Marketing & Sales, requiring submission of
"individual reports reflecting target revenues as of grid deadlines . . . not later than 4:00 P.M. . .
." 2 No compliance was made. GTE thereupon suspended its sales representatives "without pay
effective August 12, 1985 for five (5) working days" and warned them that their failure to submit the
requisite reports by August 19, 1985 would merit "more drastic disciplinary actions." Still, no sales
representative complied with the requirement to submit the reports ("list of accounts to be
cancelled"). So, by memorandum of the Marketing Director dated August 19, 1985, all the sales
representatives concerned were suspended anew "effective August 20, 1985 until you submit the . . .
(report)."

Finally, GTE gave its sales representatives an ultimatum. By memorandum dated August 23, 1985,
individually addressed to its sales representatives, GTE required them, for the last time, to submit
the required reports ("list of accounts to be cancelled") within twenty-four (24) hours from receipt of
the memorandum; otherwise, they would be terminated "for cause." Again not one sales
representatives submitted a report. Instead, on August 29, 1985, the Union President sent an
undated letter to GTE (addressed to its Director for Marketing & Sales) acknowledging receipt of the
notice of their suspension on August 19, 1985 in view of their "continued refusal to submit the list of
accounts to be cancelled," professing surprise at being "served with a contradictory notice, giving us
this time 24 hours to submit the required list, without the suspension letter, which we consider as still
in force, being first recalled or withdrawn," asking that they be informed which of the two directives
should be followed, and reserving their "right to take such action against you personally for your acts
of harassment and intimidation which are clearly designed to discourage our legitimate union
activities in protesting management's continious (sic) unfair labor practices."
Consequently, by separate letters dated August 29, 1985 individually received, GTE terminated the
employment of the recalcitrant sales representatives, numbering fourteen, with the undertaking to
give them "separation pay, upon proper clearance and submission of company documents, material
etc., in . . . (their) possession." Among those dismissed were the union's president and third vice
president, and several members of its board of directors. On September 2, 1985, the union declared
a strike in which about 60 employees participated.

During all this time, conciliation efforts were being exerted by the Bureau of Labor Relations,
including attempts to prevent the imposition of sanctions by GTE on its employees, and the strike
itself. When these proved futile, Acting Labor Minister Vicente Leogardo, Jr. issued an Order dated
December 6, 1985 assuming jurisdiction over the dispute. The order made the following disposition,
to wit:

WHEREFORE, this Office hereby assumes jurisdiction over the labor dispute at G.T.E.
Directories, pursuant to Article 264 (g) of the Labor Code of the Philippines, as amended.
Accordingly, all striking workers including those who were dismissed during the conciliation
proceedings, except those who have already resigned, are hereby directed to return to work
and the management of G.T.E. Directories to accept all returning employees under the same
terms and conditions prevailing previous to the strike notice and without prejudice to the
determination of the obligation and rights of the parties or to the final outcome of this dispute.
The Bureau of Labor Relations is hereby directed to hear the dispute and submit its
recommendations within 15 days upon submission of the case for resolution.

All concerned including the military and police authorities are hereby requested to assist in
the implementation of this Order."

The Acting Secretary opined that the dispute "adversely affects the national interest," because:

1) GTE, a "100% foreign owned" company, had, as publisher of "PLDT's Metro Manila and provincial
directories . . . earned a total of P127,038,463 contributing close to P10 million in income tax alone
to the Philippine government," and that "major contribution to the national economy . . . (was) being
threatened because of the strike;" and

2) "top officers of the union were dismissed during the conciliation process thereby compounding the
dispute,"

Reconsideration of this Order was sought by GTE by motion filed on December 16, 1985, on the
ground that

1) "the basis for assumption of jurisdiction is belied by the facts and records of the case and
hence, unwarranted;"

2) "national interest is not adversely affected to warrant assumption of jurisdiction by (the)

Office of the Minister of Labor and Employment;" and

3) "assumption of jurisdiction by the . . . Minister . . . without prior consultation with the

parties violates the company's right to due process of law."

GTE however reiterated its previously declared "position that with or without the order now being
questioned, it will accept all striking employees back to work except the fourteen (14) premise sales
representatives who were dismissed for cause prior to the strike."
By Resolution of then Labor Minister Blas Ople dated January 20, 1986, GTE's motion for
reconsideration was denied. The order noted inter alia that GTE had "accepted back to work all the
returning workers except fourteen (14) whom it previously dismissed insisting that they were legally
dismissed for violation of company rules and, therefore, are not included and may not be reinstated
on the basis of a return-to-work order," and that "they were dismissed for their alleged failure to
comply with the reportorial requirement under the Sales and Administrative Practices in effect since
1981 but which for the present is the subject of negotiations between the parties." The Order then

1) adverted to the "general rule (that) promulgations of company policies and regulations are basic
management prerogatives although the principle of collective bargaining encompasses almost all
relations between the employer and its employees which are best threshed out through negotiations,
. . . (and that) it is recognized that company policies and regulations are, unless shown to be grossly
oppressive or contrary to law, generally binding and valid on the parties until finally revised or
amended unilaterally or preferably through negotiations or by competent authorities;"

2) affirmed the "recognized principle of law that company policies and regulations are, unless shown
to be grossly oppressive or contrary to law, generally binding (and) valid on the parties and must be
complied with until finally revised or amended unilaterally or preferably through negotiations or by
competent authorities;" and

3) closed by pointing out that "as a basic principle, the matter of the acceptability of company
policies and rules is a proper subject of collective negotiations between the parties or arbitration if
necessary."

In a clarificatory Order dated January 21, 1986, Minister Ople reiterated the proposition that
"promulgations of company policies and regulations are basic management prerogatives," and that
"unless shown to be grossly oppressive or contrary to law," they are "generally binding and valid on
the parties and must be complied with until finally revised or amended unilaterally or preferably,
through negotiations or by competent authorities."

Adjudication of the dispute on the merits was made on March 31, 1986 by Order of Minister Ople's
successor, Augusto Sanchez. The Order

1) pointed out "that the issue central to the labor dispute revolves around compliance with existing
company policies, rules and regulations specifically the sales evaluation and production policy which
was amended by the October 12, 1984 memorandum and the grid schedule;"

2) declared that because fourteen (14) sales representatives who after reinstatement pursuant to
the order of January 20, 1986 had been placed "on forced leave with pay "were actually dismissed
for failure to comply with the reporting requirements under the "Sales Administration Practices"
which was (sic) then the subject of negotiations between the parties at the Bureau of Labor
Relations," it was only fair that they 'be reinstated . . .with back wages since they were terminated
from employment based on a policy . . . still being negotiated to avoid precisely a labor-management
dispute from arising" therefrom;"

3) pronounced the union's action relative to the allegedly illegal dismissal of one Brian Pineda to be
"barred by extinctive prescription" in accordance with the CBA then in force; and

4) on the foregoing premises adjudicated the dispute as follows:

 1. The union and management of G.T.E. Directories Corporation are directed to negotiate
and effect a voluntary settlement on the questioned Grid schedule, the Sales Evaluation and
Production Policy;

2. Management is ordered to reinstate the fourteen (14) employees with full back wages from
the time they were dismissed up to the time that they were on forced leave with pay."

Both the Union and GTE moved for reconsideration of the Order.

The Union contended that:

1) GTE should have been adjudged guilty of unfair labor practice and other unlawful acts;

2) its strike should have been declared lawful;

3) GTE's so-called "bottom-third" policy, as well as all sales and administrative practices related
thereto, should have been held illegal; and

4) GTE should have been commanded: (a) to pay all striking employees their usual salaries,
allowances, commission and other emoluments corresponding to the period of their strike; (b) to
release to its employees the 8-days pay increase unlawfully withheld from them; (c) to lift the
suspension imposed on Brian Pineda and restore to him the pay withheld corresponding to the
suspension period; (d) to pay the sales representatives all their lost income corresponding to the
period of their suspensions, and dismissal, including commissions that they might have earned
corresponding to their one-week forced leave.

GTE for its part, argued that the termination of the employment of its fourteen (14) premise sales
representatives prior to the strike should have been upheld. It also filed an opposition to the union's
motion for reconsideration.

The motions were resolved in a "Decision" handed down by Minister Sanchez on June 6, 1986. The
Minister stated that he saw no need to change his rulings as regards Pineda's suspension, the
question on GTE's sales and administrative policies, and the matter of back wages. However, as
regards "the other issues raised by the union," the Minister agreed "with the company that these
were not adequately threshed out in the earlier proceedings . . . (for) (w)hile it is true that the union
had already presented evidence to support its contention, the company should be given the
opportunity to present its own evidence." Accordingly, he directed the Bureau of Labor Relations to
hear said "other issues raised by the union and to submit its findings and recommendations thereon
within 20 days from submission of the case for decision."

Again GTE moved for reconsideration; again it was rebuffed. The Labor Minister denied its motion
by Order dated October 1, 1986. In that order, the Minister, among other things

1) invoked Section 6, Rule XIII of the Rules and Regulations Implementing the Labor Code,
pertinently reading as follows:

During the proceedings, the parties shall not do any act which may disrupt or impede the
early settlement of the dispute. They are obliged, as part of their duty to bargain collectively
in good faith, to participate fully and promptly in the conciliation proceedings called by the
Bureau or the Regional Office.
and pointed out that "in dismissing 14 salesmen . . . for alleged violations of the reportorial
requirements of its sales policies which was then the subject of conciliation proceedings between
them, (GTE) acted evidently in bad faith; hence the status quo prior to their dismissal must be
restored . . . (and) their reinstatement with backwages is in order up to the time they were on forced
leave. . . ;"

2) declared that because he had "ordered the parties to negotiate and effect a voluntary settlement
of the questioned Grid Schedule, the Sales Evaluation and Productions Policy, it would be unripe
and premature for us to rule on the legality or illegality on the company's sales policies at this
instance;"

3) opted, however, to himself resolve "the so-called 'other issues"' which he had earlier directed the
Bureau of Labor Relations to first hear and resolve (in the Decision of June 6, 1986, supra), i.e.,
GTE's liability for unfair labor practice, the legality of the strike and the strikers' right to be paid their
wages while on strike, his ruling thereon being as follows:

While the company, in merely implementing its challenged sales policies did not ipso
facto commit an unfair labor practice, it did so when it in mala fide dismissed the fourteen
salesmen, all union members, while conciliation proceedings were being conducted on
disputes on its very same policies, especially at that time when a strike notice was filed on
the complaint of the union alleging that said sales policies are being used to bust the union;
thus precipitating a lawful strike on the part of the latter. A strike is legal if it was provoked by
the employer's failure to abide by the terms and conditions of its collective bargaining
agreement with the union, by the discrimination employed by it with regard to the hire and
tenure of employment, and the dismissal of employees due to union activities as well as the
company's refusal to bargain collectively in good faith (Cromwell Commercial Co., Inc. vs.
Cromwell Employees and Laborers Union, 19 SCRA 398). The same rule applies if employer
was guilty of bad faith delay in reinstating them to their position (RCPI vs. Phil.
Communications Electronics & Electricity Workers Federation, 58 SCRA 762).

While as a rule strikers are not entitled to backpay for the strike period (J.P. Heilbronn Co.
vs. NLU, 92 Phil. 575) strikers may be properly awarded backwages where the strike was
precipitated by union busting activities of the employer (Davao Free Workers, Front, et al. vs,
CIR, 60 SCRA 408), as in the case at bar. . . .

The Minister accordingly annulled and set aside his order for the Bureau of Labor Relations to
conduct hearings on said issues since he had already resolved them, and affirmed his Order of
March 31, 1986"directing Union and Management to negotiate a voluntary settlement on the
company sales policies and reinstating the fourteen employees with full backwages from the time
they were dismissed up to the time they were on forced leave with pay" "but with the modification
that management . . . (was) directed to give the striking workers strike duration pay for the whole
period of the strike less earnings."

GTE thereupon instituted the special civil action of certiorari at bar praying for invalidation, because
rendered with grave abuse of discretion, of the Labor Minister's orders

1) commanding "reinstatement of the fourteen dismissed employees, and

2) "finding . . . (it) guilty of unfair labor practice and directing (it) to pay strike duration pay to striking
workers."
It seems to the Court that upon the undisputed facts on record, GTE had cause to dismiss the
fourteen (14) premise sales representatives who had repeatedly and deliberately, not to say
defiantly, refused to comply with its directive for submission of individual reports on specified
matters. The record shows that GTE addressed no less than (six) written official communications to
said premise sales representatives embodying this requirement, to wit:

1) Memorandum of July 9, 1985 pursuant to GTE's "Sales Administrative Practices" superseded

by a memorandum dated July 16, 198 requiring submission of individual reports by August 2,
1985;

2) Memorandum of August 5, 1985, requiring submission of the reports by 2:00 P.M.;

3) Memorandum of August 6, 1985, for submission of requisite reports not later than 4:00 P.M. of
that day, with a warning of "appropriate disciplinary action;"

4) Letter of August 9, 1985 imposing suspension without pay for five (5) working days and extending
the period for submission of reports to August 19, 1985;

5) Letter of August 19, 1985 suspending the sales representatives until their submission of the
required reports;

6) Letter dated August 28, 1985 giving the sales representatives "a last chance to comply with . . .
(the) directive within 24 hours from receipt . . .;" with warning that failure to comply would result in
termination of employment.

The only response of the sales representatives to these formal directives were:

1) a letter by their Union to GTE's Sales Manager dated August 5, 1985 in which the requirement
was criticized as not being the "result of an agreement of all concerned," and as incomprehensible,
"discriminate and whimsical;"

2) a strike notice filed with the Ministry of Labor on August 6, 1985; and

3) an undated letter sent to GTE's Director for Marketing & Sales on August 29, 1985, drawing
attention to what it deemed contradictory directives, and reserving the right to take action against the
manager for "acts of harassment and intimidation . . . clearly designed to discourage our legitimate
union activities in protesting management's continuous unfair labor practices."

The basic question then is whether or not the effectivity of an employer's regulations and policies is
dependent upon the acceptance and consent of the employees thereby sought to be bound; or
otherwise stated, whether or not the union's objections to, or request for reconsideration of those
regulations or policies automatically suspend enforcement thereof and excuse the employees'
refusal to comply with the same.

This Court has already had occasion to rule upon a similar issue. The issue was raised in a 1989
case, G.R. No. 53515, San Miguel Brewery Sales Force Union (PTGWO) v. Ople. 3 In that case, the
facts were briefly as follows:

In September 1979, the company introduced a marketing scheme known as the

"Complementary distribution system" (CDS) whereby its beer products were offered for sale
directly to wholesalers through San Miguel's sales offices.
 The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of
Labor, with a notice of strike on the ground that the CDS was contrary to the existing
marketing scheme whereby the Route Salesmen were assigned specific territories within
which to sell their stocks of beer, and wholesalers had to buy beer products from them, not
from the company. It was alleged that the new marketing scheme violates . . . (a provision) of
the collective bargaining agreement because the introduction of the CDS would reduce the
take-home pay of the salesmen and their truck helpers for the company would be unfairly
competing with them."

The Labor Minister found nothing to suggest that the employer's unilateral action of inaugurating a
new sales scheme "was designed to discourage union organization or diminish its influence;" that on
the contrary, it was "part of its overall plan to improve efficiency and economy and at the same time
gain profit to the highest;" that the union's "conjecture that the new plan will sow dissatisfaction from
its rank is already a prejudgment of the plan's viability and effectiveness, . . . like saying that the plan
will not work out to the workers' (benefit) and therefore management must adopt a new system of
marketing." The Minister accordingly dismissed the strike notice, although he ordered a slight
revision of the CDS which the employer evidently found acceptable.

This Court approved of the Minister's findings, and declared correct his holding that the CDS was "a
valid exercise of management prerogatives," 4 viz.:

Except as limited by special laws, an employer is free to regulate, according to his own
discretion and judgment, all aspects of employment, including hiring, work assignments,
working methods, time, place and manner of work, tools to be used, processes to be
followed, supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall of work. . . . (NLU vs.
Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR, 21 SCRA 226, 235.)
(Perfecto V. Hernandez, Labor Relations Law, 1985 ed., p. 44.) (Emphasis ours.)

The Court then closed its decision with the following pronouncements: 5

Every business enterprise endeavors to increase its profits. In the process, it may adopt or
devise means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713,
We ruled:

. . . Even as the law is solicitous of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.

So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid agreements, this
Court will uphold them (LVN, Pictures Workers vs. LVN, 35 SCRA 147; Phil. American
Embroideries vs. Embroidery and Garments Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110). . . .

In the case at bar, it must thus be conceded that its adoption of a new "Sales Evaluation and
Production Policy" was within its management prerogative to regulate, according to its own
discretion and judgment, all aspects of employment, including the manner, procedure and processes
by which particular work activities should be done. There were, to be sure, objections presented by
the union, i.e., that the schedule had not been "drawn (up) as a result of an agreement of all
concerned," that the new policy was incomprehensible, discriminatory and whimsical, and "would
result to further reduction" of the sales representatives' compensation. There was, too, the union's
accusation that GTE had committed unfair labor practices, such as

1. Refusal to bargain on unjust sales policies particularly on the failure to meet the 75% of
the average sales production for two consecutive years;

2. Open territory of accounts;

3. Illegal suspension of Brian Pineda, a union officer; and

4. Non-payment of eight days' suspension pay increase.

This Court fails to see, however, how these objections and accusations justify the deliberate and
obdurate refusal of the sales representatives to obey the management's simple requirement for
submission by all Premise Sales Representatives (PSRs) of individual reports or memoranda
requiring reflecting target revenueswhich is all that GTE basically required and which it
addressed to the employees concerned no less than six (6) times. The Court fails to see how the
existence of objections made by the union justify the studied disregard, or wilful disobedience by the
sales representatives of direct orders of their superior officers to submit reports. Surely, compliance
with their superiors' directives could not have foreclosed their demands for the revocation or revision
of the new sales policies or rules; there was nothing to prevent them from submitting the requisite
reports with the reservation to seek such revocation or revision.

To sanction disregard or disobedience by employees of a rule or order laid down by management,

on the pleaded theory that the rule or order is unreasonable, illegal, or otherwise irregular for one
reason or another, would be disastrous to the discipline and order that it is in the interest of both the
employer and his employees to preserve and maintain in the working establishment and without
which no meaningful operation and progress is possible. Deliberate disregard or disobedience of
rules, defiance of management authority cannot be countenanced. This is not to say that the
employees have no remedy against rules or orders they regard as unjust or illegal. They may object
thereto, ask to negotiate thereon, bring proceedings for redress against the employer before the
Ministry of Labor. But until and Unless the rules or orders are declared to be illegal or improper by
competent authority, the employees ignore or disobey them at their peril. It is impermissible to
reverse the process: suspend enforcement of the orders or rules until their legality or propriety shall
have been subject of negotiation, conciliation, or arbitration.

These propositions were in fact adverted to in relation to the dispute in question by then Minister
Blas Ople in his Order dated January 21, 1986, to the effect among others, that "promulgations of
company policies and regulations are basic management prerogatives" and that it is a "recognized
principle of law that company policies and regulations are, unless shown to be grossly oppressive or
contrary to law, generally binding (and) valid on the parties and must be complied with until finally
revised or amended unilaterally or preferably through negotiations or by competent authorities."

Minister Sanchez however found GTE to have "acted evidently in bad faith" in firing its 14
salespersons "for alleged violations of the reportorial requirements of its sales policies which was
then the subject of conciliation proceedings between them;" 6 and that "(w)hile the company, in
merely implementing its challenged sales policies did not ipso facto commit an unfair labor practice,
it did so when it in mala fide dismissed the fourteen salesmen, all union members, while conciliation
proceedings were being conducted on disputes on its very same policies, especially at that time
when a strike notice was filed on the complaint of the union alleging that said sales policies are
being used to bust the union; thus precipitating a lawful strike on the part of the latter." No other facts
appear on record relevant to the issue of GTE's dismissal of the 14 sales representatives. There is
no proof on record to demonstrate any underhanded motive on the part of GTE in formulating and
imposing the sales policies in question, or requiring the submission of reports in line therewith. What,
in fine, appears to be the Minister's thesis is that an employer has the prerogative to lay down basic
policies and rules applicable to its employees, but may not exact compliance therewith, much less
impose sanctions on employees shown to have violated them, the moment the propriety or feasibility
of those policies and rules, or their motivation, is challenged by the employees and the latter file a
strike notice with the Labor Department which is the situation in the case at bar.

When the strike notice was filed by the union, the chain of events which culminated in the
termination of the 14 sales persons' employment was already taking place, the series of defiant
refusals by said sales representatives to comply with GTE's requirement to submit individual reports
was already in progress. At that time, no less than three (3) of the ultimate six (6) direct orders of the
employer for the submission of the reports had already been disobeyed. The filing of the strike
notice, and the commencement of conciliation activities by the Bureau of Labor Relations did not
operate to make GTE's orders illegal or unenforceable so as to excuse continued non-compliance
therewith. It does not follow that just because the employees or their union are unable to realize or
appreciate the desirability of their employers' policies or rules, the latter were laid down to oppress
the former and subvert legitimate union activities. Indeed, the overt, direct, deliberate and continued
defiance and disregard by the employees of the authority of their employer left the latter with no
alternative except to impose sanctions. The sanction of suspension having proved futile, termination
of employment was the only option left to the employer.

To repeat, it would be dangerous doctrine indeed to allow employees to refuse to comply with rules
and regulations, policies and procedures laid down by their employer by the simple expedient of
formally challenging their reasonableness or the motives which inspired them, or filing a strike notice
with the Department of Labor and Employment, or, what amounts to the same thing, to give the
employees the power to suspend compliance with company rules or policies by requesting that they
be first subject of collective bargaining, It would be well nigh impossible under these circumstances
for any employer to maintain discipline in its establishment. This is, of course, intolerable. For
common sense teaches, as Mr. Justice Gregorio Perfecto once had occasion to stress 7 that:

Success of industries and public services is the foundation upon which just wages may be
paid. There cannot be success without efficiency. There cannot be efficiency without
discipline. Consequently, when employees and laborers violate the rules of discipline they
jeopardize not only the interest of the employer but also their own. In violating the rules of
discipline they aim at killing the hen that lays the golden eggs. Laborers who trample down
the rules set for an efficient service are, in effect, parties to a conspiracy, not only against
capital but also against labor. The high interest of society and of the individuals demand that
we should require everybody to do his duty. That demand is addressed not only to employer
but also to employees.

Minister Sanchez decided the dispute in the exercise of the jurisdiction assumed by his predecessor
in accordance with Article 263 (g) of the Labor Code, 8 providing in part as follows:

(g) When in his opinion there exists a labor dispute causing or likely to cause strikes or
lockouts adversely affecting the national interest, such as may occur in but not limited to
public utilities, companies engaged in the generation or distribution of energy, banks,
hospitals, and export-oriented industries, including those within export processing zones, the
Minister of Labor and Employment shall assume jurisdiction over the dispute and decide it or
certify the same to the Commission for compulsory arbitration. . . .
Even that assumption of jurisdiction is open to question.

The production and publication of telephone directories, which is the principal activity of GTE, can
scarcely be described as an industry affecting the national interest. GTE is a publishing firm chiefly
dependent on the marketing and sale of advertising space for its not inconsiderable revenues. Its
services, while of value, cannot be deemed to be in the same category of such essential activities as
"the generation or distribution of energy" or those undertaken by "banks, hospitals, and export-
oriented industries." It cannot be regarded as playing as vital a role in communication as other mass
media. The small number of employees involved in the dispute, the employer's payment of "P10
million in income tax alone to the Philippine government," and the fact that the "top officers of the
union were dismissed during the conciliation process," obviously do not suffice to make the dispute
in the case at bar one "adversely affecting the national interest."

WHEREFORE, the petition is GRANTED, and as prayed for, the Order dated October 1, 1986 of the
public respondent is NULLIFIED and SET ASIDE.

SO ORDERED.

Gancayco, Grio-Aquino and Medialdea, JJ., concur.

Cruz, J., took no part.

Footnotes

1
The original was attached as Annex B of the Compliance dated Sept. 10, 1990 submitted
by GTE through counsel (rollo, pp. 270, 273).

2
Copies were attached as Annexes C, C-1 to C-15 of the Compliance dated Sept. 10,
1990, supra (rollo, pp. 276-291).

3
170 SCRA 25-28.

4
At pp. 27-28.

5
At p. 28.

6
SEE page 7, supra.

7
Batangas Transportation Co. v. Bagong Pagkakaisa of the Employees and Laborers of the
Batangas Trans. Co., 7 Phil. 108, 112 (1949).

8
Order dated Dec. 6, 1985 by Acting Labor Minister Vicente Leogardo, Jr.: SEE p. 4, supra.