Topic: E. Collective Bargaining Agreement 1.

Definition
GR No. 186965 / 23 Dec 2009 / J. Brion

FACTS
 The employer petitioner, Temic Automotive, is a manufacturer of electronic brake systems
and comfort body electronics. Respondent Temic Automotive Phils Employees Union -
FFW is the exclusive bargaining agent of the petitioner's rank-and-file employees.
 Union members are regular rank-and-file employees in the warehouse department. They
worked as clerks, material handlers, system encoders and general clerks.
 Since 1998 the employer had been contracting out some work in the warehouse
department, specifically those in the receiving and finished goods sections, to three
independent service providers, Diversified Cargo Services, Airfreight 2100 and Kuchne &
Nagel. These forwarders have their own employees who hold the position of clerk,
material handler, system encoder and general clerk. The regular employees of the
employer and those of the forwarders share the same work area and use the same
equipment, tools and computers all belonging to the employer.
 The outsourcing arrangement gave rise to a union grievance on the issue of the scope and
coverage of the collective bargaining unit, specifically the question of "W/N the functions
of the forwarders employees are functions being performed by the regular rank-and-file
employees covered by the bargaining unit".
 The union demanded that the forwarder's employees be absorbed into petitioner's
regular employee force and be given positions within the bargaining unit. Employer
meanwhile posits that the contracting arrangement is a valid exercise of management
prerogative and that the forwarder's employees do not have the same functions as regular
company employees.
 Failing to resolve the dispute through the grievance machinery, the parties made recourse
to voluntary arbitration. Their voluntary submission agreement delineated the issues as:
1. W/N the company validly contracted out or outsourced the services involving
forwarding, packing, loading and clerical activities related thereto
2. W/N the functions of the forwarders' employees are functions being performed by
rank-and-file employees covered by the bargaining unit.
 Union presented the manpower complement of the warehouse, and as evidence the
affidavits of the forwarders' employees allegedly performing the same functions as regular
employees.
 The VA defined forwarding as a universally accepted and normal business practice or
activity, and ruled that the company validly contracted out its forwarding services.
However the VA also found that the petitioner went beyond the limits of legally allowed
contracting out because the forwarders' employees encroached upon the functions of the
petitioner's regular rank-and-file workers.
 Thee VA declared that the forwarders' employees serving as clerks, material handlers,
system encoders and general clerks to be "employees of the company who are entitled to
all the rights and privileges of regular employees of the company including security of
tenure."
 Petition for review to the CA - CA affirmed VA. Thus this petition for review on certiorari

ISSUE
 W/N company validly contracted out the services involving forwarding, packing, loading
and clerical activities related thereto. YES
  W/N company employees of the forwarders' can be considered regular employees and
part of the bargaining unit. NO

RATIO
Jurisdiction of the VA
 The VA had no power to impugn the forwarder's agreements through voluntary
arbitration because the forwarders were never made parties. Thus any decision would
only be binding upon the parties in this case. The union has no authority to speak for the
forwarders' employees.
 Thus the ruling will only cover the immediate parties particularly the enforcement and
interpretation of the CBA provisions
Validity of contracting out
 Both the VA and the CA recognized petitioner's right to contract out as an exercise of
management prerogative. As held in Meralco v. Quisumbing, outsourcing is a legitimate
activity as long as:
1. The employer is motivated by good faith
2. The contracting is not for purposes of circumventing the law
3. It does not involve or be the result of malicious or arbitrary action
 However the SC differs from the VA and CA conclusion that since the workplace activities
for ancillary or support services were undertaken by the company's regular rank-and-file
were the same as those done by the forwarders, then the forwarders' employees should
be considered as regular company employees.
 The contracting out arrangement has been in place since 1998 and there is no evidence
that an employee has been dismissed or displaced by the forwarders' employees since
then.
 The job of contracting consists not only of a single activity but of several activities that
complement one another and can be best viewed as one whole process involving a
package of services. These services can include packing, loading, materials handling and
support clerical activities, all of which are directed at the transport of the company goods.
 Thus by appreciating the services as one whole package it is an error to equate the
functions of forwarders' employees with those of the regular rank-and-file of the
employer. The forwarder controls its own means, manner and results of the works of its
employees in the same manner as the employer with respect to its own employees. The
forwarders' own operation is in itself a contracted work from the employer.
 By signing the current CBA, the union implicitly accepted the forwarding agreement. It
agreed implicitly that the jobs related to contracted forwarding activities are not regular
company activities and are not undertaken by regular employees falling within the scope
of the bargaining unit but by the forwarders' employees.
 Quoting the CBA, the forwarders' employees were not part of the appropriate bargaining
unit "as already constituted." At this point the union cannot simply turn around and claim
through voluntary arbitration that some forwarder employees should be regular
employees and should be part of its bargaining unit because they undertake regular
company functions. What the union wants is a funciton of negotiations or an
appropriate action before the NLRC impleading the proper parties, but not a voluntary
arbitration that does not implead the affected parties.
 The evidence presented does not prove the union's point that forwarders' employees
undertake company rather than the forwarders' activities. The essential nature of the
outsourced services is not substantially altered by the claim of the three KNI employees
that they occasionally do work that pertains to the company's finished goods supervisor or
a company employee such as the inspection of goods.