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G.R. No.

157802 October 13, 2010 The respondent opposed the petitioners’ motion to dismiss,5 insisting that his
status as a member of Matling’s Board of Directors was doubtful, considering that
MATLING INDUSTRIAL AND COMMERCIAL CORPORATION, RICHARD K. he had not been formally elected as such; that he did not own a single share of
SPENCER, CATHERINE SPENCER, AND ALEX MANCILLA, Petitioners, stock in Matling, considering that he had been made to sign in blank an undated
vs. indorsement of the certificate of stock he had been given in 1992; that Matling had
RICARDO R. COROS, Respondent. taken back and retained the certificate of stock in its custody; and that even
assuming that he had been a Director of Matling, he had been removed as the
DECISION Vice President for Finance and Administration, not as a Director, a fact that the
notice of his termination dated April 10, 2000 showed.
BERSAMIN, J.:
On October 16, 2000, the LA granted the petitioners’ motion to dismiss,6 ruling that
the respondent was a corporate officer because he was occupying the position of
This case reprises the jurisdictional conundrum of whether a complaint for illegal Vice President for Finance and Administration and at the same time was a
dismissal is cognizable by the Labor Arbiter (LA) or by the Regional Trial Court Member of the Board of Directors of Matling; and that, consequently, his removal
(RTC). The determination of whether the dismissed officer was a regular employee was a corporate act of Matling and the controversy resulting from such removal
or a corporate officer unravels the conundrum. In the case of the regular was under the jurisdiction of the SEC, pursuant to Section 5, paragraph (c) of
employee, the LA has jurisdiction; otherwise, the RTC exercises the legal authority Presidential Decree No. 902.
to adjudicate.
Ruling of the NLRC
In this appeal via petition for review on certiorari, the petitioners challenge the
decision dated September 13, 20021and the resolution dated April 2, 2003,2 both
The respondent appealed to the NLRC,7 urging that:
promulgated in C.A.-G.R. SP No. 65714 entitled Matling Industrial and Commercial
Corporation, et al. v. Ricardo R. Coros and National Labor Relations Commission,
whereby by the Court of Appeals (CA) sustained the ruling of the National Labor I
Relations Commission (NLRC) to the effect that the LA had jurisdiction because
the respondent was not a corporate officer of petitioner Matling Industrial and THE HONORABLE LABOR ARBITER COMMITTED GRAVE ABUSE OF
Commercial Corporation (Matling). DISCRETION GRANTING APPELLEE’S MOTION TO DISMISS WITHOUT
GIVING THE APPELLANT AN OPPORTUNITY TO FILE HIS OPPOSITION
Antecedents THERETO THEREBY VIOLATING THE BASIC PRINCIPLE OF DUE PROCESS.

After his dismissal by Matling as its Vice President for Finance and Administration, II
the respondent filed on August 10, 2000 a complaint for illegal suspension and
illegal dismissal against Matling and some of its corporate officers (petitioners) in THE HONORABLE LABOR ARBITER COMMITTED AN ERROR IN DISMISSING
the NLRC, Sub-Regional Arbitration Branch XII, Iligan City.3 THE CASE FOR LACK OF JURISDICTION.

The petitioners moved to dismiss the complaint,4 raising the ground, among On March 13, 2001, the NLRC set aside the dismissal, concluding that the
others, that the complaint pertained to the jurisdiction of the Securities and respondent’s complaint for illegal dismissal was properly cognizable by the LA, not
Exchange Commission (SEC) due to the controversy being intra-corporate by the SEC, because he was not a corporate officer by virtue of his position in
inasmuch as the respondent was a member of Matling’s Board of Directors aside Matling, albeit high ranking and managerial, not being among the positions listed in
from being its Vice-President for Finance and Administration prior to his Matling’s Constitution and By-Laws.8 The NLRC disposed thuswise:
termination.

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WHEREFORE, the Order appealed from is SET ASIDE. A new one is entered thereof appointed or elected by the same board of directors or stockholders. This
declaring and holding that the case at bench does not involve any intracorporate is the implication of the ruling in Tabang v. National Labor Relations Commission,
matter. Hence, jurisdiction to hear and act on said case is vested with the Labor which reads:
Arbiter, not the SEC, considering that the position of Vice-President for Finance
and Administration being held by complainant-appellant is not listed as among "The president, vice president, secretary and treasurer are commonly regarded as
respondent's corporate officers. the principal or executive officers of a corporation, and modern corporation
statutes usually designate them as the officers of the corporation. However, other
Accordingly, let the records of this case be REMANDED to the Arbitration Branch offices are sometimes created by the charter or by-laws of a corporation, or the
of origin in order that the Labor Arbiter below could act on the case at bench, hear board of directors may be empowered under the by-laws of a corporation to create
both parties, receive their respective evidence and position papers fully observing additional offices as may be necessary.
the requirements of due process, and resolve the same with reasonable dispatch.
It has been held that an 'office' is created by the charter of the corporation and the
SO ORDERED. officer is elected by the directors or stockholders. On the other hand, an 'employee'
usually occupies no office and generally is employed not by action of the directors
The petitioners sought reconsideration,9 reiterating that the respondent, being a or stockholders but by the managing officer of the corporation who also determines
member of the Board of Directors, was a corporate officer whose removal was not the compensation to be paid to such employee."
within the LA’s jurisdiction.
This ruling was reiterated in the subsequent cases of Ongkingco v. National Labor
The petitioners later submitted to the NLRC in support of the motion for Relations Commission and De Rossi v. National Labor Relations Commission.
reconsideration the certified machine copies of Matling’s Amended Articles of
Incorporation and By Laws to prove that the President of Matling was thereby The position of vice-president for administration and finance, which Coros used to
granted "full power to create new offices and appoint the officers thereto, and the hold in the corporation, was not created by the corporation’s board of directors but
minutes of special meeting held on June 7, 1999 by Matling’s Board of Directors to only by its president or executive vice-president pursuant to the by-laws of the
prove that the respondent was, indeed, a Member of the Board of Directors. 10 corporation. Moreover, Coros’ appointment to said position was not made through
any act of the board of directors or stockholders of the corporation. Consequently,
Nonetheless, on April 30, 2001, the NLRC denied the petitioners’ motion for the position to which Coros was appointed and later on removed from, is not a
reconsideration.11 corporate office despite its nomenclature, but an ordinary office in the corporation.

Ruling of the CA Coros’ alleged illegal dismissal therefrom is, therefore, within the jurisdiction of the
labor arbiter.
The petitioners elevated the issue to the CA by petition for certiorari, docketed as
C.A.-G.R. No. SP 65714, contending that the NLRC committed grave abuse of WHEREFORE, the petition for certiorari is hereby DISMISSED.
discretion amounting to lack of jurisdiction in reversing the correct decision of the
LA. SO ORDERED.

In its assailed decision promulgated on September 13, 2002,12 the CA dismissed The CA denied the petitioners’ motion for reconsideration on April 2, 2003.13
the petition for certiorari, explaining:
Issue
For a position to be considered as a corporate office, or, for that matter, for one to
be considered as a corporate officer, the position must, if not listed in the by-laws, Thus, the petitioners are now before the Court for a review on certiorari, positing
have been created by the corporation's board of directors, and the occupant that the respondent was a stockholder/member of the Matling’s Board of Directors

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as well as its Vice President for Finance and Administration; and that the CA 6. Except claims for Employees Compensation, Social Security,
consequently erred in holding that the LA had jurisdiction. Medicare and maternity benefits, all other claims arising from
employer-employee relations, including those of persons in
The decisive issue is whether the respondent was a corporate officer of Matling or domestic or household service, involving an amount exceeding
not. The resolution of the issue determines whether the LA or the RTC had five thousand pesos (₱5,000.00) regardless of whether
jurisdiction over his complaint for illegal dismissal. accompanied with a claim for reinstatement.

Ruling (b) The Commission shall have exclusive appellate jurisdiction over all
cases decided by Labor Arbiters.
The appeal fails.
(c) Cases arising from the interpretation or implementation of collective
I bargaining agreements and those arising from the interpretation or
enforcement of company personnel policies shall be disposed of by the
Labor Arbiter by referring the same to the grievance machinery and
The Law on Jurisdiction in Dismissal Cases voluntary arbitration as may be provided in said agreements. (As amended
by Section 9, Republic Act No. 6715, March 21, 1989).
As a rule, the illegal dismissal of an officer or other employee of a private employer
is properly cognizable by the LA. This is pursuant to Article 217 (a) 2 of the Labor Where the complaint for illegal dismissal concerns a corporate officer, however,
Code, as amended, which provides as follows: the controversy falls under the jurisdiction of the Securities and Exchange
Commission (SEC), because the controversy arises out of intra-corporate or
Article 217. Jurisdiction of the Labor Arbiters and the Commission. - (a) Except as partnership relations between and among stockholders, members, or associates,
otherwise provided under this Code, the Labor Arbiters shall have original and or between any or all of them and the corporation, partnership, or association of
exclusive jurisdiction to hear and decide, within thirty (30) calendar days after the which they are stockholders, members, or associates, respectively; and between
submission of the case by the parties for decision without extension, even in the such corporation, partnership, or association and the State insofar as the
absence of stenographic notes, the following cases involving all workers, whether controversy concerns their individual franchise or right to exist as such entity; or
agricultural or non-agricultural: because the controversy involves the election or appointment of a director, trustee,
officer, or manager of such corporation, partnership, or association.14 Such
1. Unfair labor practice cases; controversy, among others, is known as an intra-corporate dispute.

2. Termination disputes; Effective on August 8, 2000, upon the passage of Republic Act No.
8799,15 otherwise known as The Securities Regulation Code, the SEC’s jurisdiction
3. If accompanied with a claim for reinstatement, those cases that over all intra-corporate disputes was transferred to the RTC, pursuant to Section
workers may file involving wages, rates of pay, hours of work and 5.2 of RA No. 8799, to wit:
other terms and conditions of employment;
5.2. The Commission’s jurisdiction over all cases enumerated under Section 5
4. Claims for actual, moral, exemplary and other forms of of Presidential Decree No. 902-A is hereby transferred to the Courts of general
damages arising from the employer-employee relations; jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme
Court in the exercise of its authority may designate the Regional Trial Court
branches that shall exercise jurisdiction over these cases. The Commission shall
5. Cases arising from any violation of Article 264 of this Code,
retain jurisdiction over pending cases involving intra-corporate disputes submitted
including questions involving the legality of strikes and lockouts;
for final resolution which should be resolved within one (1) year from the
and
enactment of this Code. The Commission shall retain jurisdiction over pending

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suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally as that made by the Board of Directors, making the office a corporate office. In
disposed. justification, they cite Tabang v. National Labor Relations Commission,17 which
held that "other offices are sometimes created by the charter or by-laws of a
Considering that the respondent’s complaint for illegal dismissal was commenced corporation, or the board of directors may be empowered under the by-laws of a
on August 10, 2000, it might come under the coverage of Section 5.2 of RA No. corporation to create additional officers as may be necessary."
8799, supra, should it turn out that the respondent was a corporate, not a regular,
officer of Matling. The respondent counters that Matling’s By-Laws did not list his position as Vice
President for Finance and Administration as one of the corporate offices; that
II Matling’s By-Law No. III listed only four corporate officers, namely: President,
Executive Vice President, Secretary, and Treasurer; 18 that the corporate offices
Was the Respondent’s Position of Vice President contemplated in the phrase "and such other officers as may be provided for in the
for Administration and Finance a Corporate Office? by-laws" found in Section 25 of the Corporation Code should be clearly and
expressly stated in the By-Laws; that the fact that Matling’s By-Law No. III dealt
with Directors & Officers while its By-Law No. V dealt with Officers proved that
We must first resolve whether or not the respondent’s position as Vice President there was a differentiation between the officers mentioned in the two provisions,
for Finance and Administration was a corporate office. If it was, his dismissal by with those classified under By-Law No. V being ordinary or non-corporate officers;
the Board of Directors rendered the matter an intra-corporate dispute cognizable and that the officer, to be considered as a corporate officer, must be elected by the
by the RTC pursuant to RA No. 8799. Board of Directors or the stockholders, for the President could only appoint an
employee to a position pursuant to By-Law No. V.
The petitioners contend that the position of Vice President for Finance and
Administration was a corporate office, having been created by Matling’s President We agree with respondent.
pursuant to By-Law No. V, as amended,16 to wit:
Section 25 of the Corporation Code provides:
BY LAW NO. V
Officers
Section 25. Corporate officers, quorum.--Immediately after their election, the
directors of a corporation must formally organize by the election of a president,
The President shall be the executive head of the corporation; shall preside over who shall be a director, a treasurer who may or may not be a director, a secretary
the meetings of the stockholders and directors; shall countersign all certificates, who shall be a resident and citizen of the Philippines, and such other officers as
contracts and other instruments of the corporation as authorized by the Board of may be provided for in the by-laws. Any two (2) or more positions may be held
Directors; shall have full power to hire and discharge any or all employees of the concurrently by the same person, except that no one shall act as president and
corporation; shall have full power to create new offices and to appoint the officers secretary or as president and treasurer at the same time.
thereto as he may deem proper and necessary in the operations of the corporation
and as the progress of the business and welfare of the corporation may demand;
shall make reports to the directors and stockholders and perform all such other The directors or trustees and officers to be elected shall perform the duties
enjoined on them by law and the by-laws of the corporation. Unless the articles of
duties and functions as are incident to his office or are properly required of him by
incorporation or the by-laws provide for a greater majority, a majority of the number
the Board of Directors. In case of the absence or disability of the President, the
of directors or trustees as fixed in the articles of incorporation shall constitute a
Executive Vice President shall have the power to exercise his functions.
quorum for the transaction of corporate business, and every decision of at least a
majority of the directors or trustees present at a meeting at which there is a
The petitioners argue that the power to create corporate offices and to appoint the quorum shall be valid as a corporate act, except for the election of officers which
individuals to assume the offices was delegated by Matling’s Board of Directors to shall require the vote of a majority of all the members of the board.
its President through By-Law No. V, as amended; and that any office the President
created, like the position of the respondent, was as valid and effective a creation
Directors or trustees cannot attend or vote by proxy at board meetings.

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Conformably with Section 25, a position must be expressly mentioned in the By- appointive positions other than the positions of corporate Officers, but the
Laws in order to be considered as a corporate office. Thus, the creation of an persons occupying such positions are not considered as corporate officers
office pursuant to or under a By-Law enabling provision is not enough to make a within the meaning of Section 25 of the Corporation Code and are not
position a corporate office. Guerrea v. Lezama,19 the first ruling on the matter, held empowered to exercise the functions of the corporate Officers, except those
that the only officers of a corporation were those given that character either by the functions lawfully delegated to them. Their functions and duties are to be
Corporation Code or by the By-Laws; the rest of the corporate officers could be determined by the Board of Directors/Trustees.
considered only as employees or subordinate officials. Thus, it was held
in Easycall Communications Phils., Inc. v. King:20 Moreover, the Board of Directors of Matling could not validly delegate the power to
create a corporate office to the President, in light of Section 25 of the Corporation
An "office" is created by the charter of the corporation and the officer is elected by Code requiring the Board of Directors itself to elect the corporate officers. Verily,
the directors or stockholders. On the other hand, an employee occupies no office the power to elect the corporate officers was a discretionary power that the law
and generally is employed not by the action of the directors or stockholders but by exclusively vested in the Board of Directors, and could not be delegated to
the managing officer of the corporation who also determines the compensation to subordinate officers or agents.22 The office of Vice President for Finance and
be paid to such employee. Administration created by Matling’s President pursuant to By Law No. V was an
ordinary, not a corporate, office.
In this case, respondent was appointed vice president for nationwide expansion by
Malonzo, petitioner’'s general manager, not by the board of directors of petitioner. To emphasize, the power to create new offices and the power to appoint the
It was also Malonzo who determined the compensation package of respondent. officers to occupy them vested by By-Law No. V merely allowed Matling’s
Thus, respondent was an employee, not a "corporate officer." The CA was President to create non-corporate offices to be occupied by ordinary employees of
therefore correct in ruling that jurisdiction over the case was properly with the Matling. Such powers were incidental to the President’s duties as the executive
NLRC, not the SEC (now the RTC). head of Matling to assist him in the daily operations of the business.

This interpretation is the correct application of Section 25 of the Corporation Code, The petitioners’ reliance on Tabang, supra, is misplaced. The statement
which plainly states that the corporate officers are the President, Secretary, in Tabang, to the effect that offices not expressly mentioned in the By-Laws but
Treasurer and such other officers as may be provided for in the By-Laws. were created pursuant to a By-Law enabling provision were also considered
Accordingly, the corporate officers in the context of PD No. 902-A are exclusively corporate offices, was plainly obiter dictum due to the position subject of the
those who are given that character either by the Corporation Code or by the controversy being mentioned in the By-Laws. Thus, the Court held therein that the
corporation’s By-Laws. position was a corporate office, and that the determination of the rights and
liabilities arising from the ouster from the position was an intra-corporate
A different interpretation can easily leave the way open for the Board of Directors controversy within the SEC’s jurisdiction.
to circumvent the constitutionally guaranteed security of tenure of the employee by
the expedient inclusion in the By-Laws of an enabling clause on the creation of just In Nacpil v. Intercontinental Broadcasting Corporation,23 which may be the more
any corporate officer position. appropriate ruling, the position subject of the controversy was not expressly
mentioned in the By-Laws, but was created pursuant to a By-Law enabling
It is relevant to state in this connection that the SEC, the primary agency provision authorizing the Board of Directors to create other offices that the Board
administering the Corporation Code, adopted a similar interpretation of Section 25 of Directors might see fit to create. The Court held there that the position was a
of the Corporation Code in its Opinion dated November 25, 1993,21 to wit: corporate office, relying on the obiter dictum in Tabang.

Thus, pursuant to the above provision (Section 25 of the Corporation Code), Considering that the observations earlier made herein show that the soundness of
whoever are the corporate officers enumerated in the by-laws are the exclusive their dicta is not unassailable, Tabang and Nacpil should no longer be controlling.
Officers of the corporation and the Board has no power to create other Offices
without amending first the corporate By-laws. However, the Board may create III

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Did Respondent’s Status as Director and the parties but also the nature of the question that is the subject of their
Stockholder Automatically Convert his Dismissal controversy.
into an Intra-Corporate Dispute?
Not every conflict between a corporation and its stockholders involves corporate
Yet, the petitioners insist that because the respondent was a Director/stockholder matters that only the SEC can resolve in the exercise of its adjudicatory or quasi-
of Matling, and relying on Paguio v. National Labor Relations judicial powers. If, for example, a person leases an apartment owned by a
Commission24 and Ongkingko v. National Labor Relations Commission,25 the corporation of which he is a stockholder, there should be no question that a
NLRC had no jurisdiction over his complaint, considering that any case for illegal complaint for his ejectment for non-payment of rentals would still come under the
dismissal brought by a stockholder/officer against the corporation was an intra- jurisdiction of the regular courts and not of the SEC. By the same token, if one
corporate matter that must fall under the jurisdiction of the SEC conformably with person injures another in a vehicular accident, the complaint for damages filed by
the context of PD No. 902-A. the victim will not come under the jurisdiction of the SEC simply because of the
happenstance that both parties are stockholders of the same corporation. A
The petitioners’ insistence is bereft of basis. contrary interpretation would dissipate the powers of the regular courts and distort
the meaning and intent of PD No. 902-A.
To begin with, the reliance on Paguio and Ongkingko is misplaced. In both rulings,
the complainants were undeniably corporate officers due to their positions being In another case, Mainland Construction Co., Inc. v. Movilla,28 the Court reiterated
expressly mentioned in the By-Laws, aside from the fact that both of them had these determinants thuswise:
been duly elected by the respective Boards of Directors. But the herein
respondent’s position of Vice President for Finance and Administration was not In order that the SEC (now the regular courts) can take cognizance of a case, the
expressly mentioned in the By-Laws; neither was the position of Vice President for controversy must pertain to any of the following relationships:
Finance and Administration created by Matling’s Board of Directors. Lastly, the
President, not the Board of Directors, appointed him. a) between the corporation, partnership or association and the public;

True it is that the Court pronounced in Tabang as follows: b) between the corporation, partnership or association and its
stockholders, partners, members or officers;
Also, an intra-corporate controversy is one which arises between a stockholder
and the corporation. There is no distinction, qualification or any exemption c) between the corporation, partnership or association and the State as far
whatsoever. The provision is broad and covers all kinds of controversies between as its franchise, permit or license to operate is concerned; and
stockholders and corporations.26
d) among the stockholders, partners or associates themselves.
However, the Tabang pronouncement is not controlling because it is too sweeping
and does not accord with reason, justice, and fair play. In order to determine The fact that the parties involved in the controversy are all stockholders or that the
whether a dispute constitutes an intra-corporate controversy or not, the Court
parties involved are the stockholders and the corporation does not necessarily
considers two elements instead, namely: (a) the status or relationship of the
place the dispute within the ambit of the jurisdiction of SEC. The better policy to be
parties; and (b) the nature of the question that is the subject of their controversy.
followed in determining jurisdiction over a case should be to consider concurrent
This was our thrust in Viray v. Court of Appeals:27
factors such as the status or relationship of the parties or the nature of the
question that is the subject of their controversy. In the absence of any one of these
The establishment of any of the relationships mentioned above will not necessarily factors, the SEC will not have jurisdiction. Furthermore, it does not necessarily
always confer jurisdiction over the dispute on the SEC to the exclusion of regular follow that every conflict between the corporation and its stockholders would
courts. The statement made in one case that the rule admits of no exceptions or involve such corporate matters as only the SEC can resolve in the exercise of its
distinctions is not that absolute. The better policy in determining which body has adjudicatory or quasi-judicial powers.29
jurisdiction over a case would be to consider not only the status or relationship of

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The criteria for distinguishing between corporate officers who may be ousted from Even though he might have become a stockholder of Matling in 1992, his
office at will, on one hand, and ordinary corporate employees who may only be promotion to the position of Vice President for Finance and Administration in 1987
terminated for just cause, on the other hand, do not depend on the nature of the was by virtue of the length of quality service he had rendered as an employee of
services performed, but on the manner of creation of the office. In the respondent’s Matling. His subsequent acquisition of the status of Director/stockholder had no
case, he was supposedly at once an employee, a stockholder, and a Director of relation to his promotion. Besides, his status of Director/stockholder was
Matling. The circumstances surrounding his appointment to office must be fully unaffected by his dismissal from employment as Vice President for Finance and
considered to determine whether the dismissal constituted an intra-corporate Administration.1avvphi1
controversy or a labor termination dispute. We must also consider whether his
status as Director and stockholder had any relation at all to his appointment and In Prudential Bank and Trust Company v. Reyes,30 a case involving a lady bank
subsequent dismissal as Vice President for Finance and Administration. manager who had risen from the ranks but was dismissed, the Court held that her
complaint for illegal dismissal was correctly brought to the NLRC, because she
Obviously enough, the respondent was not appointed as Vice President for was deemed a regular employee of the bank. The Court observed thus:
Finance and Administration because of his being a stockholder or Director of
Matling. He had started working for Matling on September 8, 1966, and had been It appears that private respondent was appointed Accounting Clerk by the Bank on
employed continuously for 33 years until his termination on April 17, 2000, first as July 14, 1963. From that position she rose to become supervisor. Then in 1982,
a bookkeeper, and his climb in 1987 to his last position as Vice President for she was appointed Assistant Vice-President which she occupied until her illegal
Finance and Administration had been gradual but steady, as the following dismissal on July 19, 1991. The bank’s contention that she merely holds an
sequence indicates: elective position and that in effect she is not a regular employee is belied by
the nature of her work and her length of service with the Bank. As earlier
1966 – Bookkeeper stated, she rose from the ranks and has been employed with the Bank since 1963
until the termination of her employment in 1991. As Assistant Vice President of the
1968 – Senior Accountant Foreign Department of the Bank, she is tasked, among others, to collect checks
drawn against overseas banks payable in foreign currency and to ensure the
1969 – Chief Accountant collection of foreign bills or checks purchased, including the signing of transmittal
letters covering the same. It has been stated that "the primary standard of
determining regular employment is the reasonable connection between the
1972 – Office Supervisor particular activity performed by the employee in relation to the usual trade or
business of the employer. Additionally, "an employee is regular because of the
1973 – Assistant Treasurer nature of work and the length of service, not because of the mode or even the
reason for hiring them." As Assistant Vice-President of the Foreign Department of
1978 – Special Assistant for Finance the Bank she performs tasks integral to the operations of the bank and her length
of service with the bank totaling 28 years speaks volumes of her status as a
1980 – Assistant Comptroller regular employee of the bank. In fine, as a regular employee, she is entitled to
security of tenure; that is, her services may be terminated only for a just or
authorized cause. This being in truth a case of illegal dismissal, it is no wonder
1983 – Finance and Administrative Manager
then that the Bank endeavored to the very end to establish loss of trust and
confidence and serious misconduct on the part of private respondent but, as will be
1985 – Asst. Vice President for Finance and Administration discussed later, to no avail.

1987 to April 17, 2000 – Vice President for Finance and Administration WHEREFORE, we deny the petition for review on certiorari, and affirm the
decision of the Court of Appeals.

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Costs of suit to be paid by the petitioners. As early as October 1991, however, GMC had received collective and
individual letters from workers who stated that they had withdrawn from
SO ORDERED. their union membership, on grounds of religious affiliation and personal
differences. Believing that the union no longer had standing to negotiate a
CBA, GMC did not send any counter-proposal.

On December 16, 1991, GMC wrote a letter to the union’s officers, Rito
G.R. No. 146728 February 11, 2004 Mangubat and Victor Lastimoso. The letter stated that it felt there was no
basis to negotiate with a union which no longer existed, but that
GENERAL MILLING CORPORATION, petitioner, management was nonetheless always willing to dialogue with them on
vs matters of common concern and was open to suggestions on how the
HON. COURT OF APPEALS, GENERAL MILLING CORPORATION company may improve its operations.
INDEPENDENT LABOR UNION (GMC-ILU), and RITO
MANGUBAT, respondents. In answer, the union officers wrote a letter dated December 19, 1991
disclaiming any massive disaffiliation or resignation from the union and
DECISION submitted a manifesto, signed by its members, stating that they had not
withdrawn from the union.
QUISUMBING, J.:
On January 13, 1992, GMC dismissed Marcia Tumbiga, a union member,
decision1
Before us is a petition for certiorari assailing the dated July 19, 2000, of on the ground of incompetence. The union protested and requested GMC
the Court of Appeals in CA-G.R. SP No. 50383, which earlier reversed the to submit the matter to the grievance procedure provided in the CBA.
decision2 dated January 30, 1998 of the National Labor Relations Commission GMC, however, advised the union to "refer to our letter dated December
(NLRC) in NLRC Case No. V-0112-94. 16, 1991."3

The antecedent facts are as follows: Thus, the union filed, on July 2, 1992, a complaint against GMC with the NLRC,
Arbitration Division, Cebu City. The complaint alleged unfair labor practice on the
In its two plants located at Cebu City and Lapu-Lapu City, petitioner part of GMC for: (1) refusal to bargain collectively; (2) interference with the right to
General Milling Corporation (GMC) employed 190 workers. They were all self-organization; and (3) discrimination. The labor arbiter dismissed the case with
members of private respondent General Milling Corporation Independent the recommendation that a petition for certification election be held to determine if
Labor Union (union, for brevity), a duly certified bargaining agent. the union still enjoyed the support of the workers.lawphi1.nêt

On April 28, 1989, GMC and the union concluded a collective bargaining The union appealed to the NLRC.
agreement (CBA) which included the issue of representation effective for a
term of three years. The CBA was effective for three years retroactive to On January 30, 1998, the NLRC set aside the labor arbiter’s decision. Citing Article
December 1, 1988. Hence, it would expire on November 30, 1991. 253-A of the Labor Code, as amended by Rep. Act No. 6715,4 which fixed the
terms of a collective bargaining agreement, the NLRC ordered GMC to abide by
On November 29, 1991, a day before the expiration of the CBA, the union the CBA draft that the union proposed for a period of two (2) years beginning
sent GMC a proposed CBA, with a request that a counter-proposal be December 1, 1991, the date when the original CBA ended, to November 30, 1993.
submitted within ten (10) days. The NLRC also ordered GMC to pay the attorney’s fees.5

In its decision, the NLRC pointed out that upon the effectivity of Rep. Act No. 6715,
the duration of a CBA, insofar as the representation aspect is concerned, is five (5)

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years which, in the case of GMC-Independent Labor Union was from December 1, I
1988 to November 30, 1993. All other provisions of the CBA are to be renegotiated
not later than three (3) years after its execution. Thus, the NLRC held that THE COURT OF APPEALS DECISION VIOLATED THE CONSTITUTIONAL
respondent union remained as the exclusive bargaining agent with the right to RULE THAT NO DECISION SHALL BE RENDERED BY ANY COURT WITHOUT
renegotiate the economic provisions of the CBA. Consequently, it was unfair labor EXPRESSING THEREIN CLEARLY AND DISTINCTLY THE FACTS AND THE
practice for GMC not to enter into negotiation with the union. LAW ON WHICH IT IS BASED.

The NLRC likewise held that the individual letters of withdrawal from the union II
submitted by 13 of its members from February to June 1993 confirmed the
pressure exerted by GMC on its employees to resign from the union. Thus, the
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
NLRC also found GMC guilty of unfair labor practice for interfering with the right of
REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS
its employees to self-organization.
COMMISSION IN THE ABSENCE OF ANY FINDING OF SUBSTANTIAL ERROR
OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
With respect to the union’s claim of discrimination, the NLRC found the claim JURISDICTION.
unsupported by substantial evidence.
III
On GMC’s motion for reconsideration, the NLRC set aside its decision of January
30, 1998, through a resolution dated October 6, 1998. It found GMC’s doubts as to THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT
the status of the union justified and the allegation of coercion exerted by GMC on
APPRECIATING THAT THE NLRC HAS NO JURISDICTION TO DETERMINE
the union’s members to resign unfounded. Hence, the union filed a petition
THE TERMS AND CONDITIONS OF A COLLECTIVE BARGAINING
for certiorari before the Court of Appeals. For failure of the union to attach the
AGREEMENT.7
required copies of pleadings and other documents and material portions of the
record to support the allegations in its petition, the CA dismissed the petition on
February 9, 1999. The same petition was subsequently filed by the union, this time Thus, in the instant case, the principal issue for our determination is whether or not
with the necessary documents. In its resolution dated April 26, 1999, the appellate the Court of Appeals acted with grave abuse of discretion amounting to lack or
court treated the refiled petition as a motion for reconsideration and gave the excess of jurisdiction in (1) finding GMC guilty of unfair labor practice for violating
petition due course. the duty to bargain collectively and/or interfering with the right of its employees to
self-organization, and (2) imposing upon GMC the draft CBA proposed by the
union for two years to begin from the expiration of the original CBA.lawphi1.nêt
On July 19, 2000, the appellate court rendered a decision the dispositive portion of
which reads:
On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No.
6715, states:
WHEREFORE, the petition is hereby GRANTED. The NLRC Resolution of
October 6, 1998 is hereby SET ASIDE, and its decision of January 30,
1998 is, except with respect to the award of attorney’s fees which is ART. 253-A. Terms of a collective bargaining agreement. – Any
hereby deleted, REINSTATED.6 Collective Bargaining Agreement that the parties may enter into shall,
insofar as the representation aspect is concerned, be for a term of five (5)
years. No petition questioning the majority status of the incumbent
A motion for reconsideration was seasonably filed by GMC, but in a resolution bargaining agent shall be entertained and no certification election shall be
dated October 26, 2000, the CA denied it for lack of merit. conducted by the Department of Labor and Employment outside of the
sixty-day period immediately before the date of expiry of such five year
Hence, the instant petition for certiorari alleging that: term of the Collective Bargaining Agreement. All other provisions of the

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Collective Bargaining Agreement shall be renegotiated not later than three bargaining, but the impact of all such occasions or actions, considered as
(3) years after its execution.... a whole.11

The law mandates that the representation provision of a CBA should last for five Under Article 252 abovecited, both parties are required to perform their mutual
years. The relation between labor and management should be undisturbed until obligation to meet and convene promptly and expeditiously in good faith for the
the last 60 days of the fifth year. Hence, it is indisputable that when the union purpose of negotiating an agreement. The union lived up to this obligation when it
requested for a renegotiation of the economic terms of the CBA on November 29, presented proposals for a new CBA to GMC within three (3) years from the
1991, it was still the certified collective bargaining agent of the workers, because it effectivity of the original CBA. But GMC failed in its duty under Article 252. What it
was seeking said renegotiation within five (5) years from the date of effectivity of did was to devise a flimsy excuse, by questioning the existence of the union and
the CBA on December 1, 1988. The union’s proposal was also submitted within the status of its membership to prevent any negotiation.
the prescribed 3-year period from the date of effectivity of the CBA, albeit just
before the last day of said period. It was obvious that GMC had no valid reason to It bears stressing that the procedure in collective bargaining prescribed by the
refuse to negotiate in good faith with the union. For refusing to send a counter- Code is mandatory because of the basic interest of the state in ensuring lasting
proposal to the union and to bargain anew on the economic terms of the CBA, the industrial peace. Thus:
company committed an unfair labor practice under Article 248 of the Labor Code,
which provides that: ART. 250. Procedure in collective bargaining. – The following
procedures shall be observed in collective bargaining:
ART. 248. Unfair labor practices of employers. – It shall be unlawful for
an employer to commit any of the following unfair labor practice: (a) When a party desires to negotiate an agreement, it shall serve
a written notice upon the other party with a statement of its
... proposals. The other party shall make a reply thereto not later
than ten (10) calendar days from receipt of such notice.
(g) To violate the duty to bargain collectively as prescribed by this (Underscoring supplied.)
Code;
GMC’s failure to make a timely reply to the proposals presented by the union is
... indicative of its utter lack of interest in bargaining with the union. Its excuse that it
felt the union no longer represented the workers, was mainly dilatory as it turned
Article 252 of the Labor Code elucidates the meaning of the phrase "duty out to be utterly baseless.
to bargain collectively," thus:
We hold that GMC’s refusal to make a counter-proposal to the union’s proposal for
ART. 252. Meaning of duty to bargain collectively. – The duty CBA negotiation is an indication of its bad faith. Where the employer did not even
to bargain collectively means the performance of a mutual bother to submit an answer to the bargaining proposals of the union, there is a
obligation to meet and convene promptly and expeditiously in clear evasion of the duty to bargain collectively.12
good faith for the purpose of negotiating an agreement....
Failing to comply with the mandatory obligation to submit a reply to the union’s
We have held that the crucial question whether or not a party has met his proposals, GMC violated its duty to bargain collectively, making it liable for unfair
statutory duty to bargain in good faith typically turn$ on the facts of the labor practice. Perforce, the Court of Appeals did not commit grave abuse of
individual case.8 There is no per se test of good faith in bargaining.9Good discretion amounting to lack or excess of jurisdiction in finding that GMC is, under
faith or bad faith is an inference to be drawn from the facts.10 The effect of the circumstances, guilty of unfair labor practice.
an employer’s or a union’s actions individually is not the test of good-faith

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Did GMC interfere with the employees’ right to self-organization? The CA found … petitioner Company’s approach and attitude – stalling the negotiation by
that the letters between February to June 1993 by 13 union members signifying a series of postponements, non-appearance at the hearing conducted, and
their resignation from the union clearly indicated that GMC exerted pressure on its undue delay in submitting its financial statements, lead to no other
employees. The records show that GMC presented these letters to prove that the conclusion except that it is unwilling to negotiate and reach an agreement
union no longer enjoyed the support of the workers. The fact that the resignations with the Union. Petitioner has not at any instance, evinced good faith or
of the union members occurred during the pendency of the case before the labor willingness to discuss freely and fully the claims and demands set forth by
arbiter shows GMC’s desperate attempts to cast doubt on the legitimate status of the Union much less justify its objection thereto.14
the union. We agree with the CA’s conclusion that the ill-timed letters of
resignation from the union members indicate that GMC had interfered with the right Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and
of its employees to self-organization. Thus, we hold that the appellate court did not Employment,15 petitioner therein, Divine Word University of Tacloban, refused to
commit grave abuse of discretion in finding GMC guilty of unfair labor practice for perform its duty to bargain collectively. Thus, we upheld the unilateral imposition
interfering with the right of its employees to self-organization. on the university of the CBA proposed by the Divine Word University Employees
Union. We said further:
Finally, did the CA gravely abuse its discretion when it imposed on GMC the draft
CBA proposed by the union for two years commencing from the expiration of the That being the said case, the petitioner may not validly assert that its
original CBA? consent should be a primordial consideration in the bargaining process. By
its acts, no less than its action which bespeak its insincerity, it has forfeited
The Code provides: whatever rights it could have asserted as an employer. 16

ART. 253. Duty to bargain collectively when there exists a collective Applying the principle in the foregoing cases to the instant case, it would be unfair
bargaining agreement. – .... It shall be the duty of both parties to keep to the union and its members if the terms and conditions contained in the old CBA
the status quo and to continue in full force and effect the terms and would continue to be imposed on GMC’s employees for the remaining two (2)
conditions of the existing agreement during the 60-day period [prior to its years of the CBA’s duration. We are not inclined to gratify GMC with an extended
expiration date] and/or until a new agreement is reached by the parties. term of the old CBA after it resorted to delaying tactics to prevent negotiations.
(Underscoring supplied.) Since it was GMC which violated the duty to bargain collectively, based on Kiok
Loy and Divine Word University of Tacloban, it had lost its statutory right to
The provision mandates the parties to keep the status quo while they are still in the negotiate or renegotiate the terms and conditions of the draft CBA proposed by the
process of working out their respective proposal and counter proposal. The union.
general rule is that when a CBA already exists, its provision shall continue to
govern the relationship between the parties, until a new one is agreed upon. The We carefully note, however, that as strictly distinguished from the facts of this
rule necessarily presupposes that all other things are equal. That is, that neither case, there was no pre-existing CBA between the parties in Kiok Loy and Divine
party is guilty of bad faith. However, when one of the parties abuses this grace Word University of Tacloban. Nonetheless, we deem it proper to apply in this case
period by purposely delaying the bargaining process, a departure from the general the rationale of the doctrine in the said two cases. To rule otherwise would be to
rule is warranted. allow GMC to have its cake and eat it too.

In Kiok Loy vs. NLRC,13 we found that petitioner therein, Sweden Ice Cream Plant, Under ordinary circumstances, it is not obligatory upon either side of a labor
refused to submit any counter proposal to the CBA proposed by its employees’ controversy to precipitately accept or agree to the proposals of the other. But an
certified bargaining agent. We ruled that the former had thereby lost its right to erring party should not be allowed to resort with impunity to schemes feigning
bargain the terms and conditions of the CBA. Thus, we did not hesitate to impose negotiations by going through empty gestures.17 Thus, by imposing on GMC the
on the erring company the CBA proposed by its employees’ union - lock, stock and provisions of the draft CBA proposed by the union, in our view, the interests of
barrel. Our findings in Kiok Loy are similar to the facts in the present case, to wit: equity and fair play were properly served and both parties regained equal footing,

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which was lost when GMC thwarted the negotiations for new economic terms of The facts, as found by the Secretary of Labor and affirmed by the Court of
the CBA. Appeals, are as follows:

The findings of fact by the CA, affirming those of the NLRC as to the "On December 1992, Salvador Abtria, then President of respondent union,
reasonableness of the draft CBA proposed by the union should not be disturbed Association of Employees and Faculty of Letran, initiated the renegotiation of its
since they are supported by substantial evidence. On this score, we see no cogent Collective Bargaining Agreement with petitioner Colegio de San Juan de Letran for
reason to rule otherwise. Hence, we hold that the Court of Appeals did not commit the last two (2) years of the CBA's five (5) year lifetime from 1989-1994. On the
grave abuse of discretion amounting to lack or excess of jurisdiction when it same year, the union elected a new set of officers wherein private respondent
imposed on GMC, after it had committed unfair labor practice, the draft CBA Eleanor Ambas emerged as the newly elected President (Secretary of Labor and
proposed by the union for the remaining two (2) years of the duration of the original Employment's Order dated December 2, 1996, p. 12).
CBA. Fairness, equity, and social justice are best served in this case by sustaining
the appellate court’s decision on this issue. Ambas wanted to continue the renegotiation of the CBA but petitioner, through Fr.
Edwin Lao, claimed that the CBA was already prepared for signing by the parties.
WHEREFORE, the petition is DISMISSED and the assailed decision dated July The parties submitted the disputed CBA to a referendum by the union members,
19, 2000, and the resolution dated October 26, 2000, of the Court of Appeals in who eventually rejected the said CBA (Ibid, p. 2).
CA-G.R. SP No. 50383, are AFFIRMED. Costs against petitioner.
Petitioner accused the union officers of bargaining in bad faith before the National
SO ORDERED. Labor Relations Commission (NLRC). Labor Arbiter Edgardo M. Madriaga decided
in favor of petitioner. However, the Labor Arbiter's decision was reversed on
appeal before the NLRC (Ibid, p. 2).

On January 1996, the union notified the National Conciliation and Mediation Board
(NCMB) of its intention to strike on the grounds (sic) of petitioner's: non-
[G.R. No. 141471. September 18, 2000] compliance with the NLRC (1) order to delete the name of Atty. Federico Leynes
as the union's legal counsel; and (2) refusal to bargain (Ibid, p. 1).

On January 18, 1996, the parties agreed to disregard the unsigned CBA and to
COLEGIO DE SAN JUAN DE LETRAN, petitioner, vs. ASSOCIATION OF start negotiation on a new five-year CBA starting 1994-1999. On February 7, 1996,
EMPLOYEES AND FACULTY OF LETRAN and ELEONOR the union submitted its proposals to petitioner, which notified the union six days
AMBAS, respondents. later or on February 13, 1996 that the same had been submitted to its Board of
Trustees. In the meantime, Ambas was informed through a letter dated February
15, 1996 from her superior that her work schedule was being changed from
DECISION Monday to Friday to Tuesday to Saturday. Ambas protested and requested
KAPUNAN, J.: management to submit the issue to a grievance machinery under the old CBA
(Ibid, p. 2-3).
This is a petition for review on certiorari seeking the reversal of the Decision
of the Court of Appeals, promulgated on 9 August 1999, dismissing the petition Due to petitioner's inaction, the union filed a notice of strike on March 13, 1996.
filed by Colegio de San Juan de Letran (hereinafter, "petitioner") and affirming the The parties met on March 27, 1996 before the NCMB to discuss the ground rules
Order of the Secretary of Labor, dated December 2, 1996, finding the petitioner for the negotiation. On March 29, 1996, the union received petitioner's letter
guilty of unfair labor practice on two (2) counts. dismissing Ambas for alleged insubordination. Hence, the union amended its
notice of strike to include Ambas' dismissal. (Ibid, p. 2-3).

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On April 20, 1996, both parties again discussed the ground rules for the CBA SUSPENDING THE COLLECTIVE BARGAINING NEGOTIATIONS WITH
renegotiation. However, petitioner stopped the negotiations after it purportedly RESPONDENT AEFL, DESPITE THE FACT THAT THE SUSPENSION OF THE
received information that a new group of employees had filed a petition for NEGOTIATIONS WAS BROUGHT ABOUT BY THE FILING OF A PETITION FOR
certification election (Ibid, p. 3). CERTIFICATION ELECTION BY A RIVAL UNION WHO CLAIMED TO
COMMAND THE MAJORITY OF THE EMPLOYEES WITHIN THE BARGAINING
On June 18, 1996, the union finally struck. On July 2, 1996, public respondent the UNIT.
Secretary of Labor and Employment assumed jurisdiction and ordered all striking
employees including the union president to return to work and for petitioner to II
accept them back under the same terms and conditions before the actual strike.
Petitioner readmitted the striking members except Ambas. The parties then THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE
submitted their pleadings including their position papers which were filed on July ABUSE OF DISCRETION IN AFFIRMING THE RULING OF THE SECRETARY
17, 1996 ( Ibid, pp. 2-3). OF LABOR AND EMPLOYMENT WHICH DECLARES PETITIONER LETRAN
GUILTY OF UNFAIR LABOR PRACTICE FOR DISMISSING RESPONDENT
On December 2, 1996, public respondent issued an order declaring petitioner AMBAS, DESPITE THE FACT THAT HER DISMISSAL WAS CAUSED BY HER
guilty of unfair labor practice on two counts and directing the reinstatement of INSUBORDINATE ATTITUDE, SPECIFICALLY, HER REFUSAL TO FOLLOW
private respondent Ambas with backwages. Petitioner filed a motion for THE PRESCRIBED WORK SCHEDULE.[3]
reconsideration which was denied in an Order dated May 29, 1997 (Petition, pp. 8-
9)."[1] The twin questions of law before this Court are the following: (1) whether
petitioner is guilty of unfair labor practice by refusing to bargain with the union
Having been denied its motion for reconsideration, petitioner sought a review when it unilaterally suspended the ongoing negotiations for a new Collective
of the order of the Secretary of Labor and Employment before the Court of Bargaining Agreement (CBA) upon mere information that a petition for certification
Appeals. The appellate court dismissed the petition and affirmed the findings of the has been filed by another legitimate labor organization? (2) whether the
Secretary of Labor and Employment. The dispositive portion of the decision of the termination of the union president amounts to an interference of the employees'
Court of Appeals sets forth: right to self-organization?
The petition is without merit.
WHEREFORE, foregoing premises considered, this Petition is DISMISSED, for
being without merit in fact and in law. After a thorough review of the records of the case, this Court finds that
petitioner has not shown any compelling reason sufficient to overturn the ruling of
With cost to petitioner. the Court of Appeals affirming the findings of the Secretary of Labor and
Employment. It is axiomatic that the findings of fact of the Court of Appeals are
SO ORDERED.[2] conclusive and binding on the Supreme Court and will not be reviewed or
disturbed on appeal. In this case, the petitioner failed to show any extraordinary
circumstance justifying a departure from this established doctrine.
Hence, petitioner comes to this Court for redress.
As regards the first issue, Article 252 of the Labor Code defines the meaning
Petitioner ascribes the following errors to the Court of Appeals: of the phrase "duty to bargain collectively," as follows:
I
Art. 252. Meaning of duty to bargain collectively. - The duty to bargain collectively
THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE means the performance of a mutual obligation to meet and convene promptly and
ABUSE OF DISCRETION IN AFFIRMING THE RULING OF THE SECRETARY expeditiously in good faith for the purpose of negotiating an agreement with
OF LABOR AND EMPLOYMENT WHICH DECLARES PETITIONER LETRAN respect to wages, hours of work and all other terms and conditions of employment
GUILTY OF REFUSAL TO BARGAIN (UNFAIR LABOR PRACTICE) FOR including proposals for adjusting any grievances or questions arising under such

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agreement and executing a contract incorporating such agreements if requested from Mondays to Fridays to Tuesdays to Saturdays. A requestfrom the union
by either party but such duty does not compel any party to agree to a proposal or president that the issue be submitted to a grievance machinery was subsequently
to make any concession. denied. Thereafter, the petitioner and the union met on March 27, 1996 to discuss
the ground rules for negotiation. However, just two days later, or on March 29,
Noteworthy in the above definition is the requirement on both parties of the 1996, petitioner dismissed the union president for alleged insubordination. In its
performance of the mutual obligation to meet and convene promptly and final attempt to thwart the bargaining process, petitioner suspended the negotiation
expeditiously in good faith for the purpose of negotiating an on the ground that it allegedly received information that a new group of employees
agreement.Undoubtedly, respondent Association of Employees and Faculty of called the Association of Concerned Employees of Colegio (ACEC) had filed a
Letran (AEFL) (hereinafter, "union") lived up to this requisite when it presented its petition for certification election. Clearly, petitioner tried to evade its duty to bargain
proposals for the CBA to petitioner on February 7, 1996. On the other hand, collectively.
petitioner devised ways and means in order to prevent the negotiation. Petitioner, however, argues that since it has already submitted the union's
Petitioner's utter lack of interest in bargaining with the union is obvious in its proposals to the Board of Trustees and that a series of conferences had already
failure to make a timely reply to the proposals presented by the latter. More than a been undertaken to discuss the ground rules for negotiation such should already
month after the proposals were submitted by the union, petitioner still had not be considered as acts indicative of its intention to bargain. As pointed out earlier,
made any counter-proposals. This inaction on the part of petitioner prompted the the evidence on record belie the assertions of petitioner.
union to file its second notice of strike on March 13, 1996. Petitioner could only Petitioner, likewise, claims that the suspension of negotiation was proper
offer a feeble explanation that the Board of Trustees had not yet convened to since by the filing of the petition for certification election the issue on majority
discuss the matter as its excuse for failing to file its reply. This is a clear violation of representation of the employees has arose. According to petitioner, the authority of
Article 250 of the Labor Code governing the procedure in collective bargaining, to the union to negotiate on behalf of the employees was challenged when a rival
wit: union filed a petition for certification election. Citing the case of Lakas Ng
Manggagawang Makabayan v. Marcelo Enterprises,[7] petitioner asserts that in
Art. 250. Procedure in collective bargaining. - The following procedures shall be view of the pendency of the petition for certification election, it had no duty to
observed in collective bargaining: bargain collectively with the union.

(a) When a party desires to negotiate an agreement, it shall serve a written notice We disagree. In order to allow the employer to validly suspend the bargaining
upon the other party with a statement of its proposals. The other party shall make process there must be a valid petition for certification election raising a legitimate
a reply thereto not later than ten (10) calendar days from receipt of such notice.[4] representation issue. Hence, the mere filing of a petition for certification election
does not ipso facto justify the suspension of negotiation by the employer. The
petition must first comply with the provisions of the Labor Code and its
xxx Implementing Rules. Foremost is that a petition for certification election must be
As we have held in the case of Kiok Loy vs. NLRC,[5] the company's refusal to filed during the sixty-day freedom period. The "Contract Bar Rule" under Section 3,
make counter-proposal to the union's proposed CBA is an indication of its bad Rule XI, Book V, of the Omnibus Rules Implementing the Labor Code, provides
faith. Where the employer did not even bother to submit an answer to the that: " . If a collective bargaining agreement has been duly registered in
bargaining proposals of the union, there is a clear evasion of the duty to bargain accordance with Article 231 of the Code, a petition for certification election or a
collectively.[6] In the case at bar, petitioner's actuation show a lack of sincere desire motion for intervention can only be entertained within sixty (60) days prior to the
to negotiate rendering it guilty of unfair labor practice. expiry date of such agreement." The rule is based on Article 232, [8] in relation to
Articles 253, 253-A and 256 of the Labor Code. No petition for certification election
Moreover, the series of events that transpired after the filing of the first notice for any representation issue may be filed after the lapse of the sixty-day freedom
of strike in January 1996 show petitioner's resort to delaying tactics to ensure that period. The old CBA is extended until a new one is signed. The rule is that despite
negotiation would not push through. Thus, on February 15, 1996, or barely a few the lapse of the formal effectivity of the CBA the law still considers the same as
days after the union proposals for the new CBA were submitted, the union continuing in force and effect until a new CBA shall have been validly
president was informed by her superior that her work schedule was being changed executed.[9] Hence, the contract bar rule still applies.[10] The purpose is to ensure

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stability in the relationship of the workers and the company by preventing frequent her working schedule was from Monday to Friday.However, things began to
modifications of any CBA earlier entered into by them in good faith and for the change when she was elected as union president and when she started
stipulated original period.[11] negotiating for a new CBA. Thus, it was when she was the union president and
during the period of tense and difficult negotiations when her work schedule was
In the case at bar, the lifetime of the previous CBA was from 1989-1994. The altered from Mondays to Fridays to Tuesdays to Saturdays. When she did not
petition for certification election by ACEC, allegedly a legitimate labor organization, budge, although her schedule was changed, she was outrightly dismissed for
was filed with the Department of Labor and Employment (DOLE) only on May 26, alleged insubordination.[16] We quote with approval the following findings of the
1996. Clearly, the petition was filed outside the sixty-day freedom period. Hence, Secretary of Labor on this matter, to wit:
the filing thereof was barred by the existence of a valid and existing collective
bargaining agreement. Consequently, there is no legitimate representation issue
and, as such, the filing of the petition for certification election did not constitute a "Assuming arguendo that Ms. Ambas was guilty, such disobedience was not,
bar to the ongoing negotiation. Reliance, therefore, by petitioner of the ruling however, a valid ground to teminate her employment. The disputed management
in Lakas Ng Manggagawang Makabayan v. Marcelo Enterprises [12] is misplaced action was directly connected with Ms. Ambas' determination to change the
since that case involved a legitimate representation issue which is not present in complexion of the CBA. As a matter of fact, Ms. Ambas' unflinching position in
the case at bar. faithfully and truthfully carrying out her duties and responsibilities to her Union and
its members in getting a fair share of the fruits of their collective endeavors was the
Significantly, the same petition for certification election was dismissed by the proximate cause for her dismissal, the charge of insubordination being merely a
Secretary of Labor on October 25, 1996. The dismissal was upheld by this Court in ploy to give a color of legality to the contemplated management action to dismiss
a Resolution, dated April 21, 1997.[13] her. Thus, the dismissal of Ms. Ambas was heavily tainted with and evidently done
in bad faith. Manifestly, it was designed to interfere with the members' right to self-
In view of the above, there is no doubt that petitioner is guilty of unfair labor organization.
practice by its stern refusal to bargain in good faith with respondent union.
Concerning the issue on the validity of the termination of the union president, Admittedly, management has the prerogative to discipline its employees for
we hold that the dismissal was effected in violation of the employees' right to self- insubordination. But when the exercise of such management right tends to
organization. interfere with the employees' right to self-organization, it amounts to union-busting
and is therefore a prohibited act. The dismissal of Ms. Ambas was clearly designed
To justify the dismissal, petitioner asserts that the union president was to frustrate the Union in its desire to forge a new CBA with the College that is
terminated for cause, allegedly for insubordination for her failure to comply with the reflective of the true wishes and aspirations of the Union members. Her dismissal
new working schedule assigned to her, and pursuant to its managerial prerogative was merely a subterfuge to get rid of her, which smacks of a pre-conceived plan to
to discipline and/or dismiss its employees. While we recognize the right of the oust her from the premises of the College. It has the effect of busting the Union,
employer to terminate the services of an employee for a just or authorized cause, stripping it of its strong-willed leadership. When management refused to treat the
nevertheless, the dismissal of employees must be made within the parameters of charge of insubordination as a grievance within the scope of the Grievance
law and pursuant to the tenets of equity and fair play. [14] The employer's right to Machinery, the action of the College in finally dismissing her from the service
terminate the services of an employee for just or authorized cause must be became arbitrary, capricious and whimsical, and therefore violated Ms. Ambas'
exercised in good faith.[15] More importantly, it must not amount to interfering with, right to due process."[17]
restraining or coercing employees in the exercise of their right to self-organization
because it would amount to, as in this case, unlawful labor practice under Article
In this regard, we find no cogent reason to disturb the findings of the Court of
248 of the Labor Code.
Appeals affirming the findings of the Secretary of Labor and Employment. The right
The factual backdrop of the termination of Ms. Ambas leads us to no other to self-organization of employees must not be interfered with by the employer on
conclusion that she was dismissed in order to strip the union of a leader who would the pretext of exercising management prerogative of disciplining its employees. In
fight for the right of her co-workers at the bargaining table. Ms. Ambas, at the time this case, the totality of conduct of the employer shows an evident attempt to
of her dismissal, had been working for the petitioner for ten (10) years already. In restrain the employees from fully exercising their rights under the law. This cannot
fact, she was a recipient of a loyalty award. Moreover, for the past ten (10) years be done under the Labor Code.

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WHEREFORE, premises considered, the petition is DENIED for lack of merit. II
SO ORDERED.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION WHEN HE CURTAILED THE PARTIES' RIGHT TO
FREE COLLECTIVE BARGAINING, AND WHEN HE GRANTED
MONETARY AWARDS AND ADDITIONAL BENEFITS TO THE
G.R. No. 99395 June 29, 1993
EMPLOYEES GROSSLY DISPROPORTIONATE TO THE
OPERATING INCOME OF PETITIONER.
ST. LUKE'S MEDICAL CENTER, INC., petitioner,
vs.
III
HON. RUBEN O. TORRES and ST. LUKE'S MEDICAL CENTER ASSOCIATION-
ALLIANCE OF FILIPINO WORKERS ("SLMCEA-AFW"), respondents.
PUBLIC RESPONDENT COMMITTED GRAVE ABUSE OF
DISCRETION WHEN HE ADOPTED/CONSIDERED THE
Sofronio A. Ona for petitioner.
ALLEGATIONS OF THE UNION THAT THE HOSPITAL
OFFERED SALARY AND MEAL ALLOWANCE INCREASES IN
Edgar R. Martir for respondent union. THE AMOUNT OF P1,140,00 FOR THE FIRST YEAR AND
P700.00 ACROSS THE BOARD MONTHLY SALARY
INCREASES FOR THE SECOND AND THIRD YEARS OF THE
NEW CBA.
MELO, J.:
IV
In response to the mandate under Article 263(g) of the Labor Code and amidst the
labor controversy between petitioner St. Luke's Medical Center and private FINALLY, PUBLIC RESPONDENT COMMITTED GRAVE ABUSE
respondent St. Luke's Medical Center Employees Association-Alliance of Filipino OF DISCRETION WHEN HE GAVE HIS AWARD RETROACTIVE
Workers (SLMCEA-AFW), then Secretary of Labor Ruben D. Torres, issued the EFFECT.
Order of January 28, 1991 requiring the parties to execute and finalize their 1990-
1993 collective bargaining agreement (CBA) to retroact to the expiration of the When the collective bargaining agreement for the period August 1, 1987 to July 30,
anterior CBA. The parties were also instructed to incorporate in the new CBA the 1990 was forged between petitioner and private respondent, the incumbent
disposition on economic and non-economic issues spelled out in said Order (p. national president of AFW, the federation to which the local union SLMCEA is
48, Rollo). Separate motions for re-evaluation from the parties were to no avail; affiliated, was Gregorio del Prado.
hence, the petition at bar premised on the following ascriptions of error, to wit:
Before the expiration of the 1987-90 CBA, the AFW was plagued by internal
I squabble splitting its leadership between Del Prado and Purita Ramirez, resulting
in the filing by AFW and Del Prado of a petition later docketed before the
PUBLIC RESPONDENT HON. SECRETARY OF LABOR ACTED Department of Labor as NCR-00-M-90-05-077, where a declaration was sought on
IN EXCESS OF JURISDICTION AND/OR COMMITTED GRAVE the legitimacy of Del Prado's faction as bona fide officers of the federation.
ABUSE OF DISCRETION WHEN HE VIOLATED PETITIONER'S Pending resolution of said case, herein private respondent SLMCEA-AFW brought
RIGHT TO DUE PROCESS, PUBLIC RESPONDENT to the attention of petitioner via a letter dated July 4, 1990 that the 1987-1990 was
COMPLETELY IGNORED THE LATTER'S EVIDENCE AND about to expire, and manifested in the process that private respondent wanted to
ISSUED THE QUESTIONED AWARDS ON THE BASIS OF renew the CBA. This development triggered round-table talks on which occasions
ARBITRARY GUESSWORKS, CONJECTURES AND petitioner proposed, among other items, a maximum across-the-board monthly
INFERENCES. salary increase of P375.00 per employee, to which proposal private respondent

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demanded a P1,500.00 hike or 50% increase based on the latest salary rate of First year — P1,140.00 broken down as follows: P510.00 in
each employee, whichever is higher. compliance with the government mandated daily salary increase
of P17.00; and P630.00 CBA across the board monthly salary
In the meantime, relative to the interpleader case (NCR-00-M-90-05-070) initiated increase.
by petitioner to settle the question as to who between Del Prado and Diwa was
authorized to collect federation dues assessed from hospital employees, the Med- Second year — P700.00 across the board monthly salary
Arbiter recognized Del Prado's right (p. 423, Rollo). This resolution of July 31, increase.
1990 was elevated to the Labor Secretary.
Third year — P700.00 across the board monthly salary increase.
That talks that then ensued between petitioner and private respondent were
disturbed anew when the other wing in the AFW headed by Purita Ramirez, It is understood that the second and third year salary increases
expressed its objections to the on-going negotiations, and when a petition for shall not be chargeable to future government mandated wage
certification election was filed by the Association of Democratic Labor Organization increases. (p. 47, Rollo.)
of petitioner. However, private respondent emerged victorious after the elections
and was thus certified as the exclusive bargaining entity of petitioner's rank and file
As earlier stated, both parties moved for reconsideration of the above order, but
employees.
both motions were denied. Consequently, petitioner St. Luke's filed the instant
petition, a special civil action on certiorari.
Following the decision dated September 14, 1990 in NCR-00-M-90-05-077 (pp.
444-445, Rollo) which upheld the legitimacy of Del Prado's
In assailing the Order of January 28, 1991, petitioner St. Luke's focuses on public
status including the other officers, Bayani Diwa of the Ramirez Wing
respondent's disposition of the economic issues.
appealed; the two cases — NCR-00-M-90-05-070 for interpleader and NCR-00-90-
05-077 — were consolidated.
First, petitioner finds highly questionable the very basis of public respondent's
decision to award P1,140.00 as salary and meal allowance increases for the first
On September 17, 1990, private respondent wrote petitioner for the resumption of
year and P700.00 across-the-board monthly salary increases for the succeeding
their negotiations concerning the union's proposed CBA. Petitioner reacted by
second and third years of the new CBA. According to petitioner, private respondent
writing a letter on September 20, 1990 expressing willingness to negotiate a new
SLMCEA-AFW misled public respondent into believing that said amounts were the
CBA for the rank and file employees who are not occupying confidential positions.
last offer of petitioner St. Luke's immediately prior to the deadlock. Petitioner
Negotiations thus resumed. However, a deadlock on issues, especially that vehemently denies having made such offer, claiming that its only offer consists of
bearing on across-the-board monthly and meal allowances followed and to pre-
the following:
empt the impending strike as voted upon by a majority of private respondent's
membership, petitioner lodged the petition below. The Secretary of Labor
immediately assumed jurisdiction and the parties submitted their respective Non-Economic Issues:
pleadings.
St. Luke's submits that it is adopting the non-economic issues
On January 22, 1991, a resolution was issued in the consolidated cases which proposed and agreed upon in its Collective Bargaining Agreement
eventually declared Gregorio del Prado and his group as the legitimate officials of with SLMCEA-AFW for the period covering 1987, 1990. Copy of
the AFW and the acknowledged group to represent AFW (pp. 320-321, Rollo). the CBA is attached as Annex "F" hereof.

On January 28, 1991, public respondent Secretary of Labor issued the Order now Economic Issue
under challenge. Said Order contained a disposition on both the economic and
non-economic issues raised in the petition. On the economic issues, he thus ruled: St. Luke's respectfully offers to give an increase to all its rank and
file employees computed as follows:

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First Year — P900 (P700.00 basic + P200.00 food e) Sick leave — 855,000
allowance) for an over all total food allowance of
P320.00. f) Funeral, Paternity, Maternity leaves, retirement
pay — 820,000
Second Year — P400
B. P230 added to meal allowance
Third Year — P400
a) P230 x 1,500 x 12 — 4,140,000
plus the union will be allowed to operate and manage one (1)
canteen for free to augment their funds. Although the profit shall C. One day added to sick leave
be divided equally between union and SLMC, the operation of the
canteen will generate for them a monthly income of no less than a) (Ave. pay P3,000 = P1,140) divided by 30 x 1,500 — 222,000
P15,000.00, and likewise provide cheap and subsidized food to
Union members.
D. Sick leave cash conversion base reduced from 60 to 45 days
The wage increase as proposed shall be credited to whatever
increases in the minimum wage or to any across the board a) (P3,300 = P1,140)/30 x 1,200 — 2,664,000
increases that may be mandated by the government or the DOLE.
(pp. 20-21, Rollo.) E. Retirement benefits adjustment — 500,000

Petitioner charges that public respondent, in making such award, erroneously —————
relied on the extrapolated figures provided by respondent SLMCEA-AFW, which
grossly inflated petitioner St. Luke's net income. Petitioner contends that if the FIRST YEAR ADDITIONAL COST P 36,561,000
disputed award are sustained, the wage increases and benefits shall total
approximately P194,403,000.00 which it claims is excessive and unreasonable, YR II
considering that said aggregate amount is more than its projected income for the
next three years. To illustrate its point, petitioner submits the following
A. Yr I increase except sick leave cash conversion
computation:

from 60 to 45 — P33,897,000
YR I

B. P700 added to monthly basic pay


A. P1,40 added to basic pay

a) P700 x 1,500 x 12 — 2,600,000


a) P1,140 x 1,500 (no. of employees) x 12 (months) — P
b) 13th month pay: P700 x 1,500 — 1,050,000
20,520,000
c) Overtime, pay, 20% of P12.6 M — 2,520,000
d) Holiday pay, PM/Night pay — 630,000
b) 13th month pay: P1,140 x 1,500 — 1,710,000 e) Sick leave: 15 days x 700/30 x 1,500 — 525,000
f) Funeral, paternity, maternity leaves, retirement pay — 504,000
c) Overtime pay, 20% of payroll — 4,104,000 ————

d) Holiday pay, PM/Night pay — 1,026,000 SECOND YEAR ADDITIONAL COST P51,726,000

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YR III salary for the second and third years of the new CBA. It raises doubts on the
veracity of the minutes presented by private respondent SLMCEA-AFW to prove
A. Yr I and Yr II increases — 88,287,000 that negotiations were held, particularly on October 26, 1990, when petitioner
allegedly made said offer as its last ditch effort for a compromise prior to the
deadlock. According to petitioner, these minutes, unsigned by petitioner, were
B. P700 added to basic pay
merely concocted by private respondent SLMCEA-AFW.
a) P700 x 1,500 x 12 — 12,600,000
b) 13th month pay: P700 x 1,500 — 1,050,000 Finally, petitioner attacks the Order of January 28, 1991 for being violative of
Article 253-A of the Labor Code, particularly its provisions on retroactivity. Said
c) Overtime pay, 20% of P12.6 M — 2,520,000
Article pertinently provides:
d) Holiday pay, PM/Night pay — 630,000
e) Sick leave — 525,000
f) Funeral, paternity, maternity, leaves, xxx xxx xxx
retirement pay — 504,000
———— Any agreement on such other provisions of the collective
bargaining agreement entered into within six (6) months from the
THIRD YEAR ADDITIONAL COST — 106,116,000 date of expiry of the term of such other provisions as fixed in the
collective bargaining agreement, shall retroact to the day
TOTAL THREE-YEAR ADDITIONAL immediately following such date. If any such agreement is entered
into beyond six months, the parties shall agree on the duration of
retroactivity thereof. In case of a deadlock in the renegotiation of
BENEFIT/WAGES — 194,403,000 the collective bargaining agreement, the parties may exercise their
rights under this Code.
(pp. 14-16, Rollo).
Petitioner argues that in granting retroactive effect to the enforceability of the CBA,
On the basis of the foregoing, petitioner St. Luke's concludes that it would be in a public respondent committed an act contrary to the above provision of law, pointing
very poor position to even produce the resources necessary to pay the wage out that the old CBA expired on July 30, 1990 and the questioned order was
increases of its rank and file employees. issued on January 28, 1991. Petitioner theorizes that following Article 13 of the
Civil Code which provides that there are 30 days in one month, the questioned
Petitioner also impugns public respondent's awards on grounds of prematurity, Order of January 28, 1991 was issued beyond the six-month period, graphically
emphasizing that the awards in question even preceded collective bargaining shown thus:
negotiations which have to take place first between both litigants. It denies entering
into a round of negotiations with private respondent SLMCEA-AFW on the theory July 30, 1990 Expiration
that the meetings referred to by the latter were merely informal ones, without any
binding effect on the parties because AFW is torn between two factions vying for July 31 = 1 day
the right to represent it. Thus, petitioner maintains that nothing conclusive on the August 1-31, 1990 = 31 days
terms and conditions of the proposed CBA could be arrived at when the other September 1-30, 1990 = 30 days
party, private respondent SLMCEA-AFW is confronted with an unresolved October 1-31, 1990 = 31 days
representation issue. November 1-30, 1990 = 30 days
December 1-31, 1990 = 31 days
Petitioner argues further that since no formal negotiations were conducted, it could January 1-28, 1991 = 28 days
not have possibly made an offer of P1,140.00 as salary and meal allowance —————————
increases for the first year and an increase of P700.00 across-the-board monthly TOTAL = 182 days

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(6 months and 2 days) Third, that out of an estimated workforce of 1,264 regular
employees inclusive of about 209 supervisors, unit, junior area,
(p. 34, Rollo.) division department managers and top level executives, all
occupying permanent positions, and approximately 55 regular but
highly confidential employees, only 1,000 rank-and-file
Traversing petitioner's arguments, private respondent SLMCEA-AFW contends
regular/permanent employees (casuals, contractuals, probies and
that the formulation of the terms and conditions of the CBA awards is well
security guards excluded) are entitled to the CBA benefits for
supported by the factual findings of public respondent which established that
petitioner failed to refute private respondent's allegation that during their last three (3) years (1990-1993) (as private respondent SLMCEA-AFW
meeting on October 26, 1990, petitioner stood pat on its offer of P1,140.00 as gathered and analyzed from the petitioner's Personnel Strength
Report hereto attached as Annex "28" hereof) vis-a-vis the
salary and meal allowance increases for the first year of the new CBA and
generalized and inflated 1,500 employees as total workforce
P700.00 across-the-board salary increases for the second and third years thereof.
purportedly entitled to CBA benefits per its self-serving and
Said awards, it said, are well within the means of petitioner because its reported
incredible computation;
net income of P15 million, P11 million, and 13 million for 1987, 1988, and 1989,
respectively, have been actually understated. Moreover, private respondent claims
that petitioner, in actual terms, does not have to pay the alleged amount of Fourth, the petitioner's computed 20% overtime pay of the basic
P194,403,000.00 for wages and benefits in favor of its employees. Such amount, salary is unrealistic and overstated in view of its extreme cost-
according to private respondent, is bloated and excessive. Private respondent in cutting/ savings measures on all expenditures, most specially, on
substantiating such claim made the following analysis: overtime work adopted since last year and a continuing
management priority project up to the present; and
First P1,140.00 total salary increase for the first year (1990-1991)
of the new CBA is divided into: P510.00 in compliance with the Fifth, due to the above consideration, the total real award of
government mandated daily salary increase of P17.00 and wages and fringe benefits is far less than the true annual hefty
P630.00 CBA across the board monthly salary increase, thus, the operating net income of the petitioner.
whole P1,140.00 salary increase is payable only beginning August
1, 1990 (reckoned from the CBA July 30, 1990 expiry date) up to The net result is that the first year award of P1,140.00 monthly
October 31, 1990 only following the November 1, 1990 effectivity salary increase of which P510.00 monthly salary increase is made
of WAGE ORDER NO. NCR-01 which granted the said P17.00 in compliance with the P510.00 monthly wage increase at P17.00
daily wage increase or P510.00 monthly of daily wage increase effective November 1, 1990 under Wage
which herein petitioner promptly complied with and paid to its Order No. NCR-01 (Annex "13" hereof) or with the intended
employees and therefore deductible from P1,140.00 total monthly P630.00 CBA monthly salary increase is further reduced by
salary increase (Annex "A" — Petitioner and Annex "13" hereof); P360.00 monthly wage increase at P12.00 daily wage increase
effective January 8, 1991 under Wage Order No.
Second, the remaining P630.00 CBA across the board monthly NCR-02 (Annex "22" hereof), thereby leaving a downgraded or
salary increase takes effect on November 1, 1990 up to January 7, watered down CBA monthly increase of P270.00 only.
1991 only following the January 8, 1991 effectivity of WAGE
ORDER NO. NCR-02 which mandated P12.00 daily wage Comparatively speaking, the 13% monthly salary increase of each
increase or P630.00 monthly, hence, reducing the P630.00 CBA employee average basic monthly salary of P2,500.00 in 1987 or
monthly salary increase to P270.00 CBA monthly salary increase P325.00 monthly salary increase granted by the petitioner under
effective January 8, 1991 and onwards till July 31, 1991 (Annexes the first old CBA (1987-1990) is better than the much diluted
"22" and "23" hereof); P270.00 CBA monthly salary increase (in lieu of the awarded
P630.00 CBA monthly salary increase for the first year of the new

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CBA under Order, dated January 28, 1991, of public respondent). Petitioner assails the Order of January 28, 1991 on three grounds:
(Annexes "A" and "G" — Petition). (pp. 390-391, Rollo.) (a) unreasonable and baselessness; (b) prematurity; and (c) violation of Article
253-A of the Labor Code.
Private respondent concludes that petitioner's version that it will have to pay
P194,403,000.00 is not true because this will be drastically reduced by 40% to We rule that the Order, particularly in its disposition on the economic issues, was
60% in real terms due to a smaller number of employees covered. It is further not arbitrarily imposed by public respondent. A perusal of the Order shows that
explained that the government-decreed wage increases abovementioned already public respondent took into consideration the parties' respective contentions, a
form part of the P1,140.00 wage and meal allowance increases, not to mention the clear indication that he was keenly aware of their contrary positions. Both sides
strict cost-cutting measures and practices on overtime and expense items adopted having been heard, they were allowed to present their respective evidence. The
by petitioner since 1990. due process requirement was thus clearly observed. Considering public
respondent's expertise on the subject and his observance of the cardinal principles
With respect to public respondent's ruling that the CBA awards should be given of due process, the assailed Order deserves to be accorded great respect by this
retroactive effect, private respondent agrees with the Labor Secretary's view that Court.
Article 253-A of the Labor Code does not apply to arbitral awards such as those
involved in the instant case. According to private respondent, Article 253-A of the Equally worth mentioning is the fact that in resolving the economic issues, public
Labor Code is clear and plain on its face as referring only to collective bargaining respondent merely adopted in toto petitioner's proposals. Consequently, petitioner
agreements entered into by management and the certified exclusive bargaining cannot now claim that the awards are unreasonable and baseless. Neither can it
agent of all rank-and-file employees therein within six (6) months from the expiry of deny having made such proposals, as it attempted to do in its Motion for
the old CBA. Reconsideration of the challenged Order before public respondent and which it
continues to pursue in the instant petition. It is too late in the day for such
These foregoing contentions and arguments of private respondent have been pretense, especially so because petitioner failed to controvert private respondent's
similarly put forward by the Office of the Solicitor General in its Consolidated allegation contained in its Comment to the petition before the Labor Secretary that
Comment filed on November 23, 1991. The Solicitor General share a the views of petitioner had offered as its last proposal said salary and meal allowance
private respondent SLMCEA-AFW. increases. As correctly pointed out by public respondent, petitioner failed, when it
had the chance, to rebut the same in its Reply to said Comment, considering that
the resolution of the labor dispute at that was still pending. Any objection on this
We are now tasked to rule on the petition. Do petitioner's evidence and arguments
point is thus deemed waived.
provide adequate basis for the charge of alleged grave abuse of discretion
committed by public respondent in his Order of January 28, 1991 as to warrant its
annulment by this Court? This is the sole issue in the case at bar. Consequently, We do not see merit in petitioner's theory that the awards were granted
this Court would apply the following yardstick in resolving the aforestated issue: prematurely. In its effort to persuade this Court along this point, petitioner denies
that public respondent, in the exercise of his power to assume over subject labor having negotiated with private respondent SLMCEA-AFW. Petitioner collectively
dispute, acted whimsically, capriciously, or in an arbitrary, despotic manner by refers to all the talks conducted with private respondent as mere informal
reason of passion or personal hostility which was so patent and gross as to negotiations due to the representation issue involving AFW. Petitioner thus argues
amount to an evasion of positive duty or to a virtual refusal to perform a duty that in the absence of any formal negotiations, no collective bargaining could have
enjoined or to act at all in contemplation of law (San Sebastian College vs. Court of taken place. Public respondent, petitioner avers, should have required the parties
Appeals, 197 SCRA 138 [1991]). instead to negotiate rather than prematurely issuing his order.

Subjected to and measure by this test, the challenged Order, we believe, can We cannot agree with this line of reasoning. It is immaterial whether the
withstand even the most rigorous scrutiny. representation issue within AFW has been resolved with finality or not. Said
squabble could not possibly serve as a bar to any collective bargaining since AFW
is not the real party-in-interest to the talks; rather, the negotiations were confined
to petitioner and the local union SLMCEA which is affiliated to AFW. Only the

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collective bargaining agent, the local union SLMCEA in this case, possesses legal respondent's authority and recognized the latter's power to settle the labor dispute
standing to negotiate with petitioner. A duly registered local union affiliated with a pursuant to article 263(g) of the Labor Code granting him the power and authority
national union or federation does not lose its legal personality or independence to decide the dispute. It cannot, therefore, be said that public respondent's
(Adamson and Adamson, Inc. vs. The Court of Industrial Relations and Adamson decision to grant the awards is premature and pre-emptive of the parties' right to
and Adamson Supervising Union (FFW), 127 SCRA 268 [1984]). In Elisco-Elirol collectively bargain, simply because the Order of January 28, 1991 was
Labor Union (NAFLU) vs. Noriel (180 SCRA 681 [1977]), then Justice Teehankee unfavorable to one or the other party, for as we held in Saulog Transit,
re-echoed the words of Justice Esguerra in Liberty Cotton Mills Workers Union Inc. vs. Lazaro, (128 SCRA 591 [1984]):
vs. Liberty Cotton Mills, Inc. (66 SCRA 512 [1975]), thus:
It is a settled rule that a party cannot invoke the jurisdiction of a
(T)he locals are separate and distinct units primarily designed to court to secure affirmative relief against his opponent and after
secure and maintain an equality of bargaining power between the failing to obtain such relief, repudiate or question that same
employer and their employee-members in the economic struggle jurisdiction. A party cannot invoke jurisdiction at one time and
for the fruits of the joint productive effort of labor and capital; reject it at another time in the same controversy to suit its interests
and the association of the locals into the national union (as and convenience. The Court frowns upon and does not tolerate
PAFLU) was in furtherance of the same end. These associations the undesirable practice of same litigants who submit voluntarily a
are consensual entities capable of entering into such legal cause and then accepting the judgment when favorable to them
relations with their members. The essential purpose was the and attacking it for lack of jurisdiction when adverse. (Tajonera v.
affiliation of the local unions into a common enterprise to increase Lamaroxa, 110 SCRA 447, citingTijam v. Sibonghanoy, 23 SCRA
by collective action the common bargaining power in respect of 35). (at p. 601.)
the terms and conditions of labor. Yet the locals remained the
basic units of association, free to serve their own and the common Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of
interest of all, subject to the restraints imposed by the Constitution the expiration of the previous CBA, contrary to the position of petitioner. Under the
and By-Laws of the Association, and free also to renounce the circumstances of the case, Article 253-A cannot be property applied to herein
affiliation for mutual welfare upon the terms laid down in the case. As correctly stated by public respondent in his assailed Order of April 12,
agreement which brought it into existence. (at p. 688; emphasis in 1991 dismissing petitioner's Motion for Reconsideration —
the original.)
Anent the alleged lack of basis for the retroactivity provisions
Appending "AFW" to the local union's name does not mean that the federation awarded, we would stress that the provision of law invoked by the
absorbed the latter. No such merger can be construed. Rather, what is conveyed Hospital, Article 253-A of the Labor Code, speak of agreements by
is the idea of affiliation, with the local union and the larger national federation and between the parties, and not arbitral awards . . . (p.
retaining their separate personalities. 818, Rollo.)

Petitioner cannot pretend to be unaware of these legal principles since they enjoy Therefore, in the absence of a specific provision of law prohibiting retroactivity of
the benefit of legal advice from their distinguished counsel. Thus, we are the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
constrained to agree with the position of the Solicitor General that petitioner Article 263 (g) of the Labor Code, such as herein involved, public respondent is
conveniently used the representation issue within AFW to skirt entering into deemed vested with plenary and discretionary powers to determine the effectivity
bargaining negotiations with the private respondent. thereof.

Too, petitioner is in error in contending that the order was prematurely issued. It WHEREFORE, the instant petition is hereby DISMISSED for lack of merit.
must be recalled that immediately after the deadlock in the talks, it was petitioner
which filed a petition with the Secretary of Labor for the latter to assume
SO ORDERED.
jurisdiction over the labor dispute. In effect, petitioner submitted itself to the public

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G.R. No. 110854 February 13, 1995 8, North Harbor and its offices and said positions
are [sic] listed in ANNEX "A" hereof.
PIER 8 ARRASTRE & STEVEDORING SERVICES, INC., petitioner,
vs. As such representative the UNION is designated
HON. MA. NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of as the collective bargaining agent with respect to
Labor and Employment, and GENERAL MARITIME & STEVEDORES UNION and concerning the terms and conditions of
(GMSU), respondents. employment and the interpretations and
implementation of the provisions and conditions of
this Agreement.

PUNO, J.: Annex "A" of the CBA is the listing of positions covered thereby.
These are:
Petitioner corporation and private respondent labor union entered into a three-year
Collective Bargaining Agreement (CBA) with expiry date on November 27, 1991. 1. Foremen;
During the freedom period the National Federation of Labor Unions (NAFLU) 2. Gang bosses;
questioned the majority status of Private respondent through a petition for 3. Winchmen;
certification election. The election conducted on February 27, 1992 was won by 4. Signalmen;
private respondent. On March 19, 1992, private respondent was certified as the 5. Stevedores;
sole and exclusive bargaining agent of petitioner's rank-and-file employees. 6. Dockworkers;
7. Tallymen;
8. Checkers;
On June 22, 1992, private respondent's CBA proposals were received by
9. Forklift and crane operators;
petitioner. Counter-proposals were made by petitioner. Negotiations collapsed, and
on August 24, 1992, private-respondent filed a Notice of Strike with the National 10. Sweepers;
Conciliation and Mediation Board (NCMB). The NCMB tried but failed to settle the 11. Mechanics;
12. Utilitymen;
parties' controversy.
13. Carpenters; and
14. Other rank and file employees;
On September 30, 1992, public respondent Secretary of Labor assumed
jurisdiction over the dispute. She resolved the bargaining deadlock between the
The company argues in the first instance that under Article 212(m)
parties through an Order, dated March 4, 1993, which reads, in part:
in relation to Article 245 of the Labor Code, supervisors are
ineligible for. membership in a labor organization of rank and file.
xxx xxx xxx Being supervisors, foremen should be excluded from the
bargaining unit.
A. The non-economic issues
The Company likewise seeks the exclusion on the ground of lack
1. Scope/coverage of the CBA. Article I of the 1988 CBA provides: of community of interest and divergence in functions, mode of
compensation and working conditions of the following:
The Company recognizes the Union as the sole
and exclusive collective bargaining representative 1. Accounting clerk;
of all the stevedores, dockworkers, gang bosses, 2. Audit clerk;
foremen, rank and file employees working at Pier 3. Collector;
4. Payroll clerk;

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5. Nurse; 7. Effectivity of the CBA. The Union demands that the CBA should
6. Chief biller; be fully retroactive to 28 November 1991. The Company is
7. Biller; opposed on the ground that under Article 253-A of the labor code,
8. Teller/biller; the six-month period within which the parties must come to an
9. Personnel clerk; agreement so that the same will be automatically retroactive is
10. Timekeeper; long past.
11. Asst. timekeeper;
12. Legal secretary; The Union's demand for full retroactivity, we note, will result in
13. Telephone operator; undue financial burden to the Company. On the other hand, the
14. Janitor/Utility; and Company's reliance on Article 253-A is misplaced as this applies
15. Clerk only to the renegotiated terms of an existing CBA. Here, the
deadlock arose from negotiations for a new CBA.
These positions, the Company argues, cannot be lumped together
with the stevedores or dockworkers who mostly comprise the These considered, the CBA shall be effective from the time we
bargaining unit. Further, notwithstanding the check-off provisions assumed jurisdiction over the dispute, that is, on 22 September
of the CBA, the incumbents in these positions have never paid 1992, and shall remain e effective for five (5) years thereafter. It
union dues. Finally, some of them occupy confidential positions shall be understood that except for the representation aspect all
and therefore ought to be excluded from the bargaining unit. other provisions thereof shall be renegotiated not later than three
(3) years after its effectivity, consistently with Article 253-A of the
The Union generally argues that the Company's proposed Labor Code.
exclusions retrogressive. . . .
B. The economic issues
We see no compelling justification to order the modification of
Article I of the 1988 CBA as worded. For by lumping together The comparative positions of the parties are:
stevedores and other rank and file employees, the obvious intent
of the parties was to treat all employees not disqualified from
COMPANY UNION
union membership as members of one bargaining unit. This is
regardless of working conditions, mode of compensation, place of
work, or other considerations. In the absence of mutual agreement xxx xxx xxx
of the parties or evidence that the present compositions of the
bargaining unit is detrimental to the individual and
5. Vacation organizational
and sick leave 17 days vacation and sick leave i) For all covered employees
rights either of the employees or of the Company, this expressed
intent cannot be set aside. 17 days sick leave per year and 17 days sick than gang
for employment with at least gang bosses:
It may well be that as a consequence of Republic Act No. 6715, five years of service.
foremen are ineligible to join the union of the rank and file. But this 15 working days vacation and
provision can be invoked only upon proof that the foremen sought
to be excluded from the bargaining unit are cloaked with effective 15 working days sick leave
recommendatory powers such as to qualify them under the legal for those with at least 1 year
definitions of supervisors. of service

xxx xxx xxx

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20 working days vacation and Same as the above schedule
20 working days sick leave except that:
for those with more than one
year of service up to 5 years 1) the condition that a gang
of service bosses must have worked for at
least 120 days in a calendar
25 working days vacation and year shall be reduced to 110
25 working days sick leave days; and
for those with more than 5
years of service up to 10 2) where the above number of
years of service days worked is not met, the
gang boss shall still be entitled
30 working days vacation and to vacation and sick leave with
30 working days sick leave pay, as follows:
for those with more than 10 109 - 90 days worked: 90%
years of service 89 - 75 days worked: 50%

Provided that in the case Provided that in the case of a xxx xxx xxx
of a rotation worker, he rotation worker, he must have
7. Death aid P1,500.00 to heirs P10,000.00 to heirs of covered
must have work for at worked for 140 days in a
of covered employees employees
least 160 days in a year calendar year as a condition
for availment for availment.
P5,000.00 assistance for death
of immediate member of
Provided, further that in the
covered employee's family
event a rotation worker fails
to complete 140 days work in
xxx xxx xxx
a calendar year, he shall still
be entitled to vacation and 12.Emergency
sick leave with pay, as follows: loan
139 - 120 days worked: 90% a) amount of P700.00 but 30 days salary payable
119 - 110 days worked: 50% damage through
entitlement to dwelling by fire payroll deduction in twelve
shall
ii) For Gang bosses:

Page 25 of 161
Labor Law Review – Part 1
be included monthly installments provided that the gang
boss must have
b) cash bond None The company shall put up worked for at least 115
a cash days in a
for loss, damage bond of not less than calendar year
P40,000.00
or accident for winchmen, crane and
forklift xxx xxx xxx
operators.
8. Death aid P3,000.00 to the heirs of each covered employee

xxx xxx xxx


xxx xxx xxx

12. Emergency loan 30 days pay, payable through payroll


Balancing the right of the Company to remain viable and to just
deductions of 1/12 of monthly salary
returns to its investments with right of the Union members to just
rewards for their labors, we find the following award to be fair and
reasonable: WHEREFORE, the Pier 8 Arrastre and Stevedoring Services and
the General Maritime Services Union are hereby ordered to
execute new collective bargaining agreement the incorporating the
xxx xxx xxx
dispositions herein contained. These shall be in addition to all
other existing terms, conditions and benefits of employment,
6.Vacation and Sick except those specifically deleted herein, which have previously
Leave governed the relations of the parties. All other disputed items not
a) Non-rotation workers 17 days vacation/17 days specifically touched upon herein are deemed denied, without
sick leave prejudice to such other agreements as the parties may have
for those with at least 1 reached in the meantime. The collective bargaining agreement so
year of service executed shall be effective from 22 September 1992 and up to five
years thereafter, subject to renegotiation on the third year of its
effectivity pursuant to Article 253-A of the Labor Code.1
b) Rotation workers other 17 days vacation/17 days
sick leave, Petitioner sought partial reconsideration of the Order. On June 8, 1993, public
than gang boss provided that the covered respondent affirmed her findings, except for the date of effectivity of the Collective
worker Bargaining Agreement which was changed to September 30, 1992. This is the
must have worked for at date when she assumed jurisdiction over the deadlock.
least 155 days
in a calendar year Petitioner now assails the Order as follows:

I
c) Gang bosses 17 days vacation/17 days
sick leave,

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THE HONORABLE SECRETARY OF LABOR COMMITTED The applicable law governing the proper composition of bargaining unit is Article
GRAVE ABUSE OF DISCRETION IN NOT EXCLUDING 245 of the labor Code, as amended, which provides as follows:
CERTAIN POSITIONS FROM THE BARGAINING AGREEMENT
UNIT Art. 245. Ineligibility of managerial employees to join any labor
organization; employees to join any labor organization; right of
II supervisory employees. — Managerial employees are not eligible
to join, assist or form any labor organization. Supervisory
THE HONORABLE SECRETARY OF LABOR COMMITTED employees shall not be eligible for membership in a labor
GRAVE ABUSE OF DISCRETION IN MAKING THE CBA organization of the rank-and-file employees but may join, assist or
EFFECTIVE ON SEPTEMBER 30, 1992 WHEN SHE ASSUMED form separate labor organizations of their own.
JURISDICTION OVER THE LABOR DISPUTE AND NOT MARCH
4, 1993 WHEN SHE RENDERED JUDGMENT OVER THE Article 212(m) of the same Code, as well as Book V, Rule 1, Section 1(o) of the
DISPUTE Omnibus Rules Implementing the Labor Code, as amended by the Rules and
Regulations Implementing R.A.. 6715, differentiate managerial, supervisory, and
III rank-and-file employees, thus:

THE HONORABLE SECRETARY OF LABOR COMMITTED "Managerial Employee" is one who is vested with powers or
GRAVE ABUSE OF DISCRETION IN REDUCING THE NUMBER prerogatives to lay down and execute management policies and/or
OF DAYS AN EMPLOYEE SHOULD ACTUALLY WORK TO BE to hire, transfer, suspend, layoff recall, discharge, assign or
ENTITLED TO VACATION AND SICK LEAVE BENEFITS discipline employees. Supervisory employees are those who, in
the interest of the employer, effectively recommend such
managerial actions if the exercise of such authority is not merely
IV
routinary or clerical in nature but requires the use of independent
judgment. All employees not falling within any of the above
THE HONORABLE SECRETARY OF LABOR COMMITTED definitions are considered rank-and-file employees for purposes of
GRAVE ABUSE OF DISCRETION IN INCREASING WITHOUT the Book.
FACTUAL BASIS THE DEATH AID AND EMERGENCY LOAN 2
This Court has ruled on numerous occasions that the test of supervisory or
The petition is partially meritorious. managerial status is whether an employee possesses authority to act in the
interest of his employer which authority is not merely routinary or clerical in nature
Firstly, petitioner questions public respondent for not excluding four (4) foremen, a but requires use of independent judgment. 3 What governs the determination of the
legal secretary, a timekeeper and an assistant timekeeper from the bargaining unit nature of employment is not the employee's title, but his job description. If the
composed of rank-and-file employees represented by private respondent. nature of the employee's job does not fall under the definition of "managerial" or
Petitioner argues that: (1) the failure of private respondent to object when the "supervisory" in the Labor Code, he is eligible to be a member of the rank-and-file
foremen and legal secretary were prohibited from voting in the certification election bargaining unit. 4
constitutes an admission that such employees holdsupervisory/confidential
positions; and (2) the primary duty and responsibility of the timekeeper and Foremen are chief and often especially-trained workmen who work with and
assistant timekeeper is "to enforce company rules and regulations by reporting to commonly are in charge of a group of employees in an industrial plant or in
petitioner . . . those workers who committed infractions, such as those caught construction work. 5 They are the persons designated by the employer-
abandoning their posts." and hence, they should not be considered as rank-and- management to direct the work of employees and to superintend and oversee
file employees. them. 6 They are representatives of the employer-management with authority over
particular groups of workers, processes, operations, or sections of a plant or an

Page 27 of 161
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entire organization. In the modern industrial plant, they are at once a link in the spies of either party to a collective bargaining
chain of command and the bridge between the management and labor. 7 In the agreement. . . .
performance their work, foremen definitely use their independent judgment and are
empowered to make recommendations for managerial action with respect to those We thus hold that public respondent acted with grave abuse of discretion in not
employees under their control. Foremen fall squarely under the category excluding the four foremen and legal secretary from the bargaining unit composed
of supervisory employees, and cannot be part of rank-and-file unions. of rank-and-file employees.

Upon the other hand, legal secretaries are neither managers nor supervisors. Their As for the timekeeper and assistant timekeeper it is clear from petitioner's own
work is basically routinary and clerical. However, they should be differentiated from pleadings that they are, neither managerial nor supervisory employees. They are
rank-and-file employees because they, are tasked with, among others, the typing merely tasked to report those who commit infractions against company rules and
of legal documents, memoranda and correspondence, the keeping of records and regulations. This reportorial function is routinary and clerical. They do not
files, the giving of and receiving notices and such other duties as required by the determine the fate of those who violate company policy rules and regulations
legal personnel of the corporation. 8 Legal secretaries therefore fall under the function. It follows that they cannot be excluded from the subject bargaining unit.
category of confidential employees. Thus, to them applies our holding in the case
of Philips Industrial Development, Inv., v. NLRC, 210 SCRA 339 (1992), that:
The next issue is the date when the new CBA of the parties should be given effect.
Public respondent fixed the effectivity date on September 30, 1992. when she
. . . By the very functions, they assist confidential capacity to, or assumed jurisdiction over the dispute. Petitioner maintains it should be March 4.
have access to confidential. matters of, persons to, exercise 1993, when public respondent rendered judgment over the dispute.
managerial functions in the field of labor relations. As such, the
rationale behind the ineligibility of managerial employees to form,
The applicable laws are Articles 253 and 253- A of the Labor Code, thus:
assist or join a labor union equally applies to them.
Art. 253. Duty to bargain collectively when there exists a collective
In Bulletin Publishing Co., Inc., vs. Hon. Augusto Sanchez, this bargaining agreement. — When there is a collective bargaining
Court elaborated on this rationale, thus: agreement, the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its
. . . The rationale, for this inhibition has been lifetime. However, either party can serve a written notice to
stated to be, because if these managerial terminate or modify the agreement at least sixty (60) days prior to
employees would belong to or be affiliated with its expiration date. It shall be the duty of both parties to keep
Union the latter might not, be assured of their the status quo and to continue in full force and effect the terms
loyalty to the Union in view of evident conflict of and conditions of the existing agreement during the 60-day period
interests. The Union can also become company- and/or until a new agreement is reached by the parties.
dominated with the presence of managerial
employees in Union membership. and;

In Golden Farms, Inc., vs. Ferrer-Calleja, 9 this court explicitly


Art. 253-A. Terms of a collective bargaining agreement. — Any
made this rationale applicable to confidential employees:
Collective Bargaining Agreement that the parties may enter into
shall, insofar as the representation aspect is concerned, be for a
This rationale holds true also for confidential term of five (5) years. No petition questioning the majority status of
employees . . ., who having access to confidential the incumbent bargaining agent shall be entertained and no
information, may become the source of undue certification election shall be conducted by the Department of
advantage. Said employee(s) may act as a spy or Labor and Employment outside the sixty-day period immediately
before the date of expiry of such five year term of the Collective

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Labor Law Review – Part 1
Bargaining Agreement. All other provisions of the Collective Finally, we find no need to discuss at length the merits of the third and fourth
Bargaining Agreement shall be renegotiated not later than three assignments of error. The questioned Order relevantly states:
(3) years after its execution. Any agreement on such other
provisions of the Collective Bargaining Agreement entered into In the resolution of the economic issues, the Company urges us to
within six (6) months from the date of expiry of the term of such consider among others, present costs of living, its financial
other provisions as fixed in such Collective Bargaining Agreement, capacity, the present wages being paid by the other cargo
shall retroact to the day immediately following such date. If any handlers at the North Harbor, and the fact that the present
such agreement is entered into beyond six months, the parties average wage of its workers is P127.75 a day, which is higher
shall agree on the duration of collective bargaining agreement, the than the statutory minimum wage of P118.00 a day. The
parties may exercise their rights under this Code. Company's evidence, consisting of its financial statements for the
past three years, shows that its net income was P743,423.45 for
In Union of Filipino Employees v. NLRC, 192 SCRA 414 (1990), this court 1989, P2,108,569.03 for 1990, and P1,479,671.84 for 1991, or an
interpreted the above law as follows: average of P1,443,885.10 over the three-year period. It argues
that for just the first year of effectivity of the CBA, the Company's
In light of the foregoing, this Court upholds the pronouncement of proposals on wages, effect thereof on overtime, 13th month pay,
the NLRC holding the CBA to be signed by the parties effective and vacation and sick leave commutation, will cost about
upon the promulgation of the assailed resolution. It is clear and P520,723,44, or 35.19% of its net income for 1991. The Company
explicit from Article 253-A that any agreement on such other likewise urges us to consider the multiplier effect of its proposals
provisions of the CBA shall be given retroactive effect only when it on the second and third years of the CBA. As additional argument,
is entered into within six (6) months from its expiry date. If the the Company manifests that a portion of its pier will undergo a six-
agreement was entered into outside the six (6) month period, then month to one-year renovation starting January 1993.
the parties shall agree on the duration of the retroactivity thereof.
On the other hand, the Union's main line of argument — that is,
The assailed resolution which incorporated the CBA to be signed aside from being within the financial capacity of the Company to
by the parties was promulgated June 5, 1989, the expiry date of grant, its demands are fair and reasonable — is not supported by
the past CBA. Based on the provision of Section 253-A, its evidence controverting the Company's own presentation of its
retroactivity should be agreed upon. by the parties. But since no financial capacity. The Union in fact uses statements of the
agreement to that effect was made, public respondent did not Company for 1989-1991, although it interprets these data as
abuse its discretion in giving the said CBA a prospective effect. sufficient justification for its own proposals. It also draws our
The action of the public respondent is within the ambit of its attention to the bargaining history of the parties, particularly the
authority vested by existing law. 1988 negotiations during which the company was able to grant
wage increases despite operational losses.
In the case of Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA
179 (1991), this Court reiterated the rule that although a CBA has expired, it Balancing the right of the Company to remain viable and to just
continues to have legal effects as between the parties until a new CBA has been returns to its investments with right of the Union members to just
entered into. It is the duty of both parties to the to keep the status quo, and to rewards for their labors, we find the following award to be fair and
continue in full force and effect the terms and conditions of the existing agreement reasonable . . . . 11
during the 60-day freedom period and/or until a new agreement is reached by the
parties. 10 Applied to the case at bench, the legal effects of the immediate past It is evident that the above portion of the impugned Order is based on well-studied
CBA between petitioner and private respondent terminated, and the effectivity of evidence. The conclusions reached by public respondent in the discharge of her
the new CBA began, only on March 4, 1993 when public respondent resolved their statutory duty as compulsory arbitrator, demand the high respect of this Court. The
dispute. study and settlement of these disputes fall within public respondent's distinct

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administrative expertise. She is especially trained for this delicate task, and she On September 7, 1995, MEWA informed MERALCO of its intention to re-negotiate
has within her cognizance such data and information as will assist her in striking the terms and conditions of their existing 1992-1997 Collective Bargaining
the equitable balance between the needs of management, labor and the public. Agreement (CBA) covering the remaining period of two years starting from
Unless there is clear showing of grave abuse of discretion, this Court cannot and December 1, 1995 to November 30, 1997. 1 MERALCO signified its willingness to
will not interfere with the labor expertise of public respondent Secretary of Labor. re-negotiate through its letter dated October 17, 19952 and formed a CBA
negotiating panel for the purpose. On November 10, 1995, MEWA submitted its
IN VIEW WHEREOF, public respondents Order, dated March 4, 1993, and proposal3 to MERALCO, which, in turn, presented a counter-proposal. Thereafter,
Resolution, dated June 8, 1993, are hereby MODIFIED to exclude foremen and collective bargaining negotiations proceeded. However, despite the series of
legal secretaries from the rank-and-file bargaining unit represented by private meetings between the negotiating panels of MERALCO and MEWA, the parties
respondent union, and to fix the date of effectivity of the five-year collective failed to arrive at "terms and conditions acceptable to both of them."
bargaining agreement between petitioner corporation and private respondent union
on March 4, 1993. No costs. On April 23, 1996, MEWA filed a Notice of Strike with the National Capital Region
Branch of the National Conciliation and Mediation Board (NCMB) of the
SO ORDERED. Department of Labor and Employment (DOLE) which was docketed as NCMB-
NCR-NS-04-152-96, on the grounds of bargaining deadlock and unfair labor
practices. The NCMB then conducted a series of conciliation meetings but the
parties failed to reach an amicable settlement. Faced with the imminence of a
strike, MERALCO on May 2, 1996, filed an Urgent Petition4 with the Department of
G.R. No. 127598 January 27, 1999 Labor and Employment which was docketed as OS-AJ No. 0503[1]96 praying that
the Secretary assume jurisdiction over the labor dispute and to enjoin the striking
MANILA ELECTRIC COMPANY, petitioner, employees to go back to work.
vs.
THE HONORABLE SECRETARY OF LABOR LEONARDO QUISUMBING AND The Labor Secretary granted the petition through its Order5 of May 8, 1996, the
MERALCO EMPLOYEES AND WORKERS ASSOCIATION dispositive portion of which reads:
(MEWA), respondents.
WHEREFORE, premises considered, this Office now assumes
jurisdiction over the labor dispute obtaining between the parties
pursuant to Article 263(g) of the Labor Code. Accordingly, the
MARTINEZ, J.: parties are here enjoined from committing any act that may
exacerbate the situation. To speed up the resolution of the
In this petition for certiorari, the Manila Electric Company (MERALCO) seeks to dispute, the parties are also directed to submit their respective
annul the orders of the Secretary of Labor dated August 19, 1996 and December Position Papers within ten (10) days from receipt.
28, 1996, wherein the Secretary required MERALCO and its rank and file union —
the Meralco Workers Association (MEWA) — to execute a collective bargaining Undersecretary Jose M. Espanol, Jr. is deputized to conduct
agreement (CBA) for the remainder of the parties' 1992-1997 CBA cycle, and to conciliation conferences between the parties to bridge their
incorporate in this new CBA the Secretary's dispositions on the disputed economic differences and eventually hammer out a solution that is mutually
and non-economic issues. acceptable. He shall be assisted by the Legal Service.

MEWA is the duly recognized labor organization of the rank-and-file employees of SO ORDERED.
MERALCO.

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Thereafter, the parties submitted their respective memoranda and on August 19, Vacation Leave — MEWA's demand for upgrading denied & the
1996, the Secretary resolved the labor dispute through an Order, 6 containing the company's present policy is maintained which must be
following awards: incorporated into the new CBA but scheduled vacation leave may
be rounded off to one full day at a time in case of a benefit
ECONOMIC DEMANDS involving a fraction of a day;

Wage increase — P2,300.00 for the first year Union Leave — of MEWA's officers, directors or
covering the period from December 1, 1995 to stewards assigned to perform union duties or
November 30, 1996 legitimate union activity is increased from 30 to 40
Mondays per month.
— P2,200.00 for
the second year Maternity, Paternity and Funeral leaves — the existing policy is to
covering the be maintained and must be incorporated in the new CBA unless a
period December new law granting paternity leave benefit is enacted which is
1, 1996 to superior to what the company has already granted.
November 30,
1997. Birthday Leave — union's demand is granted. If birthday falls on
the employee's rest day or on a non-working holiday, the worker
Red Circle Rate (RCR) Allowance — all RCR allowances shall be entitled to go on leave with pay on the next working day.
(promotional increases that go beyond the maximum range of a
job classification salary) shall be integrated into the basic salary of Group Hospitalization & Surgical Insurance Plan (GHSIP) and
employees effective December 1, 1995. Health Maintenance Plan (HMP) — present policy is maintained
insofar as the cost sharing is concerned — 70% for the Company
Longevity Allowance — the integration of the longevity allowance and 30% for MEWA.
into the basic wage is denied; the present policy is maintained.
Health Maintenance Plan (HMP) for dependents — subsidized
Longevity Increase — the present longevity bonus is maintained dependents increased from three to five dependents.
but the bonus shall be incorporated into the new CBA.
Longevity Bonus — is increased from P140.00 to P200.00 for
Sick Leave — MEWA's demand for upgrading is denied; the even year of service to be received by the employee after serving
company's present policy is maintained. However, those who have the Company for 5 years.
not used the sick leave benefit during a particular year shall be
entitled to a one-day sick leave incentive. Christmas Bonus and Special Christmas Grant — MEWA's
demand of one month salary as Christmas Bonus two month's
Sick leave reserve — the present reserve of 25 days shall be salary as Special Christmas Grant is granted and to be
reduced to 15 days; the employee has the option either to convert incorporated in the new CBA.
the excess of 10 days to cash or let it remain as long as he wants.
In case he opts to let it remain, he may later on convert it into cash Midyear Bonus — one month's pay to be included in the CBA.
at his retirement or separation.
Anniversary Bonus — union's demand is denied.

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Christmas Gift Certificate — company has the discretion as to Dental, Medical and Hospitalization Benefits — grant of all the
whether it will give it to its employees. allowable medical, surgical, dental and annual physical
examination benefits, including free medicine whenever the same
Retirement Benefits: is not available at the JFCH.

a. Full retirement-present policy is Resignation benefits — union's demand is denied.


maintained;
Night work — union demand is denied but present policy must be
b. one cavan of rice per month is incorporated in CBA.
granted to retirees;
Shortswing — work in another shift within the same day shall be
c. special retirement leave and considered as the employee's work for the following day and the
allowance-present policy is employee shall be given additional four (4) hours straight time and
maintained; the applicable excess time premium if he works beyond 8 hours in
the other shift.
d. HMP coverage for retirees —
HMP coverage is granted to High Voltage allowance — is increased from P45.00 to P55.00 to
retirees who have not reached be given to any employee authorized by the Safety Division to
the age of 70, with MERALCO perform work on or near energized bare lines & bus including
subsidizing 100% of the monthly stockman drivers & crane operators and other crew members on
premium; those over 70 are ground.
entitled to not more than 30 days
of hospitalization at the J.F. High Pole Allowance — is increased from P30.00 to P40.00 to be
Cotton Hospital with the company given to those authorized to climb poles up to at least 60 ft. from
shouldering the entire cost. the ground. Members of the team including stockman drivers,
crane operators and other crew members on the ground, are
e. HMP coverage for retiree's entitled to this benefit.
dependents is denied.
Towing Allowance — where stockmen drive tow trailers with long
f. Monthly pension of P3,000.00 poles and equipment on board, they shall be entitled to a towing
for each retiree is denied. allowance of P20.00 whether they perform the job on regular shift
or on overtime.
g. Death benefit for retiree's
beneficiaries is denied. Employee's Cooperative — a loan of P3 M seed money is granted
to the proposed establishment of a cooperative, payable in twenty
Optional retirement — union's demand is denied; (20) years starting one year from the start of operations.
present policy is maintained; employee is eligible
for optional retirement if he has rendered at least Holdup Allowance — the union demand is denied; the present
18 years of service. policy shall be maintained.

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Meal and Lodging Allowance — shall be increased effective to lunch and transportation
December 1, 1995 as follows: allowance.

Breakfast — from P25.00 to P35.00 c. The collector shall be entitled


to an incentive pay of P25.00 for
Lunch — from P35.00 to P45.00 every delinquent account
disconnected.
Dinner — from P35.00 to P45.00
d. When a collector voluntarily
performs other work on regular
Lodging — from P135.00 to P180.00 a night in all
shift or overtime, he shall be
MERALCO franchise areas.
entitled to remuneration based on
his computed hourly
Payroll Treatment for Accident while on Duty — an employee shall compensation and the
be paid his salary and allowance if any is due plus average excess reimbursement of actually
time for the past 12 months from the time of the accident up to the incurred transportation expenses.
time of full recovery and placing of the employee back to normal
duty or an allowance of P2,000.00, whichever is higher.
e. Collectors shall be provided
with bobcat belt bags every year.
Housing and Equity Assistance Loan — is increased to
P60,000.00; those who have already availed of the privilege shall
f. Collector's cash bond shall be
be allowed to get the difference.
deposited under his capital
contribution to MESALA.
Benefits for Collectors:
g. Collectors quota and MAPL
a. Company shall reduce shall be proportionately reduced
proportionately the quota and during typhoons, floods,
monthly average product level earthquakes and other similar
(MAPL) in terms of equivalent bill force majeure events when it is
assignment when an employee is impossible for a collector to
on sick leave and paid vacation perform collection work.
leave.
Political Demands:
b. When required to work on
Saturdays, Sundays and
a. Scope of the collective
holidays, an employee shall
receive P60.00 lunch allowance bargaining unit — the collective
and applicable transportation bargaining unit shall be
composed of all regular rank-and-
allowance as determined by the
file employees hired by the
Company and shall also receive
company in all its offices and
an additional compensation to
operative centers throughout its
one day fixed portion in addition
franchise area and those it may

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employ by reason of expansion, regular
reorganization or as a result of employees of the
operational exigencies. rights, duties and
benefits of Union
b. Union recognition and security membership.

iii. The right of all
i. The union shall rank-and-file
be recognized by employees to join
the Company as the union shall be
sole and recognized in
exclusive accordance with
bargaining the maintenance
representative of of membership
the rank-and-file principle as a
employees form of union
included in the security.
bargaining unit.
The Company c. Transfer of assignment and job
shall agree to security —
meet only with
Union officers i. No transfer of
and its authorized an employee
representatives from one position
on all matters to another shall
involving the be made if
Union and all motivated by
issues arising considerations of
from the sex, race, creed,
implementation political and
and interpretation religious belief,
of the new CBA. seniority or union
activity.
ii. The union shall
meet with the ii. If the transfer is
newly regularized due to the
employees for a reorganization or
period not to decentralization,
exceed four (4) the distance from
hours, on the employee's
company time, to residence shall
acquaint the new be considered

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unless the majority of the members. The
transfer is Company shall honor only those
accepted by the individual authorizations signed
employee. If the by the majority of the union
transfer is members and collectively
extremely submitted by the union to the
necessary, the Company's Salary Administration.
transfer shall be
made within the e. Payroll Reinstatement — shall
offices in the be in accordance with Article 223,
same district. p. 3 of the Labor Code.

iii. Personnel f. Union Representation in


hired through Committees — the union is
agencies or allowed to participate in policy
contractors to formulation and in the decision-
perform the work making process on matters
done by covered affecting their rights and welfare,
employees shall particularly in the Uniform
not exceed one Committee, the Safety Committee
month. If and other committees that may
extension is be formed in the future.
necessary the
union shall be
Signing Bonus — P4,000.00 per member of the bargaining unit for
informed. But the the conclusion of the CBA.
Company shall
not permanently
contract out Existing benefits already granted by the Company but which are
regular or not expressly or impliedly repealed in the new agreement shall
permanent remain subsisting and shall be included in the new agreement to
positions that are be signed by the parties effective December 1, 1995.
necessary in the
normal operation On August 30, 1996, MERALCO filed a motion for reconsideration7 alleging that
of the Company. the Secretary of Labor committed grave abuse of discretion amounting to lack or
excess of jurisdiction:
d. Check off Union Dues —
where the union increases its 1. in awarding to MEWA a package that would
dues as approved by the Board of cost at least P1.142 billion, a package that is
Directors, the Company shall grossly excessive and exorbitant, would not be
check off such increase from the affordable to MERALCO and would imperil its
salaries of union members after viability as a public utility affected with national
the union submits check off interest.
authorizations signed by the

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2. in ordering the grant of a P4,500.00 wage First year — P2,200.00 per
increase, as well as a new and improved fringe month;
benefits, under the remaining two (2) years of the
CBA for the-rank-and-file employees. Second year — P2,200.00 per
month.
3. in ordering the "incorporation into the CBA of all
existing employee benefits, on the one hand, and 3) Integration of Red Circle Rate (RCR) and Longevity Allowance
those that MERALCO has unilaterally granted to into Basic Salary — the RCR allowance shall be integrated into
its employees by virtue of voluntary company the basic salary of employees as of August 19, 1996 (the date of
policy or practice, on the other hand." the disputed Order).

4. in granting certain "political demands" 4) Longevity Bonus — P170 per year of service starting from 10
presented by the union. years of continuous service.

5. in ordering the CBA to be "effective December 5) Vacation Leave — The status quo shall be maintained as to the
1995" instead of August 19, 1996 when he number of vacation leave but employees' scheduled vacation may
resolved the dispute. be taken one day at a time in the manner that this has been
provided in the supervisory CBA.
MERALCO filed a supplement to the motion for reconsideration on September 18,
1995, alleging that the Secretary of Labor did not properly appreciate the effect of 6) Sick Leave Reserve — is reduced to 15 days, with any excess
the awarded wages and benefits on MERALCO's financial viability. payable at the end of the year. The employee has the option to
avail of this cash conversion or to accumulate his sick leave
MEWA likewise filed a motion asking the Secretary of Labor to reconsider its Order credits up to 25 days for conversion to cash at retirement or
on the wage increase, leaves, decentralized filing of paternity and maternity separation from the service.
leaves, bonuses, retirement benefits, optional retirement, medical, dental and
hospitalization benefits, short swing and payroll treatment. On its political 7) Birthday Leave — the grant of a day off when an employee's
demands, MEWA asked the Secretary to rule on its proposal to institute a Code of birthday falls on a non-working day is deleted.
Discipline for its members and the union's representation in the administration of
the Pension Fund.
8) Retirement Benefits for Retirees — The benefits granted shall
be effective on August 19, 1996, the date of the disputed order up
On December 28, 1996, the Secretary issued an Order 8 resolving the parties' to November 30, 1997, which is the date the CBA expires and
separate motions, the modifications of the August 19, 1996 Order being shall apply to those who are members of the bargaining unit at the
highlighted hereunder: time the award is made.

1) Effectivity of Agreement — December 1, 1995 to November 30, One sack of rice per quarter of the year shall be
1997. given to those retiring between August 19, 1996
and November 30, 1997.
Economic Demands
On HMP Coverage for Retirees — The parties
2) Wage Increase: "maintain the status quo, that is, with the

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Company complying with the present from one position to another, without the employee's written
arrangement and the obligations to retirees as is." consent, shall be made if motivated by considerations of sea,
race, creed, political and religious belief, age or union activity.
9) Medical, Dental and Hospitalization Benefits — The cost of
medicine unavailable at the J.F. Cotton Hospital shall be in 17) Contracting Out — The Company has the prerogative to
accordance with MERALCO's Memorandum dated September 14, contract out services provided that this move is based on valid
1976. business reasons in accordance with law, is made in good faith, is
reasonably exercised and, provided further that if the contracting
10) GHSIP and HMP for Dependents — The number of out involves more than six months, the Union must be consulted
dependents to be subsidized shall be reduced from 5 to 4 before its implementation.
provided that their premiums are proportionately increased.
18) Check off of union dues
11) Employees' Cooperative — The original award of P3 million
pesos as seed money for the proposed Cooperative is reduced to In any increase of union dues or contributions for
P1.5 million pesos. mandatory activities, the union must submit to the
Company a copy of its board resolution increasing
12) Shortswing — the original award is deleted. the union dues or authorizing such contributions;

13) Payroll Treatment for Accident on Duty — Company ordered If a board resolution is submitted, the Company
to continue its present practice on payroll treatment for accident shall deduct union dues from all union members
on duty without need to pay the excess time the Union demanded. after a majority of the union members have
submitted their individual written authorizations.
Political Demands: Only those check-off authorization submitted by
the union shall be honored by the Company.
14) Scope of the collective bargaining unit — The bargaining unit
With respect to special assessments, attorney's
shall be composed of all rank and file employees hired by the
Company in accordance with the original Order. fees, negotiation fees or any other extraordinary
fees individual authorization shall be necessary
before the company may so deduct the same.
15) Union recognition and security — The incorporation of a
closed shop form of union security in the CBA; the Company is
prohibited from entertaining individuals or groups of individuals 19) Union Representation in Committees — The union is granted
only on matters that are exclusively within the domain of the union; representation in the Safety Committee, the Uniform Committee
and other committees of a similar nature and purpose involving
the Company shall furnish the Union with a complete list of newly
personnel welfare, rights and benefits as well as duties.
regularized employees within a week from regularization so that
the Union can meet these employees on the Union's and the
employee's own time. Dissatisfied, petitioner filed this petition contending that the Secretary of Labor
gravely abused his discretion:
16) Transfer of assignment and job security — Transfer is a
prerogative of the Company but the transfer must be for a valid 1) . . . in awarding wage increases of P2,200.00
business reason, made in good faith and must be reasonably for 1996 and P2,200 for 1997.
exercised. The CBA shall provide that "No transfer of an employee

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2) . . . in awarding the following economic 5) . . . in ordering that Meralco should consult the
benefits: union before any contracting out for more than six
months;
a. Two months Christmas bonus;
6) . . . in decreeing that the union be allowed to
b. Rice Subsidy and retirement have representation in policy and decision making
benefits for retirees; into matters affecting "personnel welfare, rights
and benefits as well as duties;"
c. Loan for the employees'
cooperative; 7) . . . in ruling for the inclusion of all terms and
conditions of employment in the collective
d. Social benefits such as GHSIP bargaining agreement;
and HMP for dependents,
employees' cooperative and 8) . . . in exercising discretion in determining the
housing equity assistance loan; retroactivity of the CBA;

e. Signing bonus; Both MEWA and the Solicitor General, on behalf of the Secretary of Labor, filed
their comments to the petition. While the case was also set for oral argument on
Feb. 10, 1997, this hearing was cancelled due to MERALCO not having received
f. Integration of the Red Circle
the comment of the opposing parties. The parties were instead required to submit
Rate Allowance.
written memoranda, which they did. Subsequently, both petitioner and private
respondent MEWA also filed replies to the opposing parties' Memoranda, all of
g. Sick leave reserve of 15 days which We took into account in the resolution of this case.

h. The 40-day union leave; The union disputes the allegation of MERALCO that the Secretary abused his
discretion in issuing the assailed orders arguing that he acted within the scope of
i. High pole/high voltage and the powers granted him by law and by the Constitution. The union contends that
towing allowance; and any judicial review is limited to an examination of the Secretary's decision-
making/discretion — exercising process to determine if this process was attended
j. Benefits for collectors by some capricious or whimsical act that constitutes "grave abuse"; in the absence
of such abuse, his findings — considering that he has both jurisdiction and
3) . . . in expanding the scope of the bargaining expertise to make them — are valid.
unit to all regular rank and file employees hired by
the company in all its offices and operating The union's position is anchored on two premises:
centers and those it may employ by reason of
expansion, reorganization or as a result of First, no reviewable abuse of discretion could have attended the Secretary's
operational exigencies; arbitral award because the Secretary complied with constitutional norms in
rendering the disputed award. The union posits that the yardstick for comparison
4) . . . in ordering for a closed shop when his and for the determination of the validity of the Secretary's actions should be the
original order for a maintenance of membership specific standards laid down by the Constitution itself. To the union, these
arrangement was not questioned by the parties; standards include the State policy on the promotion of workers' welfare,9 the
principle of distributive justice, 10 the right of the State to regulate the use of

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property, 11 the obligation of the State to protect workers, both organized and of discretion is alleged to exist in the award, i.e., in the appreciation of and the
unorganized, and insure their enjoyment of "humane conditions of work" and a conclusions the Secretary drew from the evidence presented.
"living wage," and the right of labor to a just share in the fruits of production. 12
The natural and ever present limitation on the Secretary's acts is, of course, the
Second, no reversible abuse of discretion attended the Secretary's decision Constitution. And we recognize that indeed the constitutional provisions the union
because the Secretary took all the relevant evidence into account, judiciously cited are State policies on labor and social justice that can serve as standards in
weighed them, and rendered a decision based on the facts and law. Also, the assessing the validity of a Secretary of Labor's actions. However, we note that
arbitral award should not be reversed given the Secretary's expertise in his field these provisions do not provide clear, precise and objective standards of conduct
and the general rule that findings of fact based on such expertise is generally that lend themselves to easy application. We likewise recognize that the
binding on this Court. Constitution is not a lopsided document that only recognizes the interests of the
working man; it too protects the interests of the property owner and employer as
To put matters in proper perspective, we go back to basic principles. The well. 14
Secretary of Labor's statutory power under Art. 263 (g) of the Labor Code to
assume jurisdiction over a labor dispute in an industry indispensable to the For these reasons — and more importantly because a ruling on the breadth and
national interest, and, to render an award on compulsory arbitration, does not scope of the suggested constitutional yardsticks is not absolutely necessary in the
exempt the exercise of this power from the judicial review that Sec. 1, Art. 8 of the disposition of this case — we shall not use these yardsticks in accordance with the
Constitution mandates. This constitutional provision states: time-honored practice of avoiding constitutional interpretations when a decision
can be reached using non-constitutional standards. We have repeatedly held that
Judicial power includes the duty of the courts of one of the essential requisites for a successful judicial inquiry into constitutional
justice to settle actual controversies involving questions is that the resolution of the constitutional question must be necessary in
rights which are legally demandable and deciding the case. 15
enforceable, and to determine whether or not
there has been a grave abuse of discretion In this case we believe that the more appropriate and available standard — and
amounting to lack or excess of jurisdiction on the one does not require a constitutional interpretation — is simply the standard of
part of any branch or instrumentality of the reasonableness. In layman's terms, reasonableness implies the absence of
government. arbitrariness; 16 in legal parlance, this translates into the exercise of proper
discretion and to the observance of due process. Thus, the question we have to
Under this constitutional mandate, every legal power of the Secretary of Labor answer in deciding this case is whether the Secretary's actions have been
under the Labor Code, or, for that matter, any act of the Executive, that is attended reasonable in light of the parties positions and the evidence they presented.
by grave abuse of discretion is subject to review by this Court in an appropriate
proceeding. To be sure, the existence of an executive power alone — whether MEWA's second premise — i.e., that the Secretary duly considered the evidence
granted by statute or by the Constitution — cannot exempt the executive action presented — is the main issue that we shall discuss at length below. Additionally,
from judicial oversight, interference or reversal when grave abuse of discretion is, MEWA implied that we should take great care before reading an abuse of
or is alleged to be, present. This is particularly true when constitutional norms are discretion on the part of the Secretary because of his expertise on labor issues and
cited as the applicable yardsticks since this Court is the final interpreter of the because his findings of fact deserve the highest respect from this Court.
meaning and intent of the Constitution. 13
This Court has recognized the Secretary of Labor's distinct expertise in the study
The extent of judicial review over the Secretary of Labor's arbitral award is not and settlement of labor disputes falling under his power of compulsory
limited to a determination of grave abuse in the manner of the secretary's exercise arbitration. 17 It is also well-settled that factual findings of labor administrative
of his statutory powers. This Court is entitled to, and must — in the exercise of its officials, if supported by substantial evidence, are entitled not only to great respect
judicial power — review the substance of the Secretary's award when grave abuse but even to finality. 18 We, therefore, have no difficulty in accepting the
union's caveat on how to handle a Secretary of Labor's arbitral award.

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But at the same time, we also recognize the possibility that abuse of discretion income for 1996 5,795,000,000
may attend the exercise of the Secretary's arbitral functions; his findings in an
Principals and interests 1,426,571,703
arbitration case are usually based on position papers and their supporting
documents (as they are in the present case), and not on the thorough examination Dividends at 1995 rate 1,636,949,000
of the parties' contending claims that may be present in a court trial and in the Net Amount left with the Company 2,729,479,297
face-to-face adversarial process that better insures the proper presentation and Add: Tax credit equivalent to 35% of labor cost 231,804,940
appreciation of evidence. 19 There may also be grave abuse of discretion where
the board, tribunal or officer exercising judicial function fails to consider evidence Company's net operating income 2,961,284,237
adduced by the present. 20 Given the parties' positions on the justiciability of the
issues before us, the question we have to answer is one that goes into the For 1997, the projected income is P7,613,612 which can easily
substance of the Secretary's disputed orders: Did the Secretary properly consider absorb the incremental increase of P2,200 per month or a total of
and appreciate the evidence presented before him? P4,500 during the last year of the CBA period.

We find, based on our consideration of the parties' positions and the evidence on xxx xxx xxx
record, that the Secretary of Labor disregarded and misappreciated evidence,
particularly with respect to the wage award. The Secretary of Labor apparently An overriding aim is to estimate the amount that is left with the
also acted arbitrarily and even whimsically in considering a number of legal points; Company after the awarded wages and benefits and the
even the Solicitor General himself considered that the Secretary gravely abused company's customary obligations are paid. This amount can be
his discretion on at least three major points: (a) on the signing bonus issue; (b) on the source of an item not found in the above computations but
the inclusion of confidential employees in the rank and file bargaining unit, and (c) which the Company must provide for, that is — the amount the
in mandating a union security "closed-shop" regime in the bargaining unit. company can use for expansion.

We begin with a discussion on the wages issue. The focal point in the Considering the expansion plans stated in the Company's
consideration of the wage award is the projected net income for 1996 which Supplement that calls for capital expenditures of 6 billion, 6.263
became the basis for the 1996 wage award, which in turn — by extrapolation — billion and 5.802 billion for 1996, 1997 and 1998 respectively, We
became the basis for the (2nd Year) 1997 award. MERALCO projected that the net conclude that our original award of P2,300 per month for the first
operating income for 1996 was 14.7% above the 1999 level or a total net operating year and P2,200 for the second year will still leave much by way of
income of 4.171 Billion, while the union placed the 1996 net operating income at retained income that can be used for expansion." 22 (Emphasis
5.795 Billion. ours.)

MERALCO based its projection on the increase of the income for the first 6 months We find after considering the records that the Secretary gravely abused his
of 1996 over the same period in 1995. The union, on the other hand, projected that discretion in making this wage award because he disregarded evidence on record.
the 1996 income would increase by 29% to 35% because the "consumption of Where he considered MERALCO's evidence at all, he apparently misappreciated
electric power is at its highest during the last two quarters with the advent of the this evidence in favor of claims that do not have evidentiary support. To our mind,
Yuletide season." The union likewise relied heavily on a newspaper report citing an the MERALCO projection had every reason to be reliable because it mas based on
estimate by an all Asia capital financial analyst that the net operating income would actual and undisputed figures for the first six months of 1996. 23 On the other hand,
amount to 5.795 Billion. 21 the union projection was based on a speculation of Yuletide consumption that the
union failed to substantiate. In fact, as against the union's unsubstantiated Yuletide
Based essentially on these considerations, the Secretary made the following consumption claim, MERALCO adduced evidence in the form of historical
computations and ordered his disputed wage award: consumption data showing that a lengthy consumption does not tend to rise during
the Christmas period. 24 Additionally, the All-Asia Capital Report was nothing more
Projected net operating than a newspaper report that did not show any specific breakdown or

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computations. While the union claimed that its cited figure is based on approach" instead promotes a "play safe" attitude that leads to more deadlocks
MERALCO's 10-year income stream, 25 no data or computation of this 10-year than to successfully negotiated CBAs.
stream appear in the record.
After considering the various factors the parties cited, we believe that the interests
While the Secretary is not expected to accept the company-offered figures of both labor and management are best served by a wage increase of P1,900.00
wholesale in determining a wage award, we find it a grave abuse of discretion to per month for the first year and another P1,900.00 per month for the second year
completely disregard data that is based on actual and undisputed record of of the two-year CBA term. Our reason for this is that these increases sufficiently
financial performance in favor of the third-hand and unfounded claims the protects the interest of the worker as they are roughly 15% of the monthly average
Secretary eventually relied upon. At the very least, the Secretary should have salary of P11,600.00. 26 They likewise sufficiently consider the employer's costs
properly justified his disregard of the company figures. The Secretary should have and its overall wage structure, while at the same time, being within the range that
also reasonably insured that the figure that served as the starting point for his will not disrupt the wage trends in Philippine industries.
computation had some substantial basis.
The record shows that MERALCO, throughout its long years of existence, was
Both parties extensely discussed the factors that the decision maker should never remiss in its obligation towards its employees. In fact, as a manifestation of
consider in making a wage award. While We do not seek to enumerate in this its strong commitment to the promotion of the welfare and well-being of its
decision the factors that should affect wage determination, we must emphasize employees, it has consistently improved their compensation package. For
that a collective bargaining dispute such as this one requires due consideration instance, MERALCO has granted salary increases 27 through the collective
and proper balancing of the interests of the parties to the dispute and of those who bargaining agreement the amount of which since 1980 for both rank-and-file and
might be affected by the dispute. To our mind, the best way in approaching this supervisory employees were as follows:
task holistically is to consider the available objective facts, including, where
applicable, factors such as the bargaining history of the company, the trends and AMOUNT OF CBA INCREASES DIFFERENCE
amounts of arbitrated and agreed wage awards and the company's previous
CBAs, and industry trends in general. As a rule, affordability or capacity to pay CBA COVERAGE RANK-AND-FILE SUPERVISORY AMOUNT PERCENT
should be taken into account but cannot be the sole yardstick in determining the 1980 230 342.5 112.5 48.91%
wage award, especially in a public utility like MERALCO. In considering a public 1981 210 322.5 112.5 53.57
utility, the decision maker must always take into account the "public interest"
aspects of the case; MERALCO's income and the amount of money available for 1982 200 312.5 112.5 56.25
operating expenses — including labor costs — are subject to State regulation. We TOTAL 640 977.5 337.5 52.73
must also keep in mind that high operating costs will certainly and eventually be 1983 320 432.5 112.5 35.16
passed on to the consuming public as MERALCO has bluntly warned in its
1984 350 462.5 112.5 32.14
pleadings.
1985 370 482.5 112.5 30.41
We take note of the "middle ground" approach employed by the Secretary in this TOTAL 1,040.00 1,377.50 337.5 32.45
case which. we do not necessarily find to be the best method of resolving a wage 1986 860 972.5 112.5 13.08
dispute. Merely finding the midway point between the demands of the company
1987 640 752.5 112.5 17.58
and the union, and "splitting the difference" is a simplistic solution that fails to
recognize that the parties may already be at the limits of the wage levels they can 1988 600 712.5 112.5 18.75
afford. It may lead to the danger too that neither of the parties will engage in TOTAL 2,100.00 2,437.50 337.5 16.07
principled bargaining; the company may keep its position artificially low while the 1989 1,100.00 1,212.50 112.5 10.23
union presents an artificially high position, on the fear that a "Solomonic" solution
cannot be avoided. Thus, rather than encourage agreement, a "middle ground 1990 1,200.00 1,312.50 112.5 9.38
1991 1,300.00 1,412.50 112.5 8.65

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TOTAL 3,600.00 3,937.50 337.5 9.38 different titles and were for varying amounts.
Significantly, the Company explained the reason
1992 1,400.00 1,742.50 342.5 24.46
for the 1995 bonuses and this explanation was not
1993 1,350.00 1,682.50 332.5 24.63 substantially contradicted by the Union.
1994 1,150.00 1,442.50 292.5 25.43
TOTAL 3,900.00 4,867.50 967.5 24.81 What comes out from all these is that while the
Company has consistently give some amount by
way of bonuses since 1988, these awards were
not given uniformly as Christmas bonuses or
special Christmas grants although they may have
Based on the above-quoted table, specifically under the column "RANK-AND- been given at or about Christmas time.
FILE," it is easily discernible that the total wage increase of P3,800.00 for 1996 to
1997 which we are granting in the instant case is significantly higher than the total
xxx xxx xxx
increases given in 1992 to 1994, or a span of three (3) years, which is only
P3,900.00 a month. Thus, the Secretary's grant of P2,200.00 monthly wage
increase in the assailed order is unreasonably high a burden for MERALCO to The Company is not therefore correct in its
shoulder. position that there is no established practice of
giving Christmas bonuses that has ripened to the
status of being a term and condition of
We now go to the economic issues.
employment. Regardless of its nomenclature and
purpose, the act of giving this bonus in the spirit of
1. CHRISTMAS BONUS Christmas has ripened into a Company
practice. 28
MERALCO questions the Secretary's award of "Christmas bonuses" on the ground
that what it had given its employees were special bonuses to mark or celebrate It is MERALCO's position that the Secretary erred when he recognized that there
"special occasions," such as when the Asia Money Magazine recognized was an "established practice" of giving a two-month Christmas bonus based on the
MERALCO as the "best managed company in Asia." These grants were given on fact that bonuses were given on or about Christmas time. It points out that the
or about Christmas time, and the timing of the grant apparently led the Secretary to "established practice" attributed to MERALCO was neither for a considerable
the conclusion that what were given were Christmas bonuses given by way of a period of time nor identical in either amount or purpose. The purpose and title of
"company practice" on top of the legally required 13th month pay. the grants were never the same except for the Christmas bonuses of 1988 and
1989, and were not in the same amounts.
The Secretary in granting the two-month bonus, considered the following factual
finding, to wit: We do not agree.

We note that each of the grant mentioned in the As a rule, a bonus is not a demandable and enforceable obligation; 29 it may
commonly adopted table of grants has a special nevertheless be granted on equitable considerations 30 as when the giving of such
description. Christmas bonuses were given in bonus has been the company's long and regular practice. 31 To be considered a
1988 and 1989. However, the amounts of "regular practice," the giving of the bonus should have been done over a long
bonuses given differed. In 1988, it was P1,500. In period of time, and must be shown to have been consistent and deliberate. 32 Thus
1989, it was 1/2 month salary. The use of we have ruled in National Sugar Refineries Corporation vs. NLRC: 33
"Christmas bonus" title stopped after 1989. In
1990, what was given was a "cash gift" of 1/2
The test or rationale of this rule on long practice requires an
month's salary. The grants thereafter bore
indubitable showing that the employer agreed to continue giving

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the benefits knowing fully well that said employees are not The issue requires a finding of fact on the legal personality of the retirement fund.
covered by the law requiring payment thereof. In the absence of any evidence on record indicating the nature of the retirement
fund's legal personality, we rule that the issue should be remanded to the
In the case at bar, the record shows that MERALCO, aside from complying with Secretary for reception of evidence as whether or not the MERALCO retirement
the regular 13th month bonus, has further been giving its employees an additional fund is a separate and independent trust fund. The existence of a separate and
Christmas bonus at the tail-end of the year since 1988. While the special bonuses independent juridical entity which controls an irrevocable retirement trust fund
differed in amount and bore different titles, it can not be denied that these were means that these retirement funds are beyond the scope of collective bargaining:
given voluntarily and continuously on or about Christmas time. The considerable they are administered by an entity not a party to the collective bargaining and the
length of time MERALCO has been giving the special grants to its employees funds may not be touched without the trustee's conformity.
indicates a unilateral and voluntary act on its part, to continue giving said benefits
knowing that such act was not required by law. On the other hand, MERALCO control over these funds means that MERALCO
may be compelled in the compulsory arbitration of a CBA deadlock where it is the
Indeed, a company practice favorable to the employees has been established and employer, to improve retirement benefits since retirement is a term or condition of
the payments made by MERALCO pursuant thereto ripened into benefits enjoyed employment that is a mandatory subject of bargaining.
by the employees. Consequently, the giving of the special bonus can no longer be
withdrawn by the company as this would amount to a diminution of the employee's 3. EMPLOYEES' COOPERATIVE
existing benefits. 34
The Secretary's disputed ruling requires MERALCO to provide the employees
We can not, however, affirm the Secretary's award of a two-month special covered by the bargaining unit with a loan of 1.5 Million as seed money for the
Christmas bonus to the employees since there was no recognized company employees formation of a cooperative under the Cooperative Law, R.A. 6938. We
practice of giving a two-month special grant. The two-month special bonus was see nothing in this law — whether expressed or implied — that requires employers
given only in 1995 in recognition of the employees prompt and efficient response to provide funds, by loan or otherwise, that employees can use to form a
during the calamities. Instead, a one-month special bonus, We believe, is cooperative. The formation of a cooperative is a purely voluntary act under this
sufficient, this being merely a generous act on the part of MERALCO. law, and no party in any context or relationship is required by law to set up a
cooperative or to provide the funds therefor. In the absence of such legal
2. RICE SUBSIDY and RETIREMENT BENEFITS for RETIREES requirement, the Secretary has no basis to order the grant of a 1.5 million loan to
MERALCO employees for the formation of a cooperative. Furthermore, we do not
It appears that the Secretary of Labor originally ordered the increase of the see the formation of an employees cooperative, in the absence of an agreement
retirement pay, rice subsidy and medical benefits of MERALCO retirees. This by the collective bargaining parties that this is a bargainable term or condition of
employment, to be a term or condition of employment that can be imposed on the
ruling was reconsidered based on the position that retirees are no longer
parties on compulsory arbitration.
employees of the company and therefore are no longer bargaining members who
can benefit from a compulsory arbitration award. The Secretary, however, ruled
that all members of the bargaining unit who retire between August 19, 1996 and 4. GHSIP, HMP BENEFITS FOR DEPENDENTS and HOUSING EQUITY LOAN
November 30, 1997 (i.e., the term of the disputed CBA under the Secretary's
disputed orders) are entitled to receive an additional rice subsidy. MERALCO contends that it is not bound to bargain on these benefits because
these do not relate to "wages, hours of work and other terms and conditions of
The question squarely brought in this petition is whether the Secretary can issue employment" hence, the denial of these demands cannot result in a bargaining
an order that binds the retirement fund. The company alleges that a separate and impasse.
independent trust fund is the source of retirement benefits for MERALCO retirees,
while the union maintains that MERALCO controls these funds and may therefore The GHSIP, HMP benefits for dependents and the housing equity loan have been
be compelled to improve this benefit in an arbitral award. the subject of bargaining and arbitral awards in the past. We do not see any

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reason why MERALCO should not now bargain on these benefits. Thus, we agree any order for such payment, to our mind, constitutes grave abuse of discretion.
with the Secretary's ruling: This is more so where the signing bonus is in the not insignificant total amount of
P16 Million.
. . . Additionally and more importantly, GHSIP and
HMP, aside from being contributory plans, have 6. RED-CIRCLE-RATE ALLOWANCE
been the subject of previous rulings from this
Office as bargainable matters. At this point, we An RCR allowance is an amount, not included in the basic salary, that is granted
cannot do any less and must recognize that by the company to an employee who is promoted to a higher position grade but
GHSIP and HMP are matters where the union can whose actual basic salary at the time of the promotion already exceeds the
demand and negotiate for improvements within maximum salary for the position to which he or she is promoted. As an allowance,
the framework of the collective bargaining it applies only to specific individuals whose salary levels are unique with respect to
system. 35 their new and higher positions. It is for these reasons that MERALCO prays that it
be allowed to maintain the RCR allowance as a separate benefit and not be
Moreover, MERALCO have long been extending these benefits to the employees integrated in the basic salary.
and their dependents that they now become part of the terms and conditions of
employment. In fact, MERALCO even pledged to continue giving these benefits. The integration of the RCR allowance in the basic salary of the employees had
Hence, these benefits should be incorporated in the new CBA. consistently been raised in the past CBAs (1989 and 1992) and in those cases, the
Secretary decreed the integration of the RCR allowance in the basic salary. We do
With regard to the increase of the housing equity grant, we find P60,000.00 not see any reason why it should not be included in the present CBA. In fact, in the
reasonable considering the prevailing economic crisis. 1995 CBA between MERALCO and the supervisory union (FLAMES), the
integration of the RCR allowance was recognized. Thus, Sec. 4 of the CBA
5. SIGNING BONUS provides:

On the signing bonus issue, we agree with the positions commonly taken by All Red-Circle-date Allowance as of December 1,
MERALCO and by the Office of the Solicitor General that the signing bonus is a 1995 shall be integrated in the basic salary of the
grant motivated by the goodwill generated when a CBA is successfully negotiated covered employees who as of such date are
and signed between the employer and the union. In the present case, this goodwill receiving such allowance. Thereafter, the
does not exist. In the words of the Solicitor General: company rules on RCR allowance shall continue
to be observed/applied. 37
When negotiations for the last two years of the
1992-1997 CBA broke down and the parties For purposes of uniformity, we affirm the Secretary's order on the integration of the
sought the assistance of the NCMB, but which RCR allowance in the basic salary of the employees.
failed to reconcile their differences, and when
petitioner MERALCO bluntly invoked the 7. SICK LEAVE RESERVE OF 15 DAYS
jurisdiction of the Secretary of Labor in the
resolution of the labor dispute, whatever goodwill MERALCO assails the Secretary's reduction of the sick leave reserve benefit from
existed between petitioner MERALCO and 25 days to 15 days, contending that the sick leave reserve of 15 days has reached
respondent union disappeared. . . . . 36 the lowest safe level that should be maintained to give employees sufficient buffer
in the event they fall ill.
In contractual terms, a signing bonus is justified by and is the consideration paid
for the goodwill that existed in the negotiations that culminated in the signing of a
CBA. Without the goodwill, the payment of a signing bonus cannot be justified and

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We find no compelling reason to deviate from the Secretary's ruling that the sick the heavy risk the employees concerned are exposed to. The high-voltage
leave reserve is reduced to 15 days, with any excess convertible to cash at the allowance is granted to an employee who is authorized by the company to actually
end of the year. The employee has the option to avail of this cash conversion or to perform work on or near energized bare lines and bus, while the high-pole
accumulate his sick leave credits up to 25 days for conversion to cash at his allowance is given to those authorized to climb poles on a height of at least 60 feet
retirement or separation from the service. This arrangement is, in fact, beneficial to from the ground to work thereat. The towing allowance, on the other hand, is
MERALCO. The latter admits that "the diminution of this reserve does not seriously granted to the stockman drivers who tow trailers with long poles and equipment on
affect MERALCO because whatever is in reserve are sick leave credits that are board. Based on the nature of the job of these concerned employees, it is
payable to the employee upon separation from service. In fact, it may be to imperative to give them these additional allowances for taking additional risks.
MERALCO's financial interest to pay these leave credits now under present salary These increases are not even commensurate to the danger the employees
levels than pay them at future higher salary levels. 38 concerned are subjected to. Besides, no increase has been given by the company
since 1992. 39
8. 40-DAY UNION LEAVE
We do not, however, subscribe to the Secretary's order granting these allowances
MERALCO objects to the demanded increase in union leave because the union to the members of the team who are not exposed to the given risks. The reason is
leave granted to the union is already substantial. It argues that the union has not obvious no risk, no pay. To award them the said allowances would be manifestly
demonstrated any real need for additional union leave. unfair for the company and even to those who are exposed to the risks, as well as
to the other members of the bargaining unit who do not receive the said
allowances.
The thirty (30) days union leave granted by the Secretary, to our mind, constitute
sufficient time within which the union can carry out its union activities such as but
not limited to the election of union officers, selection or election of appropriate 10. BENEFITS FOR COLLECTORS
bargaining agents, conduct referendum on union matters and other union-related
matters in furtherance of union objectives. Furthermore, the union already enjoys a MERALCO opposes the Secretary's grant of benefits for collectors on the ground
special union leave with pay for union authorized representatives to attend work that this is grossly unreasonable both in scope and on the premise it is founded.
education seminars, meetings, conventions and conferences where union
representation is required or necessary, and Paid-Time-off for union officers, We have considered the arguments of the opposing parties regarding these
stewards and representatives for purpose of handling or processing grievances. benefits and find the Secretary's ruling on the (a) lunch allowance; (b)
disconnection fee for delinquent accounts; (c) voluntary performance of other work
9. HIGH VOLTAGE/HIGH POLE/TOWING ALLOWANCE at the instance of the Company; (d) bobcat belt bags; and (e) reduction of quota
and MAPL during typhoons and other force majeure events, reasonable
MERALCO argues that there is no justification for the increase of these considering the risks taken by the company personnel involved, the nature of the
allowances. The personnel concerned will not receive any additional risk during the employees' functions and responsibilities and the prevailing standard of living. We
life of the current CBA that would justify the increase demanded by the union. In do not however subscribe to the Secretary's award on the following:
the absence of such risk, then these personnel deserve only the same salary
increase that all other members of the bargaining unit will get as a result of the (a) Reduction of quota and MAPL when the
disputed CBA. MERALCO likewise assails the grant of the high voltage/high pole collector is on sick leave because the previous
allowance to members of the team who are not exposed to the high voltage/high CBA has already provided for a reduction of this
pole risks. The risks that justify the higher salary and the added allowance are demand. There is no need to further reduce this.
personal to those who are exposed to those risks. They are not granted to a team
because some members of the team are not exposed to the given risks. (b) Deposit of cash bond at MESALA because this
is no longer necessary in view of the fact that
The increase in the high-voltage allowance (from P45.00 to P55.00), high-pole collectors are no longer required to post a bond.
allowance (from P30.00 to P40.00), and towing allowance is justified considering

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We shall now resolve the non-economic issues. From the foregoing disquisition, it is clear that employees holding a confidential
position are prohibited from joining the union of the rank and file employees.
1. SCOPE OF THE BARGAINING UNIT
2. ISSUE OF UNION SECURITY
The Secretary's ruling on this issue states that:
The Secretary in his Order of August 19, 1996, 42 ruled that:
a. Scope of the collective bargaining unit. The
union is demanding that the collective bargaining b. Union recognition and security. The Union is
unit shall be composed of all regular rank and file proposing that it be recognized by the Company
employees hired by the company in all its offices as sole and exclusive bargaining representative of
and operating centers through its franchise and the rank and file employees included in the
those it may employ by reason of expansion, bargaining unit for the purpose of collective
reorganization or as a result of operational bargaining regarding rates of pay, wages, hours of
exigencies. The law is that only managerial work and other terms and conditions of
employees are excluded from any collective employment. For this reason, the Company shall
bargaining unit and supervisors are now allowed agree to meet only with the Union officers and its
to form their own union (Art. 254 of the Labor authorized representatives on all matters involving
Code as amended by R.A. 6715 ). We grant the the Union as an organization and all issues arising
union demand. from the implementation and interpretation of the
new CBA. Towards this end, the Company shall
Both MERALCO and the Office of the Solicitor General dispute this ruling because not entertain any individual or group of individuals
it disregards the rule. We have established on the exclusion of confidential on matters within the exclusive domain of the
employees from the rank and file bargaining unit. Union.

In Pier 8 Arrastre vs. Confesor and General Maritime and Stevedores Union, 40 we Additionally, the Union is demanding that the right
ruled that: of all rank and file employees to join the Union
shall be recognized by the Company. Accordingly,
Put another way, the confidential employee does all rank and file employees shall join the Union.
not share in the same "community of interest" that
might otherwise make him eligible to join his rank xxx xxx xxx
and file co-workers, precisely because of a conflict
in those interests. These demands are fairly reasonable. We grant
the same in accordance with the maintenance of
Thus, in Metrolab Industries vs. Roldan-Confesor, 41 We ruled: membership principle as a form of union security.

. . . that the Secretary's order should exclude the The Secretary reconsidered this portion of his original order when he said in his
confidential employees from the regular rank and December 28, 1996 order that:
file employees qualified to become members of
the MEWA bargaining unit. . . . . When we decreed that all rank and file
employees shall join the Union, we were actually
decreeing the incorporation of a closed shop form

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of union security in the CBA between the parties. issue we see is whether the Secretary's consultation requirement is reasonable or
In Ferrer v. NLRC, 224 SCRA 410, the Supreme unduly restrictive of the company's management prerogative. We note that the
Court ruled that a CBA provision for a closed shop Secretary himself has considered that management should not be hampered in the
is a valid form of union security and is not a operations of its business when he said that:
restriction on the right or freedom of association
guaranteed by the Constitution, citing Lirag v. We feel that the limitations imposed by the union
Blanco, 109 SCRA 87. advocates are too specific and may not be
applicable to the situations that the company and
MERALCO objected to this ruling on the grounds that: (a) it was never questioned the union may face in the future. To our mind, the
by the parties; (b) there is no evidence presented that would justify the restriction greater risk with this type of limitation is that it will
on employee's union membership; and (c) the Secretary cannot rule on the union tend to curtail rather than allow the business
security demand because this is not a mandatory subject for collective bargaining growth that the company and the union must
agreement. aspire for. Hence, we are for the general
limitations we have stated above because they
We agree with MERALCO's contention. will allow a calibrated response to specific future
situations the company and the union may face. 44
An examination of the records of the case shows that the union did not ask for a
closed shop security regime; the Secretary in the first instance expressly stated Additionally, We recognize that contracting out is not unlimited; rather, it is a
that a maintenance of membership clause should govern; neither MERALCO nor prerogative that management enjoys subject to well-defined legal limitations. As
MEWA raised the issue of union security in their respective motions for we have previously held, the company can determine in its best business judgment
reconsideration of the Secretary's first disputed order; and that despite the parties whether it should contract out the performance of some of its work for as long as
clear acceptance of the Secretary's first ruling, the Secretary motu the employer is motivated by good faith, and the contracting out must not have
proprio reconsidered his maintenance of membership ruling in favor of the more been resorted to circumvent the law or must not have been the result of malicious
stringent union shop regime. or arbitrary action. 45 The Labor Code and its implementing rules also contain
specific rules governing contracting out (Department or Labor Order No. 10, May
30, 1997, Sections 1-25).
Under these circumstances, it is indubitably clear that the Secretary gravely
abused his discretion when he ordered a union shop in his order of December 28,
1996. The distinctions between a maintenance of membership regime from a Given these realities, we recognize that a balance already exists in the parties'
closed shop and their consequences in the relationship between the union and the relationship with respect to contracting out; MERALCO has its legally defined and
company are well established and need no further elaboration. protected management prerogatives while workers are guaranteed their own
protection through specific labor provisions and the recognition of limits to the
exercise of management prerogatives. From these premises, we can only
Consequently, We rule that the maintenance of membership regime should govern
conclude that the Secretary's added requirement only introduces an imbalance in
at MERALCO in accordance with the Secretary's order of August 19, 1996 which
neither party disputed. the parties' collective bargaining relationship on a matter that the law already
sufficiently regulates. Hence, we rule that the Secretary's added requirement,
being unreasonable, restrictive and potentially disruptive should be struck down.
3. THE CONTRACTING OUT ISSUE
4. UNION REPRESENTATION IN COMMITTEES
This issue is limited to the validity of the requirement that the union be consulted
before the implementation of any contracting out that would last for 6 months or
more. Proceeding from our ruling in San Miguel Employees Union-PTGWO vs. As regards this issue, We quote with approval the holding of the Secretary in his
Bersamira, 43 (where we recognized that contracting out of work is a proprietary Order of December 28, 1996, to wit:
right of the employer in the exercise of an inherent management prerogative) the

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We see no convincing reason to modify our All other benefits being enjoyed by the Company's
original Order on union representation in employees but which are not expressly or
committees. It reiterates what the Article 211 impliedly repealed in this new agreement shall
(A)(g) of the Labor Code provides: "To ensure the remain subsisting and shall likewise be included in
participation of workers in decision and policy- the new collective bargaining agreement to be
making processes affecting their rights, duties and signed by the parties effective December 1,
welfare. Denying this opportunity to the Union is to 1995.46
lay the claim that only management has the
monopoly of ideas that may improve management claiming that the above-quoted ruling intruded into the employer's freedom to
strategies in enhancing the Company's growth. contract by ordering the inclusion in the new CBA all other benefits presently
What every company should remember is that enjoyed by the employees even if they are not incorporated in the new CBA. This
there might be one among the Union members matter of inclusion, MERALCO argues, was never discussed and agreed upon in
who may offer productive and viable ideas on the negotiations; nor presented as issues before the Secretary; nor were part of
expanding the Company's business horizons. The the previous CBA's between the parties.
Union's participation in such committees might
just be the opportune time for dormant ideas to
We agree with MERALCO.
come forward. So, the Company must welcome
this development (see also PAL v. NLRC, et. al.,
G.R. 85985, August 13, 1995). It must be The Secretary acted in excess of the discretion allowed him by law when he
understood, however, that the committees ordered the inclusion of benefits, terms and conditions that the law and the parties
referred to here are the Safety Committee, the did not intend to be reflected in their CBA.
Uniform Committee and other committees of a
similar nature and purpose involving personnel To avoid the possible problems that the disputed orders may bring, we are
welfare, rights and benefits as well as duties." constrained to rule that only the terms and conditions already existing in the
current CBA and was granted by the Secretary (subject to the modifications
We do not find merit in MERALCO's contention that the above-quoted ruling of the decreed in this decision) should be incorporated in the CBA, and that the
Secretary is an intrusion into the management prerogatives of MERALCO. It is Secretary's disputed orders should accordingly be modified.
worthwhile to note that all the Union demands and what the Secretary's order
granted is that the Union be allowed to participate in policy formulation and 6. RETROACTIVITY OF THE CBA
decision-making process on matters affecting the Union members' rights, duties
and welfare as required in Article 211 (A) (g) of the Labor Code. And this can only Finally, MERALCO also assails the Secretary's order that the effectivity of the new
be done when the Union is allowed to have representatives in the Safety CBA shall retroact to December 1, 1995, the date of the commencement of the last
Committee, Uniform Committee and other committees of a similar nature. two years of the effectivity of the existing CBA. This retroactive date, MERALCO
Certainly, such participation by the Union in the said committees is not in the argues, is contrary to the ruling of this Court in Pier 8 Arrastre and Stevedoring
nature of a co-management control of the business of MERALCO. What is granted Services, Inc. vs. Roldan-Confessor 47 which mandates that the effective date of
by the Secretary is participation and representation. Thus, there is no impairment the new CBA should be the date the Secretary of Labor has resolved the labor
of management prerogatives. dispute.

5. INCLUSION OF ALL TERMS AND CONDITIONS IN THE CBA On the other hand, MEWA supports the ruling of the Secretary on the theory that
he has plenary power and discretion to fix the date of effectivity of his arbitral
MERALCO also decries the Secretary's ruling in both the assailed Orders that — award citing our ruling in St. Lakes Medical Center, Inc. vs.
Torres. 48 MEWA also contends that if the arbitral award takes effect on the date of
the Secretary Labor's ruling on the parties' motion for reconsideration (i.e., on

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December 28, 1996), an anomaly situation will result when CBA would be more One such provision is the principle of hold over, i.e., that in the absence of a new
than the 5-year term mandated by Article 253-A of the Labor Code. CBA, the parties must maintain thestatus quo and must continue in full force and
effect the terms and conditions of the existing agreement until a new agreement is
However, neither party took into account the factors necessary for a proper reached. 51 In this manner, the law prevents the existence of a gap in the
resolution of this aspect. Pier 8, for instance, does not involve a mid-term relationship between the collective bargaining parties. Another legal principle that
negotiation similar to this case, while St. Lukes does not take the "hold over" should apply is that in the absence of an agreement between the parties, then, an
principle into account, i.e., the rule that although a CBA has expired, it continues to arbitrated CBA takes on the nature of any judicial or quasi-judicial award; it
have legal effects as between the parties until a new CBA has been entered operates and may be executed only respectively unless there are legal
into. 49 justifications for its retroactive application.

Art. 253-A serves as the guide in determining when the effectivity of the CBA at Consequently, we find no sufficient legal ground on the other justification for the
bar is to take effect. It provides that the representation aspect of the CBA is to be retroactive application of the disputed CBA, and therefore hold that the CBA
for a term of 5 years, while should be effective for a term of 2 years counted from December 28, 1996 (the
date of the Secretary of Labor's disputed order on the parties' motion for
reconsideration) up to December 27, 1999.
. . . [A]ll other provisions of the Collective
Bargaining Agreement shall be re-negotiated not
later than 3 years after its execution. Any WHEREFORE, the petition is granted and the orders of public respondent
agreement on such other provision of the Secretary of Labor dated August 19, 1996 and December 28, 1996 are set aside to
Collective Bargaining Agreement entered into the extent set forth above. The parties are directed to execute a Collective
within 6 months from the date of expiry of the term Bargaining Agreement incorporating the terms and conditions contained in the
of such other provisions as fixed in such unaffected portion is of the Secretary of Labor's orders of August 19, 1996 and
Collective Bargaining Agreement shall retroact to December 28, 1996, and the modifications set forth above. The retirement fund
the day immediately following such date. If such issue is remanded to the Secretary of Labor for reception of evidence and
agreement is entered into beyond 6 months, the determination of the legal personality of the MERALCO retirement
parties shall agree on the duration of the fund.1âwphi1.nêt
effectivity thereof. . . . .
SO ORDERED.
Under these terms, it is clear that the 5-year term requirement is specific to the
representation aspect. What the law additionally requires is that a CBA must be re-
negotiated within 3 years "after its execution." It is in this re-negotiation that gives
rise to the present CBA deadlock.

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

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

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G.R. No. 127598 February 22, 2000 Union leave - 40 days (typo error) 30 days

MANILA ELECTRIC COMPANY, petitioner, High voltage/pole - not apply to those who are members of a team
vs. not exposed to the risk
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO
EMPLOYEES and WORKERS ASSOCIATION (MEWA), respondent. Collectors - no need for cash bond, no
need to reduce quota and
MAPL
RESOLUTION
exclude confidential
YNARES-SANTIAGO, J.: CBU - include
employees

In the Decision promulgated on January 27, 1999, the Court disposed of the case Union security - maintenance of membership closed shop
as follows:
Contracting out - no need to consult union consult first

WHEREFORE, the petition is granted and the orders of public respondent All benefits - existing terms and conditions all terms
Secretary of Labor dated August 19, 1996 and December 28, 1996 are set
aside to the extent set forth above. The parties are directed to execute a Dec. 28, 1996-Dec. 27,
Retroactivity - from Dec. 1, 1995
Collective Bargaining Agreement incorporating the terms and conditions 199(9)
contained in the unaffected portions of the Secretary of Labor's orders of
August 19, 1996 and December 28, 1996, and the modifications set forth
Dissatisfied with the Decision, some alleged members of private respondent union
above. The retirement fund issue is remanded to the Secretary of Labor
(Union for brevity) filed a motion for intervention and a motion for reconsideration
for reception of evidence and determination of the legal personality of the
of the said Decision. A separate intervention was likewise made by the
MERALCO retirement fund.1
supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona
fide legal interest in the outcome of the case.3 The Court required the "proper
The modifications of the public respondent's resolutions include the following: parties" to file a comment to the three motions for reconsideration but the Solicitor-
General asked that he be excused from filing the comment because the "petition
Secretary's filed in the instant case was granted" by the Court.4 Consequently, petitioner filed
January 27, 1999 decision its own consolidated comment. An "Appeal Seeking Immediate Reconsideration"
resolution
was also filed by the alleged newly elected president of the Union. 5 Other
Wages - P1,900.00 for 1995-96 P2,200.00 subsequent pleadings were filed by the parties and intervenors.

X'mas bonus - modified to one month 2 months The issues raised in the motions for reconsideration had already been passed
upon by the Court in the January 27, 1999 decision. No new arguments were
Retirees - remanded to the Secretary granted
presented for consideration of the Court. Nonetheless, certain matters will be
Loan to coops - denied granted considered herein, particularly those involving the amount of wages and the
retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.
GHSIP, HMP
and Petitioner warns that if the wage increase of P2,200.00 per month as ordered by
Housing loans - granted up to P60,000.00 granted the Secretary is allowed, it would simply pass the cost covering such increase to
the consumers through an increase in the rate of electricity. This is a non sequitur.
Signing bonus - denied granted The Court cannot be threatened with such a misleading argument. An increase in

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the prices of electric current needs the approval of the appropriate regulatory the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced
government agency and does not automatically result from a mere increase in the to P1,350.00; for 1993; further reduced to P1,150.00 for 1994. For supervisory
wages of petitioner's employees. Besides, this argument presupposes that employees, the agreed wage increase for the years 1992-1994 are P1,742.50,
petitioner is capable of meeting a wage increase. The All Asia Capital report upon P1,682.50 and P1,442.50, respectively. Based on the foregoing figures, the
which the Union relies to support its position regarding the wage issue cannot be P2,000.00 increase for the two-year period awarded to the rank-and-file is much
an accurate basis and conclusive determinant of the rate of wage increase. higher than the highest increase granted to supervisory employees. 9 As mentioned
Section 45 of Rule 130 Rules of Evidence provides: in the January 27, 1999 Decision, the Court does "not seek to enumerate in this
decision the factors that should affect wage determination" because collective
Commercial lists and the like. — Evidence of statements of matters of bargaining disputes particularly those affecting the national interest and public
interest to persons engaged in an occupation contained in a list, register, service "requires due consideration and proper balancing of the interests of the
periodical, or other published compilation is admissible as tending to prove parties to the dispute and of those who might be affected by the dispute." 10 The
the truth of any relevant matter so stated if that compilation is published for Court takes judicial notice that the new amounts granted herein are significantly
use by persons engaged in that occupation and is generally used and higher than the weighted average salary currently enjoyed by other rank-and-file
relied upon by them therein. employees within the community. It should be noted that the relations between
labor and capital is impressed with public interest which must yield to the common
good.11 Neither party should act oppressively against the other or impair the
Under the afore-quoted rule, statement of matters contained in a periodical, may
interest or convenience of the public.12Besides, matters of salary increases are
be admitted only "if that compilation is published for use by persons engaged in
part of management prerogative.13
that occupation and is generally used and relied upon by them therein." As
correctly held in our Decision dated January 27, 1999, the cited report is a mere
newspaper account and not even a commercial list. At most, it is but an analysis or On the retroactivity of the CBA arbitral award, it is well to recall that this petition
opinion which carries no persuasive weight for purposes of this case as no had its origin in the renegotiation of the parties' 1992-1997 CBA insofar as the last
sufficient figures to support it were presented. Neither did anybody testify to its two-year period thereof is concerned. When the Secretary of Labor assumed
accuracy. It cannot be said that businessmen generally rely on news items such as jurisdiction and granted the arbitral awards, there was no question that these
this in their occupation. Besides, no evidence was presented that the publication arbitral awards were to be given retroactive effect. However, the parties dispute
was regularly prepared by a person in touch with the market and that it is generally the reckoning period when retroaction shall commence. Petitioner claims that the
regarded as trustworthy and reliable. Absent extrinsic proof of their accuracy, award should retroact only from such time that the Secretary of Labor rendered the
these reports are not admissible.6 In the same manner, newspapers containing award, invoking the 1995 decision in Pier 8 case 14 where the Court, citing Union of
stock quotations are not admissible in evidence when the source of the reports is Filipino Employees v. NLRC,15 said:
available.7 With more reason, mere analyses or projections of such reports cannot
be admitted. In particular, the source of the report in this case can be easily made The assailed resolution which incorporated the CBA to be signed by the
available considering that the same is necessary for compliance with certain parties was promulgated on June 5, 1989, the expiry date of the past CBA.
governmental requirements. Based on the provision of Section 253-A, its retroactivity should be agreed
upon by the parties. But since no agreement to that effect was made,
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 public respondent did not abuse its discretion in giving the said CBA a
was P5.1 billion.8 An estimate by the All Asia financial analyst stated that prospective effect. The action of the public respondent is within the ambit
petitioner's net operating income for the same year was about P5.7 billion, a figure of its authority vested by existing law.
which the Union relies on to support its claim. Assuming without admitting the truth
thereof, the figure is higher than the P4.171 billion allegedly suggested by On the other hand, the Union argues that the award should retroact to such time
petitioner as its projected net operating income. The P5.7 billion which was the granted by the Secretary, citing the 1993 decision of St. Luke's.16
Secretary's basis for granting the P2,200.00 is higher than the actual net income of
P5.1 billion admitted by petitioner. It would be proper then to increase this Court's Finally, the effectivity of the Order of January 28, 1991, must retroact to
award of P1,900.00 to P2,000.00 for the two years of the CBA award. For 1992, the date of the expiration of the previous CBA, contrary to the position of

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petitioner. Under the circumstances of the case, Article 253-A cannot be virtue of the mutual agreement of the parties but by intervention of the government.
properly applied to herein case. As correctly stated by public respondent in Despite the silence of the law, the Court rules herein that CBA arbitral awards
his assailed Order of April 12, 1991 dismissing petitioner's Motion for granted after six months from the expiration of the last CBA shall retroact to such
Reconsideration — time agreed upon by both employer and the employees or their union. Absent such
an agreement as to retroactivity, the award shall retroact to the first day after the
Anent the alleged lack of basis for the retroactivity provisions six-month period following the expiration of the last day of the CBA should there be
awarded; we would stress that the provision of law invoked by the one. In the absence of a CBA, the Secretary's determination of the date of
Hospital, Article 253-A of the Labor Code, speaks of agreements retroactivity as part of his discretionary powers over arbitral awards shall control.
by and between the parties, and not arbitral awards . . .
It is true that an arbitral award cannot per se be categorized as an agreement
Therefore, in the absence of a specific provision of law prohibiting voluntarily entered into by the parties because it requires the interference and
retroactivity of the effectivity of arbitral awards issued by the Secretary of imposing power of the State thru the Secretary of Labor when he assumes
Labor pursuant to Article 263(g) of the Labor Code, such as herein jurisdiction. However, the arbitral award can be considered as an approximation of
involved, public respondent is deemed vested with plenary and a collective bargaining agreement which would otherwise have been entered into
discretionary powers to determine the effectivity thereof. by the parties.19 The terms or periods set forth in Article 253-A pertains explicitly to
a CBA. But there is nothing that would prevent its application by analogy to an
arbitral award by the Secretary considering the absence of an applicable law.
In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine
Under Article 253-A: "(I)f any such agreement is entered into beyond six months,
and ruled that:
the parties shall agree on the duration of retroactivity thereof." In other words, the
law contemplates retroactivity whether the agreement be entered into before or
In St. Luke's Medical Center v. Torres, a deadlock also developed during after the said six-month period. The agreement of the parties need not be
the CBA negotiations between management and the union. The Secretary categorically stated for their acts may be considered in determining the duration of
of Labor assumed jurisdiction and ordered the retroaction of the CBA to retroactivity. In this connection, the Court considers the letter of petitioner's
the date of expiration of the previous CBA. As in this case, it was alleged Chairman of the Board and its President addressed to their stockholders, which
that the Secretary of Labor gravely abused its discretion in making his states that the CBA "for the rank-and-file employees covering the period
award retroactive. In dismissing this contention this Court held: December 1, 1995 to November 30, 1997 is still with the Supreme Court,"20 as
indicative of petitioner's recognition that the CBA award covers the said period.
Therefore, in the absence of a specific provision of law prohibiting Earlier, petitioner's negotiating panel transmitted to the Union a copy of its
retroactive of the effectivity of arbitral awards issued by the proposed CBA covering the same period inclusive.21 In addition, petitioner does
Secretary of Labor pursuant to Article 263(g) of the Labor Code, not dispute the allegation that in the past CBA arbitral awards, the Secretary
such as herein involved, public respondent is deemed vested with granted retroactivity commencing from the period immediately following the last
plenary and discretionary powers to determine the effectivity day of the expired CBA. Thus, by petitioner's own actions, the Court sees no
thereof. reason to retroact the subject CBA awards to a different date. The period is herein
set at two (2) years from December 1, 1995 to November 30, 1997.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective
for a period of 2 years counted from December 28, 1996 up to December 27, On the allegation concerning the grant of loan to a cooperative, there is no merit in
1999." Parenthetically, this actually covers a three-year period. Labor laws are the union's claim that it is no different from housing loans granted by the employer.
silent as to when an arbitral award in a labor dispute where the Secretary had The award of loans for housing is justified because it pertains to a basic necessity
assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In of life. It is part of a privilege recognized by the employer and allowed by law. In
general, a CBA negotiated within six months after the expiration of the existing contrast, providing seed money for the establishment of the employee's
CBA retroacts to the day immediately following such date and if agreed thereafter, cooperative is a matter in which the employer has no business interest or legal
the effectivity depends on the agreement of the parties.18 On the other hand, the obligation. Courts should not be utilized as a tool to compel any person to grant
law is silent as to the retroactivity of a CBA arbitral award or that granted not by loans to another nor to force parties to undertake an obligation without justification.

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On the contrary, it is the government that has the obligation to render financial been distributed to them. The assailed Decision is AFFIRMED in all other
assistance to cooperatives and the Cooperative Code does not make it an respects.1âwphi1.nêt
obligation of the employer or any private individual.22
SO ORDERED.
Anent the 40-day union leave, the Court finds that the same is a typographical
error. In order to avoid any confusion, it is herein declared that the union leave is
only thirty (30) days as granted by the Secretary of Labor and affirmed in the
Decision of this Court.
G.R. No. 127598 August 1, 2000
The added requirement of consultation imposed by the Secretary in cases of
contracting out for six (6) months or more has been rejected by the Court. Suffice it MANILA ELECTRIC COMPANY, petitioner,
to say that the employer is allowed to contract out services for six months or more. vs.
However, a line must be drawn between management prerogatives regarding HON. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO
business operationsper se and those which affect the rights of employees, and in EMPLOYEES AND WORKERS ASSOCIATION (MEWA), respondents.
treating the latter, the employer should see to it that its employees are at least
properly informed of its decision or modes of action in order to attain a harmonious RESOLUTION
labor-management relationship and enlighten the workers concerning their
rights.23 Hiring of workers is within the employer's inherent freedom to regulate and YNARES-SANTIAGO, J.:
is a valid exercise of its management prerogative subject only to special laws and
agreements on the matter and the fair standards of justice.24 The management On February 22, 2000, this Court promulgated a Resolution with the following
cannot be denied the faculty of promoting efficiency and attaining economy by a decretal portion:
study of what units are essential for its operation. It has the ultimate determination
of whether services should be performed by its personnel or contracted to outside
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the
agencies. While there should be mutual consultation, eventually deference is to be
assailed Decision is MODIFIED as follows: (1) the arbitral award shall retroact from
paid to what management decides.25 Contracting out of services is an exercise of
December 1, 1995 to November 30, 1997; and (2) the award of wage is increased
business judgment or management prerogative.26 Absent proof that management
from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to
acted in a malicious or arbitrary manner, the Court will not interfere with the
Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is
exercise of judgment by an employer.27 As mentioned in the January 27, 1999
subject to the monetary advances granted by petitioner to its rank-and-file
Decision, the law already sufficiently regulates this matter. 28 Jurisprudence also
employees during the pendency of this case assuming such advances had actually
provides adequate limitations, such that the employer must be motivated by good
been distributed to them. The assailed Decision is AFFIRMED in all other
faith and the contracting out should not be resorted to circumvent the law or must
respects.
not have been the result of malicious or arbitrary actions.29 These are matters that
may be categorically determined only when an actual suit on the matter arises.
SO ORDERED.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the
assailed Decision is MODIFIED as follows: (1) the arbitral award shall retroact from Petitioner Manila Electric Company filed with this Court, on March 17, 2000, a
December 1, 1995 to November 30, 1997; and (2) the award of wage is increased "Motion for Partial Modification (Re: Resolution Dated 22 February 2000)"
from the original amount of One Thousand Nine Hundred Pesos (P1,900.00) to anchored on the following grounds:
Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is
subject to the monetary advances granted by petitioner to its rank-and-file I
employees during the pendency of this case assuming such advances had actually

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With due respect, this Honorable Court’s ruling on the retroactivity issue: may be executed only prospectively unless there are legal justifications for its
(a) fails to account for previous rulings of the Court on the same issue; (b) retroactive application. Fourth, petitioner assigns as error this Court’s interpretation
fails to indicate the reasons for reversing the original ruling in this case on of certain acts of petitioner as consent to the retroactive application of the arbitral
the retroactivity issue; and (c) is internally inconsistent. award. Fifth, petitioner contends that the Resolution is internally flawed because
when it held that the award shall retroact to the first day after the six-month period
II following the expiration of the last day of the CBA, the reckoning date should have
been June 1, 1996, not December 1, 1995, which is the last day of the three-year
With due respect, the Honorable Court’s ruling on the retroactivity issue lifetime of the economic provisions of the CBA.
does not take into account the huge cost that this award imposes on
petitioner, estimated at no less than P800 Million. Anent the second ground, petitioner alleges that the retroactive application of the
arbitral award will cost it no less than P800 Million. Thus, petitioner prays that the
two-year term of the CBA be fixed from December 28, 1996 to December 27,
In the assailed Resolution, it was held:
1998. Petitioner also seeks this Court’s declaration that the award of P2,000.00 be
paid to petitioner’s rank-and-file employees during this two-year period. In the
Labor laws are silent as to when an arbitral award in a labor dispute where the alternative, petitioner prays that the award of P2,000.00 be made to retroact to
Secretary (of Labor and Employment) had assumed jurisdiction by virtue of Article June 1, 1996 as the effectivity date of the CBA.
263 (g) of the Labor Code shall retroact. In general, a CBA negotiated within six
months after the expiration of the existing CBA retroacts to the day immediately
following such date and if agreed thereafter, the effectivity depends on the Private respondent MEWA filed its Comment on May 19, 2000, contending that the
agreement of the parties. On the other hand, the law is silent as to the retroactivity Motion for Partial Modification was unauthorized inasmuch as Mr. Manuel M.
Lopez, President of petitioner corporation, has categorically stated in a
of a CBA arbitral award or that granted not by virtue of the mutual agreement of
memorandum to the rank-and-file employees that management will comply with
the parties but by intervention of the government. Despite the silence of the law,
this Court’s ruling and will not file any motion for reconsideration; and that the
the Court rules herein that CBA arbitral awards granted after six months from the
assailed Resolution should be modified to conform to the St. Luke’sruling, to the
expiration of the last CBA shall retroact to such time agreed upon by both
employer and the employees or their union. Absent such an agreement as to effect that, in the absence of a specific provision of law prohibiting retroactivity of
the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
retroactivity, the award shall retroact to the first day after the six-month period
Article 263(g) of the Labor Code, he is deemed vested with plenary and
following the expiration of the last day of the CBA should there be one. In the
discretionary powers to determine the effectivity thereof.
absence of a CBA, the Secretary’s determination of the date of retroactivity as part
of his discretionary powers over arbitral awards shall control.
This Court has re-examined the assailed portion of the Resolution in this case vis-
à-vis the rulings cited by petitioner. Invariably, these cases involve Articles 253-A
Petitioner specifically assails the foregoing portion of the Resolution as being
in relation to Article 263 (g)4 of the Labor Code. Article 253-A is hereunder
logically flawed, arguing, first, that while it alludes to the Secretary’s discretionary
reproduced for ready reference:
powers only in the absence of a CBA, Article 253-A of the Labor Code always
presupposes the existence of a prior or subsisting CBA; hence the exercise by the
Secretary of his discretionary powers will never come to pass. Second, petitioner ART. 253-A. Terms of a collective bargaining agreement. --- Any Collective
claims that the Resolution contravenes the jurisprudential rule laid down in the Bargaining Agreement that the parties may enter into shall, insofar as the
cases of Union of Filipro Employees v. NLRC,1 Pier 8 Arrastre and Stevedoring representation aspect is concerned, be for a term of five (5) years. No petition
Services v. Roldan-Confesor2 and St. Luke’ s Medical Center v. Torres.3 Third, questioning the majority status of the incumbent bargaining agent shall be
petitioner contends that this Court erred in holding that the effectivity of CBA entertained and no certification election shall be conducted by the Department of
provisions are automatically retroactive. Petitioner invokes, rather, this Court’s Labor and Employment outside of the sixty-day period immediately before the date
ruling in the Decision dated January 27, 1999, which was modified in the assailed of expiry of such five year term of the Collective Bargaining Agreement. All other
Resolution, that in the absence of an agreement between the parties, an arbitrated provisions of the Collective Bargaining Agreement shall be renegotiated not later
CBA takes on the nature of any judicial or quasi-judicial award; it operates and than three (3) years after its execution. Any agreement on such other provisions of

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the Collective Bargaining Agreement entered into within six (6) months from the during the 60-day freedom period and/or until a new agreement is reached by the
date of expiry of the term of such other provisions as fixed in such Collective parties (National Congress of Unions in the Sugar Industry of the Philippines v.
Bargaining Agreement, shall retroact to the day immediately following such date. If Ferrer-Calleja, 205 SCRA 478 [1992]). Applied to the case at bench, the legal
any such agreement is entered into beyond six months, the parties shall agree on effects of the immediate past CBA between petitioner and private respondent
the duration of retroactivity thereof. In case of a deadlock in the renegotiation of terminated, and the effectivity of the new CBA began, only on March 4, 1993,
the collective bargaining agreement, the parties may exercise their rights under when public respondent resolved their dispute.8
this Code.5
On the other hand, respondent MEWA invokes the ruling in St. Luke’s Medical
The parties’ respective positions are both well supported by jurisprudence. For its Center, Inc. v. Torres,9 which held that the Secretary of Labor has plenary and
part, petitioner invokes the ruling in Union of Filipro Employees6 , wherein this discretionary powers to determine the effectivity of arbitral awards. 10 Thus,
Court upheld the NLRC’s act of giving prospective effect to the CBA, and argues respondent maintains that the arbitral award in this case should be made effective
that the two-year arbitral award in the case at bar should likewise be applied from December 1, 1995 to November 30, 1997. The ruling in the St. Luke’s case
prospectively, counted from December 28, 1996 to December 27, 1998. Petitioner was restated in the 1998 case of Manila Central Line Corporation v. Manila Central
maintains that there is nothing in Article 253-A of the Labor Code which states that Line Free Workers Union-National Federation of Labor, et al.,11 where it was held
arbitral awards or renewals of a collective bargaining agreement shall always have that:
retroactive effect. The Filipro case was applied more recently in Pier 8 Arrastre &
Stevedoring Services, Inc. v. Roldan-Confesor7 thus: Art. 253-A refers to collective bargaining agreements entered into by the parties as
a result of their mutual agreement. The CBA in this case, on the other hand, is part
In Union of Filipro Employees v. NLRC, 192 SCRA 414 (1990), this Court of an arbitral award. As such, it may be made retroactive to the date of expiration
interpreted the above law as follows: of the previous agreement. As held in St. Luke’s Medical Center, Inc. v. Torres:

"In light of the foregoing, this Court upholds the pronouncement of the NLRC Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of
holding the CBA to be signed by the parties effective upon the promulgation of the the expiration of the previous CBA, contrary to the position of petitioner. Under the
assailed resolution. It is clear and explicit from Article 253-A that any agreement on circumstances of the case, Article 253-A cannot be properly applied to herein
such other provisions of the CBA shall be given retroactive effect only when it is case. As correctly stated by public respondent in his assailed Order of April 12,
entered into within six (6) months from its expiry date. If the agreement was 1991 dismissing petitioner’s Motion for Reconsideration –
entered into outside the six (6) month period, then the parties shall agree on the
duration of the retroactivity thereof. Anent the alleged lack of basis for the retroactivity provisions awarded, we would
stress that the provision of law invoked by the Hospital, Article 253-A of the Labor
"The assailed resolution which incorporated the CBA to be signed by the parties Code, speaks of agreements by and between the parties, and not arbitral awards .
was promulgated June 5, 1989, and hence, outside the 6 month period from June . . (p. 818 Rollo).
30, 1987, the expiry date of the past CBA. Based on the provision of Section 253-
A, its retroactivity should be agreed upon by the parties. But since no agreement to Therefore, in the absence of a specific provision of law prohibiting retroactivity of
that effect was made, public respondent did not abuse its discretion in giving the the effectivity of arbitral awards issued by the Secretary of Labor pursuant to
said CBA a prospective effect. The action of the public respondent is within the Article 263(g) of the Labor Code, such as herein involved, public respondent is
ambit of its authority vested by existing laws." deemed vested with plenary and discretionary powers to determine the effectivity
thereof (223 SCRA 779, 792-793 [1993]; reiterated in Philippine Airlines, Inc. v.
In the case of Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA Confessor 231 SCRA 41 [1994]).
179 (1991), this Court reiterated the rule that although a CBA has expired, it
continues to have legal effects as between the parties until a new CBA has been Indeed, petitioner has not shown that the question of effectivity was not included in
entered into. It is the duty of both parties to the CBA to keep the status quo, and to the general agreement of the parties to submit their dispute for arbitration. To the
continue in full force and effect the terms and conditions of the existing agreement

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contrary, as the order of the labor arbiter states, this question was among those concerns of both sides. Hence, this Court held that the arbitral award in this case
submitted for arbitration by the parties: be made to retroact to the first day after the six-month period following the
expiration of the last day of the CBA, i.e., from June 1, 1996 to May 31, 1998.
As regards the "Effectivity and Duration" clause, the company proposes that the
collective bargaining agreement shall take effect only upon its signing and shall This Court, therefore, maintains the foregoing rule in the assailed Resolution pro
remain in full force and effect for a period of five years. The union proposes that hac vice. It must be clarified, however, that consonant with this rule, the two-year
the agreement shall take effect retroactive to March 15, 1989, the expiration date effectivity period must start from June 1, 1996 up to May 31, 1998, not December
of the old CBA. 1, 1995 to November 30, 1997.1âwphi1

And after an evaluation of the parties’ respective contention and argument thereof, During the interregnum between the expiration of the economic provisions of the
it is believed that that of the union is fair and reasonable. It is the observation of CBA and the date of effectivity of the arbitral award, it is understood that the hold-
this Arbitrator that in almost subsequent CBAs, the effectivity of the renegotiated over principle shall govern, viz:
CBA, usually and most often is made effective retroactive to the date when the
immediately preceding CBA expires so as to give a semblance of continuity. "[I]t shall be the duty of both parties to keep the status quo and to continue in full
Hence, for this particular case, it is believed that there is nothing wrong adopting force and effect the terms and conditions of the existing agreement during the 60-
the stand of the union, that is that this CBA be made retroactive effective March day freedom period and/or until a new agreement is reached by the parties."
15, 1989.12 Despite the lapse of the formal effectivity of the CBA the law still considers the
same as continuing in force and effect until a new CBA shall have been validly
Parenthetically, the Decision rendered in the case at bar on January 27, executed.16
199913 ordered that the CBA should be effective for a term of two years counted
from December 28, 1996 (the date of the Secretary of Labor’s disputed Order on Finally, this Court finds that petitioner’s prayer, that the award of Two Thousand
the parties’ motion for reconsideration) up to December 27, 1998.14 That is to say, Pesos shall be paid to rank-and-file employees during the two-year period, is well-
the arbitral award was given prospective effect. taken. The award does not extend to supervisory employees of petitioner.

Upon a reconsideration of the Decision, this Court issued the assailed Resolution WHEREFORE, the Motion for Partial Modification is GRANTED. The Resolution of
which ruled that where an arbitral award granted beyond six months after the February 22, 2000 is PARTIALLYMODIFIED as follows: (a) the arbitral award shall
expiration of the existing CBA, and there is no agreement between the parties as retroact to the two-year period from June 1, 1996 to May 31, 1998; (b) the
to the date of effectivity thereof, the arbitral award shall retroact to the first day increased wage award of Two Thousand Pesos (P2,000.00) shall be paid to the
after the six-month period following the expiration of the last day of the CBA. In the rank-and-file employees during the said two-year period. This Resolution is subject
dispositive portion, however, the period to which the award shall retroact was to the monetary advances granted by petitioner to said employees during the
inadvertently stated as beginning on December 1, 1995 up to November 30, 1997. pendency of this case, assuming such advances had actually been distributed to
them.
In resolving the motions for reconsideration in this case, this Court took into
account the fact that petitioner belongs to an industry imbued with public interest. SO ORDERED.
As such, this Court can not ignore the enormous cost that petitioner will have to
bear as a consequence of the full retroaction of the arbitral award to the date of
expiry of the CBA, and the inevitable effect that it would have on the national
economy. On the other hand, under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane
justification that those with less privilege in life should have more in
law.15 Balancing these two contrasting interests, this Court turned to the dictates of
fairness and equitable justice and thus arrived at a formula that would address the

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G.R. No. 127422 April 17, 2001 P40 per day on the first year

LMG CHEMICALS CORPORATION, LMG CHEMICALS P40 per day on the second year
CORPORATION, petitioner,
vs. P40 per day on the third year
THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT,
THE HON. LEONARDO A. QUISUMBING, and CHEMICAL WORKER'S Respondent Union
UNION, respondents.
P350 per day on the first 18 months, and
SANDOVAL-GUTIERREZ, J.:
P150 per day for the next 18 months"
Before us is a petition certiorari with prayer for a temporary restraining order and a
writ of preliminary injunction under Rule 65 of the 1997 Rules of Civil Procedure,
as amended, seeking to nullify the orders dated October 7, 1996 and December In the course of the negotiations, respondent union pruned down the originally
17, 1996, issued by the then Secretary of Labor and Employment, Hon. Leonardo proposed wage increase quoted above to P215 per day, broken down as follows:
A. Quisumbing,1 in OS-AJ-05-10(1)-96, "IN RE: LABOR DISPUTE AT LMB
CHEMICALS CORPORATION" "P142 for the first 18 months

The facts as culled from the records are: P73 for the second 18 months"

LMG Chemicals Corporation, (petitioner) is a domestic corporation engaged in the With the CBA negotiations at a deadlock, on March 6, 1996, respondent union filed
manufacture and sale of various kinds of chemical substances, including aluminum a Notice of Strike with the National Conciliation and Mediation Board, National
sulfate which is essential in purifying water, and technical grade sulfuric acid used Capital Region. Despite several conferences and efforts of the designated
in thermal power plants. Petitioner has three divisions, namely: the Organic conciliator-mediator, the parties failed to reach an amicable settlement.
Division, Inorganic Division and the Pinamucan Bulk Carriers. There are two
unions within petitioner's Inorganic Division. One union represents the daily paid On April 16, 1996, respondent union staged a strike. IN an attempt to end the
employees and the other union represents the monthly paid employees. Chemical strike early, petitioner, on April 24, 1996, made an improved offer of P135 per day,
Workers Union, respondent, is a duly registered labor organization acting as the spread over the period of three years, as follows:
collective bargaining agent of all the daily paid employees of petitioner's Inorganic
Division. "P55 per day on the first year;

Sometime in December 1995, the petitioner and the respondent started negotiation P45 per day on the second year;
for a new Collective Bargaining Agreement (CBA) as their old CBA was about to
expire. They were able to agree on the political provisions of the new CBA, but no
P35 per day on the third year."
agreement was reached on the issue of wage increase. The economic issues were
not also settled.
On May 9, 1996, another conciliation meeting was held between the parties. In that
meeting, petitioner reiterated its improved offer of P135 per day which was again
The positions of the parties with respect to wage issue were:
rejected by the respondent union.
"Petitioner Company
On May 20, 1996, the Secretary of Labor and Employment, finding the instant
labor dispute impressed with national interest, assumed jurisdiction over the same.

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In compliance with the directive of the Labor Secretary, the parties submitted their rejected. The provisions in the old CBA as well as those contained in
respective positive papers both dated June 21, 1996. the Company's Employee's Primer of Benefits as of Aug. 1, 1994
shall be retained and incorporated in the new CBA.
In its position paper, petitioner made a turn-around, stating that it could no longer
afford to grant its previous offer due to serious financial losses during the early 3. Effectivity of the new CBA
months of 1996. It then made the following offer:
Article 253-A of the Labor Code, as amended, provides that when no
Zero increase in the first year; new CBA is signed during a period of six months from the expiry
date of the old CBA, the retroactivity period shall be according to the
P30 per day increase in the second year; and parties' agreement, Inasmuch as the parties could not agree on this
issue and since this Office has assumed jurisdiction, then this matter
P20 per day increase in the third year. now lies at the discretion of the Secretary of labor and Employment.
Thus the new Collective Bargaining Agreement which the parties will
sign pursuant to this Order shall retroact to January 1, 1996.
In its reply to petitioner's position paper, respondent union claimed it had a positive
performance in terms of income during the covered period.
x x x
On October 7, 1996, the Secretary of Labor and Employment issued the first
Forthwith, petitioner filed a motion for reconsideration but was denied by the
assailed order, pertinent portions of which read:
Secretary in his order dated December 16, 1996.
"xxx. In the light of the Company's last offer and the Union's last
position, We decree that the Company's offer of P135 per day wage Petitioner now contends that in issuing the said orders, respondent Secretary
increase be further increased to P140 per (day), which shall be gravely abused his discretion, thus:
incorporated in the new CBA, as follows:
I
P90 per day for the first 18 months, and
"THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE
P50 per day for the next 18 months. ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
DISREGARDING THE EVIDENCE OF PETITIONER'S FINANCIAL
LOSSES AND IN GRANTING A P140.00 WAGE INCREASE TO THE
After all, the Company had granted its supervisory employees an RESPONDENT UNION.
increase of P4,500 per month or P166 per day, more or less, if the
period reckoned is 27 working days.
II
In regard to the division of the three-year period into two sub-periods
of 18 months each, this office take cognizance of the same practice THE HONORABLE SECRETARY OF LABOR COMMITTED GRAVE
under the old CBA. ABUSE OF DISCRETION AMOUNTING TO LACK OF JURISDICTION IN
DECREEING THAT THE NEW COLLECTIVE BARGAINING
AGREEMENT TO BE SIGNED BY THE PARTIES SHALL RETROACT TO
2. Other economic demands JANUARY 1, 1996."

Considering the financial condition of the Company, all other Anent the first ground, petitioner asserts that the decreed amount of P140 wage
economic demands except those provided in No. 3 below are increase has no basis in fact and in law. Petitioner insists that public respondent

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Secretary whimsically presumed that the company can survive despite the losses would not be a good argument to deny them of any salary increase.
being suffered by its Inorganic Division and its additional losses caused by the When the Company made the offer of P135 per day for the three year
strike held by respondent union. Petitioner further contends that respondent period, it was presumed to have studied its financial condition
Secretary disregarded its evidence showing that for the first part of 1996, its properly, taking into consideration its past performance and
Inorganic Division suffered serious losses amounting to P15.651 million. Hence, by projected income. In fact, the Company realized a net income of
awarding wage increase without any basis, respondent Secretary gravely abused P10,806,678 for 1995 in all its operations, which could be one factor
his discretion and violated petitioner's right to due process. why it offered the wage increase package of P135 per day for the
Union members.1âwphi1.nêt
We are not persuaded.
Besides, as a major player in the country's corporate field, reneging
As aptly stated by the Solicitor General in his comment on the petition dated July from a wage increase package it previously offered and later on
1, 1996, respondent Secretary considered all the evidence and arguments withdrawing the same simply because this Office had already
adduced by both parties. In ordering the wage increase, the Secretary ratiocinated assumed jurisdiction over its labor dispute with the Union cannot be
as follows: countenanced. It will be worse if the employer is allowed to withdraw
its offer on the ground that the union staged a strike and
consequently subsequently suffered business setbacks in its income
"xxx
projections. To sustain the Company's position is like hanging the
proverbial sword of Damocles over the Union's right to concerted
In the Company's Supplemental Comment, it says that it has three activities, ready to fall when the latter clamors for better terms and
divisions, namely: the Organic Division, Inorganic Division and the conditions of employment.
Pinamucan Bulk Carriers. The Union in this instant dispute represent
the daily wage earners in the Inorganic Division. The respective
But we cannot also sustain the Union's demand for an increase of
income of the three divisions is shown in Annex B to the Company's
P215 per day. If we add the overload factors such as the increase in
Supplemental Comment. The Organic Division posted an income of
P369,754,000 in 1995. The Inorganic Division realized an income of SSS premiums, medicare and medicaid, and other multiplier costs,
the Company will be saddled with additional labor cost, and its
P261,288,000 in the same period. The tail ender is the Pinamucan
projected income for the CBS period may not be able to absorb the
Bulk Carriers Division with annual income of P11,803,000 for the
added cost without impairing its viability. xxx"
same period. Total Company income for the period was
P642,845,000.
Verily, petitioner's assertion that respondent Secretary failed to consider the
It is a sound business practice that a Company's income from all evidence on record lacks merit. It was only the Inorganic Division of the petitioner
sources are collated to determine its true financial condition. corporation that was sustaining losses. Such incident does not justify the
Regardless of whether one division or another losses or gains in its withholding of any salary increase as petitioner's income from all sources are
yearly operation is not material in reckoning a Company's financial collated for the determination of its true financial condition. As correctly stated by
status. In fact, the loss in one is usually offset by the gains in the the Secretary, "the loss in one is usually offset by the gains in the others."
others. It is not a good business practice to isolate the employees or
workers of one division, which incurred an operating loss for a Moreover, petitioner company granted its supervisory employees, during the
particular period. That will create demoralization among its ranks, pendency of the negotiations between the parties, a wage increase of P4,500 per
which will ultimately affect productivity. The eventual loser will be the month or P166 per day, more or less. Petitioner justified this by saying that the
company. said increase was pursuant to its earlier agreement with the supervisions. Hence,
the company had no choice but to abide by such agreement even if it was already
So, even if We believe the position of the company that its Inorganic sustaining losses as a result of the strike of the rank-and-file employees.
Division lost last year and during the early months of this year, it

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Petitioner's actuation is actually a discrimination against respondent union expiration of the previous CBA. The management claimed that the Secretary of
members. If it could grant a wage increase to its supervisors, there is no valid Labor gravely abused his discretion. This Court held:
reason why it should deny the same to respondent union members. Significantly,
while petitioner asserts that it sustained losses in the first part of 1996, yet during "xxx
the May 9, 1996 conciliation meeting, it made the offer of P135 daily wage to the
said union members. Finally, the effectivity of the Order of January 28, 1991, must retroact
to the date of the expiration of the previous CBA, contrary to the
This Court, therefore, holds that respondent Secretary did not gravely abuse his position of the petitioner. Under the circumstances of the case, Art.
discretion in ordering the wage increase. Grave abuse of discretion implies 253-A cannot be properly applied to herein case. As correctly stated
whimsical and capricious exercise of power which, in the instant case, is not by public respondent in his assailed Order of April 12, 1991 –
obtaining.
'Anent the alleged lack of basis for retroactivity provisions
On the second ground, petitioner contends that public respondent committed grave awarded, We would stress that the provision of law invoked
abuse of discretion when he ordered that the new CBA which the parties will sign by the Hospital, Article 253-A of the Labor Code, speaks of
shall retroact to January 1, 1996, citing the cases of Union of Filipro Employees vs. agreement by and between the parties, and not arbitral
NLRC,2 and Pier 8 Arrastre and Stevedoring Services, Inc. vs. Roldan Confesor. 3 awards.'

Invoking the provisions of Article 253-A of the Labor Code, petitioner insists that Therefore in the absence of the specific provision of law prohibiting
public respondent's discretion on the issue of the date of the effectivity of the new retroactivity of the effectivity of the arbitral awards issued by the
CBA is limited to either: (1) leaving the matter of the date of effectivity of the new Secretary of Labor pursuant to Article 263(g) of the Labor Code, such
CBA is limited to either: (1) leaving the matter of the date of effectivity of the new as herein involved, public respondent is deemed vested with plenary
CBA to the agreement of the parties or (2) ordering that the terms of the new CBA powers to determine the effectivity thereof."
be prospectively applied.
Finally, to deprive respondent Secretary of such power and discretion would run
It must be emphasized that respondent Secretary assumed jurisdiction over the counter to the well-established rule that all doubts in the interpretation of labor laws
dispute because it is impressed with national interest. As noted by the Secretary, should be resolved in favor of labor. In upholding the assailed orders of respondent
"the petitioner corporation was then supplying the sulfate requirements of MWSS Secretary, this Court is only giving meaning to this rule. Indeed, the Court should
as well as the sulfuric acid of NAPOCOR, and consequently, the continuation of help labor authorities in providing workers immediate benefits, without being
the strike would seriously affect the water supply of Metro Manila and the power hampered by arbitration or litigation processes that prove to be not only nerve-
supply of the Luzon Grid." Such authority of the Secretary to assume jurisdiction wracking but financially burdensome in the long run.
carries with it the power to determine the retroactivity of the parties' CBA.
As we said in Maternity Children's Hospital vs. Secretary of Labor 6:
It is well settled in our jurisprudence that the authority of the Secretary of Labor to
assume jurisdiction over a labor dispute causing or likely to cause a strike or "Social Justice Legislation, to be truly meaningful and rewarding to
lockout in an industry indispensable to national interest includes and extends to all our workers, must not be hampered in its application by long winded-
questions and controversies arising therefrom. The power is plenary and arbitration and litigation. Rights must be asserted and benefits
discretionary in nature to enable him to effectively and efficiently dispose of the received with the least inconvenience. Labor laws are meant to
primary dispute.4 promote, not to defeat, social justice."

In St. Luke's Medical Center, Inc. vs. Torres5, a deadlock developed during the
CBA negotiations between the management and the union. The Secretary of Labor
assumed jurisdiction and ordered that their CBA shall retroact to the date of the

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WHEREFORE, the instant petition is DENIED. The assailed orders of the Respondent Philippine National Bank (PNB) used to be a government-owned and
Secretary of Labor dated October 7, 1996 and December 16, 1996 controlled banking institution established under Public Act 2612, as amended by
are AFFIRMED. Costs against petitioner. Executive Order No. 80 dated December 3, 1986 (otherwise known as The 1986
Revised Charter of the Philippine National Bank). Its rank-and-file employees,
SO ORDERED. being government personnel, were represented for collective negotiation by the
Philnabank Employees Association (PEMA), a public sector union.

In 1996, the Securities and Exchange Commission approved PNB’s new Articles of
Incorporation and By-laws and its changed status as a private corporation. PEMA
G.R. No.174287 August 12, 2013 affiliated with petitioner National Union of Bank Employees (NUBE), which is a
labor federation composed of unions in the banking industry, adopting the name
NATIONAL UNION OF BANK EMPLOYEES (NUBE), PETITIONER, NUBE-PNB Employees Chapter (NUBE-PEC).
vs.
PHILNABANK EMPLOYEES ASSOCIATION (PEMA) AND PHILIPPINE Later, NUBE-PEC was certified as the sole and exclusive bargaining agent of the
NATIONAL BANK, RESPONDENTS. PNB rank-and-file employees. A collective bargaining agreement (CBA) was
subsequently signed between NUBE-PEC and PNB covering the period of January
DECISION 1, 1997 to December 31, 2001.

PERALTA, J.: Pursuant to Article V on Check-off and Agency Fees of the CBA, PNB shall deduct
the monthly membership fee and other assessments imposed by the union from
Assailed in this petition for review on certiorari under Rule 45 of the 1997 Rules of the salary of each union member, and agency fee (equivalent to the monthly
Civil Procedure are the May 22, 2006 Decision1 and August 17, 2006 membership dues) from the salary of the rank- and-file employees within the
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 84606, which bargaining unit who are not union members. Moreover, during the effectivity of the
reversed the May 27, 2004 Decision3 of the Secretary of Labor and Employment CBA, NUBE, being the Federation union, agreed that PNB shall remit ₱15.00 of
acting as voluntary arbitrator, the dispositive portion of which states: the ₱65.00 union dues per month collected by PNB from every employee, and that
PNB shall directly credit the amount to NUBE’s current account with PNB. 5
WHEREFORE, in light of the foregoing findings, the Bank is hereby ORDERED to
release all union dues withheld and to continue remitting to NUBE-PNB chapter
the members' obligations under the CBA, LESS the amount corresponding to the
number of non-union members including those who participated in the Following the expiration of the CBA, the Philnabank Employees Association-FFW
unsuccessful withdrawal of membership from their mother union. (PEMA-FFW) filed on January 2, 2002 a petition for certification election among
the rank-and-file employees of PNB. The petition sought the conduct of a
The parties are enjoined to faithfully comply with the above- mentioned resolution. certification election to be participated in by PEMA-FFW and NUBE-PEC.

With respect to the URGENT MOTION FOR INTERVENTION filed by PEMA, the While the petition for certification election was still pending, two significant events
same is hereby denied without prejudice to the rights of its members to bring an transpired – the independent union registration of NUBE- PEC and its disaffiliation
action to protect such rights if deemed necessary at the opportune time. with NUBE.

SO ORDERED.4 With a legal personality derived only from a charter issued by NUBE, NUBE-PEC,
under the leadership of Mariano Soria, decided to apply for a separate registration
We state the facts. with the Department of Labor and Employment (DOLE). On March 25, 2002, it was

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registered as an independent labor organization under Registration Certificate No. "PEMA" but with PEMA-FFW and NUBE-PEC be denominated as "PEMA-Bustria
NCR-UR-3-3790-2002. Group" and "PEMA-Serrana Group," respectively.

Thereafter, on June 20, 2003, the Board of Directors of NUBE-PEC adopted a On the same date, PEMA sent a letter to the PNB management informing its
Resolution6 disaffiliating itself from NUBE. Cited as reasons were as follows: disaffiliation from NUBE and requesting to stop, effective immediately, the check-
off of the ₱15.00 due for NUBE.9
xxxx
Acting thereon, on July 4, 2003, PNB informed NUBE of PEMA’s letter and its
WHEREAS, in the long period of time that the Union has been affiliated with decision to continue the deduction of the ₱15.00 fees, but stop its remittance to
NUBE, the latter has miserably failed to extend and provide satisfactory services NUBE effective July 2003. PNB also notified NUBE that the amounts collected
and support to the former in the form of legal services, training assistance, would be held in a trust account pending the resolution of the issue on PEMA’s
educational seminars, and the like; disaffiliation.10

WHEREAS, this failure by NUBE to provide adequate essential services and On July 11, 2003, NUBE replied that: it remains as the exclusive bargaining
support to union members have caused the latter to be resentful to NUBE and to representative of the PNB rank-and-file employees; by signing the Resolution (on
demand for the Union’s disaffiliation from the former[;] disaffiliation), the chapter officers have abandoned NUBE-PEC and joined another
union; in abandoning NUBE-PEC, the chapter officers have abdicated their
WHEREAS, just recently, NUBE displayed its lack of regard for the interests and respective positions and resigned as such; in joining another union, the chapter
officers committed an act of disloyalty to NUBE-PEC and the general membership;
aspirations of the union members by blocking the latter’s desire for the early
the circumstances clearly show that there is an emergency in NUBE-PEC
commencement of CBA negotiations with the PNB management[;]
necessitating its placement under temporary trusteeship; and that PNB should
cease and desist from dealing with Serrana, Roma, Latorre, Garcia, Medrano, and
WHEREAS, this strained relationship between NUBE and the Union is no longer Magtibay, who are expelled from NUBE-PEC.11 With regard to the issue of non-
conducive to a fruitful partnership between them and could even threaten industrial remittance of the union dues, NUBE enjoined PNB to comply with the union check-
peace between the Union and the management of PNB. off provision of the CBA; otherwise, it would elevate the matter to the grievance
machinery in accordance with the CBA.
WHEREAS, under the circumstances, the current officers of the Union have no
choice but to listen to the clamor of the overwhelming majority of union members Despite NUBE’s response, PNB stood firm on its decision. Alleging unfair labor
for the Union to disaffiliate from NUBE.7 practice (ULP) for non-implementation of the grievance machinery and procedure,
NUBE brought the matter to the National Conciliation and Mediation Board
The duly notarized Resolution was signed by Edgardo B. Serrana (President), Rico (NCMB) for preventive mediation.12 In time, PNB and NUBE agreed to refer the
B. Roma (Vice-President), Rachel C. Latorre (Secretary), Valeriana S. Garcia case to the Office of the DOLE Secretary for voluntary arbitration. They executed a
(Director/Acting Treasurer), Ruben C. Medrano (Director), and Verlo C. Magtibay Submission Agreement on October 28, 2003.13
(Director). It is claimed that said Resolution was overwhelmingly ratified by about
eighty-one percent (81%) of the total union membership. Meantime, the DOLE denied PEMA’s motion to change its name in the official
ballots. The certification election was finally held on October 17, 2003. The election
On June 25, 2003, NUBE-PEC filed a Manifestation and Motion8 before the Med- yielded the following results:
Arbitration Unit of DOLE, praying that, in view of its independent registration as a
labor union and disaffiliation from NUBE, its name as appearing in the official
ballots of the certification election be changed to "Philnabank Employees 3,74
Number of eligible voters
Association (PEMA)" or, in the alternative, both parties be allowed to use the name 2

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2,99 evidence adduced by both parties, We find that indeed no effective disaffiliation
Number of valid votes cast took place.
3

Number of spoiled ballots 72 It is well settled that [l]abor unions may disaffiliate from their mother federations to
form a local or independent union only during the 60-day freedom period
3,06 immediately preceding the expiration of the CBA. [Tanduay Distillery Labor Union
Total
5 v. National Labor Relations Commission, et al.] However, such disaffiliation must
be effected by a majority of the members in the bargaining unit. (Volkschel Labor
Philnabank Employees Association-FFW 289
Union v. Bureau of Labor Relations).
National Union of Bank Employees (NUBE)- 2,68
Philippine National Bank (PNB) Chapter 3 Applying the foregoing jurisprudence to the case at bar, it is difficult to believe that
a justified disaffiliation took place. While the record apparently shows that attempts
No Union 21 at disaffiliation occurred sometime in June of 2003 x x x the latest result of a
14
certification election dated 17 October 2003 mooted such disaffiliation.
Total 2,993
Further, even if for the sake of argument an attempt at disaffiliation occurred, the
On April 28, 2004, PEMA filed before the voluntary arbitrator an Urgent Motion for record is bereft of substantial evidence to support a finding of effective
Intervention,15 alleging that it stands to be substantially affected by whatever disaffiliation. There might have been a mass withdrawal of the union members
judgment that may be issued, because one of the issues for resolution is the from the NUBE-PNB Chapter. The record shows, however, that only 289 out of
validity of its disaffiliation from NUBE. It further claimed that its presence is 3,742 members shifted their allegiance from the mother union. Hence, they
necessary so that a complete relief may be accorded to the parties. Only NUBE constituted a small minority for which reason they could not have successfully
opposed the motion, arguing that PEMA has no legal personality to intervene, as it severed the local union’s affiliation with NUBE.
is not a party to the existing CBA; and that NUBE is the exclusive bargaining
representative of the PNB rank-and-file employees and, in dealing with a union Thus, since only a minority of the members wanted disaffiliation as shown by the
other than NUBE, PNB is violating the duty to bargain collectively, which is another certification election, it can be inferred that the majority of the members wanted the
form of ULP.16 union to remain an affiliate of the NUBE. [Villar, et al. v. Inciong, et al.]. There
being no justified disaffiliation that took place, the bargaining agent’s right under
Barely a month after, DOLE Acting Secretary Manuel G. Imson denied PEMA’s the provision of the CBA on Check-Off is unaffected and still remained with the old
motion for intervention and ordered PNB to release all union dues withheld and to NUBE-PNB Chapter. x x x
continue remitting the same to NUBE. The May 27, 2004 Decision opined:
While it is true that the obligation of an employee to pay union dues is co-terminus
Before we delve into the merits of the present dispute, it behooves [Us] to discuss with his affiliation [Philippine Federation of Petroleum Workers v. CIR], it is equally
in passing the propriety of the MOTION FOR INTERVENTION filed by the tenable that when it is shown, as in this case, that the withdrawal from the mother
Philnabank Employees Association (PEMA) on April 28, 2004, the alleged [break- union is not supported by majority of the members, the disaffiliation is unjustified
away] group of NUBE- PNB Chapter. and the disaffiliated minority group has no authority to represent the employees of
the bargaining unit. This is the import of the principle laid down in [Volkschel Labor
A cursory reading of the motion reveals a denial thereof is not prejudicial to the Union v. Bureau of Labor Relations supra] and the inverse application of the
individual rights of its members. They are protected by law. Supreme Court decision in [Philippine Federation of Petroleum Workers v. CIR]
regarding entitlement to the check-off provision of the CBA.
Coming now to the main issues of the case, suffice it to say that after an evaluative
review of the record of the case, taking into consideration the arguments and

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As a necessary consequence to our finding that no valid disaffiliation took place, a non-sequitur to make the intervention of the union in this case dependent on the
the right of NUBE to represent its local chapter at the PNB, less those employees question of whether its members can pursue their own agenda under the same
who are no longer members of the latter, is beyond reproach. constraints.23

However, the Bank cannot be faulted for not releasing union dues to NUBE at the On the validity of PEMA’s disaffiliation, the CA ratiocinated:
time when representation status issue was still being threshed out by proper
governmental authority. Prudence dictates the discontinuance of remittance of The power and freedom of a local union to disaffiliate from its mother union or
union dues to NUBE under such circumstances was a legitimate exercise of federation is axiomatic. As Volkschel vs. Bureau of Labor Relations [137 SCRA 42]
management discretion apparently in order to protect the Bank’s business interest. recognizes, a local union is, after all, a separate and voluntary association that
The suspension of the check-off provision of the CBA, at the instance of the latter under the constitutional guarantee of freedom of expression is free to serve the
made in good faith, under the present circumstances cannot give rise to a right of interests of its members. Such right and freedom invariably include the right to
action. For having been exercised without malice much less evil motive and for not disaffiliate or declare its autonomy from the federation or mother union to which it
causing actual loss to the National Union of Bank Employees (NUBE), the same belongs, subject to reasonable restrictions in the law or the federation’s
act of management [cannot] be penalized.17 constitution. [Malayang Samahan ng mga Manggagawa sa M. Greenfield vs.
Ramos, 326 SCRA 428]
Aggrieved, PEMA filed before the CA a petition under Rule 43 of the Rules on Civil
Procedure with prayer for the issuance of a temporary restraining order (TRO) or Without any restrictive covenant between the parties, [Volkschel Labor Union vs.
writ of preliminary injunction (WPI). On November 2, 2004, the CA denied the Bureau of Labor Relations, supra, at 48,] it is instructive to look into the state of the
application for WPI.18 PEMA’s motion for reconsideration was also denied on law on a union’s right to disaffiliate. The voluntary arbitrator alludes to a provision
February 24, 2005, noting PNB’s manifestation that it would submit to the in PD 1391 allowing disaffiliation only within a 60-day period preceding the
judgment of the CA as to which party it should remit the funds collected from the expiration of the CBA. In Alliance of Nationalist and Genuine Labor Organization
employees.19 vs. Samahan ng mga Manggagawang Nagkakaisa sa Manila Bay Spinning Mills,
etc. [258 SCRA 371], however, the rule was not held to be iron-clad. Volkschel
On June 21, 2005, however, petitioner again filed an Urgent Motion for the was cited to support a more flexible view that the right may be allowed as the
Issuance of a TRO against the June 10, 2005 Resolution of DOLE Acting circumstances warrant. In Associated Workers Union-PTGWO vs. National Labor
Secretary Imson, which ordered PNB to properly issue a check directly payable to Relations Commission [188 SCRA 123], the right to disaffiliate was upheld before
the order of NUBE covering the withheld funds from the trust the onset of the freedom period when it became apparent that there was a shift of
account.20 Considering the different factual milieu, the CA resolved to grant the allegiance on the part of the majority of the union members.
motion.21
xxxx
Subsequent to the parties’ submission of memoranda, the CA promulgated its May
22, 2006 Decision, declaring the validity of PEMA’s disaffiliation from NUBE and As the records show, a majority, indeed a vast majority, of the members of the
directing PNB to return to the employees concerned the amounts deducted and local union ratified the action of the board to disaffiliate. Our count of the members
held in trust for NUBE starting July 2003 and to stop further deductions in favor of who approved the board action is, 2,638. If we divide this by the number of eligible
NUBE.22 voters as per the certification election which is 3,742, the quotient is 70.5%,
representing the proportion of the members in favor of disaffiliation. The [PEMA]
As to the impropriety of denying PEMA’s motion for intervention, the CA noted: says that the action was ratified by 81%. Either way, the groundswell of support for
the measure was overwhelming.
x x x Among the rights of the [PEMA] as an affiliate of a federation is to disaffiliate
from it. Any case in which this is an issue is then one in which the union has a The respondent NUBE has developed the ingenious theory that if the disaffiliation
significant legal interest and as to which it must be heard, irrespective of any was approved by a majority of the members, it was neutered by the subsequent
residual rights of the members after a decision that might deny a disaffiliation. It is certification election in which NUBE-PNB Chapter was voted the sole and

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exclusive bargaining agent. It is argued that the effects of this change must be VI.
upheld as the latest expression of the will of the employees in the bargaining unit.
The truth of the matter is that the names of PEMA and NUBE-PNB Chapter are PEMA and NUBE are not one and the same, and the denial by the Secretary of
names of only one entity, the two sides of the same coin. We have seen how Labor of the motion for intervention was proper.
NUBE-PNB Employees Chapter evolved into PEMA and competed with
Philnabank Employees Association-FFW for supremacy in the certification
VII.
election. To realize that it was PEMA which entered into the contest, we need only
to remind ourselves that PEMA was the one which filed a motion in the certification
election case to have its name PEMA put in the official ballot. DOLE insisted, NUBE-PNB Chapter, not PEMA, has been fighting for PNB rank-and-file interests
however, in putting the name NUBE-PNB Chapter in the ballots unaware of the and rights since PNB’s privatization, which is further pro of that NUBE-PNB
implications of this seemingly innocuous act.24 Chapter and PEMA are not one and the same.

NUBE filed a motion for reconsideration, but it was denied;25 hence, this petition VIII.
raising the following issues for resolution:
The alleged disaffiliation was not valid as proper procedure was not followed.
I.
IX.
The Secretary of Labor acted without error and without grave abuse of discretion in
not giving due course to the urgent motion for intervention filed by PEMA. NUBE is entitled to check-off.26

II. Stripped of the non-essential, the issue ultimately boils down on whether PEMA
validly disaffiliated itself from NUBE, the resolution of which, in turn, inevitably
The Secretary of Labor acted without grave abuse of discretion and without affects the latter’s right to collect the union dues held in trust by PNB.
serious error in ruling that PEMA’s alleged disaffiliation was invalid.
We deny the petition.
III.
Whether there was a valid disaffiliation is a factual issue.27 It is elementary that a
The Secretary of Labor did not commit serious error in ordering the release of the question of fact is not appropriate for a petition for review on certiorari under Rule
disputed union fees/dues to NUBE-PNB Chapter. 45 of the Rules of Court. The parties may raise only questions of law because the
Supreme Court is not a trier of facts. As a general rule, We are not duty-bound to
analyze again and weigh the evidence introduced in and considered by the
IV.
tribunals below. When supported by substantial evidence, the findings of fact of the
CA are conclusive and binding on the parties and are not reviewable by this Court,
There is no substantial basis for the issuance of a preli minary injunction or except: (1) When the conclusion is a finding grounded entirely on speculation,
temporary restraining order. surmises and conjectures; (2) When the inference made is manifestly mistaken,
absurd or impossible; (3) Where there is a grave abuse of discretion; (4) When the
V. judgment is based on a misapprehension of facts; (5) When the findings of fact are
conflicting; (6) When the CA, in making its findings, went beyond the issues of the
Under the Rules of Court, the appeal/petition of PEMA should have been case and the same is contrary to the admissions of both parties; (7) When the
dismissed. findings are contrary to those of the trial court; (8) When the findings of fact are
conclusions without citation of specific evidence on which they are based; (9)
When the facts set forth in the petition as well as in the petitioner’s main and reply

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briefs are not disputed by the respondents; and (10) When the findings of fact of members. The sole essence of affiliation is to increase, by collective action, the
the CA are premised on the supposed absence of evidence and contradicted by common bargaining power of local unions for the effective enhancement and
the evidence on record.28The Court finds no cogent reason to apply these protection of their interests. Admittedly, there are times when without succor and
recognized exceptions. support local unions may find it hard, unaided by other support groups, to secure
justice for themselves.
Even a second look at the records reveals that the arguments raised in the petition
are bereft of merit. Yet the local unions remain the basic units of association, free to serve their own
interests subject to the restraints imposed by the constitution and by-laws of the
The right of the local union to exercise the right to disaffiliate from its mother union national federation, and free also to renounce the affiliation upon the terms laid
is well settled in this jurisdiction. In MSMG-UWP v. Hon. Ramos,29 We held: down in the agreement which brought such affiliation into existence.

A local union has the right to disaffiliate from its mother union or declare its Such dictum has been punctiliously followed since then.32
autonomy. A local union, being a separate and voluntary association, is free to
serve the interests of all its members including the freedom to disaffiliate or declare And again, in Coastal Subic Bay Terminal, Inc. v. Department of Labor and
its autonomy from the federation which it belongs when circumstances warrant, in Employment – Office of the Secretary,33this Court opined:
accordance with the constitutional guarantee of freedom of association.
Under the rules implementing the Labor Code, a chartered local union acquires
The purpose of affiliation by a local union with a mother union [or] a federation legal personality through the charter certificate issued by a duly registered
federation or national union, and reported to the Regional Office in accordance
"x x x is to increase by collective action the bargaining power in respect of the with the rules implementing the Labor Code. A local union does not owe its
terms and conditions of labor. Yet the locals remained the basic units of existence to the federation with which it is affiliated. It is a separate and distinct
association, free to serve their own and the common interest of all, subject to the voluntary association owing its creation to the will of its members. Mere affiliation
restraints imposed by the Constitution and By-Laws of the Association, and free does not divest the local union of its own personality, neither does it give the
also to renounce the affiliation for mutual welfare upon the terms laid down in the mother federation the license to act independently of the local union. It only gives
agreement which brought it into existence." rise to a contract of agency, where the former acts in representation of the latter.
Hence, local unions are considered principals while the federation is deemed to be
merely their agent. As such principals, the unions are entitled to exercise the rights
Thus, a local union which has affiliated itself with a federation is free to sever such
affiliation anytime and such disaffiliation cannot be considered disloyalty. In the and privileges of a legitimate labor organization, including the right to seek
certification as the sole and exclusive bargaining agent in the appropriate employer
absence of specific provisions in the federation's constitution prohibiting
unit.34
disaffiliation or the declaration of autonomy of a local union, a local may dissociate
with its parent union.30
Finally, the recent case of Cirtek Employees Labor Union-Federation of Free
Likewise, Philippine Skylanders, Inc. v. National Labor Relations Workers v. Cirtek Electronics, Inc35ruled:
Commission31 restated:
x x x [A] local union may disaffiliate at any time from its mother federation, absent
any showing that the same is prohibited under its constitution or rule. Such,
The right of a local union to disaffiliate from its mother federation is not a novel
thesis unillumined by case law.1âwphi1 In the landmark case of Liberty Cotton however, does not result in it losing its legal personality altogether. Verily, Anglo-
Mills Workers Union vs. Liberty Cotton Mills, Inc., we upheld the right of local KMU v. Samahan Ng Mga Manggagawang Nagkakaisa Sa Manila Bar Spinning
Mills At J.P. Coats enlightens:
unions to separate from their mother federation on the ground that as separate and
voluntary associations, local unions do not owe their creation and existence to the
national federation to which they are affiliated but, instead, to the will of their A local labor union is a separate and distinct unit primarily designed to secure and
maintain an equality of bargaining power between the employer and their

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employee-members. A local union does not owe its existence to the federation with showing their unequivocal support for the disaffiliation of PEMA from NUBE. Note
which it is affiliated. It is a separate and distinct voluntary association owing its must be taken of the fact that the list of PEMA members (identifying themselves as
creation to the will of its members. The mere act of affiliation does not divest the "PEMA-Serrana Group"41) who agreed with the board resolution was attached as
local union of its own personality, neither does it give the mother federation the Annex "H" of PEMA’s petition before the CA and covered pages 115 to 440 of the
license to act independently of the local union. It only gives rise to a contract of CA rollo. While fully displaying the employees’ printed name, identification number,
agency where the former acts in representation of the latter.36 branch, position, and signature, the list was left unchallenged by NUBE. No
evidence was presented that the union members’ ratification was obtained by
These and many more have consistently reiterated the earlier view that the right of mistake or through fraud, force or intimidation. Surely, this is not a case where one
the local members to withdraw from the federation and to form a new local union or two members of the local union decided to disaffiliate from the mother
depends upon the provisions of the union's constitution, by-laws and charter and, federation, but one where more than a majority of the local union members
in the absence of enforceable provisions in the federation's constitution preventing decided to disaffiliate.
disaffiliation of a local union, a local may sever its relationship with its parent. 37 In
the case at bar, there is nothing shown in the records nor is it claimed by NUBE Consequently, by PEMA's valid disaffiliation from NUBE, the vinculum that
that PEMA was expressly forbidden to disaffiliate from the federation nor were previously bound the two entities was completely severed. As NUBE was divested
there any conditions imposed for a valid breakaway. This being so, PEMA is not of any and all power to act in representation of PEMA, any act performed by the
precluded to disaffiliate from NUBE after acquiring the status of an independent former that affects the interests and affairs of the latter, including the supposed
labor organization duly registered before the DOLE. expulsion of Serrana et al., is rendered without force and effect.

Also, there is no merit on NUBE’s contention that PEMA’s disaffiliation is invalid for Also, in effect, NUBE loses it right to collect all union dues held in its trust by PNB.
non-observance of the procedure that union members should make such The moment that PEMA separated from and left NUBE and exists as an
determination through secret ballot and after due deliberation, conformably with independent labor organization with a certificate of registration, the former is no
Article 241 (d) of the Labor Code, as amended.38 Conspicuously, other than citing longer obliged to pay dues and assessments to the latter; naturally, there would be
the opinion of a "recognized labor law authority," NUBE failed to quote a specific no longer any reason or occasion for PNB to continue making deductions. 42 As we
provision of the law or rule mandating that a local union’s disaffiliation from a said in Volkschel Labor Union v. Bureau of Labor Relations:43
federation must comply with Article 241 (d) in order to be valid and effective.
x x x In other words, ALUMETAL [NUBE in this case] is entitled to receive the dues
Granting, for argument’s sake, that Article 241 (d) is applicable, still, We uphold from respondent companies as long as petitioner union is affiliated with it and
PEMA’s disaffiliation from NUBE. First, non-compliance with the procedure on respondent companies are authorized by their employees (members of petitioner
disaffiliation, being premised on purely technical grounds cannot rise above the union) to deduct union dues. Without said affiliation, the employer has no link to
employees’ fundamental right to self-organization and to form and join labor the mother union. The obligation of an employee to pay union dues is coterminous
organizations of their own choosing for the purpose of collective with his affiliation or membership. "The employees' check-off authorization, even if
bargaining.39 Second, the Article nonetheless provides that when the nature of the declared irrevocable, is good only as long as they remain members of the union
organization renders such secret ballot impractical, the union officers may make concerned." A contract between an employer and the parent organization as
the decision in behalf of the general membership. In this case, NUBE did not even bargaining agent for the employees is terminated bv the disaffiliation ofthe local of
dare to contest PEMA’s representation that "PNB employees, from where [PEMA] which the employees are members. x x x44
[derives] its membership, are scattered from Aparri to Jolo, manning more than
300 branches in various towns and cities of the country," hence, "[to] gather the On the other hand, it was entirely reasonable for PNB to enter into a CBA with
general membership of the union in a general membership to vote through secret PEMA as represented by Serrana et al. Since PEMA had validly separated itself
balloting is virtually impossible."40 It is understandable, therefore, why PEMA’s from NUBE, there would be no restrictions which could validly hinder it from
board of directors merely opted to submit for ratification of the majority their collectively bargaining with PNB.
resolution to disaffiliate from NUBE. Third, and most importantly, NUBE did not
dispute the existence of the persons or their due execution of the document

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WHEREFORE, the foregoing considered, the instant Petition is DENIED. The May labor organization certified as the sole and exclusive bargaining agent of the
22, 2006 Decision and August 17, 2006 Resolution of the Court of Appeals in CA- proposed bargaining unit within one year prior to the filing of the petition. 6 Among
G.R. SP No. 84606, which reversed the May 27, 2004 Decision ofthe Secretary of the documents attached to the petition were the certificate of affiliation with Pinag-
Labor and Employment, are AFFIRMED. Isang Tinig at Lakas ng Anakpawis Kristiyanong Alyansa ng Makabayang Obrero
(PIGLAS-KAMAO) issued by the Bureau of Labor Relations (BLR), charter
SO ORDERED. certificate issued by PIGLASKAMAO, and certificate of registration of HCCS-TELU
as a legitimate labor organization issued by the DOLE.7

In its Comment8 and Position Paper,9 petitioner HCCS consistently noted that it is
a parochial school with a total of 156 employees as of June 28, 2002, broken down
G.R. No. 179146 July 23, 2013 as follows: ninety-eight (98) teaching personnel, twenty-five (25) non-teaching
academic employees, and thirty-three (33) non-teaching non-academic workers. It
HOLY CHILD CATHOLIC SCHOOL, Petitioner, averred that of the employees who signed to support the petition, fourteen (14)
vs. already resigned and six (6) signed twice. Petitioner raised that members of private
HON. PATRICIA STO. TOMAS, in her official capacity as Secretary of the respondent do not belong to the same class; it is not only a mixture of managerial,
Department of Labor and Employment, and PINAG-ISANG TINIG AT LAKAS supervisory, and rank-and-file employees – as three (3) are vice-principals, one (1)
NG ANAKPAWIS – HOLY CHILD CATHOLIC SCHOOL TEACHERS AND is a department head/supervisor, and eleven (11) are coordinators – but also a
EMPLOYEES LABOR UNION (HCCS-TELU-PIGLAS), Respondents. combination of teaching and non-teaching personnel – as twenty-seven (27) are
non-teaching personnel. It insisted that, for not being in accord with Article 24510 of
DECISION the Labor Code, private respondent is an illegitimate labor organization lacking in
personality to file a petition for certification election, as held in Toyota Motor
PERALTA, J.: Philippines Corporation v. Toyota Motor Philippines Corporation Labor
Union;11 and an inappropriate bargaining unit for want of community or mutuality of
interest, as ruled in Dunlop Slazenger (Phils.), Inc. v. Secretary of Labor and
Assailed in this petition for review on certiorari under Rule 45 of the Rules of Civil
Employment12 and De La Salle University Medical Center and College of Medicine
Procedure are the April 18, 2007 Decision1 and July 31, 2007 Resolution2 of the
v. Laguesma.13
Court of Appeals in CA-G.R. SP No. 76175, which affirmed the December 27,
2002 Decision3 and February 13, 2003 Resolution4 of the Secretary of the
Department of Labor and Employment (SOLE) that set aside the August 10, 2002 Private respondent, however, countered that petitioner failed to substantiate its
Decision5 of the Med-Arbiter denying private respondent’s petition for certification claim that some of the employees included in the petition for certification election
election. holds managerial and supervisory positions.14 Assuming it to be true, it argued that
Section 11 (II),15 Rule XI of DOLE Department Order (D.O.) No. 9, Series of 1997,
provided for specific instances in which a petition filed by a legitimate organization
The factual antecedents are as follows:
shall be dismissed by the Med-Arbiter and that "mixture of employees" is not one
of those enumerated. Private respondent pointed out that questions pertaining to
On May 31, 2002, a petition for certification election was filed by private qualifications of employees may be threshed out in the inclusion-exclusion
respondent Pinag-Isang Tinig at Lakas ng Anakpawis – Holy Child Catholic School proceedings prior to the conduct of the certification election, pursuant to Section
Teachers and Employees Labor Union (HCCS-TELUPIGLAS), alleging that: 2,16 Rule XII of D.O. No. 9. Lastly, similar to the ruling in In Re: Globe Machine and
PIGLAS is a legitimate labor organization duly registered with the Department of Stamping Company,17 it contended that the will of petitioner’s employees should
Labor and Employment (DOLE) representing HCCS-TELU-PIGLAS; HCCS is a be respected as they had manifested their desire to be represented by only one
private educational institution duly registered and operating under Philippine laws; bargaining unit. To back up the formation of a single employer unit, private
there are approximately one hundred twenty (120) teachers and employees respondent asserted that even if the teachers may receive additional pay for an
comprising the proposed appropriate bargaining unit; and HCCS is unorganized, advisory class and for holding additional loads, petitioner’s academic and non-
there is no collective bargaining agreement or a duly certified bargaining agent or a academic personnel have similar working conditions. It cited Laguna College v.

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Court of Industrial Relations,18 as well as the case of a union in West Negros We agree with the Med-Arbiter that there are differences in the nature of work,
College in Bacolod City, which allegedly represented both academic and non- hours and conditions of work and salary determination between the teaching and
academic employees. non-teaching personnel of petitioner. These differences were pointed out by
petitioner in its position paper. We do not, however, agree with the Med-Arbiter
On August 10, 2002, Med-Arbiter Agatha Ann L. Daquigan denied the petition for that these differences are substantial enough to warrant the dismissal of the
certification election on the ground that the unit which private respondent sought to petition. First, as pointed out by private respondent, "inappropriateness of the
represent is inappropriate. She resolved: bargaining unit sought to be represented is not a ground for the dismissal of the
petition." In fact, in the cited case of University of the Philippines v. Ferrer-Calleja,
A certification election proceeding directly involves two (2) issues namely: (a) the supra, the Supreme Court did not order the dismissal of the petition but ordered
the conduct of a certification election, limiting the same among the non-academic
proper composition and constituency of the bargaining unit; and (b) the validity of
personnel of the University of the Philippines.
majority representation claims. It is therefore incumbent upon the Med-Arbiter to
rule on the appropriateness of the bargaining unit once its composition and
constituency is questioned. It will be recalled that in the U.P. case, there were two contending unions, the
Organization of Non-Academic Personnel of U.P. (ONAPUP) and All U.P. Workers
Union composed of both academic and nonacademic personnel of U.P. ONAPUP
Section 1 (q), Rule I, Book V of the Omnibus Rules defines a "bargaining unit" as a
sought the conduct of certification election among the rank-and-file non-academic
group of employees sharing mutual interests within a given employer unit
personnel only while the all U.P. Workers Union sought the conduct of certification
comprised of all or less than all of the entire body of employees in the employer
election among all of U.P.’s rank-and-file employees covering academic and
unit or any specific occupational or geographical grouping within such employer
unit. This definition has provided the "community or mutuality of interest" test as nonacademic personnel. While the Supreme Court ordered a separate bargaining
the standard in determining the constituency of a collective bargaining unit. This is unit for the U.P. academic personnel, the Court, however, did not order them to
organize a separate labor organization among themselves. The All U.P. Workers
so because the basic test of an asserted bargaining unit’s acceptability is whether
Union was not directed to divest itself of its academic personnel members and in
or not it is fundamentally the combination which will best assure to all employees
fact, we take administrative notice that the All U.P. Workers Union continue to exist
the exercise of their collective bargaining rights. The application of this test may
with a combined membership of U.P. academic and non-academic personnel
either result in the formation of an employer unit or in the fragmentation of an
employer unit. although separate bargaining agreements is sought for the two bargaining units.
Corollary, private respondent can continue to exist as a legitimate labor
organization with the combined teaching and non-teaching personnel in its
In the case at bar, the employees of petitioner, may, as already suggested, quite membership and representing both classes of employees in separate bargaining
easily be categorized into (2) general classes: one, the teaching staff; and two, the negotiations and agreements.
non-teaching-staff. Not much reflection is needed to perceive that the community
or mutuality of interest is wanting between the teaching and the non-teaching staff.
WHEREFORE, the Decision of the Med-Arbiter dated 10 August 2002 is hereby
It would seem obvious that the teaching staff would find very little in common with
REVERSED and SET ASIDE. In lieu thereof, a new order is hereby issued
the non-teaching staff as regards responsibilities and function, working conditions,
directing the conduct of two certification elections, one among the non-teaching
compensation rates, social life and interests, skills and intellectual pursuits, etc.
personnel of Holy Child Catholic School, and the other, among the teaching
These are plain and patent realities which cannot be ignored. These dictate the
separation of these two categories of employees for purposes of collective personnel of the same school, subject to the usual pre-election conferences and
bargaining. (University of the Philippines vs. Ferrer-Calleja, 211 SCRA 451)19 inclusion-exclusion proceedings, with the following choices:

A. Certification Election Among Petitioner’s Teaching Personnel:


Private respondent appealed before the SOLE, who, on December 27, 2002, ruled
against the dismissal of the petition and directed the conduct of two separate
certification elections for the teaching and the non-teaching personnel, thus: 1. Holy Child Catholic School Teachers and Employees Labor
Union; and

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2. No Union. x x x While it may be true that they wield power over other subordinate employees
of the petitioner, it must be stressed, however, that their functions are not confined
B. Certification Election Among Petitioner’s Non-Teaching Personnel: with policy-determining such as hiring, firing, and disciplining of employees,
salaries, teaching/working hours, other monetary and non-monetary benefits, and
other terms and conditions of employment. Further, while they may formulate
1. Holy Child Catholic School Teachers and Employees Labor
policies or guidelines, nonetheless, such is merely recommendatory in nature, and
Union; and
still subject to review and evaluation by the higher executives, i.e., the principals or
executive officers of the petitioner. It cannot also be denied that in institutions like
2. No Union. the petitioner, company policies have already been pre-formulated by the higher
executives and all that the mentioned employees have to do is carry out these
Petitioner is hereby directed to submit to the Regional Office of origin within ten company policies and standards. Such being the case, it is crystal clear that there
(10) days from receipt of this Decision, a certified separate list of its teaching and is no improper commingling of members in the private respondent union as to
non-teaching personnel or when necessary a separate copy of their payroll for the preclude its petition for certification of (sic) election.33
last three (3) months prior to the issuance of this Decision.20
Anent the alleged mixture of teaching and non-teaching personnel, the CA agreed
Petitioner filed a motion for reconsideration21 which, per Resolution dated February with petitioner that the nature of the former’s work does not coincide with that of
13, 2003, was denied. Consequently, petitioner filed before the CA a Petition for the latter. Nevertheless, it ruled that the SOLE did not commit grave abuse of
Certiorari with Prayer for Temporary Restraining Order and Preliminary discretion in not dismissing the petition for certification election, since it directed
Injunction.22 The CA resolved to defer action on the prayer for TRO pending the the conduct of two separate certification elections based on Our ruling in University
filing of private respondent’s Comment.23 Later, private respondent and petitioner of the Philippines v. Ferrer-Calleja.34
filed their Comment24 and Reply,25 respectively.
A motion for reconsideration35 was filed by petitioner, but the CA denied the
On July 23, 2003, petitioner filed a motion for immediate issuance of a TRO, same;36 hence, this petition assigning the alleged errors as follows:
alleging that Hon. Helen F. Dacanay of the Industrial Relations Division of the
DOLE was set to implement the SOLE Decision when it received a summons and I.
was directed to submit a certified list of teaching and non-teaching personnel for
the last three months prior to the issuance of the assailed Decision.26 Acting
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE
thereon, on August 5, 2003, the CA issued the TRO and ordered private
respondent to show cause why the writ of preliminary injunction should not be RULING IN THE CASE OF TOYOTA MOTOR PHILIPPINES CORPORATION VS.
TOYOTA MOTOR PHILIPPINES CORPORATION LABOR UNION (268 SCRA
granted.27 Subsequently, a Manifestation and Motion28 was filed by private
573) DOES NOT APPLY IN THE CASE AT BAR DESPITE THE [COMMINGLING]
respondent, stating that it repleads by reference the arguments raised in its
OF BOTH SUPERVISORY OR MANAGERIAL AND RANK-AND-FILE
Comment and that it prays for the immediate lifting of the TRO and the denial of
EMPLOYEES IN THE RESPONDENT UNION;
the preliminary injunction. The CA, however, denied the manifestation and motion
on November 21, 200329 and, upon motion of petitioner,30 granted the preliminary
injunction on April 21, 2005.31 Thereafter, both parties filed their respective II
Memorandum.32
THE HONORABLE COURT OF APPEALS ERRED IN ITS CONFLICTING
On April 18, 2007, the CA eventually dismissed the petition. As to the purported RULING ALLOWING THE CONDUCT OF CERTIFICATION ELECTION BY
commingling of managerial, supervisory, and rank-and-file employees in private UPHOLDING THAT THE RESPONDENT UNION REPRESENTED A
respondent’s membership, it held that the Toyota ruling is inapplicable because the BARGAINING UNIT DESPITE ITS OWN FINDINGS THAT THERE IS NO
vice-principals, department head, and coordinators are neither supervisory nor MUTUALITY OF INTEREST BETWEEN THE MEMBERS OF RESPONDENT
managerial employees. It reasoned: UNION APPLYING THE TEST LAID DOWN IN THE CASE OF UNIVERSITY OF
THE PHILIPPINES VS. FERRER-CALLEJA (211 SCRA 451).37

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We deny. union.43 Indeed, the demand of the law and policy for an employer to take a strict,
hands-off stance in certification elections is based on the rationale that the
Petitioner claims that the CA contradicted the very definition of managerial and employees’ bargaining representative should be chosen free from any extraneous
supervisory employees under existing law and jurisprudence when it did not influence of the management; that, to be effective, the bargaining representative
classify the vice-principals, department head, and coordinators as managerial or must owe its loyalty to the employees alone and to no other.44
supervisory employees merely because the policies and guidelines they formulate
are still subject to the review and evaluation of the principal or executive officers of Now, going back to petitioner’s contention, the issue of whether a petition for
petitioner. It points out that the duties of the vice-principals, department head, and certification election is dismissible on the ground that the labor organization’s
coordinators include the evaluation and assessment of the effectiveness and membership allegedly consists of supervisory and rank-and-file employees is
capability of the teachers under them; that such evaluation and assessment is actually not a novel one. In the 2008 case of Republic v. Kawashima Textile Mfg.,
independently made without the participation of the higher Administration of Philippines, Inc.,45 wherein the employer-company moved to dismiss the petition
petitioner; that the fact that their recommendation undergoes the approval of the for certification election on the ground inter alia that the union membership is a
higher Administration does not take away the independent nature of their mixture of rank-and-file and supervisory employees, this Court had conscientiously
judgment; and that it would be difficult for the vice-principals, department head, discussed the applicability of Toyota and Dunlop in the context of R.A. No. 6715
and coordinators to objectively assess and evaluate the performances of teachers and D.O. No. 9, viz.:
under them if they would be allowed to be members of the same labor union.
It was in R.A. No. 875, under Section 3, that such questioned mingling was first
On the other hand, aside from reiterating its previous submissions, private prohibited, to wit:
respondent cites Sections 9 and 1238 of Republic Act (R.A.) No. 9481 to buttress
its contention that petitioner has no standing to oppose the petition for certification Sec. 3. Employees' right to self-organization. - Employees shall have the right to
election. On the basis of the statutory provisions, it reasons that an employer is not self-organization and to form, join or assist labor organizations of their own
a party-in-interest in a certification election; thus, petitioner does not have the choosing for the purpose of collective bargaining through representatives of their
requisite right to protect even by way of restraining order or injunction. own choosing and to engage in concerted activities for the purpose of collective
bargaining and other mutual aid or protection. Individuals employed as supervisors
First off, We cannot agree with private respondent’s invocation of R.A. No. 9481. shall not be eligible for membership in a labor organization of employees under
Said law took effect only on June 14, 2007; hence, its applicability is limited to their supervision but may form separate organizations of their own. (Emphasis
labor representation cases filed on or after said date. 39 Instead, the law and rules supplied)
in force at the time private respondent filed its petition for certification election on
May 31, 2002 are R.A. No. 6715, which amended Book V of Presidential Decree Nothing in R.A. No. 875, however, tells of how the questioned mingling can affect
(P.D.) No. 442 (the Labor Code), as amended, and the Rules and Regulations the legitimacy of the labor organization. Under Section 15, the only instance when
Implementing R.A. No. 6715, as amended by D.O. No. 9, which was dated May 1, a labor organization loses its legitimacy is when it violates its duty to bargain
1997 but took effect on June 21, 1997.40 collectively; but there is no word on whether such mingling would also result in loss
of legitimacy. Thus, when the issue of whether the membership of two supervisory
However, note must be taken that even without the express provision of Section 12 employees impairs the legitimacy of a rank-and-file labor organization came before
of RA No. 9481, the "Bystander Rule" is already well entrenched in this jurisdiction. the Court En Banc in Lopez v. Chronicle Publication Employees Association, the
It has been consistently held in a number of cases that a certification election is the majority pronounced:
sole concern of the workers, except when the employer itself has to file the petition
pursuant to Article 259 of the Labor Code, as amended, but even after such filing It may be observed that nothing is said of the effect of such ineligibility upon the
its role in the certification process ceases and becomes merely a bystander. 41 The union itself or on the status of the other qualified members thereof should such
employer clearly lacks the personality to dispute the election and has no right to prohibition be disregarded. Considering that the law is specific where it intends to
interfere at all therein.42 This is so since any uncalled-for concern on the part of the divest a legitimate labor union of any of the rights and privileges granted to it by
employer may give rise to the suspicion that it is batting for a company law, the absence of any provision on the effect of the disqualification of one of its

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organizers upon the legality of the union, may be construed to confine the effect of Sec. 18. Article 245 of the same Code, as amended, is hereby further amended to
such ineligibility only upon the membership of the supervisor. In other words, the read as follows:
invalidity of membership of one of the organizers does not make the union illegal,
where the requirements of the law for the organization thereof are, nevertheless, Art. 245. Ineligibility of managerial employees to join any labor organization; right
satisfied and met. (Emphasis supplied) of supervisory employees. Managerial employees are not eligible to join, assist or
form any labor organization. Supervisory employees shall not be eligible for
Then the Labor Code was enacted in 1974 without reproducing Sec. 3 of R.A. No. membership in a labor organization of the rank-and-file employees but may join,
875. The provision in the Labor Code closest to Sec. 3 is Article 290, which is assist or form separate labor organizations of their own (Emphasis supplied)
deafeningly silent on the prohibition against supervisory employees mingling with
rank-and-file employees in one labor organization. Even the Omnibus Rules Unfortunately, just like R.A. No. 875, R.A. No. 6715 omitted specifying the exact
Implementing Book V of the Labor Code (Omnibus Rules) merely provides in effect any violation of the prohibition would bring about on the legitimacy of a labor
Section 11, Rule II, thus: organization.

Sec. 11. Supervisory unions and unions of security guards to cease operation. - All It was the Rules and Regulations Implementing R.A. No. 6715 (1989 Amended
existing supervisory unions and unions of security guards shall, upon the effectivity Omnibus Rules) which supplied the deficiency by introducing the following
of the Code, cease to operate as such and their registration certificates shall be amendment to Rule II (Registration of Unions):
deemed automatically cancelled. However, existing collective agreements with
such unions, the life of which extends beyond the date of effectivity of the Code Sec. 1. Who may join unions. - x x x Supervisory employees and security guards
shall be respected until their expiry date insofar as the economic benefits granted shall not be eligible for membership in a labor organization of the rank-and-file
therein are concerned.
employees but may join, assist or form separate labor organizations of their own;
Provided, that those supervisory employees who are included in an existing rank-
Members of supervisory unions who do not fall within the definition of managerial and-file bargaining unit, upon the effectivity of Republic Act No. 6715, shall remain
employees shall become eligible to join or assist the rank and file organization. in that unit x x x. (Emphasis supplied)
The determination of who are managerial employees and who are not shall be the
subject of negotiation between representatives of supervisory union and the
and Rule V (Representation Cases and Internal-Union Conflicts) of the Omnibus
employer. If no agreement s reached between the parties, either or both of them
Rules, viz.;
may bring the issue to the nearest Regional Office for determination. (Emphasis
supplied)
Sec. 1. Where to file. - A petition for certification election may be filed with the
Regional Office which has jurisdiction over the principal office of the employer. The
The obvious repeal of the last clause of Sec. 3, R.A. No. 875 prompted the Court
petition shall be in writing and under oath.
to declare in Bulletin v. Sanchez that supervisory employees who do not fall under
the category of managerial employees may join or assist in the formation of a labor
organization for rank-and-file employees, but they may not form their own labor Sec. 2. Who may file. - Any legitimate labor organization or the employer, when
organization. requested to bargain collectively, may file the petition.

While amending certain provisions of Book V of the Labor Code, E.O. No. 111 and The petition, when filed by a legitimate labor organization, shall contain, among
its implementing rules continued to recognize the right of supervisory employees, others:
who do not fall under the category of managerial employees, to join a rank- and-file
labor organization. xxxx

Effective 1989, R.A. No. 6715 restored the prohibition against the questioned (c) description of the bargaining unit which shall be the employer unit unless
mingling in one labor organization, viz.: circumstances otherwise require; and provided further, that the appropriate

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bargaining unit of the rank-and-file employees shall not include supervisory But then, on June 21, 1997, the 1989 Amended Omnibus Rules was further
employees and/or security guards. (Emphasis supplied) amended by Department Order No. 9, series of 1997 (1997 Amended Omnibus
Rules). Specifically, the requirement under Sec. 2(c) of the 1989 Amended
By that provision, any questioned mingling will prevent an otherwise legitimate and Omnibus Rules - that the petition for certification election indicate that the
duly registered labor organization from exercising its right to file a petition for bargaining unit of rank-and-file employees has not been mingled with supervisory
certification election. employees - was removed. Instead, what the 1997 Amended Omnibus Rules
requires is a plain description of the bargaining unit, thus:
Thus, when the issue of the effect of mingling was brought to the fore in Toyota,
the Court, citing Article 245 of the Labor Code, as amended by R.A. No. 6715, Rule XI
held: Certification Elections

Clearly, based on this provision, a labor organization composed of both rank-and- xxxx
file and supervisory employees is no labor organization at all. It cannot, for any
guise or purpose, be a legitimate labor organization. Not being one, an Sec. 4. Forms and contents of petition. - The petition shall be in writing and under
organization which carries a mixture of rank-and-file and supervisory employees oath and shall contain, among others, the following: x x x (c) The description of the
cannot possess any of the rights of a legitimate labor organization, including the bargaining unit."
right to file a petition for certification election for the purpose of collective
bargaining. It becomes necessary, therefore, anterior to the granting of an order In Pagpalain Haulers, Inc. v. Trajano, the Court had occasion to uphold the validity
allowing a certification election, to inquire into the composition of any labor of the 1997 Amended Omnibus Rules, although the specific provision involved
organization whenever the status of the labor organization is challenged on the therein was only Sec. 1, Rule VI, to wit:
basis of Article 245 of the Labor Code.
Sec. 1. Chartering and creation of a local/chapter.- A duly registered federation or
xxxx national union may directly create a local/chapter by submitting to the Regional
Office or to the Bureau two (2) copies of the following: a) a charter certificate
In the case at bar, as respondent union's membership list contains the names of at issued by the federation or national union indicating the creation or establishment
least twenty-seven (27) supervisory employees in Level Five positions, the union of the local/chapter; (b) the names of the local/chapter's officers, their addresses,
could not, prior to purging itself of its supervisory employee members, attain the and the principal office of the local/chapter; and (c) the local/ chapter's constitution
status of a legitimate labor organization. Not being one, it cannot possess the and by-laws; provided that where the local/chapter's constitution and by-laws is the
requisite personality to file a petition for certification election. (Emphasis supplied) same as that of the federation or national union, this fact shall be indicated
accordingly.
In Dunlop, in which the labor organization that filed a petition for certification
election was one for supervisory employees, but in which the membership included All the foregoing supporting requirements shall be certified under oath by the
rank-and-file employees, the Court reiterated that such labor organization had no Secretary or the Treasurer of the local/chapter and attested to by its President.
legal right to file a certification election to represent a bargaining unit composed of
supervisors for as long as it counted rank-and-file employees among its members. which does not require that, for its creation and registration, a local or chapter
submit a list of its members.
It should be emphasized that the petitions for certification election involved in
Toyota and Dunlop were filed on November 26, 1992 and September 15, 1995, Then came Tagaytay Highlands Int'l. Golf Club, Inc. v. Tagaytay Highlands
respectively; hence, the 1989 Rules was applied in both cases. Employees Union-PTGWO in which the core issue was whether mingling affects
the legitimacy of a labor organization and its right to file a petition for certification
election. This time, given the altered legal milieu, the Court abandoned the view in

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Toyota and Dunlop and reverted to its pronouncement in Lopez that while there is hence, the 1989 Rules and Regulations Implementing R.A. No. 6715 (1989
a prohibition against the mingling of supervisory and rank-and-file employees in Amended Omnibus Rules) was applied. In contrast, D.O. No. 9 is applicable in the
one labor organization, the Labor Code does not provide for the effects thereof. petition for certification election of private respondent as it was filed on May 31,
Thus, the Court held that after a labor organization has been registered, it may 2002.
exercise all the rights and privileges of a legitimate labor organization. Any
mingling between supervisory and rank-and-file employees in its membership Following the doctrine laid down in Kawashima and SMCC-Super, it must be
cannot affect its legitimacy for that is not among the grounds for cancellation of its stressed that petitioner cannot collaterally attack the legitimacy of private
registration, unless such mingling was brought about by misrepresentation, false respondent by praying for the dismissal of the petition for certification election:
statement or fraud under Article 239 of the Labor Code.
Except when it is requested to bargain collectively, an employer is a mere
In San Miguel Corp. (Mandaue Packaging Products Plants) v. Mandaue Packing bystander to any petition for certification election; such proceeding is non-
Products Plants-San Miguel Packaging Products-San Miguel Corp. Monthlies adversarial and merely investigative, for the purpose thereof is to determine which
Rank-and-File Union-FFW, the Court explained that since the 1997 Amended organization will represent the employees in their collective bargaining with the
Omnibus Rules does not require a local or chapter to provide a list of its members, employer. The choice of their representative is the exclusive concern of the
it would be improper for the DOLE to deny recognition to said local or chapter on employees; the employer cannot have any partisan interest therein; it cannot
account of any question pertaining to its individual members. interfere with, much less oppose, the process by filing a motion to dismiss or an
appeal from it; not even a mere allegation that some employees participating in a
More to the point is Air Philippines Corporation v. Bureau of Labor Relations, which petition for certification election are actually managerial employees will lend an
involved a petition for cancellation of union registration filed by the employer in employer legal personality to block the certification election. The employer's only
1999 against a rank-and-file labor organization on the ground of mixed right in the proceeding is to be notified or informed thereof.
membership: the Court therein reiterated its ruling in Tagaytay Highlands that the
inclusion in a union of disqualified employees is not among the grounds for The amendments to the Labor Code and its implementing rules have buttressed
cancellation, unless such inclusion is due to misrepresentation, false statement or that policy even more.49
fraud under the circumstances enumerated in Sections (a) and (c) of Article 239 of
the Labor Code.
Further, the determination of whether union membership comprises managerial
and/or supervisory employees is a factual issue that is best left for resolution in the
All said, while the latest issuance is R.A. No. 9481, the 1997 Amended Omnibus inclusion-exclusion proceedings, which has not yet happened in this case so still
Rules, as interpreted by the Court in Tagaytay Highlands, San Miguel and Air premature to pass upon. We could only emphasize the rule that factual findings of
Philippines, had already set the tone for it. Toyota and Dunlop no longer hold sway labor officials, who are deemed to have acquired expertise in matters within their
in the present altered state of the law and the rules.46 jurisdiction, are generally accorded not only with respect but even finality by the
courts when supported by substantial evidence.50 Also, the jurisdiction of this Court
When a similar issue confronted this Court close to three years later, the above in cases brought before it from the CA via Rule 45 is generally limited to reviewing
ruling was substantially quoted in Samahang Manggagawa sa Charter Chemical errors of law or jurisdiction. The findings of fact of the CA are conclusive and
Solidarity of Unions in the Philippines for Empowerment and Reforms (SMCC- binding. Except in certain recognized instances,51 We do not entertain factual
Super) v. Charter Chemical and Coating Corporation. 47 In unequivocal terms, We issues as it is not Our function to analyze or weigh evidence all over again; the
reiterated that the alleged inclusionof supervisory employees in a labor evaluation of facts is best left to the lower courts and administrative
organization seeking to represent the bargaining unit of rank-and-file employees agencies/quasi-judicial bodies which are better equipped for the task.52
does not divest it of its status as a legitimate labor organization.48
Turning now to the second and last issue, petitioner argues that, in view of the
Indeed, Toyota and Dunlop no longer hold true under the law and rules governing improper mixture of teaching and non-teaching personnel in private respondent
the instant case. The petitions for certification election involved in Toyota and due to the absence of mutuality of interest among its members, the petition for
Dunlop were filed on November 26, 1992 and September 15, 1995, respectively; certification election should have been dismissed on the ground that private

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respondent is not qualified to file such petition for its failure to qualify as a acceptability is whether or not it is fundamentally the combination which will best
legitimate labor organization, the basic qualification of which is the representation assure to all employees the exercise of their collective bargaining rights." 57
of an appropriate bargaining unit.
As the SOLE correctly observed, petitioner failed to comprehend the full import of
We disagree. Our ruling in U.P. It suffices to quote with approval the apt disposition of the SOLE
when she denied petitioner’s motion for reconsideration:
The concepts of a union and of a legitimate labor organization are different from,
but related to, the concept of a bargaining unit: Petitioner likewise claimed that we erred in interpreting the decision of the
Supreme Court in U.P. v. Ferrer-Calleja, supra. According to petitioner, the
Article 212(g) of the Labor Code defines a labor organization as "any union or Supreme Court stated that the non-academic rank-andfile employees of the
association of employees which exists in whole or in part for the purpose of University of the Philippines shall constitute a bargaining unit to the exclusion of
collective bargaining or of dealing with employers concerning terms and conditions the academic employees of the institution. Hence, petitioner argues, it sought the
of employment." Upon compliance with all the documentary requirements, the creation of separate bargaining units, namely: (1) petitioner’s teaching personnel to
Regional Office or Bureau shall issue in favor of the applicant labor organization a the exclusion of non-teaching personnel; and (2) petitioner’s non-teaching
certificate indicating that it is included in the roster of legitimate labor personnel to the exclusion of teaching personnel.
organizations. Any applicant labor organization shall acquire legal personality and
shall be entitled to the rights and privileges granted by law to legitimate labor Petitioner appears to have confused the concepts of membership in a bargaining
organizations upon issuance of the certificate of registration.53 unit and membership in a union. In emphasizing the phrase "to the exclusion of
academic employees" stated in U.P. v. Ferrer-Calleja, petitioner believed that the
In case of alleged inclusion of disqualified employees in a union, the proper petitioning union could not admit academic employees of the university to its
procedure for an employer like petitioner is to directly file a petition for cancellation membership. But such was not the intention of the Supreme Court.
of the union’s certificate of registration due to misrepresentation, false statement or
fraud under the circumstances enumerated in Article 239 of the Labor Code, as A bargaining unit is a group of employees sought to be represented by a
amended.54 To reiterate, private respondent, having been validly issued a petitioning union. Such employees need not be members of a union seeking the
certificate of registration, should be considered as having acquired juridical conduct of a certification election. A union certified as an exclusive bargaining
personality which may not be attacked collaterally. agent represents not only its members but also other employees who are not union
members. As pointed out in our assailed Decision, there were two contending
On the other hand, a bargaining unit has been defined as a "group of employees of unions in the U.P. case, namely, the Organization of Non-Academic Personnel of
a given employer, comprised of all or less than all of the entire body of employees, U.P. (ONAPUP) and the All U.P. Worker’s Union composed of both U.P. academic
which the collective interests of all the employees, consistent with equity to the and non-academic personnel. ONAPUP sought the conduct of a certification
employer, indicated to be best suited to serve reciprocal rights and duties of the election among the rank-and-file non-academic personnel only, while the All U.P.
parties under the collective bargaining provisions of the law."55 In determining the Workers Union intended to cover all U.P. rank-and-file employees, involving both
proper collective bargaining unit and what unit would be appropriate to be the academic and non-academic personnel.
collective bargaining agency, the Court, in the seminal case of Democratic Labor
Association v. Cebu Stevedoring Company, Inc.,56 mentioned several factors that The Supreme Court ordered the "non-academic rank-and-file employees of U.P. to
should be considered, to wit: (1) will of employees (Globe Doctrine); (2) affinity and constitute a bargaining unit to the exclusion of the academic employees of the
unity of employees' interest, such as substantial similarity of work and duties, or institution", but did not order them to organize a separate labor organization. In the
similarity of compensation and working conditions; (3) prior collective bargaining U.P. case, the Supreme Court did not dismiss the petition and affirmed the order
history; and (4) employment status, such as temporary, seasonal and probationary for the conduct of a certification election among the non-academic personnel of
employees. We stressed, however, that the test of the grouping is community or U.P., without prejudice to the right of the academic personnel to constitute a
mutuality of interest, because "the basic test of an asserted bargaining unit's separate bargaining unit for themselves and for the All U.P. Workers Union to
institute a petition for certification election.

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In the same manner, the teaching and non-teaching personnel of petitioner school Our review is, therefore, limited to the determination of whether the CA correctly
must form separate bargaining units.1âwphi1 Thus, the order for the conduct of resolved the presence or absence of grave abuse of discretion in the decision of
two separate certification elections, one involving teaching personnel and the other the SOLE, not on the basis of whether the latter's decision on the merits of the
involving non-teaching personnel. It should be stressed that in the subject petition, case was strictly correct. Whether the CA committed grave abuse of discretion is
private respondent union sought the conduct of a certification election among all not what is ruled upon but whether it correctly determined the existence or want of
the rank-and-file personnel of petitioner school. Since the decision of the Supreme grave abuse of discretion on the part of the SOLE.
Court in the U.P. case prohibits us from commingling teaching and non-teaching
personnel in one bargaining unit, they have to be separated into two separate WHEREFORE, the pet1t1on is DENIED. The April 18, 2007 Decision and July 31,
bargaining units with two separate certification elections to determine whether the 2007, Resolution of the Court of Appeals in CA-G.R. SP No. 76175, which affirmed
employees in the respective bargaining units desired to be represented by private the December 27, 2002 Decision of the Secretary of the Department of Labor and
respondent. In the U.P. case, only one certification election among the non- Employment that set aside the
academic personnel was ordered, because ONAPUP sought to represent that
bargaining unit only. No petition for certification election among the academic
August 10, 2002 Decision of the Med-Arbiter denying private respondent's petition
personnel was instituted by All U.P. Workers Union in the said case; thus, no for certification election are hereby AFFIRMED.
certification election pertaining to its intended bargaining unit was ordered by the
Court.58
SO ORDERED.
Indeed, the purpose of a certification election is precisely to ascertain the majority
of the employees’ choice of an appropriate bargaining unit – to be or not to be
represented by a labor organization and, if in the affirmative case, by which one. 59
G.R. No. 170054 January 21, 2013
At this point, it is not amiss to stress once more that, as a rule, only questions of
law may be raised in a Rule 45 petition. In Montoya v. Transmed Manila GOYA, INC., Petitioner,
Corporation,60 the Court discussed the particular parameters of a Rule 45 appeal vs.
from the CA’s Rule 65 decision on a labor case, as follows: GOYA, INC. EMPLOYEES UNION-FFW, Respondent.

x x x In a Rule 45 review, we consider the correctness of the assailed CA decision, DECISION


in contrast with the review for jurisdictional error that we undertake under Rule 65.
Furthermore, Rule 45 limits us to the review of questions of law raised against the PERALTA, J.:
assailed CA decision. In ruling for legal correctness, we have to view the CA
decision in the same context that the petition for certiorari it ruled upon was
This petition for review on certiorari under Rule 45 of the Rules of Civil Procedure
presented to it; we have to examine the CA decision from the prism of whether it
seeks to reverse and set aside the June 16, 2005 Decision1 and October 12, 2005
correctly determined the presence or absence of grave abuse of discretion in the
Resolution2 of the Court of Appeals in CA-G.R. SP No. 87335, which sustained the
NLRC decision before it, not on the basis of whether the NLRC decision on the
October 26, 2004 Decision3 of Voluntary Arbitrator Bienvenido E. Laguesma, the
merits of the case was correct. In other words, we have to be keenly aware that
dispositive portion of which reads:
the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. This is the approach that should be basic in a Rule 45 review
of a CA ruling in a labor case. In question form, the question to ask is: Did the CA WHEREFORE, judgment is hereby rendered declaring that the Company is NOT
correctly determine whether the NLRC committed grave abuse of discretion in guilty of unfair labor practice in engaging the services of PESO.
ruling on the case?61

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The company is, however, directed to observe and comply with its commitment as (b) Regular Employee. – An employee who has satisfactorily completed his
it pertains to the hiring of casual employees when necessitated by business probationary period and automatically granted regular employment status in the
circumstances.4 Company.

The facts are simple and appear to be undisputed. (c) Casual Employee, – One hired by the Company to perform occasional or
seasonal work directly connected with the regular operations of the Company, or
Sometime in January 2004, petitioner Goya, Inc. (Company), a domestic one hired for specific projects of limited duration not connected directly with the
corporation engaged in the manufacture, importation, and wholesale of top quality regular operations of the Company.
food products, hired contractual employees from PESO Resources Development
Corporation (PESO) to perform temporary and occasional services in its factory in It was averred that the categories of employees had been a part of the CBA since
Parang, Marikina City. This prompted respondent Goya, Inc. Employees Union– the 1970s and that due to this provision, a pool of casual employees had been
FFW (Union) to request for a grievance conference on the ground that the maintained by the Company from which it hired workers who then became regular
contractual workers do not belong to the categories of employees stipulated in the workers when urgently necessary to employ them for more than a year. Likewise,
existing Collective Bargaining Agreement (CBA).5 When the matter remained the Company sometimes hired probationary employees who also later became
unresolved, the grievance was referred to the National Conciliation and Mediation regular workers after passing the probationary period. With the hiring of contractual
Board (NCMB) for voluntary arbitration. employees, the Union contended that it would no longer have probationary and
casual employees from which it could obtain additional Union members; thus,
During the hearing on July 1, 2004, the Company and the Union manifested before rendering inutile Section 1, Article III (Union Security) of the CBA, which states:
Voluntary Arbitrator (VA) Bienvenido E. Laguesma that amicable settlement was
no longer possible; hence, they agreed to submit for resolution the solitary issue of Section 1. Condition of Employment. – As a condition of continued employment in
"[w]hether or not the Company is guilty of unfair labor acts in engaging the the Company, all regular rank-and-file employees shall remain members of the
services of PESO, a third party service provider, under the existing CBA, laws, and Union in good standing and that new employees covered by the appropriate
jurisprudence."6 Both parties thereafter filed their respective pleadings. bargaining unit shall automatically become regular employees of the Company and
shall remain members of the Union in good standing as a condition of continued
The Union asserted that the hiring of contractual employees from PESO is not a employment.
management prerogative and in gross violation of the CBA tantamount to unfair
labor practice (ULP). It noted that the contractual workers engaged have been The Union moreover advanced that sustaining the Company’s position would
assigned to work in positions previously handled by regular workers and Union easily weaken and ultimately destroy the former with the latter’s resort to
members, in effect violating Section 4, Article I of the CBA, which provides for retrenchment and/or retirement of employees and not filling up the vacant regular
three categories of employees in the Company, to wit: positions through the hiring of contractual workers from PESO, and that a possible
scenario could also be created by the Company wherein it could "import" workers
Section 4. Categories of Employees.– The parties agree on the following from PESO during an actual strike.
categories of employees:
In countering the Union’s allegations, the Company argued that: (a) the law
(a) Probationary Employee. – One hired to occupy a regular rank-and-file position expressly allows contracting and subcontracting arrangements through
in the Company and is serving a probationary period. If the probationary employee Department of Labor and Employment (DOLE) Order No. 18-02; (b) the
is hired or comes from outside the Company (non-Goya, Inc. employee), he shall engagement of contractual employees did not, in any way, prejudice the Union,
be required to undergo a probationary period of six (6) months, which period, in the since not a single employee was terminated and neither did it result in a reduction
sole judgment of management, may be shortened if the employee has already of working hours nor a reduction or splitting of the bargaining unit; and (c) Section
acquired the knowledge or skills required of the job. If the employee is hired from 4, Article I of the CBA merely provides for the definition of the categories of
the casual pool and has worked in the same position at any time during the past employees and does not put a limitation on the Company’s right to engage the
two (2) years, the probationary period shall be three (3) months.

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services of job contractors or its management prerogative to address employees when necessitated by business circumstances. Professing that such
temporary/occasional needs in its operation. order was not covered by the sole issue submitted for voluntary arbitration, the
Company assigned the following errors:
On October 26, 2004, VA Laguesma dismissed the Union’s charge of ULP for
being purely speculative and for lacking in factual basis, but the Company was THE HONORABLE VOLUNTARY ARBITRATOR EXCEEDED HIS POWER
directed to observe and comply with its commitment under the CBA. The VA WHICH WAS EXPRESSLY GRANTED AND LIMITED BY BOTH PARTIES IN
opined: RULING THAT THE ENGAGEMENT OF PESO IS NOT IN KEEPING WITH THE
INTENT AND SPIRIT OF THE CBA.10
We examined the CBA provision Section 4, Article I of the CBAallegedly violated
by the Company and indeed the agreement prescribes three (3) categories of THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED A PATENT AND
employees in the Company and provides for the definition, functions and duties of PALPABLE ERROR IN DECLARING THAT THE ENGAGEMENT OF PESO IS
each. Material to the case at hand is the definition as regards the functions of a NOT IN KEEPING WITH THE INTENT AND SPIRIT OF THE CBA.11
casual employee described as follows:
On June 16, 2005, the CA dismissed the petition. In dispensing with the merits of
Casual Employee – One hired by the COMPANY to perform occasional or the controversy, it held:
seasonal work directly connected with the regular operations of the COMPANY, or
one hired for specific projects of limited duration not connected directly with the This Court does not find it arbitrary on the part of the Hon. Voluntary Arbitrator in
regular operations of the COMPANY. ruling that "the engagement of PESO is not in keeping with the intent and spirit of
the CBA." The said ruling is interrelated and intertwined with the sole issue to be
While the foregoing agreement between the parties did eliminate management’s resolved that is, "Whether or not the Company is guilty of unfair labor practice in
prerogative of outsourcing parts of its operations, it serves as a limitation on such engaging the services of PESO, a third party service provider, under existing CBA,
prerogative particularly if it involves functions or duties specified under the laws, and jurisprudence." Both issues concern the engagement of PESO by the
aforequoted agreement. It is clear that the parties agreed that in the event that the Company which is perceived as a violation of the CBA and which constitutes as
Company needs to engage the services of additional workers who will perform unfair labor practice on the part of the Company. This is easily discernible in the
"occasional or seasonal work directly connected with the regular operations of the decision of the Hon. Voluntary Arbitrator when it held:
COMPANY," or "specific projects of limited duration not connected directly with the
regular operations of the COMPANY", the Company can hire casual employees x x x x While the engagement of PESO is in violation of Section 4, Article I of the
which is akin to contractual employees. If we note the Company’s own declaration CBA, it does not constitute unfair labor practice as it (sic) not characterized under
that PESO was engaged to perform "temporary or occasional services" (See the the law as a gross violation of the CBA. Violations of a CBA, except those which
Company’s Position Paper, at p. 1), then it should have directly hired the services are gross in character, shall no longer be treated as unfair labor practice. Gross
of casual employees rather than do it through PESO. violations of a CBA means flagrant and/or malicious refusal to comply with the
economic provisions of such agreement. x x x
It is evident, therefore, that the engagement of PESO is not in keeping with the
intent and spirit of the CBA provision in question. It must, however, be stressed Anent the second assigned error, the Company contends that the Hon. Voluntary
that the right of management to outsource parts of its operations is not totally Arbitrator erred in declaring that the engagement of PESO is not in keeping with
eliminated but is merely limited by the CBA. Given the foregoing, the Company’s the intent and spirit of the CBA. The Company justified its engagement of
engagement of PESO for the given purpose is indubitably a violation of the CBA. 7 contractual employees through PESO as a management prerogative, which is not
prohibited by law. Also, it further alleged that no provision under the CBA limits or
While the Union moved for partial reconsideration of the VA Decision,8 the prohibits its right to contract out certain services in the exercise of management
Company immediately filed a petition for review9 before the Court of Appeals (CA) prerogatives.
under Rule 43 of the Revised Rules of Civil Procedure to set aside the directive to
observe and comply with the CBA commitment pertaining to the hiring of casual

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Germane to the resolution of the above issue is the provision in their CBA with Incidentally, on July 16, 2009, the Company filed a Manifestation15 informing this
respect to the categories of the employees: Court that its stockholders and directors unanimously voted to shorten the
Company’s corporate existence only until June 30, 2006, and that the three-year
xxxx period allowed by law for liquidation of the Company’s affairs already expired on
June 30, 2009. Referring to Gelano v. Court of Appeals,16 Public Interest Center,
Inc. v. Elma,17 and Atienza v. Villarosa,18 it urged Us, however, to still resolve the
A careful reading of the above-enumerated categories of employees reveals that
case for future guidance of the bench and the bar as the issue raised herein
the PESO contractual employees do not fall within the enumerated categories of
employees stated in the CBA of the parties. Following the said categories, the allegedly calls for a clarification of a legal principle, specifically, whether the VA is
Company should have observed and complied with the provision of their CBA. empowered to rule on a matter not covered by the issue submitted for arbitration.
Since the Company had admitted that it engaged the services of PESO to perform
temporary or occasional services which is akin to those performed by casual Even if this Court would brush aside technicality by ignoring the supervening event
employees, the Company should have tapped the services of casual employees that renders this case moot and academic19 due to the permanent cessation of the
instead of engaging PESO. Company’s business operation on June 30, 2009, the arguments raised in this
petition still fail to convince Us.
In justifying its act, the Company posits that its engagement of PESO was a
management prerogative. It bears stressing that a management prerogative refers We confirm that the VA ruled on a matter that is covered by the sole issue
to the right of the employer to regulate all aspects of employment, such as the submitted for voluntary arbitration. Resultantly, the CA did not commit serious error
freedom to prescribe work assignments, working methods, processes to be when it sustained the ruling that the hiring of contractual employees from PESO
followed, regulation regarding transfer of employees, supervision of their work, lay- was not in keeping with the intent and spirit of the CBA. Indeed, the opinion of the
off and discipline, and dismissal and recall of work, presupposing the existence of VA is germane to, or, in the words of the CA, "interrelated and intertwined with,"
employer-employee relationship. On the basis of the foregoing definition, the the sole issue submitted for resolution by the parties. This being said, the
Company’s engagement of PESO was indeed a management prerogative. This is Company’s invocation of Sections 4 and 5, Rule IV20 and Section 5, Rule VI21 of
in consonance with the pronouncement of the Supreme Court in the case of Manila the Revised Procedural Guidelines in the Conduct of Voluntary Arbitration
Electric Company vs. Quisumbing where it ruled that contracting out of services is Proceedings dated October 15, 2004 issued by the NCMB is plainly out of order.
an exercise of business judgment or management prerogative.
Likewise, the Company cannot find solace in its cited case of Ludo & Luym
This management prerogative of contracting out services, however, is not without Corporation v. Saornido.22 In Ludo, the company was engaged in the manufacture
limitation. In contracting out services, the management must be motivated by good of coconut oil, corn starch, glucose and related products. In the course of its
faith and the contracting out should not be resorted to circumvent the law or must business operations, it engaged the arrastre services of CLAS for the loading and
not have been the result of malicious arbitrary actions. In the case at bench, the unloading of its finished products at the wharf. The arrastre workers deployed by
CBA of the parties has already provided for the categories of the employees in the CLAS to perform the services needed were subsequently hired, on different dates,
Company’sestablishment. These categories of employees particularly with respect as Ludo’s regular rank-and-file employees. Thereafter, said employees joined
to casual employees serve as limitation to the Company’s prerogative to outsource LEU, which acted as the exclusive bargaining agent of the rank-and-file
parts of its operations especially when hiring contractual employees. As stated employees. When LEU entered into a CBA with Ludo, providing for certain benefits
earlier, the work to be performed by PESO was similar to that of the casual to the employees (the amount of which vary according to the length of service
employees. With the provision on casual employees, the hiring of PESO rendered), it requested to include in its members’ period of service the time during
contractual employees, therefore, is not in keeping with the spirit and intent of their which they rendered arrastre services so that they could get higher benefits. The
CBA. (Citations omitted)12 matter was submitted for voluntary arbitration when Ludo failed to act. Per
submission agreement executed by both parties, the sole issue for resolution was
The Company moved to reconsider the CA Decision,13 but it was denied;14 hence, the date of regularization of the workers. The VA Decision ruled that: (1) the
this petition. subject employees were engaged in activities necessary and desirable to the
business of Ludo, and (2) CLAS is a labor-only contractor of Ludo. It then disposed

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as follows: (a) the complainants were considered regular employees six months leeway of authority as well as adequate prerogative to accomplish the reason for
from the first day of service at CLAS; (b) the complainants, being entitled to the which the law on voluntary arbitration was created – speedy labor justice. It bears
CBA benefits during the regular employment, were awarded sick leave, vacation stressing that the underlying reason why this case arose is to settle, once and for
leave, and annual wage and salary increases during such period; (c) respondents all, the ultimate question of whether respondent employees are entitled to higher
shall pay attorney’s fees of 10% of the total award; and (d) an interest of 12% per benefits. To require them to file another action for payment of such benefits would
annum or 1% per month shall be imposed on the award from the date of certainly undermine labor proceedings and contravene the constitutional mandate
promulgation until fully paid. The VA added that all separation and/or retirement providing full protection to labor.23
benefits shall be construed from the date of regularization subject only to the
appropriate government laws and other social legislation. Ludo filed a motion for Indubitably, Ludo fortifies, not diminishes, the soundness of the questioned VA
reconsideration, but the VA denied it. On appeal, the CA affirmed in toto the Decision. Said case reaffirms the plenary jurisdiction and authority of the voluntary
assailed decision; hence, a petition was brought before this Court raising the issue, arbitrator to interpret the CBA and to determine the scope of his/her own authority.
among others, of whether a voluntary arbitrator can award benefits not claimed in Subject to judicial review, the leeway of authority as well as adequate prerogative
the submission agreement. In denying the petition, We ruled: is aimed at accomplishing the rationale of the law on voluntary arbitration – speedy
labor justice. In this case, a complete and final adjudication of the dispute between
Generally, the arbitrator is expected to decide only those questions expressly the parties necessarily called for the resolution of the related and incidental issue
delineated by the submission agreement. Nevertheless, the arbitrator can assume of whether the Company still violated the CBA but without being guilty of ULP as,
that he has the necessary power to make a final settlement since arbitration is the needless to state, ULP is committed only if there is gross violation of the
final resort for the adjudication of disputes. The succinct reasoning enunciated by agreement.
the CA in support of its holding, that the Voluntary Arbitrator in a labor controversy
has jurisdiction to render the questioned arbitral awards, deserves our Lastly, the Company kept on harping that both the VA and the CA conceded that
concurrence, thus: its engagement of contractual workers from PESO was a valid exercise of
management prerogative. It is confused. To emphasize, declaring that a particular
In general, the arbitrator is expected to decide those questions expressly stated act falls within the concept of management prerogative is significantly different
and limited in the submission agreement. However, since arbitration is the final from acknowledging that such act is a valid exercise thereof. What the VA and the
resort for the adjudication of disputes, the arbitrator can assume that he has the CA correctly ruled was that the Company’s act of contracting out/outsourcing is
power to make a final settlement. Thus, assuming that the submission empowers within the purview of management prerogative. Both did not say, however, that
the arbitrator to decide whether an employee was discharged for just cause, the such act is a valid exercise thereof. Obviously, this is due to the recognition that
arbitrator in this instance can reasonably assume that his powers extended beyond the CBA provisions agreed upon by the Company and the Union delimit the free
giving a yes-or-no answer and included the power to reinstate him with or without exercise of management prerogative pertaining to the hiring of contractual
back pay. employees. Indeed, the VA opined that "the right of the management to outsource
parts of its operations is not totally eliminated but is merely limited by the CBA,"
In one case, the Supreme Court stressed that "xxx the Voluntary Arbitrator had while the CA held that "this management prerogative of contracting out services,
plenary jurisdiction and authority to interpret the agreement to arbitrate and to however, is not without limitation. x x x These categories of employees particularly
determine the scope of his own authority subject only, in a proper case, to the with respect to casual employees serve as limitation to the Company’s prerogative
certiorari jurisdiction of this Court. The Arbitrator, as already indicated, viewed his to outsource parts of its operations especially when hiring contractual employees."
authority as embracing not merely the determination of the abstract question of
whether or not a performance bonus was to be granted but also, in the affirmative A collective bargaining agreement is the law between the parties:
case, the amount thereof.
It is familiar and fundamental doctrine in labor law that the CBA is the law between
By the same token, the issue of regularization should be viewed as two-tiered the parties and they are obliged to comply with its provisions. We said so in Honda
issue. While the submission agreement mentioned only the determination of the Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda:
date or regularization, law and jurisprudence give the voluntary arbitrator enough

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A collective bargaining agreement or CBA refers to the negotiated contract G.R. No. 179001 August 28, 2013
between a legitimate labor organization and the employer concerning wages,
hours of work and all other terms and conditions of employment in a bargaining MZR INDUSTRIES, MARILOU R. QUIROZ AND LEA TIMBAL, PETITIONERS,
unit.1âwphi1 As in all contracts, the parties in a CBA may establish such vs.
stipulations, clauses, terms and conditions as they may deem convenient provided MAJEN COLAMBOT, RESPONDENT.
these are not contrary to law, morals, good customs, public order or public policy.
Thus, where the CBA is clear and unambiguous, it becomes the law between the
DECISION
parties and compliance therewith is mandated by the express policy of the law.
PERALTA, J.:
Moreover, if the terms of a contract, as in a CBA, are clear and leave no doubt
upon the intention of the contracting parties, the literal meaning of their stipulations
shall control. x x x.24 This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court
seeking the reversal of the Decision1dated May 17, 2007 and Resolution2 dated
July 25, 2007 of the Court of Appeals in CA-G.R. SP No. 98445, reversing the
In this case, Section 4, Article I (on categories of employees) of the CBA between
Decision dated October 31, 20063 and Resolution4 dated December 21, 2006 of
the Company and the Union must be read in conjunction with its Section 1, Article
the National Labor Relations Commission (NLRC) which set aside the
III (on union security). Both are interconnected and must be given full force and
Decision5 dated April 28, 2006 of the Labor Arbiter.
effect. Also, these provisions are clear and unambiguous. The terms are explicit
and the language of the CBA is not susceptible to any other interpretation. Hence,
the literal meaning should prevail. As repeatedly held, the exercise of management The facts are as follows:
prerogative is not unlimited; it is subject to the limitations found in law, collective
bargaining agreement or the general principles of fair play and justice 25 Evidently, On February 8, 2000, petitioner Marilou Quiroz, Owner and Vice-President for
this case has one of the restrictions- the presence of specific CBA provisions- Finance and Marketing of MZR, hired respondent Majen Colambot (Colambot) as
unlike in San Miguel Corporation Employees Union-PTGWO v. Bersamira,26 De messenger. Colambot's duties and responsibilities included field, messengerial
Ocampo v. NLRC,27 Asian Alcohol Corporation v. NLRC,28 and Serrano v. and other liaison work.
NLRC29cited by the Company. To reiterate, the CBA is the norm of conduct
between the parties and compliance therewith is mandated by the express policy However, beginning 2002, Colambot's work performance started to deteriorate.
of the law.30 Petitioners issued several memoranda to Colambot for habitual tardiness,
negligence, and violations of office policies.6 He was also given written warnings
WHEREFORE, the petition is DENIED. The assailed June 16, 2005 Decision, as for insubordination committed on August 27, 2003 and September 11-12,
well as the October 12, 2005 Resolution of the Court of Appeals, which sustained 2003;7 on September 16, 2003 for negligence caused by careless handling of
the October 26, 2004 Decision of the Voluntary Arbitrator, are hereby AFFIRMED. confidential office documents;8 on September 22, 2004 for leaving his post without
proper turnover;9 and, on October 4, 2004 for insubordination.10
SO ORDERED.
Petitioners claimed that despite written warnings for repeated tardiness and
insubordination, Colambot failed to mend his ways. Hence, in a
Memorandum11 dated October 25, 2004 issued by petitioner Lea Timbal (Timbal),
MZR's Administrative Manager, Colambot was given a notice of suspension for
insubordination and negligence.

Again, in a Memorandum12 dated November 25, 2004, Colambot was suspended


from November 26, 2004 until December 6, 2004 for insubordination. Allegedly,
Colambot disobeyed and left the office despite clear instructions to stay in the

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office because there was an important meeting in preparation for a very important WHEREFORE, premises considered, respondents are hereby declared guilty of
activity the following day. ILLEGAL DISMISSAL and hereby ORDERED to reinstate complainant to his
former position with full backwages from date of dismissal until actual
Petitioners claimed they waited for Colambot to report back for work on December reinstatement and moral and exemplary damages in the sum of ₱100,000.00 and
7, 2004, but they never heard from him anymore. Later, petitioners were surprised ₱50,000.00, respectively.
to find out that Colambot had filed a complaint for illegal suspension,
underpayment of salaries, overtime pay, holiday pay, rest day, service incentive The computation of the judgment award marked as Annex "A" is part and parcel of
leave and 13th month pay. On December 16, 2004, the complaint was amended to this decision.
illegal dismissal, illegal suspension, underpayment of salaries, holiday pay, service
incentive pay, 13th month pay and separation pay.13 SO ORDERED.16

For his part, Colambot narrated that he worked as a messenger for petitioners The Labor Arbiter held that there was no abandonment as there was no deliberate
since February 2000. That on November 2004, he was directed to take care of the intent on the part of Colambot to sever the employer-employee relationship. The
processing of a document in Roxas Boulevard, Pasay City. When he arrived at the Labor Arbiter likewise noted that Colambot should have been notified to return
office around 6 to 7 o'clock in the evening, he looked for petitioner Quiroz to give back to work, which petitioner failed to do.
the documents. The latter told him to wait for her for a while. When respondent
finally had the chance to talk to Quiroz, she allegedly told him that she is
Aggrieved, petitioners appealed the decision before the NLRC.
dissatisfied already with his work performance. Afterwards, Colambot claimed that
he was made to choose between resigning from the company or the company will
be the one to terminate his services. He said he refused to resign. Colambot On October 31, 2006, the NLRC rendered a Decision, 17 the dispositive portion of
alleged that Quiroz made him sign a memorandum for his suspension, from which reads as follows:
November 26 to December 6, 2004. After affixing his signature, Quiroz told him
that effective December 7, 2004, he is already deemed terminated. Later, on WHEREFORE, premises considered, the appeal filed by respondents is
December 2, 2004, respondent went back to the company to look for Timbal to get GRANTED. The judgment of the Labor Arbiter dated April 28, 2006 is hereby SET
his salary. He claimed that Timbal asked him to turn over his company I.D.14 ASIDE and the Complaint is DISMISSED for lack of merit.

Petitioners, however, insisted that while Colambot was suspended due to SO ORDERED.18
insubordination and negligence, they maintained that they never terminated
Colambot's employment. They added that Colambot's failure to report for work The NLRC pointed out that Colambot's complaint was unsupported by any
since December 7, 2004 without any approved vacation or sick leave constituted evidence and was not even made under oath, thus, lacking in credibility and
abandonment of his work, but they never terminated his employment. Petitioners probative value. The NLRC further believed that Colambot abandoned his work
further emphasized that even with Colambot's filing of the complaint against them, due to his refusal to report for work after his suspension. The failure of MZR to
his employment with MZR has not been terminated. notify Colambot to return back to work is not tantamount to actual dismissal.

Colambot, meanwhile, argued that contrary to petitioners’ claim that he abandoned Colambot filed a motion for reconsideration, but was denied. Thus, via a petition
his job, he claimed that he did not report back to work after the expiration of his for certiorari under Rule 65 of the Rules of Court, raising grave abuse of discretion
suspension on December 6, 2004, because Quiroz told him that his employment as a ground, Colambot appealed before the Court of Appeals and sought that the
was already terminated effective December 7, 2004. Decision dated October 31, 2006 and Resolution dated December 21, 2006 of the
NLRC be reversed and set aside.
On April 28, 2006, the Labor Arbiter rendered a Decision,15 the dispositive portion
of which reads: In the disputed Decision19 dated May 17, 2007, the Court of Appeals granted the
petition and reversed the assailed Decision dated October 31, 2006 and

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Resolution dated December 21, 2006 of the NLRC. The Decision dated April 28, is no dismissal, then there can be no question as to the legality or illegality
2006 of the Labor Arbiter was ordered reinstated with modification that in lieu of thereof.21
reinstatement, petitioners were ordered to pay respondent separation pay
equivalent to one (1) month pay for every year of service in addition to full In the present case, other than Colambot's unsubstantiated allegation of having
backwages. been verbally terminated from his work, there was no evidence presented to show
that he was indeed dismissed from work or was prevented from returning to his
The appellate court ruled that Colambot was illegally dismissed based on the work. In the absence of any showing of an overt or positive act proving that
grounds that: (1) MZR failed to prove abandonment on the part of Colambot, and petitioners had dismissed respondent, the latter's claim of illegal dismissal cannot
(2) MZR failed to serve Colambot with the required written notices of be sustained22 – as the same would be self-serving, conjectural and of no
dismissal.2007. probative value.

Petitioners appealed, but was denied in a Resolution20 dated July 25, 2007. A review of the Notice of Suspension23 dated November 25, 2004 shows that
respondent was merely suspended from work for 6 days, there was, however, no
Thus, via Rule 45 of the Rules of Court, before this Court, petitioners raised the evidence that Colambot was terminated from work. For clarification, we quote:
following issues:
TO : MAJEN COLAMBOT
I
MZR MESSENGER
THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT
COMPLAINANT WAS ILLEGALLY DISMISSED FROM THE SERVICE. FROM : HUMAN RESOURCE DEPT

II DATE : NOV. 25, 2004

THE HONORABLE COURT SERIOUSLY ERRED IN RULING THAT PETITIONER RE : SUSPENSION DUE TO INSUBORDINATION
IS ENTITLED TO SEPARATION PAY AND BACKWAGES.
xxxx
Petitioners argue that they did not terminate the employer-employee relationship
with Colambot. Other than Colambot's self-serving and unverified narration of Cases of insubordination and violations have been filed against you many times.
facts, he failed to present any document showing that he was terminated from We kept on reminding that you should have changed and improved your working
work. Petitioners assert that Colambot abandoned his work when he failed to attitudes because it greatly affects not only your working performance but the
report back to work without an approved vacation or sick leave, thus, he is not company's productivity as well.
entitled to an award of separation pay and backwages.
Your attitude only shows HARD HEADEDNESS AND LACK OF RESPECT TO
RULING YOUR SUPERIORS which in any company cannot tolerate.

While we recognize the rule that in illegal dismissal cases, the employer bears the With these, you are suspended for 6 working days effective November 26, 2004,
burden of proving that the termination was for a valid or authorized cause, in the you will only report on December 7, 2004.
present case, however, the facts and the evidence do not establish a prima facie
case that the employee was dismissed from employment. Before the employer THIS IS OUR LAST WARNING FOR YOU TO IMPROVE, FAILURE TO DO SO
must bear the burden of proving that the dismissal was legal, the employee must MAY MEAN TERMINATION OF YOUR EMPLOYMENT CONTRACT.
first establish by substantial evidence the fact of his dismissal from service. If there

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x x x x24 Neither could the petitioners be blamed for failing to order respondent to return
back to work.1âwphi1 Records show that Colambot immediately filed the complaint
While the same appeared to contain a warning of termination should Colambot fail for illegal dismissal on December 16, 2004,29 or just a few days when he was
to improve his behavior, it is likewise apparent that there was also a specific supposed to report back to work on December 7, 2004. For petitioners to order
instruction for him to report back to work, on December 7, 2004, upon serving his respondent to report back to work, after the latter had already filed a case for
suspension. The subject of the Letter, i.e., "Suspension due to Insubordination," illegal dismissal, would be unsound.
the wordings and content of the letter is a clear-cut notice of suspension, and not a
notice of termination. The notice of suspension may have contained warnings of However, while the Court concurs with the conclusion of the NLRC that there was
termination, but it must be noted that such was conditioned on the ground that – no illegal dismissal, no dismissal having actually taken place, the Court does not
Colambot would fail to improve his attitude/behavior. There were no wordings agree with its findings that Colambot committed abandonment of work.
whatsoever implying actual or constructive dismissal. Thus, Colambot's general
allegation of having been orally dismissed from the service as against the clear In a number of cases,30 this Court consistently held that to constitute abandonment
wordings and intent of the notice of suspension which he signed, we are then of work, two elements must be present: first, the employee must have failed to
inclined to believe that there was no dismissal. report for work or must have been absent without valid or justifiable reason; and
second, there must have been a clear intention on the part of the employee to
In Machica v. Roosevelt Services Center, Inc.,25 this Court sustained the sever the employer-employee relationship manifested by some overt act.
employer's denial as against the employees' categorical assertion of illegal
dismissal. In so ruling, this Court held that: In the instant case, other than Colambot's failure to report back to work after
suspension, petitioners failed to present any evidence which tend to show his
The rule is that one who alleges a fact has the burden of proving it; thus, intent to abandon his work. It is a settled rule that mere absence or failure to report
petitioners were burdened to prove their allegation that respondents dismissed for work is not enough to amount to abandonment of work. There must be a
them from their employment. It must be stressed that the evidence to prove this concurrence of the intention to abandon and some overt acts from which an
fact must be clear, positive and convincing. The rule that the employer bears the employee may be deduced as having no more intention to work.31 On this point,
burden of proof in illegal dismissal cases finds no application here because the the CA was correct when it held that:
respondents deny having dismissed the petitioners.26
Mere absence or failure to report for work, even after notice to return, is not
Hence, as between respondents’ general allegation of having been orally tantamount to abandonment. The burden of proof to show that there was
dismissed from the service vis-a-vis those of petitioners which were found to be unjustified refusal to go back to work rests on the employer. Abandonment is a
substantiated by the sworn statement of foreman Wenifredo, we are persuaded by matter of intention and cannot lightly be presumed from certain equivocal acts. To
the latter. Absent any showing of an overt or positive act proving that petitioners constitute abandonment, there must be clear proof of deliberate and unjustified
had dismissed respondents, the latter’s claim of illegal dismissal cannot be intent to sever the employer-employee relationship. Clearly, the operative act is
sustained. Indeed, a cursory examination of the records reveal no illegal dismissal still the employee’s ultimate act of putting an end to his employment. Furthermore,
to speak of.27 it is a settled doctrine that the filing of a complaint for illegal dismissal is
inconsistent with abandonment of employment. An employee who takes steps to
Moreover, in Abad v. Roselle Cinema,28 we ruled that the substantial evidence protest his dismissal cannot logically be said to have abandoned his work. the filing
proffered by the employer that it had not terminated the employee should not be of such complaint is proof enough of his desire to return to work, thus negating any
ignored on the pretext that the employee would not have filed the complaint for suggestion of abandonment.32
illegal dismissal if he had not really been dismissed. We held that such non
sequitur reasoning cannot take the place of the evidence of both the employer and Suffice it to say that, it is the employer who has the burden of proof to show a
the employee. deliberate and unjustified refusal of the employee to resume his employment
without any intention of returning. It is therefore incumbent upon petitioners to

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ascertain the respondents’ interest or non-interest in the continuance of their The case stemmed from the following facts:
employment. This, petitioners failed to do so.
Respondent was employed by petitioner as bookkeeper. Petitioner's Board of
These circumstances, taken together, the lack of evidence of dismissal and the Directors (the Board) received a letter from a certain Napoleon Gao-ay (Napoleon)
lack of intent on the part of the respondent to abandon his work, the remedy is reporting the alleged immoral coaduct and unbecoming behavior of respondent by
reinstatement but without backwages.33 However, considering that reinstatement is having an illicit relationship with Napoleon’s sister, Thelma G. Palma (Thelma).
no longer applicable due to the strained relationship between the parties and that This prompted the Board to conduct a preliminary investigation.3
Colambot already found another employment, each party must bear his or her own
loss, thus, placing them on equal footing. During the preliminary investigation, the Board received the following evidence of
respondent’s alleged extramarital affair:
Verily, in a case where the employee's failure to work was occasioned neither by
his abandonment nor by a termination, the burden of economic loss is not rightfully 1. Melanie Gao-ay’s (Melanie) sworn statement declaring that sometime in
shifted to the employer; each party must bear his own loss.34 December 1996, respondent slept on the same bed with Thelma in a
boarding house in San Fernando, La Union where she (Melanie) and
WHEREFORE, premises considered and subject to the above disquisitions, the Thelma resided. She personally witnessed the intimacy of respondent and
Decision dated May 1 7, 2007 of the Court of Appeals is hereby REVERSED and Thelma when they engaged in lovemaking as they slept in one room and
SET ASIDE. The Resolution dated October 31, 2006 of the National Labor openly displayed their affection for each other.4
Relations Commission in NLRC NCR CASE No. 00-11-12189-04/ CA No. 049533-
06 is hereby REINSTATED. 2. Rosita Tegon’s (Rosita) sworn statement that on May 23, 1997, she saw
Thelma talk to respondent in petitioner’s office asking him to accompany
SO ORDERED. her in San Fernando, La Union.5

3. Emma Gao-ay Lubrin’s (Emma, Thelma’s sister) interview wherein she


admitted that she and her family confronted Thelma about the alleged
G.R. No. 173489 February 25, 2013 extramarital affair which Thelma allegedly admitted.6

ALILEM CREDIT COOPERATIVE, INC., now known as ALILEM 4. Napoleon’s interview with the Board wherein he claimed that their family
MULTIPURPOSE COOPERATIVE, INC.,Petitioner, tried to convince Thelma to end her extramarital affair with respondent but
vs. instead of complying, she in fact lived together with respondent.7
SALVADOR M. BANDIOLA, JR., Respondent.
The Board decided to form an Ad Hoc Committee to investigate the charges
DECISION against respondent yielding the following additional evidence:

PERALTA, J.: 1. Agustina Boteras’ (Agustina) sworn statement that she witnessed a
confrontation between Thelma and her sister in the latter’s residence
concerning the alleged extramarital affair. At that time, respondent’s wife
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed was allegedly present who in fact pleaded Thelma to end her relationship
by petitioner Alilem Credit Cooperative, Inc. against respondent Salvador M. with respondent but she supposedly said "No way!"8
Bandiola, Jr. assailing the Court of Appeals (CA) Decision1 dated January 16,
2006 and Resolution2 dated July 5, 2006 in CAG. R. SP No. 64554.
2. Milagros Villacorte’s sworn statement that while she was at the Bethany
Hospital in San Fernando, La Union where her husband was confined,

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respondent approached her and asked her to look for Thelma who was Aggrieved, respondent filed a Complaint for Illegal Dismissal against petitioner
then having her class. When he finally found her, respondent and Thelma before the Regional Arbitration Branch of the National Labor Relations
met and talked in the hospital premises.9 Commission (NLRC).19

3. Julienne Marie L. Dalangey’s certification that on August 9 to 10, 1996, On April 30, 1998, the Labor Arbiter (LA) dismissed20 respondent’s complaint for
respondent attended a seminar on Internal Control and Systems Design I lack of merit. The LA concluded that respondent had been or might still be carrying
at the Northern Luzon Federation of Cooperatives and Development on an affair with a married woman. The LA found it unforgiving in the case of a
Center (NORLU) Pension House in Baguio City, together with a lady married employee who sleeps with or has illicit relations with another married
companion whom he introduced as his wife. Apparently, the lady was not person for in such case, the employee sullies not only the reputation of his spouse
his wife because at that time, his wife reported for work in the Municipal and his family but the reputation as well of the spouse of his paramour and the
Hall of Alilem.10 latter’s family.21 As opposed to respondent’s claim that the accusation is a mere
fabrication of some of the directors or cooperative members who were allegedly
Respondent, on the other hand, denied the accusation against him. He, instead, envious of his growing popularity, the LA gave more credence to the testimonies of
claimed that the accusation was a result of the insecurity felt by some members of petitioner’s witnesses who were relatives of Thelma and who had no motive to
the cooperative and of the Board because of his growing popularity owing to his falsely testify because their family reputation was likewise at a risk of being
exemplary record as an employee.11 Thelma executed an affidavit likewise denying tarnished.22 The LA, thus, found respondent to have been validly dismissed from
the allegations of extra-marital affair.12 employment for violation of the cooperative’s Personnel Policy, specifically "the
commission of acts that bring discredit to the cooperative organization, especially,
Meanwhile, on June 7, 1997, the Board received a petition from about fifty but not limited to conviction of any crime, illicit marital affairs, scandalous acts
members of the cooperative asking the relief of respondent due to his illicit affair inimical to established and accepted social mores." The LA also found no violation
of respondent’s right to due process as he was given ample opportunity to defend
with Thelma.13
himself from the accusation against him.23
In its Summary Investigation Report, the Ad Hoc Committee concluded that
respondent was involved in an extra-marital affair with Thelma. On July 10, 1997, On appeal, the NLRC set aside24 the LA decision and rendered a judgment
disposed in this wise:
the Chairman of the Board sent a letter14 to respondent informing him of the
existence of a prima facie case against him for "illicit marital affair, an act that
brings discredit to the cooperative organization and a cause for termination per WHEREFORE, the appealed Decision of the Executive Labor Arbiter is SET
AMPC (Alilem Multi-Purpose Cooperative) Personnel Policy. Respondent was ASIDE. Judgment is hereby rendered:
directed to appear and be present at the AMPC office for a hearing. He was
likewise advised of his right to be assisted by counsel. 1. declaring respondent Alilem Credit Cooperative, Inc. (ACCI) also known
as Alilem Multi-Purpose Cooperative (AMPC) guilty of illegal dismissal for
On the day of the hearing, respondent requested15 for postponement on the the reasons above-discussed;
ground that his lawyer was not available. The request was, however, denied and
the hearing proceeded as scheduled. 2. directing the said respondent to pay complainant Salvador Bandiola, Jr.
full backwages computed from the time of (sic) his wages were withheld
In a Memorandum16 dated July 16, 1997, respondent was informed of Board until finality of this judgment;
Resolution No. 05, series of 199717embodying the Board’s decision to terminate
his services as bookkeeper of petitioner, effective July 31, 1997, without any 3. directing, on account of strained relationship between the parties, the
compensation or benefit except the unpaid balance of his regular salary for above-named respondent to pay complainant, in lieu of reinstatement,
services actually rendered.18 separation pay computed at one (1) month pay for every year of service, a
fraction of six (6) months to be computed as one (1) whole year; [and]

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4. directing respondent to pay complainant ten (10%) percent attorney’s The existence of the Personnel Policy containing provisions on the grounds for
fees based on the total monetary award. termination of employees was not questioned by respondent. In his position paper,
respondent only assailed the effectivity of the policy, as for him as it was amended
SO ORDERED.25 on the same date as the letter-complaints against him. In other words, he claimed
that the policy was amended in order to include therein the ground for his
termination to make sure that he is removed from his position.36
The NLRC found petitioner’s Personnel Policy to be of questionable existence and
validity because it was unnumbered.26 It held that even assuming that respondent
had an extra-marital affair with a married woman, the latter is not his fellow worker We do not subscribe to such an argument.
in petitioner’s business establishment.27 It, thus, concluded that respondent’s
dismissal was not founded on any of the just causes for termination of employment A comparison of petitioner’s old and new Personnel Policies attached by
under Article 282 of the Labor Code, as amended.28 It, likewise, declared that respondent himself to his Position Paper shows that under the old policy, one of
respondent was not afforded his right to his counsel of choice as his request for the grounds for termination of an employee is "commission of acts or
postponement was not allowed.29 Therefore, the NLRC declared respondent’s commission (sic) of duties that bring discredit to the organization,37" while
dismissal from employment illegal, entitling him to the payment of backwages, under the new policy, one of the grounds is the "commission of acts that brings
separation pay, and attorney’s fees.30 (sic) discredit to the cooperative organization, especially, but not limited to,
conviction of any crime, illicit marital affairs, scandalous acts inimical to
Petitioner elevated the matter to the CA, but it failed to obtain a favorable decision. established and accepted social mores."38 Contrary to respondent’s claim, with
The CA found respondent’s dismissal being founded on the serious misconduct he the amendment of the Personnel Policy, petitioner did not create a new ground for
allegedly committed by carrying an illicit relationship with a married the termination of employment to make sure that respondent is removed from his
woman.31 While considering said act a serious misconduct, it refused to consider it position. The quoted ground under the old policy is similar to that provided for in
sufficient to justify respondent’s dismissal, because it was not done in the the new policy. The enumeration containing the specific act of "illicit marital affairs"
performance of his duties as would make him unfit to continue working for is not an additional ground, but an example of an act that brings discredit to the
petitioner.32 Petitioner’s motion for reconsideration was likewise denied in the cooperative. It is merely an interpretation of what petitioner considers as such. It is,
assailed July 5, 2006 resolution. thus, clear from the foregoing that engaging in extra-marital affairs is a ground for
termination of employment not only under the new but even under the old
Personnel Policy of petitioner. The effectivity of the policy as to respondent cannot,
Unsatisfied, petitioner now comes before the Court in this petition for review
on certiorari insisting on the validity of respondent’s dismissal from employment. therefore, be questioned.

We find merit in the petition. To be sure, an employer is free to regulate all aspects of employment. 39 It may
make reasonable rules and regulations for the government of its employees which
become part of the contract of employment provided they are made known to the
It is undisputed that respondent was dismissed from employment for engaging in employee.40 In the event of a violation, an employee may be validly terminated
extramarital affairs, a ground for termination of employment stated in petitioner’s from employment on the ground that an employer cannot rationally be expected to
Personnel Policy. This basis of termination was made known to respondent as retain the employment of a person whose lack of morals, respect and loyalty to his
early as the first communication made by petitioner. In its June 20, 1997 letter, employer, regard for his employer’s rules and application of the dignity and
petitioner directed respondent to explain in writing or personal confrontation why responsibility, has so plainly and completely been bared.41
he should not be terminated for violation of Section 4.1.4 of the Personnel
Policy.33 Respondent merely denied the accusation against him 34 and did not
Applying now the above-discussed ground for termination, we now determine
question the basis of such termination. When the LA was called upon to decide the
illegal dismissal case, it ruled in favor of petitioner and upheld the basis of such whether respondent was properly dismissed from employment. In other words, did
dismissal which is the cited Personnel Policy.1âwphi1 The NLRC, however, petitioner adequately prove that respondent indeed engaged in extra-marital
affairs, an act which petitioner considers as would bring discredit to the
refused to recognize the existence and validity of petitioner’s Personnel Policy on
cooperative?
which the ground for termination was embodied.35

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We answer in the affirmative. conducted a preliminary investigation and even created an Ad Hoc Committee to
investigate the matter. Respondent was directed to explain either in writing or by a
The employer’s evidence consists of sworn statements of either relatives or friends personal confrontation with the Board why he should not be terminated for
of Thelma and respondent. They either had direct personal knowledge of the illicit engaging in illicit affair.46 Not only did petitioner give him the opportunity but
relationship or revealed circumstances indicating the existence of such respondent in fact informed petitioner that he opted to present his side orally47 and
relationship. As aptly observed by the LA: did so as promised when he specifically denied such allegations before the AdHoc
Committee.48 Moreover, respondent was also allowed to peruse the investigation
x x x Moreover, the credibility of the persons who bore witness against him can report prepared by the Ad Hoc Committee and was advised that he was entitled to
hardly be questioned because some of these persons are relatives or friends of assistance of counsel.49 Afterwhich, hearing was conducted. It was only after
thorough investigation and proper notice and hearing to respondent that petitioner
either [respondent] or his lover. In particular, it is hard to see how Napoleon Gao-
decided whether to dismiss the former or not. The decision to terminate
ay, the brother of his lover, Thelma, could have resorted to a lie just to destroy him
respondent from employment was embodied in Board Resolution No. 05, series of
when the same scandal could also result in tarnishing the reputation of his own
1997 a copy of which was furnished respondent.50 With this resolution, respondent
family. The motive of Napoleon in bringing the matter to the attention of the Board
of Directors, after all, was based on ethical grounds – he wanted a stop to the was adequately notified of petitioner’s decision to remove him from his position.
affair because it was a disgrace to the community. Respondent cannot now claim that his right to due process was infringed upon.

WHEREFORE, premises considered, the petition is hereby GRANTED. The Court


There is also no reason to doubt the statement of Melanie Gao-ay, the wife of
of Appeals Decision dated January 16, 2006 and Resolution dated July 5, 2006 in
Napoleon, who witnessed the embarrassing "encounter", to borrow the term she
CA-G.R. SP No. 64554, are SET ASIDE. The Labor Arbiter's Decision dated April
used, between [respondent] and Thelma in her own boarding house.42
30, 1998 in NLRC Case No. RAB-1-08-1144-97 (IS) dismissing respondent
Salvador M. Bandiola, Jr.'s complaint against petitioner Alilem Credit Cooperative,
While respondent’s act of engaging in extra--marital affairs may be considered Inc., Is REINSTATED.
personal to him and does not directly affect the performance of his assigned task
as bookkeeper, aside from the fact that the act was specifically provided for by
petitioner’s Personnel Policy as one of the grounds for termination of employment, SO ORDERED.
said act raised concerns to petitioner as the Board received numerous complaints
and petitions from the cooperative members themselves asking for the removal of
respondent because of his immoral conduct.43

The next question is whether procedural due process was observed in the
termination of respondent’s services. "Before the services of an employee can be
validly terminated, the employer must furnish him two written notices: (a) a written
notice served on the employee specifying the ground or grounds for termination,
and giving the employee reasonable opportunity to explain his side; and (b) a
written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination."44 The employer must inform the employee of the charges against him
and to hear his defenses. A full adversarial proceeding is not necessary as the
parties may be heard through pleadings, written explanations, position papers,
memorandum or oral argument.45

In this case, respondent was adequately afforded the opportunity to defend himself
and explain the accusation against him. Upon receipt of the complaint, petitioner

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G.R. No. 160828 August 9, 2010 PRI has a collective bargaining agreement (CBA) with NAMAPRI-SPFL for a
period of five (5) years from May 22, 1995 until May 22, 2000.
PICOP RESOURCES, INCORPORATED (PRI), Petitioner,
vs. The CBA contained the following union security provisions:
ANACLETO L. TAÑECA, GEREMIAS S. TATO, JAIME N. CAMPOS,
MARTINIANO A. MAGAYON, JOSEPH B. BALGOA, MANUEL G. ABUCAY, Article II- Union Security and Check-Off
MOISES M. ALBARAN, MARGARITO G. ALICANTE, JERRY ROMEO T. AVILA,
LORENZO D. CANON, RAUL P. DUERO, DANILO Y. ILAN, MANUEL M. Section 6. Maintenance of membership.
MATURAN, JR., LUISITO R. POPERA, CLEMENTINO C. QUIMAN, ROBERTO
Q. SILOT, CHARLITO D. SINDAY, REMBERT B. SUZON ALLAN J. TRIMIDAL,
and NAMAPRI-SPFL, Respondents. 6.1 All employees within the appropriate bargaining unit who are
members of the UNION at the time of the signing of this AGREEMENT
shall, as a condition of continued employment by the COMPANY,
DECISION maintain their membership in the UNION in good standing during the
effectivity of this AGREEMENT.
PERALTA, J.:
6.2 Any employee who may hereinafter be employed to occupy a position
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court covered by the bargaining unit shall be advised by the COMPANY that
seeking the reversal of the Decision1dated July 25, 2003 and Resolution2 dated they are required to file an application for membership with the UNION
October 23, 2003 of the Court of Appeals in CA-G.R. SP No. 71760, setting aside within thirty (30) days from the date his appointment shall have been made
the Resolutions dated October 8, 20013 and April 29, 20024 of the National Labor regular.
Relations Commission in NLRC CA No. M-006309-2001 and reinstating the
Decision5 dated March 16, 2001 of the Labor Arbiter. 6.3 The COMPANY, upon the written request of the UNION and after
compliance with the requirements of the New Labor Code, shall give
The facts, as culled from the records, are as follows: notice of termination of services of any employee who shall fail to
fulfill the condition provided in Section 6.1 and 6.2 of this Article, but
On February 13, 2001, respondents Anacleto Tañeca, Loreto Uriarte, Joseph it assumes no obligation to discharge any employee if it has reasonable
Balgoa, Jaime Campos, Geremias Tato, Martiniano Magayon, Manuel Abucay and grounds to believe either that membership in the UNION was not available
fourteen (14) others filed a Complaint for unfair labor practice, illegal dismissal and to the employee on the same terms and conditions generally applicable to
money claims against petitioner PICOP Resources, Incorporated (PRI), Wilfredo other members, or that membership was denied or terminated for reasons
Fuentes (in his capacity as PRI's Vice President/Resident Manager), Atty. Romero other than voluntary resignation or non-payment of regular union dues.
Boniel (in his capacity as PRI's Manager of Legal/Labor), Southern Philippines Separation under the Section is understood to be for cause, consequently,
Federation of Labor (SPFL), Atty. Wilbur T. Fuentes (in his capacity as Secretary the dismissed employee is not entitled to separation benefits provided
General of SPFL), Pascasio Trugillo (in his capacity as Local President of under the New Labor Code and in this AGREEMENT."7
Nagkahiusang Mamumuo sa PICOP Resources, Inc.- SPFL [NAMAPRI-
SPFL]) and Atty. Proculo Fuentes, Jr.6 (in his capacity as National President of On May 16, 2000, Atty. Proculo P. Fuentes (Atty. Fuentes) sent a letter to the
SPFL). management of PRI demanding the termination of employees who allegedly
campaigned for, supported and signed the Petition for Certification Election of the
Respondents were regular rank-and-file employees of PRI and bona fide members Federation of Free Workers Union (FFW) during the effectivity of the CBA.
of Nagkahiusang Mamumuo saPRI Southern Philippines Federation of Labor NAMAPRI-SPFL considered said act of campaigning for and signing the petition
(NAMAPRI-SPFL), which is the collective bargaining agent for the rank-and-file for certification election of FFW as an act of disloyalty and a valid basis for
employees of petitioner PRI. termination for a cause in accordance with its Constitution and By-Laws, and the

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terms and conditions of the CBA, specifically Article II, Sections 6.1 and 6.2 on Respondents alleged that none of them ever withdrew their membership from
Union Security Clause. NAMAPRI-SPFL or submitted to PRI any union dues and check-off
disauthorizations against NAMAPRI-SPFL. They claimed that they continue to
In a letter dated May 23, 2000, Mr. Pascasio Trugillo requested the management remain on record as bona fide members of NAMAPRI-SPFL. They pointed out that
of PRI to investigate those union members who signed the Petition for Certification a patent manifestation of one’s disloyalty would have been the explicit resignation
Election of FFW during the existence of their CBA. NAMAPRI-SPFL, likewise, or withdrawal of membership from the Union accompanied by an advice to
furnished PRI with machine copy of the authorization letters dated March 19, 20 management to discontinue union dues and check-off deductions. They insisted
and 21, 2000, which contained the names and signatures of employees. that mere affixation of signature on such authorization to file a petition for
certification election was not per se an act of disloyalty. They claimed that while it
may be true that they signed the said authorization before the start of the freedom
Acting on the May 16 and May 23, 2000 letters of the NAMAPRI-SPFL, Atty.
period, the petition of FFW was only filed with the DOLE on May 18, 2000, or 58
Romero A. Boniel issued a memorandum addressed to the concerned employees
days after the start of the freedom period.
to explain in writing within 72 hours why their employment should not be
terminated due to acts of disloyalty as alleged by their Union.
Respondents maintained that their acts of signing the authorization signifying
support to the filing of a Petition for Certification Election of FFW was merely
Within the period from May 26 to June 2, 2000, a number of employees who were
prompted by their desire to have a certification election among the rank-and-file
served "explanation memorandum" submitted their explanation, while some did
employees of PRI with hopes of a CBA negotiation in due time; and not to cause
not.
the downfall of NAMAPRI-SPFL.
In a letter dated June 2, 2000, Atty. Boniel endorsed the explanation letters of the
Furthermore, respondents contended that there was lack of procedural due
employees to Atty. Fuentes for evaluation and final disposition in accordance with
process. Both the letter dated May 16, 2000 of Atty. Fuentes and the follow-up
the CBA.
letter dated May 23, 2000 of Trujillo addressed to PRI did not mention their names.
Respondents stressed that NAMAPRI-SPFL merely requested PRI to investigate
After evaluation, in a letter dated July 12, 2000, Atty. Fuentes advised the union members who supported the Petition for Certification Election of FFW.
management of PRI that the Union found the member's explanations to be Respondents claimed that they should have been summoned individually,
unsatisfactory. He reiterated the demand for termination, but only of 46 member- confronted with the accusation and investigated accordingly and from where the
employees, including respondents. Union may base its findings of disloyalty and, thereafter, recommend to
management the termination for causes.1avvphi1
On October 16, 2000, PRI served notices of termination for causes to the 31 out of
the 46 employees whom NAMAPRIL-SPFL sought to be terminated on the ground Respondents, likewise, argued that at the time NAMAPRI-SPFL demanded their
of "acts of disloyalty" committed against it when respondents allegedly supported termination, it was no longer the bargaining representative of the rank-and-file
and signed the Petition for Certification Election of FFW before the "freedom workers of PRI, because the CBA had already expired on May 22, 2000. Hence,
period" during the effectivity of the CBA. A Notice dated October 21, 2000 was there could be no justification in PRI’s act of dismissing respondents due to acts of
also served on the Department of Labor and Employment Office (DOLE), Caraga disloyalty.
Region.
Respondents asserted that the act of PRI, Wilfredo Fuentes and Atty. Boniel in
Respondents then accused PRI of Unfair Labor Practice punishable under Article giving in to the wishes of the Union in discharging them on the ground of disloyalty
248 (a), (b), (c), (d) and (e) of the Labor Code, while Atty. Fuentes and Wilbur T. to the Union amounted to interference with, restraint or coercion of respondents’
Fuentes and Pascasio Trujillo were accused of violating Article 248 (a) and (b) of exercise of their right to self-organization. The act indirectly required petitioners to
the Labor Code. support and maintain their membership with NAMAPRI-SPFL as a condition for
their continued employment. The acts of NAMAPRI-SPFL, Atty. Fuentes and

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Trujillo amounted to actual restraint and coercion of the petitioners in the exercise WHETHER AN EXISTING COLLECTIVELY (sic) BARGAINING AGREEMENT
of their rights to self-organization and constituted acts of unfair labor practice. (CBA) CAN BE GIVEN ITS FULL FORCE AND EFFECT IN ALL ITS TERMS AND
CONDITION INCLUDING ITS UNION SECURITY CLAUSE, EVEN BEYOND THE
In a Decision8 dated March 16, 2001, the Labor Arbiter declared the respondents’ 5-YEAR PERIOD WHEN NO NEW CBA HAS YET BEEN ENTERED INTO.
dismissal to be illegal and ordered PRI to reinstate respondents to their former or
equivalent positions without loss of seniority rights and to jointly and solidarily pay II
their backwages. The dispositive portion of which reads:
WHETHER OR NOT AN HONEST ERROR IN THE INTERPRETATION AND/OR
WHEREFORE, premises considered, judgment is hereby entered: CONCLUSION OF LAW FALL WITHIN THE AMBIT OF THE EXTRAORDINARY
REMEDY OF CERTIORARI UNDER RULE 65, REVISED RULES OF COURT.10
1. Declaring complainants’ dismissal illegal; and
We will first delve on the technical issue raised.
2. Ordering respondents Picop Resources Inc. (PRI) and NAMAPRI-SPFL
to reinstate complainants to their former or equivalent positions without PRI perceived a patent error in the mode of appeal elected by respondents for the
loss of seniority rights and to jointly and solidarily pay their backwages in purpose of assailing the decision of the NLRC. It claimed that assuming that the
the total amount of ₱420,339.30 as shown in the said Annex "A" plus NLRC erred in its judgment on the legal issues, its error, if any, is not tantamount
damages in the amount of ₱10,000.00 each, or a total of ₱210,000.00 and to abuse of discretion falling within the ambit of Rule 65.
attorney’s fees equivalent to 10% of the total monetary award.
Petitioner is mistaken.
SO ORDERED.9
The power of the Court of Appeals to review NLRC decisions via Rule 65 or
PRI and NAMAPRI-SPFL appealed to the National Labor Relations Commission Petition for Certiorari has been settled as early as in our decision in St. Martin
(NLRC), which reversed the decision of the Labor Arbiter; thus, declaring the Funeral Home v. National Labor Relations Commission.11 This Court held that the
dismissal of respondents from employment as legal. proper vehicle for such review was a Special Civil Action for Certiorari under Rule
65 of the Rules of Court, and that this action should be filed in the Court of Appeals
Respondents filed a motion for reconsideration, but it was denied on April 29, 2001 in strict observance of the doctrine of the hierarchy of courts.12 Moreover, it is
for lack of merit. already settled that under Section 9 of Batas Pambansa Blg. 129, as amended by
Republic Act No. 7902[10] (An Act Expanding the Jurisdiction of the Court of
Appeals, amending for the purpose of Section Nine of Batas Pambansa Blg. 129
Unsatisfied, respondents filed a petition for certiorari under Rule 65 before the
as amended, known as the Judiciary Reorganization Act of 1980), the Court of
Court of Appeals and sought the nullification of the Resolution of the NLRC dated
October 8, 2001 which reversed the Decision dated March 16. 2001 of Labor Appeals – pursuant to the exercise of its original jurisdiction over Petitions
for Certiorari – is specifically given the power to pass upon the evidence, if and
Arbiter and the Resolution dated April 29, 2002, which denied respondent’s motion
when necessary, to resolve factual issues. 13
for reconsideration.

We now come to the main issue of whether there was just cause to terminate the
On July 25, 2003, the Court of Appeals reversed and set aside the assailed
Resolutions of the NLRC and reinstated the Decision dated March 16, 2001 of the employment of respondents.
Labor Arbiter.
PRI argued that the dismissal of the respondents was valid and legal. It claimed to
have acted in good faith at the instance of the incumbent union pursuant to the
Thus, before this Court, PRI, as petitioner, raised the following issues:
Union Security Clause of the CBA.
I

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Citing Article 253 of the Labor Code,14 PRI contends that as parties to the CBA, However, as to the third requisite, we find that there is no sufficient evidence to
they are enjoined to keep the status quo and continue in full force and effect the support the decision of PRI to terminate the employment of the respondents.
terms and conditions of the existing CBA during the 60-day period and/or until a
new agreement is reached by the parties. PRI alleged that respondents were terminated from employment based on the
alleged acts of disloyalty they committed when they signed an authorization for the
Petitioner's argument is untenable. Federation of Free Workers (FFW) to file a Petition for Certification Election among
all rank-and-file employees of PRI. It contends that the acts of respondents are a
"Union security" is a generic term, which is applied to and comprehends "closed violation of the Union Security Clause, as provided in their Collective Bargaining
shop," "union shop," "maintenance of membership," or any other form of Agreement.
agreement which imposes upon employees the obligation to acquire or retain
union membership as a condition affecting employment. There is union shop when We are unconvinced.
all new regular employees are required to join the union within a certain period as
a condition for their continued employment. There is maintenance of membership We are in consonance with the Court of Appeals when it held that the mere signing
shop when employees, who are union members as of the effective date of the of the authorization in support of the Petition for Certification Election of FFW on
agreement, or who thereafter become members, must maintain union membership March 19, 20 and 21, or before the "freedom period," is not sufficient ground to
as a condition for continued employment until they are promoted or transferred out terminate the employment of respondents inasmuch as the petition itself was
of the bargaining unit, or the agreement is terminated. A closed shop, on the other actually filed during the freedom period. Nothing in the records would show that
hand, may be defined as an enterprise in which, by agreement between the respondents failed to maintain their membership in good standing in the Union.
employer and his employees or their representatives, no person may be employed Respondents did not resign or withdraw their membership from the Union to which
in any or certain agreed departments of the enterprise unless he or she is, they belong. Respondents continued to pay their union dues and never joined the
becomes, and, for the duration of the agreement, remains a member in good FFW.
standing of a union entirely comprised of or of which the employees in interest are
a part.15
Significantly, petitioner's act of dismissing respondents stemmed from the latter's
act of signing an authorization letter to file a petition for certification election as
However, in terminating the employment of an employee by enforcing the union they signed it outside the freedom period. However, we are constrained to believe
security clause, the employer needs to determine and prove that: (1) the union that an "authorization letter to file a petition for certification election" is different
security clause is applicable; (2) the union is requesting for the enforcement of the from an actual "Petition for Certification Election." Likewise, as per records, it was
union security provision in the CBA; and (3) there is sufficient evidence to support clear that the actual Petition for Certification Election of FFW was filed only on May
the decision of the union to expel the employee from the union. These requisites 18, 2000.17 Thus, it was within the ambit of the freedom period which commenced
constitute just cause for terminating an employee based on the union security from March 21, 2000 until May 21, 2000. Strictly speaking, what is prohibited is the
provision of the CBA.16 filing of a petition for certification election outside the 60-day freedom period.18 This
is not the situation in this case. If at all, the signing of the authorization to file a
As to the first requisite, there is no question that the CBA between PRI and certification election was merely preparatory to the filing of the petition for
respondents included a union security clause, specifically, a maintenance of certification election, or an exercise of respondents’ right to self-organization.
membership as stipulated in Sections 6 of Article II, Union Security and Check-Off.
Following the same provision, PRI, upon written request from the Union, can Moreover, PRI anchored their decision to terminate respondents’ employment on
indeed terminate the employment of the employee who failed to maintain its good Article 253 of the Labor Code which states that "it shall be the duty of both
standing as a union member. parties to keep the status quo and to continue in full force and effect the
terms and conditions of the existing agreement during the 60-day period
Secondly, it is likewise undisputed that NAMAPRI-SPFL, in two (2) occasions and/or until a new agreement is reached by the parties." It claimed that they
demanded from PRI, in their letters dated May 16 and 23, 2000, to terminate the are still bound by the Union Security Clause of the CBA even after the expiration of
employment of respondents due to their acts of disloyalty to the Union. the CBA; hence, the need to terminate the employment of respondents.

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Petitioner's reliance on Article 253 is misplaced. the incumbent bargaining agent does not hold true when petitions for certification
election were filed, as in this case.
The provision of Article 256 of the Labor Code is particularly enlightening. It reads:
Moreover, the last sentence of Article 253 which provides for automatic renewal
Article 256. Representation issue in organized establishments. - In organized pertains only to the economic provisions of the CBA, and does not include
establishments, when a verified petition questioning the majority status of the representational aspect of the CBA. An existing CBA cannot constitute a bar to a
incumbent bargaining agent is filed before the Department of Labor and filing of a petition for certification election. When there is a representational issue,
Employment within the sixty-day period before the expiration of a collective the status quo provision in so far as the need to await the creation of a new
bargaining agreement, the Med-Arbiter shall automatically order an election by agreement will not apply. Otherwise, it will create an absurd situation where the
secret ballot when the verified petition is supported by the written consent of at union members will be forced to maintain membership by virtue of the union
least twenty-five percent (25%) of all the employees in the bargaining unit to security clause existing under the CBA and, thereafter, support another union
ascertain the will of the employees in the appropriate bargaining unit. To have a when filing a petition for certification election. If we apply it, there will always be an
valid election, at least a majority of all eligible voters in the unit must have cast issue of disloyalty whenever the employees exercise their right to self-organization.
their votes. The labor union receiving the majority of the valid votes cast shall be The holding of a certification election is a statutory policy that should not be
certified as the exclusive bargaining agent of all the workers in the unit. When an circumvented,23 or compromised.1avvphi
election which provides for three or more choices results in no choice receiving a
majority of the valid votes cast, a run-off election shall be conducted between the Time and again, we have ruled that we adhere to the policy of enhancing the
labor unions receiving the two highest number of votes: Provided, That the total welfare of the workers. Their freedom to choose who should be their bargaining
number of votes for all contending unions is at least fifty per cent (50%) of the representative is of paramount importance. The fact that there already exists a
number of votes cast. bargaining representative in the unit concerned is of no moment as long as the
petition for certification election was filed within the freedom period. What is
At the expiration of the freedom period, the employer shall continue to imperative is that by such a petition for certification election the employees are
recognize the majority status of the incumbent bargaining agent where no given the opportunity to make known of who shall have the right to represent them
petition for certification election is filed.19 thereafter. Not only some, but all of them should have the right to do so. What is
equally important is that everyone be given a democratic space in the bargaining
unit concerned.24
Applying the same provision, it can be said that while it is incumbent for the
employer to continue to recognize the majority status of the incumbent bargaining
agent even after the expiration of the freedom period, they could only do so when We will emphasize anew that the power to dismiss is a normal prerogative of the
no petition for certification election was filed. The reason is, with a pending petition employer. This, however, is not without limitations. The employer is bound to
for certification, any such agreement entered into by management with a labor exercise caution in terminating the services of his employees especially so when it
organization is fraught with the risk that such a labor union may not be chosen is made upon the request of a labor union pursuant to the Collective Bargaining
thereafter as the collective bargaining representative.20 The provision Agreement. Dismissals must not be arbitrary and capricious. Due process must be
for status quo is conditioned on the fact that no certification election was filed observed in dismissing an employee, because it affects not only his position but
during the freedom period. Any other view would render nugatory the clear also his means of livelihood. Employers should, therefore, respect and protect the
statutory policy to favor certification election as the means of ascertaining the true rights of their employees, which include the right to labor. 25
expression of the will of the workers as to which labor organization would
represent them.21 An employee who is illegally dismissed is entitled to the twin reliefs of full
backwages and reinstatement. If reinstatement is not viable, separation pay is
In the instant case, four (4) petitions were filed as early as May 12, 2000. In fact, a awarded to the employee. In awarding separation pay to an illegally dismissed
petition for certification election was already ordered by the Med-Arbiter of DOLE employee, in lieu of reinstatement, the amount to be awarded shall be equivalent
Caraga Region on August 23, 2000.22 Therefore, following Article 256, at the to one month salary for every year of service. Under Republic Act No. 6715,
expiration of the freedom period, PRI's obligation to recognize NAMAPRI-SPFL as employees who are illegally dismissed are entitled to full backwages, inclusive of

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allowances and other benefits, or their monetary equivalent, computed from the The basic facts follow.
time their actual compensation was withheld from them up to the time of their
actual reinstatement. But if reinstatement is no longer possible, the backwages Petitioner Erector Advertising Sign Group, Inc. is a domestic corporation engaged
shall be computed from the time of their illegal termination up to the finality of the in the business of constructing billboards and advertising signs. Sometime in the
decision. Moreover, respondents, having been compelled to litigate in order to middle of 1996, petitioner engaged the services of Expedito Cloma (Cloma) as
seek redress for their illegal dismissal, are entitled to the award of attorney’s fees company driver and the latter had served as such until his dismissal from service
equivalent to 10% of the total monetary award.26 in May 2000.4

WHEREFORE, the petition is DENIED. The Decision dated July 25, 2003 and the In his Complaint5 filed with the National Labor Relations Commission (NLRC),
Resolution dated October 23, 2003 of the Court of Appeals in CA-G.R. SP No. Cloma alleged that he was illegally suspended and then dismissed from his
71760, which set aside the Resolutions dated October 8, 2001 and April 29, 2002 employment without due process of law. He likewise claimed his unpaid monetary
of the National Labor Relations Commission in NLRC CA No. M-006309-2001, are benefits such as overtime pay, premium pay for worked rest days, service
AFFIRMED accordingly. Respondents are hereby awarded full backwages and incentive leave pay and 13th month pay, as well as moral, exemplary and actual
other allowances, without qualifications and diminutions, computed from the time damages and attorneys fees.
they were illegally dismissed up to the time they are actually reinstated. Let this
case be remanded to the Labor Arbiter for proper computation of the full
It is conceded by petitioner that Cloma has been suspended several times from
backwages due respondents, in accordance with Article 279 of the Labor Code, as
work due to frequent tardiness and absenteeism, but the instant case appears to
expeditiously as possible.
be likewise the result of documented instances of absenteeism without prior notice
to and approval from his superior, and of misbehavior. The former happened
SO ORDERED. between May 12 and May 15, 2000 when Cloma supposedly failed to report for
work without prior notice and prior leave approval6 which thus effectively prevented
the other workers from being transported to the job site as there was no other
driver available; whereas the latter incident happened on May 11, 2000 when
G.R. No. 167218 July 2, 2010 allegedly, Cloma, without authority, suddenly barged into the premises of the
Outright Division and, without being provoked, threatened the employees with
bodily harm if they did not stop from doing their work.7 This second incident was
ERECTOR ADVERTISING SIGN GROUP, INC. and ARCH. JIMMY C. supposedly narrated fully in a letter dated May 13, 2000 addressed to the
AMOROTO, Petitioners, personnel manager and signed by one Victor Morales and Ruben Que.81avvphi1
vs.
NATIONAL LABOR RELATIONS COMMISSION, Respondent.
As a result of these incidents, petitioner served on Cloma two (2) Suspension
Orders dated May 15, 2000 and May 17, 2000, both signed by Nelson Clavacio
DECISION (Clavacio), personnel and production manager of petitioner company, and
approved by Architect Jimmy C. Amoroto (Amoroto), president and chief executive
PERALTA, J.: officer. For easy reference, the suspension orders are reproduced as follows:

In this petition for review under Rule 45 of the Rules of Court, petitioner Erector May 15, 2000
Advertising Sign Group, Inc. assails the February 16, 2005 Decision1 of the Court
of Appeals in CA-G.R. SP No. 80027. The challenged Decision affirmed the Para kay: MR. EXPEDITO CLOMA
February 28, 2003 Resolution2 of the National Labor Relations Commission in Company Driver
NLRC NCR CA No. 028711-01. In turn, the said Decision reversed and set aside
the March 30, 2001 Decision3 of the Labor Arbiter, which dismissed for lack of
merit the complaint for illegal dismissal filed by respondent Expedito Cloma. Paksa: SUSPENSION ORDER

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Dahil sa iyong pagliban mula pa nuong Mayo 12 hanggang Mayo 15, 2000 na wala Ginoong Expedito Cloma:
man lang pasabi o paalam, ikaw ay binibigyan ng tatlong araw na suspensyon na
magsisimula ngayon Mayo 15 hanggang Mayo 17, 2000. Ito ay bilang paggawad Malungkot naming ibinabalita sa iyo na napagpasyahan ng Pamunuang ito na
ng batas at disiplina sa ating sarili at sa iba upang huwag ng pamarisan pa. tanggalin ka na sa iyong serbisyo bilang "Company Driver." Ito ay dahil sa mga
sumusunod na kadahilanan:
Malinaw na nakasaad sa Company Rules and Regulations SECTION 1,
PARAGRAPH 4: "Ang pagliban ng walang paalam na sunod-sunod ay may kalakip 1. Ang pagliban ng dalawang araw na wala man lang pasabi o paalam.
na kaparusahan. Dalawang araw na absent ay katumbas ng tatlong araw na
suspension.9
2. Ang pananakot sa kapwa manggagawa o trabahador na nagresulta sa
pagkauwi ng mga trabahador ng Outright Division.
May 17, 2000
3. Ang pagpigil sa operasyon ng ibang Department sa pamamalakad ni
Para kay: MR. EXPEDITO CLOMA Ms. Anne Dongel.
Company Driver
4. Maraming pagkakataon na "late" na naging dahilan ng pagsabotahe ng
Paksa: SUSPENSION ORDER operasyon ng mga Production Crews.

Ikaw ay ginagawaran ng isang linggong Suspensyon mula bukas, Mayo 18, 2000 Mula sa mga dahilan na nabanggit, ito ay sapat na dahilan upang tanggalin ka sa
hanggang Mayo 24, 2000. Ito ay dahil sa [sumusunod] na dahilan: iyong posisyon, nagpapakita lamang na hindi mo nagampanan ng maayos ang
iyong trabaho katulad ng inaasahan sa iyo ng Pamunuang ito.12
1. Ang pagpigil sa mga trabahador ni Ms. Anne Dongel na taga-Outright Division
na magtrabaho nuong Mayo 11, 2000 at pananakot sa mga trabahador ni Ms. Ridden with angst and anxiety, Cloma walked away and filed the instant complaint
Anne Dongel samantalang iba naman ang kanilang Division. (SECTION 2 for illegal dismissal.
PARAGRAPH 2/PANANAKOT "ISANG LINGGONG SUSPENSYON)
Following the submission of position papers and other documentary exhibits by
Ang iyong suspension ay epektibo kaagad bukas at makakabalik ka lamang sa both parties, the Labor Arbiter, after evidentiary evaluation, issued its March 30,
Mayo 25, 2000. Ang parusang nabanggit ay para sa pagpapairal ng disiplina sa 2001 Decision dismissing Cloma’s complaint for lack of merit.13 In so ruling, the
atin at sa ating mga kapwa manggagawa.10 Labor Arbiter put much weight on the evidence presented by petitioner company
bearing on Cloma’s frequent tardiness and unauthorized absences, as well as the
When Cloma reported back for work on May 25, 2000, he was taken by surprise several incidents of misbehavior and misconduct in which Cloma figured as the
when the security guard on duty prevented him from entering the company’s protagonist. It went on to say that while the onus of proving the existence of the
premises and, instead, handed him a termination letter dated May 20, 2000, cause for termination and the observance of due process lie on the employer,
signed and approved by Clavacio and Amoroto.11 The letter states: petitioner company was actually able to establish the validity of Cloma’s dismissal
by its evidence.14 It also noted that while the company, by memorandum/notice,
May 20, 2000 had directed Cloma to submit his explanation on his alleged infractions, the latter
nevertheless did not comply with the directive and instead ignored the same. In
this connection, the Labor Arbiter declared that a plea of denial of procedural due
Para kay: MR. EXPEDITO CLOMA
process would not lie when he who had been given an opportunity to be heard had
Company Driver
chosen not to avail of such opportunity. 15
Paksa: Notice of Termination

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Aggrieved, Cloma appealed to the NLRC.16 On February 28, 2003, the NLRC Hence, this petition, which raises the sole issue of whether Cloma was dismissed
issued its Resolution17 reversing and setting aside the Labor Arbiter’s decision. with just cause and with due process of law.

The NLRC pointed out that not only was Cloma dismissed without due process but Petitioner insists that the just cause for Cloma’s termination abounds in the
also, that he was dismissed without just cause. The NLRC based its finding on the records, alluding to several infractions and violations of company rules and
termination letter served by petitioner on Cloma such that with respect to the first regulations for which he has been suspended many times from work. In addition, it
ground of termination, i.e., Ang pagliban ng dalawang araw na wala man lang likewise enumerates a number of Cloma’s other acts of misbehavior such as
pasabi o paalam, the letter did not state the dates when these two absences had reporting for work under the influence of alcohol, picking fights with co-workers and
been incurred; that in relation to the second and third grounds, i.e., Ang pananakot others which the management merely let pass but which, nevertheless, could
sa kapwa manggagawa x x x and Ang pagpigil sa operasyon ng ibang Department constitute valid grounds for dismissal. Yet significantly, petitioner admits that it is
x x x, petitioner did not profess having conducted investigation on these matters Cloma’s repeated infractions which gave the company the motivation to finally
that would have afforded Cloma the opportunity to confront his witnesses and that terminate his services.24
Cloma had already been sanctioned for this offense under the May 17, 2000
suspension order; and that as to the last ground, i.e., Maraming pagkakataon na Also, petitioner maintains that it observed due process in deciding to dismiss
late x x x, the NLRC noted that the best proof on this allegation would have been Cloma from service. It claims that the decision to let go of Cloma was the result of
Cloma’s corresponding daily time record but which, however, petitioner failed to a thorough consideration of the totality of the many infractions he has committed,
make of record at the hearing of the case.18 Hence, finding that Cloma was as well as of his general behavior toward his work. It reasons that ample time, prior
dismissed without just cause and without due process, the NLRC ordered to May 20, 2000, has been afforded Cloma so that he could explain why he should
petitioner to pay full backwages, allowances and other benefits, as well as not be dismissed, but he nevertheless failed to comply despite the fact that he was
separation pay in lieu of reinstatement.19 The appeal was disposed of as follows: residing only a few houses away from the company.25

WHEREFORE, premises considered, Complainant’s appeal is GRANTED. The Commenting on the petition, Cloma maintains that petitioner’s evidence is
Labor Arbiter’s decision in the above-entitled case is hereby REVERSED and SET insubstantial to support the theory that the dismissal has complied with due
ASIDE. A new one is entered declaring that Complainant’s dismissal from process and is with just cause. He stresses that the evidence presented by
employment is illegal. Respondents are hereby ordered to jointly as (sic) severally petitioner hardly supports the grounds relied on for his termination and that, more
pay Complainant the amount of ₱271,673.08 as backwages and separation pay, importantly, petitioner did not comply with the two-notice rule required by law to
plus ten percent (10%) of his total monetary award as attorney’s fees. validate an employee’s dismissal from service, that is, a written notice stating the
cause for termination and a written notice of the intention to terminate employment
SO ORDERED.20 stating clearly the reason therefor.26

Petitioner’s motion for reconsideration was denied,21 and forthwith it elevated the We find no merit in the petition.
case to the Court of Appeals on petition for certiorari.22
The validity of an employee’s dismissal from service hinges on the satisfaction of
On February 16, 2005, the Court of Appeals rendered the assailed the two substantive requirements for a lawful termination. These are, first, whether
Decision23 adopting the findings and conclusions of the NLRC as follows: the employee was accorded due process the basic components of which are the
opportunity to be heard and to defend himself. This is the procedural aspect. And
WHEREFORE, the instant petition is DENIED. The resolution of the National Labor second, whether the dismissal is for any of the causes provided in the Labor Code
Relations Commission dated 28 February 2003 reversing the decision of the Labor of the Philippines. This constitutes the substantive aspect.27
Arbiter dated 30 March 2001 in NLRC CASE No. 00-05-02887-2000 is hereby
AFFIRMED. With respect to due process requirement, the employer is bound to furnish the
employee concerned with two (2) written notices before termination of employment
SO ORDERED. can be legally effected. One is the notice apprising the employee of the particular

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acts or omissions for which his dismissal is sought and this may loosely be grounds. There is not an allusion in the said orders that petitioner was giving
considered as the proper charge. The other is the notice informing the employee of Cloma sufficient opportunity to submit his defenses or explanation. Instead, what it
the management’s decision to sever his employment. This decision, however, implies is that the management has already decided, for causes stated therein, to
must come only after the employee is given a reasonable period from receipt of the suspend Cloma from work in the company, and nothing more.
first notice within which to answer the charge, thereby giving him ample
opportunity to be heard and defend himself with the assistance of his Moreover, the May 15, 2000 Order, in particular, could not have constituted the
representative should he so desire. The requirement of notice, it has been first notice relative to the charge that Cloma has incurred unauthorized absences
stressed, is not a mere technicality but a requirement of due process to which for two days as stated in the notice of termination. This, inasmuch as the order
every employee is entitled.28 refers to a four (4)–day absence supposedly incurred between May 12, 2000 and
May 15, 2000 for which Cloma has actually been sanctioned with suspension. In
In this case, we find that Cloma’s dismissal from service did not comply with this this regard, it suffices to say that even assuming that the May 15, 2000 order could
basic precept. validly take the place of the first notice, still, Cloma’s dismissal cannot be validly
effected, because an employee may be dismissed only if the grounds mentioned in
We recall that the notice of termination served by petitioner on Cloma cites three the pre-dismissal notice were the ones cited for the termination of
reasons why the management has arrived at the decision to dismiss him from employment.29 The same is true with the third ground of termination, i.e., that
service: first, his absence from work for two (2) days without prior notice and Cloma has frequently been late in reporting for work. Observably, aside from the
approval; second, his act of barging into the premises of the Outright Division and fact that Cloma, with respect to this ground, has not been furnished a pre-dismissal
threatening the members of the said division with bodily harm if they did not stop notice, the notice of termination does not state the inclusive dates on which Cloma
doing their work; and third, his frequent tardiness in reporting for work. actually reported late for his work.

Certainly, nowhere in the records does it appear that Cloma attempted to deny Moreover, we agree with the Court of Appeals that not only did petitioner fail to
these allegations, yet it is equally certain that the records do not contain any comply with the procedural due process requirements in terminating Cloma’s
suggestion that petitioner, with respect to these three grounds with which Cloma is employment, but also that petitioner has not overcome the quantum of substantial
charged, has tried to notify the latter of the said charges. Indeed, we find that evidence needed to establish the existence of just causes for dismissal in this
petitioner has not complied with the basic requirement of serving a pre-dismissal case.
notice on Cloma. What is clear from the records is that the only notice that was
given to Cloma prior to his termination is the May 20, 2000 notice of termination With respect to the charges of frequent tardiness and incurring an unauthorized
informing him that his employment in the company has been severed for the two-day leave of absence, it is plain in the records that the same have not been
causes mentioned. sufficiently proved by petitioner. For one, petitioner could not identify the dates
when Cloma incurred the alleged tardiness in reporting for work. Add to that the
Be that as it may, petitioner insists that Cloma has been sufficiently informed of the fact that Cloma’s daily time records, which would have been the best evidence on
acts constituting the grounds for his termination and that with respect thereto, the matter, have not been made of record when they are actually within petitioner’s
ample opportunity was thereafter given to him to be heard thereon, only that he did power to produce and submit at the trial. The same applies to the charge of
not choose to avail of that opportunity. Petitioner seems to be referring to the May unauthorized absences.
15 and May 17, 2000 Suspension Orders which it previously served on Cloma.
These orders, however, hardly constitute the first notice required by law prior to Finally, anent the charge that Cloma had terrorized the staff of the Outright
termination. Here is why: a fleeting glance at these two orders readily reveals that Division and incited a work stoppage, it is clear, from the May 17, 2000 suspension
the alleged offenses mentioned therein were not to be used as grounds for order, that he has already been penalized with suspension for this offense and,
termination, but rather merely for suspension. The wording of the orders conveys hence, this act may no longer be added to support the imposition of the ultimate
the idea that as a result of his shortcomings, Cloma was going to be meted the penalty of dismissal from service nor may it be used as an independent ground to
penalty of suspension in accordance with the provisions of the company’s rules that end.30
and regulations, but not that he might be dismissed from service upon the same

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All told, we find that no error has been committed by the Court of Appeals in ruling loan, petitioners and respondent HSBC SRP entered into a real estate mortgage
that Cloma’s dismissal from service was both without just cause and without due contract3where petitioners mortgaged their property covered by TCT No. 17169 of
process of law. the Register of Deeds of Parañaque. The monthly amortizations of the loan were
paid by petitioner Ana through automatic payroll deductions.
WHEREFORE, the petition is DENIED. The February 16, 2005 Decision of the
Court of Appeals in CA-G.R. SP No. 80027, affirming the February 28, 2003 In January 1993, a labor dispute arose between the bank and the employees'
Resolution of the National Labor Relations Commission in NLRC NCR CA No. union, where petitioner Ana was a member thereof, which culminated in a strike
028711-01, is hereby AFFIRMED. staged on December 22, 1993. Majority of the bank employees, which included
petitioner Ana, were dismissed from service for abandonment. Petitioner Ana and
SO ORDERED. the other dismissed bank employees had filed with the Labor Arbiter an illegal
dismissal case against the bank. The Labor Arbiter declared the strike illegal. The
labor case has now reached Us on a petition for review filed by the employees
against the bank.

G.R. No. 166970 August 17, 2011 In a letter4 dated November 28, 1994 addressed to petitioner Ana, respondent
HSBC SRP demanded the payment of her unpaid accounts as of November 25,
MA. ANA M. TAMONTE and EDILBERTO A. TAMONTE, Petitioners, 1994, which included her housing loan. Petitioners failed to settle their obligation;
vs. thus, respondent HSBC SRP effected the foreclosure of petitioners' property
HONGKONG and SHANGHAI BANKING CORPORATION LTD., HONGKONG subject of the real estate mortgage. The foreclosure proceeding was conducted on
and SHANGHAI BANKING CORPORATION STAFF RETIREMENT PLAN, May 28, 1996 with Alejandro L. Custodio (Custodio), one of the herein
represented by ATTY. MANUEL G. MONTECILLO, STUART P. MILNE and respondents, emerging as the highest bidder.5
ALEJANDRO CUSTODIO; ALEJANDRO CUSTODIO; RTC CLERK OF COURT
& EX-OFFICIO SHERIFF and SHERIFF IN CHARGE CLEMENTE BOLOY and On October 29, 1997, petitioners filed with the RTC of Parañaque, Metro Manila, a
BENEDICTO G. HEBRON, respectively,Respondents. Complaint6 for Annulment of the Entire Proceedings in Foreclosure No. 96-037
with Prayer for Damages, Temporary Restraining Order, Preliminary and Final
DECISION Injunction, etc. against the bank, HSBC SRP, represented by Atty. Manuel G.
Montecillo, Stuart P. Milne and Alejandro L. Custodio and the RTC Clerk of Court
PERALTA, J.: and Ex-Officio Sheriff Benedicto G. Hebron.

Assailed in this petition for review on certiorari are the Decision1 dated October 12, Respondents HSBC SRP and Custodio filed a Motion to Dismiss 7 with Opposition
2004 and Resolution2 dated January 25, 2005 of the Court of Appeals (CA) issued to petitioners' prayer for the issuance of a writ of preliminary injunction on the
in CA-G.R. CV No. 66920. The CA affirmed the Order dated January 8, 1998 of ground that the complaint stated no cause of action. Respondents contended that
the Regional Trial Court (RTC), Branch 274, Parañaque, Metro Manila, dismissing the extrajudicial foreclosure of petitioners' mortgaged property was proper and
the complaint filed by petitioners Ma. Ana M. Tamonte and Edilberto A. Tamonte regular as the full amount of the loan had accelerated after petitioner Ana had
for annulment of the foreclosure proceedings. ceased to be an employee of the bank as she was terminated for cause and
petitioners were unable to settle the same upon demand; and that petitioner Ana's
Petitioner Ma. Ana M. Tamonte (Ana) was a regular employee of the Hongkong continued employment with the bank was the sort of the security/guaranty for her
and Shanghai Banking Corporation Ltd. (the bank) and a member of the Hongkong loan. Respondents also stated that petitioners had not made any single payment
and Shanghai Banking Corporation Staff Retirement Plan (HSBC SRP). The since December 1993 which made them in default under their mortgage contract.
HSBC SRP was established through its Board of Trustees for the purpose of Respondents argued that they can proceed with the foreclosure of the mortgaged
providing retirement, disability and loan benefits to all its regular employees. property pending the labor dispute, since the foreclosure proceeding was civil in
Petitioner Ana applied for a housing loan with the HSBC SRP. To secure the said nature which arose from a purely civil obligation and pursuant to its rights under

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the mortgage contract. Respondents continued that even assuming petitioners had In a Decision dated October 12, 2004, the CA dismissed the appeal and affirmed
been making payments, these cannot operate as payment for all intents and the RTC decision. In dismissing the appeal, the CA affirmed the RTC’s findings
purposes under the law, because they were not for the full and accelerated that petitioners defaulted in the payment of their monthly amortizations on the
obligation. housing loan, and despite demand, petitioners failed and refused to pay their
obligations. The CA also found speculative and without factual basis petitioners'
Respondent bank filed a Motion to Dismiss,8 alleging, among others, that no cause claim that respondent HSBC SRP would not have accepted their monthly
of action existed against it, since it was not a party to the mortgage contract nor did amortizations after petitioner Ana's dismissal as what respondents did to petitioner
it participate in the foreclosure proceedings sought to be annulled. Ana's colleagues. It also ruled that the pendency of the labor case between
petitioner Ana and the bank would not suspend their default in the payment of their
loan and the foreclosure sale, since the demand for the amortizations on the loan
Respondent HSBC SRP filed a Supplemental Motion to Dismiss 9 stating that their
case was anchored on the same facts obtaining in the case of Cadena v. involved a creditor-debtor rather than an employer-employee relationship.
HSBC filed in the RTC which had already been dismissed by the RTC after finding
that the employee concerned had defaulted in the payment of her monthly Petitioners filed their motion for reconsideration, which the CA denied in a
amortizations which gave rise to the foreclosure of the mortgaged property; that Resolution dated January 25, 2005.
just like the Cadena case, herein petitioners did not make any single payment of
their housing loan since petitioner Ana's termination in December 1993, thus, their Hence, the instant petition for review filed by petitioners on the issue of:
housing loan became delinquent and the eventual foreclosure of their mortgaged
property. WHETHER OR NOT THE COURT OF APPEALS COMMITTED GRAVE ERROR
IN SUSTAINING THE FINDING THAT PETITIONERS HAD NO CAUSE OF
Petitioners filed their Consolidated Opposition10 to the Motion to Dismiss which ACTION.13
stated, among others, that petitioner Ana's continued employment with the bank
was never meant to secure the housing loan extended to petitioners. Petitioners Petitioners reiterate their arguments raised in the CA. They insist that respondent
did not deny that no amortization payments were made after December 1993, but HSBC SRP foreclosed their property because of petitioner Ana's termination from
claimed that it was not the cause of the foreclosure action but petitioner Ana's employment and not because of their default in the payment of their loan
termination. obligation. Petitioners contend that based on the allegations in respondents HSBC
SRP and Custodio's Motion to Dismiss filed in the RTC, the default respondents
In an Order11 dated January 8, 1998, the RTC dismissed the complaint. The RTC spoke of was petitioners' failure to pay the entire balance of their loan in a single
found that petitioners did not pay their monthly amortizations after petitioner Ana's payment upon the cessation of petitioner Ana's employment with the bank. Such
termination in December 1993 which was a violation of the terms and conditions of being the case, petitioners claim that the question that arose was whether or not
their housing loan and the real estate mortgage contract they executed as security respondent HSBC SRP had the right to withdraw the loan benefit from petitioner
therefor; that when petitioners defaulted in the payment of their monthly Ana, considering that the issue of her employment status has not yet been
amortizations, respondent HSBC SRP had the right to foreclose the mortgage resolved with finality as the labor case is still pending with Us. Petitioners admitted
property pursuant to their mortgage contract. The RTC also ruled that petitioners' that while it had not made any amortization payments since the termination of
obligation to regularly pay their housing loan was purely a civil obligation which petitioner Ana from her employment on December 27, 1993, the RTC and the CA
arose from a contract which had the force of law between the parties and should erred in finding that it was the failure to make the amortization payments that
be complied with in good faith. placed petitioners in default which led to the foreclosure of their property. The
arguments raised by respondents in their Motion to Dismiss refuted the CA
Petitioners' motion for reconsideration was denied in an Order 12 dated June 1, declaration that it was speculative for petitioners to claim that the amortization
1999. payments would not be accepted had they made their efforts to do so.

Petitioners filed their appeal with the CA. After the filing of the parties' respective We are not persuaded.
Briefs, the case was submitted for resolution.

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It appears that respondent HSBC SRP's Motion to Dismiss on the ground that the have the right, at his election, to foreclose this mortgage and sell the mortgage
complaint failed to state a cause of action cited the failure of petitioners to make a property extrajudicially, in the manner hereinafter in this paragraph set forth; and
single payment of the entire balance of their housing loan obligation which for such purpose the MORTGAGEE is hereby appointed the attorney-in-fact of the
respondent claimed to have accelerated after she was dismissed from her MORTGAGOR(S), with full power of substitution and revocation.15
employment. Notably, however, it was also stated in the same motion that
petitioners had not paid a single monthly amortization after petitioner Ana's Undeniably, respondent HSBC SRP has a clear right to foreclose the mortgaged
termination from her employment in December 1993, which petitioners did not property. In real estate mortgage, when the principal obligation is not paid when
deny but even admitted. Moreover, we note that in their Supplemental Motion to due, the creditor-mortgagee has the right to foreclose the mortgage, sell the
Dismiss, respondent HSBC SRP reiterated that petitioners did not make any single property, and apply the proceeds of the sale to the satisfaction of the unpaid
payment on their housing loan after December 1993, thus, they resorted to loan.16 Clearly, foreclosure is but a necessary consequence of non-payment of
foreclosure proceedings. Thus, there is no basis to petitioners' claim that the mortgage indebtedness.17
default which led the respondent to foreclose the mortgaged property was mainly
due to petitioner Ana's discontinued employment.
Petitioners argue that the resolution of the validity of petitioner Ana's termination is
akin to a prejudicial question, i.e., without a final determination of the legality or
Petitioners were in default in the payment of their loan obligation when they never illegality of the termination of her employment, respondent HSBC SRP cannot
made any payment after December 1993. In fact, the demand letter sent to validly decide to recall the loan benefits and demand immediate full payment; and
petitioners, dated November 28, 1994, showed petitioners' unpaid accounts to that the auction sale of their property was premature.
respondents as of November 25, 1994, and despite receipt of the demand letter,
petitioners still failed to settle the same. Under the real estate mortgage contract We do not agree.
executed between respondent HSBC SRP as mortgagee and petitioners as
mortgagors, it was provided, among others, that:
As we said, petitioners were already in default in the payment of their loan
obligations; thus, foreclosure of the mortgage property was resorted to by
III
respondents. Respondents were only enforcing the civil obligation of petitioners
under their mortgage contract. There is no labor aspect involved in the
THE MORTGAGOR(S) hereby undertake(s) and agree(s) to pay to the enforcement of petitioners' obligation.
MORTGAGEE, upon demand, any and all sums which may be or become due
from and owing by the MORTGAGOR(S) to said MORTGAGEE, under and in In Nestle Philippines, Inc. v. National Labor Relations Commission (NLRC),18 the
virtue of the credit or credit facilities hereby granted or hereinafter to be granted by employees therein who were sales/medical representatives were allowed to avail
the latter to the former, together with the interest thereon at the rate computed in of the company's car loan policy. Under the policy, the company advanced the
the manner set out in Article II hereof.14
purchase price of a car to be paid back by the employee through monthly
deductions from his salary, but the company retained ownership of the motor
Considering that petitioners failed to pay their obligation with respondent HSBC vehicle until it shall have been fully paid for. Respondents-employees who availed
SRP, the latter, as mortgagee, resorted to extrajudicial foreclosure of petitioners' of the car loan were later dismissed from the service for participating in an illegal
mortgaged property which respondents did pursuant to the provisions of their real strike. They filed a complaint for illegal dismissal with the Labor Arbiter which
estate mortgage contract, to wit: dismissed their complaint and upheld the legality of the employees' dismissal.
While the appeal was then pending with the NLRC, the employees sought a
VI temporary restraining order with the NLRC to stop Nestle company from canceling
their loans and collecting their monthly amortizations pending the final resolution of
H. In the event that the MORTGAGOR(S) should fail to pay the sums of money their illegal dismissal case. The employees claimed that there was a labor dispute
secured by this mortgage, or any part thereof in accordance with the terms and between them and petitioner Nestle, and that their default in paying their
conditions herein set forth, or should the MORTGAGOR(S) fail to perform any of amortizations was brought about by their illegal dismissal from work by Nestle as
the conditions stipulated herein, then and in that case, the MORTGAGEE shall punishment for their participation in the strike; that if they had not participated in

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the strike, they would not have been dismissed from work and they would not have To reiterate, respondent HSBC SRP and petitioners agreed in their mortgage
defaulted in the payment of their amortizations. The employees admitted their civil contract that HSBC SRP as mortgagee was authorized to foreclose the mortgaged
obligations to the petitioner. We then held that: property in the event that the petitioners-mortgagors failed to pay the sum of
money secured by the mortgage. After petitioners failed to pay upon demand, the
Nestlé's demand for payment of the private respondents' amortizations on their car civil obligation of the petitioners under the mortgage contract must be enforced to
loans, or, in the alternative, the return of the cars to the company, is not a labor, protect HSBC SRP's interest in the housing loan. The dismissal of petitioners'
but a civil, dispute. It involves debtor-creditor relations, rather than employee- complaint for the annulment of the foreclosure proceedings is, therefore, valid and
employer relations. proper.

Petitioner Nestlé Philippines, Inc. correctly pointed out that: WHEREFORE, the petition is DENIED. The Decision dated October 12, 2004 and
the Resolution dated January 25, 2005 of the Court of Appeals are hereby
AFFIRMED.
The twin directives contained in petitioner's letters to the private respondents to
either (1) settle the remaining balance on the value of their assigned cars under
the company car plan or return the cars to the company for proper disposition; or SO ORDERED.
(2) to pay all outstanding accountabilities to the company - are matters related to
the enforcement of a civil obligation founded on contract. It is not dependent on or
related to any labor aspect under which a labor injunction can be issued. Whether
or not the private respondents remain as employees of the petitioner, there is no G.R. No. 161934 October 6, 2010
escape from their obligation to pay their outstanding accountabilities to petitioner;
and if they cannot afford it, to return the cars assigned to them.
VARORIENT SHIPPING CO., INC., and.,d ARIA MARITIME CO.,
LTD., Petitioners,
As noted, the options given to the private respondents are civil in nature arising vs.
from contractual obligations. There is no labor aspect involved in the enforcement GIL A. FLORES, Respondent.
of those obligations.
DECISION
The NLRC gravely abused its discretion and exceeded its jurisdiction by issuing
the writ of injunction to stop the company from enforcing the civil obligation of the
private respondents under the car loan agreements and from protecting its interest PERALTA, J.:
in the cars which, by the terms of those agreements, belong to it (the company)
until their purchase price shall have been fully paid by the employee. The terms of Before the Court is a petition for review on certiorari seeking to set aside the
the car loan agreements are not in issue in the labor case. The rights and Decision1 dated February 28, 2003, of the Court of Appeals (CA) in CA-G.R. SP.
obligations of the parties under those contracts may be enforced by a separate No. 55512, entitled Varorient Shipping Co., Inc. and Aria Maritime Co., Ltd. v.
civil action in the regular courts, not in the NLRC.19 1avvphi1 National Labor Relations Commission, Third Division and Gil A. Flores, which
affirmed with modification the Decision2 dated May 25, 1999, and
In Hongkong and Shanghai Banking Corporation, Ltd. Staff Retirement Plan Resolution3 dated August 18, 1999, of the National Labor Relations Commission
(HSBC SRP) v. Spouses Broqueza,20which involved the dismissed co-employees (NLRC) in NLRC CN OCW RAB-IV-9-917-97-C, and its Resolution4 dated January
of herein petitioner Ana who were also unable to pay the monthly amortizations of 29, 2004, denying petitioners’ motion for reconsideration thereof. The assailed CA
their respective loans, and despite HSBC SRP's demand for them to pay their Decision ordered petitioners Varorient Shipping Co., Inc. and Aria Maritime Co.,
loan, they still failed to pay their loan obligations, We said, among others, that the Ltd., jointly and severally, to pay respondent Gil A. Flores the balance of sickness
enforcement of a loan agreement involves debtor-creditor relations founded on wages in the amount of US$3,790.00, or its peso equivalent at the time of actual
contracts and does not in any way concern employee relations. payment, and to reimburse his medical and surgical expenses in the total amount

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of ₱15,373.26, instead of ₱13,579.76. However, it dismissed all the other claims of The ligamentum flavum, however, is not hypertrophic.
respondent for lack of merit.
The vertebral bodies, pedicles, laminae, facets and sacro-iliac joints are intact.
The antecedent facts are as follows:
There is straightening of the lumbar curvature, but with no compression deformities
On April 7, 1997, petitioners employed respondent, in behalf of its foreign principal, nor spondylolisthesis.
Aria Maritime Co., Ltd. of Piraeus, Greece, for the position of Chief Officer on
board M/V Aria, per Contract of Employment5 dated April 7, 1997, duly approved IMPRESSION: Large disc herniation, ventral and right lateral at the L5-S1 level
by the Philippine Overseas Employment Administration (POEA), for a period of 12 with secondary right nerve root compression and edema. Small disc protrusion
months, with a basic monthly salary of US$1,200.00 at 48 hours of work weekly, also noted ventral and bilateral at the L4-L5.7
overtime pay of US$600.00, allowance of US$200.00, and vacation leave with pay
of 30 days a year (or US$100.00 a month) or pro-rata. The total fixed monthly Dr. Igual observed that the "CT scan showed large disc herniation L5-S1 with 2°
salary of respondent was US$2,100.00. nerve root compression and edema" and recommended respondent’s
"confinement for at least two weeks for P.T. [physical therapy] and medications; if
On April 16, 1997, he was deployed aboard M/V Aria in Bangkok, Thailand. During not resolved, may need surgical decompression."8
his employment, the master of the vessel sent respondent to the Centre Medical
de Ngodi at Doula, Cameroon, where he was treated for three days due to the In a letter9 to petitioner Varorient dated July 29, 1997, respondent, through his
shooting pain in the lower extremities, particularly on his right foot. In the Medical counsel, stated that due to the gross and evident bad faith of petitioners in refusing
Certificate6 dated June 19, 1997, the attending physician, Dr. R. Mongouè
to grant him continued medical assistance until he becomes fit to work, as
Tchouakẻ, stated that he diagnosed respondent's pain on the right foot as "sciatic
recommended by their company doctors, he was forced to seek medical treatment
neuralgia" and administered "[drips], injection, and acupuncture." Respondent was
at his own expense.10Respondent demanded that petitioners should provide him
declared not fit to work. The doctor recommended respondent’s repatriation to the
medical treatment and pay him sickness wages and disability compensation, within
Philippines for continuing treatment. five (5) days from receipt of the letter; otherwise, he would be constrained to
institute appropriate legal action against them.
On June 21, 1997, respondent was repatriated to the Philippines. When he
reported back to work, he was referred to the company physician, Dr. John H.E.
In a Certification11 dated November 7, 1997, Dr. Copernico J. Villaruel, Jr.,
Cusi who, in turn, referred him to Dr. Irene B. Roman-Igual, a neurologist at Makati
attending orthopedic surgeon at the Philippine General Hospital, stated that
Medical Center. On June 30, 1997, respondent was subjected to the Computed respondent has been admitted under his care from October 9 to 10, 1997 for
Tomography Scan (CT Scan), which yielded the following results:
hemilaminectomy and foraminotomy of L4-L5 and L5-SI, due to the pain in his right
foot, and that respondent is now fit to go back to work.
CT scan examination of the lumbosacral spine demonstrates a large disc
herniation ventral and right lateral at the L5-S1 level encroaching into the right Acting on the endorsement letter12 dated November 24, 1997 by Labor Arbiter
neural exit foramina. There is compression of the right nerve root at the same L5- Pedro C. Ramos, Dr. Francisco A. Estacio, Chief of the Medical and Rehabilitation
S1 level.
Division of the Employees Compensation Commission (ECC), submitted the
Disability Evaluation Report13 dated December 15, 1997, conducted on the health
Smaller disc protrusion is also noted ventral and bilateral at the L4-L5 interspace condition of respondent, with the following findings:
level obliterating the underlying epidural fatty plane.
PHYSICAL EXAMINATION:
The right nerve root appears relatively swollen when compared with the left at the
L5-S1.
- Fairly developed fairly nourished

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- Head, Eyes, Ears, Nose, and Throat no abnormal findings Position Paper), moral damages of ₱1,100,000.00, and exemplary damages and
attorney’s fees in such an amount as the labor arbiter may deem proper.
- Heart and lungs – no rales and no murmur appreciated
In his Position Paper,15 respondent sought reimbursement of his medical expenses
- Abdomen – no abnormal finding and asserted that petitioners are liable to pay him sickness wages, compensatory
damages, moral damages, and attorney's fees. However, respondent withdrew his
- Extremities – no limitation of movements, no atrophy of muscles. claim for disability benefits with reservation to re-file a complaint should there be a
recurrence of his injury.
DIAGNOSIS:
In their Position Paper,16 petitioners countered that respondent is not entitled to the
benefits arising from his alleged permanent and total disability as he was later
- Large Herniated Disc L5 S1, with Nerve Roat Compression and Edema declared to be fit to work per Certification dated November 7, 1997 by Dr.
Copernico J. Villaruel, Jr., the attending orthopedic surgeon at the Philippine
- Small Disc Protrusion, L4 L5 General Hospital; that respondent can no longer seek continuation of his medical
treatment and claim for sickness wages and reimbursement of medical expenses
RECOMMENDATION: because upon his repatriation, he had received the amount of US$1,010.00 (or the
equivalent then of about ₱40,400.00) as settlement for his sickness wages and
Based on ECC Schedule of Compensation, the Complainant deserves to other benefits, as evidenced by the Receipt and Quitclaim 17 dated June 25, 1997,
receive daily income benefit for the loss of income he incurred from June executed by respondent; and that respondent is not entitled to moral and
1997 to November 1997, plus reimbursement of hospital and medical exemplary damages and attorney's fees. By way of counterclaim, they sought
expenses for his injury, Herniated Disc. recovery of litigation expenses, actual damages, and attorney's fees in an amount
not less than ₱20,000.00 and, also, exemplary damages in an amount at the
discretion of the labor arbiter.
On September 19, 1997, respondent filed a Complaint14 against petitioners,
alleging that (1) per his employment contract, he boarded M/V Aria at Bangkok,
Thailand on April 16, 1997; (2) prior to his deployment, he was employed by In their Supplement to Position Paper,18 petitioners averred that respondent sought
petitioner for the past 12 years; (3) during his employment and while in the another employment with Tara Trading Shipmanagement, Inc. (for and in behalf of
performance of his duties, he suffered injuries consisting of "large disc herniation, Amethyst Shipping Co.), on board M/V Luna Azul, for a period of twelve (12)
ventral and right lateral at the L5-S1 level with secondary right and nerve root months, with a basic monthly salary of US$967.00 at 48 hours of work weekly,
compression and edema, small disc protrusion also noted at ventral and bilateral overtime pay of US$535.00/month (US$6.24 per hour beyond 105 hours), and
at the L4-L5"; (4) due to petitioners’ refusal to provide for his medical treatment vacation leave with pay of 3 days a year (or US$98.00 a month), as evidenced by
and continued failure to pay his sickness wages amounting to US$4,800.00, he his Contract of Employment,19 Seafarer Info-Sheet20 and POEA Overseas
was constrained to provide for his own medical expenses; (5) his injuries Employment Certificate.21
constituted permanent and total disability which, under POEA Memorandum
Circular No. 5, series of 1994, would make petitioners liable for disability benefits On September 7, 1998, Acting Executive Labor Arbiter Pedro C. Ramos dismissed
under his employment contract in the amount of US$60,000.00; and (6) his injury respondent's complaint for permanent and total disability benefits, sickness wages
or disability was directly and proximately due to the direct and vicarious acts of and all other claims and, likewise, petitioners' counterclaim for damages, for lack of
negligence of petitioners and their agents. Respondent prayed that judgment be merit. The labor arbiter found that petitioners have substantially complied with all
rendered, declaring petitioners liable to reimburse his medical and hospital their obligations to
expenses in the total amount of ₱103,969.00 and to pay him disability benefits in
the amount of US$60,000.00, sickness wages of US$4,800.00, compensatory respondent under the POEA-approved employment contract. He debunked
damages of US$604,800.00 (this amount was reduced to US$13,370.00 in his respondent's claim for permanent and total disability benefits because respondent
had been duly proven and declared to be "fit to work" not only by the hospital of his

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choice, i.e., Philippine General Hospital, but also by the Employees Compensation SEVENTY-NINE and 76/00 PESOS (₱13,579.76), representing the balance of the
Commission (ECC); that respondent withdrew his claim during the pendency of the sickness wages and reimbursement of medical and surgical expenses.
proceedings, although with reservation to re-file the same; and that respondent is
now on board M/V Luna Azul on an overseas deployment. He upheld the validity of All other claims are DISMISSED for lack of merit.
the Receipt and Quitclaim executed by respondent and stated that respondent had
received reimbursement of his medical expenses in the amount ₱4,896.50. He
SO ORDERED.22
declared that respondent is no longer entitled to sickness wages as it would
amount to double recovery of benefits, as provided for under Paragraph 11,
Section 4 of the POEA Standard Employment Contract. Both parties filed their respective motions for reconsideration. Petitioners sought
exoneration from liability, while respondent averred that the NLRC erred in
excluding certain items or receipts from the reimbursable medical expenses,
On May 25, 1999, the NLRC rendered a Decision which reversed and set aside
deducting US$1,010.00 from the award of sickness wages, not holding petitioners
the Decision of the labor arbiter. It ruled that respondent is entitled to sickness
liable for his entire wages up to the time he would be employed with another
wages and to free medical and hospital treatment for the injury he sustained during company, and not awarding him compensatory and moral damages and attorney’s
the term of his contract, pursuant to Section C 4(b) and (c), Part II of the Standard fees.
Employment Contract Governing All Filipino Seamen On Board Ocean-Going
Vessels, which obligates the employer to: (1) provide continuous medical
treatment to the repatriated injured seaman until such time he is declared fit or the The NLRC denied respondent's motion for reconsideration in a Resolution dated
degree of his disability has been established by the company-designated June 30, 1999 and, likewise, petitioners' motion for reconsideration in its
physician; and (2) pay the injured seaman one hundred percent (100%) of his Resolution dated August 18, 1999.
basic wages from the time he leaves the vessel for treatment until he is declared fit
to work, but in no case shall this period exceed 120 days. The NLRC observed that On petition for review by petitioners, the CA affirmed the Decision dated May 25,
petitioners cannot be considered to have adequately discharged their obligation in 1999 and the Resolution dated August 18, 1999 of the NLRC with the following
providing continuous treatment for respondent, as they failed to follow through their disposition:
company-designated physician’s recommendation, which required respondent to
undergo a two-week confinement and physical therapy and, if the injury remains WHEREFORE, the Decision of the National Labor Relations Commission dated
unresolved, for respondent to have surgical decompression. As a consequence, May 25, 1999 is AFFIRMED with MODIFICATION. Petitioners Varorient Shipping
respondent was constrained to seek treatment and surgery from a doctor other Co., Inc. and Aria Maritime Co., Ltd., are, jointly and severally, ordered to pay
than the company-designated physician. The NLRC also declared that respondent private respondent Gil A. Flores:
is entitled to sickness wages equivalent to 120 days in the amount of
US$4,800.00, less the amount of US$1,010.00 which he had received, as full 1) the balance of sickness wages in the amount of US$3,790.00, or its
settlement of the claim from the petitioners, per Receipt and Quitclaim dated June peso equivalent at the time of actual payment; and
25, 1997, or a net total of US$3,790.00. However, the NLRC denied respondent's
claim for compensatory damages, as the contractual benefit of sickness wages
2) reimbursement of medical and surgical expenses in the total amount of
provided for under the Standard Contract is already a compensatory measure
₱15,373.26, instead of ₱13,579.76.
intended to assist the injured seaman during the term of his contract. The
dispositive portion of the Decision reads:
All other claims are DISMISSED for lack of merit.23
WHEREFORE, the decision appealed from is hereby SET ASIDE. Respondents
Varorient Shipping Co., Inc. and Aria Maritime Co., Ltd., are, jointly and severally, As the CA denied their motion for reconsideration in the Resolution dated January
ordered to pay complainant Gil A. Flores the Philippine Peso equivalent at the time 29, 2004, petitioners filed this present petition.
of actual payment of THREE THOUSAND SEVEN HUNDRED NINETY US
DOLLARS (US$3,790.00), plus THIRTEEN THOUSAND FIVE HUNDRED Petitioners contend that respondent is not entitled to sickness wages, as this would
be tantamount to unjust enrichment and double recovery on the part of

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respondent. They maintain that they had paid him US$1,010.00 as full payment of 2. If the injury or illness requires medical and/or dental treatment in a
his salaries and benefits, including his medical treatment and, by reason thereof, foreign port, the employer shall be liable for the full cost of such medical,
respondent executed the Receipt and Quitclaim. They also claim that prior to his serious dental, surgical and hospital treatment, as well as board and
departure from the country and actual deployment overseas, respondent and his lodging, until the seafarer is declared fit to work or to be repatriated.
wife received financial accommodations in the form of cash advances, i.e.,
US$1,000.00, per cash voucher dated April 16, 1997, signed by respondent; and However, if after repatriation, the seafarer still requires medical attention
US$2,790.00, per cash voucher dated April 21, 1997, signed by Crisanta Flores arising from said injury or illness, he shall be so provided at cost to the
(wife of respondent), or the total amount of US$3,790.00. According to petitioners, employer until such time he is declared fit or the degree of his disability
since the amount of US$3,790.00 remained unpaid by respondent and his wife, has been established by the company-designated physician.
therefore, they can properly offset the said amount with the sickness wages they
would be paying to respondent.
3. Upon sign-off from the vessel for medical treatment, the seafarer is
entitled to sickness allowance equivalent to his basic wage until he is
Respondent denies that he and his wife were given cash advances while he was declared fit to work, or the degree of permanent disability has been
on board; that he had received the amount of US$1,010.00 from the petitioners as assessed by the company-designated physician, but in no case shall this
settlement of all his claims; and that the Receipt and Quitclaim dated June 25, period exceed one hundred twenty (120) days.
1997, allegedly executed by him, was a falsified document as the signature
appearing therein was a forgery.
For this purpose, the seafarer shall submit himself to a post-employment
medical examination by a company-designated physician within three
Contrary to petitioners' contention, respondent is entitled to sickness wages. The working days upon his return, except when he is physically incapacitated
shooting pain on his right foot is an injury which he suffered during the course of to do so, in which case a written notice to the agency within the same
his employment and, therefore, obligates petitioners to compensate him and period is deemed as compliance. Failure of the seafarer to comply with the
provide him the appropriate medical treatment. mandatory reporting requirement shall result in his forfeiture of the right to
claim the above benefits.
This is in consonance with the mandated provisions under Section 20 B (1), (2),
(3), (4), and (5) of the Standard Terms and Conditions Governing the Employment If a doctor appointed by the seafarer disagrees with the assessment,
of Filipino Seafarers On Board Ocean-Going Vessels,24 pursuant to Department
Order No. 4, series of 2000, of the Department of Labor and Employment (by then
a third doctor may be agreed jointly between the employer and the
Secretary Bienvenido E. Laguesma), adopted on May 31, 2000, which provides seafarer. The third doctor's decision shall be final and binding on both
that: parties.

SECTION 20. COMPENSATION AND BENEFITS


4. Those illnesses not listed in Section 32 of this Contract are disputably
presumed as work related.
B. COMPENSATION AND BENEFITS FOR INJURY OR ILLNESS
5. Upon sign-off of the seafarer from the vessel for medical treatment, the
The liabilities of the employer when the seafarer suffers work-related injury or employer shall bear the full cost of repatriation in the event the seafarer is
illness during the term of his contract are as follows: declared (1) fit for repatriation; or (2) fit to work, but the employer is unable
to find employment for the seafarer on board his former vessel or another
1. The employer shall continue to pay the seafarer his wages during the vessel of the employer despite earnest efforts.
time he is on board the vessel;
6. In case of permanent total or partial disability of the seafarer caused by
either injury or illness, the seafarer shall be compensated in accordance

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with the schedule of benefits enumerated in Section 32 of his Contract. should accordingly be reimbursed for the purchase of these medicines. The
Computation of his benefits arising from an illness or disease shall be records disclose the following purchases:
governed by the rates and the rules of compensation applicable at the time
the illness or disease was contracted.
1. Mercury Drug Receipt No. 535112 (Annex "F")
On June 21, 1997, respondent was repatriated to the Philippines and declared fit Myonal - ₱97.50
to work on November 7, 1997, or a total period of 141 days. Applying the said
provisions of the Standard Contract, respondent is entitled to receive sickness Neo-pyrozon - 71.50 < - s>P169.00
wages, covering the maximum period of 120 days, or the amount of US$4,800.00.
The NLRC, as affirmed by the CA, found that petitioners are liable to pay 2. Mercury Drug Receipt No. 532746 (Annex "F-1")
respondent the total amount of US$3,790.00 (US$4,800.00 less the amount of
US$1,010.00 which he already received by virtue of the Receipt and Quitclaim Ne[u]robin - ₱76.00
dated June 25, 1997). Myonal - 97.50 - ₱173.50

As pointed out by the CA, petitioners, in their motion for reconsideration of the 3. Mercury Drug Receipt No. 533708 (Annex "F-2")
NLRC Decision dated May 25, 1999, raised for the first time that they had given
the amount of US$3,790.00 to respondent and belatedly submitted two (2) cash Neo-pyrazon - ₱71.50
vouchers, i.e., US$1,000.00, dated April 16, 1997, which was signed by
Neurobin - 76.00
respondent; and US$2,290.00, dated April 21, 1997, which was signed by
respondent's wife Cristina Flores, or a total of US$3,790.00. The CA observed that Myonal - 97.50 - ₱244.00
the said cash vouchers do not bear the name and logo of petitioners, unlike the
check voucher they issued for the reimbursement of the medical expenses of 4. Mercury Drug Receipt No. 251929 (Annex "F-3")
respondent amounting to ₱4,896.50, and that these vouchers were supposedly
already in existence or in the possession of the petitioners since April 1997, but Pyrazon - ₱71.50 - ₱71.50
they never interposed such fact in their pleadings, e.g., Position Paper,
Supplement to Respondent's Position Paper, or Opposition to Complainant's 5. Mercury Drug Receipt No. 251931 (Annex "F-4")
Appeal. The Court sees no reason to disturb this factual finding. Myonal - ₱97.50 - ₱97.50

Moreover, petitioners were remiss in providing continuous treatment for 6. Mercury Drug Receipt No. 534528 (Annex "F-5")
respondent in accordance with the recommendation of their company physician
that respondent should undergo a two-week confinement and physical therapy Neo Pyrozon - ₱71.50
and, if his condition does not improve, then he would have to be subjected to
Myonal - 97.50 - ₱169.00
surgical decompression to alleviate the pain on his right foot. Respondent's ailment
required urgent medical response, thereby necessitating him to seek immediate 7. Mercury Drug Receipt No. 253117 (Annex "F-6")
medical attention, even at his own expense. The CA enumerated the medical
expenses of respondent for which petitioner would be liable. Thus, Myobal - ₱97.50

[w]hile we agree substantially with the NLRC’s decision in allowing the Neo-Pyrozon - 71.50 - ₱169.00
reimbursement of ₱13,579.76, we disagree with its findings that the receipts for
TOTAL - ₱1,093.50
medicines were not covered by prescriptions. Dr. Irene Igual recommended the
continued use of neo-pyrozon, ne[u]robin, and myonal [and], thus, respondent
xxxx

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In the same vein, receipt numbers 630 and 0091, issued by the offices of Dr. Betty and (c) that the contract is not contrary to law, public order, public policy, morals or
Dy Mancao (Annex "F-40") and Dr. Copernico J. Villaruel (Annex "F-39") for good customs, or prejudicial to a third person with a right recognized by law.
₱300.00 and ₱400.00, respectively, should be reimbursed to Flores. The PGH
hospital bills do not include the doctors’ fee, thus, it is safe to conclude that the A perusal of the provisions of the Receipt and Quitclaim shows that respondent
doctors who attended to Flores billed him personally. x x x would be releasing and discharging petitioners from all claims, demands, causes
of action, and the like in an all-encompassing manner, including the fact that he
xxxx had not contracted or suffered any illness or injury in the course of his employment
and that he was discharged in good and perfect health. These stipulations clearly
In fine, private respondent is entitled to reimbursement of his medical expenses placed respondent in a disadvantageous position vis-á-vis the petitioners.
totalling ₱15,373.26.25
WHEREFORE, the petition is DENIED. The Decision dated February 28, 2003 and
In view of the foregoing, respondent should be reimbursed the amount of the Resolution dated January 29, 2004 of the Court of Appeals in CA-G.R. SP No.
₱13,579.76, representing the balance of the sickness wages due him, the cost of 55512, which affirmed with modification the Decision dated May 25, 1999 and
the prescribed medicines he purchased, and the surgical expenses he incurred, as Resolution dated August 18, 1999 of the National Labor Relations Commission,
evaluated by the CA. are AFFIRMED.

Petitioners argue that the Receipt and Quitclaim sufficed to cover the balance of SO ORDERED.
the sickness wages, after deducting the cash advances, which respondent would
be entitled to; while respondent questions the veracity of the said
document.1avvphi1
G.R. No. 165935 February 8, 2012
The Receipt and Quitclaim executed by respondent lacks the elements of
voluntariness and free will and, therefore, does not absolve petitioners from liability BRIGHT MARITIME CORPORATION (BMC)/DESIREE P. TENORIO, Petitioners,
in paying him the sickness wages and other monetary claims. vs.
RICARDO B. FANTONIAL, Respondent.
Although respondent avers that his signature on the said quitclaim was a forgery,
the CA relied on the factual findings of the labor arbiter and the NLRC that gave DECISION
credence to it. Thus, the matter to be resolved would be whether the Receipt and
Quitclaim can be considered substantial compliance to the contractual obligation
by petitioners under the standard employment contract. PERALTA, J.:

In More Maritime Agencies, Inc. v. NLRC,26 the Court ruled that the law does not This is a petition for review on certiorari1 of the Decision of the Court of Appeals in
consider as valid any agreement to receive less compensation than what a worker CA-G.R. SP No. 67571, dated October 25, 2004, reversing and setting aside the
is entitled to recover nor prevent him from demanding benefits to which he is Decision of the National Labor Relations Commission (NLRC), and reinstating the
entitled. Quitclaims executed by the employees are thus commonly frowned upon Decision of the Labor Arbiter finding that respondent Ricardo B. Fantonial was
as contrary to public policy and ineffective to bar claims for the full measure of the illegally dismissed, but the Court of Appeals modified the award of damages.
worker’s legal rights, considering the economic disadvantage of the employee and
the inevitable pressure upon him by financial necessity. Thus, it is never enough to The facts are as follows:
assert that the parties have voluntarily entered into such a quitclaim. There are
other requisites, to wit: (a) that there was no fraud or deceit on the part of any of On January 15, 2000, a Contract of Employment2 was executed by petitioner
the parties; (b) that the consideration of the quitclaim is credible and reasonable; Bright Maritime Corporation (BMC), a manning agent, and its president, petitioner

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Desiree P. Tenorio, for and in behalf of their principal, Ranger Marine S.A., and January 17, 2000, the same day when respondent was supposed to fly to
respondent Ricardo B. Fantonial, which contract was verified and approved by the Germany to join the vessel. Unfortunately, respondent was not declared fit to work
Philippine Overseas Employment Administration (POEA) on January 17, 2000. on January 17, 2000 due to some medical problems.
The employment contract provided that respondent shall be employed as
boatswain of the foreign vessel M/V AUK for one year, with a basic monthly salary Petitioners submitted the Affidavit6 of Dr. Lyn dela Cruz-De Leon, stating that the
of US$450, plus an allowance of US$220. The contract also provided for a 90 said doctor examined respondent on January 17, 2000; that physical and
hours per month of overtime with pay and a vacation leave with pay of US$45 per laboratory results were all within normal limits except for the finding, after chest x-
month. ray, of Borderline Heart Size, and that respondent was positive to Hepatitis B on
screening; that respondent underwent ECG to check if he had any heart problem,
Respondent was made to undergo a medical examination at the Christian Medical and the result showed left axis deviation. Dr. De Leon stated that she requested for
Clinic, which was petitioner’s accredited medical clinic. Respondent was issued a a Hepatitis profile, which was done on January 18, 2000; that on January 20, 2000,
Medical Certificate3 dated January 17, 2000, which certificate had the phrase "FIT the result of the Hepatitis profile showed non-infectious Hepatitis B. Further, Dr. De
TO WORK" stamped on its lower and upper portion. Leon stated that respondent was declared fit to work only on January 21, 2000;
however, the date of the Medical Certificate was January 17, 2000, which was the
At about 3:30 p.m. of January 17, 2000, respondent, after having undergone the date when she started to examine the patient per standard operating procedure.
pre-departure orientation seminar and being equipped with the necessary
requirements and documents for travel, went to the Ninoy Aquino International Petitioners argued that since respondent was declared fit to work only on January
Airport upon instruction of petitioners. Petitioners told respondent that he would be 21, 2000, he could not join the vessel anymore as it had left the port in Germany.
departing on that day, and that a liaison officer would be delivering his plane ticket Respondent was advised to wait for the next vacancy for boatswain, but he failed
to him. At about 4:00 p.m., petitioners’ liaison officer met respondent at the airport to report to petitioners’ office, and he gave them an incorrect telephone number.
and told him that he could not leave on that day due to some defects in his medical During the mandatory conference/conciliation stage of this case, petitioners offered
certificate. The liaison officer instructed respondent to return to the Christian respondent to join one of their vessels, but he refused.
Medical Clinic.
Petitioners further argued that they cannot be held liable for illegal dismissal as the
Respondent went back to the Christian Medical Clinic the next day, and he was contract of employment had not yet commenced based on Section 2 of the
told by the examining physician, Dr. Lyn dela Cruz-De Leon, that there was Standard Terms and Conditions Governing the Employment of Filipino Seafarers
nothing wrong or irregular with his medical certificate. on Board Ocean-Going Vessels (POEA Memorandum Circular No. 055-96), which
states:
Respondent went to petitioners’ office for an explanation, but he was merely told to
wait for their call, as he was being lined-up for a flight to the ship's next port of call. SEC 2. COMMENCEMENT/DURATION OF CONTRACT
However, respondent never got a call from petitioners.
A. The employment contract between the employer and the seafarer shall
On May 16, 2000, respondent filed a complaint against petitioners for illegal commence upon actual departure of the seafarer from the airport or seaport in the
dismissal, payment of salaries for the unexpired portion of the employment point of hire and with a POEA approved contract. It shall be effective until the
contract and for the award of moral, exemplary, and actual damages as well as seafarer’s date of arrival at the point of hire upon termination of his employment
attorney’s fees before the Regional Arbitration Branch No. 7 of the NLRC in Cebu pursuant to Section 18 of this Contract.
City.4
Petitioners asserted that since respondent was not yet declared fit to work on
In their Position Paper,5 petitioners stated that to comply with the standard January 17, 2000, he was not able to leave on the scheduled date of his flight to
requirements that only those who meet the standards of medical fitness have to be Germany to join the vessel. With his non-departure, the employment contract was
sent on board the vessel, respondent was referred to their accredited medical not commenced; hence, there is no illegal dismissal to speak of. Petitioners prayed
clinic, the Christian Medical Clinic, for pre-employment medical examination on for the dismissal of the complaint.

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On September 25, 2000, Labor Arbiter Ernesto F. Carreon rendered a Decision7 in The other claims and the case against respondent Desiree P. Tenorio are
favor of respondent. The pertinent portion of the decision reads: dismissed for lack of merit.8

Unarguably, the complainant and respondents have already executed a contract of Petitioners appealed the decision of the Labor Arbiter to the NLRC.
employment which was duly approved by the POEA. There is nothing left for the
validity and enforceability of the contract except compliance with what are agreed On May 31, 2001, the NLRC, Fourth Division, rendered a Decision9 reversing the
upon therein and to all their consequences. Under the contract of employment, the decision of the Labor Arbiter. The dispositive portion of the NLRC decision reads:
respondents are under obligation to employ the complainant on board M/V AUK for
twelve months with a monthly salary of 450 US$ and 220 US$ allowance. The
WHEREFORE, premises considered, the decision of Labor Arbiter Ernesto F.
respondents failed to present plausible reason why they have to desist from
Carreon, dated 25 September 2000, is SET ASIDE and a new one is entered
complying with their obligation under the contract. The allegation of the
DISMISSING the complaint of the complainant for lack of merit.
respondents that the complainant was unfit to work is ludicrous. Firstly, the
respondents' accredited medical clinic had issued a medical certificate showing
that the complainant was fit to work. Secondly, if the complainant was not fit to SO ORDERED.10
work, a contract of employment would not have been executed and approved by
the POEA. The NLRC held that the affidavit of Dr. Lyn dela Cruz-De Leon proved that
respondent was declared fit to work only on January 21, 2000, when the vessel
We are not also swayed by the argument of the respondents that since the was no longer at the port of Germany. Hence, respondent’s failure to depart on
complainant did not actually depart from Manila his contract of employment can be January 17, 2000 to join the vessel M/V AUK in Germany was due to respondent’s
withdrawn because he has not yet commenced his employment. The health. The NLRC stated that as a recruitment agency, petitioner BMC has to
commencement of the employment is not one of those requirements in order to protect its name and goodwill, so that it must ensure that an applicant for
make the contract of employment consummated and enforceable between the employment abroad is both technically equipped and physically fit because a labor
parties, but only as a gauge for the payment of salary. In this case, while it is true contract affects public interest.
that the complainant is not yet entitled to the payment of wages because then his
employment has not yet commenced, nevertheless, the same did not relieve the Moreover, the NLRC stated that the Labor Arbiter’s decision ordering petitioners to
respondents from fulfilling their obligation by unilaterally revoking the contract as refund respondent’s placement fee and other actual expenses, which was fixed at
the same amounted to pre-termination of the contract without just or authorized one month pay in the amount of US$670.00, does not have any bases in law,
cause perforce, we rule to be constitutive of illegal dismissal. because in the deployment of seafarers, the manning agency does not ask the
applicant for a placement fee. Hence, respondent is not entitled to the said
Anent our finding of illegal dismissal, we condemn the respondent corporation to amount.
pay the complainant three (3) months salary and the refund of his placement fee,
including documentation and other actual expenses, which we fixed at one month Respondent filed a motion for reconsideration of the NLRC decision, which motion
pay. was denied in a Resolution11dated July 23, 2001.

The granted claims are computed as follows: Respondent filed a petition for certiorari before the Court of Appeals, alleging that
the NLRC committed grave abuse of discretion in rendering the Decision dated
US$670 x 4 months US$ 2,680.00 May 31, 2001and the Resolution dated July 23, 2001.

WHEREFORE, premises considered, judgment is hereby rendered ordering the On March 12, 2002, respondent’s counsel filed a Manifestation with Motion for
respondent Bright Maritime Corporation to pay the complainant Ricardo Fantonial Substitution of Parties due to the death of respondent on November 15, 2001,
the peso equivalent at the time of actual payment of US$ 2,680.00. which motion was granted by the Court of Appeals.

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On October 25, 2004, the Court of Appeals rendered a Decision, the dispositive The Court of Appeals held that petitioners’ act of preventing respondent from
portion of which reads: leaving for Germany was tainted with bad faith, and that petitioners were also
liable to respondent for moral and exemplary damages.
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by
us REVERSING and SETTING ASIDE the May 31, 2001 Decision and the July 23, Thereafter, petitioners filed this petition raising the following issues:
2001 Resolution of the NLRC, Fourth Division, and REINSTATING the September
25, 2000 Decision of the Labor Arbiter with the modification that the placement fee I
and other expenses equivalent to one (1) month salary is deleted and that the
private respondent Bright Maritime Corporation must also pay the amounts of
WHETHER OR NOT THE HONORABLE APPELLATE COURT
₱30,000.00 and ₱10,000.00 as moral and exemplary damages, respectively, to the
COMMITTED A SERIOUS ERROR AND GRAVE ABUSE OF
petitioner.12
DISCRETION WHEN IT HELD THE PETITIONERS LIABLE FOR
ILLEGALLY TERMINATING THE PRIVATE RESPONDENT FROM HIS
The Court of Appeals held that the NLRC, Fourth Division, acted with grave abuse EMPLOYMENT.
of discretion in reversing the decision of the Labor Arbiter who found that
respondent was illegally dismissed. It agreed with the Labor Arbiter that the
II
unilateral revocation of the employment contract by petitioners amounted to pre-
termination of the said contract without just or authorized cause.
WHETHER OR NOT THE HONORABLE APPELLATE COURT
COMMITTED SERIOUS ERROR AND GRAVE ABUSE OF DISCRETION
The Court of Appeals held that the contract of employment between petitioners
IN SETTING ASIDE THE OVERWHELMING EVIDENCE SHOWING
and respondent had already been perfected and even approved by the POEA.
THAT THE PRIVATE RESPONDENT FAILED TO COMPLY WITH THE
There was no valid and justifiable reason for petitioners to withhold the departure
REQUIREMENTS SET BY THE POEA RULES REGARDING FITNESS
of respondent on January 17, 2000. It found petitioners’ argument that respondent
FOR WORK.
was not fit to work on the said date as preposterous, since the medical certificate
issued by petitioners’ accredited medical clinic showed that respondent was
already fit to work on the said date. The Court of Appeals stated, thus: III

Private respondent's contention, which was contained in the affidavit of Dr. Lyn WHETHER OR NOT THE HONORABLE APPELLATE COURT
dela Cruz-De Leon, that the Hepatitis profile was done only on January 18, 2000 SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF
and was concluded on January 20, 2000, is of dubious merit. For how could the DISCRETION WHEN IT AWARDED MONETARY BENEFITS TO THE
said examining doctor place in the medical certificate dated January 17, 2000 the PRIVATE RESPONDENT DESPITE THE PROVISION OF THE POEA
words "CLASS-B NON-Infectious Hepatitis" (Rollo, p. 17) if she had not conducted [STANDARD EMPLOYMENT CONTRACT] TO THE CONTRARY.
the hepatitis profile? Would the private respondent have us believe that its
accredited physician would fabricate medical findings? IV

It is obvious, therefore, that the petitioner had been fit to work on January 17, 2000 WHETHER OR NOT THE HONORABLE APPELLATE COURT
and he should have been able to leave for Germany to meet with the vessel M/V COMMITTED SERIOUS ERROR WITH REGARD TO ITS FINDINGS OF
AUK, had it not been for the unilateral act by private respondent of preventing him FACTS, WHICH, IF NOT CORRECTED, WOULD CERTAINLY CAUSE
from leaving. The private respondent was merely grasping at straws in attacking GRAVE OR IRREPARABLE DAMAGE OR INJURY TO THE
the medical condition of the petitioner just so it can justify its act in preventing PETITIONERS.14
petitioner from leaving for abroad.13
The general rule that petitions for review only allow the review of errors of law by
this Court is not ironclad.15 Where the issue is shrouded by a conflict of factual

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perceptions by the lower court or the lower administrative body, such as the NLRC only on January 21, 2000 cannot overcome the evidence in the Medical Certificate
in this case, this Court is constrained to review the factual findings of the Court of dated January 17, 2000, which already stated that respondent had "Class-B Non-
Appeals.16 Infectious Hepatitis-B," and that he was fit to work. The explanation given by Dr.
Lyn dela Cruz-De Leon in her affidavit that the Medical Certificate was dated
Petitioners contend that the Court of Appeals erred in doubting the Affidavit of Dr. January 17, 2000, since it carries the date when they started to examine the
Lyn dela Cruz-De Leon, which affidavit stated that the Hepatitis profile of patient per standard operating procedure, does not persuade as it goes against
respondent was done only on January 18, 2000 and was concluded on January logic and the chronological recording of medical procedures. The Medical
20, 2000. Petitioners stated that they had no intention to fabricate or mislead the Certificate submitted as documentary evidence18 is proof of its contents, including
appellate court and the Labor Arbiter, but they had to explain the circumstances the date thereof which states that respondent was already declared fit to work on
that transpired in the conduct of the medical examination. Petitioners reiterated January 17, 2000, the date of his scheduled deployment.
that the medical examination was conducted on January 17, 2000 and the result
was released on January 20, 2000. As explained by Dr. Lyn dela Cruz-De Leon, Next, petitioners contend that respondent’s employment contract was not
the date "January 17, 2000" was written on the medical examination certificate perfected pursuant to the POEA Standard Employment Contract, which provides:
because it was the day when respondent was referred and initially examined by
her. The medical examination certificate was dated January 17, 2000 not for any SEC 2. COMMENCEMENT/DURATION OF CONTRACT
reason, but in accordance with a generally accepted medical practice, which was
not controverted by respondent.
A. The employment contract between the employer and the seafarer shall
commence upon actual departure of the seafarer from the airport or seaport in the
Petitioners assert that respondent’s failure to join the vessel on January 17, 2000 point of hire and with a POEA approved contract. It shall be effective until the
should not be attributed to it for it was a direct consequence of the delay in the seafarer’s date of arrival at the point of hire upon termination of his employment
release of the medical report. Respondent was not yet declared fit to work at the pursuant to Section 18 of this Contract.19
time when he was supposed to be deployed on January 17, 2000, as instructed by
petitioners’ principal. Respondent’s fitness to work is a condition sine qua non for
Petitioners argue that, as ruled by the NLRC, since respondent did not actually
purposes of deploying an overseas contract worker. Since respondent failed to depart from the Ninoy Aquino International Airport in Manila, no employer-
qualify on the date designated by the principal for his deployment, petitioners had
employee relationship existed between respondent and petitioners’ principal,
to find a qualified replacement considering the nature of the shipping business
Ranger Marine S.A., hence, there is no illegal dismissal to speak of, so that the
where delay in the departure of the vessel is synonymous to demurrage/damages
award of damages must be set aside.
on the part of the principal and on the vessel’s charterer. Without a clean bill of
health, the contract of employment cannot be considered to have been perfected
as it is wanting of an important requisite. Petitioners assert that they did not conceal any information from respondent
related to his contract of employment, from his initial application until the release of
the result of his medical examination. They even tried to communicate with
Based on the foregoing argument of petitioners, the first issue to be resolved is
respondent for another shipboard assignment even after his failed deployment,
whether petitioners’ reason for preventing respondent from leaving Manila and
which ruled out bad faith. They pray that respondent’s complaint be dismissed for
joining the vessel M/V AUK in Germany on January 17, 2000 is valid. lack of merit.

The Court rules in the negative.


Petitioners’ argument is partly meritorious.

The Court has carefully reviewed the records of the case, and agrees with the An employment contract, like any other contract, is perfected at the moment (1) the
Court of Appeals that respondent’s Medical Certificate17 dated January 17, 2000, parties come to agree upon its terms; and (2) concur in the essential elements
stamped with the words "FIT TO WORK," proves that respondent was medically fit
thereof: (a) consent of the contracting parties, (b) object certain which is the
to leave Manila on January 17, 2000 to join the vessel M/V AUK in Germany. The
subject matter of the contract, and (c) cause of the obligation.20 The object of the
Affidavit of Dr. Lyn dela Cruz-De Leon that respondent was declared fit to work

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contract was the rendition of service by respondent on board the vessel for which faith,26 considering that respondent’s Medical Certificate stated that he was fit to
service he would be paid the salary agreed upon. work on the day of his scheduled departure, yet he was not allowed to leave
allegedly for medical reasons.1âwphi1
Hence, in this case, the employment contract was perfected on January 15, 2000
when it was signed by the parties, respondent and petitioners, who entered into Further, the Court agrees with the Court of Appeals that petitioner BMC is liable to
the contract in behalf of their principal, Ranger Marine S.A., thereby signifying their respondent for exemplary damages,27 which are imposed by way of example or
consent to the terms and conditions of employment embodied in the contract, and correction for the public good in view of petitioner’s act of preventing respondent
the contract was approved by the POEA on January 17, 2000. However, the from being deployed on the ground that he was not yet declared fit to work on the
employment contract did not commence, since petitioners did not allow respondent date of his departure, despite evidence to the contrary. Such act, if tolerated,
to leave on January 17, 2000 to embark the vessel M/V AUK in Germany on the would prejudice the employment opportunities of our seafarers who are qualified to
ground that he was not yet declared fit to work on the day of departure, although be deployed, but prevented to do so by a manning agency for unjustified reasons.
his Medical Certificate dated January 17, 2000 proved that respondent was fit to Exemplary damages are imposed not to enrich one party or impoverish another,
work. but to serve as a deterrent against or as a negative incentive to curb socially
deleterious actions.28 In this case, petitioner should be held liable to respondent for
In Santiago v. CF Sharp Crew Management, Inc.,21 the Court held that the exemplary damages in the amount of ₱50,000.00,29 following the recent case of
employment contract did not commence when the petitioner therein, a hired Claudio S. Yap v. Thenamaris Ship’s Management, et al.,30 instead of ₱10,000.00
seaman, was not able to depart from the airport or seaport in the point of hire;
thus, no employer-employee relationship was created between the parties. The Court also holds that respondent is entitled to attorney’s fees in the concept of
damages and expenses of litigation.31 Attorney's fees are recoverable when the
Nevertheless, even before the start of any employer-employee relationship, defendant's act or omission has compelled the plaintiff to incur expenses to protect
contemporaneous with the perfection of the employment contract was the birth of his interest.32 Petitioners’ failure to deploy respondent based on an unjustified
certain rights and obligations, the breach of which may give rise to a cause of ground forced respondent to file this case, warranting the award of attorney’s fees
action against the erring party.22 If the reverse happened, that is, the seafarer equivalent to ten percent (10%) of the recoverable amount.33
failed or refused to be deployed as agreed upon, he would be liable for damages. 23
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in
The Court agrees with the NLRC that a recruitment agency, like petitioner BMC, CA-G.R. SP No. 67571, dated October 25, 2004, is AFFIRMED with modification.
must ensure that an applicant for employment abroad is technically equipped and Petitioner Bright Maritime Corporation is hereby ORDERED to pay respondent
physically fit because a labor contract affects public interest. Nevertheless, in this Ricardo B. Fantonial actual damages in the amount of the peso equivalent of
case, petitioners failed to prove with substantial evidence that they had a valid US$8,040.00, representing his salary for one year under the contract; moral
ground to prevent respondent from leaving on the scheduled date of his damages in the amount Thirty Thousand Pesos (₱30,000.00); exemplary damages
deployment. While the POEA Standard Contract must be recognized and that is increased from Ten Thousand Pesos (₱10,000.00) to Fifty Thousand Pesos
respected, neither the manning agent nor the employer can simply prevent a (₱50,000.00), and attorney’s fees equivalent to ten percent (10%) of the
seafarer from being deployed without a valid reason.24 recoverable amount.

Petitioners’ act of preventing respondent from leaving and complying with his Costs against petitioners.
contract of employment constitutes breach of contract for which petitioner BMC is
liable for actual damages to respondent for the loss of one-year salary as provided SO ORDERED.
in the contract.25 The monthly salary stipulated in the contract is US$670, inclusive
of allowance.

The Court upholds the award of moral damages in the amount of ₱30,000.00, as
the Court of Appeals correctly found petitioners’ act was tainted with bad

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G.R. No. 169757 November 23, 2011 Respondent stated that a few days after he started working as a studio manager,
petitioner approached him and told him about his project to produce an album for
CESAR C. LIRIO, doing business under the name and style of CELKOR AD his 15-year-old daughter, Celine Mei Lirio, a former talent of ABS-CBN Star
SONICMIX, Petitioner, Records. Petitioner asked respondent to compose and arrange songs for Celine
vs. and promised that he (Lirio) would draft a contract to assure respondent of his
WILMER D. GENOVIA, Respondent. compensation for such services. As agreed upon, the additional services that
respondent would render included composing and arranging musical scores only,
DECISION while the technical aspect in producing the album, such as digital editing, mixing
and sound engineering would be performed by respondent in his capacity as
studio manager for which he was paid on a monthly basis. Petitioner instructed
PERALTA, J.: respondent that his work on the album as composer and arranger would only be
done during his spare time, since his other work as studio manager was the
This is a petition for review on certiorari of the decision of the Court of Appeals in priority. Respondent then started working on the album.
CA-G.R. SP No. 88899 dated August 4, 2005 and its Resolution dated September
21, 2005, denying petitioner’s motion for reconsideration. Respondent alleged that before the end of September 2001, he reminded
petitioner about his compensation as composer and arranger of the album.
The Court of Appeals reversed and set aside the resolution of the NLRC, and Petitioner verbally assured him that he would be duly compensated. By mid-
reinstated the decision of the Labor Arbiter with modification, finding that November 2001, respondent finally finished the compositions and musical
respondent is an employee of petitioner, and that respondent was illegally arrangements of the songs to be included in the album. Before the month ended,
dismissed and entitled to the payment of backwages and separation pay in lieu of the lead and back-up vocals in the ten (10) songs were finally recorded and
reinstatement. completed. From December 2001 to January 2002, respondent, in his capacity as
studio manager, worked on digital editing, mixing and sound engineering of the
The facts are as follows: vocal and instrumental audio files.

On July 9, 2002, respondent Wilmer D. Genovia filed a complaint against petitioner Thereafter, respondent was tasked by petitioner to prepare official
Cesar Lirio and/or Celkor Ad Sonicmix Recording Studio for illegal dismissal, non- correspondence, establish contacts and negotiate with various radio stations,
payment of commission and award of moral and exemplary damages. malls, publishers, record companies and manufacturers, record bars and other
outlets in preparation for the promotion of the said album. By early February 2002,
In his Position Paper,1 respondent Genovia alleged, among others, that on August the album was in its manufacturing stage. ELECTROMAT, manufacturer of CDs
15, 2001, he was hired as studio manager by petitioner Lirio, owner of Celkor Ad and cassette tapes, was tapped to do the job. The carrier single of the album,
Sonicmix Recording Studio (Celkor). He was employed to manage and operate which respondent composed and arranged, was finally aired over the radio on
Celkor and to promote and sell the recording studio's services to music enthusiasts February 22, 2002.
and other prospective clients. He received a monthly salary of ₱7,000.00. They
also agreed that he was entitled to an additional commission of ₱100.00 per hour On February 26, 2002, respondent again reminded petitioner about the contract on
as recording technician whenever a client uses the studio for recording, editing or his compensation as composer and arranger of the album. Petitioner told
any related work. He was made to report for work from Monday to Friday from 9:00 respondent that since he was practically a nobody and had proven nothing yet in
a.m. to 6 p.m. On Saturdays, he was required to work half-day only, but most of the music industry, respondent did not deserve a high compensation, and he
the time, he still rendered eight hours of work or more. All the employees of should be thankful that he was given a job to feed his family. Petitioner informed
petitioner, including respondent, rendered overtime work almost everyday, but respondent that he was entitled only to 20% of the net profit, and not of the gross
petitioner never kept a daily time record to avoid paying the employees overtime sales of the album, and that the salaries he received and would continue to receive
pay. as studio manager of Celkor would be deducted from the said 20% net profit
share. Respondent objected and insisted that he be properly compensated. On

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March 14, 2002, petitioner verbally terminated respondent’s services, and he was According to petitioner, they arrived at the foregoing sharing of profits based on the
instructed not to report for work. mutual understanding that respondent was just an amateur composer with no track
record whatsoever in the music industry, had no definite source of income, had
Respondent asserts that he was illegally dismissed as he was terminated without limited experience as an arranger, had no knowledge of the use of sound mixers or
any valid grounds, and no hearing was conducted before he was terminated, in digital arranger and that petitioner would help and teach him how to use the studio
violation of his constitutional right to due process. Having worked for more than six equipment; that petitioner would shoulder all the expenses of production and
months, he was already a regular employee. Although he was a so called "studio provide the studio and equipment as well as his knowledge in the use thereof; and
manager," he had no managerial powers, but was merely an ordinary employee. Celine Mei Lirio would sing the songs. They embarked on the production of the
album on or about the third week of August 2002.
Respondent prayed for his reinstatement without loss of seniority rights, or, in the
alternative, that he be paid separation pay, backwages and overtime pay; and that Petitioner asserted that from the aforesaid terms and conditions, his relationship
he be awarded unpaid commission in the amount of ₱2,000.00 for services with respondent is one of an informal partnership under Article 1767 5 of the New
rendered as a studio technician as well as moral and exemplary damages. Civil Code, since they agreed to contribute money, property or industry to a
common fund with the intention of dividing the profits among themselves.
Petitioner had no control over the time and manner by which respondent
Respondent’s evidence consisted of the Payroll dated July 31, 2001 to March 15,
composed or arranged the songs, except on the result thereof. Respondent
2002, which was certified correct by petitioner,2 and Petty Cash
reported to the recording studio between 10:00 a.m. and 12:00 noon. Hence,
Vouchers3 evidencing receipt of payroll payments by respondent from Celkor.
petitioner contended that no employer-employee relationship existed between him
and the respondent, and there was no illegal dismissal to speak of.
In defense, petitioner stated in his Position Paper4 that respondent was not hired
as studio manager, composer, technician or as an employee in any other capacity
On October 31, 2003, Labor Arbiter Renaldo O. Hernandez rendered a
of Celkor. Respondent could not have been hired as a studio manager, since the
decision,6 finding that an employer-employee relationship existed between
recording studio has no personnel except petitioner. Petitioner further claimed that
petitioner and respondent, and that respondent was illegally dismissed. The
his daughter Celine Mei Lirio, a former contract artist of ABS-CBN Star Records,
failed to come up with an album as the latter aborted its project to produce one. dispositive portion of the decision reads:
Thus, he decided to produce an album for his daughter and established a
recording studio, which he named Celkor Ad Sonicmix Recording Studio. He WHEREFORE, premises considered, we find that respondents CELKOR AD
looked for a composer/arranger who would compose the songs for the said album. SONICMIX RECORDING STUDIO and/ or CESAR C. LIRIO (Owner), have
In July 2001, Bob Santiago, his son-in-law, introduced him to respondent, who illegally dismissed complainant in his status as regular employee and,
claimed to be an amateur composer, an arranger with limited experience and consequently, ORDERING said respondents:
musician without any formal musical training. According to petitioner, respondent
had no track record as a composer, and he was not known in the field of music. 1) To pay him full backwages from date of illegal dismissal on March 14,
Nevertheless, after some discussion, respondent verbally agreed with petitioner to 2002 until finality of this decision and, in lieu of reinstatement, to [pay] his
co-produce the album based on the following terms and conditions: (1) petitioner separation pay of one (1) month pay per year of service reckoned from
shall provide all the financing, equipment and recording studio; (2) Celine Mei Lirio [the] date of hire on August 15, 2001 until finality of this decision, which as
shall sing all the songs; (3) respondent shall act as composer and arranger of all of date amounts to full backwages total of 145,778.6 (basic ₱7,000.00 x
the lyrics and the music of the five songs he already composed and the revival 19.6 mos.=₱133,000.00 + 1/12 thereof as 13th month pay of ₱11,083.33 +
songs; (4) petitioner shall have exclusive right to market the album; (5) petitioner SILP ₱7,000/32.62 days=₱214.59/day x 5=₱1,072.96 x 1.58
was entitled to 60% of the net profit, while respondent and Celine Mei Lirio were yrs.=₱1,695.27); separation pay of ₱22,750.00 (₱7,000.00 x 3.25 yrs.);
each entitled to 20% of the net profit; and (6) respondent shall be entitled to draw
advances of ₱7,000.00 a month, which shall be deductible from his share of the 2) To pay complainant's unpaid commission of ₱2,000.00;
net profits and only until such time that the album has been produced.

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3) To pay him moral and exemplary damages in the combined amount of WHEREFORE, the petition is GRANTED and the assailed resolutions dated
₱75,000.00. October 14, 2004 and December 14, 2004 are hereby REVERSED and SET
ASIDE. Accordingly, the decision dated October 31, 2003 of the Labor Arbiter
Other monetary claims of complainant are dismissed for lack of merit.7 is REINSTATED, with the modification that the awards of commission and
damages are deleted.11(Emphasis supplied.)
The Labor Arbiter stated that petitioner’s denial of the employment relationship
cannot overcome respondent’s positive assertion and documentary evidence Petitioner’s motion for reconsideration was denied for lack of merit by the Court of
proving that petitioner hired respondent as his employee.8 Appeals in its Resolution12 dated September 21, 2005.

Petitioner appealed the decision of the Labor Arbiter to the National Labor Hence, petitioner Lirio filed this petition.
Relations Commission (NLRC).
Petitioner states that respondent appealed to the Court of Appeals via a petition for
In aResolution7 dated October 14, 2004, the NLRC reversed and set aside the certiorari under Rule 65, which will prosper only if there is a showing of grave
decision of the Labor Arbiter. The dispositive portion of the Resolution reads: abuse of discretion or an act without or in excess of jurisdiction on the part of the
NLRC.13 However, petitioner contends that the Court of Appeals decided the case
not in accordance with law and applicable rulings of this Court as petitioner could
WHEREFORE, premises considered, the Appeal is GRANTED. Accordingly, the
Decision appealed from is REVERSED and, hence, SET ASIDE and a new one not find any portion in the Decision of the Court of Appeals ruling that the NLRC
ENTERED dismissing the instant case for lack of merit.9 acted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction. Petitioner submits that the Court of
Appeals could not review an error of judgment by the NLRC raised before it on a
The NLRC stated that respondent failed to prove his employment tale with petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure.
substantial evidence. Although the NLRC agreed that respondent was able to Moreover, petitioner contends that it was error on the part of the Court of Appeals
prove that he received gross pay less deduction and net pay, with the to review the finding of facts of the NLRC on whether there exists an employer-
corresponding Certification of Correctness by petitioner, covering the period from employee relationship between the parties.
July 31, 2001 to March 15, 2002, the NLRC held that respondent failed to proved
with substantial evidence that he was selected and engaged by petitioner, that
Petitioner’s argument lacks merit.
petitioner had the power to dismiss him, and that they had the power to control him
not only as to the result of his work, but also as to the means and methods of
accomplishing his work. It is noted that respondent correctly sought judicial review of the decision of the
NLRC via a petition for certiorari under Rule 65 of the Rules of Court filed before
the Court of Appeals in accordance with the decision of the Court in St. Martin
Respondent’s motion for reconsideration was denied by the NLRC in a
Funeral Home v. NLRC,14 which held:
Resolution9 dated December 14, 2004.

Therefore, all references in the amended Section 9 of B.P. No. 129 to


Respondent filed a petition for certiorari before the Court of Appeals.
supposed appeals from the NLRC to the Supreme Court are interpreted and
hereby declared to mean and refer to petitions for certiorari under Rule 65.
On August 4, 2005, the Court of Appeals rendered a decision 10 reversing and Consequently, all such petitions should henceforth be initially filed in the Court of
setting aside the resolution of the NLRC, and reinstating the decision of the Labor Appeals in strict observance of the doctrine on the hierarchy of courts as the
Arbiter, with modification in regard to the award of commission and damages. The appropriate forum for the relief desired.15
Court of Appeals deleted the award of commission, and moral and exemplary
damages as the same were not substantiated. The dispositive portion of the Court
The Court of Appeals stated in its decision that the issue it had to resolve was
of Appeals’ decision reads:
"whether or not the public respondent [NLRC] committed grave abuse of discretion
when it declared that no employer-employee relationship exists between the

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petitioner and the private respondents, since the petitioner failed to prove such fact Between the documentary evidence presented by respondent and the mere
by substantial evidence."16 allegation of petitioner without any proof by way of any document evincing their
alleged partnership agreement, the Court of Appeals agreed with the Labor Arbiter
Errors of judgment, as distinguished from errors of jurisdiction, are not within the that petitioner failed to substantiate his claim that he had a partnership with
province of a special civil action for certiorari, which is merely confined to issues of respondent, citing the Labor Arbiter’s finding, thus:
jurisdiction or grave abuse of discretion.17 By grave abuse of discretion is meant
such capricious and whimsical exercise of judgment as is equivalent to lack of In this case, complainant's evidence is substantial enough to prove the
jurisdiction, and it must be shown that the discretion was exercised arbitrarily or employment relationship that on August 14, 2001, he was hired as 'Studio
despotically.18 manager' by respondent Lirio to manage and operate the recording studio and to
promote and sell its services to music enthusiasts and clients, proven by his
The Court of Appeals, therefore, could grant the petition for certiorari if it finds that receipt for this purpose from said respondent a fixed monthly compensation of
the NLRC, in its assailed decision or resolution, committed grave abuse of ₱7,000.00, with commission of ₱100.00 per hour when serving as recording
discretion by capriciously, whimsically, or arbitrarily disregarding evidence that is technician, shown by the payroll from July 31, 2001-March 15, 2002. The said
material to or decisive of the controversy; and it cannot make this determination evidence points to complainant's hiring as employee so that the case comes within
without looking into the evidence of the parties.19 Necessarily, the appellate court the purview of our jurisdiction on labor disputes between an employer and an
can only evaluate the materiality or significance of the evidence, which is alleged employee. x x x.
to have been capriciously, whimsically, or arbitrarily disregarded by the NLRC, in
relation to all other evidence on record.20 Thus, contrary to the contention of Respondent Lirio's so-called existence of a partnership agreement was not
petitioner, the Court of Appeals can review the finding of facts of the NLRC and the substantiated and his assertion thereto, in the face of complainant's
evidence of the parties to determine whether the NLRC gravely abused its evidence, constitute but a self-serving assertion, without probative value, a
discretion in finding that no employer-employee relationship existed between mere invention to justify the illegal dismissal.
petitioner and respondent.21
xxxx
Respondent raised before the Court of Appeals the following issues:
Indeed, we find credible that what caused complainant's dismissal on March 14,
I. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED 2002 was due to his refusal to respondent's Lirio's insistences on merely giving
GRAVE ABUSE OF DISCRETION IN SHIFTING THE BURDEN OF PROVING him 20% based on net profit on sale of the album which he composed and
THAT EMPLOYMENT RELATIONS EXISTED BETWEEN THE PETITIONER AND arranged during his free time and, moreover, that salaries which he received would
THE PRIVATE RESPONDENTS TO THE FORMER, IN VIOLATION OF be deducted therefrom, which obviously, soured the relations from the point of
ESTABLISHED PROVISION OF LAWS AND JURISPRUDENCE. view of respondent Lirio.23

II. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED Hence, based on the finding above and the doctrine that "if doubt exists between
GRAVE ABUSE OF DISCRETION IN HOLDING THAT NO EMPLOYER- the evidence presented by the employer and the employee, the scales of justice
EMPLOYEE RELATIONSHIP EXISTED BETWEEN THE PETITIONER AND THE must be tilted in favor of the latter,"24 the Court of Appeals reversed the resolution
PRIVATE RESPONDENTS. of the NLRC and reinstated the decision of the Labor Arbiter with modification.
Even if the Court of Appeals was remiss in not stating it in definite terms, it is
III. RESPONDENT NATIONAL LABOR RELATIONS COMMISSION COMMITTED implied that the Court of Appeals found that the NLRC gravely abused its
GRAVE ABUSE OF DISCRETION IN DISREGARDING THE PETITIONER'S discretion in finding that no employer-employee relationship existed between
PAYROLL AND THE PETTY CASH VOUCHERS AS AN INDICIA OF petitioner and respondent based on the evidence on record.
EMPLOYMENT RELATIONS BETWEEN PETITIONER AND THE PRIVATE
RESPONDENTS.22 We now proceed to the main issue raised before this Court: Whether or not the
decision of the Court of Appeals is in accordance with law, or whether or not the

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Court of Appeals erred in reversing and setting aside the decision of the NLRC, On the other hand, petitioner failed to prove that his relationship with respondent
and reinstating the decision of the Labor Arbiter with modification. was one of partnership.1âwphi1 Such claim was not supported by any written
agreement. The Court notes that in the payroll dated July 31, 2001 to March 15,
In petitions for review, only errors of law are generally reviewed by this Court. This 2002,35 there were deductions from the wages of respondent for his absence from
rule, however, is not ironclad.25Where the issue is shrouded by a conflict of factual work, which negates petitioner’s claim that the wages paid were advances for
perceptions by the lower court or the lower administrative body, in this case, the respondent’s work in the partnership. In Nicario v. National Labor Relations
NLRC, this Court is constrained to review the factual findings of the Court of Commission,36 the Court held:
Appeals.26
It is a well-settled doctrine, that if doubts exist between the evidence presented by
Before a case for illegal dismissal can prosper, it must first be established that an the employer and the employee, the scales of justice must be tilted in favor of the
employer-employee relationship existed between petitioner and respondent.27 latter. It is a time-honored rule that in controversies between a laborer and his
master, doubts reasonably arising from the evidence, or in the interpretation of
The elements to determine the existence of an employment relationship are: (a) agreements and writing should be resolved in the former’s favor. The policy is to
the selection and engagement of the employee; (b) the payment of wages; (c) the extend the doctrine to a greater number of employees who can avail of the benefits
under the law, which is in consonance with the avowed policy of the State to give
power of dismissal; and (d) the employer’s power to control the employee’s
maximum aid and protection of labor. This rule should be applied in the case at
conduct. The most important element is the employer’s control of the employee’s
bar, especially since the evidence presented by the private respondent company is
conduct, not only as to the result of the work to be done, but also as to the means
not convincing. x x x37
and methods to accomplish it.28

Based on the foregoing, the Court agrees with the Court of Appeals that the
It is settled that no particular form of evidence is required to prove the existence of
evidence presented by the parties showed that an employer-employee relationship
an employer-employee relationship.29 Any competent and relevant evidence to
existed between petitioner and respondent.
prove the relationship may be admitted.30

In this case, the documentary evidence presented by respondent to prove that he In termination cases, the burden is upon the employer to show by substantial
evidence that the termination was for lawful cause and validly made.38 Article 277
was an employee of petitioner are as follows: (a) a document denominated as
(b) of the Labor Code39 puts the burden of proving that the dismissal of an
"payroll" (dated July 31, 2001 to March 15, 2002) certified correct by
employee was for a valid or authorized cause on the employer, without distinction
petitioner,31 which showed that respondent received a monthly salary of ₱7,000.00
(₱3,500.00 every 15th of the month and another ₱3,500.00 every 30th of the whether the employer admits or does not admit the dismissal.40 For an employee’s
month) with the corresponding deductions due to absences incurred by dismissal to be valid, (a) the dismissal must be for a valid cause, and (b) the
employee must be afforded due process.41 Procedural due process requires the
respondent; and (2) copies of petty cash vouchers,32 showing the amounts he
employer to furnish an employee with two written notices before the latter is
received and signed for in the payrolls.
dismissed: (1) the notice to apprise the employee of the particular acts or
omissions for which his dismissal is sought, which is the equivalent of a charge;
The said documents showed that petitioner hired respondent as an employee and and (2) the notice informing the employee of his dismissal, to be issued after the
he was paid monthly wages of ₱7,000.00. Petitioner wielded the power to dismiss employee has been given reasonable opportunity to answer and to be heard on his
as respondent stated that he was verbally dismissed by petitioner, and respondent, defense.42 Petitioner failed to comply with these legal requirements; hence, the
thereafter, filed an action for illegal dismissal against petitioner. The power of Court of Appeals correctly affirmed the Labor Arbiter’s finding that respondent was
control refers merely to the existence of the power.33 It is not essential for the illegally dismissed, and entitled to the payment of backwages, and separation pay
employer to actually supervise the performance of duties of the employee, as it is in lieu of reinstatement.
sufficient that the former has a right to wield the power.34Nevertheless, petitioner
stated in his Position Paper that it was agreed that he would help and teach
respondent how to use the studio equipment. In such case, petitioner certainly had
the power to check on the progress and work of respondent.

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WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in It appears that on April 10, 2000, Monday, which was the supposed cut-off date for
CA-G.R. SP No. 88899, dated August 4, 2005, and its Resolution dated payroll purposes for the April 15 payroll, you went home early without finishing
September 21, 2005, are AFFIRMED. your work and requested for a referral letter from the company clinic to E. Delos
Santos Hospital claiming that you are not feeling well.
No costs.
On April 11, Tuesday, you did not report for work, without any notice to the
SO ORDERED. company or to any of your immediate superior section head, department head and
division head. A phone call was made to your home, but the company could not
make any contact.

On April 12, Wednesday, you reported for work but went home early claiming that
G.R. No. 164181 September 14, 2011 you were again not feeling well. You were reminded of the coming payday on
Friday, April 14, and you said you will be able to finish it on time and that you will
NISSAN MOTORS PHILS., INC., Petitioner, just continue/finish your work the following day.
vs.
VICTORINO ANGELO, Respondent. On April 13, Thursday, you again did not report for work without any notice to the
company just like what you did last Tuesday. Your immediate superior, sensing
DECISION that you did not finish your task, tried to contact you but to no avail, as you were
residing in Novaliches and your home phone was not in order. So we decided to
PERALTA, J.: open your computer thru the help of our IT people to access the payroll program.

This is to resolve the Petition for Review1 dated July 10, 2004 of petitioner Nissan On April 14, Friday (payday), we were still doing the payroll thru IT because we
Motors Phils., Inc. (Nissan) assailing the Decision2 dated March 24, 2004 of the could not contact you. Later in the day, the Company decided to release the
Court of Appeals (CA) and the latter's Resolution3 dated June 9, 2004. payroll of employees the following day as we already ran out of time and the
Company just based the net pay of the employees on their March 15 payroll.
The records contain the following antecedent facts: Naturally, the amount released to the employees were not accurate as some got
more than (sic), while some got less than what they were supposed to receive.
Respondent Victorino Angelo was employed by Nissan on March 11, 1989 as one
of its payroll staff. On April 7 to 17, 2000, respondent was on sick leave, thus, he Consequently, many employees got angry, as the Company paid on a Saturday,
was not able to prepare the payroll for the said period. Again, on April 27 and 28, (in practice we do not release salary on a Saturday as it is always done in
2000, respondent was on an approved vacation leave which again resulted in the advance, i.e., Friday) and majority got lesser amount than what they were
non-preparation of the payroll for that particular period. supposed to receive. In addition, the employees were not given their payslip where
they can base the net pay they received.
On May 8, 2000, respondent received a Memorandum 4 from the petitioner
containing the following: When you reported for work on Tuesday, April 18, we had a meeting and you were
advised to transfer your payroll task to your immediate superior, which you agreed.
The time table agreement was 2 payroll period, meaning April 30 and May 15
This is to inform you that the Company is considering your dismissal from
payroll.
employment on the grounds of serious misconduct, willful disobedience and
gross neglect of duties.
Still on April 18, Tuesday, you filed an application for vacation leave due to your
son's graduation on April 27 and 28. Because it is again payroll time, we advised
that your leave will be approved on the condition that you will ensure that the

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payroll is finished on time and [you] will make a proper turn over to your immediate anger among employees, as in fact for two (2) consecutive days, May 3 and May
superior before your leave. You agreed and your leave was approved. 4, the plant workers refused to render overtime.

On April 24, Monday, you were reminded you should start on your payroll task As a consequence of all these, the manufacturing employees, numbering about
because you will be on leave starting April 27, Thursday, you said yes. 350 people or about 65% of [Nissan's total population], since April 16, have started
to decline rendering overtime work, saying after their 15 days of work they
On April 25, Tuesday, you were again reminded on finishing the payroll and the received only less than ₱200 while some even received only ₱80.
turn over again and you said yes.
The manufacturing operation was hampered completely in the month of April and
On April 26, Wednesday, you were again reminded on the same matter and, in the first week of May because of these several incidents. In sum, the company has
fact, Mr. AA del Rosario reminded you also on the matter about 5:30 p.m. And you suffered massive loss of opportunity to sell because of failure to produce in the
promised him that the task will be finished by tomorrow (sic) and will just leave the production area due to non-availability of workers rendering overtime, high
diskette in your open drawer. You were left in the office until 6:00 p.m. absenteeism rate among plant direct workers primarily due to the payroll problem.
It came at a time when NMPI sales [are] just starting to pick up due to the
introduction of the new model Sentra Exalta. The loss is simply too overwhelming.
On April 27, Thursday, you were already on leave and your superior, Mr. M.
Panela, found out that the diskette only contained the amount and name of
employees, but not the account number. Likewise, the deductions from salaries Accordingly, you are hereby given a period of three (3) days from receipt hereof to
was not finished, the salaries of contractuals, apprentices were also not finished. submit your written answer.
Since the bank only reads account numbers of employees, we experienced delay
in the payroll processing. You even promised to call the office i.e., M Panela to In the meantime, you are hereby placed on preventive suspension effective
give additional instructions not later than 12:00 noon on the same day, but you did immediately.
not do so. In fact, the direct phone line of Mr. AA del Rosario was given to you by
your officemate so you can call the office directly and not thru long distance. A hearing will be conducted by Mr. AA del Rosario, on May 13, 2000 at 9:00 a.m.
at the Company's conference room (Fairlady).
On April 28, Friday, after exhaustive joint efforts done by Welfare Management
Section and IT Division, we were able to finally release the payroll thru the bank, Respondent filed a Complaint5 for illegal suspension with the Department of Labor
but many employees got lower amount than what they have expected, as in fact at and Employment (DOLE) on May 12, 2000.
least 43 employees out of 360 got salaries below ₱1,000.00, among them about
10 people got no salary primarily due to wrong deduction and computation done by
Petitioner conducted an investigation on May 13, 2000, and concluded that
you. Again, many people got angry to the management's inefficient handling of
respondent's explanation was untrue and insufficient. Thus, on June 13, 2000,
their payroll.
petitioner issued a Notice of Termination. 6

On May 2, Tuesday, you did not report for work, again you said you are not feeling
Respondent amended his previous complaint against petitioner on June 22, 2000,
well, but the information to us came very late at about noon time.
to include the charge of illegal dismissal.7 On September 29, 2000, the Labor
Arbiter rendered a Decision8 dismissing respondent's complaint for lack of merit.
On May 3, Wednesday, you reported for work, and was instructed to finish the Undaunted, respondent brought the case to the National Labor Relations
payslips for the payroll periods April 15 and April 30. You said yes, and you Commission (NLRC), which eventually rendered a Resolution9 dated February 14,
promised not to go home on that day without finishing the payslips. Later, you 2002 dismissing the appeal and affirming the Labor Arbiter's Decision.
decided on your own to just compute the payslip on a monthly basis instead of the Respondent's motion for reconsideration of the NLRC resolution was subsequently
usual semi-monthly basis as is the customary thing to do. As a result thereof, an denied on May 13, 2002.10
error in the tax withholding happened and again resulted in another confusion and

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Aggrieved, respondent filed a petition for certiorari11 under Rule 65 of the Rules of Petitioner argues that the factual findings of the Labor Arbiter and the NLRC
Court with the CA and the latter granted the same petition in its Decision dated should have been accorded respect by the CA as they are based on substantial
March 24, 2004, the dispositive portion of which reads: evidence. However, factual findings of administrative agencies are not infallible
and will be set aside if they fail the test of arbitrariness. 13 In the present case, the
WHEREFORE, the petition is GRANTED. The assailed resolutions dated February findings of the CA differ from those of the Labor Arbiter and the NLRC. The Court,
14, 2002 and May 13, 2002 are REVERSED and SET ASIDE. The petitioner is in the exercise of its equity jurisdiction, may look into the records of the case and
hereby reinstated and the private respondents are ordered to pay him backwages re-examine the questioned findings.14
from the time of his illegal dismissal.
The Labor Code provides that an employer may terminate the services of an
SO ORDERED. employee for a just cause.15 Petitioner, the employer in the present case,
dismissed respondent based on allegations of serious miscounduct, willful
disobedience and gross neglect.
Unsatisfied with the decision of the CA, Nissan filed a motion for reconsideration,
which was denied by the same court in a Resolution dated June 9, 2004.
One of the just causes enumerated in the Labor Code is serious misconduct.
Misconduct is improper or wrong conduct.16 It is the transgression of some
Thus, the present petition, to which the petitioner cites the following grounds:
established and definite rule of action, a forbidden act, a dereliction of duty, willful
in character, and implies wrongful intent and not mere error in judgment.17 Such
A misconduct, however serious, must nevertheless be in connection with the
employee's work to constitute just cause for his separation.18Thus, for misconduct
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) it
WHEN IT OVERTURNED THE FACTUAL FINDINGS OF BOTH THE must relate to the performance of the employee’s duties; and (c) it must show that
LABOR ARBITER AND THE NLRC WHICH ARE BASED ON the employee has become unfit to continue working for the employer.19
SUBSTANTIAL EVIDENCE.
Going through the records, this Court found evidence to support the allegation of
B serious misconduct or insubordination. Petitioner claims that the language used by
respondent in his Letter-Explanation is akin to a manifest refusal to cooperate with
THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW company officers, and resorted to conduct which smacks of outright disrespect and
WHEN IT DISREGARDED PRIVATE RESPONDENT'S SERIOUS willful defiance of authority or insubordination. The misconduct to be serious within
MISCONDUCT AND INSUBORDINATION, AND DECIDED THE CASE the meaning of the Labor Code must be of such a grave and aggravated character
ONLY ON THE CHARGE OF GROSS AND HABITUAL NEGLIGENCE. and not merely trivial or unimportant.20 The Letter-Explanation21 partly reads:

C Again, it's not negligence on my part and I'm not alone to be blamed. It's
negligence on your part [Perla Go] and A.A. Del Rosario kasi, noong pang April
THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW IN 1999 ay alam ninyo na hindi ako ang dapat may responsibilidad ng payroll kundi
IGNORING PRIVATE RESPONDENT'S MISCONDUCT WHICH, IF EVER ang Section Head eh bakit hindi ninyo pinahawak sa Section Head noon pa. Pati
IT DOES NOT JUSTIFY DISMISSAL BECAUSE OF HIS 11-YEAR kaming dalawa sa payroll, kasama ko si Thelma. Tinanggal nyo si Thelma. Hindi
SERVICE NONETHELESS LIMITS THE AWARD OF BACKWAGES.12 nyo ba naisip na kailangan dalawa ang tao sa payroll para pag absent ang isa ay
may gagawa. Dapat noon nyo pa naisip iyan. Ang tagal kong gumawa ng
trabahong hindi ko naman dapat ginagawa.
The petition is meritorious.
This Court finds the above to be grossly discourteous in content and tenor. The
most appropriate thing he could have done was simply to state his facts without

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resorting to such strong language. Past decisions of this Court have been one in respondent company, certainly involves serious, diligent, and meticulous attention
ruling that accusatory and inflammatory language used by an employee to the of the employee tasked of performing such function and a company definitely could
employer or superior can be a ground for dismissal or termination. 22 not let either negligence or absence of the employee concerned get in the way of
the performance of the undertaking of such, otherwise, serious repercussion(s)
Another just cause cited by the petitioner is willful disobedience. One of the would be the logical and unavoidable consequences; such is what befell the
fundamental duties of an employee is to obey all reasonable rules, orders and respondents. Be it mentioned at this juncture that under the circumstances herein
instructions of the employer. Disobedience, to be a just cause for termination, must then prevailing, it would seem just logical and in keeping with the natural
be willful or intentional, willfulness being characterized by a wrongful and perverse "reflexes," so to speak, of a business entity, to require an incapable employee
mental attitude rendering the employee’s act inconsistent with proper tasked to perform a vital function, to effect the necessary turn over of functions of
subordination. A willful or intentional disobedience of such rule, order or instruction such employee to someone capable. Be it further emphasized, however, that even
justifies dismissal only where such rule, order or instruction is (1) reasonable and assuming that no formal directive was given by the company to the employee
lawful, (2) sufficiently known to the employee, and (3) connected with the duties concerned for the turn over of the latter's functions, said employee should have
which the employee has been engaged to discharge.23This allegation of willful taken the initiative of so doing considering the importance of the task(s) he is
disobedience can still be adduced and proven from the same Letter-Explanation performing. Hence, failure to do so would clearly be tantamount to serious neglect
cited earlier. of duty, a valid ground in terminating employment relations.25

Petitioner also dismissed respondent because of gross or habitual negligence. Gross negligence connotes want of care in the performance of one's
Neglect of duty, to be a ground for dismissal, must be both gross and habitual.24 In duties.1ªvvph!1 Habitual neglect implies repeated failure to perform one's duties
finding that petitioner was able to adduce evidence that would justify its dismissal for a period of time, depending upon the circumstances. On the other hand, fraud
of respondent, the NLRC correctly ruled that the latter's failure to turn over his and willful neglect of duties imply bad faith on the part of the employee in failing to
functions to someone capable of performing the vital tasks which he could not perform his job to the detriment of the employer and the latter's business. 26
effectively perform or undertake because of his heart ailment or condition
constitutes gross neglect. It stated that: It must be emphasized at this point that the onus probandi to prove the lawfulness
of the dismissal rests with the employer. In termination cases, the burden of proof
x x x Be it mentioned and emphasized that complainant cannot be faulted for his rests upon the employer to show that the dismissal is for just and valid cause.
absences incurred on 10, 11, 13, 14, 17, 27 and 28 of April 2000 as he went on Failure to do so would necessarily mean that the dismissal was not justified and,
official leave on said dates. Except for the last two dates mentioned (27 and 28 therefore, was illegal.27 In this case, both the Labor Arbiter and the NLRC were not
April 2000), health problem compelled complainant to be on sick leave of absence amiss in finding that the dismissal of respondent was legal or for a just cause
on the foregoing dates. It is not the complainant's liking, in other words, to be based on substantial evidence presented by petitioner. Substantial evidence,
afflicted with any form of heart ailment which actually caused him to incur such which is the quantum of proof required in labor cases, is that amount of relevant
leave of absences. Complainant's pellucid fault, however, lies on his failure to evidence which a reasonable mind might accept as adequate to justify a
effect the "much-needed" turn over of functions to someone capable of performing conclusion.28
the vital task(s) which he could not effectively perform or undertake because of his
heart ailment or condition. Indeed, the trouble(s) "felt" by management and the However, although the dismissal was legal, respondent is still entitled to a
employees concerned on the payday of 15 April 2000 may seem justified under the separation pay as a measure of financial assistance, considering his length of
circumstances as complainant indeed has gotten ill and in fact went on sick leave service and his poor physical condition which was one of the reasons he filed a
of absence prior to said payday. The same, however, certainly does not hold true leave of absence. As a general rule, an employee who has been dismissed for any
as to the trouble(s) and chaos felt and which occurred on the payday of 30 April of the just causes enumerated under Article 28229 of the Labor Code is not entitled
2000 as diligence and prudence logically and equitably required complainant to to separation pay.30 Although by way of exception, the grant of separation pay or
have effected the necessary turn over of his functions to someone capable of some other financial assistance may be allowed to an employee dismissed for just
taking over his assigned task(s) even perhaps on a merely temporary basis. The causes on the basis of equity.31 This concept has been thoroughly discussed
preparation of payroll, especially that of a big business entity such as herein in Solidbank Corporation v. NLRC,32 thus:

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The reason that the law does not statutorily grant separation pay or financial G.R. No. 169905 September 7, 2011
assistance in instances of termination due to a just cause is precisely because the
cause for termination is due to the acts of the employee. In such instances, St. PAUL COLLEGE QUEZON CITY, SR. LILIA THERESE TOLENTINO, SPC,
however, this Court, inspired by compassionate and social justice, has in the SR. BERNADETTE RACADIO, SPC, AND SR. SARAH MANAPOL, Petitioners,
past awarded financial assistance to dismissed employees when vs.
circumstances warranted such an award. REMIGIO MICHAEL A. ANCHETA II AND CYNTHIA A. ANCHETA, Respondent.

In Central Philippines Bandag Retreaders, Inc. v. Diasnes,33 this Court discussed DECISION
the parameters of awarding separation pay to dismissed employees as a measure
of financial assistance, viz:
PERALTA, J.:

To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must This resolves the Petition for Review1 dated November 18, 2005 of petitioners St.
demur the award of separation pay based on social justice when an employee's Paul College, Quezon City, et al. which seeks to reverse and set aside the
dismissal is based on serious misconduct or willful disobedience; gross and
Decision2 dated July 8, 2005 of the Court of Appeals (CA) and its
habitual neglect of duty; fraud or willful breach of trust; or commission of a crime
Resolution3 dated September 29, 2005, reversing the Decision4 dated February
against the person of the employer or his immediate family - grounds under Art.
28, 2003 of the National Labor Relations Commission (NLRC) and the
282 of the Labor Code that sanction dismissals of employees. They must be most
Decision5 dated November 20, 2000 of the Labor Arbiter.
judicious and circumspect in awarding separation pay or financial assistance as
the constitutional policy to provide full protection to labor is not meant to be an
instrument to oppress the employers. The commitment of the Court to the cause of As culled from the records, the antecedent facts are the following:
labor should not embarrass us from sustaining the employers when they are right,
as here. In fine, we should be more cautious in awarding financial assistance to Petitioner St. Paul College, Quezon City (SPCQC) is a private Catholic educational
the undeserving and those who are unworthy of the liberality of the law. 34 institution. It is represented by its President, petitioner Sr. Lilia Therese Tolentino,
SPC, the College Dean, Sr. Bernadette Racadio, SPC, and the Mass
Thus, in Philippine Commercial International Bank v. Abad,35 this Court, having Communication Program Director, Sr. Sarah Manapol, SPC. The respondents,
considered the circumstances present therein and as a measure of social justice, Spouses Remigio Michael A. Ancheta II and Cynthia A. Ancheta are former
awarded separation pay to a dismissed employee for a just cause under Article teachers of the same school.
282. The same concession was given by this Court in Aparente, Sr. v. National
Labor Relations Commission36 and Tanala v. National Labor Relations Respondent Remigio Michael was hired by the SPCQC as a teacher in the
Commission.37 General Education Department with a probationary rank in the School Year (SY)
1996-1997 which was renewed in the following SY 1997-1998. His wife,
WHEREFORE, the Petition for Review dated July 10, 2004 of petitioner Nissan respondent Cynthia was hired by the same school as a part time teacher of the
Motors Phils., Inc. is hereby GRANTED. Consequently, the Decision dated March Mass Communication Department in the second semester of SY 1996-1997 and
24, 2004 of the Court of Appeals and the latter's Resolution dated June 9, 2004 her appointment was renewed for SY 1997-1998.
are hereby REVERSED AND SET ASIDE and the Decision dated September 29,
2000 of the Labor Arbiter and its Resolution dated February 14, 2002 are On February 13, 1998, respondent Remigio Michael wrote a letter6 to petitioner Sr.
hereby REINSTATED with the MODIFICATION that petitioner shall award Lilia, signifying his intention to renew his contract with SPCQC for SY 1998-1999.
respondent his separation pay, the computation of which shall be based on the A letter7 of the same tenor was also written by respondent Cynthia addressed to
prevailing pertinent laws on the matter. petitioner Sr. Lilia.

SO ORDERED. Petitioner Sr. Bernadette, on March 9, 1998, sent two letters 8 with the same
contents to the respondent spouses informing them that upon the recommendation

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of the College Council, the school is extending to them new contracts for SY 1998- 4. Failure to submit and update required modules (syllabi) of their subject
1999. despite reminders (violating D, 1.5, p. 40 of our Faculty Manual).

A letter9 dated April 22, 1998 was sent to petitioner Sr. Bernadette and signed by 5. Both spouses have a gross number of failure in their class.
some of the teachers of SPCQC, including the respondent spouses. The said letter
contained the teachers' sentiments regarding two school policies, namely: first, the Mr. Ancheta failed 27 in a class of 44 students, and had a total number of
policy of penalizing the delay in encoding final grades and, second, the policy of 56 failures in his sections of Philippine History. Mrs. Ancheta failed 11
withholding salaries of the teachers. Meanwhile, a letter 10 dated April 21, 1998 (the students in a class of 37, and had a total number of 16 failures in her 2
date, later on contested by respondent Remigio Michael to be ante-dated) was classes of Communication Theories.
written by petitioner Sr. Bernadette to respondent Remigio Michael, reiterating the
conversation that took place between them the day before the date of the said
When I talked to each of them to re-examine their bases of failure, they
letter (April 20, 1998). The letter enumerated the departmental and instructional
refused saying that they had done this; otherwise, the number of failures
policies that respondent Remigio Michael failed to comply with, such as the late would have been more. I gathered data as to the mental ability of the
submission of final grades, failure to submit final test questions to the Program students who failed, and the number of students who incurred more than
Coordinator, the giving of tests in the essay form instead of the multiple choice
one failure. In Mr. Ancheta's class of 44 students with 27 failures, majority
format as mandated by the school and the high number of students with failing
had average IQ's, 8 were on probation status, and 2 had above-average
grades in the classes that he handled.
IQ. Only 7 of his 27 failures were also failing in other subjects.

Thereafter, petitioner Sr. Bernadette wrote a letter11 dated April 30, 1998 to 6. Failure to report to work on time <re: Mr. Ancheta> (violating par. 1, 21,
petitioner Sr. Lilia, endorsing the immediate termination of the teaching services of
p. 63 of our Faculty Manual).
the respondent spouses on the following grounds:
7. Both spouses are not open to suggestions to improve themselves as
1. Non-compliance with the departmental policy to submit their final test teachers. They just see their points and their principles.
questions to their respective program coordinators for checking/comments
(violating par. 7.1, p. 65 of the Faculty Manual).
When I talked to Mr. Ancheta the second time telling him of the data I gathered,
including the information that statistics permits only 1 to 2% failures, he still
This policy was formulated to ensure the validity and reliability of test
refused to budge in to review his grades and his quality of teaching. He stood firm
questions of teachers for the good of the students. This in effect can in his conviction and ground that the students were to blame for their failures, and
minimize if not prevent unnecessary failure of students.
reiterated his disagreement with several school policies (which he violated)
contained in his letter which he had asked his wife to give to the dean's office. Not
2. Non-compliance with the standard format (multiple choice) of final test content on writing down his personal disagreement on some policies, he also
questions as agreed upon in the department. Mr. Ancheta prepared purely asked some faculty members to read his letter and put their signatures on it if they
essay questions for the students. were in favor of one or all of his points.

Well-prepared multiple choice questions are more objective, and develop In other words, said spouses had refused and continue to refuse to evaluate the
critical thinking among students. students' performance on the bases of an established grading system to ensure
just and fair appraisal (violating par. 1.4, p. 40 of our Faculty Manual). 12
3. Failure to encode their modular grade reports as required (violating par.
H. 8, p. 66 of our Faculty manual). Respondent spouses were given an opportunity to comment on the above letter-
recommendation of petitioner Sr. Bernadette.13 On May 4, 1998, respondent
spouses sent their respective comments14 to petitioner Sr. Lilia. Subsequently, the

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respondent spouses received their respective letters of termination 15 on May 14, d) Exemplary damages also in the amount of ₱250,000.00 to each [of the]
1998. Respondent spouses sent a letter16 for reconsideration to petitioner Sr. Lilia, petitioners; and
but was eventually denied.17
e) Attorney's fees.
Thus, respondent spouses filed a Complaint18 for illegal dismissal with the NLRC.
On November 20, 2000, the Labor Arbiter dismissed the complaint,19 the SO ORDERED.
dispositive portion of the decision reads:
In its Resolution23 dated September 29, 2005, the CA denied the motion for
WHEREFORE, premises considered, judgment is hereby rendered DISMISSING reconsideration of the petitioners herein; hence, the present petition.
the complaint of illegal dismissal for lack of merit. All other claims are denied for
lack of basis.
The petitioners cited the following arguments:

SO ORDERED.
I.

The decision of the Labor Arbiter was appealed to the NLRC, but was affirmed by
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
the latter on February 28, 2003,20disposing the case as follows: COMMITTED GRAVE AND REVERSIBLE ERROR IN SETTING ASIDE
THE FINDING IN THE D E C I S I O N DATED 20 NOVEMBER 2000 OF
WHEREFORE, premises considered, the appeal is DISMISSED for lack of merit THE HONORABLE LABOR ARBITER IN NLRC NCR CASE NO. 00-07-
and the Decision appealed from is AFFIRMED en toto. 06018-98 THAT INDIVIDUAL CONTRACTS OF EMPLOYMENT OF
ATTY. REMIGIO MICHAEL A. ANCHETA II AND MS. CYNTHIA A.
SO ORDERED. ANCHETA HAD EXPIRED AT THE END OF SY 1997-1998, I.E., 1 JUNE
1997- 31 MARCH 1998, AND WAS NOT RENEWED FOR SY 1998-1999
After the denial of their motion for reconsideration with the NLRC,21 the respondent AND, ACCORDINGLY, THEY WERE NOT ILLEGALLY TERMINATED BY
spouses filed a petition for certiorari with the CA. In its Decision22 dated July 8, ST. PAUL COLLEGE QUEZON CITY.
2005, the CA granted the petition and reversed the decisions of the Labor Arbiter
and the NLRC, thus, it ruled: II.

WHEREFORE, finding grave abuse of discretion amounting to lack or excess of THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
jurisdiction, the court resolved to SET ASIDE the decision dated February 28, 2003 COMMITTED GRAVE AND REVERSIBLE ERROR IN SETTING ASIDE
of public respondent National Labor Relations Commission. Private respondents THE D E C I S I O N DATED 28 FEBRUARY 2003 OF THE NATIONAL
are hereby ordered to pay, jointly and severally, petitioners the following: LABOR RELATIONS COMMISSION IN NLRC NCR CA NO. 02775-01
FINDING THAT ATTY. REMIGIO MICHAEL A. ANCHETA II AND MS.
a) Separation pay equivalent to one (1) month's pay for every year of CYNTHIA A. ANCHETA WERE DISMISSED FOR JUST CAUSE AND
continuous service; AFTER DUE PROCESS.

b) Deficiency wages to be computed from the unexpired portion of III.


petitioners’ employment contract.
THE HONORABLE COURT OF APPEALS, WITH ALL DUE RESPECT,
c) Moral damages in the amount of ₱250,000.00 to each [of the] COMMITTED GRAVE AND REVERSIBLE ERROR IN RULING THAT
petitioners; ATTY. REMIGIO MICHAEL A. ANCHETA II AND MS. CYNTHIA A.
ANCHETA WERE (A) EXTENDED A THIRD APPOINTMENT TO TEACH

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AS PROBATIONARY TEACHERS FOR SY 1998-1999, (B) ILLEGALLY performance.32 If the contract is not renewed, the employment relationship
DISMISSED BY ST. PAUL COLLEGE QUEZON CITY AS AN ACT OF terminates.33 If the contract is renewed, usually for another school year, the
RETALIATION ON THE PART OF SR. BERNADETTE RACADIO, SPC probationary employment continues.34 Again, at the end of that period, the parties
AND (C) ENTITLED TO SEPARATION PAY, DEFICIENCY WAGES, may opt to renew or not to renew the contract.35 If renewed, this second renewal of
MORAL AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.24 the contract for another school year would then be the last year – since it would be
the third school year – of probationary employment.36 At the end of this third year,
The petition is impressed with merit. the employer may now decide whether to extend a permanent appointment to the
employee, primarily on the basis of the employee having met the reasonable
Before this Court delves into the merits of the petition, it deems it necessary to standards of competence and efficiency set by the employer.37 For the entire
duration of this three-year period, the teacher remains under probation.38 Upon the
discuss the nature of the employment of the respondents. It is not disputed that
expiration of his contract of employment, being simply on probation, he cannot
respondent Remigio Michael was a full-time probationary employee and his wife, a
automatically claim security of tenure and compel the employer to renew his
part-time teacher of the petitioner school.
employment contract.39
A reality we have to face in the consideration of employment on probationary
Petitioner school contends that it did not extend the contracts of respondent
status of teaching personnel is that they are not governed purely by the Labor
spouses. It claims that, although, it has sent letters to the spouses informing them
Code.25 The Labor Code is supplemented with respect to the period of probation
that the school is extending to them new contracts for the coming school year, the
by special rules found in the Manual of Regulations for Private Schools.26 On the
letters do not constitute as actual employment contracts but merely offers to teach
matter of probationary period, Section 92 of these regulations provides:
on the said school year. The respondent spouses wrote to the president, petitioner
Sr. Lilia:
Section 92. Probationary Period. - Subject in all instances to compliance with the
Department and school requirements, the probationary period for academic
Respondent Remigio Michael:
personnel shall not be more than three (3) consecutive years of satisfactory
service for those in the elementary and secondary levels, six (6) consecutive
regular semesters of satisfactory service for those in the tertiary level, and nine (9) Dear Sister,
consecutive trimesters of satisfactory service for those in the tertiary level where
collegiate courses are offered on a trimester basis. Peace!

A probationary employee or probationer is one who is on trial for an employer, This signifies my intention of renewing my contract of employment with [SPCQC]
during which the latter determines whether or not he is qualified for permanent for SY 1998-1999.
employment.27 The probationary employment is intended to afford the employer an
opportunity to observe the fitness of a probationary employee while at work, and to Thank you.40
ascertain whether he will become an efficient and productive employee.28 While
the employer observes the fitness, propriety and efficiency of a probationer to Respondent Cynthia:
ascertain wh