LABOR REVIEW (BATCH 2)

1. Manila Mandarin Employees Union vs. NLRC

MANILA MANDARIN EMPLOYEES UNION, petitioners, vs. NATIONAL LABOR RELATIONS

COMMISSION, and MELB A C. BELONCIO, respondents,

No. L-76989. September 29,1987.*

Labor; NLRC; Jurisdiction; Where the dispute is not purely intra-union but involves an interpretation
of the collective bargaining agreement and whether or not there was an illegal dismissal, the NLRC
has jurisdiction.—On the issue of the NLRC jurisdiction over the case, the Court finds no grave abuse
of discretion in the NLRC conclusion that the dispute is not purely intra-union but involves an
interpretation of the collective bargaining agreement (CBA) provisions and whether or not there was
an illegal dismissal. Under the CBA, A, membership in the union may be lost through expulsion only
if there is non-payment of dues or a member organizes, joins, or forms another labor organization.

Same;Same;Judgments; Findings of facts of quasi-judicial agencies like the NLRC are generally
accorded not only respect but also finality if they are supported by substantial evidence.—lt is a
wellsettled principle that findings of facts quasi-judicial agencies like the NLRC, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally accorded not only
respect but at times even finality if such findings are supported by substantial evidence. (Akay
Printing Press v. Minister of Labor and Employment, 140 SCRA 381; Alba Patio de Makati v. Alba
Patio de Makati Employees Association, 128 SCRA 253; Dangan v, National Labor Relations
Commission, 127 SCRA 706; De la Concepcion v. Mindanao Portland Cement Corporation, 127
SCRA 647).

Same; Same; Illegal Dismissal; Reinstatement with backwages to be paid by the union; Dismissal of
employee was through the insistence and demand of the union.—The Hotel would not have
compelled Beloncio to go on forced leave were it not for the union's insistence and demand to the
extent that because of the failure of the hotel to dismiss Beloncio as requested, the union filed a
notice of strike with the Ministry of Labor and Employment on August 17, 1984 on the issue of unfair
labor practice. The hotel was then compelled to put Beloncio on forced leave and to stop payment
of her salary from September 1,1984.

Same; Same; Closed-shop agreement, nature of.—A closed-shop agreement is an agreement

whereby an employer binds himself to hire only members of the contracting union who must continue
to remain members in good standing to keep their jobs. It is "the most prized achievement of
unionism." It adds membership and compulsory dues. By holding out to loyal members a promise of
employment in the closed-shop, it welds group solidarity. (National Labor Union v. Aguinaldo's
Echague, Inc., 97 Phil. 184). It is a very effective form of union secretary agreement.

Same; Same; Same; A closed-shop is a valid form of union security.—This Court has held that a
closed-shop is a valid form of union security, and such a provision in a collective bargaining
agreement is not a restriction of the right of freedom of association guaranteed by the Constitution.
(Lirag Textile Mills, Inc. v. Blanco, 109 SCRA 87; Manalang v. Artex Development Company, Inc.,
21 SCRA 561).

Same; Same; Same; Union security clauses cannot be used by union officials against an employer,
much less their own members, except with a high sense of responsibility and fairness.—The Court
stresses, however, that union security clauses are also governed by law and by principles of justice,
fair play, and legality. Union security clauses cannot be used by union officials against an employer,
much less their own members, except with a high sense of responsibility, fairness, prudence, and
judiciousness.
Same; Same; Same, Same; A union member may not be expelled from her union and from her job
for personal reasons or for causes foreign to the closed-shop agreement—A union member may not
be expelled from her union, and consequently from her job, for personal or impetuous reasons or for
causes foreign to the closed-shop agreement and in a manner characterized by arbitrariness and
whimsicality.

Same; Same; Same; Same; Union membership does not entitle hotel workers to be sloppy in their
work and inattentive to customers and disrespectful to supervisors.—This is particularly true in this
case where Ms. Beloncio was trying her best to make a hotel bus boy do his work promptly and
courteously so as to serve hotel customers in the coffee shop expeditiously and cheerfully. Union
membership does not entitle waiters, janitors, and other workers to be sloppy in their work, inattentive
to customers, and disrespectful to supervisors. The Union should have disciplined its erring and
troublesome members instead of causing so much hardship to a member who was only doing her
work for the best interests of the employer, all its employees, and the general public whom they
serve,

PETITION for certiorari to review the decision of the National Labor Relations Commission.

The facts are stated in the opinion of the Court.

GUTIERREZ, JR., J.:

This is a petition to review on certiorari the National Labor Relations Commission's (NLRC) decision
which modified the Labor Arbiter's decision and ordered the Manila Mandarin Employees Union to
pay the wages and fringe benefits of Melba C. Beloncio from the time she was placed on forced
leave until she is actually reinstated, plus ten percent (10%) thereof as attorney's fees. Manila
Mandarin Hotel was ordered to reinstate Beloncio and to pay her whatever service charges may be
due her during that period, which amount would be held in escrow by the hotel.

The petition was filed on January 19, 1987. The private respondent filed her comment on March 7,
1987 while the Solicitor General filed a comment on June 1, 1987 followed by the petitioner's reply
on August 22, 1987. We treat the comment as answer and decide the case on its merits.

The facts of the case are undisputed.

Herein private respondent, Melba C. Beloncio, an employee of Manila Mandarin Hotel since 1976
and at the time of her dismissal, assistant head waitress at the hotel's coffee shop, was expelled
from the petitioner Manila Mandarin Employees Union for acts allegedly inimical to the interests of
the union. The union demanded the dismissal from employment of Beloncio on the basis of the union
security clause of their collective bargaining agreement and the Hotel acceded by placing Beloncio
on forced leave effective August 10,1984.

The union security clause of the collective bargaining agreement provides:

"Section 2. Dismissals,

x x x x x

b) Members of the Union who cease to be such members and/or who fail to maintain their
membership in good standing therein by reason of their resignation from the Union, and/or by reason
of their expulsion from the Union, in accordance with the Constitution and By-Laws of the Union, for
non-payment of union dues and other assessment, for organizing, joining or forming another labor
organization shall, upon written notice of such cessation of membership or failure to maintain
membership in the Union and upon written demand to the company by the Union, be dismissed from
employment by the Company after complying with the requisite due process requirement; x x x"
(Italics supplied)" (Rollo, p. 114)
Two days before the effective date of her forced leave or on August 8, 1984, Beloncio filed a
complaint for unfair labor practice and illegal dismissal against herein petitioner-union and Manila
Mandarin Hotel, Inc. before the NLRC, Arbitration Branch.

Petitioner-union filed a motion to dismiss on grounds that the complainant had no cause of action
against it and the NLRC had no jurisdiction over the subject matter of the complaint.

This motion was denied by the Labor Arbiter.

After the hearings that ensued and the submission of the parties' respective position papers, the
Labor Arbiter held that the union was guilty of unfair labor practice when it demanded the separation
of Beloncio. The union was then ordered to pay all the wages and fringe benefits due to Beloncio
from the time she was on forced leave until actual reinstatement, and to pay P30,000.00 as
exemplary damages and P10,000.00 as attorney's s fees. The charge against the hotel was
dismissed.

The Union then appealed to the respondent NLRC which modified the Labor Arbiter's decision as
earlier stated.

A subsequent motion for reconsideration and a second motion for reconsideration were denied.

Hence, this present petition.

The petitioner raises the following assignment of errors:

'THAT RESPONDENT NLRC ERRED IN NOT DECLARING THAT THE PRESENT

CONTROVERSY INVOLVED INTRAUNION CONFLICTS AND THEREFOR IT HAS NO
JURISDICTION OVER THE SUB JECT-MATTER THEREOF.

II

'THAT RESPONDENT NLRC SERIOUSLY ERRED IN HOLDING PETITIONER LIABLE FOR THE
PAYMENT OF PRIVATE RESPONDENT'S SALARY AND FRINGE BENEFITS, AND AWARD OF
10% ATTORNEY'S FEES, AFTER FINDING AS UNMERITORIOUS HER PRETENDED CLAIMS
OR COMPLAINTS FOR UNFAIR LABOR PRACTICE, ILLEGAL DISMISSAL, AND DAMAGES."
(Rollo, pp. 6-9)

On the issue of the NLRC jurisdiction over the case, the Court finds no grave abuse of discretion in
the NLRC conclusion that the dispute is not purely intra-union but involves an interpretation of the
collective bargaining agreement (CBA) provisions and whether or not there was an illegal dismissal.
Under the CBA, membership in the union may be lost through expulsion only if there is non-payment
of dues or a member organizes, joins, or forms another labor organization, The charge of disloyalty
against Beloncio arose from her emotional remark to a waitress who happened to be a union
steward, "Wala akong tiwala sa Union ninyo." The remark was made in the course of a heated
discussion regarding Beloncio's efforts to make a lazy and recalcitrant waiter adopt a better attitude
towards his work.

We agree with the Solicitor General when he noted that:

"x x x The Labor Arbiter explained correctly that '(I)f the only question is the legality of the expulsion
of Beloncio from the Union undoubtedly, the question is one cognizable by the BLR (Bureau of Labor
Relations). But, the question extended to the dismissal of Beloncio or steps leading thereto.
Necessarily, when the hotel decides the recommended dismissal, its acts would be subject to
scrutiny. Particularly, it will be asked whether it violates or not the existing CBA. Certainly, violations
of the CBA would be unfair labor practice.'
" Article 250 of the Labor Code provides the following:

" 'Art. 250. Unfair labor practices of labor organizations.—It shall be unfair labor practice for a labor
organization, its officers, agents or representatives: x x x xxx xxx

" '(b) To cause or attempt to cause an employer to discriminate against an employee, including
discrimination against an employee with respect to whom membership in such organization has been
denied or to terminate an employee on any ground other than the usual terms and conditions under
which membership or continuation of membership is made available to other members.' (Italics
supplied)

Article 217 of the Labor Code also provides:

" 'Art. 217. Jurisdiction of Labor Arbiters and the

Commission.—(a) The Labor Arbiters shall have the originaland exclusive jurisdiction to hear and
decide x x x the following cases involving all workers, whether agricultural or nonagricultural;
" ' (1 ) Unfair labor practice cases; x x x xxx xxx

" '(b) The Commission shall have exclusive appellate jurisdiction over all cases decided by Labor
Arbiters.' " (Rollo, pp. 155-157.)

The petitioner also questions the factual findings of the public respondent on the reasons for
Beloncio's dismissal and, especially, on the argument that she was on forced leave; she was never
dismissed; and not having worked, she deserved no pay.

The Court finds nothing in the records that indicates reversible error, much less grave abuse of
discretion, in the NLRC's findings of facts.

It is a well-settled principle that findings of facts quasijudicial agencies like the NLRC, which have
acquired expertise because their jurisdiction is confined to specific matters, are generally accorded
not only respect but at times even finality if such findings are supported by substantial evidence.
(Akay Printing Press v. Minister of Labor and Employment, 140 SCRA 381; Alba Patio de Makati v.
Alba Patio de Makati Employees Association, 128 SCRA 253; Dangan v. National Labor Relations
Commission, 127 SCRA 706; De la Concepcion v. Mindanao Portland Cement Corporation, 127
SCRA 647),

The petitioner now questions the decision of the National Labor Relations Commission ordering the
reinstatement of the private respondent and directing the Union to pay the wages and fringe benefits
which she failed to receive as a result of her forced leave and to pay attorney 's fees.

We find no error in the questioned decision.

The Hotel would not have compelled Beloncio to go on forced leave were it not for the union's
insistence and demand to the extent that because of the failure of the hotel to dismiss Beloncio as
requested, the union filed a notice of strike with the Ministry of Labor and Employment on August
17,1984 on the issue of unfair labor practice. The hotel was then compelled to put Beloncio on forced
leave and to stop payment of her salary from September 1,1984.

Furthermore, as provided for in the collective bargaining agreement between the petitioner—the
Union and the Manila Mandarin Hotel, "the Union shall hold the Company free and blameless from
any and all liabilities that may arise" should the employee question the dismissal, as has happened
in the case at bar.

It is natural for a union to desire that all workers in a particular company should be its dues-paying
members. Since it would be difficult to insure 100 percent membership on a purely voluntary basis
and practically impossible that such total membership would continuously be maintained purely on
the merits of belonging to the union. the labor movement has evolved the system whereby the
employer is asked, on the strength of collective action, to enter into what are now familiarly known
as "union security" agreements.

The collective bargaining agreement in this case contains a union security clause—a closed-shop
agreement.

A closed-shop agreement is an agreement whereby an employer binds himself to hire only members
of the contracting union who must continue to remain members in good standing to keep their jobs.
It is "the most prized achievement of unionism." It adds membership and compulsory dues. By
holding out to loyal members a promise of employment in the closed-shop, it welds group solidarity.
(National Labor Union v. Aguinaldo's Echague, Inc., 97 Phil. 184). It is a very effective form of union
security agreement.

This Court has held that a closed-shop is a valid form of union security, and such a provision in a
collective bargaining agreement is not a restriction of the right of freedom of association guaranteed
by the Constitution. (Lirag Textile Mills, Inc. v. Blanco, 109 SCRA 87; Manalang v. Artex
Development Company, Inc., 21 SCRA 561).

The Court stresses, however, that union security clauses are also governed by law and by principles
of justice, fair play, and legality. Union security clauses cannot be used by union officials against an
employer, much less their own members, except with a high sense of responsibility, fairness,
prudence, and judiciousness.

A union member may not be expelled from her union, and consequently from her job, for personal
or impetuous reasons or for causes foreign to the closed-shop agreement and in a manner
characterized by arbitrariness and whimsicality.

This is particularly true in this case where Ms. Beloncio was trying her best to make a hotel bus boy
do his work promptly and courteously so as to serve hotel customers in the coffee shop expeditiously
and cheerfully. Union membership does not entitle waiters, janitors, and other workers to be sloppy
in their work, inattentive to customers, and disrespectful to supervisors, The Union should have
disciplined its erring and troublesome members instead of causing so much hardship to a member
who was only doing her work for the best interests of the employer, all its employees, and the general
public whom they serve.

WHEREFORE, the petition is hereby DISMISSED. The questioned decision of the National Labor
Relations Commission is AFFIRMED. Costs against the petitioner.

SO ORDERED.

Fernan (Chairman), Feliciano, Bidin and Cortés, JJ., concur.

Petition dismissed Decision affirmed.

Note.—The National Labor Relations Commission committed grave abuse of discretion in

authorizing the company to permanently replace the individual petitioners who fail to return to work
(National Federation of Labor vs. National Labor Relation) for 7 months later found to be without
basis is illegal. (Magtoto vs. National Labor Relations Commission, 140 SCRA 58.)

——oOo——

2. Tanduay Distillery Labor Union v. NLRC

No. L-75037. April 30, 1987.*

 TANDUAY DISTILLERY LABOR UNION, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, LAMBERTO SANTOS, PEDRO ESTERAL, ROMAN CHICO, JOSELITO
ESTANISLAO, JOSE DELGADO, JUANITO ARGUELLES, RICARDO CAJOLES, and
JOSEFINO PAGUYO, respondents.

No. L-75055. April 30, 1987.*

TANDUAY DISTILLERY, INC., petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION

(NLRC), LAMBERTO SANTOS, PEDRO ESTERAL, ROMAN CHICO, JOSELITO ESTANISLAO,
JOSE DELGADO, JUANITO ARGUELLES, RICARDO CAJOLES, and JOSEFINO PAGUYO,
respondents.
_______________

Labor; National Labor Relations Commission; Collective Bargaining Agreement; Certification

Elections; Last 60 days in a collective bargaining agreement referred to as the "freedom period,"
concept of.—The last 60 days in a collective bargaining agreement is referred to as the "freedom
period" when rival union representation can be entertained during the existence of a valid CBA. In
this case, the "freedom period" was May 1 to June 30, 1982.

Same; Same; Same; Dismissal; Unfair labor practice, not a case of; Union Security Agreement;
Dismissal of employees pursuant to a demand of the majority union under a union security
agreement following the loss of seniority rights is valid and privileged, and does not constitute unfair
labor practice.—We enforce basic principles essential to a strong and dynamic labor movement. An
established postulate in labor relations firmly rooted in this jurisdiction is that the dismissal of an
employee pursuant to a demand of the majority union in accordance with a union security agreement
following the loss of seniority rights is valid and privileged and does not constitute an unfair labor
practice.

Same; Same; Same; Same; Same; Same; Constitutional Law; Freedom of association; Closed shop,
union shop, maintenance of membership shop, preferential shop, maintenance of treasury shop and
check off provisions do not constitute unfair labor practice nor violate the freedom of association
clause of the Constitution.—Article 249 (e) of the Labor Code as amended specifically recognizes
the closed shop arrangement as a form of union security. The closed shop, the union shop, the
maintenance of membership shop, the preferential shop, the maintenance of treasury shop, and
check-off provisions are valid forms of union security and strength. They do not constitute unfair
labor practice nor are they violations of the freedom of association clause of the Constitution. (See
Pascual, Labor Relations Law, 1986 Edition, pp. 221-225 and cases cited therein.)

Same; Same; Same; Same; Same; Same; Having ratified the CBA and being members of a labor
union, the employees are required under the union security clause to maintain their membership in
good standing, which ceases to be binding only during the 60 days freedom period before the
expiration of the CBA.—Having ratified that CBA and being then members of the TDLU, the private
respondents owe fealty and are required under the Union Security Clause to maintain their
membership in good standing with it during the term thereof, a requirement which ceases to be
binding only during the 60-day freedom period immediately preceding the expiration of the CBA.
When the private respondents organized and joined the KAMPIL Chapter in TDI and filed the
corresponding petition for certification election in November 1980, there was no freedom period to
speak of yet.

Same; Same; Same; Same; Same; Same; Certification election, concept of.—That question was
neither raised nor passed upon in the certification case, and was not a proper issue therein because
a petition for certification election is not a litigation but a mere investigation of a non-adversary
character to determine the bargaining unit to represent the employees (George Peter Lines, Inc. v.
Associated Labor Union, 134 SCRA 82).
Same; Same; Same; Same; Same; Same; Employees are guilty of disloyalty against the union for
having organized another union while still members of petitioner union.—But the fact that the CBA
had expired on June 30, 1982 and the BLR, because of such supervening event, ordered the holding
of a certification election could not and did not wipe out or cleanse private respondents from the acts
of disloyalty committed in October 1980 when they organized KAMPIL's local chapter in TDI while
still members of TDLU. The ineluctable fact is that private respondents committed acts of disloyalty
against TDLU while the CBA was in force and existing for which they have to face the necessary
sanctions lawfully imposed by TDLU.

Same; Same; Same; Same; Same; Same; Disaffiliation of employees, not valid, and they should
suffer the consequences of their separation from the union under the security clause of the CBA;
Expulsion and consequent suspension and termination from employment of employees, sustained;
Case at bar.—In Villar v. Inciong (121 SCRA 444), we held that "petitioners, although entitled to
disaffiliation from their union and to f orm a new organization of their own, must, however, suffer the
consequences of their separation from the union under the security clause of the CBA." A.''

PETITIONS for certiorari to review the decisions of the National Labor Relations Commission.

The facts are stated in the opinion of the Court.

Pacifico de Ocampo and Benjamin C. Gascon for petitioner in G.R. No. 75055.

Estevan Mendoza for private respondents in both cases.

GUTIERREZ, JR., J.:

These consolidated petitions for certiorari seek the review and setting aside of respondent National
Labor Relations Commission's decision in NLRC Case No. AB-6-11685-81 dated May 26, 1986,
affirming the October 12, 1984 decision of the Labor Arbiter, and of the NLRC resolution dated June
26, 1986, which denied the motion for reconsideration of the petitioners.

The facts of the case are as follows:

Private respondents were all employees of Tanduay Distillery, Inc., (TDI) and members of the
Tanduay Distillery Labor Union (TDLU), a duly organized and registered labor organization and the
exclusive bargaining agent of the rank and file employees of the petitioner company.

On March 11, 1980, a Collective Bargaining Agreement (CBA), was-executed between TDI and
TDLU. The CBA- was duly ratified by a majority of the workers in TDI including herein private
respondents, and a copy was filed with the Ministry of Labor and Employment (MOLE) on October
29, 1980 for certification. The CBA had a term of three (3) years from July 1, 1979 to June 30, 1982.
It also contained a union security clause, which provides:

''All workers who are or may during the effectivity of this Contract, become members of the Union in
accordance with its Constitution and By-Laws shall, as a condition of their continued employment,
maintain membership in good standing in the Union for the duration of the agreement."

On or about the early part of October 1980, while the CBA was in effect and within the contract bar
period, the private respondents joined another union, the Kaisahan Ng Manggagawang Pilipino
(KAMPIL) and organized its local chapter in TDI, with private respondents Pedro Esteral and
Lamberto Santos being elected President and Vice-President, respectively.

On November 7, 1980, KAMPIL filed a petition for certification election to determine union
representation in TDI, which development compelled TDI to file a grievance with TDLU on November
7, 1980 pursuant to Article XV of the CBA.
Acting on the grievance of TDI, TDLU wrote the private respondents on December 23, 1980 requiring
them to explain why TDLU should not take disciplinary action against them for, among other things—

"Disloyalty to the Tanduay Distillery Labor Union (T.D.L.U.) by forming and joining another union
with a complete takeover intent as the sole and exclusive bargaining representative of all rank and
file employees at TDI." (p. 16, Rollo/

TDLU created a committee to investigate its erring members in accordance with its by-laws which
are not disputed by the private respondents. Except for Josefino Paguyo who, despite due notice,
was absent during the investigation conducted on January 2, 1981, all the private respondents were
present and given a chance to explain their side. Thereafter, in a resolution dated January 9, 1981,
TDLU, through the Investigating Committee and approved by TDLU's Board of Directors, expelled
the private respondents from TDLU for disloyalty to the Union effective January 16, 1981. By letter
dated January 10, 1981, TDLU notified TDI that private respondents had been expelled from TDLU
and demanded that TDI terminate the employment of private respondents because they had lost
their membership with TDLU.

Acting on the demand of TDLU, TDI, in a Memorandum dated January 13, 1981, notified "that
effective January 16, 1981, we shall file the usual application for clearance (with preventive
suspension to take effect on the same day) to terminate your services on the basis of the union
security clause of our CBA.

Accordingly, TDI filed with the MOLE on January 14,1981 its application for clearance to terminate
the employment of private respondents. This application docketed as Case No.

NCR-AC-1-435-81 specifically stated that the action applied for was preventive suspension which
will result in termination of employment, x x x due to (T)hreat to (P)roduction traceable to rival (U)nion
activity. The private respondents then filed with the MOLE a complaint for illegal dismissal against
TDI and Benjamin Agaloos, in his capacity as President of TDLU, which complaint was docketed as
Case No. STF-1 -333-91. The cases were jointly heard and tried by Labor Arbiter Teodorico Dogelio.

However, on January 26, 1981, the Med-Arbiter granted the private respondents' petition calling for
a certification election among the rank and file employees of TDI. The Med-Arbiter's Order stated,
inter-alia that the existence of an uncertified CBA cannot be availed of as a bar to the holding of a
certification election (italics supplied). On appeal of TDI and TDLU to the Bureau of Labor Relations
(BLR), the order for the holding of a certification election was reversed and set aside by the BLR on
July 8, 1982, thus:

"A careful perusal of the records of the case will reveal that the uncertified CBA was duly filed and
submitted on 29 October 1980, to last until June 30, 1982. Indeed, said CBA is certifiable for having
complied with all the necessary requirements for certification. Consistent with the intent and spirit of
P.D. 1391 and its implementing rules, the contract bar rule should have been applied in this case.
The representation issue cannot be entertained except within the last sixty (60) days of the collective
agreement." (Italics supplied) (p. 243, Rollo)

The last 60 days in a collective bargaining agreement is referred to as the "freedom period" when
rival union representation can be entertained during the existence of a valid CBA. In this case, the
"freedom period" was May 1 to June 30, 1982. After the term of the CBA lapsed, KAMPIL moved for
a reconsideration of the July 8,1982 decision of the BLR on July 23, 1982 on the same ground that
since the CBA then in question was uncertified, the contract bar rule could not be made to apply. On
December 3, 1982, the BLR reversed itself, but for a different reason and held that:

"Movant union (Kampil) now seeks for the reconsideration of that Order on the ground, among
others, that the CBA in question is not certifiable and, hence, the contract bar rule cannot properly
apply in this case.
"After a more careful examination of the records, this Bureau is of the view that the instant motion
should be given due course, not necessarily for the arguments raised by herein movant,

"It should be noted that the alleged CBA has now expired. Its expiry date being 30 June 1982.
Consequently; there appears to be no more obstacle in allowing a certification election to be
conducted among the rank and file of respondent. The contract bar rule will no longer apply in view
of the supervening event, that is, the expiration of the contract." (Italics supplied) (pp. 244-245, Rollo)

TDLU filed a petition for review of the BLR decision with the Supreme Court, docketed as Case No.
G.R. No. 63995. TDI argued that KAMPIL did not have a cause of action when the petition for
certification was filed on November 7, 1980 because the freedom period was not yet in effect. The
fact that the BLR issued its order when the 60-day freedom period had supervened, did not cure this
defect. Moreover, the BLR decision completely overlooked or ignored the fact that on September 21,
1982, a new CBA had been executed between the TDLU and TDI so that when the BLR allowed a
certification election in its order dated December 3, 1982, the contract bar rule was applicable again.
This Court denied TDLU's petition in a minute resolution on November 14, 1983.

Using the foregoing as relevant and applicable to the consolidated cases for the clearance
application for termination filed by TDI and the illegal dismissal case filed by the private respondents
on October 12, 1984, Labor Arbiter Teodorico Dogelio rendered a decision denying TDI's application
to terminate the private respondents and ordering TDI to reinstate the complainants with backwages.
It should be noted that the Labor Arbiter rendered the decision even before the petitioner company
could file its memorandum, formal offer of exhibits and its manifestation and motion to correct
tentative markings of exhibits. This decision of the arbiter was upheld by the respondent NLRC in
NLRC Case No. AB-6-11685-81 in its decision dated May 20,1986.

TDI and TDLU moved for reconsideration of the questioned decision. In its motion, TDI alleged, inter
alia, that respondent NLRC did not rule on the validity of the CB A as a contract, neither did it resolve
squarely the validity of the enforcement of the union security clause of the CBA. TDI stated further
that respondent NLRC failed to consider the fact that at the time the private respondents were
expelled by TDLU and consequently terminated by TDI, the union security clause of the CBA was in
full force and effect, binding TDI and TDLU.

For its part, TDLU said that the decision of the Supreme Court in the certification case could not be
used by respondent NLRC to justify its decision in the dismissal case because the issues on the
cases are entirely different and miles apart. It is for this reason that there are two (2) cases that are
involved. TDLU explained that the Supreme Court decided to dismiss the petition for certiorari of TDI
and TDLU in the certification case because the original CBA existing at the time the private
respondents formed and joined KAMPIL had already expired. However, TDLU made it clear that
when the private respondents organized KAMPIL in TDI, the same CBA was still in force and the
disaffiliation did not take place within the freedom period. Hence, at that point in time, the private
respondents committed disloyalty against the union.

On June 26, 1986, respondent NLRC denied the motion for reconsideration filed by TDI and TDLU
for lack of merit. In its petition, TDI alleged that:

I.

"RESPONDENT COMMISSION ACTED IN EXCESS AND WITH GRAVE ABUSE OF ITS

DISCRETION AND IN A MANNER CONTRARY TO LAW IN RENDERING ITS DECISION EN BANC
OF MAY 20, 1986 AND IN DENYING PETITIONER'S MOTION FOR RECONSIDERATION
THEREOF IN ITS RESOLUTION DATED JUNE 26,1986 BECAUSE

"1. THE RESPONDENT COMMISSION HAS IG.NORED THE FACT , THAT THE PRIVATE
RESPONDENTS WERE EXPELLED BY TDLU FROM ITS MEMBERSHIP ON JANUARY 16, 1981
AND, CONSEQUENTLY, TDLU HAD DEMANDED OF THE PETITIONER OF THE
ENFORCEMENT OF THE UNION SECURITY CLAUSE OF THE CBA, THE SAID CBA WAS AN
EXISTING AND A VALID CONTRACT BETWEEN THE PETITIONER AND TDLU, AND EFFECTIVE
BETWEEN THE PARTIES;
"2. IT IS FUNDAMENTAL THAT A UNION SECURITY CLAUSE PROVISION IN COLLECTIVE
BARGAINING AGREEMENT IS BINDING BETWEEN THE PARTIES TO THE CBA UNDER THE
LAWS;
"3. THE EXPULSION OF THE PRIVATE RESPONDENTS FROM TDLU WAS THE UNION'S OWN
DECISION. HENCE, WHEN TDLU DEMANDED OF THE PETITIONER THE ENFORCEMENT OF
THE SECURITY CLAUSE PROVISION OF THE CBA BY SEPARATING PRIVATE
RESPONDENTS FROM THEIR EMPLOYMENT, FOR HAVING LOST THEIR MEMBERSHIP IN
THE UNION, THE PETITIONER WAS DUTY BOUND TO DO SO;
"4. THE ALLUSION THAT THE CBA WAS NOT CERTIFIED BY THE BUREAU OF LABOR
RELATIONS (BLR) HAS NOTHING TO DO WITH ITS EFFECTIVENESS AS A VALID CONTRACT
BETWEEN ALL PARTIES THERETO.
II

RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AND IN EXCESS

OF ITS JURISDICTION IN HOLDING THAT PRIVATE RESPONDENTS DID NOT COMMIT ACTS
PREJUDICIAL TO THE PETITIONER'S PRODUCTION EFFORTS TO BE SUFFICIENT BASIS
FOR THEIR PREVENTIVE SUSPENSION AND EVENTUAL REMOVAL."

On the other hand, petitioner TDLU in essence contends that:

THE CBA IS VALID AND BINDING NOT ONLY ON TDI AND TDLU BUT LIKEWISE ON PRIVATE
RESPONDENTS WHO HAVE RATIFIED THE SAME IN THEIR INDIVIDUAL CAPACITIES AS
MEMBERS OF TDLU; HENCE, THE UNION SECURITY CLAUSE IS VALID.AND BINDING ON
THEM;

THE ACTION OF TDLU IN REQUESTING FOR THE ENFORCEMENT OF THE UNION SECURITY
CLAUSE OF THE CBA BETWEEN TDI AND TDLU IS PART OF THE INHERENT RIGHT TO SELF-
ORGANIZATION;

TDLU CANNOT BE MADE LIABLE FOR THE PAYMENT OF BACKWAGES BECAUSE ALL THAT
IT DID WAS ASK FOR THE ENFORCEMENT OF A CBA, WHICH CBA HAS NEVER BEEN
DECLARED NULL AND VOID AND THE UNION SECURITY CLAUSE SOUGHT TO BE
ENFORCED WAS NOT ALSO DECLARED NULL AND VOID;

PRIVATE RESPONDENTS DISAFFILIATED THEMSELVES FROM TDLU BY ORGANIZING THE

LOCAL CHAPTER OF KAMPIL IN TDI IN OCTOBER 1980, BUT THE ACT OF DISAFFILIATION
WAS COMMITTED OUTSIDE THE FREEDOM PERIOD PROVIDED UNDER PRESIDENTIAL
DECREE 1391 WHICH LIMIT ALL PETITIONS FOR CERTIFICATION ELECTION,
DISAFFILIATION AND INTERVENTION TO THE 60DAY FREEDOM PERIOD PRECEDING THE
EXPIRATION OF THE CBA. HENCE, PRIVATE RESPONDENTS COULD BE EXPELLED FROM
MEMBERSHIP FOR DISLOYALTY AND OTHER INIMICAL ACTS AGAINST THE INTEREST OF
TDLU.

The private respondents admit that the root of the whole controversy in the instant case is the
organization of a Local Union Chapter of KAMPIL at TDI and the subsequent filing of a petition for
certification election with the MOLE by said local chapter. This local chapter of KAMPIL was
organized with the help of, among others, the private respondents some of whom were elected union
officers of said chapter. They contend that their act of organizing a local chapter of KAMPIL and
eventual filing of a petition for certification election was pursuant to their constitutional right to self-
organization.

The issues to be resolved are the following: (a) whether or not TDI was justified in terminating private
respondents' employment in the company on the basis of TDLU's demand for the enforcement of
the Union Security Clause of the CBA between TDI and TDLU; and (b) whether or not TDI is guilty
of unfair labor practice in complying with TDLU's demand for the dismissal of private respondents.
We enforce basic principles essential to a strong and dynamic labor movement. An established
postulate in labor relations firmly rooted in this jurisdiction is that the dismissal of an employee
pursuant to a demand of the majority union in accordance with a union security agreement following
the loss of seniority rights is valid and privileged and does not constitute an unfair labor practice.

Article 249 (e) of the Labor Code as amended specifically recognizes the closed shop arrangement
as a form of union security. The closed shop, the union shop, the maintenance of membership shop,
the preferential shop, the maintenance of treasury shop, and check-off provisions are valid forms of
union security and strength. They do not constitute unfair labor practice nor are they violations of the
freedom of association clause of the Constitution. (See Pascual, Labor Relations Law, 1986 Edition,
pp. 221-225 and cases cited therein.) There is no showing in these petitions of any arbitrariness or
a viola tion of the safeguards enunciated in the decisions of this Court interpreting union security
arrangements brought to-us for review.

In this light, the petitioner points out that embedded at the very core and as raison d'etre for the
doctrine which enforces the closed-shop, the union shop, and other forms of union security clauses
in the collective bargaining agreement is the principle of sanctity and inviolability of contracts
guaranteed by the Constitution.

This Court speaking thru Mr. Justice Labrador, in Victorias Milling Co., Inc., v. Victorias-Manapla
Workers Organization (9 SCRA 154), ruled:

"Another reason for enforcing the closed-shop agreement is the principle of sanctity or inviolability
of contracts guaranteed by the Constitution. As a matter of principle the provision of the Industrial
Peace Act granting freedom to employees to organize themselves and select their representative for
entering into bargaining agreements, should be subordinated to the constitutional provision
protecting the sanctity of contracts. We can not conceive how freedom to contract, which should be
allowed to be exercised without limitation may be subordinated to the freedom of laborers to choose
the organization they desire to represent them. And even if the legislature had intended to do so and
made such freedom of the laborer paramount to the sanctity of obligation of contracts, such attempt
to override the constitutional provision would necessarily and ipso facto be null and void.

xxx xxx xxx

[T]he action of the respondent company in enforcing the terms of the closed-shop agreement is a
valid exercise of its rights and obligations under the contract. The dismissal by virtue thereof cannot
constitute an unfair labor practice, as it was in pursuance of an agreement that has been found to
be regular and of a closed-shop agreement which under our laws is valid and binding.

In the instant case, the CBA in question provides for a Union Security Clause requiring:

"(c) All workers who are or may during the effectivity of this contract, become members of the union
in accordance with its constitution and by-laws shall as a condition of their continued employment,
maintain membership in good standing in the union for the duration of the agreement (Italics
supplied)

Having ratified that CBA and being then members of the TDLU, the private respondents owe fealty
and are required under the Union Security Clause to maintain their membership in good standing
with it during the term thereof, a requirement which ceases to be binding only during the 60-day
freedom period immediately preceding the expiration of the CBA. When the private respondents
organized and joined the KAMPIL Chapter in TDI and filed the corresponding petition for certification
election in November 1980, there was no freedom period to speak of yet. For under Presidential
Decree No. 1391, promulgated May 29, 1978, the law applicable in this instance provides:
"No petition for certification election, for intervention, disaffiliation shall be entertained or given due
course except within the 60day freedom period immediately preceding the execution of the Collective
Bargaining Agreement.

and under Section 21, Rule 3 of the Rules Implementing PD 1391 "x x x pending certification of a
duly filed collective bargaining agreement, no petition for certification election in the same bargaining
unit shall be entertained or processed." (promulgated September 19, 1978). The Labor Code further
mandates that "no certification election shall be entertained if a Collective Bargaining Agreement
which has been submitted in accordance with Article 231 of the Code exists between the employer
and a legitimate labor organization except within sixty (60) days prior to the expiration of the life of
such collective agreement" (Art. 257).

The fact, therefore, that the Bureau of Labor Relations (BLR) failed to certify or act on TDLU's request
for certification of the CBA in question is of no moment to the resolution of the issues presented in
this case. The BLR itself found in its order of July 8, 1982 that "the certified CBA was duly filed and
submitted on October 29, 1980, to last until June 30, 1982 is certifiable for having complied with all
the requirements for certification."

The validity of the CBA is not here assailed by private respondents. They admitted having organized
the local chapter of KAMPIL at TDI, although it is claimed that this was done when there was no
certified CBA between TDI and TDLU that would constitute a bar to the certification election. Of
significance is the ruling in Manalang v. Artex Development Co., Inc,, (21 SCRA 561, 569) decided
on a factual setting where the petitioners had affiliated themselves with another labor union, Artex
Free Workers, without first terminating their membership with Bagong Buhay Labor Union (BBLU)
and without the knowledge of the officers of the latter union, for which reason the petitioners were
expelled from the BBLU for acts of disloyalty; and the company, upon the behest of BBLU dismissed
them from employment pursuant to the closed-shop stipulation in a Collective Bargaining Agreement.
This Court ruled:

'The validity of the Collective Bargaining Agreement of March 4,1960 is not assailed by the
petitioners. Nor do they deny that they were members of the BBLU prior to March 4, 1960 and until
they were expelled f rom the union. x x x..'

'The petitioners' further contention that the closed-shop provision in the Collective Bargaining
Agreement is illegal because it is unreasonable, restrictive of right of freedom of association
guaranteed by the Constitution is a futile exercise in argumentation as this Court has in a number of
cases sustained closed-shop as a valid form of union security.

"Finally, even if we assume, in gratia argumenti, that the petitioners were unaware of the stipulations
set forth in the collective bargaining agreement, since their membership in the BBLU prior to their
expulsion therefrom is undenied, there can be no question that as long as the agreement with closed-
shop provision was in force, they were bound by it. Neither their ignorance of, nor their dissatisfaction
with, its terms and conditions would justify breach thereof or the formation by them of a union of their
own. As has been aptly said, 'a collective bargaining agreement entered into by of ficers of a union,
as agent of the members, and an employer, gives rise to valid enforcible contractual relations,
against the individual union members in matters that affect the entire membership or large classes
of its members/ and 'a union member who is employed under an agreement between the union and
his employer is bound by the provisions thereof, since it is a joint and several contract of the members
of the union and entered into by the union as their agent.' "

In an earlier case, this Court held:

"Nor can it be said that the stipulation providing that the employer may dismiss an employee
whenever the union recommends his expulsion either for disloyalty or for any violation of its by-laws
and constitution is illegal or constitute of unfair labor practice, for such is one of the matters on which
management and labor can agree in order to bring about harmonious relations between them and
the union, and cohesion and integrity of their organization. And as an act of loyalty a union may
certainly require its members not to affiliate with any other labor union and to consider its
infringement as a reasonable cause for separation. This is what was done by respondent union. And
the respondent employer did nothing but to put in force their agreement when it separated the herein
complainants upon the recommendation of said union. Such a stipulation is not only necessary to
maintain loyalty and preserve the integrity of the union but is allowed by the Magna Charta of Labor
When it provided that while it is recognized that an employee shall have the right to selforganization,
it is at the same time postulated that such right shall not injure the right of the labor organization to
prescribe its own rules with respect to the acquisition or retention of membership therein (Section
41(b) par. 1, Republic Act 875). This provision is significant. It is an indirect restriction on the right of
an employee to self-organization. It is a solemn pronouncement of a policy that while an employee
is given the right to join a labor organization, such right should only be asserted in a manner that will
not spell the destruction of the same organization. The law requires loyalty to the union on the part
of its members in order to obtain to the full extent its cohesion and integrity. We therefore, see nothing
improper in the disputed provisions of the collective bargaining agreement entered into between the
parties." (Ang Malayang Manggagawa ng Ang Tibay Enterprises, et al. v. Ang Tibay, et al. 102 Phil.
669) (Italics supplied)

We agree with petitioner TDLU that the dismissal of the petition for certiorari in G.R. No. 63995
entitled TDLU v. Kaisahan ng Manggagawang Pilipino could not be construed as to extinguish the
right of TDLU to expel private respondents for acts of disloyalty when they organized a local chapter
of KAMPIL in October 1980 in TDI. The subject matter brought to this Court in G.R. No. 63995 was
the decision of the Bureau of Labor Relations dated December 3, 1982 requiring the holding of
certification election in TDI within twenty (20) days from receipt of said BLR's decision which reads:

"Movant union (KAMPIL) now seeks for the reconsideration of that order on the ground, among
others, that the CBA in question is not certifiable and, hence, the contract bar rule cannot properly
apply to this case.

" After a careful examination of the records, this Bureau is of the view that the instant motion should
be given due course, not necessarily for the arguments raised by herein movant.

"It should be noted that alleged CBA has now expired, its expiry date being 30 June 1982.
Consequently, there appears to be no more obstacle in allowing a certification election to be
conducted among the rank and file of respondent The contract bar rule will no longer apply in view
of the supervening event, that is, the expiration of the contract (ANNEX C, TDI's Memorandum dated
November 28,1986; italics supplied).

It is clearly apparent that the BLR aforesaid Order which this Court upheld in G.R. No. 63995 when
it dismissed TDLU's petition in a minute resolution, did not pass upon the question of legality or
illegality of the dismissal of private respondents from TDI by reason of their expulsion from TDLU for
disloyalty. That question was neither raised nor passed upon in the certification case, and was not a
proper issue therein because a petition for certification election is not a litigation but a mere
investigation of a non-adversary character to determine the bargaining unit to represent the
employees (George Peter Lines, Inc. v. Associated Labor Union, 134 SCRA 82). Hence, no inference
could be derived from the dismissal of said petition that either the BLR or this Court has decided in
favor of private respondents insofar as the question of union disloyalty and their suspension and
termination from employment of TDI is concerned.

Simply put, the BLR ordered the holding of a certification election because the CBA in question had
already expired, its expiry date being June 30, 1982. Consequently, there appears to be no more
obstacle in allowing a certification election. "x x x [T]he contract bar rule will not apply in view of the
supervening event, that is, the expiration of the CBA."

But the fact that the CBA had expired on June 30, 1982 and the BLR, because of such supervening
event, ordered the holding of a certification election could not and did not wipe out or cleanse private
respondents from the acts of disloyalty committed in October 1980 when they organized KAMPIL's
local chapter in TDI while still members of TDLU. The ineluctable fact is that private respondents
committed acts of disloyalty against TDLU while the CBA was in force and existing for which they
have to face the necessary sanctions lawfully imposed by TDLU.

In Villar v. Inciong (121 SCRA 444), we held that "petitioners, although entitled to disaffiliation from
their union and to form anew organization of their own, must, however, suffer the consequences of
their separation from the union under the security clause of the CBA: "

"Inherent in every labor union, or any organization for that matter, is the right of self-preservation.
When members of a labor union, therefore, sow the seeds of dissension and strife within the union;
when they seek the disintegration and destruction of the very union to which they belong; they
thereby forfeit their rights to remain as members of the union which they seek to destroy. Prudence
and equity, as well as the dictates of law and justice, therefore, compelling mandate the adoption by
the labor union of such corrective and remedial measures, in keeping with its laws and regulations,
for its preservation and continued existence; lest by its folly and inaction, the labor union crumble
and fall. (Idem., p. 458)

The private respondents cannot, therefore, escape the effects of the security clause of their own
applicable collective bargaining agreement.

WHEREFORE, the decision dated May 26, 1986 and the resolution dated June 26, 1986 of
respondent National Labor Relations Commission in NLRC Case No. AB-11685-81 are hereby SET
ASIDE. The expulsion of private respondents from TANDUAY DISTILLERY LABOR UNION and
their consequent suspension and termination from employment with TANDUAY DISTILLERY, INC.,
without reinstatement and backwages, are hereby SUSTAINED.

No cost.

SO ORDERED.

Paras, Padilla, Bidin and Cortes, JJ., concur.

Fernan (Chairman), J., no part. My brother-in-law, Atty. Pompeyo Nolaco, is a partner of the law
firm counsel for the petitioner in G.R. No. 75055.

Decision set aside.

Notes.—Where the labor unions concerned agreed, not only to the holding of the election, but also
to the use of the company payroll as of a given date as the basis for determining who are qualified
to vote subject to the approval of the lower court, and said unions were given an opportunity to make
comments and observation on said list contained in the payroll, and petitioning union's representative
agreed to abide by whatever ruling the court may make on the matter of inclusion and exclusion of
voters, and although two other unions and the company moved for reconsideration of the rulings of
the lower court on said matter, the petitioning union failed to-do so, the petitioner may no longer
contest the accuracy of said voters list. (Acoje Workers' Union vs. National Mines and Allied Workers'
Union, 7 SCRA 730.)

An agreement entered into by the company with a union not chosen by all the employees of said
company in a certification election is not binding on the other employees not members of said union.
(Sta. Cecilia Sawmills Inc. vs. CIR, 10 SCRA 433.)

——o0o——

3. The Insular Life Assurance Co., Ltd., Employees Association-NATU vs. The Insular Life
Assurance Co., Ltd.
 THE INSULAR LIFE ASSURANCE CO., LTD., EMPLOYEES ASSOCIATION-NATU, FGU
INSURANCE GROUP WORKERS & EMPLOYEES ASSOCIATION-NATU, and INSULAR LIFE
BUILDING EMPLOYEES ASSOCIATION-NATU, petitioners, vs. THE INSULAR LIFE
ASSURANCE CO., LTD., FGU INSURANCE GROUP,JOSE M. OLBES and COURT OF
INDUSTRIAL RELATIONS, respondents.

No. L-25291. January 30, 1971.

Labor law; Collective bargaining; Unfair labor practice; Notifying absent employees individually
during strike by employer.—The act of an employer in notifying absent employees individually during
a strike following unproductive efforts at collective bargaining that the plant would be operated the
next day and that their jobs were open for them should they want to come in has been held to be an
unfair labor practice, as an active interference with the right of collective bargaining through dealing
with the employees individually instead of through their collective bargaining representatives.

Same; Same; Same; When employer negotiates or attempts to negotiate with his employees
individually in connection with changes in the agreement is unfair labor practice.—It is an unfair labor
practice for an employer operating under a collective bargaining agreement to negotiate or attempt
to negotiate with his employees individually in connection with changes in the agreement. And the
basis of the prohibition regarding individual bargaining with the strikers is that although the union is
on strike, the employer is still under obligation to bargain with the union as the employees’ bargaining
representative.

Same; Same; When act of company president in writing letters to strikers urging them to return to
work is an interference with the right to collective bargaining; Individual solicitation is also
interference.—Some such similar actions are illegal as constituting unwarranted acts of interference.
Thus, the act of a company president in writing letters to the strikers, urging their return to work on
terms inconsistent with their union membership, was adjudged as a constituting interference with the
exercise of his employee’s right to collective bargaining. It is likewise an act of interference for the
employer to send a letter to all employees notifying them to return to work at a time specified therein,
otherwise new employees would be engaged to perform their jobs. Individual solicitation of the
employees or visiting their homes, with the employer or his representative urging the employees to
cease union activity or cease striking, constitutes unfair labor practice. All the above-detailed
activities are unfair practices because they tend to undermine the concerted activity of the
employees, an activity to which they are entitled free from the employer’s molestation.

Constitutional law; Freedom of speech; When free speech protection under the Constitution is
inapplicable.—Moreover, since exhibit A is a letter containing promises of benefits to the employees
in order to entice them to return to work, it is not protected by the free speech provisions of the
Constitution. The same is true with exhibit B since it contained threats to obtain replacements for the
striking employees in the event they did not report for work on June 2, 1952. The free speech
protection under the Constitution is inapplicable where the expression of opinion by the employer of
his agent contains a promise of benefit, or threats, or reprisal.

Labor law; Unfair labor practice; When strike-breaking or union-busting is unfair labor practice.—
When the respondent offered reinstatement and attempted to “bribe” the strikers with “comfortable
cots,” free coffee and occasional movies,” “overtime” pay for “work performed in excess of eight
hours,” and ‘‘arrangements” for their families, so they would abandon the strike and return to work,
they were guilty of strike-breaking and/or union-busting and, consequently, of unfair labor practice.
It is equivalent to an attempt to break a strike for an employer to offer reinstatement to striking
employees individually, when they are represented by a union, since the employees thus offered
reinstatement are unable to determine what the consequences of returning to work would be.

Same: Collective bargaining; Labor unions; Acts violative of right to organize, form and join labor
organizations.—Violative of the rights to organize, form and join labor organizations are the following
acts: the offer of a Christmas bonus to all “loyal” employees of a company shortly after the making
of a request by the union to bargain; wage increases given for the purpose of mollifying employees
after the employer has refused to bargain with the union, or for the purpose of inducing striking
employees to return to work; the employer’s promises of benefits in return for the strikers’
abandonment of their strike in support of the union; and the employer’s statement, made about 6
weeks after the strike started, to a group of strikers in a restaurant to the effect that if the strikers
returned to work, they would receive new benefits in the form of hospitalization, accident insurance,
profit-sharing, and a new building to work in.

Same; Unfair labor practice; Employer’s interference; Test of whether an employer has interfered
with and coerced em-ployees.—The test of whether an employer has interfered with and coerced
employees within the meaning of subsection (a) (1) is whether the employer has engaged in conduct
which it may reasonably be said tends to interfere with the free exercise of employees’ right under
section 3 of the Act, and it is not necessary that there be direct evidence that any employee was in
fact intimidated or coerced by statements of threats of the employer if there is a reasonable inference
that anti-union conduct of the employer does have an adverse effect on self-organization and
collective bargaining.

Same; Same; The letters should be interpreted according to the totality of conduct doctrine.—The
letters, exhibits A and B, should not be considered by themselves alone but should be read in the
light of the preceding and subsequent circumstances surrounding. The letter should be interpreted
according to the “totality of conduct doctrine,” whereby the culpability of an employer’s remarks were
to be evaluated not only on the basis of their implicit implications, but were to be appraised against
the background of and in conjunction with collateral circumstances. Under this doctrine expressions
of opinion by an employer which, though innocent in themselves, frequently were held to be culpable
because of the circumstances under which they were uttered, the history of the particular employer’s
labor relations or anti-union bias or because of their connection with an established collateral plan
of coercion or interference.

Same; Same; Discrimination practiced by the companies.— Our point of inquiry should therefore be
directed at whether they also complied with the second condition. It is not denied that when the
strikers reported for work on June 2, 1958, 63 members of the Unions were refused readmission
because they had pending criminal charges. However, despite the fact that they were able to secure
their respective clearances 34 officials and union members were still refused readmission on the
alleged ground that they committed acts inimical to the Companies. It is beyond dispute, however,
that non-strikers who also had criminal charges pending against them in fiscal’s office, arising from
the same incidents whence the criminal charges against the strikers evolved, were readily readmitted
and were not required to secure clearances. This is a clear act of discrimination practiced by the
Companies in the process of rehiring and is therefore a violation of sec. 4(a) (4) of the Industrial
Peace Act.

Same; Same; Discrimination in dismissal of employees constitutes waiver of employer’s right to

dismiss.—So is there an unfair labor practice where the employer, although authorized by the Court
of Industrial Relations to dismiss the employees who participated in an illegal strike, dismissed only
the leaders of the strikers, such dismissal being evidence of discrimination against those dismissed
and constituting a waiver of the employer’s right to dismiss the striking employees and condonation
of the fault committed by them.

Same; Same; Delayed reinstatement of employees constitutes discrimination.—Delayed

reinstatement is a form of discrimination, as is having the machinery of reinstatement in the hands
of employees hostile to the strikers, and reinstating a union official who formerly worked in a
unionized plant, to a job in another mill, which was imperfectly organized.

Same; Same; When failure to report for work after notice to return does not constitute abandonment
nor bar reinstatement—At any rate, it has been held that mere failure to report for work after notice
to return, does not constitute abandonment nor bar reinstatement. In one case, the U.S. Supreme
Court held that the taking back of six of eleven men constituted discrimination although the five
strikers who were not reinstated, all of whom were prominent in the union and in the strike, reported
for work at various times during the next three days, but were told that there were no opening.

Constitutional law; Freedom of speech; When a statement made is but an expression of free speech
protected by the Constitution.—Being a union man and one of the strikers, Tongos was expected to
reveal the whole truth on whether or not the respondent Companies were justified in refusing to
accede to union demands. After all, not being one of the supervisors, he was not a part of
management. And his statement if indeed made, is but an expression of free speech protected by
the Constitution.

Labor law; Right to strike; When heated altercations and occasional blows exchanged on the picket
line do not affect or diminish the right to strike.—We think it must be conceded that some disorder is
unfortunately quite usual in any extensive or long drawn out strike. A strike is essentially a battle
waged with economic weapons. Engaged in it are human beings whose feelings are stirred to the
depths. Rising passions call forth hot words. Hot words lead to blows on the picket line. The
transformation from economic to physical combat by those engaged in the contest is difficult to
prevent even when cool heads direct the fight. Violence of this nature, however much it is to be
regretted, must have been in the contemplation of the Congress when it provided in Section 13 of
Act 29 USCA Sec. 163, that nothing therein should be construed so as to interfere with or impede or
diminish in any way the right to strike. If this were not so, the rights afforded to employees by the Act
would indeed be illusory. We accordingly recently held that it was not intended by the Act that minor
disorders of this nature would deprive a striker of the possibility of reinstatement.

Same; Unfair labor practice; Spying of the union activities is unfair labor practice.—Under the
circumstances, there is good ground to believe that Encarnacion was made to spy on the activities
of the union members. This act of the respondents is considered unjustifiable interference in the
union activities of the petitioners and is unfair labor practice.

Same; Back wages; Strikers are entitled for back pay when strikes arise from unfair labor practice.—
The lower court should have ordered the reinstatement of the officials and members of the Unions,
with full back wages from June 2, 1958 to the date of their actual reinstatement to their usual
employment. Because all too clear from the factual and environmental milieu of this case, coupled
with settled decisional law, is that the Unions went on strike because of the unfair labor practices
committed by the respondents, and that when the strikers reported back for work—upon the invitation
of the respondents—they were discriminatory dismissed. The members and officials of the Unions
therefore are entitled to reinstatement with back pay.

Same: Reinstatement; The fact that positions of union members were already filled by replacements
is not a defense to reinstatement.—Where the employers’ unfair labor practice caused or contributed
to the strike or where the lock-out by the employer constitutes an unfair labor practice, the employer
cannot successfully urge as a defense that the striking or locked-out employee’s position has been
filled by replacement. Under such circumstances, if no job sufficiently and satisfactorily comparable
to that previously held by the aggrieved employee can be found, the employer must discharge the
replacement employee, if necessary, to restore the striking or locked-out worker to his old
comparable position, x x x If the employer’s improper conduct was an initial cause of the strike, all
the strikers are entitled to reinstatement and the dismissal of replacement employees wherever
necessary.

Same; Back pay; Computation; What date should the backpay payable to the unionists be
computed.—It is now a settled doctrine that strikers who are entitled to reinstatement are not entitled
to back pay during the period of the strike, even though it is caused by an unfair labor practice.
However, if they offer to return to work under the same conditions just before the strike, the refusal
to re-employ or the imposition of conditions amounting to unfair labor practice is a violation of section
4 (a) (4) of the Industrial Peace Act and the employer is liable for backpay from the date of the offer.
We have likewise ruled that discriminatorily dismissed employees must receive backpay from the
date of the act of discrimination, that is, from the date of their discharge.
Same; Separation pay; Republic, Act 1052 construed.— While Republic Act No. 1052 authorizes a
commercial establishment to terminate the employment of its employee by serving notice on him
one month in advance, or, in the absence thereof, by paying him one month compensation from the
date of the termination of his employment, such Act does not give to the employer a blanket authority
to terminate the employment regardless of the cause or purpose behind such termination. Certainly,
it cannot be made use of as a cloak to circumvent a final order of the court or a scheme to trample
upon the right of an employee who has been the victim of an unfair labor practice.

Same; Supreme Court decisions and rulings; Duty of courts, judges and lawyers to reproduce or
copy the same word-for-word and punctuation mark-for-punctuation mark.—We must articulate our
firm view that in citing this Court’s decisions and rulings, it is the bounden duty of courts, judges and
lawyers to reproduce or copy the same word-for-word and punctuation mark-for-punctuation mark.
Indeed, there is a salient and salutary reason why they should do this. Only from this Tribunal’s
decisions and rulings do all other courts, as well as lawyers and litigants, take their bearings. This is
because the decisions referred to in article 8 of the Civil Code which reads, “Judicial decisions
applying or interpreting the laws or the Constitution shall form a part of the legal system of the
Philippines,” are only those enunciated by this Court of last resort. We said in no uncertain terms in
Miranda, et al. vs. Imperial, et al. (77 Phil. 1066) that “[O]nly the decisions of this Honorable Court
establish jurisprudence or doctrines in this jurisdiction.” Thus, ever present is the danger that if not
faithfully and exactly quoted, the decisions and rulings of this Court may lose their proper and correct
meaning, to the detriment of other courts, lawyers and the public who may thereby be misled. But if
inferior courts and members of the bar meticulously discharge their duty to check and recheck their
citations of authorities culled not only from this Court’s decisions but from other sources and make
certain that they are verbatim reproductions down to the last word and punctuation mark, appellate
courts will be precluded from acting on misinformation, as well as be saved precious time in finding
out whether the citations are correct.

APPEAL by certiorari to review a decision and a resolution of the Court of Industrial Relations.

The facts are stated in the opinion of the Court.

Lacsina, Lontok & Perez and Luis F. Aquino for petitioners.

Francisco de los Reyes for respondent Court of Industrial Relations.

Araneta, Mendoza & Papa for other respondents.

CASTRO, J .:

Appeal, by certiorari to review a decision and a resolution en banc of the Court of Industrial Relations
dated August 17, 1965 and October 20, 1965, respectively, in Case 1698-ULP.

The Insular Life Assurance Co., Ltd., Employees Association-NATU, FGU Insurance Group Workers
& Employees Association-NATU, and Insular Life Building Employees Association-NATU
(hereinafter referred to as the Unions), while still members of the Federation of Free Workers (FFW),
entered into separate collective bargaining agreements with the Insular Life Assurance Co., Ltd. and
the FGU Insurance Group (hereinafter referred to as the Companies) .

Two of the lawyers of the Unions then were Felipe Enaje and Ramon Garcia; the latter was formerly
the secretary-treasurer of the FFW and acting president of the Insular Life/FGU unions and the
Insular Life Building Employees Association. Garcia, as such acting president, in a circular issued in
his name and signed by him, tried to dissuade the members of the Unions from disaffiliating with the
FFW and joining the National Association of Trade Unions (NATU), to no avail.

Enaje and Garcia soon left the FFW and secured employment with the Anti-Dummy Board of the
Department of Justice. Thereafter, the Companies hired Garcia in the latter part of 1956 as assistant
corporate secretary and legal assistant in their Legal Department, and he was soon receiving P900
a month, or P600 more than he was receiving from the FFW. Enaje was hired on or about February
19, 1957 as personnel manager of the Companies, and was likewise made chairman of the
negotiating panel for the Companies in the collective bargaining with the Unions.

In a letter dated September 16, 1957, the Unions jointly submitted proposals to the Companies for a
modified renewal of their respective collective bargaining contracts which were then due to expire
on September 30, 1957. The parties mutually agreed, and to make whatever benefits could be
agreed upon retroactively effective October 1, 1957.

Thereafter, in the months of September and October 1957 negotiations were conducted on the
Union’s proposals, but these were snagged by a deadlock on the issue of union shop, as a result of
which the Unions filed on January 27, 1958 a notice of strike for “deadlock on collective bargaining.”
Several conciliation conferences were held under the auspices of the Department of Labor wherein
the conciliators urged the Companies to make reply to the Unions’ proposals en toto so that the said
Unions might consider the feasibility of dropping their demand for union security in exchange for
other benefits. However, the Companies did not make any counter-proposals but, instead, insisted
that the Unions first drop their demand for union security, promising money benefits if this was done.
Thereupon, and prior to April 15, 1958, the petitioner Insular Life Building Employees Association-
NATU dropped this particular demand, and requested the Companies to answer its demands, point
by point, en toto. But the respondent Insular Life Assurance Co. still refused to make any counter-
proposals. In a letter addressed to the two other Unions by the joint management of the Companies,
the former were also asked to drop their union security demand, otherwise the Companies “would
no longer consider themselves bound by the commitment to make money benefits retroactive to
October 1, 1957.” By a letter dated April 17, 1958, the remaining two petitioner unions likewise
dropped their demand for union shop. April 25, 1958 then was set by the parties to meet and discuss
the remaining demands.

From April 25 to May 6, 1958, the parties negotiated on the labor demands but with no satisfactory
result due to a stalemate on the matter of salary increases. On May 13, 1958 the Unions demanded
from the Companies final counter-proposals on their economic demands, particularly on salary
increases. Instead of giving counter-proposals, the Companies on May 15, 1958 presented facts and
figures and requested the Unions to submit a workable formula which would justify their own
proposals, taking into account the financial position of the former. Forthwith the Unions voted to
declare a strike in protest against what they considered the Companies’ unfair labor practices.

Meanwhile, eighty-seven (87) unionists were reclassified as supervisors without increase in salary
nor in responsibility while negotiations were going on in the Department of Labor after the notice to
strike was served on the Companies. These employees resigned from the Unions.

On May 20, 1958 the Unions went on strike and picketed the offices of the Insular Life Building at
Plaza Moraga.

On May 21, 1958 the Companies through their acting manager and president, the respondent Jose
M. Olbes (hereinafter referred to as the respondent Olbes), sent to each of the strikers a letter (exhibit
A) quoted verbatim as follows:

“We recognize it is your privilege both to strike and to conduct picketing.

“However, if any of you would like to come back to work voluntarily, you may:

“1. Advise the nearest police officer or security guard of your intention to do so.
“2. Take your meals within the office.
“3. Make a choice whether to go home at the end of the day or to sleep nights at the office where
comfortable cots have been prepared.
“4. Enjoy free coffee and occasional movies.
“5. Be paid overtime for work performed in excess of eight hours.
“6. Be sure arrangements will be made for your families.
“The decision to make is yours—whether you still believe in the motives of the strike or in the fairness
of the Management.”

The Unions, however, continued on strike, with the exception of a few unionists who were convinced
to desist by the aforesaid letter of May 21, 1958.

From the date the strike was called on May 21, 1958, until it was called off on May 31, 1958, some
management men tried to break thru the Unions’ picket lines. Thus, on May 21, 1958 Garcia,
assistant corporate secretary, and Vicente Abella, chief of the personnel records section,
respectively of the Companies, tried to penetrate the picket lines in front of the Insular Life Building.
Garcia, upon approaching the picket line, tossed aside the placard of a picketer, one Paulino Bugay;
a fight ensued between them, in which both suffered injuries. The Companies organized three bus-
loads of employees, including a photographer, who with the said respondent Olbes, succeeded in
penetrating the picket lines in front of the Insular Life Building, thus causing injuries to the picketers
and also to the strike-breakers due to the resistance offered by some picketers.

Alleging that some non-strikers were injured and with the use of photographs as evidence, the
Companies then filed criminal charges against the strikers with the City Fiscal’s Office of Manila.
During the pendency of the said cases in the fiscal’s office, the Companies likewise filed a petition
for injunction with damages with the Court of First Instance of Manila which, on the basis of the
pendency of the various criminal cases against striking members of the Unions, issued on May 31,
1958 an order restraining the strikers, until further orders of the said court, from stopping, impeding,
obstructing, etc. the free and peaceful use of the Companies’ gates, entrance and driveway and the
free movement of persons and vehicles to and from, out and in, of the Companies’ building.

On the same date, the Companies, again through the respondent Olbes, sent individually to the
strikers a letter (exhibit B), quoted hereunder in its entirety:

“The first day of the strike was last 21 May 1958.

“Our position remains unchanged and the strike has made us even more convinced of our decision.

“We do not know how long you intend to stay out, but we cannot hold your positions open for long.
We have continued to operate and will continue to do so with or without you.

“If you are still interested in continuing in the employ of the Group Companies, and if there are no
criminal charges pending against you, we are giving you until 2 June 1958 to report for work at the
home office. If by this date you have not yet reported, we may be forced to obtain your replacement.

“Before, the decisions was yours to make.

“So it is now.”

Incidentally, all of the more than 120 criminal charges filed against the members of the Unions,
except three (3), were dismissed by the fiscal’s office and by the courts. These three cases involved
“slight physical injuries” against one striker and “light coercion” against two others.

At any rate, because of the issuance of the writ of preliminary injunction against them as well as the
ultimatum of the Companies giving them until June 2, 1958 to return to their jobs or else be replaced,
the striking employees decided to call off their strike and to report back to work on June 2, 1958.

However, before readmitting the strikers, the Companies required them not only to secure
clearances from the City Fiscal’s Office of Manila but also to be screened by a management
committee among the members of which were Enage and Garcia. The screening committee initially
rejected 83 strikers with pending criminal charges. However, all non-strikers with pending criminal
charges which arose from the breakthrough incident were readmitted immediately by the Companies
without being required to secure clearances from the fiscal’s office. Subsequently, when practically
all the strikers had secured clearances from the fiscal’s office, the Companies readmitted only some
but adamantly refused readmission to 34 officials and members of the Unions who were most active
in the strike, on the ground that they committed “acts inimical to the interest of the respondents,”
without however stating the specific acts allegedly committed. Among those who were refused
readmission are Emiliano Tabasondra, vice president of the Insular Life Building Employees’
AssociationNATU; Florencio Ibarra, president of the FGU Insurance Group Workers & Employees
Association-NATU; and Isagani Du Timbol, acting president of the Insular Life Assurance Co., Ltd.
Employees Association-NATU. Some 24 of the above number were ultimately notified months later
that they were being dismissed retroactively as of June 2, 1958 and given separation pay checks
computed under Rep. Act 1787, while others (ten in number) up to now have not been readmitted
although there have been no formal dismissal notices given to them.

On July 29, 1958 the CIR prosecutor filed a complaint for unfair labor practice against the Companies
under Republic Act 875. The complaint specifically charged the Companies with (1) interfering with
the members of the Unions in the exercise of their right to concerted action, by sending out individual
letters to them urging them to abandon their strike and return to work, with a promise of comfortable
cots, free coffee and movies, and paid overtime, and, subsequently, by warning them that if they did
not return to work on or before June 2, 1958, they might be replaced; and (2) discriminating against
the members of the Unions as regards readmission to work after the strike on the basis of their union
membership and degree of participation in the strike.

On August 4, 1958 the Companies filed their answer denying all the material allegations of the
complaint, stating special defenses therein, and asking for the dismissal of the complaint.

After trial on the merits, the Court of Industrial Relations, through Presiding Judge Arsenio Martinez,
rendered on August 17, 1965 a decision dismissing the Unions’ complaint for lack of merit. On August
31, 1965 the Unions seasonably filed their motion for reconsideration of the said decision, and their
supporting memorandum on September 10, 1965. This was denied by the Court of Industrial
Relations en banc in a resolution promulgated on October 20, 1965.

Hence, this petition for review, the Unions contending that the lower court erred:

1.

In not finding the Companies guilty of unfair labor practice in sending out individually to the strikers
the letters marked Exhibits A and B;

2.

In not finding the Companies guilty of unfair labor practice for discriminating against the striking
members of the Unions in the matter of readmission of employees after the strike;

3.

In not finding the Companies guilty of unfair labor practice for dismissing officials and members of
the Unions without giving them the benefit of investigation and the opportunity to present their side
in regard to activities undertaken by them in the legitimate exercise of their right to strike; and

4.

In not ordering the reinstatement of officials and members of the Unions, with full back wages, from
June 2, 1958 to the date of their actual reinstatement to their usual employment,

I. The respondents contend that the sending of the letters, exhibits A and B, constituted a legitimate
exercise of their freedom of speech. We do not agree. The said letters were directed to the striking
employees individually—by registered special delivery mail at that—without being coursed through
the Unions which were representing the employees in the collective bargaining.
“The act of an employer in notifying absent employees individually during a strike following
unproductive efforts at collective bargaining that the plant would be operated the next day and that
their jobs were open for them should they want to come in has been held to be an unfair labor
practice, as an active interference with the right of collective bargaining through dealing with the
employees individually instead of through their collective bargaining representatives.” (31 Am. Jur.
563, citing NLRB v. Montgomery Ward & Co. [CA 9th] 133 F2d 676, 146 ALR 1045)

Indeed, it is an unfair labor practice for an employer operating under a collective bargaining
agreement to negotiate or to attempt to negotiate with his employees individually in connection with
changes in the agreement. And the basis of the prohibition regarding individual bargaining with the
strikers is that although the union is on strike, the employer is still under obligation to bargain with
the union as the employees’ bargaining representative (Melo Photo Supply Corporation vs. National
Labor Relations Board, 321 U.S. 332).

Indeed, some such similar actions are illegal as constituting unwarranted acts of interference. Thus,
the act of a company president in writing letters to the strikers, urging their return to work on terms
inconsistent with their union membership, was adjudged as constituting interference with the
exercise of his employees’ right to collective bargaining (Lighter Publishing, CCA 7th, 133 F2d 621).
It is likewise an act of interference for the employer to send a letter to all employees notifying them
to return to work at a time specified therein, otherwise new employees would be engaged to perform
their jobs. Individual solicitation of the employees or visiting their homes, with the employer or his
representative urging the employees to cease union activity or cease striking, constitutes unfair labor
practice. All the above-detailed activities are unfair labor practices because they tend to undermine
the concerted activity of the employees, an activity to which they are entitled free from the employer’s
molestation.1

Moreover, since exhibit A is a letter containing promises of benefits to the employees in order to
entice them to return to work, it is not protected by the free speech provisions of the Constitution
(NLRB v. Clearfield Cheese Co., Inc., 213 F2d 70). The same is true with exhibit B since it contained
threats to obtain replacements for the striking employees in the event they did not report for work on
June 2, 1958. The free speech protection under the Constitution is inapplicable where the expression
of opinion by the employer or his agent contains a promise of benefit, or threats, or reprisal (31 Am.
Jur. 544; NLRB vs. Clearfield Cheese Co., Inc., 213 F2d 70; NLRB vs. Goigy Co., 211 F2d 533, 35
ALR 2d 422).

Indeed, when the respondents offered reinstatement and attempted to “bribe” the strikers with
“comfortable cots,” “free coffee and occasional movies,” “overtime” pay for “work performed in
excess of eight hours,” and “arrangements” for their families, so they would abandon the strike and
return to work, they were guilty of strike-breaking and/or union-busting and, consequently, of unfair
labor practice. It is equivalent to an attempt to break a strike for an employer to offer reinstatement
to striking employees individually, when they are represented by a union, since the employees thus
offered reinstatement are unable to determine what the consequences of returning to work would
be.

Likewise violative of the right to organize, form and join labor organizations are the following acts:
the offer of a Christmas bonus to all “loyal” employees of a company shortly after the making of a
request by the union to bargain; wage increases given for the purpose of mollifying employees after
the employer has refused to bargain with the union, or for the purpose of inducing striking employees
to return to work; the employer’s promises of benefits in return for the strikers’ abandonment of their
strike in support of their union; and the employer’s statement, made about 6 weeks after the strike
started, to a group of strikers in a restaurant to the effect that if the strikers returned to work, they
would receive new benefits in the form of hospitalization, accident insurance, profit-sharing, and a
new building to work in.2

Citing paragraph 5 of the complaint filed by the acting prosecutor of the lower court which states that
“the officers and members of the complainant unions decided to call off the strike and return to work
on June 2, 1958 by reason of the injunction issued by the Manila Court of First Instance,” the
respondents contend that this was the main cause why the strikers returned to work and not the
letters, exhibits A and B. This assertion is without merit. The circumstance that the strikers later
decided to return to work ostensibly on account of the injunctive writ issued by the Court of First
Instance of Manila cannot alter the intrinsic quality of the letters, which were calculated, or which
tended, to interfere with the employees’ right to engage in lawful concerted activity in the form of a
strike. Interference constituting unfair labor practice will not cease to be such simply because it was
susceptible of being thwarted or resisted, or that it did not proximately cause the result intended. For
success of purpose is not, and should not, be the criterion in determining whether or not a prohibited
act constitutes unfair labor practice.

“The test of whether an employer has interfered with and coerced employees within the meaning of
subsection (a) (1) is whether the employer has engaged in conduct which it may reasonably be said
tends to interfere with the free exercise of employees’ rights under section 3 of the Act, and it is not
necessary that there be direct evidence that any employee was in fact intimidated or coerced by
statements of threats of the employer if there is a reasonable inference that anti-union conduct of
the employer does have an adverse effect on self-organization and collective bargaining.”
(Francisco, Labor Laws 1956, Vol. II, p. 323, citing NLRB v. Ford, C.A., 1948, 170 F2d 735).

Besides, the letters, exhibits A and B, should not be considered by themselves alone but should be
read in the light of the preceding and subsequent circumstances surrounding them. The letters
should be interpreted according to the “totality of conduct doctrine,”

“xxx whereby the culpability of an employer’s remarks were to be evaluated not only on the basis of
their implicit implications, but were to be appraised against the background of and in conjunction with
collateral circumstances. Under this ‘doctrine’ expressions of opinion by an employer which, though
innocent in themselves, frequently were held to be culpable because of the circumstances under
which they were uttered, the history of the particular employer’s labor relations or anti-union bias or
because of their connection with an established collateral plan of coercion or interference.”
(Rothenberg on Relations, p. 374, and cases cited therein.)

It must be recalled that previous to the petitioners’ submission of proposals for an amended renewal
of their respective collective bargaining agreements to the respondents, the latter hired Felipe Enage
and Ramon Garcia, former legal counsel of the petitioners, as personnel manager and assistant
corporate secretary, respectively, with attractive compensations. After the notice to strike was served
on the Companies and negotiations were in progress in the Department of Labor, the respondents
reclassified 87 employees as supervisors without increase in salary or in responsibility, in effect
compelling these employees to resign from their unions. And during the negotiations in the
Department of Labor, despite the fact that the petitioners granted the respondents’ demand that the
former drop their demand for union shop and in spite of urgings by the conciliators of the Department
of Labor, the respondents adamantly refused to answer the Unions’ demands en toto. Incidentally,
Enage was the chairman of the negotiating panel for the Companies in the collective bargaining
between the former and the Unions. After the petitioners went to strike, the strikers were individually
sent copies of exhibit A, enticing them to abandon their strike by inducing them to return to work
upon promise of special privileges. Two days later, the respondents, thru their president and
manager, respondent Jose M. Olbes, brought three truckloads of non-strikers and others, escorted
by armed men, who, despite the presence of eight entrances to the three buildings occupied by the
Companies, entered thru only one gate less than two meters wide and in the process, crashed thru
the picket line posted in front of the premises of the Insular Life Building. This resulted in injuries on
the part of the picketers and the strike-breakers. Then the respondents brought against the picketers
criminal charges, only three of which were not dismissed, and these three only for slight
misdemeanors. As a result of these criminal actions, the respondents were able to obtain an
injunction from the court of first instance restraining the strikers from stopping, impeding, obstructing,
etc. the free and peaceful use of the Companies’ gates, entrance and driveway and the free
movement of persons and vehicles to and from, out and in, of the Companies’ buildings. On the
same day that the injunction was issued, the letter, Exhibit B, was sent—again individually and by
registered special delivery mail—to the strikers, threatening them with dismissal if they did not report
for work on or before June 2, 1958. But when most of the petitioners reported for work, the
respondents thru a screening committee—of which Ramon Garcia was a member—refused to admit
63 members of the Unions on the ground of “pending criminal charges.” However, when almost all
were cleared of criminal charges by the fiscal’s office, the respondents adamantly refused admission
to 34 officials and union members. It is not, however, disputed that all-non-strikers with pending
criminal charges which arose from the breakthrough incident of May 23, 1958 were readmitted
immediately by the respondents. Among the nonstrikers with pending criminal charges who were
readmitted were Generoso Abella, Enrique Guidote, Emilio Carreon, Antonio Castillo, Federico
Barretto, Manuel Chuidian and Nestor Cipriano. And despite the fact that the fiscal’s office found no
probable cause against the petitioning strikers, the Companies adamantly refused admission to them
on the pretext that they committed “acts inimical to the interest of the respondents,” without stating
specifically the inimical acts allegedly committed. They were soon to admit, however, that these
alleged inimical acts were the same criminal charges which were dismissed by the fiscal and by the
courts.

Verily, the above actuations of the respondents before and after the issuance of the letters, exhibits
A and B, yield the clear inference that the said letters formed of the respondents scheme to preclude
if not destroy unionism within them.

To justify the respondents’ threat to dismiss the strikers and secure replacements for them in order
to protect and continue their business, the CIR held the petitioners’ strike to be an economic strike
on the basis of exhibit 4 (Notice of Strike) which states that there was a “deadlock in collective
bargaining” and on the strength of the supposed testimonies of some union men who did not actually
know the very reason for the strike. It should be noted that exhibit 4, which was filed on January 27,
1958, states, inter alia:

“TO:

BUREAU OF LABOR RELATIONS

DEPARTMENT OF LABOR

MANILA

“Thirty (30) days from receipt of this notice by the Office, this [sic] unions intends to go on strike
against

“THE INSULAR LIFE ASSURANCE CO., LTD.

Plaza Moraga, Manila “THE FGU INSURANCE GROUP

Plaza Moraga, Manila

“INSULAR LIFE BUILDING ADMINISTRATION

Plaza Moraga, Manila

for the following reason: DEADLOCK IN COLLECTIVE BARGAINING, x x x”

However, the employees did not stage the strike after the thirty-day period, reckoned from January
27, 1958. This simply proves that the reason for the strike was not the deadlock on collective
bargaining nor any lack of economic concessions. By letter dated April 15, 1958, the respondents
categorically stated what they thought was the cause of the “Notice of Strike,” which so far as
material, reads:

“3.

Because you did not see fit to agree with our position on the union shop, you filed a notice of strike
with the Bureau of Labor Relations on 27 January 1958, citing ‘deadlock in collective bargaining’
which could have been for no other issue than the union shop.” (exhibit 8, letter dated April 15, 1958.)

The strike took place nearly four months from the date the said notice of strike was filed. And the
actual and main reason for the strike was, “When it became crystal clear the management double
crossed or will not negotiate in good faith, it is tantamount to refusal collectively and considering the
unfair labor practice in the meantime being committed by the management such as the sudden
resignation of some unionists and [who] became supervisors without increase in salary or change in
responsibility, such as the coercion of employees, decided to declare the strike.” (tsn., Oct. 14, 1958,
p. 14.) The truth of this assertion is amply proved by the following circumstances: (1) it took the
respondents six (6) months to consider the petitioners’ proposals, their only excuse being that they
could not go on with the negotiations if the petitioners did not drop the demand for union shop (exh.
7, respondents’ letter dated April 7, 1958); (2) when the petitioners dropped the demand for union
shop, the respondents did not have a counter-offer to the petitioners’ demands. Sec. 14 of Rep. Act
875 required the respondents to make a reply to the petitioners’ demands within ten days from receipt
thereof, but instead they asked the petitioners to give a “well reasoned, workable formula which
takes into account the financial position of the group companies.” (tsn., Sept. 8, 1958, p. 62; tsn.,
Feb. 26, 1969, p. 49.)

II. Exhibit H imposed three conditions for readmission of the strikers, namely: (1) the employee must
be interested in continuing his work with the group companies; (2) there must be no criminal charges
against him; and (3) he must report for work on June 2, 1958, otherwise he would be replaced. Since
the evidence shows that all the employees reported back to work at the respondents’ head office on
June 2, 1953, they must be considered as having complied with the first and third conditions.

Our point of inquiry should therefore be directed at whether they also complied with the second
condition. It is not denied that when the strikers reported for work on June 2, 1958, 63 members of
the Unions were refused readmission because they had pending criminal charges. However, despite
the fact that they were able to secure their respective clearances 34 officials and union members
were still refused readmission on the alleged ground that they committed acts inimical to the
Companies. It is beyond dispute, however, that non-strikers who also had criminal charges pending
against them in the fiscal’s office, arising from the same incidents whence the criminal charges
against the strikers evolved, were readily readmitted and were not required to secure clearances.
This is a clear act of discrimination practiced by the Companies in the process of rehiring and is
therefore a violation of sec. 4 (a) (4) of the Industrial Peace Act.

The respondents did not merely discriminate against all the strikers in general. They separated the
active from the less active unionists on the basis of their militancy, or lack of it, on the picket lines.
Unionists belonging to the first category were refused readmission even after they were able to
secure clearances from the competent authorities with respect to the criminal charges filed against
them. It is significant to note in this connection that except for one union official who deserted his
union on the second day of the strike and who later participated in crashing through the picket lines,
not a single union officer was taken back to work. Discrimination undoubtedly exists where the record
shows that the union activity of the rehired strikers has been less prominent than that of the strikers
who were denied reinstatement.

“So is there an unfair labor practice where the employer, although authorized by the Court of
Industrial Relations to dismiss the employees who participated in an illegal strike, dismissed only the
leaders of the strikers, such dismissal being evidence of discrimination against those dismissed and
constituting a waiver of the employer’s right to dismiss the striking employees and a condonation of
the fault committed by them.” (Carlos and Fernando, Labor and Social Legislation, p. 62, citing Phil.
Air Lines, Inc. v. Phil. Air Lines Employees Association, L-8197, Oct. 31, 1958.)

It is noteworthy that—perhaps in an anticipatory effort to exculpate themselves from charges of

discrimination in the readmission of strikers returning to work—the respondents delegated the power
to readmit to a committee. But the respondent Olbes had chosen Vicente Abella, chief of the
personnel records section, and Ramon Garcia, assistant corporate secretary, to screen the unionists
reporting back to work. It is not difficult to imagine that these two employees—having been involved
in unpleasant incidents with the picketers during the strike—were hostile to the strikers. Needless to
say, the mere act of placing in the hands of employees hostile to the strikers the power of
reinstatement, is a form of discrimination in rehiring.

“Delayed reinstatement is a form of discrimination in re-hiring, as is having the machinery of

reinstatement in the hands of employees hostile to the strikers, and reinstating a union official who
formerly worked in a unionized plant, to a job in another mill, which was imperfectly organized.”
(Morabe The Law on Strikes, p. 473, citing Sunshine Mining Co., 7 NLRB 1252; Cleveland Worsted
Mills, 43 NLRB 545; italics supplied.)

Equally significant is the fact that while the management and the members of the screening
committee admitted the discrimination committed against the strikers, they tossed back and around
to each other the responsibility for the discrimination. Thus, Garcia admitted that in exercising for the
management the authority to screen the returning employees, the committee admitted the non-
strikers but refused readmission to the strikers (tsn., Feb. 6, 1962, pp. 15-19, 23-29). Vicente Abella,
chairman of the management’s screening committee, while admitting the discrimination, placed the
blame therefor squarely on the management (tsn., Sept. 20, 1960, pp. 7-8, 14-18). But the
management, speaking through the respondent Olbes, head of the Companies, disclaimed
responsibility for the discrimination. He testified that “The decision whether to accept or not an
employee was left in the hands of that committee that had been empowered to look into all cases of
the strikers.” (tsn., Sept. 6, 1962, p. 19.)

Of course, the respondents—through Ramon Garcia—tried to explain the basis for such
discrimination by testifying that strikers whose participation in any alleged misconduct during the
picketing was not serious in nature were readmissible, while those whose participation was serious
were not. (tsn., Aug. 4, 1961, pp. 48-49, 56). But even this distinction between acts of slight
misconduct and acts of serious misconduct which the respondents contend was the basis for either
reinstatement or discharge, is completely shattered upon a cursory examination of the evidence on
record. For with the exception of Pascual Esquillo whose dismissal sent to the other strikers cited
the alleged commission by them of simple “acts of misconduct.”

III. Anent the third assignment of error, the record shows that not a single dismissed striker was
given the opportunity to defend himself against the supposed charges against him. As earlier
mentioned, when the striking employees reported back for work on June 2, 1958, the respondents
refused to readmit them unless they first secured the necessary clearances; but when all, except
three, were able to secure and subsequently present the required clearances, the respondents still
refused to take them back. Instead, several of them later received letters from the respondents in
the following stereotyped tenor:

“This will confirm the termination of your employment with the Insular Life-FGU Insurance Group as
of 2 June 1958.

“The termination of your employment was due to the fact that you committed acts of misconduct
while picketing during the last strike. Because this may not constitute sufficient cause under the law
to terminate your employment without pay, we are giving you the amount of P1,930.32 corresponding
to one-half month pay for every year of your service in the Group Company.

“Kindly acknowledge receipt of the check we are sending herewith.

Very truly yours,

(Sgd.) JOSE M. OLBES

“President, Insurance Life
Acting President, FGU.”

The respondents, however, admitted that the alleged “acts of misconduct” attributed to the dismissed
strikers were the same acts with which the said strikers were charged before the fiscal’s office and
the courts. But all these charges except three were dropped or dismissed.

Indeed, the individual cases of dismissed officers and members of the striking unions do not indicate
sufficient basis for dismissal.

Emiliano Tabasondra, vice-president of the petitioner FGU Insurance Group Workers & Employees
Association-NATU, was refused reinstatement allegedly because he did not report for duty on June
2, 1958 and, hence, had abandoned his office. But the overwhelming evidence adduced at the trial
and which the respondents failed to rebut, negates the respondents’ charge that he had abandoned
his job. In his testimony, corroborated by many others, Tabasondra particularly identified the
management men to whom he and his group presented themselves on June 2, 1958. He mentioned
the respondent Olbes’ secretary, De Asis, as the one who received them and later directed them—
when Olbes refused them an audience—to Felipe Enage, the Companies’ personnel manager. He
likewise categorically stated that he and his group went to see Enage as directed by Olbes’ secretary.
If Tabasondra were not telling the truth, it would have been an easy matter for the respondents to
produce De Asis and Enage—who testified anyway as witnesses for the respondents on several
occasions—to rebut his testimony. The respondents did nothing of the kind. Moreover, Tabasondra
called on June 21, 1958 the respondents’ attention to his non-admission and asked them to inform
him of the reasons therefor, but instead of doing so, the respondents dismissed him by their letter
dated July 10, 1958. Elementary fairness required that before being dismissed for cause,
Tabasondra be given “his day in court.”

At any rate, it has been held that mere failure to report for work after notice to return, does not
constitute abandonment nor bar reinstatement. In one case, the U.S. Supreme Court held that the
taking back of six of eleven men constituted discrimination although the five strikers who were not
reinstated, all of whom were prominent in the union and in the strike, reported for work at various
times during the next three days, but were told that there were no openings. Said the Court:

“x x x The Board found, and we cannot say that its finding is unsupported, that, in taking back six
union men, the respondent’s officials discriminated against the latter on account of their union
activities and that the excuse given that they did not apply until after the quota was full was an
afterthought and not the true reason for the discrimination against them.” (NLRB v. Mackay Radio &
Telegraph Co., 304 U.S. 333, 58 Sup. Ct. 904, 82 L. Ed. 1381) (Mathews, Labor Relations and the
Law, p. 725, 728)

The respondents’ allegation that Tabasondra should have returned after being refused readmission
on June 2, 1958, is not persuasive. When the employer puts off reinstatement when an employee
reports for work at the time agreed, we consider the employee relieved from the duty of returning
further.

Sixto Tongos was dismissed allegedly because he revealed that despite the fact that the Companies
spent more than P80,000 for the vacation trips of officials, they refused to grant union demands;
hence, he betrayed his trust as an auditor of the Companies. We do not find this allegation
convincing. First, this accusation was emphatically denied by Tongos on the witness stand.
Gonzales, president of one of the respondent Companies and one of the officials referred to, took a
trip abroad in 1958. Exchange controls were then in force, and an outgoing traveller on a combined
business and vacation trip was allowed by the Central Bank, per its Circular 52 (Notification to
Authorized Agent Banks) dated May 9, 1952, an allocation of $1,000 or only P2,000, at the official
rate of two pesos to the dollar, as pocket money; hence, this was the only amount that would appear
on the books of the Companies. It was only on January 21, 1962, per its Circular 133 (Notification to
Authorized Agent Banks), that the Central Bank lifted the exchange controls. Tongos could not
therefore have revealed an amount bigger than the above sum. And his competence in figures could
not be doubted considering that he had passed the board examinations for certified public
accountants. But assuming arguendo that Ton-gos indeed revealed the true expenses of Gonzales’
trip—which the respondents never denied or tried to disprove—his statements clearly fall within the
sphere of a unionist’s right to discuss and advertise the facts involved in a labor dispute, in
accordance with section 9(a) (5) of Republic Act 875 which guarantees the untramelled exercise by
striking employees of the right to give “publicity to the existence of, or the fact involved in any labor
dispute, whether by advertising, speaking, patrolling, or by any method not involving fraud or
violence.” Indeed, it is not only the right, it is as well the duty, of every unionist to advertise the facts
of a dispute for the purpose of informing all those affected thereby. In labor disputes, the combatants
are expected to expose the truth before the public to justify their respective demands. Being a union
man and one of the strikers, Tongos was expected to reveal the whole truth on whether or not the
respondent Companies were justified in refusing to accede to union demands. After all, not being
one of the supervisors, he was not a part of management. And his statement, if indeed made, is but
an expression of free speech protected by the Constitution.

“Free speech on both sides and for every faction on any side of the labor relation is to me a
constitutional and useful right. Labor is free x x x to turn its publicity on any labor oppression,
substandard wages, employer unfairness, or objectionable working conditions. The employer, too,
should be free to answer and to turn publicity on the records of the leaders of the unions which seek
the confidence of his men. x x x” (Concurring opinion of Justice Jackson in Thomas v. Collins, 323
U.S. 516, 547, 65 Sup. Ct. 315, 89 L. Ed. 430.) (Mathews, Labor Relations and the Law, p. 591.)

The respondents also allege that in revealing certain confidential information, Tongos committed not
only a betrayal of trust but also a violation of the moral principles and ethics of accountancy. But
nowhere in the Code of Ethics for Certified Public Accountants under the Revised Rules and
Regulations of the Board of Accountancy formulated in 1954, is this stated. Moreover, the
relationship of the Companies with Tongos was that of an employer and not a client. And with regard
to the testimonies of Juan Raymundo and Antolin Carillo, both vice-presidents of the Trust Insurance
Agencies, Inc. about the alleged utterances made by Tongos, the lower court should not have given
them much weight. The firm of these witnesses was newly established at that time and was still a
‘‘general agency” of the Companies. It is not therefore amiss to conclude that they were more inclined
to favor the respondents rather than Tongos.

Pacifico Ner, Paulino Bugay, Jose Garcia, Narciso Daño, Vicente Alsol and Hermenigildo Ramirez,
opined the lower court, were constructively dismissed by non-readmission allegedly because they
not only prevented Ramon Garcia, assistant corporate secretary, and Vicente Abella, chief of the
personnel records section of the Companies, from entering the Companies’ premises on May 21,
1958, but they also caused bruises and abrasions on Garcia’s chest and forehead—acts considered
inimical to the interest of the respondents. The Unions, upon the other hand, insist that there is
complete lack of evidence that Ner took part in pushing Garcia; that it was Garcia who elbowed his
way through the picket lines and therefore Ner shouted “Close up,” which the picketers did; and that
Garcia tossed Paulino Bugay’s placard and a fight ensued between them in which both suffered
injuries. But despite these conflicting versions of what actually happened on May 21, 1958, there are
grounds to believe that the picketers are not responsible for what happened. The picketing on May
21, 1958, as reported in the police blotter, was peaceful (see Police blotter report, exh. 3 in CA-G.R.
No. 25991-R of the Court of Appeals, where Ner was acquitted). Moreover, although the Companies
during the strike were holding offices at the Botica Boie building at Escolta, Manila; Tuason Building
at San Vicente Street, Manila; and Ayala, Inc. offices at Makati, Rizal, Garcia, the assistant corporate
secretary, and Abella, the chief of the personnel records section, reported for work at the Insular Life
Building. There is therefore a reasonable suggestion that they were sent to work at the latter building
to create such an incident and have a basis for filing criminal charges against the petitioners in the
fiscal’s office and applying for injunction from the court of first instance. Besides, under the
circumstances the picketers were not legally bound to yield their grounds and withdraw from the
picket lines. Being where the law expects them to be in the legitimate exercise of their rights, they
had every reason to defend themselves and their rights from any assault or unlawful transgression.
Yet the police blotter, about adverted to, attests that they did not resort to violence.

The heated altercations and occasional blows exchanged on the picket line do not affect or diminish
the right to strike. Persuasive on this point is the following commentary:

“We think it must be conceded that some disorder is unfortunately quite usual in any extensive or
long drawn out strike. A strike is essentially a battle waged with economic weapons. Engaged in it
are human beings whose feelings are stirred to the depths. Rising passions call forth hot words. Hot
words lead to blows on the picket line. The transformation from economic to physical combat by
those engaged in the contest is difficult to prevent even when cool heads direct the fight. Violence
of this nature, however much it is to be regretted, must have been in the contemplation of the
Congress when it provided in Sec. 13 of Act 29 USCA Sec. 163, that nothing therein should be
construed so as to interfere with or impede or diminish in any way the right to strike. If this were not
so, the rights afforded to employees by the Act would indeed be illusory. We accordingly recently
held that it was not intended by the Act that minor disorders of this nature would deprive a striker of
the possibility of reinstatement.” (Republic Steel Corp. v. N. L. R. B., 107 F2d 472, cited in Mathews,
Labor Relations and the Law, p. 378)

Hence the incident that occurred between Ner, et al. and Ramon Garcia was but a necessary incident
of the strike and should not be considered as a bar to reinstatement. Thus it has been held that:

“Fist-fighting between union and non-union employees in the midst of a strike is no bar to
reinstatement.” (Teller, Labor Disputes and Collective Bargaining, Vol. II, p. 855 citing Stackpole
Carbon, Co. 6 NLRB 171, enforced 105 F2d 167.)

Furthermore, assuming that the acts committed by the strikers were transgressions of law, they
amount only to mere ordinary misdemeanors and are not a bar to reinstatement.

“In cases involving misdemeanors, the board has generally held that unlawful acts are not bar to
reinstatement.” (Teller, Labor Disputes and1 Collective Bargaining, Id., p. 854, citing Ford Motor
Company, 23 NLRB No. 28.)

Finally, it is not disputed that despite the pendency of criminal charges against non-striking
employees before the fiscal’s office, they were readily admitted, but those strikers who had pending
charges in the same office were refused readmission. The reinstatement of the strikers is thus in
order.

“[W]here the misconduct, whether in reinstating persons equally guilty with those whose
reinstatement is opposed, or in other ways, gives rise to the inference that union activities rather
than misconduct is the basis of his [employer] objection, the Board has usually required
reinstatement” (Teller, supra, p. 853, citing the Third Annual Report of NLRB [1938], p. 211.)

Lastly, the lower Court justified the constructive dismissal of Florencio Ibarra allegedly because he
committed acts inimical to the interest of the respondents when, as president of the FGU Workers
and Employees Association-NATU, he advised the strikers that they could use force and violence to
have a successful picket and that picketing was precisely intended to prevent the non-strikers and
company clients and customers from entering the Companies’ buildings. Even if this were true, the
record discloses that the picket line had been generally peaceful, and that incidents happened only
when management men made incursions into and tried to break the picket line. At any rate, with or
without the advice of Ibarra, picketing is inherently explosive. For, as pointed out by one author, “The
picket line is an explosive front, charged with the emotions and fierce loyalties of the union-
management dispute. It may be marked by colorful name-calling, intimidating threats or sporadic
fights between the pickets and those who pass the line.” (Mathews, Labor Relations and the Law, p.
752). The picket line being the natural result of the respondents’ unfair labor practice, Ibarra’s
misconduct is at most a misdemeanor which is not a bar to reinstatement. Besides, the only evidence
presented by the Companies regarding Ibarra’s participation in the strike was the testimony of one
Rodolfo Encarnacion, a former member of the board of directors of the petitioner FGU Insurance
Group Workers and Employees Union-NATU, who became a “turncoat” and who likewise testified
as to the union activities of Atty. Lacsina, Ricardo Villaruel and others (annex C, Decision, p. 27)—
another matter which emphasizes the respondents’ unfair labor practice. For under the
circumstances, there is good ground to believe that Encarnacion was made to spy on the activities
of the union members. This act of the respondents is considered unjustifiable interference in the
union activities of the petitioners and is unfair labor practice.

“It has been held in a great number of decisions that espionage by an employer of union activities,
or surveillance thereof, are such instances of interference, restraint or coercion of employees in
connection with their right to organize, form and join unions as to constitute unfair labor practice.

x x x ‘Nothing is more calculated to interfere with, restrain and coerce employees in the exercise of
their right to self-organization than such activity even where no discharges result. The information
obtained by means of espionage is invaluable to the employer and can be used in a variety of cases
to break a union.’ The unfair labor practice is committed whether the espionage is carried on by a
professional labor spy or detective, by officials or supervisory employees of the employer, or by
fellow employees acting at the request or direction of the employer, or an ex-employee, x x x” (Teller,
Labor Disputes and Collective Bargaining, Vol. II, pp. 765-766, and cases cited.)

IV. The lower court should have ordered the reinstatement of the officials and members of the
Unions, with full back wages from June 2, 1958 to the date of their actual reinstatement to their usual
employment. Because all too clear from the factual and environmental milieu of this case, coupled
with settled decisional law, is that the Unions went on strike because of the unfair labor practices
committed by the respondents, and that when the strikers reported back for work—upon the invitation
of the respondents—they were discriminatorily dismissed. The members and officials of the Unions
therefore are entitled to reinstatement with back pay.

“[W]here the strike was induced and provoked by improper conduct on the part of an employer
amounting to an ‘unfair labor practice,’ the strikers are entitled to reinstatement with back pay.”
(Rothenberg on Labor Relations, p. 418.)

“[A]n employee who has been dismissed in violation of the provisions of the Act is entitled to
reinstatement with back pay upon an adjudication that the discharge was illegal.” (Id., citing
Waterman S. S. Corp. v. N. L. R. B., 119 F2d 760; N. L. R. B. v. Richter’s Bakery, 140 F2d 870; N.
L. R. B. v. Southern Wood Preserving Co., 135 F. 2d 606; C. G. Conn, Ltd. v. N. L. R. B., 108 F2d
390; N. L. R. B. v. American Mfg. Co., 106 F2d 61; N. L. R. B. v. Kentucky Fire Brick Co., 99 F2d
99.)

And it is not a defense to reinstatement for the respondents to allege that the positions of these union
members have already been filled by replacements.

“[W]here the employers’ ‘unfair labor practice’ caused or contributed to the strike or where the ‘lock-
out’ by the employer constitutes an ‘unfair labor practice,’ the employer cannot successfully urge as
a defense that the striking or lock-out employees position has been filled by replacement. Under
such circumstances, if no job sufficiently and satisfactorily comparable to that previously held by the
aggrieved employee can be found, the employer must discharge the replacement employee, if
necessary, to restore the striking or locked-out worker to his old or comparable position. x x x If the
employer’s improper conduct was an initial cause of the strike, all the strikers are entitled to
reinstatement and the dismissal of replacement employees wherever necessary; x x x.” (Id., p. 422
and cases cited.)

A corollary issue to which we now address ourselves is, from what date should the backpay payable
to the unionists be computed? It is now a settled doctrine that strikers who are entitled to
reinstatement are not entitled to back pay during the period of the strike, even though it is caused by
an unfair labor practice. However, if they offer to return to work under the same conditions just before
the strike, the refusal to re-employ or the imposition of conditions amounting to unfair labor practice
is a violation of section 4 (a) (4) of the Industrial Peace Act and the employer is liable for backpay
from the date of the offer (Cromwell Commercial Employees and Laborers Union vs. Court of
Industrial Relations, L-19778, Decision, Sept. 30, 1964, 12 SCRA 124; Id., Resolution on motion for
reconsideration, 13 SCRA 258; see also Mathews, Labor Relations and the Law, p. 730 and the
cited cases). We have likewise ruled that discriminatorily dismissed employees must receive
backpay from the date of the act of discrimination, that is, from the date of their discharge (Cromwell
Commercial Employees and Laborers Union vs. Court of Industrial Relations, supra).

The respondents notified the petitioner strikers to report back for work on June 2, 1958, which the
latter did. A great number of them, however, were refused readmission because they had criminal
charges against them pending before the fiscal’s office, although non-strikers who were also facing
criminal indictments were readily readmitted. These strikers who were refused readmission on June
2, 1958 can thus be categorized as discriminatorily dismissed employees and are entitled to backpay
from said date. This is true even with respect to the petitioners Jose Pilapil, Paulino Bugay, Jr. and
Jose Garcia, Jr. who were found guilty only of misdemeanors which are not considered sufficient to
bar reinstatement (Teller, Labor Disputes and Collective Bargaining, p. 854), especially so because
their unlawful acts arose during incidents which were provoked by the respondents’ men. However,
since the employees who were denied readmission have been out of the service of the Companies
(for more than ten years) during which they may have found other employment or other means of
livelihood, it is only just and equitable that whatever they may have earned during that period should
be deducted from their back wages to mitigate somewhat the liability of the company, pursuant to
the equitable principle that no one is allowed to enrich himself at the expense of another (Macleod
& Co. of the Philippines v. Progressive Federation of Labor, 97 Phil. 205 [1955]).

The lower court gave inordinate significance to the payment to and acceptance by the dismissed
employees of separation pay. This Court has ruled that while employers may be authorized under
Republic Act 1052 to terminate employment of employees by serving the required notice, or, in the
absence thereof, by paying the required compensation, the said Act may not be invoked to justify a
dismissal prohibited by law, e.g., dismissal for union activities.

“* * * While Republic Act No. 1052 authorizes a commercial establishment to terminate the
employment of its employee by serving notice on him one month in advance, or, in the absence
thereof, by paying him one month compensation from the date of the termination of his employment,
such Act does not give to the employer a blanket authority to terminate the employment regardless
of the cause or purpose behind such termination. Certainly, it cannot be made use of as a cloak to
circumvent a final order of the court or a scheme to trample upon the right of an employee who has
been the victim of an unfair labor practice.” (Yu Ki Lam, et al. v. Nena Micaller, et al., 99 Phil. 904
[1956].)

Finally, we do not share the respondents’ view that the findings of fact of the Court of Industrial
Relations are supported by substantial and credible proof. This Court is not therefore precluded from
digging deeper into the factual milieu of the case (Union of Philippine Education Employees v.
Philippine Education Company, 91 Phil. 93; Lu Do & Lu Ym Corporation v. Philippine-Land-Air-Sea
Labor Union, 11 SCRA 134 [1964]).

V. The petitioners (15 of them) ask this Court to cite for contempt the respondent Presiding Judge
Arsenio Martinez of the Court of Industrial Relations and the counsel for the private respondents, on
the ground that the former wrote the following in his decision subject of the instant petition for
certiorari, while the latter quoted the same on pages 90-91 of the respondents’ brief:

“* * * Says the Supreme Court in the following decisions:

“ ‘In a proceeding for unfair labor practice, involving a determination as to whether or not the acts of
the employees concerned justified the adoption of the employer of disciplinary measures against
them, the mere fact that the employees may be able to put up a valid defense in a criminal
prosecution for the same acts, does not erase or neutralize the employer’s right to impose discipline
on said employees. For it is settled that not even the acquittal of an employee of the criminal charge
against him is a bar to the employer’s right to impose discipline on its employees, should the act
upon which the criminal charge was based constitute nevertheless an activity inimical to the
employer’s interest. ... The act of the employees now under consideration may be considered as a
misconduct which is a just cause for dismissal.’ (Lopez, Sr., et al. vs. Chronicle Publication
Employees Ass’n. et al., G.R. No. L-20179-81, December 28, 1964.)” (italics supplied)

The two pertinent paragraphs in the above-cited decision* which contained the underscored portions
of the above citation read however as follows:

“Differently as regard the dismissal of Orlando Aquino and Carmelito Vicente, we are inclined to
uphold the action taken by the employer as proper disciplinary measure. A reading of the article
which allegedly caused their dismissal reveals that it really contains an insinuation albeit subtly of
the supposed exertion of political pressure by the Manila Chronicle management upon the City
Fiscal’s Office, resulting in the nonfiling of the case against the employer. In rejecting the employer’s
theory that the dismissal of Vicente and Aquino was justified, the lower court considered the article
as ‘a report of some acts and omissions of an Assistant Fiscal in the exercise of his official functions’
and, therefore, does away with the presumption of malice. This being a proceeding for unfair labor
practice, the matter should not have been viewed or gauged in the light of the doctrine on a
publisher’s culpability under the Penal Code. We are not here to determine whether the employees’
act could stand criminal prosecution, but only to find out whether the aforesaid act justifies the
adoption by the employer of disciplinary measure against them. This is not sustaining the ruling that
the publication in question is qualified privileged, but even on the assumption that this is so, the
exempting character thereof under the Penal Code does not necessarily erase or neutralize its effect
on the employer’s interest which may warrant employment of disciplinary measure. For it must be
remembered that not even the acquittal of an employee, of the criminal charges against him, is a bar
to the employer’s right to impose discipline on its employees, should the act upon which the criminal
charges was based constitute nevertheless an activity inimical to the employer’s interest.

“In the herein case, it appears to us that for an employee to publish his ‘suspicion,’ which actually
amounts to a public accusation, that his employer is exerting political pressure on a public official to
thwart some legitimate activities on the employees, which charge, in the least, would sully the
employer’s reputation, can be nothing but an act inimical to the said employer’s interest. And the fact
that the same was made in the union newspaper does not alter its deleterious character nor shield
or protect a reprehensible act on the ground that it is a union activity, because such end can be
achieved without resort to improper conduct or behavior. The act of the employees now under
consideration may be considered as a misconduct which is a just cause for dismissal.”** (Italics ours)

It is plain to the naked eye that the 60 un-underscored words of the paragraph quoted by the
respondent Judge do not appear in the pertinent paragraph of this Court’s decision in L-20179-81.
Moreover, the first underscored sentence in the quoted paragraph starts with “For it is settled. . .”
whereas it reads, “For it must be remembered. . .,” in this Court’s decision. Finally, the second and
last underlined sentence in the quoted paragraph of the respondent Judge’s decision, appears not
in the same paragraph of this Court’s decision where the other sentence is, but in the immediately
succeeding paragraph.

This apparent error, however, does not seem to warrant an indictment for contempt against the
respondent Judge and the respondents’ counsels. We are inclined to believe that the misquotation
is more a result of clerical ineptitude than a deliberate attempt on the part of the respondent Judge
to mislead. We fully realize how saddled with many pending cases are the courts of the land, and it
is not difficult to imagine that because of the pressure of their varied and multifarious work, clerical
errors may escape their notice. Upon the other hand, the respondents’ counsel have the prima facie
right to rely on the quotation as it appears in the respondent Judge’s decision, to copy it verbatim,
and to incorporate it in their brief. Anyway, the import of the underscored sentences of the quotation
in the respondent Judge’s decision is substantially the same as, and faithfully reflects, the particular
ruling in this Court’s decision, i.e., that “[N]ot even the acquittal of an employee, of the criminal
charges against him, is a bar to the employer’s right to impose discipline on its employees, should
the act upon which the criminal charges were based constitute nevertheless an activity inimical to
the employer’s interest.”

Be that as it may, we must articulate our firm view that in citing this Court’s decisions and rulings, it
is the bounden duty of courts, judges and lawyers to reproduce or copy the same word-for-word and
punctuation mark-for-punctuation mark. Indeed, there is a salient and salutary reason why they
should do this. Only from this Tribunal’s decisions and rulings do all other courts, as well as lawyers
and litigants, take their bearings. This is because the decisions referred to in article 8 of the Civil
Code which reads, “Judicial decisions applying or interpreting the laws or the Constitution shall form
a part of the legal system of the Philippines,” are only those enunciated by this Court of last resort.
We said in no uncertain terms in Miranda, et al. vs. Imperial, et al (77 Phil. 1066) that “[O]nly the
decisions of this Honorable Court establish jurisprudence or doctrines in this jurisdiction.” Thus, ever
present is the danger that if not faithfully and exactly quoted, the decisions and rulings of this Court
may lose their proper and correct meaning, to the detriment of other courts, lawyers and the public
who may thereby be misled. But if inferior courts and members of the bar meticulously discharge
their duty to check and recheck their citations of authorities culled not only from this Court’s decisions
but from other sources and make certain that they are verbatim reproductions down to the last word
and punctuation mark, appellate courts will be precluded from acting on misinformation, as well as
be saved precious time in finding out whether the citations are correct.

Happily for the respondent Judge and the respondents’ counsel there was no substantial change in
the thrust of this Court’s particular ruling which they cited. It is our view, nonetheless, that for their
mistake, they should be, as they are hereby, admonished to be more careful when citing
jurisprudence in the future.

ACCORDINGLY, the decision of the Court of Industrial Relations dated August 17, 1965 is reversed
and set aside, and another is entered, ordering the respondents to reinstate the dismissed members
of the petitioning Unions to their former or comparatively similar positions, with backwages from June
2, 1958 up to the dates of their actual reinstatements. Costs against the respondents.

Concepcion, C.J., Reyes, J.B.L., Dizon,, Makalintal, Fernando, Teehankee, Barredo, Villamor
and Makasiar, JJ., concur.

Zaldivar, J., did not take part.

Decision reversed and set aside.

Notes. —(a) Case wherein non-reinstatement of striking union members who assaulted fellow
workers who refused to join the strike was held justified.—The foregoing case may be compared or
contrasted with Union of Philippine Education Employees vs. Philippine Education Co., L-7161,

________________________________

4. Moncada Bijon Factory vs. Court of Industrial Relations

MONCADA BIJON FACTORY and/or LAO OH KIM, Yu GUAT and SOTERO BERNAL,
petitioners, vs. COURT OF INDUSTRIAL RELATIONS and MONCADA UNITED WORKERS
UNION, respondents.

No. L-18065. March 30, 1962.

Appeal and error ; Appeal by certiorari; Conclusion of trial court on questions of fact; If supported by
evidence, beyond power of review by Supreme Court.—A conclusion, reached by the lower court,
supported by competent evidence and involving a question of fact, is beyond the power of review by
the Supreme Court on appeal by certiorari.

APPEAL by certiorari from a decision of the Court of Industrial Relations.

The facts are stated in the opinion of the Court.

Ricardo Y. Navarro and Arturo V. Malazo for petitioners.

Mariano B. Tuason for respondent Court of Industrial Relations.

Teodoro C. Vertido for respondent Union.

CONCEPCION, J.:

In a complaint filed on October 12, 1956, as amended on October 4, 1957, the Moncada United
Workers Union, hereafter referred to as respondent union, prayed that the Moncada Bijon Factory
and/or Lao Oh Kim, Yu Guat and Sotero Bernal be held guilty of unfair labor practices and sentenced
to reinstate certain dismissed or laid-off employees who are members of said union, and that the
Rising Labor union—whose members are, also, employces of said factory—be declared company
dominated and, hence, ordered dissolved. After due trial, the Court of Industrial Relations rendered
a decision, which was affirmed by the Court en banc, granting the first prayer, but denying the
second. Hence, this appeal by certiorari taken by the factory and/or Lao Oh Kim, Yu Guat and Sotero
Bernal.

Admittedly, Lao Oh Kim owned the Moncada Bijon Factory, which is operated in Moncada, Tarlac.
On May 13, 1953, respondent union, whose members are employees and laborers of said factory,
filed with the Court of Industrial Relations Case No. 869-V against Lao Oh Kim, for overtime services
allegedly rendered by them. Soon thereafter, the factory seemingly suspended operations. Then on
February 17, 1954, Lao Oh Kim secured permission-from the Court to sell the factory, subject to the
condition that the deed of conveyance would be submitted to said Court for

758

758

SUPREME COURT REPORTS ANNOTATED

Moncada Bijon Factory vs. Court of Industrial Relations

approval and that, should the factory resume operations, the laid-off laborers who were members of
respondent union would be given preference by the new owner, purchaser or operator. A month
later, or on March 19, 1954, Lao Oh Kim filed with the Court a statement to the effect that, on
February 26, 1954, he had executed, in favor of Teofilo Limcaco, a deed of lease of, with option to
purchase, said factory. Subsequently, an amicable settlement was reached on March 25, 1955,
between respondent union on the one hand, and Lao Oh Kim and Limcaco on the other, whereby
Lao Oh Kim and Limcaco undertook to reinstate the dismissed workers.

Meanwhile, or on May 13, 1954, respondent union had filed unfair Labor practice case No. 220-ULP
against the factory and Teofilo Limcaco, as well as Chan It and Rufino Benitez. In due course,
decision was rendered therein on October 24, 1954; which was affirmed by the Court en banc, finding
Rufino Benitez, a labor contractor engaged by Teofilo Limcaco, guilty of the unfair labor practices
charged therein and sentencing him to reinstate the dismissed workers.
On or about July 10, 1956, Lao Oh Kim called the factory workers to a meeting, in which he asked
them to resign from respondent union, to forego their overtime claims and to revert to their former
working hours (from 3:00 a.m. to 7:30 p.m.), but the members of said union rejected the request.
Four (4) days later, the factory suspended its operations. Presently, or on July 25, 1956, Lao Oh Kim
executed a deed purporting to convey the factory to Yu Guat. When the factory resumed operations
on August 6, 1956, the members of respondent union reported for work, but—according to the
evidence introduced by respondent union—they were not readmitted, although those who had
resigned from the union were admitted. Respondent union tried to prove that the alleged sale to Yu
Guat who was Lao Oh Kim's former agent in the purchase and delivery of palay to his (Lao Oh Kim's)
rice mill, was simulated and a devise resorted to merely to get rid of the recalcitrant employees who
were members of said union. Upon the other hand, petitioners herein introduced testimonial
evidence to the contrary, but

759

VOL. 4, MARCH 30, 1962

759

Palomique vs. Palacio

the lower court gave no credence to said evidence and accepted as true the version of respondent
union, and we think, correctly, in the light of the facts and circumstances surrounding the case. In
any event, the conclusion reached by the lower court on this point is beyond our power of review on
appeal by certiorari involving, as it does, a question of fact and there being competent evidence in
support of said conclusion.

It is urged that the finding of unfair labor practices on the part of petitioners herein is inconsistent
with the conclusion of the lower court to the effect that the Rising Labor Union is not company
dominated. No such inconsistency exists, for an employer can discriminate in favor of a union, even
if it were not company dominated.

WHEREFORE, the decision appealed from is hereby af-firmed, with costs against petitioners herein.
It is so ordered.

Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Barrera, Paredes, Dizon and De Leon, JJ.,
concur.

Decision affirmed.

____________

5. Bataan Shipyard and Engineering Co., Inc. vs. NLRC

No. L-78604. May 9, 1988.*

BATAAN SHIPYARD and ENGINEERING CO., INC., petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION, HON. FRANCISCO JOSE, JR, HON. VLADIMIR P.L. SAMPANG,
JOSE G. CRUZ and NATIONAL FEDERATION OF LABOR UNIONS, respondents.

Labor; Illegal Dismissal; Retrenchment, valid, but the manner in which it should be excercised should
not be tainted with abuse of discretion; Labor is a person’s means of livelihood.—It is not disputed
that the retrenchment undertaken by the Company is valid. However, the manner in which this
prerogative is exercised should not be tainted with abuse of discretion. Labor is a person’s means
of livelihood. He cannot be deprived of his labor or work without due process of law. Retrenchment
strikes a t the very heart of one’s employment. While the right of an employer to dismiss an employee
is conceded in a valid retrenchment, the right differs from and should not be confused with the
manner in which such right is exercised. It should not be oppressive and abusive since it affects
one’s person and property. Due process of law demands nothing less.

Same; Same; Same; Unfair Labor Practice; Right of self-organiza-tion; Discrimination by employer
in selecting employees to be retrenched, constitutes unfair labor practice.—Under the circumstances

_______________

* FIRST DIVISION.

272

272

SUPREME COURT REPORTS ANNOTATED

Bataan Shipyard and Engineering Co., Inc. vs. NLRC

obtaining in this case, We are inclined to believe that the Company had indeed been discriminatory
in selecting the employees who were to be retrenched. All of the retrenched employees are officers
and members of the NAFLU. The record of the case is bereft of any satisfactory explanation from
the Company regarding this situation. As such, the action taken by the firm becomes highly suspect.
It leads Us to conclude that the firm had been discriminating against membership in the NAFLU, an
act which amounts to interference in the employees’ exercise of their right of self-organization. Under
Article 249 of the Labor Code of the Philippines, such interference is considered an act of unfair
labor practice on the part of the Company.

PETITION for certiorari to review the resolution of the National Labor Relations Commission.

The facts are stated in the opinion of the Court.

Wilfredo A. Villanueva for petitioner.

The Solicitor General for public respondents.

Francisco de los Reyes for private respondents.

GANCAYCO, J.:

This is a Petition for certiorari under Rule 65 of the Rules of Court. It seeks to set aside a Resolution
of the National Labor Relations Commission.

The record of the case discloses that the herein petitioner Bataan Shipyard & Engineering Co., Inc.
(BASECO) is a corporate entity duly organized under the laws of the Philippines. Its principal office
is in Port Area, Manila. On the other hand, the herein private respondent National Federation of
Labor Unions (NAFLU) is a labor organization registered with the Department of Labor and
Employment. The Company has around a thousand employees in its payroll and more than a
hundred of them belong to the said labor organization.
Sometime before 1984, the Company filed with the herein respondent National Labor Relations
Commission an application for the retrenchment of 285 of its employees on the ground that the firm
had been incurring heavy losses since the end of 1979. The case was docketed as NLRC Case No.
RABIII-2–536–82. In the meantime, some employees who had been on sick leave earlier were
considered retrenched. All of those so retrenched happen to be officers and members of the NAFLU.

As expected, the NAFLU submitted an opposition to the said

273

VOL. 161, MAY 9, 1988

273

Bataan Shipyard and Engineering Co., Inc. vs. NLRC

application in representation of the affected employees. Those employees retrenched earlier joined
the case as individual complainants. The parties submitted their respective position papers and
memoranda.

In a Decision dated January 30, 1984, the Executive Labor Arbiter of the respondent Commission
declared the retrenchment undertaken by the Company legal and valid. As a consequence thereof,
the firm was ordered to pay the separation benefits of the retrenched employees. The Executive
Labor Arbiter also observed that the Company had discriminated against the members of the NAFLU
in the selection of the employees to be retrenched. Thus, the firm was found guilty of unfair labor
practice and was ordered to pay each of the individual complainants six months backwages as a
penalty therefor.1

The Company appealed the case to the corresponding division of the respondent Commission and
challenged the legality of the ruling of the Executive Labor Arbiter to the effect that it had
discriminated in the retrenchment arrangements it had undertaken. The Company likewise
questioned the legality of the award for backwages.

In its Resolution promulgated on December 27, 1985, the Third Division of the respondent
Commission affirmed the Decision of the Executive Labor Arbiter.2 The Commission pointed out that
the Company had failed to satisfactorily explain why all of the employees it had retrenched were
officers and members of the NAFLU. The Commission went on to say that the management was in
a position to know who of the employees on leave were affiliated with the said labor organizations.
This view prompted the Commission to conclude that the NAFLU officers and members so
retrenched were being discriminated against by reason of their affiliation in the labor organization.

On June 10, 1987, the Company elevated the case to this Court by way of the instant Petition for
certiorari3 and sought the annulment or modification of the Resolution of the respondent Commission
as well as the Decision of the Executive Labor

_______________

1 Pages 16 to 21, Rollo.

2 Pages 12 to 15, Rollo.

3 Pages 2 to 11, Rollo.

274

274
SUPREME COURT REPORTS ANNOTATED

Bataan Shipyard and Engineering Co., Inc. vs. NLRC

Arbiter insofar as the ruling on unfair labor practice and backwages is concerned. The Company
maintains that the respondent Commission committed a grave abuse of discretion, amounting to loss
of jurisdiction, in finding the firm guilty of having committed an act of unfair labor practice when all
the while the retrenchment it had sought was held to be legal and valid. The thrust of the Petition is
that the Company cannot be considered guilty of committing an act of unfair labor practice in effecting
a valid retrenchment.

The Office of the Solicitor General, representing the respondent Commission, submitted a Comment
on the Petition on September 9, 1987.4 The Solicitor General points out that while the retrenchment
undertaken by the Company is legal, the prerogative to do so should not be confused with the
manner in which the prerogative is exercised and that such exercise must be made without abuse
of discretion because employment—the livelihood of the working class—is at stake. The Solicitor
General adds that inasmuch as the Company was found guilty of discriminatory acts in the selection
of employees to be retrenched, it cannot escape liability by simply claiming that the retrenchment is
legal and that to do so would encourage discriminatory dismissals in other business enterprises.5

In support of the argument that the findings of fact made by the respondent Commission is supported
by substantial evidence, the Solicitor General had this to say—

“The ‘substantial evidence’ test was more than adequately met by private respondents because the
evidence is clear that membership or non-membership in the NAFLU was the determining factor in
the selection of the employees to be retrenched.

The record of this case is bereft of any guideline employed by petitioner in determining who were to
be laid off, such as the following: (1) ability to perform the work; (2) physical fitness; (3) old age; (4)
disablement; (5) security in work; and (6) financial hardship of certain workers. These factors should
at least be decided by a committee. In the absence of any guideline in the implementation of the
retrenchment and the clear evidence that only NAFLU members were retrenched, it is quite evident
that there was unfair labor practice committed by petitioner in the implementation of a valid and legal

_______________

4 Pages 73 to 79, Rollo.

5 Pages 4 and 5, Comment; pages 76 and 77, Rollo.

275

VOL. 161, MAY 9, 1988

275

Bataan Shipyard and Engineering Co., Inc. us. NLRC

retrenchment."6

On account of these reasons, the Solicitor General sought the dismissal of the instant Petition for
lack of merit.

In due time, the case was deemed submitted for decision.

After a careful examination of the entire record of the case, We find the instant Petition devoid of
merit.
It is not disputed that the retrenchment undertaken by the Company is valid. However, the manner
in which this prerogative is exercised should not be tainted with abuse of discretion. Labor is a
person’s means of livelihood. He cannot be deprived of his labor or work without due process of
law.7 Retrenchment strikes at the very heart of one’s employment. While the right of an employer to
dismiss an employee is conceded in a valid retrenchment, the right differs from and should not be
confused with the manner in which such right is exercised. It should not be oppressive and abusive
since it affects one’s person and property.8 Due process of law demands nothing less.

Under the circumstances obtaining in this case, We are inclined to believe that the Company had
indeed been discriminatory in selecting the employees who were to be retrenched. All of the
retrenched employees are officers and members of the NAFLU. The record of the case is bereft of
any satisfactory explanation from the Company regarding this situation. As such, the action taken by
the firm becomes highly suspect. It leads Us to conclude that the firm had been discriminating against
membership in the NAFLU, an act which amounts to interference in the employees’ exercise of their
right of selforganization. Under Article 249 of the Labor Code of the Philippines, such interference is
considered an act of unfair labor practice on the part of the Company, to wit—

“ART. 249. Unfair labor practices of employers.—It shall be unlawful for an employer to commit any
of the following unfair labor practices:

_______________

6 Pages 6 and 7, Comment; pages 78 and 79, Rollo.

7 Phil. Movie Pictures Workers’ Association v. Premiere Productions, Inc., 92 Phil. 843 (1953).

8 De Leon v. National Labor Relations Commission, 100 SCRA 691 (1980).

276

276

SUPREME COURT REPORTS ANNOTATED

Aznar III vs. Bernad

"(a) To interfere with, restrain or coerce employees in the exercise of their right to self-organization.;

“x x x.”

The respondent Commission and the Executive Labor Arbiter took these considerations into account
in resolving the dispute. This being so, it cannot be said that the respondent Commission committed
a grave abuse of discretion, amounting to loss of jurisdiction, in finding BASECO guilty of having
committed an act of unfair labor practice despite the valid retrenchment. Accordingly, the writ of
certiorari prayed for by the petitioner cannot issue.

WHEREFORE, in view of the foregoing, the instant Petition for certiorari is hereby DISMISSED for
lack of merit. The restraining order of June 22, 1987 is hereby dissolved. We make no
pronouncement as to costs.

SO ORDERED.

Narvasa, Cruz and Griño-Aquino, JJ., concur.

Petition dismissed.
Note.—Prerogative of management to dismiss or lay off an employee must be done without abuse
of discretion for what is at stake is not only petitioner’s position but also his means of livelihood.
(Kapisanan ng Manggagawa sa Camara Shoes vs. Camara Shoes, 111 SCRA 477).

——o0o——

6. H. Aronson & Co., Inc. vs. Associated Labor Union

No. L-23010. July 9, 1971.

H. ARONSON &CO., INC., THE PHOTO MATERIALS CO., INC. and MEDEL OFFICE
MATERIALS &PAPER CO., INC., petitioners, vs. ASSOCIATED LABOR UNION,ALEJANDRO
CENIZA,LORENZO SOLON,LUCAS ATIENZA,HOSPICIO CASTILLO,EULOGIO
GERNALE,PETRONIO BUSTAMANTE,CATALINA ARANAS,MARIA CABATINGAN and THE
COURT OFINDUSTRIAL RELATIONS, respondents.

Industrial Peace Act; Shortening of corporate life to accomplish dismissal of employees constitutes
an unfair labor practice.—It is quite obvious that the question of whether or not the shortening of the
corporate life or dissolution of Aronson, and the subsequent incorporation of the other two petitioners
were part and parcel of a plan, or were intended to accomplish the dismissal of the individual
respondents. The combined capital of the two new corporations was exactly the amount of the

8
8

SUPREME COURT REPORTS ANNOTATED

H. Aronson & Co., Inc. vs. Associated Labor Union

capital` stock of Aronson, and the new corporations’ corporate purposes were exactly the same as
those of Aronson. Indeed, the facts established by the evidence lead to no other conclusion than
that the two new corporations actually took over the business of Aronson. To these circumstances
so blatantly revealing petitioners’ purpose, must be added these additional circumstances: That the
new corporations started business a day after the closure of business of Aronson; that the members
of the Aronson family who controlled said company are in the same controlling position in the two
new corporations; and lastly, that Aronson’s employees who were not members of the respondent
Union later found immediate employment with the new corporations.

Same; Court of Industrial Relations has jurisdiction over the case.—Our conclusion, therefore, is that
the Court of Industrial Relations had jurisdiction over the case and the petitioners herein; that it
correctly found petitioners guilty of unfair labor practice, and in granting to the individual respondents
the relief set forth in the dispositive portion of the appealed order.

APPEAL from an order of the Court of Industrial Relations. Bautista, J.

The facts are stated in the opinion of the Court.

Vicente L. Faelnar, Manuel Lino G. Faelnar and Humabon G. Orlanes for petitioners.

Seno, Mendoza, Ruiz & Associates for respondents.

DIZON, J.:

Petitioners’ appeal from an order of the Court of Industrial Relations issued in Case No. 290-ULP-
Cebu of November 11, 1963, penned by the then Presiding Judge, Jose S. Bautista, subsequently
affirmed by the court en banc, the dispositive part of which is as follows:

“WHEREFORE, the Court, finding the respondents guilty of unfair labor practices as charged, orders
them to cease and desist from such acts, and to reinstate complainants Alejandro Ceniza, Lorenzo
Solon, Lucas Atienza, Hospicio Castillo, Eulogio Gernale, Petronio Bustamante, Catalina Aranas
and Maria Cabatingan to their former positions under the same terms and conditions of employment
with back wages from the time they

VOL. 40, JULY 9, 1971

H. Aronson & Co., Inc. vs. Associated Labor Union

were illegally dismissed until they are actually reinstated by employing them either in the Photo
Materials Company, Inc., or Medel Office Materials and Paper Company, Inc.”

Upon the filing of a charge for unfair labor practice with the Court of Industrial Relations by herein
respondents against petitioners H. Aronson & Co., Inc.—hereinafter referred to as Aronson or the
Company—, and/or Photo Materials & Paper Co., and/or Photo Materials Company, Inc.—
hereinafter referred to as Photo Materials—and Medel Office Materials and Paper Co., Inc.—also
referred to hereinafter as Medel—a preliminary investigation was had and thereafter the
corresponding charge was filed against them under the provisions of Section 4 (a), sub-sections (1),
(2), and (4) of Republic Act No. 875. After hearing, the parties charged were found guilty. Their
motion for reconsideration having been denied subsequently by the court en banc, they took the
present appeal.

The following facts have been established: Aronson, originally known as Moody Aronson & Co., Inc.,
was incorporated in 1920, with an authorized capital stock of P500,000.00 and a corporate life of 50
years expiring on May 27, 1970. Its corporate purpose was to engage, as it actually engaged, in the
business of buying, importing and selling of goods, wares and merchandise, wholesale and retail,
including photo materials and supplies, writing paper, school books, stationery and stationery
supplies. In the course of time it became an Aronson family controlled corporation.

In 1958 its President and General Manager was Francis Aronson, and its Assistant Manager was
Donato Medel. That year thirteen of its twenty-five employees became members of the respondent
Associated Labor Union, among them being the individual respondents Alejandro Ceniza, Lorenzo
Solon, Lucas Atienza, Hospicio Castillo, Eulogio Gernale, Petronio Bustamante, Catalina Aranas
and Maria Cabatingan. In the month of September of that year,

10

10

SUPREME COURT REPORTS ANNOTATED

H. Aronson & Co., Inc. vs. Associated Labor Union

because of the dismissal of Eugenia Solon, a union member, her co-employees who were union
members declared a strike which was soon settled as a result of conciliation negotiations initiated
by the Cebú Regional Office of the Department of Labor.

Sometime thereafter, the respondent Union and its members made demands for a collective
bargaining agreement with the Company to obtain certain benefits in connection with their working
conditions. When the Company refused to enter into a collective bargaining agreement, the
employees who were union members declared a second strike in December of that year. After some
time the Company management acceded to their demands and entered into a collective bargaining
agreement with them on January 6, 1959, the same having been renewed on March 23, 1960. In
this manner the union members obtained labor benefits consisting of union security clause, security
of employment, conversion of daily to monthly salaries, sick and vacation leaves, medical and dental
care, etc.

On January 6, 1960, management sent to the employees of the Company letters of termination of
employment of the following tenor:

“This is to notify you that on July 31, 1961 you will be separated from the service of this Company.
Consequently, on August 1, 1961 you will no longer be in the employ of this Company.

“Due to poor business, the stockholders desire to dissolve this Corporation or to discontinue doing
business on or about July 31, 1961.”

Then on February 13, 1961 Aronson’s original Articles of Incorporation were amended so that,
instead of its corporate existence expiring on May 27, 1970, it was made to expire nine (9) years
earlier, or more specifically, on July 31, 1961. On March 9, 1961, or less than a month after such
amendment had been accomplished, Medel was

11

VOL. 40, JULY 9, 1971

11

H. Aronson & Co., Inc. vs. Associated Labor Union

incorporated with a capital stock of P100,000.00, and on July 17 of the same year, another new
corporation, Photo Materials was also incorporated with an authorized capital stock of P400,000.00.

The total authorized capital stock of the two new corporations amounting to P500,000.00 was exactly
the same authorized capital stock of Aronson. Moreover, Photo Materials was organized to engage
in the business of importing and exporting, buying and selling goods, specifically photographic
equipment and supplies, cameras, graphic art films, greeting cards, and to maintain a photo
processing laboratory and a photo finishing and photographic studio, while the other new
corporation, Medel, was organized to engage in the business of buying and selling wares and
merchandise of all kinds, such as paper and other office materials. It will thus be seen that the two
new corporations were organized to engage in exactly the same business in which Aronson had
been engaged; in other words, to take over the latter’s business.

On July 15, 1961, all the employees of Aronson who were members of the respondent Union were
required to stop working in spite of the fact that, according to the notice of termination of employment
served on them, their services were to be terminated on the 31st of that month. On the other hand,
the employees of the Company who were not members of the respondent Union were allowed to
continue working up to that date, and thereafter they continued working because they were absorbed
or reemployed by the newly organized corporations: Photo Materials and Medel.

There is also sufficient evidence to show that Medel started its business with the stocks and office
equipment of Aronson, and occupied for that purpose one-half of the store and bodega formerly used
by the latter. The other half was used by the other new corporation—Photo Materials—who started
business at the same time as Medel.

12

12

SUPREME COURT REPORTS ANNOTATED

H. Aronson & Co., Inc. vs. Associated Labor Union

It is not disputed that the individual respondents were among the oldest in the service of Aronson,
as may be seen in the following table showing their date of employment, salary upon termination,
and number of years in the service, quoted from the appealed order:

Name

Date of
Employment

Salary upon
Termination

No. of Years in
the Service

1.

Hospicio Castillo
12-1-19

P130.00

41 yrs. 7 mos.

2.

Alejandro Ceniza

2-18-29

200.00

32 ”

3.

Lucas Atienza

7-29-24

127.00

37 ”

4.

Maria Cabatingan

6- 1-27

170.00

34 ”

5.

Lorenzo Solon

3-27-32

130.00

29 ” 4 ”

6.

Catalina Aranas

4- 1-33

130.00

28 ” 3 ”
7.

Eulogio Gernale

3-21-48

127.00

13 ” 4 ”

8.

Petronio Bustamante

1-13-41

120.00

20 ”

To simplify the discussion of the fourteen errors allegedly committed by the Court of Industrial
Relations, We shall divide them into four groups on the basis of the relation existing among the
issues raised therein.

The first to the fourth, and the eighth to the ninth assignments of error partially state petitioners’
position as follows: that Photo Materials and Medel are not mere successors-in-interest or
subsidiaries of Aronson and that, therefore, there never had existed a relationship of employer and
employee between them, on the one hand, and the individual respondents, on the other; that, in view
of this absence of employer and employee relationship, the Court of Industrial Relations had no
jurisdiction over Photo Materials and Medel; that the law applicable to the facts of this case is
Republic Act No. 1052, as amended by Republic Act No. 1787, and not Republic Act No. 875.

The fifth to the seventh assignments of error state another phase of petitioners’ position as follows:
that the corporate life of Aronson expired on July 31, 1961; that as a consequence, the herein
individual respondents were legally dismissed from its service as of that date in accordance with the
provisions of Republic Act No. 1052,

13

VOL. 40, JULY 9, 1971

13

H. Aronson & Co., Inc. vs. Associated Labor Union

as amended by Republic Act No. 1787; that, independently of this, Aronson properly terminated their
services in accordance with the terms of their collective bargaining agreement in force at that time.

Lastly, in the tenth to the fourteenth assignments of error petitioners contend that the Court of
Industrial Relations erred in finding them guilty of unfair labor practice; in ordering them to reinstate
the respondents named in the appealed order either in Aronson or in either one of the other two
petitioners; and lastly, in ordering them to pay back wages to the individual respondents.

In view of the issues thus raised, it is quite obvious that the question of whether or not the shortening
of the corporate life or dissolution of Aronson, and the subsequent incorporation of the other two
petitioners were part and parcel of a plan, or were intended to accomplish the dismissal of the
individual respondents. In the light of the facts set forth above and others to be mentioned
hereinafter, We have come to the conclusion that such was really the case.

It is clear from the record that prior to the year 1958 Aronson had no labor trouble worth mentioning.
That year, however, thirteen of its twenty-five employees became members of the respondent Union,
and that same year Aronson saw the even tenor of its business disturbed first, by a strike declared
in September 1958 by the union members in protest against the dismissal of Eugenia Solon, and
later, by a second strike declared in December 1958—lasting until January 1959—as a result of
certain demands made upon the Company by its employees affiliated with the respondent Union.

So, on January 6, 1960, Aronson served written notice to its employees of the termination of their
services as of July 31, 1961, allegedly due to the desire of its stockholders to dissolve the corporation
because of poor business. Then, on February 13, 1961, obviously with the end in view of giving the
termination of employment the ap-

14

14

SUPREME COURT REPORTS ANNOTATED

H. Aronson & Co., Inc. vs. Associated Labor Union

pearance of good faith and legality, Aronson amended its original Articles of Incorporation to make
its corporate life expire on July 31, 1961 instead of May 27, 1970 as provided for in said original
Articles of Incorporation.

Furthermore, evidently to further give a semblance of good faith and legality to the termination of the
services of its employees—particularly those affiliated with the respondent Union—on March 9, 1961
petitioner Medel was established with a capital stock of P100,000.00, followed by the incorporation
on July 17 of the same year of the other petitioner Photo Materials with an authorized capital stock
of P400,000.00. The combined capital of the two new corporations was exactly the amount of the
capital stock of Aronson, and the new corporations’ corporate purposes were exactly the same as
those of Aronson. Indeed, the facts established by the evidence lead to no other conclusion than
that the two new corporations actually took over the business of Aronson. To these circumstances
so blatantly revealing petitioners’ purpose, must be added these additional circumstances: that the
new corporations started business a day after the closure of business of Aronson; that the members
of the Aronson family who controlled said company are in the same controlling position in the two
new corporations; and lastly, that Aronson’s employees who were not members of the respondent
Union later found immediate employment with the new corporations.

Petitioners’ contention that the dissolution of Aronson was due to “poor business” is, upon the record,
clearly without merit. It was ably disposed of by Judge Bautista in the appealed order, as follows:

“Upon careful and thorough analysis of the evidence adduced and from the observation by the
undersigned of the demeanor and manner of the witnesses who testified on both sides, the
preponderance of evidence inclines towards the finding that the H. Aronson & Company was not
doing poor business in 1959 or 1960 but on the other hand, it was making better business than in
the preceding two years, 1957 and 1958. In 1957, said Company had suffered a net loss of
P6,179.50 (Exhibit

15

VOL. 40, JULY 9, 1971

15
H. Aronson & Co., Inc. vs. Associated Labor Union

“52”). In 1958 the Company recovered amazingly for it had a net profit of P7,796.60 (Exhibit “53”).
In 1959, its net profit increased to P8,930.23 (Exhibit “34”). And in 1960, it doubled its net profit to
the tune of P16,903.63 (Exhibit “34”). These facts were admitted by Mr. Francis Aronson on the
witness stand (t.s.n., pp. 794-95); he also admitted as it likewise appears in Exhibit “34”, that in 1960,
the Company had a surplus and profit in the total amount of P34,084.46 (t.s.n, p. 682). From these
figures it is beyond dispute that the Company’s business improved gradually from 1958 to 1960 as
its profit progressively increased during the period. It is likewise apparent that its business in 1960
was more profitable than in the previous years of 1959, 1958 and 1957. Mr. Aronson openly admitted
that there was more reason, from the business point of view, to dissolve the Company in 1959 than
in 1960 (t.s.n., pp. 685-686).

That the Company was not losing or doing poor business in 1960 is shown by the fact that on April
24, 1960, it increased its personnel by adding two (2) additional employees, Patricinio Diaza and
Roberto Gorosin (t.s.n., pp. 605-606). Likewise in January, 1960, the Company gave salary
increases to two (2) employees, namely, Juanito Solon and Andres Tugot (t.s.n., p. 597).

It is true (and the evidence supporting this is uncontradicted) that the H. Aronson & Company
suffered reduction of its import quota allocations beginning 1960 until its quota was abolished in the
second quarter of 1960. This court can take judicial notice that import quota allocations were
progressively cut down beginning 1961 and 1962 in order to prepare our international dollar reserve
and that this reduction was general and nationwide for it affected all import business in the
Philippines. But the business engaged in by the H. Aronson & Company did not entirely depend for
its stock upon importation from abroad. Thus, Mr. Aronson himself admitted that to fill up its
diminishing imported stock and supplies, the Company resorted to local purchases from local
Companies. (t.s.n., pp. 672-673). That this recourse to local purchases after the import quota
allocations were altogether abolished did not as a whole bring about such poor business as to
warrant the immediate dissolution of the Company and the complete stoppage of its business is
clearly indicated by the fact that on August 1, 1961, Mr. Aronson and the members of his family, who
owned majority if not most of the stocks of the dissolved H. Aronson & Company, opened up for
business the newly incorporated Photo Materials Co., Inc., engaging in the business of

16

16

SUPREME COURT REPORTS ANNOTATED

H. Aronson & Co., Inc. vs. Associated Labor Union

photography and sale of photographic supplies and equipments which was the same business
carried by the dissolved H. Aronson & Company. As a matter of fact, this newly-incorporated Photo
Materials Company started business with stocks of photo supplies locally purchased from Kodak
(Philippines) (t.s.n., pp. 672-673). If it were true that the reduction and ultimate abolition of import
quota allocations constituted the important and immediate cause of the dissolution of the H. Aronson
& Company, then under the substantial ownership and managership of Mr. Francis Aronson, it
cannot be understood why said Mr. Aronson opened up a business similar to that of H. Aronson &
Company which allegedly depended upon import quota allocations. If at all, the opening for business
of the Photo Materials Company and the Medel Office Materials and Paper Company for that matter
after the dissolution of the H. Aronson & Company, both of which newly-opened companies carry on
the same business as the H. Aronson & Company is clear indication that the reduction and abolition
of its import quota allocations did not constitute the primary cause of the dissolution of the H. Aronson
& Company.

The true cause of the termination of the services of the complainants is their membership with the
Associated Labor Union and their union activities. This finding is supported by the antecedent facts
related above, that is, since its establishment in 1920 the only instance when the management of
the H. Aronson & Company began to find interference in the conduct of its business affairs was in
1958 when the Associated Labor Union, to which the complainants are affiliated, declared two strikes
wherein the union decisively got what it wanted from the reluctant management. Attempts were made
by the management to break the majority then held by the Union but it was not successful.”

Our conclusion, therefore, is that the Court of Industrial Relations had jurisdictions over the case and
the petitioners herein; that it correctly found petitioners guilty of unfair labor practice, and in granting
to the individual respondents the relief set forth in the dispositive portion of the appealed order
(Majestic etc. vs. Court of Industrial Relations, L-12607, Feb. 28, 1962; Fernando vs. Angat Labor
Union, L-17896, May 30, 1962; PLASLU vs. Sy, L-18476, May 30, 1964; Yu Ki Lam vs. Micaller, L-
9565, Sept. 14, 1956; Talisay etc. vs. CIR, et al., 60 O.G. pp. 5143, 5151, Jan. 30, 1960).

17

VOL. 40, JULY 9, 1971

17

Oviedo vs. Garcia

WHEREFORE, the appealed order being in accordance with law, the same is hereby affirmed, with
costs.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Teehankee, Barredo, Villamor
and Makasiar, JJ., concur.

Castro, J., did not take part.

Order affirmed.

Note.—Responsibility of a successor-in-interest to the employees of the predecessor-in-interest.—

See also Liberation Steamship Co., Inc. vs. Court of Industrial Relations, L-25389, June 27, 1968,
23 SCRA 1105.

————
7. Complex Electronics Employees Association vs. NLRC

G.R. No. 121315. July 19, 1999.*

COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION (CEEA) represented by its union

president CECILIA TALAVERA, GEORGE ARSOLA, MARIO DIAGO AND SOCORRO
BONCAYAO, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION, COMPLEX
ELECTRONICS CORPORATION, IONICS CIRCUIT, INC., LAWRENCE QUA, REMEDIOS DE
JESUS, MANUEL GONZAGA, ROMY DELA ROSA, TERESITA ANDINO, ARMAN
CABACUNGAN, GERRY GABANA, EUSEBIA MARANAN and BERNADETH GACAD,
respondents.

G.R. No. 122136. July 19, 1999.*

COMPLEX ELECTRONICS CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION, COMPLEX ELECTRONICS EMPLOYEES ASSOCIATION (CEEA), represented
by Union President, CECILIA TALAVERA, respondents.

Labor Law; Unfair Labor Practices; Strikes; Words and Phrases; A “runaway shop” is an industrial
plant moved by its owners from one location to another to escape union labor regulations or state
laws, but the term is also used to describe a plant removed to a new location in order to discriminate
against employees at the old plant because of their union activities.—A “runaway shop” is defined
as an industrial plant moved by its owners from one location to another to escape union labor
regulations or state laws, but the term is also used to describe a plant removed to a new location in
order to discriminate against employees at the old plant because of their union activities. It is one
wherein the employer moves its business to another location or it temporarily closes its business for
anti-union purposes. A “runaway shop” in this sense, is a relocation motivated by anti-union animus
rather than for business reasons. In this case, however, Ionics was not set up merely for the purpose
of transferring the business of Complex. At the time the labor dispute arose at Complex, Ionics was
already existing as an independent company. As earlier mentioned, it has been in existence since
July 5, 1984. It cannot, therefore, be said that the temporary closure in Complex and its subsequent
transfer of business to Ionics was for anti-union purposes. The Union failed to show that the primary
reason for the closure of the establishment was due to the union activities of the employees.

Same; Corporation Law; Piercing the Veil of Corporate Fiction; The mere fact that one or more
corporations are owned or controlled by the same or single stockholder is not a sufficient ground for
disregarding separate corporate personalities.—The mere fact that one or more corporations are
owned or controlled by the same or single stockholder is not a sufficient ground for disregarding
separate corporate personalities. Thus, in Indophil Textile Mill Workers Union vs. Calica, we ruled
that: [I]n the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that
the creation of the corporation is a devise to evade the application of the CBA between petitioner
Union and private respondent company. While we do not discount the possibility of the similarities
of the businesses of private respondent and Acrylic, neither are we inclined to apply the doctrine
invoked by petitioner in granting the relief sought. The fact that the businesses of private respondent
and Acrylic are related, that some of the employees of the private respondent are the same persons
manning and providing for auxiliary services to the units of Acrylic, and that the physical plants,
offices

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Complex Electronis Employees Association vs. NLRC

and facilities are situated in the same compound, it is our considered opinion that these facts are not
sufficient to justify the piercing of the corporate veil of Acrylic.

Same; Same; Same; To disregard the separate juridical personality of a corporation, the wrongdoing
must be clearly and convincingly established.—Ionics may be engaged in the same business as that
of Complex, but this fact alone is not enough reason to pierce the veil of corporate fiction of the
corporation. Well-settled is the rule that a corporation has a personality separate and distinct from
that of its officers and stockholders. This fiction of corporate entity can only be disregarded in certain
cases such as when it is used to defeat public convenience, justify wrong, protect fraud, or defend
crime. To disregard said separate juridical personality of a corporation, the wrongdoing must be
clearly and convincingly established.

Same; Same; Same; The mere fact that both of the corporations have the same president is not in
itself sufficient to pierce the veil of corporate fiction of the two corporations.—As to the additional
documentary evidence which consisted of a newspaper clipping filed by petitioner Union, we agree
with respondent Ionics that the photo/ newspaper clipping itself does not prove that Ionics and
Complex are one and the same entity. The photo/newspaper clipping merely showed that some
plants of Ionics were recertified to ISO 9002 and does not show that there is a relation between
Complex and Ionics except for the fact that Lawrence Qua was also the president of Ionics. However,
as we have stated above, the mere fact that both of the corporations have the same president is not
in itself sufficient to pierce the veil of corporate fiction of the two corporations.

Same; Unfair Labor Practices; Lockouts; Words and Phrases; Lockout is the temporary refusal of
employer to furnish work as a result of an industrial or labor dispute.—We, likewise, disagree with
the Union that there was in this case an illegal lockout/illegal dismissal. Lockout is the temporary
refusal of employer to furnish work as a result of an industrial or labor dispute. It may be manifested
by the employer’s act of excluding employees who are union members. In the present case, there
was a complete cessation of the business operations at Complex not because of the labor dispute.
It should be recalled that, before the labor dispute, Complex had already informed the employees
that they would be closing the Lite-On Line. The employees, however, demanded for a separation
pay equivalent

406

406

SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

to one (1) month salary for every year of service which Complex refused to give. When Complex
filed a notice of closure of its Lite-On Line, the employees filed a notice of strike which greatly
alarmed the customers of Complex and this led to the pull-out of their equipment, machinery and
materials from Complex. Thus, without the much needed equipment, Complex was unable to
continue its business. It was left with no other choice except to shut down the entire business. The
closure, therefore, was not motivated by the union activities of the employees, but rather by necessity
since it can no longer engage in production without the much needed materials, equipment and
machinery.

Same; Same; Same; Management Prerogatives; Closure of Establishment; Whether or not an

employer is incurring great losses, it is still one of the management’s prerogative to close down its
business as long as it is done in good faith.—As to the claim of petitioner Union that Complex was
gaining profit, the financial statements for the years 1990, 1991 and 1992 issued by the auditing and
accounting firm Sycip, Gorres and Velayo readily show that Complex was indeed continuously
experiencing deficit and losses. Nonetheless, whether or not Complex was incurring great losses, it
is still one of the management’s prerogative to close down its business as long as it is done in good
faith. Thus, in Catatista, et al. vs. NLRC and Victorias Milling Co., Inc. we ruled: In any case, Article
283 of the Labor Code is clear that an employer may close or cease his business operations or
undertaking even if he is not suffering from serious business losses or financial reverses, as long as
he pays his employees their termination pay in the amount corresponding to their length of service.
It would indeed, be stretching the intent and spirit of the law if we were to unjustly interfere in
management’s prerogative to close or cease its business operations just because said business
operations or undertaking is not suffering from any loss.

Same; Corporation Law; In the absence of malice or bad faith, a stockholder or an officer of a
corporation cannot be made personally liable for corporate liabilities.—Going now to the issue of
personal liability of Lawrence Qua, it is settled that in the absence of malice or bad faith, a
stockholder or an officer of a corporation cannot be made personally liable for corporate liabilities. In
the present case, while it may be true that the equipment, materials and machinery were pulled-out
of Complex and transferred to Ionics during the

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Complex Electronis Employees Association vs. NLRC

night, their action was sufficiently explained by Lawrence Qua in his Comment to the petition filed by
the Union.

Same; Closure of Establishment; One-Month Notice Requirement; The purpose of the one-month
notice requirement is to enable the proper authorities to determine after hearing whether such
closure is being done in good faith, i.e., for bona fide business reasons.—The purpose of the notice
requirement is to enable the proper authorities to determine after hearing whether such closure is
being done in good faith, i.e., for bona fide business reasons, or whether, to the contrary, the closure
is being resorted to as a means of evading compliance with the just obligations of the employer to
the employees affected.

Same; Same; Same; While the law acknowledges the management prerogative of closing the
business, it does not, however, allow the business establishment to disregard the requirements of
the law.—While the law acknowledges the management prerogative of closing the business, it does
not, however, allow the business establishment to disregard the requirements of the law. The case
of Magnolia Dairy Products v. NLRC is quite emphatic about this: The law authorizes an employer,
like the herein petitioners, to terminate the employment of any employee due to the installation of
labor saving devices. The installation of these devices is a management prerogative, and the courts
will not interfere with its exercise in the absence of abuse of discretion, arbitrariness, or
maliciousness on the part of management, as in this case. Nonetheless, this did not excuse petitioner
from complying with the required written notice to the employee and to the Department of Labor and
Employment (DOLE) at least one month before the intended date of termination. This procedure
enables an employee to contest the reality or good faith character of the asserted ground for the
termination of his services before the DOLE. The failure of petitioner to serve the written notice to
private respondent and to the DOLE, however, does not ipso facto make private respondent’s
termination from service illegal so as to entitle her to reinstatement and payment of backwages. If at
all, her termination from service is merely defective because it was not tainted with bad faith or
arbitrariness and was due to a valid cause.

Same; Same; Separation Pay; In case of closures or cessation of operation of business

establishments not due to serious business losses or financial reverses, the employees are always
given separation

408

408

SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

benefits.—It is settled that in case of closures or cessation of operation of business establishments

not due to serious business losses or financial reverses, the employees are always given separation
benefits. In the instant case, notwithstanding the financial losses suffered by Complex, such was,
however, not the main reason for its closure. Complex admitted in its petition that the main reason
for the cessation of the operations was the pull-out of the materials, equipment and machinery from
the premises of the corporation as dictated by its customers. It was actually still capable of continuing
the business but opted to close down to prevent further losses. Under the facts and circumstances
of the case, we find no grave abuse of discretion on the part of the public respondent in awarding
the employees one (1) month pay for every year of service as termination pay.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Patricio L. Boncayao, Jr. for Complex Electronics Employees Association.

Antonio H. Abad & Associates for Complex Electronics Corporation.

Siguion Reyna, Montecillo & Ongsiako for Ionics Circuit, Incorporated.

KAPUNAN, J.:

These consolidated cases filed by Complex Electronics Employees Association (G.R. No. 121315)
and Complex Electronics Corporation (G.R. No. 122136) assail the Decision of the NLRC dated
March 10, 1995 which set aside the Decision of the Labor Arbiter dated April 30, 1993.

The antecedents of the present petitions are as follows:

Complex Electronics Corporation (Complex) was engaged in the manufacture of electronic products.
It was actually a subcontractor of electronic products where its customers gave their job orders, sent
their own materials and consigned their equipment to it. The customers were foreign-based
companies

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with different product lines and specifications requiring the employment of workers with specific skills
for each product line. Thus, there was the AMS Line for the Adaptive Micro System, Inc., the Heril
Line for Heril Co., Ltd., the Lite-On Line for the Lite-On Philippines Electronics Co., etc.

The rank and file workers of Complex were organized into a union known as the Complex Electronics
Employees Association, herein referred to as the Union.

On March 4, 1992, Complex received a facsimile message from Lite-On Philippines Electronics Co.,
requiring it to lower its price by 10%. The full text reads as follows:

This is to inform your office that Taiwan required you to reduce your assembly cost since it is higher
by 50% and no longer competitive with that of mainland China. It is further instructed that Complex
Price be patterned with that of other sources, which is 10% lower.

Please consider and give us your revised rates soon.1

Consequently, on March 9, 1992, a meeting was held between Complex and the personnel of the
Lite-On Production Line. Complex informed its Lite-On personnel that such request of lowering their
selling price by 10% was not feasible as they were already incurring losses at the present prices of
their products. Under such circumstances, Complex regretfully informed the employees that it was
left with no alternative but to close down the operations of the Lite-On Line. The company, however,
promised that:

1) Complex will follow the law by giving the people to be retrenched the necessary 1 month notice.
Hence, retrenchment will not take place until after 1 month from March 09, 1992.
2) The Company will try to prolong the work for as many people as possible for as long as it can by
looking for job slots for them in another line if workload so allows and if their skills are compatible
with the line requirement.
_______________

1 Rollo, of G.R. No. 122636, p. 270.

410

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SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

3) The company will give the employees to be retrenched a retrenchment pay as provided for by law
i.e. half a month for every year of service in accordance with Article 283 of the Labor Code of
Philippines.2

The Union, on the other hand, pushed for a retrenchment pay equivalent to one (1) month salary for
every year of service, which Complex refused.

On March 13, 1992, Complex filed a notice of closure of the Lite-On Line with the Department of
Labor and Employment (DOLE) and the retrenchment of the ninety-seven (97) affected employees.3

On March 25, 1993, the Union filed a notice of strike with the National Conciliation and Mediation
Board (NCMB).

Two days thereafter, or on March 27, 1993, the Union conducted a strike vote which resulted in a
“yes” vote.

In the evening of April 6, 1992, the machinery, equipment and materials being used for production
at Complex were pulled out from the company premises and transferred to the premises of Ionics
Circuit, Inc. (Ionics) at Cabuyao, Laguna. The following day, a total closure of company operation
was effected at Complex.

A complaint was, thereafter, filed with the Labor Arbitration Branch of the NLRC for unfair labor
practice, illegal closure/illegal lockout, money claims for vacation leave, sick leave, unpaid wages,
13th month pay, damages and attorney’s fees. The Union alleged that the pull-out of the machinery,
equipment and materials from the company premises, which resulted to the sudden closure of the
company was in violation of Sections 3 and 8, Rule XIII, Book V of the Labor Code of the Philippines4
and the existing CBA. Ionics was impleaded as a

_______________

2 Id., at 271.

3 NLRC Decision dated March 10, 1995, rollo of G.R. No. 121315, p. 78.

4 Sec. 3. Notice of strike or lockout.—In cases of bargaining deadlocks, a notice of strike or lockout
shall be filed with the re

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Complex Electronis Employees Association vs. NLRC

party defendant because the officers and management personnel of Complex were also holding
office at Ionics with Lawrence Qua as the President of both companies.

Complex, on the other hand, averred that since the time the Union filed its notice of strike, there was
a significant decline in the quantity and quality of the products in all of the production lines. The
delivery schedules were not met prompting the customers to lodge complaints against them. Fearful
that the machinery, equipment and materials would be rendered inoperative and unproductive due
to the impending strike of the workers, the customers ordered their pull-out and transfer to Ionics.
Thus, Complex was compelled to cease operations.

Ionics contended that it was an entity separate and distinct from Complex and had been in existence
since July 5, 1984 or eight (8) years before the labor dispute arose at Complex. Like Complex, it was
also engaged in the semi-conductor business where the machinery, equipment and materials were
consigned to them by their customers. While admitting that Lawrence Qua, the President of Complex
was also the President of Ionics, the latter denied having Qua as their owner since he had no
recorded subscription of P1,200,000.00 in Ionics as

_______________

gional branch of the Board at least thirty (30) days before the intended dated thereof, a copy of said
notice having been served on the other party concerned. In case of unfair labor practices, the period
of notice shall be fifteen (15) days. However, in case of unfair labor practice involving the dismissal
from employment of union officers duly elected in accordance with the union constitution and by-
laws which may constitute union-busting where the existence of the union is threatened, the fifteen-
day cooling-off period shall not apply and the union may take action immediately after the strike vote
is conducted and the results thereof submitted to the Department of Labor and Employment.

Sec. 8. Declaration of strike and lockout.—Should the dispute remain unsettled after the lapse of the
requisite number of days from the filing of the notice of strike or lockout and the results of the election
required in the preceding section, the labor union may strike or the employer may lockout its workers.
The regional branch or the Board shall continue mediating and conciliating.

412

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SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

claimed by the Union. Ionics further argued that the hiring of some displaced workers of Complex
was an exercise of management prerogatives. Likewise, the transfer of the machinery, equipment
and materials from Complex was the decision of the owners who were common customers of
Complex and Ionics.

On April 30, 1993, the Labor Arbiter rendered a decision the dispositive portion of which reads:

WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering
the respondent Complex Electronics Corporation and/or Ionics Circuit Incorporated and/or Lawrence
Qua, to reinstate the 531 above-listed employees to their former position with all the rights, privileges
and benefits appertaining thereto, and to pay said complainants-employees the aggregate
backwages amounting P26,949,891.80 as of April 6, 1993 and to such further backwages until their
actual reinstatement. In the event reinstatement is no longer feasible for reasons not attributable to
the complainants, said respondents are also liable to pay complainantsemployees their separation
pay to be computed at the rate of one (1) month pay for every year of service, a fraction of at least
six (6) months to be considered as one whole year.

Further, the aforenamed three (3) respondents are hereby ordered to pay jointly and solidarily the
complainants-employees an aggregate moral damages in the amount of P1,062,000.00 and
exemplary damages in the aggregate sum of P531,000.00.

And finally, said respondents are ordered to pay attorney’s fees equivalent to ten percent (10%) of
whatever has been adjudicated herein in favor of the complainants.
The charge of slowdown strike filed by respondent Complex against the union is hereby dismissed
for lack of merit.

SO ORDERED.5

Separate appeals were filed by Complex, Ionics and Lawrence Qua before the respondent NLRC
which rendered the questioned decision on March 10, 1995, the decretal portion of which states:

_______________

5 Rollo of G.R. 121315, pp. 72-73.

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Complex Electronis Employees Association vs. NLRC

WHEREFORE, premises considered, the assailed decision is hereby ordered vacated and set aside,
and a new one entered ordering respondent Complex Electronics Corporation to pay 531
complainants equivalent to one month pay in lieu of notice and separation pay equivalent to one
month pay for every year of service and a fraction of six months considered as one whole year.

Respondents Ionics Circuit Incorporated and Lawrence Qua are hereby ordered excluded as parties
solidarily liable with Complex Electronics Corporation.

The award of moral damages is likewise deleted for lack of merit.

Respondent Complex, however, is hereby ordered to pay attorney’s fees equivalent to ten (10%)
percent of the total amount of award granted the complainants.

SO ORDERED.6

Complex, Ionics and the Union filed their motions for reconsideration of the above decision which
were denied by the respondent NLRC in an Order dated July 11, 1995.7

Hence these petitions.

In G.R. No. 121315, petitioner Complex Electronics Employees Association asseverates that the
respondent NLRC erred when it:

SET ASIDE THE DECISION DATED APRIL 30, 1993 ISSUED BY THE HON. LABOR ARBITER
JOSE DE VERA.
II

EXCLUDED PRIVATE RESPONDENTS IONICS CIRCUITS, INCORPORATED AND LAWRENCE

QUA AS PARTIES SOLIDARILY LIABLE WITH COMPLEX ELECTRONICS CORPORATION.

_______________

6 Id., at 99-100.

7 Id., at 102-106.

414

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SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

III

FOUND THAT COMPLEX ELECTRONICS CORPORATION WAS NOT GUILTY OF ILLEGAL

CLOSURE AND ILLEGAL DISMISSAL OF THE PETITIONERS.

IV

REMOVED THE AWARD FOR BACKWAGES, REINSTATEMENT AND DAMAGES IN THE

DECISION DATED APRIL 30, 1993 ISSUED BY THE HON. LABOR ARBITER JOSE DE VERA.8

On the other hand, in G.R. No. 122136, petitioner Complex Electronics Corporation raised the
following issues, to wit:

PUBLIC RESPONDENT NLRC ACTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OF OR IN EXCESS OF JURISDICTION IN PROMULGATING ITS DECISION AND ORDER
DATED 10 MARCH 1995, AND 11 JULY 1995, RESPECTIVELY, THE SAME BEING IN
CONTRAVENTION OF THE EXPRESS MANDATE OF THE LAW GOVERNING THE PAYMENT
OF ONE MONTH PAY IN LIEU OF NOTICE, SEPARATION PAY AND ATTORNEY’S FEES.

II

THERE IS NO APPEAL, NOR ANY PLAIN, SPEEDY AND ADEQUATE REMEDY IN THE
ORDINARY COURSE OF LAW.9
On December 23, 1996, the Union filed a motion for consolidation of G.R. No. 122136 with G.R. No.
121315.10 The motion was granted by this Court in a Resolution dated June 23, 1997.11

On November 10, 1997, the Union presented additional documentary evidence which consisted of
a newspaper clip-

_______________

8 Id., at 31.

9 Rollo of G.R. No. 122136, p. 21.

10 Rollo of G.R. No. 121315, pp. 273-274.

11 Rollo of G.R. No. 122136, p. 597.

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Complex Electronis Employees Association vs. NLRC

ping in the Manila Bulletin, dated August 18, 1997 bearing the picture of Lawrence Qua with the
following inscription:

RECERTIFICATION. The Cabuyao (Laguna) operation of Ionic Circuits, Inc. consisting of plants 2,
3, 4 and 5 was recertified to ISO 9002 as electronics contract manufacturer by the TUV, a rating firm
with headquarters in Munich, Germany. Lawrence Qua, Ionics president and chief executive officer,
holds the plaque of recertification presented by Gunther Theisz (3rd from left), regional manager of
TUV Products Services Asia during ceremonies held at Sta. Elena Golf Club. This is the first of its
kind in the country that four plants were certified at the same time.12

The Union claimed that the said clipping showed that both corporations, Ionics and Complex are one
and the same.

In answer to this allegation, Ionics explained that the photo which appeared at the Manila Bulletin
issue of August 18, 1997 pertained only to respondent Ionics’ recertification of ISO 9002. There was
no mention about Complex Electronics Corporation. Ionics claimed that a mere photo is insufficient
to conclude that Ionics and Complex are one and the same.13

We shall first delve on the issues raised by the petitioner Union.

The Union anchors its position on the fact that Lawrence Qua is both the president of Complex and
Ionics and that both companies have the same set of Board of Directors. It claims that business has
not ceased at Complex but was merely transferred to Ionics, a runaway shop. To prove that Ionics
was just a runaway shop, petitioner asserts that out of the 80,000 shares comprising the increased
capital stock of Ionics, it was Complex that owns majority of said shares with P1,200,000.00 as its
capital subscription and P448,000.00 as its paid up investment, compared to P800,000.00
subscription and P324,560.00 paid-up owing to the other stockholders,
_______________

12 Rollo of G.R. No. 121315, pp. 383-386.

13 Id., at 287-291.

416

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SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

combined. Thus, according to the Union, there is a clear ground to pierce the veil of corporate fiction.

The Union further posits that there was an illegal lockout/illegal dismissal considering that as of
March 11, 1992, the company had a gross sales of P61,967,559 from a capitalization of
P1,500,000.00. It even ranked number thirty among the top fifty corporations in Muntinlupa.
Complex, therefore, cannot claim that it was losing in its business which necessitated its closure.

With regards to Lawrence Qua, petitioner maintains that he should be made personally liable to the
Union since he was the principal player in the closure of the company, not to mention the clandestine
and surreptitious manner in which such closure was carried out, without regard to their right to due
process.

The Union’s contentions are untenable.

A “runaway shop” is defined as an industrial plant moved by its owners from one location to another
to escape union labor regulations or state laws, but the term is also used to describe a plant removed
to a new location in order to discriminate against employees at the old plant because of their union
activities.14 It is one wherein the employer moves its business to another location or it temporarily
closes its business for anti-union purposes.15 A “runaway shop” in this sense, is a relocation
motivated by anti-union animus rather than for business reasons. In this case, however, Ionics was
not set up merely for the purpose of transferring the business of Complex. At the time the labor
dispute arose at Complex, Ionics was already existing as an independent company. As earlier
mentioned, it has been in existence since July 5, 1984. It cannot, therefore, be said that the
temporary closure in Complex and its subsequent transfer of business to Ionics was

_______________

14 See Textile Workers Union v. Darlington Mfg. Co., 380 US 263, 12 L Ed. 2d 827, 85, S Ct 994.

15 William P. Statsky, WEST’S LEGAL THESAURUS/DICTIONARY, Special Deluxe Edition, p. 671.

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Complex Electronis Employees Association vs. NLRC

for anti-union purposes. The Union failed to show that the primary reason for the closure of the
establishment was due to the union activities of the employees.

The mere fact that one or more corporations are owned or controlled by the same or single
stockholder is not a sufficient ground for disregarding separate corporate personalities. Thus, in
Indophil Textile Mill Workers Union vs. Calica,16 we ruled that:

[I]n the case at bar, petitioner seeks to pierce the veil of corporate entity of Acrylic, alleging that the
creation of the corporation is a devise to evade the application of the CBA between petitioner Union
and private respondent company. While we do not discount the possibility of the similarities of the
businesses of private respondent and Acrylic, neither are we inclined to apply the doctrine invoked
by petitioner in granting the relief sought. The fact that the businesses of private respondent and
Acrylic are related, that some of the employees of the private respondent are the same persons
manning and providing for auxiliary services to the units of Acrylic, and that the physical plants,
offices and facilities are situated in the same compound, it is our considered opinion that these facts
are not sufficient to justify the piercing of the corporate veil of Acrylic.

Likewise, in Del Rosario vs. National Labor Relations Commission,17 the Court stated that
substantial identity of the incorporators of two corporations does not necessarily imply that there was
fraud committed to justify piercing the veil of corporate fiction.

In the recent case of Santos vs. National Labor Relations Commission,18 we also ruled that:

The basic rule is still that which can be deduced from the Court’s pronouncement in Sunio vs.
National Labor Relations Commission, thus:

_______________

16 205 SCRA 697 (1992).

17 187 SCRA 777 (1990).

18 254 SCRA 673 (1996).

418

418

SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

x x x. Mere ownership by a single stockholder or by another corporation of all or nearly all of the
capital stock of a corporation is not of itself sufficient ground for disregarding the separate corporate
personality.

Ionics may be engaged in the same business as that of Complex, but this fact alone is not enough
reason to pierce the veil of corporate fiction of the corporation. Well-settled is the rule that a
corporation has a personality separate and distinct from that of its officers and stockholders. This
fiction of corporate entity can only be disregarded in certain cases such as when it is used to defeat
public convenience, justify wrong, protect fraud, or defend crime.19 To disregard said separate
juridical personality of a corporation, the wrongdoing must be clearly and convincingly established.20

As to the additional documentary evidence which consisted of a newspaper clipping filed by

petitioner Union, we agree with respondent Ionics that the photo/newspaper clipping itself does not
prove that Ionics and Complex are one and the same entity. The photo/newspaper clipping merely
showed that some plants of Ionics were recertified to ISO 9002 and does not show that there is a
relation between Complex and Ionics except for the fact that Lawrence Qua was also the president
of Ionics. However, as we have stated above, the mere fact that both of the corporations have the
same president is not in itself sufficient to pierce the veil of corporate fiction of the two corporations.

We, likewise, disagree with the Union that there was in this case an illegal lockout/illegal dismissal.
Lockout is the temporary refusal of employer to furnish work as a result of

_______________

19 Concept Builders, Inc. v. National Labor Relations Commission, 257 SCRA 149 (1996); Philippine
International Bank v. Court of Appeals, 252 SCRA 259 (1996); Yu v. National Labor Relations
Commission, 245 SCRA 134 (1995).

20 Matuguina Integrated Wood Products, Inc. v. Court of Appeals, 263 SCRA 490 (1996).

419

VOL. 310, JULY 19, 1999

419

Complex Electronis Employees Association vs. NLRC

an industrial or labor dispute.21 It may be manifested by the employer’s act of excluding employees
who are union members.22 In the present case, there was a complete cessation of the business
operations at Complex not because of the labor dispute. It should be recalled that, before the labor
dispute, Complex had already informed the employees that they would be closing the Lite-On Line.
The employees, however, demanded for a separation pay equivalent to one (1) month salary for
every year of service which Complex refused to give. When Complex filed a notice of closure of its
Lite-On Line, the employees filed a notice of strike which greatly alarmed the customers of Complex
and this led to the pull-out of their equipment, machinery and materials from Complex. Thus, without
the much needed equipment, Complex was unable to continue its business. It was left with no other
choice except to shut down the entire business. The closure, therefore, was not motivated by the
union activities of the employees, but rather by necessity since it can no longer engage in production
without the much needed materials, equipment and machinery. We quote with approval the findings
of the respondent NLRC on this matter:

At first glance after reading the decision a quo, it would seem that the closure of respondent’s
operation is not justified. However, a deeper examination of the records along with the evidence,
would show that the closure, although it was done abruptly as there was no compliance with the 30-
day prior notice requirement, said closure was not intended to circumvent the provisions of the Labor
Code on termination of employment. The closure of operation by Complex on April 7, 1992 was not
without valid reasons. Customers of respondent alarmed by the pending labor dispute and the
imminent strike to be foisted by the union, as shown by their strike vote, directed respondent
Complex to pull-out its equipment, machinery and materials to other safe bonded warehouse.
Respondent being mere con-
_______________

21 Art. 212 (p), LABOR CODE OF THE PHILIPPINES.

22 Sta. Mesa Slipways & Engineering Co. v. CIR, 48 O.G. 3353, as cited in II C.A. Azucena, THE
LABOR CODE WITH COMMENTS AND CASES, Revised 1993 Ed., p. 296.

420

420

SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

signees of the equipment, machinery and materials were without any recourse but to oblige the
customers’ directive. The pull-out was effected on April 6, 1992. We can see here that Complex’s
action, standing alone, will not result in illegal closure that would cause the illegal dismissal of the
complainant workers. Hence, the Labor Arbiter’s conclusion that since there were only two (2) of
respondent’s customers who have expressed pull-out of business from respondent Complex while
most of the customer’s have not and, therefore, it is not justified to close operation cannot be upheld.
The determination to cease operation is a prerogative of management that is usually not interfered
with by the State as no employer can be required to continue operating at a loss simply to maintain
the workers in employment. That would be taking of property without due process of law which the
employer has the right to resist. (Columbia Development Corp. vs. Minister of Labor and
Employment, 146 SCRA 421)

As to the claim of petitioner Union that Complex was gaining profit, the financial statements for the
years 1990, 1991 and 1992 issued by the auditing and accounting firm Sycip, Gorres and Velayo
readily show that Complex was indeed continuously experiencing deficit and losses.23 Nonetheless,
whether or not Complex was incurring great losses, it is still one of the management’s prerogative to
close down its business as long as it is done in good faith. Thus, in Catatista, et al. vs. NLRC and
Victorias Milling Co., Inc.,24 we ruled:

In any case, Article 283 of the Labor Code is clear that an employer may close or cease his business
operations or undertaking even if he is not suffering from serious business losses or financial
reverses, as long as he pays his employees their termination pay in the amount corresponding to
their length of service. It would indeed, be stretching the intent and spirit of the law if we were to
unjustly interfere in management’s prerogative to close or cease its business operations just because
said business operations or undertaking is not suffering from any loss.

_______________

23 Records pp. 427-434.

24 247 SCRA 46 (1995).

421

VOL. 310, JULY 19, 1999

421

Complex Electronis Employees Association vs. NLRC

Going now to the issue of personal liability of Lawrence Qua, it is settled that in the absence of malice
or bad faith, a stockholder or an officer of a corporation cannot be made personally liable for
corporate liabilities.25 In the present case, while it may be true that the equipment, materials and
machinery were pulledout of Complex and transferred to Ionics during the night, their action was
sufficiently explained by Lawrence Qua in his Comment to the petition filed by the Union. We quote:

The fact that the pull-out of the machinery, equipment and materials was effected during nighttime
is not per se an indicia of bad faith on the part of respondent Qua since he had no other recourse,
and the same was dictated by the prevailing mood of unrest as the laborers were already vandalizing
the equipment, bent on picketing the company premises and threats to lock out the company officers
were being made. Such acts of respondent Qua were, in fact, made pursuant to the demands of
Complex’s customers who were already alarmed by the pending labor dispute and imminent strike
to be stage by the laborers, to have their equipment, machinery and materials pull out of Complex.
As such, these acts were merely done pursuant to his official functions and were not, in any way,
made with evident bad faith.26

We perceive no intention on the part of Lawrence Qua and the other officers of Complex to defraud
the employees and the Union. They were compelled to act upon the instructions of their customers
who were the real owners of the equipment, materials and machinery. The prevailing labor unrest
permeating within the premises of Complex left the officers with no other choice but to pull them out
of Complex at night to prevent their destruction. Thus, we see no reason to declare Lawrence Qua
personally liable to the Union.

_______________

25 AHS/Philippines, Inc. vs. Court of Appeals, 257 SCRA 319 (1996).

26 Rollo of G.R. No. 121315, p. 182.

422

422

SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

Anent the award of damages, we are inclined to agree with the NLRC that there is no basis for such
award. We again quote the respondent NLRC with favor:

By and large, we cannot hold respondents guilty of unfair labor practice as found by the Labor Arbiter
since the closure of operation of Complex was not established by strong evidence that the purpose
of said closure was to interfere with the employees’ right to selforganization and collective
bargaining. As very clearly established, the closure was triggered by the customers’ pull-out of their
equipment, machinery and materials, who were alarmed by the pending labor dispute and the
imminent strike by the union, and as a protection to their interest pulled-out of business from Complex
who had no recourse but to cease operation to prevent further losses. The indiscretion committed
by the Union in filing the notice of strike, which to our mind is not the proper remedy to question the
amount of benefits due the complainants who will be retrenched at the closure of the Lite-On Line,
gave a wrong signal to customers of Complex, which consequently resulted in the loss of
employment of not only a few but to all of the workers. It may be worth saying that the right to strike
should only be a remedy of last resort and must not be used as a show of force against the
employer.27

We shall now go to the issues raised by Complex in G.R. No. 122136.

Complex claims that the respondent NLRC erred in ordering them to pay the Union one (1) month
pay as indemnity for failure to give notice to its employees at least thirty (30) days before such closure
since it was quite clear that the employees were notified of the impending closure of the Lite-On Line
as early as March 9, 1992. Moreover, the abrupt cessation of operations was brought about by the
sudden pull-out of the customers which rendered it impossible for Complex to observe the required
thirty (30) days notice.

Article 283 of the Labor Code provides that:

_______________

27 Id., at 97-98.

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VOL. 310, JULY 19, 1999

423

Complex Electronis Employees Association vs. NLRC

ART. 283. Closure of establishment and reduction of personnel.—The employer may also terminate
the employment of any employee due to the installation of labor saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. x x x. (Italics ours.)

The purpose of the notice requirement is to enable the proper authorities to determine after hearing
whether such closure is being done in good faith, i.e., for bona fide business reasons, or whether, to
the contrary, the closure is being resorted to as a means of evading compliance with the just
obligations of the employer to the employees affected.28

While the law acknowledges the management prerogative of closing the business, it does not,
however, allow the business establishment to disregard the requirements of the law. The case of
Magnolia Dairy Products v. NLRC29 is quite emphatic about this:

The law authorizes an employer, like the herein petitioners, to terminate the employment of any
employee due to the installation of labor saving devices. The installation of these devices is a
management prerogative, and the courts will not interfere with its exercise in the absence of abuse
of discretion, arbitrariness, or maliciousness on the part of management, as in this case.
Nonetheless, this did not excuse petitioner from complying with the required written notice to the
employee and to the Department of Labor and Employment (DOLE) at least one month before the
intended date of termination. This procedure enables an employee to contest the reality or good faith
character of the asserted ground for the termination of his services before the DOLE.

The failure of petitioner to serve the written notice to private respondent and to the DOLE, however,
does not ipso facto make

_______________

28 Coca Cola Bottlers (Phils.), Inc. v. NLRC, 194 SCRA 592 (1991).

29 252 SCRA 483 (1996).

424

424

SUPREME COURT REPORTS ANNOTATED

Complex Electronics Employees Association vs. NLRC

private respondent’s termination from service illegal so as to entitle her to reinstatement and payment
of backwages. If at all, her termination from service is merely defective because it was not tainted
with bad faith or arbitrariness and was due to a valid cause.

The well settled rule is that the employer shall be sanctioned for non-compliance with the
requirements of, or for failure to observe due process in terminating from service its employee. In
Wenphil Corp. v. NLRC, we sanctioned the employer for this failure by ordering it to indemnify the
employee the amount of P1,000.00. Similarly, we imposed the same amount as indemnification in
Rubberworld (Phils.), Inc. v. NLRC, and, Aurelio v. NLRC and Alhambra Industries, Inc. v. NLRC.
Subsequently, the sum of P5,000.00 was awarded to an employee in Worldwide Papermills, Inc. v.
NLRC, and P2,000.00 in Sebuguero, et al. v. NLRC, et al. Recently, the sum of P5,000.00 was again
imposed as indemnify against the employer. We see no valid and cogent reason why petitioner
should not be likewise sanctioned for its failure to serve the mandatory written notice. Under the
attendant facts, we find the amount of P5,000.00, to be just and reasonable.

We, therefore, find no grave abuse of discretion on the part of the NLRC in ordering Complex to pay
one (1) month salary by way of indemnity. It must be borne in mind that what is at stake is the means
of livelihood of the workers so they are at least entitled to be formally informed of the management
decisions regarding their employment.30

Complex, likewise, maintains that it is not liable for the payment of separation pay since Article 283
of the Labor Code awards separation pay only in cases of closure not due to serious business
reversals. In this case, the closure of Complex was brought about by the losses being suffered by
the corporation.

We disagree.

Article 283 further provides:

x x x. In case of termination due to the installation of labor saving devices or redundancy, the worker
affected thereby shall be
_______________

30 PAL v. NLRC, 225 SCRA 301 (1993).

425

VOL. 310, JULY 19, 1999

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Complex Electronis Employees Association vs. NLRC

entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month
pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in
case of cessation of operations of establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-
half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.

It is settled that in case of closures or cessation of operation of business establishments not due to
serious business losses or financial reverses,31 the employees are always given separation
benefits.

In the instant case, notwithstanding the financial losses suffered by Complex, such was, however,
not the main reason for its closure. Complex admitted in its petition that the main reason for the
cessation of the operations was the pull-out of the materials, equipment and machinery from the
premises of the corporation as dictated by its customers. It was actually still capable of continuing
the business but opted to close down to prevent further losses. Under the facts and circumstances
of the case, we find no grave abuse of discretion on the part of the public respondent in awarding
the employees one (1) month pay for every year of service as termination pay.

WHEREFORE, premises considered, the assailed decision of the NLRC is AFFIRMED.

SO ORDERED.

Davide, Jr. (C.J., Chairman), Melo, Pardo and YnaresSantiago, JJ., concur.

Assailed decision affirmed.

_______________

31 North Davao Mining Corp. vs. NLRC, 254 SCRA 721 (1996); See also: State Investment House,
Inc. vs. Court of Appeals, 206 SCRA 348 (1992); Mindanao Terminal and Brokerage Service, Inc.
vs. The Hon. Minister of Labor and Employment, 238 SCRA 77 (1994).

426

426

SUPREME COURT REPORTS ANNOTATED

People vs. Tadeje

Notes.—Where the employer corporation is no longer existing and is unable to satisfy the judgment
in favor of the employee, the officer should be held liable for acting on behalf of the corporation.
(Valderama vs. National Labor Relations Commission, 256 SCRA 466 [1996])

The rule is that obligations incurred by the corporation, acting through its directors, officers and
employees, are its sole liabilities. (Equitable Banking Corporation vs. National Labor Relations
Commission, 273 SCRA 352 [1997])

Where it appears that three business enterprises are owned, conducted and controlled by the same
parties, both law and equity will, when necessary to protect the rights of third persons, disregard the
legal fiction that the three corporations are distinct entities, and treat them as identical. (Tomas Lao
Construction vs. National Labor Relations Commission, 278 SCRA 716 [1997])

——o0o——

8. San Miguel Brewery Sales Force Union (PTGWO) vs. Ople

G.R. No. 53515. February 8, 1989.*

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner, vs. HON. BLAS F.
OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.

Labor Law; Labor Relations; Unfair Labor Practice; The free will of management to conduct its own
business affairs to achieve its purpose cannot be denied.—Public respondent was correct in holding
that the CDS is a valid exercise of management prerogatives: “Except as limited by special laws, an
employer is free to regulate, according to his own discretion and judgment, all aspects of
employment, including hiring, work assignments, working methods, time, place and manner of work,
tools to be used, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers and the discipline, dismissal and recall of work. x x
x (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings Bank vs. CIR, 21 SCRA 226,
235.)” (Perfecto V. Hernandez, Labor Relations Law, 1985 Ed., p. 44.) Every business enterprise
endeavors to increase its profits. In the process, it may adopt or devise means designed towards
that goal. In Abott Laboratories vs. NLRC, 154 SCRA 713, We ruled: x x x Even as the law is
solicitous of the welfare of the employees, it must also protect the right of an employer to exercise
what are clearly management prerogatives. The free will of management to conduct its own business
affairs to achieve its purpose cannot be denied.” So long as a company’s management prerogatives
are exercised in good faith for the advancement of the employer’s interest and not for the purpose
of defeating or circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them (LVN Pictures Workers vs. LVN, 35 SCRA 147; Phil.
American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634; Phil. Refining Co. vs.
Garcia, 18 SCRA 110).

PETITION for certiorari to review the order of the Minister of Labor.

The facts are stated in the opinion of the Court.

Lorenzo F. Miravite for petitioner.

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

_______________

* FIRST DIVISION.

26

26

SUPREME COURT REPORTS ANNOTATED

San Miguel Brewery Sales Force Union (PTGWO) vs. Ople

Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRIÑO-AQUINO, J.:

This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor
Case No. AJML-069-79, approving the private respondent’s marketing scheme, known as the
“Complementary Distribution System” (CDS), and dismissing the petitioner labor union’s complaint
for unfair labor practice.

On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31,
1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the
private respondent, San Miguel Corporation, Section 1, of Article IV of which provided as follows:

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

In September 1979, the company introduced a marketing scheme known as the “Complementary
Distribution System” (CDS) whereby its beer products were offered for sale directly to wholesalers
through San Miguel’s sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor,
with a notice of strike on the ground that the CDS was contrary to the existing marketing scheme
whereby the Route Salesmen were assigned specific territories within which to sell their stocks of
beer, and wholesalers had to buy beer products from them, not from the company. It was alleged
that the new marketing scheme violates Section 1, Article IV of the collective bargaining agreement
because the introduction of the CDS would reduce the take-home pay of the salesmen and their
truck helpers for the company would be unfairly competing with them.

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

27

VOL. 170, FEBRUARY 8, 1989

27

San Miguel Brewery Sales Force Union (PTGWO) vs. Ople

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

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

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

The dispositive part of the Minister’s Order reads:

“WHEREFORE, premises considered, the notice of strike filed by the petitioner, San Miguel Brewery
Sales Force Union-PTGWO is hereby dismissed. Management however is hereby ordered to pay
an additional three (3) months back adjustment commissions over and above the adjusted
commission under the complementary distribution system.” (p. 26, Rollo.)

The petition has no merit.

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

“Except as limited by special laws, an employer is free to regulate, according to his own discretion
and judgment, all aspects of employment, including hiring, work assignments, working methods,
time, place and manner of work, tools to be used, processes to be followed, supervision of workers,
working regulations, transfer of employees, work supervision, lay-off of workers and the discipline,
dismissal and recall of work. x x x (NLU vs. Insular La Yebana Co., 2 SCRA 924;
28

28

SUPREME COURT REPORTS ANNOTATED

San Miguel Brewery Sales Force Union (PTGWO) vs. Ople

Republic Savings Bank vs. CIR, 21 SCRA 226, 235.)” (Perfecto V. Hernandez, Labor Relations Law,
1985 Ed., p. 44.) (Italics ours.)

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

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

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

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

SO ORDERED.

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

Petition dismissed.

Note.—In labor cases the procedural principles discussed by Justice Barredo in his dissenting
opinion must yield to the social justice and protection to labor provisions of the Constitution. (Air
Manila, Inc. vs. Court of Industrial Relations, 101 SCRA 472.)

——o0o——
9. Dabuet vs. Roche Pharmaceuticals, Inc.

No. L-45402, April 30, 1987.*

ROMEO DABUET, GAMIK BARTOLOME, SALVADOR ABESAMIS and MARIANO MALONZO,

and ROCHE PRODUCTS LABOR UNION, petitioners, vs. ROCHE PHARMACEUTICALS, INC.,
ERIC MENTHA, REYNALDO FORMELOZA, and the OFFICE OF THE PRESIDENT,
respondents.

Labor, Illegal Dismissal; Unfair Labor Practice; Letter written by and for the union addressed to
management referring to employee grievances and/or labor-management issues and the employees
being officers of the union then seeking a renegotiation of the collective bargaining agreement should
be recognized as an act of protection and benefit of the employees concerned.—Where, as in this
case, the letter written by and f or the union addressed to management referred to employee
grievances and/or labor-management issues and the employees concerned were all officers of the
union, then seeking a renegotiation of the collective bargaining agreement, a fact which respondent
company does not deny, there should, all the more, be a recognition of such letter as an act for the
mutual aid, protection and benefit of the employees concerned. This recognition, in turn, should
extend to petitioners' execution of an affidavit in support of the charge of slander against private
respondent, Eric Mentha, for calling the union's lawyer, who prepared the letter, and the contents
thereof as " stupid.''

Same; Same; Same; Breach of trust and confidence, as a ground for employees' dismissal, must
not be indiscriminately used as a shield to dismiss employee arbitrarily.—Breach of trust and
confidence, the grounds alleged for herein petitioners' dismissal, "must not be indiscriminately used
as a shield to dismiss an employee arbitrarily. For who can stop the employer from filing all the
charges in the books for the simple exercise of it, and then hide behind the pretext of loss of
confidence which can be proved by mere preponderance of evidence." Besides, there is nothing in
the record to show that the charge of perjury filed by private respondents against the petitioners has
prospered in any conclusive manner.

Same; Same; Same; Dismissal of petitioners, the remaining members of the union, constitutes an
unfair labor practice, and amounted to interference with and restraint or coercion of petitioners in the
exercise of their right to engage in concerted activities.—We, thus, hold that respondent company's
act in dismissing the petitioners, who then constituted the remaining and entire officialdom of the
Roche Products Labor Union, after the union's president and vice-president had been earlier
dismissed, and when the collective bargaining agreement in the company was about to be
renegotiated, was an unfair labor practice under Sec. 4(a) (1) of the Industrial Peace Act. Their
dismissal, under the circumstances, amounted to interference with, and restraint or coercion of, the
petitioners in the exercise of their right to engage in concerted activities for their mutual aid and
protection.

Same; Same; Same; Reinstatement with full backwages; As the

388

388

SUPREME COURT REPORTS ANNOTATED

Dabuet vs. Roche Pharmaceuticals, Inc.

company is guilty of unfair labor practice, dismissed employees are entitled to reinstatement with full
backwages not exceeding three years.—As the respondent company was guilty of unfair labor
practice, reinstatement of the dismissed employees should follow as a matter of right. It is an
established rule that an employer who commits an unfair labor practice may be required to reinstate,
with full back wages, the workers affected by such act, the amount not to exceed back wages for
three (3) years.

Same; Same; Same; Constitutional Law; Supreme Court; Power of judicial review; Supreme Court
may review decisions of the Office of the President on questions of law and jurisdiction when properly
raised.—Accordingly, we restate that this Court, in the exercise of its power of judicial review, may
review decisions of the Office of the President on questions of law and jurisdiction, when properly
raised. This does not mean judicial supremacy over the Office of the President but the performance
by this Court of a duty specifically enjoined upon it by the Constitution, as part of a system of checks
and balances.

Same; Same; Same; Same; Same; Same; Same; Two varying rul-ings by different officials in the
Office of the President, within a short period of time, is also a ground for review by the Supreme
Court on a question of law.—The checkered circumstances under which the decisions in this case
were made, notably, that two varying rulings were rendered by different officials of the Office of the
President, within a short period of time, also constrained us to review the case on a question of law.
PETITION for review of the decision of the Office of the President.

The facts are stated in the opinion of the Court.

PADILLA, J.:

This is a petition for review of the decision of the Office of the President in NLRC Case No. C-5190,
ordering the respondent Roche Pharmaceuticals, Inc. to pay the individual petitioners separation
pay, in lieu of reinstatement with back wages.

The facts of the case which led to the filing of this petition are, as follows:

389

VOL. 149, APRIL 30, 1987

389

Dabuet vs. Roche Pharmaceuticals, Inc.

On 1 March 1973, herein individual petitioners who were all officers of the Roche Products Labor
Union, the labor organization existing in the firm, and with whom the respondent company had a
collective bargaining agreement which was due for re-negotiation that month, wrote the respondent
company expressing the grievances of the union and seeking a formal conference with management
regarding the previous dismissal of the union's president and vice-president. A meeting was,
accordingly, arranged and set for 12 March 1973. At said meeting, however, instead of discussing
the problems affecting the labor union and management, Mr. Eric Mentha, the company's general
manager, allegedly berated the petitioners for writing said letter and called the letter and the person
who prepared it as "stupid."

Feeling that he was the one alluded to, since he had prepared the letter, counsel for the labor union
filed a case for grave slander against Mr. Mentha. The charge was based on the affidavit executed
by the petitioners. The company and Mentha, in turn, filed a complaint for perjury against petitioners
alleging that their af fidavit contained false statements.

The respondent company. furthermore. construed the execution by petitioners of the affidavit as an
act of breach of trust and confidence and inimical to the interest of the company, for which they were
suspended. Subsequently, the respondent company filed with the NLRC a petition for clearance to
terminate their employment The petitioners filed an opposition thereto and, at the same time, filed
charges of unfair labor practice, union busting, and harassment against the company, Eric Mentha,
and Reynaldo Formeloza, the company's Finance/Administrative Manager. 1

After due proceedings, the compulsory arbitrator found that the petitioners' dismissal was without
justifiable cause, but that there was no unfair labor practice committed and directed that petitioners
be paid separation pay.2

Petitioners filed a motion for reconsideration and/or appeal to the NLRC which agreed with the
findings of the arbitrator

________________

1 Rollo, pp. 20-21.

2 Id., pp. 21-22

390
390

SUPREME COURT REPORTS ANNOTATED

Dabuet vs. Roche Pharmaceuticals, Inc.

that the petitioners' dismissal was without just and valid cause. However, it disagreed with the
arbitrator on the relief granted. The NLRC ordered the reinstatement of the petitioners with two (2)
months salary as back wages.3

Both parties appealed to the Secretary of Labor who set aside the decision of the NLRC and entered
another one ordering the payment of severance pay only.4

The petitioners appealed to the Office of the President, and on 27 April 1976, the latter rendered a
decision finding the respondents guilty of unfair labor practice and directing the reinstatement of the
petitioners with back wages from the time of their suspension until actually reinstated, without loss
of seniority rights. The respondent company was, likewise, ordered to extend to the petitioners all
fringe benefits to which they are entitled had they not been dismissed, 5 The respondent company f
filed a motion for reconsideration of the decision, and on 16 November 1976, the Office of the
President granted the motion and reversed its previous decision of 27 April 1976. It ruled that, while
the petitioners' dismissal was not for just and valid cause, no unfair labor practice had been
committed. Consequently, it directed that petitioners be paid only separation pay in an amount
double those awarded by the compulsory arbitrator and Secretary of Labor.6

Hence, the present recourse to this Court.

The determinative issue raised in the petition is whether or not the respondent company, in
terminating the employment of the petitioners without just and lawful cause, committed an unfair
labor practice.

We have carefully examined the records of the case and we are convinced that the respondent
company had committed unfair labor practice in dismissing the petitioners without just and valid
cause.

In Republic Savings Bank vs. CIR,7 where the dismissed

________________

3 Id., pp. 22-23.

4 Id., p. 23.

5 Id., p. 34.

6 Id., p.38.

7 128 Phil. 230.

391

VOL. 149, APRIL 30, 1987

391

Dabuet vs. Roche Pharmaceuticals, Inc.

employees had written a letter decried by the Bank as patently libelous for alleging immorality,
nepotism and favoritism on the part of the Bank president, thus amounting to behavior necessitating
their dismissal, the Court declared:

x x x Assuming that the workers acted in their individual capacities when they wrote the letter-charge
they were nonetheless protected for they were engaged in concerted activity, in the exercise of their
right to self-organization that includes concerted activity for mutual aid and protection, interference
with which constitutes an unfair labor practice under section 4(a) (1). This is the view of some
members of this Court. For, as has been aptly stated, the joining in protests or demands, even by a
small group of employees, if in furtherance of their interests as such, is a concerted activity protected
by the Industrial Peace Act. It is not necessary that union activity be involved or that collective
bargaining be contemplated."

Where, as in this case, the letter written by and for the union addressed to management referred to
employee grievances and/or labor-management issues and the employees concerned were all
officers of the union, then seeking a renegotiation of the collective bargaining agreement, a fact
which respondent company does not deny, there should, all the more, be a recognition of such letter
as an act for the mutual aid, protection and benefit of the employees concerned. This recognition, in
turn, should extend to petitioners' execution of an affidavit in support of the charge of slander against
private respondent, Eric Mentha, for calling the union's lawyer, who prepared the letter, and the
contents thereof as "stupid."

Breach of trust and confidence, the grounds alleged for herein petitioners' dismissal, "must not be
indiscriminately used as a shield to dismiss an employee arbitrarily. For who can stop the employer
from filing all the charges in the books for the simple exercise of it, and then hide behind the pretext
of loss of confidence which can be proved by mere preponderance of evidence."8 Besides, there is
nothing in the record to show that the charge of perjury filed by private respondents against

________________

8 Callanta vs. Carnation (Phil.) Inc., G.R. No. 70615, October 28,1986.

392

392

SUPREME COURT REPORTS ANNOTATED

Dabuet vs. Roche Pharmaceuticals, Inc.

the petitioners has prospered in any conclusive manner.

We, thus, hold that respondent company's act in dismissing the petitioners, who then constituted the
remaining and entire officialdom of the Roche Products Labor Union, after the union's president and
vice-president had been earlier dismissed, and when the collective bargaining agreement in the
company was about to be renegotiated, was an unfair labor practice under Sec. 4(a) (1) of the
Industrial Peace Act. Their dismissal, under the circumstances, amounted to interference with, and
restraint or coercion of, the petitioners in the exercise of their right to engage in concerted activities
for their mutual aid and protection.

As the respondent company was guilty of unfair labor practice, reinstatement of the dismissed
employees should follow as a matter of right. It is an established rule that an employer who commits
an unfair labor practice may be required to reinstate, with full back wages, the workers affected by
such act, the amount not to exceed back wages for three (3) years.9

The respondents claim, however, that the Supreme Court has no jurisdiction to take cognizance of
the instant petition. They contend that pursuant to Art. 222, (should be Art. 223) of the Labor Code,
the Office of the President is the final appellate authority within the adjudicative machinery for
handling labor disputes and no law, order or regulation provides for any appeal therefrom to the
Supreme Court.

To be sure, Art. 223 of the Labor Code, while providing expressly that decisions of the Secretary of
Labor may be appealed to the Office of the President, does not provide for review of the decisions
of the Office of the President by the Supreme Court, This does not mean, however, that the power
of judicial review does not extend to decisions of the Office of the President. In San Miguel Corp. vs.
Secretary of Labor,10 where the same issue was raised, the Court categorically declared that there
is an underlying power in the courts to

________________

9 National Federation of Labor Unions (NAFLU) vs. Ople, G.R. No. 68661, July 22, 1986, 143 SCRA
124 and other cases cited therein.

10 G.R. No. L-39195, May 16. 1975, 64 SCRA 56, 60.

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393

Dabuet vs. Roche Pharmaceuticals, Inc.

scrutinize the acts of agencies exercising quasi-judicial or legislative power on questions of law and
jurisdiction even though no right of review is given by the statute. The Court therein said:

"Yanglay raised a jurisdictional question which was not brought up by respondent public officials. He
contends that this Court has no jurisdiction to review the decisions of the NLRC and the Secretary
of labor 'under the principle of separation of powers' and that judicial review is not provided for in
Presidential Decree No. 21.

"That contention is a flagrant error. 'lt is generally understood that as to administrative agencies
exercising quasi-judicial or legislative power there is an underlying power in the courts to scrutinize
the acts of such agencies on questions of law and jurisdiction even though no right of review is given
by statute' (73 C.J.S. 506, note 56).

'The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect
substantial rights of parties affected by its decisions' (73 C.J.S. 504, Sec, 165), It is part of the system
of checks and balances which restricts the separation of powers and forestalls arbitrary and unjust
adjudications.

"Judicial review is proper in case of lack of jurisdiction, grave abuse of discretion, error of law, fraud
or collusion (Timbancaya vs. Vicente, 62 O.G. 9424; Macatangay vs. Secretary of Public Works and
Communications, 63 O.G. 11236; Ortua vs. Singson Encarnacion, 59 Phil. 440)."

In Macailing vs. Androda,11 the Court also ruled that judicial review of administrative decisions is
available even if the statute does not provide for judicial review. The Court said:

"In the matter of judicial review of administrative decisions, some statutes especially provide for such
judicial review; others are silent Mere silence, however, does not necessarily imply that judicial
review is unavailable. Modes of judicial review vary according to the statutes; appeal, petition for
review or a writ of certiorari. No general rule applies to all the various administrative agencies. Where
the law stands mute, the accepted view is that the extraordinary remedies in the Rules of Court are
still available."
________________

11 G.R. No. L-21607, Jan. 30, 1970, 31 SCRA 126,129.

394

394

SUPREME COURT REPORTS ANNOTATED

Dabuet vs. Roche Pharmaceuticals, Inc.

Accordingly, we restate that this Court, in the exercise of its power of judicial review, may review
decisions of the Office of the President on questions of law and jurisdiction, when properly raised.
This does not mean judicial supremacy over the Office of the President but the performance by this
Court of a duty specifically enjoined upon it by the Constitution, 12 as part of a system of checks and
balances.

The checkered circumstances under which the decisions in this case were made, notably, that two
varying rulings were rendered by different officials of the Office of the President, within a short period
of time, also constrained us to review the case on a question of law.

WHEREFORE, the judgment appealed from should be, as it is, hereby reversed and set aside and
another one entered, ordering the respondent company to reinstate the petitioners to their former
positions, with three (3) years back wages and without loss of seniority rights. The respondent
company is further directed to extend to said petitioners fringe benefits they are entitled to had they
not been dismissed. In the event that reinstatement is no longer feasible, the respondent company
should pay, in addition, severance pay of one (1) month for every year of service based upon the
highest salary received,

SO ORDERED.

Fernan (Chairman), Gutierrez, Jr., Paras, Bidin and Cortés, JJ., concur.

Judgment reversed and set aside.

Notes.—The existence of a valid cause for dismissal negatives the claim that an employee was
dismissed for union activities because the idea of dismissal, as unfair labor practice, is incompatible
with dismissal for just cause. (Ormoc Sugar Co., Inc. vs. OSCO Workers' Fraternity Labor Union, 1
SCRA 21.)

Two types of employees involved in unfair labor practices

________________

12 Art. VIII, Sec. 1, 1987 Constitution.

395

VOL. 149, APRIL 30, 1987

395

Commissioner of Internal Revenue vs. British Overseas Airways Corporation

should be distinguished, namely: those who were discriminatorily dismissed for union activities and
those who voluntarily went on strike even if it is in protest of an unfair labor practice. (Cromwell
Commercial Employees and Laborers Union vs. Court of lndustrial Relations, 12 SCRA 124.)

——o0o——

10. CLLC E.G. Gochangco Workers Union vs. NLRC

Nos. L-67158, 67159, 67160, 67161, & 67162. May 30, 1988.*

CLLC E.G. GOCHANGCO WORKERS UNION, CORNELIO L. PANGILINAN, LEO TROPACIO,

OLIMPIO GUMIN, JUANITO SUBA, ROLANDO SANTOS, RUBEN BUELA, ODILON LISING,
REYNALDO DAYRIT, ROGELIO MANGUERRA, ORLANDO NACU, DIOSILINO PERDON,
ERNESTO GALANG, ORLANDO PANGILINAN, JESUS SEMBRANO, RENATO CASTAÑEDA,
EDILBERTO BINGCANG, ERNESTO CAPIO, RUFO A. BUGAYONG, RICARDO S. DOMINGO,
TERESITO CULLARIN, ISRAEL VINO, ERNESTO RAMIREZ, ROMEO S. GINA, ARNEL
CALILUNG, PEDRO A. SANTOS, RODOLFO CAPITLY, BUENAVENTURA B. PUNO,
EDILBERTO QUIAMBAO, FERNANDO LISING, ERNESTO M. TUAZON, MERCELO
LANGUNSAD, MARCELINO VALERIO, SERAFIN PAWA, JESUS S. DAQUIGAN, and ISMAEL
_______________

* SECOND DIVISION.

656

656

SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union us. NLRC

CAYANAN, petitioners, vs. NATIONAL LABOR RELATIONS (NLRC), and E.G. GOCHANGCO,
INC., respondents.
Labor Relations; Respondent company, guilty of unfair labor practice; Reasons.—We are convinced
that the respondent company is indeed guilty of an unfair labor practice. It is no coincidence that at
the time said respondent issued its suspension and termination orders, the petitioners were in the
midst of a certification election preliminary to a labor-management conference, purportedly, “to
normalize employer-employee relations.” It was within the legal right of the petitioners to do so, the
exercise of which was their sole prerogative, and in which management may not as a rule interfere.
In this connection, the respondent company deserves our strongest condemnation for ignoring the
petitioners’ request for permission for some time out to attend to the hearing of their petition before
the medarbiter. It is not only an act of arrogance, but a brazen interference as well with the
employees right to self-organization, contrary to the prohibition of the Labor Code against unfair
labor practices.

Same; Same; Illegal suspension of employees; In the absence of a suspension order, there was no
ground to seize the employees’ gate passes.—As a consequence of such a suspension, the Clark
Air Base guards confiscated the employees’ gate passes, and banned them from the base premises.
We cannot be befooled by the company’s pretenses that "[t]he subsequent confiscation by the
Americans of the complainants’ passes is beyond the powers of management.” To start with, those
passes would not have been confiscated had not management ordered the suspension. As put by
the Solicitor General, “the U.S. Air Force authorities could not have known who were supposed to
report for work on February 27, 1980," and who were under suspension. Conversely, in the absence
of such a suspension order, there was no ground to seize such gate passes. Base guards, by
themselves, cannot bar legitimate employees without the proper sanction of such employees’
employers. What disturbs us even more, however, is the perplexing gullibility with which the
respondent National Labor Relations Commission would fall for such an indefensible position. Said
the Commission: “So, with their gate passes confiscated, even if management will reinstate them,
without the gate passes, they cannot enter the US Clark Airforce Base and perform their jobs,.for
the gate pass is a pre-requisite for their entrance for employment.” For surely, and as we stated, the
petitioners were dispossessed of those gate passes precisely because of the suspension meted out
against them. It is not the other way around, as the Commission would have us believe, for the
confiscation of such passes would not furnish a ground for suspension.

657

VOL. 161, MAY 30, 1988

657

CLLC E.G. Gochangco Workers Union vs. NLRC

Reinstatement then would have deprived the base guards any right to hold on to such passes any
further. In the absence of superior orders, mere base guards are bereft of any discretion to act on
such matters.

Same; Same; Same; Same; Dismissal; Petitioners were regular employees and their tenure did not
end with the expiration of the contract.—In finding the petitioners’ suspension illegal, with more
reason do we hold their subsequent dismissal to be illegal. We are not persuaded by the respondent
firm’s argument that "[f]inal termination should be effected as the contract has expired.” What
impresses us is the Solicitor General’s submission that the petitioner were regular employees and
as such, their tenure did not end with the expiration of the contract.

Same; Same; Same; Same; Backwages and COLA; Respondent company is liable for such unpaid
claims; Reason.—We come, finally, to the respondent company’s liability for backwages and for
emergency cost-of-living allowances (ECOLA) In its appeal, the company denies any liability,
pointing to "[r]epresentative samples of the documents evidencing payment was likewise submitted
due to the voluminous records which cannot be all produced.” The Commission accepted this
argument, noting that “these xerox copies of payment of allowances, were never spurned by
complainants-appellees.” The Solicitor General observes, on the other hand, that these alleged
documents were never presented at the hearing but surfaced only on appeal. Indeed, there is no
reference in the Labor Arbiter’s decision to these documents, and apparently, the respondent firm
entered the same in evidence at the appeal level only. As we have declared, a party is barred from
introducing fresh matters at the appellate stage. Besides, and as the Solicitor General points out,
“the ECOLA awarded to petitioners in the decision of the Labor Arbiter include only those that pertain
to them from the time of their dismissal up to July 1,1982," the date the Labor Arbiter ordered their
reinstatement. Accordingly, we rule the respondent corporation liable for such unpaid claims.

Same; Same; Same; Same; Reinstatement; Respondent company liable for moral and exemplary
damages; Reasons.—We therefore not only order herein the reinstatement of the petitioners and
the payment of backwages (including cost-of-living allowances) to them, but impose as well moral
and exemplary damages. With respect to backwages, we hold the respondent E.G. Gochangco, Inc.
liable, in line with the recommendation of the Solicitor General and in accordance with accepted
practice, for backwages equivalent to three (3) years without qualification or deduction. As for moral
damages, we hold the said respondent liable therefor under the provisions of Article 2220 of the Civil
Code providing for damages for “breaches of contract where

658

658

SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union vs. NLRC

the defendant acted fraudulently or in bad faith.” We deem just and proper of P5,000.00 each in
favor of the terminated workers, in the concept of such damages. We likewise grant unto said
workers another P5,000.00 each to answer for exemplary damages based on the provisions of
Articles 2229 and 2231 and/or 2232 of the Civil Code. For “act[ing] in gross and evident bad faith in
refusing to satisfy the [petitioners’] plainly valid, just and demandable claim[s]," the respondent firm
is further condemned to pay attorney’s fees. The Court considers the total sum of P20,000.00 fair
and reasonable. If only for emphasis, the new Constitution considers “labor as a primary social
economic force.” As the conscience of the government, it is this Court’s sworn duty to ensure that
none trifles with labor rights.

PETITION to review the decision of the National Labor Relations Commission.

The facts are stated in the opinion of the Court.

Navarro, Angeles, Anero & Falcon Law Office for petitioners.

The Solicitor General, Isagani M. Jungco, and Bernardo P. Fernandez for respondents.

SARMIENTO, J.:

The cases before the Court pit labor against management, in which, on not a few occasions, it is
labor that has cause for complaint.

The Solicitor General states the facts as follows:

xxx xxx xxx

1. Petitioner union is a local chapter of the Central Luzon Labor Congress (CLLC), a legitimate labor
federation duly registered with the Ministry of Labor and Employment (MOLE), while the individual
petitioners are former employees of private respondent who were officers and members of the
petitioner union.
2. Private respondent is a corporation engaged in packing and crating, general hauling, warehousing,
sea van and freight forwarding.
3. Sometime in January 1980, the majority of the rank and file employees of respondent firm
organized the E.G. Gochangco Workers Union as an affiliate of the CLLC. On January 23, 1980, the
union filed a petition for certification election under R03-LRD (MA) Case No. 178–80. The MOLE
Region 111 office set the hearing for the petition on February 27, 1980.
4. On February 7, 1980, the CLLC national president wrote the general manager of respondent firm
informing him of the organization
659

VOL. 161, MAY 30, 1988

659

CLLC E.G. Gochangco Workers Union vs. NLRC

of the union and requesting for a labor-management conference to normalize employer-employee

relations (Annex “D," Case 486–80).
5. On February 26,1980, the union sent a written notice to respondent firm requesting permission for
certain member officers and members of the union to attend the hearing of the petition for certification
election. The management refused to acknowledge receipt of said notice (Annex “E," Case 486–80).
6. On February 28,1980, private respondent preventively suspended the union officers and members
who attended the hearing namely: Cornelio Pangilinan, president; Leo Tropico, vice-president;
Olimpio Gumin, treasurer; Buenaventura Puno, director; Reynaldo Dayrit, sgt-at-arms; Ernesto
Ramirez; Ernesto Galang; Odilon Lising; Jesus Daquigan; and Edilberto Quiambao. The common
ground alleged by private respondent for its action was “abandonment of work on February 27,
1980." On the same date, all the gate passes of all the above-mentioned employees to Clark Air
Base were confiscated by a Base guard.
7. Claiming that private respondent instigated the confiscation of their gate passes to prevent them
from performing their duties and that respondent firm did not pay them their overtime pay, 13th month
pay and other benefits, petitioner union and its members filed a complaint for constructive lockout
and unfair labor practice against private respondent, docketed as RO3-AB Case No. 486–80 on
March 10,1980,
8. On March 12, 1980, private respondent filed an application for clearance to dismiss Cornelio
Pangilinan, Leo Tropico, Olimpio Gumin, Reynaldo Dayrit, Odilon Lising, Edilberto Quiambao;
Ernesto Ramirez, Ernesto Galang, Buenaventura Puno, Arnel Calilung, Romeo Guina, docketed as
RO3-AB Case No. 556–80. Subsequently private respondent filed another clearance to dismiss
Jesus Daquigan, Serafin Pawa and Rufo Bugayong, docketed as RO3-AB Case No. 557–80.
9. On April 22,1980, petitioner Ricardo Domingo who was preventively suspended on April 17, 1980
filed a complaint for unfair labor practice against the latter, docketed as RO3-AB Case No. 558–80.
10. On April 30, 1980, the services of nine (9) more union members, namely: Ernesto Tuason, Israel
Vino, Pedro Santos, Juanito Suba, Edilberto Sarmiento, Diosalino Pandan, Antonio Razon,
Benjamin Capiz and Jesus Sembrano, were terminated by private respondent on the ground that its
contract with the U.S. Air Force had expired. The nine employees filed a complaint for illegal
dismissal against private respondents on June 2, 1980, docketed as RO3-AB Case No. 663–80.
11. On May 9,1980, -private respondent filed with MOLE, Re
660

660

SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union vs. NLRC

gion III, a Notice of Termination of Contract together with a list of emaffected by the of the contract,
them, the 39 individual petitioners herein.
12. All the aforementioned cases were consolidated and assigned to Labor Arbiter Andres
Palumbarit.
13. After hearing, Labor Arbiter Federico S. Bernardo who took over the cases from Arbiter
Palumbarit rendered a decision dated July 2,1982, the dispositive portion of which reads:
“WHEREFORE, In view of all the foregoing, the instant complaint of complainants is hereby granted
and the respondent’s application for clearance is hereby denied.

The respondent is hereby ordered:

1. To reinstate all the suspended/dismissed employees to their former positions without loss of
seniority rights and other privileges, with full backwages including cost of emergency living allowance
from the date of their suspension/dismissal up to the supposed date of actual reinstatement, as
follows:

NAME

BACKWAGES

ECOLA

TOTAL

1. Cornelio Pangasinan

P11 ,266.00

P7,738.00

P19,004.00

2. Leo Tropico

11,266.00

7,738.00

19,004.00

3. Olimpio Gumin

11,266.00

7,738.00

19,004.00

4. Reynaldo Dayrit

11,266.00

7,738.00

19,004.00
5. Buenaventura Puno

11,266.00

7,738.00

19,004.00

6. Ernesto Galang

11,266.00

7,738.00

19,004.00

7. Ernesto Ramirez

11,266.00

7,738.00

19,004.00

8. Edilberto Quiambao

11,266.00

7,738.00

19,004.00

9. Jesus Daquigan

11,266.00

7,738.00

19,004.00

10. Renato Castañeda

11,134.00

7,633.00

18,767.00

11. Edilberto Bingcang

11,134.00

7,663.00

18,767.00

12. Benedicto Capio

11,134.00

7,663.00

18,767.00

13. Orlando Nacu

11,134.00

7,633.00

18,767.00

14. Rodolfo Capitly

11,134.00

7,663.00

18,767.00

15. Arnel Calilung

11,134.00

7,663.00

18,767.00

16. Romeo Gina

11,134.00

7,663.00

18,767.00

17. Orlando Pangilinan

11,134.00

7,663.00

18,767.00

18. Eduardo Alegado

11,134.00

7,663.00

18,767.00

19. Teresito Cullarin

11,134.00

7,663.00

18,767.00

20. Rogelio Manguerra

11,134.00

7,663.00

18,767.00

21. Ruben Buela

11,134.00

7,663.00

18,767,00

22. Rolando Santos

11,134 00

7,663.00

18,767.00

23.Ricardo Domingo

11,134.00

7,663,00

18,767.00

24.Serafin Pawa

11,134.00

7,663.00

18,767.00

25. Rufo Bugayong

11,134.00

7,663.00

18,767.00

26. Ernesto Santos

11,134.00
7,663.00

18,767.00

27. Ismael Cayanan

11,134.00

7,663.00

18,767.00

28. Marcelo Lagunsad

11,134.00

7,663.00

18,767.00

29.Marcelino Valerio

11,134.00

7,663.00

18,767.00

30. Ernesto M. Tuazon

10,618.00

7,225.00

17,843.00

661

VOL. 161, MAY 30, 1988

661

CLLC E.G. Gochangco Workers Union vs. NLRC

NAME

BACK—
WAGES

ECOLA

TOTAL

31, Israel Vino

10,618.00
7,225.00

17,843.00

32. Pedro Santos

10,618.00

7,225.00

17,843.00

33. Juanito Suba

10.618.00

7,225.00

17,843.00

34. Edilberto Sarmiento

10,618.00

7,225.00

17,843.00

35. Dioselino Pendon

10,618.00

7,225.00

17,843.00

36. Antonio Razon

10,618.00

7,225.00

17,843.00

37. Benjamin Capiz

10,618.00

7,225.00

17,843.00

38. Jesus Sembrano

10,618.00
7,225.00

17,843.00

GRAND TOTAL

P419,636.00

P267,337.00

P706,973.00

2. To restore transportation privilege as being extended before the filing of the instant case; and
3. If their reinstatement is no longer possible due to closure of the establishment, in addition to the
payment of their full backwages and cost of living allowance, to pay their respective separation pay
as provided for under the Labor Code.”
14. Private respondent appealed to the NLRC which rendered the questioned decision on May 31,
1983 as follows:
“WHEREFORE, in the light of foregoing premises, the appealed decision is hereby set aside and
another one issued dismissing the above-entitled cases filed by the complainants-appellees for lack
of merit and granting the application for clearance to terminate the services of individual
complainants-appellees filed by respondentappellant.”

15. Petitioner s moved for a reconsideration of the above decision on July 12, 1983 which NLRC
denied in a resolution dated December 6, 1983.
16. Hence, this petition.1
xxx xxx xxx

The petitioners assign three errors in support of their petition:

I.

THAT PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION AND SERIOUSLY

COMMITTED ERRORS IN LAW IN CONSIDERING PRIVATE RESPONDENTS EVlDENCE
INTRODUCED FOR THE FIRST TIME ON APPEAL, AND PUBLIC RESPONDENT NLRC HAS
SERIOUSLY COMMITTED ERRORS IN GIVING DUE COURSE TO PRIVATE RESPONDENT
APPEAL FROM THE DECISION OF LABOR ARBITER FEDERICO S. BERNARDO, AL

_______________

1 Rollo, 70–75.

662

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SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union vs. NLRC

THOUGH SAID APPEAL WAS NOT VALIDLY PERFECTED ON TIME;

II.

THAT PUBLIC RESPONDENT NLRC COMMITTED SERIOUS ERRORS IN LAW IN RENDERING

A DECISION THAT IS CONTRARY TO THE EVIDENCE ON RECORD(S); and
III.

THAT PUBLIC RESPONDENT NLRC COMMITTED AN ERROR IN NOT AWARDING BACK

WAGES TO THE INDIVIDUAL PETITIONERS FOR REFUSAL OF PRIVATE RESPONDENT TO
REINSTATE THEM AFTER RENDERING OF THE DECISION OF LABOR ARBITER FEDERICO S.
BERNARDO AND AFTER SAID LABOR ARBITER ORDERED PRIVATE RESPONDENT TO
REINSTATE THEM.2

On the first issue, the petitioners submit that the motion for reconsideration, treated subsequently as
an appeal,3 of the private respondent had been filed beyond the ten-day period prescribed by the
Labor Code, in the absence of any statement thereon as to material dates. The respondent
Commission ruled that it was, on the strength of receipts in possession of the Labor Department
disclosing such dates and showing that said appeal had been seasonably filed. As a matter of
practice, and in connection with ordinary civil cases, this Court has assumed a stance of liberality
towards the application of the material data rule, if it can be otherwise verified from other evidence
that the appeal had been perfected within the time prescribed.4 We see no reason why we should
hold otherwise as far as labor cases are concerned. Accordingly, we yield to the respondent
Commission’s finding that the E.G. Gochangco, Inc. had filed its appeal on time. It may be further
noted that the petitioners themselves can offer no proof, other than vague inferences from
circumstances, of the belated appeal they allege.

This is not to say, however, that such an appeal has merit. The Solicitor General himself urges that
we grant the petition and hence, reverse the respondent Commission. But apart from such urgings,
the records themselves show that a reversal is in

_______________

2 Id., 10.

3 Id., 9.

4 Del Rosario v. Conanan, No. L-37901, March 30, 1977, 76 SCRA 136.

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CLLC E.G. Gochangco Workers Union vs. NLRC

order.

We are convinced that the respondent company is indeed guilty of an unfair labor practice. It is no
coincidence that at the time said respondent issued its suspension and termination orders, the
petitioners were in the midst of a certification election preliminary to a labor-management
conference, purportedly, “to normalize employer-employee relations."5 It was within the legal right
of the petitioners to do so,6 the exercise of which was their sole prerogative,7 and in which
management may not as a rule interfere.8 In this connection, the respondent company deserves our
strongest condemnation for ignoring the petitioners’ request for permission for some time out to
attend to the hearing of their petition before the med-arbiter. It is not only an act of arrogance, but a
brazen interference as well, with the employees right to self-organization, contrary to the prohibition
of the Labor Code against unfair labor practices.9

But as if to add insult to injury, the company suspended the petitioners on the ground of
“abandonment of work"10 on February 27, 1980, the date on which. apparently, the pre-election
conference had been scheduled. (The petitioners sought permission on February 26,1980 while the
suspension order was issued on February 28, 1980.) What unfolds here is a clear effort by
management to punish the petitioners for their union activities.

As a consequence of such a suspension, the Clark Air Base guards confiscated the employees’ gate
passes, and banned them from the base premises. We cannot be befooled by the company s
pretenses that "[t]he subsequent confiscation by the Americans of the complainants’ passes is
beyond the powers of management."11 To start with, those passes would not have

_______________

5 Rollo, id., 71.

6 CONST. (1973), Art. II, Sec. 9; CONST. (1987), Art. XII, Sec. 3

7 Trade Unions of the Phils, and Allied Services v. Trajano, No. L61153, January 17, 1983, 120
SCRA 64.

8 Supra, The exception is when the petitioner is management itself.

9 Pres. Decree No. 442, Art. 248, par. (a).

10 Rollo, id.

11 Id., 46

664

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SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union vs. NLRC

been confiscated had not management ordered the suspension, As put by the Solicitor General, “the
U.S. Air Force could not have known who were supposed to report for work on February 27, 1980,"12
and who were under suspension. Conversely, in the absence of such a suspension order, there was
no ground to seize such gate passes. Base guards, by themselves, cannot bar legitimate employees
without the proper sanction of such employees’ employers.

What disturbs us even more, however, is the perplexing gullibility with which the respondent National
Labor Relations Commission would fall for such an indefensible position. Said the Commission: “So,
with their gate passes confiscated, even if management will reinstate them, without the gate passes,
they cannot enter the US Clark Airforce Base and perform their jobs, for the gate pass is a pre-
requisite for their entrance for employment."13 For surely, and as we stated, the petitioners were
dispossessed of those gate passes precisely because of the suspension meted out against them. It
is not the other way around, as the Commission would have us believe, for the confiscation of such
passes would not furnish a ground for suspension. Reinstatement then would have deprived the
base guards any right to hold on to such passes any further. In the absence of superior orders, mere
base guards are bereft of any discretion to act on such matters.

In finding the petitioners’ suspension illegal, with more reason do we hold their subsequent dismissal
to be illegal. We are not persuaded by the respondent firm’s argument that "[f]inal termination should
be effected as the contract has expired."14 What impresses us is the Solicitor General’s submission
that the petitioners were regular employees and as such, their tenure did not end with the expiration
of the contract. We quote:
The records show that petitioners were regular employees whose employment did not terminate with
the expiration of private respondent’s contract with the U.S. Air Force. In their position paper in the
arbitration proceedings, they averred that they had been employed by private respondent for six (6)
months or more before they were terminated as follows:

_______________

12 Id., 83.

13 Id., 37.

14 Id., 46.

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CLLC E.G. Gochangco Workers Union vs. NLRC

NAMES

DATE EMPLOYED

POSITION

1. Cornelio Pangilinan

Jan. 1976

Driver

2. Leo Tropico

Mar. 1977

Driver

3. Olimpio Gumin

Jan. 1977

Driver

4. Juanito Suba

June 1976

Driver

5. Rolando Santos

Oct. 1978

Driver
6. Ruben Buela

Jan. 1975

Packer

7. Odilon Lising

May 1975

Packer

8. Reynaldo Dayrit

May 1976

Packer

9. Rogelio Manguerra

Mar. 1977

Packer

10. Orlando Nacu

May 1977

Packer

11. Dioselino Perdon

May 1977

Packer

12. Ernesto Galang

June 1977

Packer

13. Orlando Pangilinan

June 1977

Packer

14. Jesus Sembrano

May 1977

Packer

15. Renato Castañeda

May 1976
Packer

16. Edilberto Sarmiento

Aug. 1977

Packer

17. Eduardo Alegado

Dec. 1977

Packer

18, Benjamin Capiz

June 1978

Packer

19, Antonio Razon

Nov. 1978

Packer

20. Edilberto Bingcang

May 1978

Packer

21 . Ernesto Santos

June 1978

Packer

22. Benedicto Capio

Oct 1978

Packer

23. Rufo Bugayong

May 1977

Packer

24. Ricardo S. Domingo

Dec. 1978

Packer
25. Teresito Cullarin

Mar. 1978

Packer

26. Israel Vino

May 1979

Packer

27. Ernesto Ramirez

Mar. 1979

Packer

28. Romeo S. Gina

Sept. 1979

Packer

29. Arnel Calilung

Sept. 1979

Packer

30. Pedro A. Santos

May 1979

Packer

31. Rodolfo Capitly

Nov. 1978

Packer

32. Buenaventura B. Puno

Sept. 1979

Packer

33. Edilberto Quiambao

Nov. 1978

Packer

34, Fernando Lising

Jan. 1975
Checker

35. Ernesto M. Tuazon

Feb. 1975

Mechanic

36. Marcelo Lagunsad

Jan. 1963

Mechanic

37, Marcelino Valerio

May 1979

Mechanic

38, Serafin Pawa

Feb. 1979

Packer

39. Jesus S. Daquigan

May 1977

Packer

40. Ismael Cayanan

May 1978

Packer15

As regular employees, the petitioners’ tenure are secure, and their dismissal must be premised on
a just cause.16

_______________

15 Id., 78.

16 Pres. Decree No. 442, supra, Art. 280; CONST. (1973), supra, Art. II, Sec. 9.

666

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SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union vs. NLRC

We find none here. What we find, instead, are flimsy attempts by the respondent company to
discredit the person of the petitioners’ counsel, or their officers, and other resorts to argumenta ad
hominem.17

There is no merit in the claim that the petitioners’ terms were coterminous with the duration of the
contract. There is nothing in the records that would show that the petitioners were parties to that
contract. It appears furthermore that the petitioners18 were in the employ of the respondent company
long before that contract was concluded. They were not contract workers whose work terms are tied
to the agreement. but were, rather, regular employees of their employer who entered into that
contract.

But even if dismissal were warranted, the same nonetheless faces our disapproval in the absence
of a proper clearance then required under the Labor Code.19 It is true that efforts were undertaken
to seek such a clearance, yet there is no showing that it was issued. That still taints the dismissal
with the vice of illegality.

The Court likewise rejects the claims of an alleged waiver by the petitioners of their economic
demands, in the light of an alleged order issued by Labor Arbiter Luciano Aquino in connection with
another case(s) involving the same parties. (It was Labor Arbiter Federico Bernardo who penned the
unfair labor practice/illegal dismissal case.) The Honorable Aquino’s disposition reads:

The records show that a “Waiver of Claims, Rights and Interest” was filed by above-named
petitioners stating, among other things, that said petitioners are waiving their claims, rights and
interests against the respondents.

ACCORDINGLY, let the above-entitled cases be DISMISSED in view of the waiver made by the
petitioners.20

Acting on these allegations, the respondent Commission, baring its clear bias for management, ruled
that the petitioners

_______________

17 Rollo, id., 93–95.

18 Except for six employees; see rollo, id., 80.

19 Pres. Decree No. 442, supra, Art. 278, par. (b). Under the amendment introduced by Batas Blg.
130, sec. 13, no clearance is necessary to terminate employment upon grounds stated therein.

20 Rollo, id., 49.

667

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CLLC E.G. Gochangco Workers Union vs. NLRC

had waived their claims. Thus:

xxx xxx xxx

With respect to the second issue, that is, whether or not the waiver of rights and interests executed
by Fernando G. Lising, Odilon G. Lising, Jose C. Tiamzon, Ernesto Tuazon, Pedro Santos, Ruben
Buela, Eduardo Alegado, Estrael Vino, Rogelio Manguerra, Edilberto Bingcang, Olimpio Gumin, Leo
Tropico, Orlando Nacu, Rodolfo T. Capitly and Juanito Suba, are valid, the alleged president of
complainant-appellee union Benigno Navarro, Sr,, contends that said Atty. Solomon has no authority
to appear for and in behalf of individual complainants-appellees who waived their rights and interests
in these cases since there was no authority from him. Records, however, disclose that said Atty.
Solomon had been the attorney of record for complainants-appellees since the inception of these
cases, and. therefore, his authority to represent them cannot be questioned—not even by Mr.
Navarro who allegedly took over the presidency of complainant-appellee union after the
disappearance of the former president, Mr. Ricardo Alconga, Sr. And besides, the waiver of rights
and interests were personally executed by the signatories therein and all that Atty. Solomon did was
to assist them.21

xxx xxx xxx

We find this puzzling for clearly, Labor Arbiter Aquino’s resolution refers to other cases22 and not
the instant unfair labor practice controversy. The Commission cannot feign simple mistake for such
a lapse. Wittingly or unwittingly, It had made itself a pawn of the respondent corporation or otherwise
had yielded to its influence. The Court rebukes Atty. Isagani M. Jungco counsel for the respondent
company, for his unbecoming act and the individual members of the Commission itself, for
besmirching the integrity of the Commission.

In any event, we have held that unfair labor practice cases are not, in view of the public interest
involved, subject to compromises.23 Furthermore, these alleged waivers do not appear

_______________

21 Id., 35–36.

22 RO3-AB-CASES NOS. 852–30–855–30; 857–80 and 880–80. Labor Arbiter Bernardo decided
RO3-AB-CASES NOS. 486–80, 557–80, 558–80, 663–80, and 556–80.

23 AFP Mutual Benefit Association, Inc. vs. AFP-MBAI-EU, Nos. 39140 & 39145, May 17, 1980, 97
SCRA 715. Article 1700 of the Civil Code reads in part: “The relation between capital and labor are
not merely contractual. They are so impressed with the public interest that labor contracts must yield
to the common good.."

668

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SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union vs. NLRC

to have been presented in the first Instance, They cannot be introduced for the first time on appeal,

We come, finally, to the respondent company s liability for backwages and for emergency cost-of-
living allowances (ECOLA). In its appeal, the company denies any liability, pointing to
"[r]epresentative samples of the documents evidencing payment was likewise submitted due to the
voluminous records which cannot be all produced."24 The Commission accepted this argument,
noting that “these xerox copies of payment of allowances, were never spurned by complainants-
appellees."25 The Solicitor General observes, on the other hand, that these alleged documents were
never presented at the hearing but surfaced only on appeal.26 Indeed, there is no reference in the
Labor Arbiter’s decision to these documents, and apparently, the respondent firm entered the same
in evidence at the appeal level only. As we have declared, a party is barred from introducing fresh
matters at the appellate stage. Besides, and as the Solicitor General points out, “the ECOLA
awarded to petitioners in the decision of the Labor Arbiter include only those that pertain to them
from the time of their dismissal up to July 1, 1982,"27 the date the Labor Arbiter ordered their
reinstatement.28 Accordingly, we rule the respondent corporation liable for such unpaid claims.

Before Batas Blg. 7029 was enacted into law, unfair labor practices were considered administrative
offenses,30 and have

_______________

24 Rollo, id., 40.

25 Id., 39.

26 Id., 86.

27 Id.

28 Id. Actually, the decision is dated July 2,1982.

29 AN ACT TO STRENGTHEN THE CONSTITUTIONAL RIGHT OF WORKERS TO SELF-

ORGANIZATION AND FREE COLLECTIVE BARGAINING AND TO PENALIZE UNFAIR LABOR
PRACTICES FURTHER AMENDING FOR THE PURPOSE ARTICLES 244, 247, 249, 250, AND
289 (BOOK V) OF PRESIDENTIAL DECREE NUMBERED FOUR HUNDRED FORTY-TWO, AS
AMENDED, OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES. The act was
approved on May 1,1980.

30 Pres. Decree No. 442, Art. 250 (1979). The criminalization of unfair labor practices has been
explained as follows: “Our experience

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CLLC E.G. Gochangco Workers Union vs. NLRC

been held akin to tort,31 wherein damages are payable. We not only order herein the reinstatement
of the peti-

_______________

in the field of labor relations of the last four years, since the Labor Code (P.D. 442) took effect on
November 1, 1974, has shown that the change in concept of ‘unfair labor practice’ as outlined in
Article 250 of the same, from ‘penal’ to ‘administrative,’ has brought more harm than good.

“Emboldened by the law’s liberality, nay, inadequacy, irresponsible, sometimes vindictive employers,
many of them aliens, ride high brazenly committing such unfair labor practices. Legitimate unions
and labor organizations, most especially the weak and newly-organized, easily get busted with
impunity, harassed or discriminated against, and terms and conditions of employment retrogressing
to sub-standard level instead of improving all on account of the lack of effective deterrents to and
penal sanctions against such pernicious , practices.

“Add to this depressing spectacle the sight of many labor leaders and active members getting
arrested, detained or languishing in jails for violations of the ban on strikes, picketing or unlawful
assembly, or for having brought the law into their own hands, while you grope in frustration looking
for a single instance when an unscrupulous employer shall have suffered the same fate for having
illegally locked out his establishment resulting in countless workers losing jobs and their only means
of livelihood. Situations such as these not only serve to undermine the laudable gains achieved by
the New Society but, just like one cancerous growth, will, slowly but surely, eat up the very fiber of
our people’s faith in their government and the efficacy of its laws.

“Remedial legislative measures must, therefore, have to be instituted to effectuate the equal,
desirable balance between capital and labor, necessary to bring about a stable, but dynamic and
just industrial peace. Hence, these proposals to restore the penal concept of ‘unfair labor practice’
for a speedy, faster disposition of the more immediate labor relations grievances arising therefrom,
the civil aspect of ULP complaints must still continue to be processed and resolved in mere
administrative proceedings—and to declare as unlawful all violations of the right of workers and
employees to self-organization in order to provide adequate teeth for Article 289 of the Labor Code
to grind along implementation of the declared State policy to encourage the growth of trade unions
in the country.

The proposed amendments under Sections 3 and 4 of this Bill, correlative to the thrust of its Section
2, are aimed at removing or preventing undue restrictions on the legitimate exercise of the rights of
workers not only to self-organization but also to free collective bargaining.

31 PASCUAL, LABOR AND TENANCY RELATIONS LAW, 256 (1975).

670

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SUPREME COURT REPORTS ANNOTATED

CLLC E.G. Gochangco Workers Union vs. NLRC

tion rs and the payment of backwages (including cost-of-living allowances) to them, but impose as
well moral and exemplary damages, With respect to backwages, we hold the respondent

_______________

“Aside from violating International Labor Organization conventions, of which the Republic of the
Philippines is a signatory and therefore bound by its provisions, the limitation as to coverage
presently imposed by Article 244 of the Labor Code, on the application of such right to organize and
bargain collectively, only to enterprises or establishments ‘x x x operating for profit’ likewise unduly
and unreasonably restricts what appears to be a clear, explicit, unmistakable mandate by Section 8,
Article II (Declaration of Principles and State Policies) of the new Constitution making it, without
distinction, the duty of the State to ‘x x x assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work/

“Furthermore, it is asked, why should such right to self-organization be also confined by the Labor
Code, as to exercise thereof, only ‘xxx for purpose of collective bargaining? Was it not the original,
wellsettled. long recognized and primary purpose of self-organization of workers their own ‘mutual
aid and protection’? This explains the proposal to add this general phrase to the provision referred
to.

“Throughout the collective bargaining regime of R.A. 875, even until the present inferior courts in the
country, notwithstanding repeated admonitions from our highest tribunal in a long line of decisions
have invariably, if not unnecessarily, interfered, thru indiscriminate issuance of injunctions,
restraining orders, assumption of original jurisdiction or otherwise, with the labor-capital,
employeremployee relationship. In no small measure, this has prevented or discouraged the resort
by the traditionally-opposing parties to the truly democratic method of regulating their relations by
means of voluntary agreements entered into by themselves alone, freely and without compulsion, in
collective bargaining. Such undue interferences must be stopped. For, evidently, while the picture of
a concerned government looms heavily over labor-management relations, with a ready framework
of compulsory arbitration if their disputes go out of hand, the purpose of the policy of the State in this
regard stems from the recognition of a positive philosophy that “x x x real industrial peace cannot be
achieved by compulsion of law” and that “sound and stable labor relations must rest, in keeping with
the spirit of our democratic institutions, on an essentially voluntary basis.” (Explanatory Note, P.B.
No. 386, 2d Regular Session, Batasang Pambansa, Metro Manila, May 1,1980.)

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CLLC, E.G. Gochangco Workers Union vs. NLRC

E.G. Gochangco, Inc. liable, in line with the recommendation of General and in accordance with
accepted practice, for backwages equivalent to three (3) years without qualifica-tion or deduction.32

As for moral damages, we hold the said respondent liable therefor under the provisions of Article
2220 of the Civil Code providing for damages for “breaches of contract where the defendant acted
fraudulently or in bad faith.” We deem just and proper the sum of P5.000.00 each in favor of the
terminated workers, in the concept of such damages.

We likewise grant unto said workers another P5,000.00 each to answer for exemplary damages
based on the provisions of Articles 2229 and 2231 and/or 2232 of the Civil Code. For “act[ing] in
gross and evident bad faith in refusing to satisfy the [petitioners’] plainly valid, just and demandable
claim[s],"33 the respondent firm is further condemned to pay attorney’s fees. The Court considers
the total sum of P20,000.00 fair and reasonable.

If only for emphasis, the new Constitution considers “labor as a primary social economic force."34
As the conscience of the government, it is this Court’s sworn duty to ensure that none trifles with
labor rights.

WHEREFORE, the petition is GRANTED. The decision of the public respondent. the National Labor
Relations Commission, is REVERSED and SET ASIDE. Judgment is hereby rendered:

1. Ordering the private respondent, E.G. Gochangco, Inc., to REINSTATE the terminated workers;
2. Ordering the private respondent to PAY them backwages equivalent to three (3) years without
qualification or deduction;
3. Ordering it to PAY them the sum of FIVE THOUSAND (P5,000.00) PESOS EACH, as and for
moral damages;
_______________

32 Madrigal & Company, Inc. v. Zamora, Nos. L-48237 and 49023, June 30, 1987, 151 SCRA 355,

33 CIVIL CODE, supra, Art. 2208, par. (5).

34 CONST. (1987), supra, Art. II, Sec. 18.

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SUPREME COURT REPORTS ANNOTATED

Republic vs. Cardenas

4. Ordering it to PAY them the sum of FIVE THOUSAND (P5,000.00) PESOS EACH, as and for
exemplary damages; and
5. Ordering it to PAY them the sum of TWENTY THOUSAND (P20,000.00) PESOS as and for
attorney’s fees.
This Decision is IMMEDIATELY EXECUTORY.

Costs against the private respondent.

IT IS SO ORDERED.

Yap (C.J.), Melencio-Herrera, Paras and Padilla, JJ., concur.

Petition granted. Decision reversed and set aside.

Note.—The right to dismiss or otherwise impose disciplinary sanctions upon an employee for just
and valid cause, pertains in the first place to the employer, as well as the authority to determine the
existence of said cause in accordance with the norms of due process. (Richardson vs. Demetriou,
142 SCRA 505.)

——o0o——
11. Standard Chartered Bank Employees Union (NUBE) vs. Confesor

G.R. No. 114974. June 16, 2004.*

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), petitioner, vs. The Honorable
MA. NIEVES R. CONFESOR, in her capacity as SECRETARY OF LABOR AND
EMPLOYMENT; and the STANDARD CHARTERED BANK, respondents.

Labor Law; Labor Code; Labor Union; Interference, restraints or coercion of employees by the
employer in the exercise of their right to self-organization or the right to form association considered
unfair labor practice; In order to show that the employer committed ULP under the Labor Code,
substantial evidence is required to support such claim.—Article 248(a) of the Labor Code, considers
it an unfair labor practice when an employer interferes, restrains or coerces employees in the
exercise of their right to self-organization or the right to form association. The right to self-
organization necessarily includes the right to collective bargaining. Parenthetically, if an employer
interferes in the selection of its negotiators or coerces the Union to exclude from its panel of
negotiators a representative of the Union, and if it can be inferred that the employer adopted the said
act to yield adverse effects on the free exercise to right to self-organization or on the right to collective
bargaining of the employees, ULP under Article 248(a) in connection with Article 243 of the Labor
Code is committed. In order to show that the employer committed ULP under the Labor Code,
substantial evidence is required to support the claim. Substantial evidence has been defined as such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion. In the
case at bar, the Union bases its claim of interference on the alleged suggestions of Diokno to exclude
Umali from the Union’s negotiating panel.

Same; Same; Same; Collective Bargaining Agreement; Words and Phrases; Surface Bargaining
Defined.—Surface bargaining is defined as “going through the motions of negotiating” without any
legal intent to reach an agreement. The resolution of surface bargaining allegations never presents
an easy issue. The determination of whether a party has engaged in unlawful surface bargaining is
usually a difficult one because it involves, at bottom, a question of the intent of the party in question,
and usually such intent can only be inferred from the totality of the challenged party’s conduct both
at and away from the bargaining table. It involves the question of whether an employer’s conduct
demonstrates an unwillingness to bargain in good faith or is merely hard bargaining.

_______________

* SECOND DIVISION.

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Standard Chartered Bank Employees Union (NUBE) vs. Confesor

Same; Same; Same; Same; The duty to bargain “does not compel either party to agree to a proposal
or require the making of a concession.”—The Union has not been able to show that the Bank had
done acts, both at and away from the bargaining table, which tend to show that it did not want to
reach an agreement with the Union or to settle the differences between it and the Union. Admittedly,
the parties were not able to agree and reached a deadlock. However, it is herein emphasized that
the duty to bargain “does not compel either party to agree to a proposal or require the making of a
concession.” Hence, the parties’ failure to agree did not amount to ULP under Article 248(g) for
violation of the duty to bargain.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Perfecto Fernandez for petitioner.

Sycip, Salazar, Hernandez and Gatmaitan for private respondent.

CALLEJO, SR., J.:

This is a petition for certiorari under Rule 65 of the Rules of Court filed by the Standard Chartered
Bank Employees Union, seeking the nullification of the October 29, 1993 Order1 of then Secretary
of Labor and Employment Nieves R. Confesor and her resolutions dated December 16, 1993 and
February 10, 1994.

The Antecedents
Standard Chartered Bank (the Bank, for brevity) is a foreign banking corporation doing business in
the Philippines. The exclusive bargaining agent of the rank and file employees of the Bank is the
Standard Chartered Bank Employees Union (the Union, for brevity).

In August of 1990, the Bank and the Union signed a five-year collective bargaining agreement (CBA)
with a provision to renegotiate the terms thereof on the third year. Prior to the expiration of the three-
year period2 but within the sixty-day freedom period, the Union initiated the negotiations. On
February 18, 1993, the Union,

_______________

1 Rollo, pp. 451-464.

2 The expiration of the CBA is on March 31, 1993.

310

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SUPREME COURT REPORTS ANNOTATED

Standard Chartered Bank Employees Union (NUBE) vs. Confesor

through its President, Eddie L. Divinagracia, sent a letter3 containing its proposals4 covering political
provisions5 and thirty-four (34) economic provisions.6 Included therein was a list of the names of the
members of the Union’s negotiating panel.7

In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H. Harris, took
note of the Union’s proposals. The Bank attached its counter-proposal to the non-economic
provisions proposed by the Union.8 The Bank posited that it would be in a better position to present
its counter-proposals on the economic items after the Union had presented its justifications for the
economic proposals.9 The Bank, likewise, listed the members of its

_______________

3 Rollo, pp. 120-121.

4 Id., at pp. 122-141.

5 Sometimes referred to as non-economic provisions.

6 Uniforms, signing bonus, wages, group insurance, medicine allowance, dental benefits, optical
allowance, death assistance, additional 1/2 month in midyear allowance, additional 2.5% in the
teller’s guarantee fund; profit-sharing provision, improvements in leave benefits, i.e., maternity,
vacation, sick, emergency and union leave; introduction of paternity leave, marriage leave, birthday
leave and loyalty leave; extension of the enjoyment of salary increments from 35 to 40 years of
service; provision for meal and shift allowances; increase in overtime, weekend, holiday and shift
allowances; increase emergency premiums, increase in availments of housing corresponding
lowering of interest rates and eligibility requirements, and deletion of the current rules on availment;
improvement of gratuities to a maximum of 175% and increase of medical benefits (Rollo, p. 142).

7 Eddie L. Divinagracia, Rogelio Fernando, Nancy G. Sagum, Rebecca Gabay, Ray Michael
Quimpo, Reyel G. Vargas, Cipriano Garcia, Alberto Diaz, Ed De Mesa and Jose P. Umali, Jr.

8 The Bank’s counter-proposal centered on union recognition and scope (appropriate bargaining
agreement), union security and check-off (maintenance of membership), new employees, collection
of union dues, job security, hiring of next of kin, temporary personnel, redundancies, closure and
relocation, management prerogative, uniforms and grievance procedures. With respect to the
counter-proposals on all economic provisions, the Bank said that it is open for discussion. (Rollo, p.
144).

9 Rollo, p. 142.

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negotiating panel.10 The parties agreed to set meetings to settle their differences on the proposed
CBA.

Before the commencement of the negotiation, the Union, through Divinagracia, suggested to the
Bank’s Human Resource Manager and head of the negotiating panel, Cielito Diokno, that the bank
lawyers should be excluded from the negotiating team. The Bank acceded.11 Meanwhile, Diokno
suggested to Divinagracia that Jose P. Umali, Jr., the President of the National Union of Bank
Employees (NUBE), the federation to which the Union was affiliated, be excluded from the Union’s
negotiating panel.12 However, Umali was retained as a member thereof.

On March 12, 1993, the parties met and set the ground rules for the negotiation. Diokno suggested
that the negotiation be kept a “family affair.” The proposed non-economic provisions of the CBA were
discussed first.13 Even during the final reading of the noneconomic provisions on May 4, 1993, there
were still provisions on which the Union and the Bank could not agree. Temporarily, the notation
“DEFERRED” was placed therein. Towards the end of the meeting, the Union manifested that the
same should be changed to “DEADLOCKED” to indicate that such items remained unresolved. Both
parties agreed to place the notation “DEFERRED/DEADLOCKED.”14

On May 18, 1993, the negotiation for economic provisions commenced. A presentation of the basis
of the Union’s economic proposals was made. The next meeting, the Bank made a similar
presentation. Towards the end of the Bank’s presentation, Umali requested the Bank to validate the
Union’s “guestimates,” especially the figures for the rank and file staff.15 In the succeeding meetings,
Umali chided the Bank for the insufficiency of its counter-proposal
_______________

10 Pinky Diokno (sometimes referred to as Cielito Diokno), Jose S. Ho, Rene Padlan, Rolando
Orbeta, Janet Camarista, Sinforoso Morada and Modesto B. Lim.

11 Rollo, p. 544.

12 Id., at p. 288.

13 The negotiations for the non-economic provisions were made on March 12, 16, 23, and 30, 1993;
April 6, 13, 20, 23 and 28, 1993 and May 4, 1993.

14 The Union defined “DEADLOCKED” as exhaustion of the three readings; Rollo, p. 269.

15 Minutes of the Meeting of June 1, 1993; Rollo, p. 277.

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Standard Chartered Bank Employees Union (NUBE) vs. Confesor

on the provisions on salary increase, group hospitalization, death assistance and dental benefits. He
reminded the Bank, how the Union got what it wanted in 1987, and stated that if need be, the Union
would go through the same route to get what it wanted.16

Upon the Bank’s insistence, the parties agreed to tackle the economic package item by item. Upon
the Union’s suggestion, the Bank indicated which provisions it would accept, reject, retain and agree
to discuss.17 The Bank suggested that the Union prioritize its economic proposals, considering that
many of such economic provisions remained unresolved. The Union, however, demanded that the
Bank make a revised itemized proposal.

In the succeeding meetings, the Union made the following proposals:

Wage Increase:

1st Year—Reduced from 45% to 40%

2nd Year—Retain at 20%

Total = 60%

Group Hospitalization Insurance:

Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness annually

Death Assistance:

For the employee—Reduced from P50,000.00 to P45,000.00

For Immediate Family Member—Reduced from P30,000.00 to P25,000.00

Dental and all others—No change from the original demand.18

In the morning of the June 15, 1993 meeting, the Union suggested that if the Bank would not make
the necessary revisions on its counter-proposal, it would be best to seek a third party assistance.19
After the break, the Bank presented its revised counter-proposal20 as follows:

Wage Increase:

1st Year—from P1,000 to P1,050.00

2nd Year—P800.00—no change

_______________

16 Rollo, p. 278.

17 Minutes of the Meeting of June 8, 1993; Rollo, p. 281.

18 Rollo, p. 284.

19 Ibid.

20 Rollo, pp. 284-285.

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Group Hospitalization Insurance

From: P35,000.00 per illness

To : P35,000.00 per illness per year

Death Assistance—For employee

From: P20,000.00

To : P25,000.00

Dental Retainer—Original offer remains the same21

The Union, for its part, made the following counter-proposal:

Wage Increase:
1st Year—40%

2nd Year—19.5%

Group Hospitalization Insurance

From: P60,000.00 per year

To: P50,000.00 per year

Dental:

Temporary Filling—P150.00

Tooth Extraction

Permanent Filling—200.00

Prophylaxis—250.00

Root Canal—From P2,000 per tooth

To: 1,800.00 per tooth

Death Assistance:

For Employees: From P45,000.00 to P40,000.00

For Immediate Family Member: From P25,000.00 to P20,000.00.22

The Union’s original proposals, aside from the above-quoted, remained the same.

Another set of counter-offer followed:

Management

Union

Wage Increase

1st Year—P1,050.00
40%

2nd Year—850.00

19.0%23

_______________

21 Id., at p. 285.

22 Id., at p. 285.

23 Id.

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SUPREME COURT REPORTS ANNOTATED

Standard Chartered Bank Employees Union (NUBE) vs. Confesor

Diokno stated that, in order for the Bank to make a better offer, the Union should clearly identify what
it wanted to be included in the total economic package. Umali replied that it was impossible to do so
because the Bank’s counter-proposal was unacceptable. He furthered asserted that it would have
been easier to bargain if the atmosphere was the same as before, where both panels trusted each
other. Diokno requested the Union panel to refrain from involving personalities and to instead focus
on the negotiations.24 He suggested that in order to break the impasse, the Union should prioritize
the items it wanted to iron out. Divinagracia stated that the Bank should make the first move and
make a list of items it wanted to be included in the economic package. Except for the provisions on
signing bonus and uniforms, the Union and the Bank failed to agree on the remaining economic
provisions of the CBA. The Union declared a deadlock25 and filed a Notice of Strike before the
National Conciliation and Mediation Board (NCMB) on June 21, 1993, docketed as NCMB-NCR-NS-
06-380-93.26

On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP) and Damages before
the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, docketed as
NLRC Case No. 00-06-04191-93 against the Union on June 28, 1993. The Bank alleged that the
Union violated its duty to bargain, as it did not bargain in good faith. It contended that the Union
demanded “sky high economic demands,” indicative of blue-sky bargaining.27 Further, the Union
violated its no strike-no lockout clause by filing a notice of strike before the NCMB. Considering that
the filing of notice of strike was an illegal act, the Union officers should be dismissed. Finally, the
Bank alleged that as a consequence of the illegal act, the Bank suffered nominal and actual damages
and was forced to litigate and hire the services of the lawyer.28

_______________

24 Id.

25 Minutes of the Meeting of June 15, 1993; Rollo, p. 286.

26 Rollo, p. 683.

27 Blue-Sky Bargaining is defined as “unrealistic and unreasonable demands in negotiations by

either or both labor and management, where neither concedes anything and demands the
impossible.” It actually is not collective bargaining at all. (Harold S. Roberts, Robert’s Dictionary of
Industrial Relations (Revised Edition, 1971, p. 51); Rollo, p. 671.
28 Rollo, pp. 670-676.

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On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R. Confesor, pursuant
to Article 263(g) of the Labor Code, issued an Order assuming jurisdiction over the labor dispute at
the Bank. The complaint for ULP filed by the Bank before the NLRC was consolidated with the
complaint over which the SOLE assumed jurisdiction. After the parties submitted their respective
position papers, the SOLE issued an Order on October 29, 1993, the dispositive portion of which is
herein quoted:

“WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank Employees
Union—NUBE are hereby ordered to execute a collective bargaining agreement incorporating the
dispositions contained herein. The CBA shall be retroactive to 01 April 1993 and shall remain
effective for two years thereafter, or until such time as a new CBA has superseded it. All provisions
in the expired CBA not expressly modified or not passed upon herein are deemed retained while all
new provisions which are being demanded by either party are deemed denied, but without prejudice
to such agreements as the parties may have arrived at in the meantime.

“The Bank’s charge for unfair labor practice which it originally filed with the NLRC as NLRC-NCR
Case No. 00-06-04191-93 but which is deemed consolidated herein, is dismissed for lack of merit.
On the other hand, the Union’s charge for unfair labor practice is similarly dismissed.

“Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR Case No. 00-06-
04191-93 is pending for his guidance and appropriate action.”29

The SOLE gave the following economic awards:

1.

Wage Increase:

a)

To be incorporated to present salary rates:

Fourth year: 7% of basic monthly salary

Fifth year: 5% of basic monthly salary based on the 4th year adjusted salary

Additional fixed amount:

2.
Group Insurance

a)

Hospitalization: P45,000.00

b)

Life: P130,000.00

_______________

29 Id., at pp. 463-464.

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Standard Chartered Bank Employees Union (NUBE) vs. Confesor

c) Accident: P130,000.00

3.

Medicine Allowance

Fourth year: P5,500.00

Fifth year: P6,000.00

4.

Dental Benefits

Provision of dental retainer as proposed by the Bank, but without diminishing existing benefits

5.

Optical Allowance

Fourth year: P2,000.00

Fifth year: P2,500.00

6.

Death Assistance

a) Employee: P30,000.00

b) Immediate Family Member: P5,000.00

7.

Emergency Leave—Five (5) days for each contingency

8.

Loans

a) Car Loan: P200,000.00

b) Housing Loan: It cannot be denied that the costs attendant to having one’s own home have
tremendously gone up. The need, therefore, to improve on this benefit cannot be overemphasized.
Thus, the management is urged to increase the existing and allowable housing loan that the Bank
extends to its employees to an amount that will give meaning and substance to this CBA benefit.30

The SOLE dimissed the chargesof ULP of both the Unoion and the Bank, explaining that both parties
failed to substantiate their claims. Citing National Labor Union v. Insular-Yebana Tobacco
Corporation,31 the SOLE stated that ULP charges would prosper only if shown to have directly
prejudiced the public interest.

Dissatisfied, the Union filed a motion for reconsideration with clarification, while the Bank filed a
motion for reconsideration. On December 16, 1993, the SOLE issued a Resolution denying the
motions. The Union filed a second motion for reconsideration, which was, likewise, denied on
February 10, 1994.

On March 22, 1994, the Bank and the Union signed the CBA.32 Immediately thereafter, the wage
increase was effected and the

_______________

30 Id., at pp. 459-460.

31 2 SCRA 924 (1961).

32 Rollo, pp. 562-611.

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signing bonuses based on the increased wage were distributed to the employees covered by the
CBA.

The Present Petition

On April 28, 1994, the Union filed this petition for certiorari under Rule 65 of the Rules of Procedure
alleging as follows:

A. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION

AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE UNION’S CHARGE OF UNFAIR
LABOR PRACTICE IN VIEW OF THE CLEAR EVIDENCE OF RECORD AND ADMISSIONS
PROVING THE UNFAIR LABOR PRACTICES CHARGED.33
B. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON OTHER UNFAIR LABOR
PRACTICES CHARGED.34
C. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE CHARGES OF UNFAIR LABOR
PRACTICES ON THE GROUND THAT NO PROOF OF INJURY TO THE PUBLIC INTEREST WAS
PRESENTED.35
The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when it found that the Bank did not commit unfair labor practice when it interfered with
the Union’s choice of negotiator. It argued that, Diokno’s suggestion that the negotiation be limited
as a “family affair” was tantamount to suggesting that Federation President Jose Umali, Jr. be
excluded from the Union’s negotiating panel. It further argued that contrary to the ruling of the public
respondent, damage or injury to the public interest need not be present in order for unfair labor
practice to prosper.

The Union, likewise, pointed out that the public respondent failed to rule on the ULP charges arising
from the Bank’s surface bargaining. The Union contended that the Bank merely went through the
motions of collective bargaining without the intent to

_______________

33 Id., at p. 10.

34 Id., at p. 23.

35 Id., at p. 24.

318

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Standard Chartered Bank Employees Union (NUBE) vs. Confesor

reach an agreement, and made bad faith proposals when it announced that the parties should begin
from a clean slate. It argued that the Bank opened the political provisions “up for grabs,” which had
the effect of diminishing or obliterating the gains that the Union had made.

The Union also accused the Bank of refusing to disclose material and necessary data, even after a
request was made by the Union to validate its “guestimates.”
In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped,
considering that it signed the Collective Bargaining Agreement (CBA) on April 22, 1994. It asserted
that contrary to the Union’s allegations, it was the Union that committed ULP when negotiator Jose
Umali, Jr. hurled invectives at the Bank’s head negotiator, Cielito Diokno, and demanded that she
be excluded from the Bank’s negotiating team. Moreover, the Union engaged in blue-sky bargaining
and isolated the no strike-no lockout clause of the existing CBA.

The Office of the Solicitor General, in representation of the public respondent, prayed that the petition
be dismissed. It asserted that the Union failed to prove its ULP charges and that the public
respondent did not commit any grave abuse of discretion in issuing the assailed order and
resolutions.

The Issues
The issues presented for resolution are the following: (a) whether or not the Union was able to
substantiate its claim of unfair labor practice against the Bank arising from the latter’s alleged
“interference” with its choice of negotiator; surface bargaining; making bad faith non-economic
proposals; and refusal to furnish the Union with copies of the relevant data; (b) whether or not the
public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction
when she issued the assailed order and resolutions; and, (c) whether or not the petitioner is estopped
from filing the instant action.

The Court’s Ruling

The petition is bereft of merit.

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Standard Chartered Bank Employees Union (NUBE) vs. Confesor

“Interference” under Article

248 (a) of the Labor Code
The petitioner asserts that the private respondent committed ULP, i.e., interference in the selection
of the Union’s negotiating panel, when Cielito Diokno, the Bank’s Human Resource Manager,
suggested to the Union’s President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the
NUBE, be excluded from the Union’s negotiating panel. In support of its claim, Divinagracia executed
an affidavit, stating that prior to the commencement of the negotiation, Diokno approached him and
suggested the exclusion of Umali from the Union’s negotiating panel, and that during the first
meeting, Diokno stated that the negotiation be kept a “family affair.”

Citing the cases of U.S. Postal Service36 and Harley Davidson Motor Co., Inc., AMF,37 the Union
claims that interference in the choice of the Union’s bargaining panel is tantamount to ULP.

In the aforecited cases, the alleged ULP was based on the employer’s violation of Section 8(a)(1)
and (5) of the National Labor Relations Act (NLRA),38 which pertain to the interference, restraint or
coercion of the employer in the employees’ exercise of their rights to self-organization and to bargain
collectively through representatives of their own choosing; and the refusal of the employer to bargain
collectively with the employees’ representatives. In both

_______________

36 280 NLRB No. 80 280 NLRB No. 8.

37 214 NLRB No. 062.

38 Section 8.a. It shall be unfair labor practice for an employer—

(1) To interfere with, restrain or coerce employees in the exercise of their rights guaranteed under
Section 7;

...

(5) To refuse to bargain collectively with the representatives of his employees, subject to the
provisions of Section 9. (National Labor Management Act)

Section 7. Employees shall have the right to self-organization, to form, join or assist labor
organizations, to bargain collectively through representatives of their own choosing; and to engage
in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,
and shall also have the right to refrain from any or all of such activities except to the extent that such
right may be affected by an agreement requiring membership in a labor organization as a condition
of employment as authorized in Section 8(a)(3).

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Standard Chartered Bank Employees Union (NUBE) vs. Confesor

cases, the National Labor Relations Board held that upon the employer’s refusal to engage in
negotiations with the Union for collective-bargaining contract when the Union includes a person who
is not an employee, or one who is a member or an official of other labor organizations, such employer
is engaged in unfair labor practice under Section 8(a)(1) and (5) of the NLRA.

The Union further cited the case of Insular Life Assurance Co., Ltd. Employees Association—NATU
vs. Insular Life Assurance Co., Ltd.,39 wherein this Court said that the test of whether an employer
has interfered with and coerced employees in the exercise of their right to self-organization within
the meaning of subsection (a)(1) is whether the employer has engaged in conduct which it may
reasonably be said, tends to interfere with the free exercise of employees’ rights under Section 3 of
the Act.40 Further, it is not necessary that there be direct evidence that any employee was in fact
intimidated or coerced by statements of threats of the employer if there is a reasonable inference
that anti-union conduct of the employer does have an adverse effect on self-organization and
collective bargaining.41

Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF ASSOCIATION
AND PROTECTION OF THE RIGHT TO ORGANIZE to which the Philippines is a signatory, “workers
and employers, without distinction whatsoever,

_______________

39 37 SCRA 244 (1971).

40 Section 3. Employees’ Right to Self-Organization.—Employees shall have the right to self-

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

...
Section 4. Unfair Labor Practices.—

(a) It shall be unfair labor practice for an employer:

(1) To interfere with, restrain or coerce employees in the exercise of their rights guaranteed in Section
three; (Republic Act No. 875)

41 Referring to Sections 3 and 4(a)(1) of the Industrial Peace Act, Republic Act No. 875.

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shall have the right to establish and, subject only to the rules of the organization concerned, to job
organizations of their own choosing without previous authorization.”42 Workers’ and employers’
organizations shall have the right to draw up their constitutions and rules, to elect their
representatives in full freedom to organize their administration and activities and to formulate their
programs.43 Article 2 of ILO Convention No. 98 pertaining to the Right to Organize and Collective
Bargaining, provides:

Article 2

1. Workers’ and employers’ organizations shall enjoy adequate protection against any acts or
interference by each other or each other’s agents or members in their establishment, functioning or
administration.
2. In particular, acts which are designed to promote the establishment of workers’ organizations
under the domination of employers or employers’ organizations or to support workers’ organizations
by financial or other means, with the object of placing such organizations under the control of
employers or employers’ organizations within the meaning of this Article.
The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article 243 thereof,
which provides:

ART. 243. COVERAGE AND EMPLOYEES’ RIGHT TO SELF-ORGANIZATION.—All persons

employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical
or educational institutions whether operating for profit or not, shall have the right to self-organization
and to form, join, or assist labor organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed people, rural workers and
those without any definite employers may form labor organizations for their mutual aid and
protection.

and Articles 248 and 249 respecting ULP of employers and labor organizations.

The said ILO Conventions were ratified on December 29, 1953. However, even as early as the 1935
Constitution,44 the State had

_______________

42 Article 2, ILO Convention No. 87.

43 Article 3, ILO Convention No. 87.

44 Section 6, Article XIV of the 1935 Constitution provides:

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already expressly bestowed protection to labor as part of the general provisions. The 1973
Constitution,45 on the other hand, declared it as a policy of the state to afford protection to labor,
specifying that the workers’ rights to self-organization, collective bargaining, security of tenure, and
just and humane conditions of work would be assured. For its part, the 1987 Constitution, aside from
making it a policy to “protect the rights of workers and promote their welfare,”46 devotes an entire
section, emphasizing its mandate to afford protection to labor, and highlights “the principle of shared
responsibility” between workers and employers to promote industrial peace.47

_______________

Sec. 6. The State shall afford protection to labor, especially to working women and minors, and shall
regulate the relations between landowner and tenant, and between labor and capital in industry and
in agriculture. The State may provide for compulsory arbitration.

45 Section 9, Article II of the 1973 Constitution provides:

Sec. 9. The State shall afford protection to labor, promote full employment and equality in
employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the
relations between workers and employers. The State shall assure the rights of workers to self-
organization, collective bargaining, security of tenure, and just and humane conditions of work. The
State may provide for compulsory arbitration.

46 Section 18, Article II of the 1987 Constitution provides: Sec. 18. The State affirms labor as a
primary social economic force. It shall protect the rights of workers and promote their welfare.

47 Section 3, Article XIII on Social Justice and Human Rights reads as follows:

LABOR

Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized
and unorganized, and promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.

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Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer interferes,
restrains or coerces employees in the exercise of their right to self-organization or the right to form
association. The right to self-organization necessarily includes the right to collective bargaining.
Parenthetically, if an employer interferes in the selection of its negotiators or coerces the Union to
exclude from its panel of negotiators a representative of the Union, and if it can be inferred that the
employer adopted the said act to yield adverse effects on the free exercise to right to self-
organization or on the right to collective bargaining of the employees, ULP under Article 248(a) in
connection with Article 243 of the Labor Code is committed.

In order to show that the employer committed ULP under the Labor Code, substantial evidence is
required to support the claim. Substantial evidence has been defined as such relevant evidence as
a reasonable mind might accept as adequate to support a conclusion.48 In the case at bar, the Union
bases its claim of interference on the alleged suggestions of Diokno to exclude Umali from the
Union’s negotiating panel.

The circumstances that occurred during the negotiation do not show that the suggestion made by
Diokno to Divinagracia is an anti-union conduct from which it can be inferred that the Bank
consciously adopted such act to yield adverse effects on the free exercise of the right to self-
organization and collective bargaining of the employees, especially considering that such was
undertaken previous to the commencement of the negotiation and simultaneously with
Divinagracia’s suggestion that the bank lawyers be excluded from its negotiating panel.

_______________

The State shall promote the principle of shared responsibility between workers and employers and
the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor
to its just share in the fruits of production and the right of enterprises to reasonable return on
investments, and to expansion and growth.

48 Rubberworld (Phils.), Inc. vs. National Labor Relations Commission, 175 SCRA 450 (1989).

324

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The records show that after the initiation of the collective bargaining process, with the inclusion of
Umali in the Union’s negotiating panel, the negotiations pushed through. The complaint was made
only on August 16, 1993 after a deadlock was declared by the Union on June 15, 1993.

It is clear that such ULP charge was merely an afterthought. The accusation occurred after the
arguments and differences over the economic provisions became heated and the parties had
become frustrated. It happened after the parties started to involve personalities. As the public
respondent noted, passions may rise, and as a result, suggestions given under less adversarial
situations may be colored with unintended meanings.49 Such is what appears to have happened in
this case.

The Duty to Bargain

Collectively
If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the normal
relations and innocent communications, which are all part of the friendly relations between the Union
and Bank.
The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under Article
248(g) when it engaged in surface bargaining. It alleged that the Bank just went through the motions
of bargaining without any intent of reaching an agreement, as evident in the Bank’s counter-
proposals. It explained that of the 34 economic provisions it made, the Bank only made 6 economic
counterproposals. Further, as borne by the minutes of the meetings, the Bank, after indicating the
economic provisions it had rejected, accepted, retained or were open for discussion, refused to make
a list of items it agreed to include in the economic package.

Surface bargaining is defined as “going through the motions of negotiating” without any legal intent
to reach an agreement.50 The resolution of surface bargaining allegations never presents an easy
issue. The determination of whether a party has engaged in unlawful surface bargaining is usually a
difficult one because it involves, at bottom, a question of the intent of the party in question, and

_______________

49 Rollo, p. 462.

50 K-Mart Corporation vs. National Labor Relations Commission, 626 F.2d 704 (1980).

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Standard Chartered Bank Employees Union (NUBE) vs. Confesor

usually such intent can only be inferred from the totality of the challenged party’s conduct both at
and away from the bargaining table.51 It involves the question of whether an employer’s conduct
demonstrates an unwillingness to bargain in good faith or is merely hard bargaining.52

The minutes of meetings from March 12, 1993 to June 15, 1993 do not show that the Bank had any
intention of violating its duty to bargain with the Union. Records show that after the Union sent its
proposal to the Bank on February 17, 1993, the latter replied with a list of its counter-proposals on
February 24, 1993. Thereafter, meetings were set for the settlement of their differences. The minutes
of the meetings show that both the Bank and the Union exchanged economic and non-economic
proposals and counter-proposals.

The Union has not been able to show that the Bank had done acts, both at and away from the
bargaining table, which tend to show that it did not want to reach an agreement with the Union or to
settle the differences between it and the Union. Admittedly, the parties were not able to agree and
reached a deadlock. However, it is herein emphasized that the duty to bargain “does not compel
either party to agree to a proposal or require the making of a concession.”53 Hence, the parties’
failure to agree did not amount to ULP under Article 248(g) for violation of the duty to bargain.

We can hardly dispute this finding, for it finds support in the evidence. The inference that respondents
did not refuse to bargain collectively with the complaining union because they accepted some of the
demands while they refused the others even leaving open other demands for future discussion is
correct, especially so when those demands were discussed at a meeting called by respondents
themselves precisely in view of the letter sent by the union on April 29, 1960. . .54

In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank made bad
faith provisions has no leg to

_______________

51 Luck Limousine, 312 NLRB 770, 789 (1993).

52 Queen Mary Restaurants Corp. and Q.M. Foods, Inc. vs. National Labor Relations Board, 560
F.2d 403 (1977).

53 Eastern Maine Medical Center vs. National Labor Relations Board, 658 F.2d 1 (1981).

54 National Union of Restaurant Workers (PTUC) vs. Court of Industrial Relations, 10 SCRA 843
(1964).

326

326

SUPREME COURT REPORTS ANNOTATED

Standard Chartered Bank Employees Union (NUBE) vs. Confesor

stand on. The records show that the Bank’s counter-proposals on the non-economic provisions or
political provisions did not put “up for grabs” the entire work of the Union and its predecessors. As
can be gleaned from the Bank’s counter-proposal, there were many provisions which it proposed to
be retained. The revisions on the other provisions were made after the parties had come to an
agreement. Far from buttressing the Union’s claim that the Bank made bad-faith proposals on the
non-economic provisions, all these, on the contrary, disprove such allegations.

We, likewise, find that the Union failed to substantiate its claim that the Bank refused to furnish the
information it needed.

While the refusal to furnish requested information is in itself an unfair labor practice, and also
supports the inference of surface bargaining,55 in the case at bar, Umali, in a meeting dated May
18, 1993, requested the Bank to validate its guestimates on the data of the rank and file. However,
Umali failed to put his request in writing as provided for in Article 242(c) of the Labor Code:

Article 242. Rights of Legitimate Labor Organization . . .

(c) To be furnished by the employer, upon written request, with the annual audited financial
statements, including the balance sheet and the profit and loss statement, within thirty (30) calendar
days from the date of receipt of the request, after the union has been duly recognized by the
employer or certified as the sole and exclusive bargaining representatives of the employees in the
bargaining unit, or within sixty (60) calendar days before the expiration of the existing collective
bargaining agreement, or during the collective negotiation;

The Union, did not, as the Labor Code requires, send a written request for the issuance of a copy of
the data about the Bank’s rank and file employees. Moreover, as alleged by the Union, the fact that
the Bank made use of the aforesaid guestimates, amounts to a validation of the data it had used in
its presentation.

No Grave Abuse of Discretion

On the Part of the Public Respondent
The special civil action for certiorari may be availed of when the tribunal, board, or officer exercising
judicial or quasi-judicial func-

_______________

55 K-Mart Corporation vs. National Labor Relations Commission, supra.

327
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327

Standard Chartered Bank Employees Union (NUBE) vs. Confesor

tions has acted without or in excess of jurisdiction and there is no appeal or any plain, speedy, and
adequate remedy in the ordinary course of law for the purpose of annulling the proceeding.56 Grave
abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of
passion or personal hostility which must be so patent and gross as to amount to an invasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of
law. Mere abuse of discretion is not enough.57

While it is true that a showing of prejudice to public interest is not a requisite for ULP charges to
prosper, it cannot be said that the public respondent acted in capricious and whimsical exercise of
judgment, equivalent to lack of jurisdiction or excess thereof. Neither was it shown that the public
respondent exercised its power in an arbitrary and despotic manner by reason of passion or personal
hostility.

Estoppel not Applicable

In the Case at Bar
The respondent Bank argues that the petitioner is estopped from raising the issue of ULP when it
signed the new CBA.

Article 1431 of the Civil Code provides:

Through estoppel an admission or representation is rendered conclusive upon the person making it,
and cannot be denied or disproved as against the person relying thereon.

A person, who by his deed or conduct has induced another to act in a particular manner, is barred
from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or
injury to another.58

In the case, however, the approval of the CBA and the release of signing bonus do not necessarily
mean that the Union waived its ULP claim against the Bank during the past negotiations. After

_______________

56 Guerrero vs. Commission on Elections, 336 SCRA 458 (2000).

57 Santos vs. Commission on Elections, 399 SCRA 611 (2003).

58 Navarro vs. Second Laguna Development Bank, 398 SCRA 227 (2003).

328

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SUPREME COURT REPORTS ANNOTATED

Standard Chartered Bank Employees Union (NUBE) vs. Confesor

all, the conclusion of the CBA was included in the order of the SOLE, while the signing bonus was
included in the CBA itself. Moreover, the Union twice filed a motion for reconsideration respecting its
ULP charges against the Bank before the SOLE.
The Union Did Not Engage
In Blue-Sky Bargaining
We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky bargaining or
making exaggerated or unreasonable proposals.59 The Bank failed to show that the economic
demands made by the Union were exaggerated or unreasonable. The minutes of the meeting show
that the Union based its economic proposals on data of rank and file employees and the prevailing
economic benefits received by bank employees from other foreign banks doing business in the
Philippines and other branches of the Bank in the Asian region.

In sum, we find that the public respondent did not act with grave abuse of discretion amounting to
lack or excess of jurisdiction when it issued the questioned order and resolutions. While the approval
of the CBA and the release of the signing bonus did not estop the Union from pursuing its claims of
ULP against the Bank, we find that the latter did not engage in ULP. We, likewise, hold that the Union
is not guilty of ULP.

In light of the foregoing, the October 29, 1993 Order and December 16, 1993 and February 10, 1994
Resolutions of then Secretary of Labor Nieves R. Confesor are AFFIRMED. The Petition is hereby
DISMISSED.

SO ORDERED.

Puno (Chairman), Quisumbing, Austria-Martinez and Tinga, JJ., concur.

Assailed order and resolutions affirmed.

Note.—Until a new Collective Bargaining Agreement has been executed by and between the parties,
they are duty-bound to keep the status quo and to continue in full force and effect the terms and

_______________

59 Arthur A. Sloane and Fred Witney, Labor Relations, 7th Edition 1991, p. 195.

329

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329

Pleyto vs. Lomboy

conditions of the existing agreement. (New Pacific Timber and Supply Company, Inc. vs. National
Labor Relations Commission, 328 SCRA 404 [2000])

——o0o——
12. Metrolab Industries, Inc. vs. Roldan-Confesor

G.R. No. 108855. February 28, 1996.*

METROLAB INDUSTRIES, INC., petitioner, vs. HONORABLE MA. NIEVES ROLDAN-

CONFESOR, in her capacity as Secretary of the Department of Labor and Employment and
METRO DRUG CORPORATION EMPLOYEES ASSOCIATION-FEDERATION OF FREE
WORKERS, respondents.

Labor Law; Dismissal; Exercise of management prerogatives is not absolute but subject to limitations
imposed by law.—This Court recognizes the exercise of management prerogatives and often
declines to interfere with the legitimate business decisions of the employer. However, this privilege
is not absolute but subject to limitations imposed by law.

Same; Secretary of Labor; Evidence; Factual findings of administrative agencies supported by

substantial evidence are accorded great respect and binds the Court.—After a judicious review of
the record, we find no compelling reason to overturn the findings of the Secretary of Labor. We
reaffirm the doctrine that considering their expertise in their respective fields, factual findings of
administrative agencies supported by substantial evidence are accorded great respect and binds
this Court.

Same; Labor Union; Prohibition to join labor organization extends to confidential employees or those
who by reason of their positions or nature of work are required to assist or act in a fiduciary manner
to managerial employees.—Although Article 245 of the Labor
_______________

* FIRST DIVISION.

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Metrolab Industries, Inc. vs. Roldan-Confesor

Code limits the ineligibility to join, form and assist any labor organization to managerial employees,
jurisprudence has extended this prohibition to confidential employees or those who by reason of their
positions or nature of work are required to assist or act in a fiduciary manner to managerial
employees and hence, are likewise privy to sensitive and highly confidential records.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Bautista, Picazo, Buyco, Tan & Fider for petitioner.

Perfecto V. Fernandez, Jose P. Fernandez & Cristobal P. Fernandez for Metro Drug Corporation
Employees Association (MDCEA)-F.F.W.

KAPUNAN, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court seeking the annulment of
the Resolution and Omnibus Resolution of the Secretary of Labor and Employment dated 14 April
1992 and 25 January 1993, respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-91; NCMB-
NCR-NS-09-678-91) on grounds that these were issued with grave abuse of discretion and in excess
of jurisdiction.

Private respondent Metro Drug Corporation Employees Association-Federation of Free Workers

(hereinafter referred to as the Union) is a labor organization representing the rank and file employees
of petitioner Metrolab Industries, Inc. (hereinafter referred to as Metrolab/MII) and also of Metro Drug,
Inc.

On 31 December 1990, the Collective Bargaining Agreement (CBA) between Metrolab and the Union
expired. The negotiations for a new CBA, however, ended in a deadlock.

Consequently, on 23 August 1991, the Union filed a notice of strike against Metrolab and Metro Drug,
Inc. The parties failed to settle their dispute despite the conciliation efforts of the National Conciliation
and Mediation Board.

184

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SUPREME COURT REPORTS ANNOTATED

Metrolab Industries, Inc. vs. Roldan-Confesor

To contain the escalating dispute, the then Secretary of Labor and Employment, Ruben D. Torres,
issued an assumption order dated 20 September 1991, the dispositive portion of which reads, thus:

WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the Labor Code, as
amended, this Office hereby assumes jurisdiction over the entire labor dispute at Metro Drug, Inc.—
Metro Drug Distribution Division and Metrolab Industries, Inc.

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

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

SO ORDERED.1 (Italics ours.)

On 27 December 1991, then Labor Secretary Torres issued an order resolving all the disputed items
in the CBA and ordered the parties involved to execute a new CBA.

Thereafter, the Union filed a motion for reconsideration.

On 27 January 1992, during the pendency of the abovementioned motion for reconsideration,
Metrolab laid off 94 of its rank and file employees.

On the same date, the Union filed a motion for a cease and desist order to enjoin Metrolab from
implementing the mass layoff, alleging that such act violated the prohibition against committing acts
that would exacerbate the dispute as specifically directed in the assumption order.2

On the other hand, Metrolab contended that the layoff was temporary and in the exercise of its
management prerogative. It maintained that the company would suffer a yearly gross revenue loss
of approximately sixty-six (66) million pesos due to the withdrawal of its principals in the Toll and
Contract

_______________

1Rollo, p. 74.

2Id., at 202-204.

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Metrolab Industries, Inc. vs. Roldan-Confesor

Manufacturing Department. Metrolab further asserted that with the automation of the manufacture of
its product “Eskinol,” the number of workers required for its production is significantly reduced.3

Thereafter, on various dates, Metrolab recalled some of the laid off workers on a temporary basis
due to availability of work in the production lines.

On 14 April 1992, Acting Labor Secretary Nieves Confessor issued a resolution declaring the layoff
of Metrolab’s 94 rank and file workers illegal and ordered their reinstatement with full backwages.
The dispositive portion reads as follows:
WHEREFORE, the Union’s motion for reconsideration is granted in part, and our order of 28
December 1991 is affirmed subject to the modifications in allowances and in the close shop
provision. The layoff of the 94 employees at MII is hereby declared illegal for the failure of the latter
to comply with our injunction against committing any act which may exacerbate the dispute and with
the 30-day notice requirement. Accordingly, MII is hereby ordered to reinstate the 94 employees,
except those who have already been recalled, to their former positions or substantially equivalent,
positions with full backwages from the date they were illegally laid off on 27 January 1992 until
actually reinstated without loss of seniority rights and other benefits. Issues relative to the CBA
agreed upon by the parties and not embodied in our earlier order are hereby ordered adopted for
incorporation in the CBA. Further, the dispositions and directives contained in all previous orders
and resolutions relative to the instant dispute, insofar as not inconsistent herein, are reiterated.
Finally, the parties are enjoined to cease and desist from committing any act which may tend to
circumvent this resolution.

SO RESOLVED.4

On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration alleging that the layoff did not
aggravate the dispute since no untoward incident occurred as a result thereof. It, likewise, filed a
motion for clarification regarding

_______________

3Id., at 8-9.

4Id., at 51-52.

186

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SUPREME COURT REPORTS ANNOTATED

Metrolab Industries, Inc. vs. Roldan-Confesor

the constitution of the bargaining unit covered by the CBA.

On 29 June 1992, after exhaustive negotiations, the parties entered into a new CBA. The execution,
however, was without prejudice to the outcome of the issues raised in the reconsideration and
clarification motions submitted for decision to the Secretary of Labor.5

Pending the resolution of the aforestated motions, on 2 October 1992, Metrolab laid off 73 of its
employees on grounds of redundancy due to lack of work which the Union again promptly opposed
on 5 October 1992.

On 15 October 1992, Labor Secretary Confesor again issued a cease and desist order. Metrolab
moved for a reconsideration.6

On 25 January 1993, Labor Secretary Confesor issued the assailed Omnibus Resolution containing
the following orders:

xxx xxx x x x.

1. MII’s motion for partial reconsideration of our 14 April 1992 resolution specifically that portion
thereof assailing our ruling that the layoff of the 94 employees is illegal, is hereby denied. MII is
hereby ordered to pay such employees their full backwages computed from the time of actual layoff
to the time of actual recall;
2. For the parties to incorporate in their respective collective bargaining agreements the clarifications
herein contained; and
3. MII’s motion for reconsideration with respect to the consequences of the second wave of layoff
affecting 73 employees, to the extent of assailing our ruling that such layoff tended to exacerbate
the dispute, is hereby denied. But inasmuch as the legality of the layoff was not submitted for our
resolution and no evidence had been adduced upon which a categorical finding thereon can be
based, the same is hereby referred to the NLRC for its appropriate action.
Finally, all prohibitory injunctions issued as a result of our assumption of jurisdiction over this dispute
are hereby lifted.

SO RESOLVED.7

_______________

5Id., at 303.

6Id., at 236-241.

7Id., at 70-71.

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Metrolab Industries, Inc. vs. Roldan-Confesor

Labor Secretary Confesor also ruled that executive secretaries are excluded from the closed-shop
provision of the CBA, not from the bargaining unit.

On 4 February 1993, the Union filed a motion for execution. Metrolab opposed. Hence, the present
petition for certiorari with application for issuance of a Temporary Restraining Order.

On 4 March 1993, we issued a Temporary Restraining Order enjoining the Secretary of Labor from
enforcing and implementing the assailed Resolution and Omnibus Resolution dated 14 April 1992
and 25 January 1993, respectively.

In its petition, Metrolab assigns the following errors:

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT COMMITTED

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

_______________

** Metrolab submits that the issue in the instant petition for certiorari is limited to the determination
of whether or not the Secretary of Labor gravely abused her discretion in ruling that the layoff of its
94 workers exacerbated their labor dispute with the Union. Metrolab underscores that the basis for
the said layoff “has never been placed in issue.” (Rollo, pp. 327-328.)

In the same manner, Metrolab prefatorily declared that it does not dispute the Secretary of Labor’s
certification to the NLRC of the legality (or illegality) of the second layoff of Metrolab’s 73 rank and
file workers on grounds of redundancy (Rollo, pp. 11-12). In its Consolidated Reply, Metrolab states,
thus:

5.0. Moreover, the redundancy program of October 1992 is not an issue in the present petition. The
assailed Omnibus Order, in no uncertain terms, ordered that this matter be brought before the
National Labor Relations Commission (“NLRC”) for adjudication (Please see Annex “A-1” of the
Petition). Petitioner herein does not question the said part of the Omnibus Resolution in the present
petition. The time for the

188

188

SUPREME COURT REPORTS ANNOTATED

Metrolab Industries, Inc. vs. Roldan-Confesor

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT GRAVELY

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

Anent the first issue, we are asked to determine whether or not public respondent Labor Secretary
committed grave abuse of discretion and exceeded her jurisdiction in declaring the subject layoffs
instituted by Metrolab illegal on grounds that these unilateral actions aggravated the conflict between
Metrolab and the Union who were, then, locked in a stalemate in CBA negotiations.

Metrolab argues that the Labor Secretary’s order enjoining the parties from committing any act that
might exacerbate the dispute is overly broad, sweeping and vague and should not be used to curtail
the employer’s right to manage his business and ensure its viability.

We cannot give credence to Metrolab’s contention.

This Court recognizes the exercise of management prerogatives and often declines to interfere with
the legitimate business decisions of the employer. However, this privilege is not absolute but subject
to limitations imposed by law.9

In PAL v. NLRC,10 we issued this reminder:

_______________

same is not yet ripe, as the NLRC still has to pass judgment upon the facts surrounding the
redundancy program. As of this writing, the said redundancy program is presently being litigated
before the Arbitration Branch of the NLRC in NLRC-NCR Case No. 00-05-03325-93 entitled “Metro
Drug Corporation Employees Association-FFW v. Metrolab Industries, Inc., et al.” before Labor
Arbiter Cornelio Linsangan. (Rollo, p. 330.)

8Id., at 13.

9Radio Communications of the Philippines, Inc. v. NLRC, 221 SCRA 782 (1993); Corral v. NLRC,
221 SCRA 693 (1993); Rubber-world (Phils.), Inc. v. NLRC, 175 SCRA 450 (1989).

10 225 SCRA 301 (1993).

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Metrolab Industries, Inc. vs. Roldan-Confesor

xxx xxx xxx.

. . . the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs.
Medina (177 SCRA 565 [1989]), it was held that management’s prerogatives must be without abuse
of discretion. . . .

xxx xxx xxx.

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

xxx xxx xxx.

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

xxx xxx xxx.

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

xxx xxx xxx.

190

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SUPREME COURT REPORTS ANNOTATED

Metrolab Industries, Inc. vs. Roldan-Confesor

That Metrolab’s business is of national interest is not disputed. Metrolab is one of the leading
manufacturers and suppliers of medical and pharmaceutical products to the country.

Metrolab’s management prerogatives, therefore, are not being unjustly curtailed but duly balanced
with and tempered by the limitations set by law, taking into account its special character and the
particular circumstances in the case at bench.

As aptly declared by public respondent Secretary of Labor in its assailed resolution:

xxx xxx xxx.

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

xxx xxx xxx.

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

After a judicious review of the record, we find no compelling reason to overturn the findings of the
Secretary of Labor.

We reaffirm the doctrine that considering their expertise in their respective fields, factual findings of
administrative

_______________

11Rollo, p. 46.

12Id., at 335.

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Metrolab Industries, Inc. vs. Roldan-Confesor

agencies supported by substantial evidence are accorded great respect and binds this Court.13

The Secretary of Labor ruled, thus:

xxx xxx xxx.

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

xxx xxx xxx.

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

xxx xxx xxx.

3. This unilateral action of management is a blatant violation of the injunction of this Office against
committing acts which would exacerbate the dispute. Unless such act is enjoined the Union will be
compelled to resort to its legal right to mass actions and concerted

_______________

13Association of Marine Officers & Seamen of Reyes & Lim Co. v. Laguesma, 239 SCRA 460 (1994);
Maya Farms Employees Organization v. NLRC, 239 SCRA 508 (1994); Rabago v. NLRC, 200 SCRA
158 (1991); Pan Pacific Industrial Sales, Co., Inc. v. NLRC, 194 SCRA 633 (1991).

14Rollo, p. 57.

192

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SUPREME COURT REPORTS ANNOTATED

Metrolab Industries, Inc. vs. Roldan-Confesor

activities to protest and stop the said management action. This mass layoff is clearly one which
would result in a very serious labor dispute unless this Office swiftly intervenes.15

xxx xxx xxx.

Metrolab and the Union were still in the process of resolving their CBA deadlock when petitioner
implemented the subject layoffs. As a result, motions and oppositions were filed diverting the parties’
attention, delaying resolution of the bargaining deadlock and postponing the signing of their new
CBA, thereby aggravating the whole conflict.

We, likewise, find untenable Metrolab’s contention that the layoff of the 94 rank-and-file employees
was temporary, despite the recall of some of the laid off workers.

If Metrolab intended the layoff of the 94 workers to be temporary, it should have plainly stated so in
the notices it sent to the affected employees and the Department of Labor and Employment.
Consider the tenor of the pertinent portions of the layoff notice to the affected employees:

xxx xxx xxx.

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

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

15Id., at 202-204; 228-234; “Urgent Motion to Resolve Union’s Motion dated 27 January 1992,”
Folder 4, Original Record.

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Metrolab Industries, Inc. vs. Roldan-Confesor

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

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

xxx xxx xxx.

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

xxx xxx xxx.

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

We are not convinced by this argument. International Hardware involves a case where there had
been a reduction of workload. Precisely to avoid laying off the employees, the employer therein opted
to give them work on a rotating basis. Though on a limited scale, work was available. This was the
Supreme Court’s basis for holding that there was no intention to permanently severe (sic) the
employment relationship.

Here, there is no circumstance at all from which we can infer an intention from MII not to sever the
employment relationship permanently. If there was such an intention, MII could have made it very
clear in the notices of layoff. But as it were, the notices are couched in a language so uncertain that
the only conclusion possible is the permanent termination, not the continuation, of the employment
relationship.

MII also seeks to excuse itself from compliance with the 30-day notice with a tautology. While
insisting that there is really no best time to announce a bad news, (sic) it also claims that it broke the
bad news only on 27 January 1992 because had it complied with the

______________

16Rollo, p. 198.

194

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Metrolab Industries, Inc. vs. Roldan-Confesor

30-day notice, it could have broken the bad news on 02 January 1992, the first working day of the
year. If there is really no best time to announce a bad news (sic), it wouldn’t have mattered if the
same was announced at the first working day of the year. That way, MII could have at least complied
with the requirement of the law.17

The second issue raised by petitioner merits our consideration.

In the assailed Omnibus Resolution, Labor Secretary Confesor clarified the CBA provisions on
closed-shop and the scope of the bargaining unit in this wise:

xxx xxx xxx.

Appropriateness of the bargaining unit.

xxx

Exclusions. In our 14 April 1992 resolution, we ruled on the issue of exclusion as follows:

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

1. Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, Vice-President, Vice-
President for Sales, Personnel Manager, and Director for Corporate Planning who may have access
to vital labor relations information or who may otherwise act in confidential capacity to persons who
determine or formulate management policies.
The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall thus be modified
consistently with the foregoing.

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

_______________

17Id., at 58-59.

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

On the other hand, Attachment I provides:

Exclusion from the Scope of the Close Shop Provision

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

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

2. Executive Secretary of the Personnel Manager, or equivalent positions.
3. Executive Secretary of the Director for Corporate Planning, or equivalent positions.
4. Some personnel in the Personnel Department, EDP Staff at Head Office, Payroll Staff at Head
Office, Accounting Department at Head Office, and Budget Staff, who because of the nature of their
duties and responsibilities need not join the Association as a condition for their employment.
5. Newly-hired secretaries of Branch Managers and Regional Managers.
Both MDD and MII read the exclusion of managerial employees and executive secretaries in our 14
April 1992 resolution as exclusion from the bargaining unit. They point out that managerial
employees are lumped under one classification with executive secretaries, so that since the former
are excluded from the bargaining unit, so must the latter be likewise excluded.

This reading is obviously contrary to the intent of our 14 April 1992 resolution. By recognizing the
expanded scope of the right to

196

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Metrolab Industries, Inc. vs. Roldan-Confesor

self-organization, our intent was to delimit the types of employees excluded from the close shop
provision, not from the bargaining unit, to executive secretaries only. Otherwise, the conversion of
the exclusionary provision to one that refers to the bargaining unit from one that merely refers to the
close shop provision would effectively curtail all the organizational rights of executive secretaries.

The exclusion of managerial employees, in accordance with law, must therefore still carry the
qualifying phrase “from the bargaining unit” in Article I (b)(i) of the 1988-1990 CBA. In the same
manner, the exclusion of executive secretaries should be read together with the qualifying phrase
“are excluded from membership in the Association” of the same Article and with the heading of
Attachment I. The latter refers to “Exclusions from Scope of Close Shop Provision” and provides that
“[t]he following positions in Bargaining Unit are not covered by the close shop provision of the CBA.”

The issue of exclusion has different dimension in the case of MII. In an earlier motion for clarification,
MII points out that it has done away with the positions of Executive Vice-President, Vice-President
for Sales, and Director for Corporate Planning. Thus, the foregoing group of exclusions is no longer
appropriate in its present organizational structure. Nevertheless, there remain MII officer positions
for which there may be executive secretaries. These include the General Manager and members of
the Management Committee, specifically i) the Quality Assurance Manager; ii) the Product
Development Manager; iii) the Finance Director; iv) the Management System Manager; v) the
Human Resources Manager; vi) the Marketing Director; vii) the Engineering Manager; viii) the
Materials Manager; and ix) the Production Manager.

xxx
The basis for the questioned exclusions, it should be noted, is no other than the previous CBA
between MII and the Union. If MII had undergone an organizational restructuring since then, this is
a fact to which we have never been made privy. In any event, had this been otherwise the result
would have been the same. To repeat, we limited the exclusions to recognize the expanded scope
of the right to self-organization as embodied in the Constitution.18

Metrolab, however, maintains that executive secretaries of the General Manager and the executive
secretaries of the

_______________

18Rollo, pp. 59-63.

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Metrolab Industries, Inc. vs. Roldan-Confesor

Quality Assurance Manager, Product Development Manager, Finance Director, Management

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

We concur with Metrolab.

Although Article 245 of the Labor Code20 limits the ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence has extended this prohibition to confidential
employees or those who by reason of their positions or nature of work are required to assist or act
in a fiduciary manner to managerial employees and hence, are likewise privy to sensitive and highly
confidential records.

The rationale behind the exclusion of confidential employees from the bargaining unit of the rank
and file employees and their qualification to join any labor organization was succinctly discussed in
Philips Industrial Development v. NLRC:21

xxx xxx xxx.

On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave abuse
of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that a PIDI’s
“Service Engineers, Sales Force, division secretaries, all Staff

_______________

19Id., at 31-32.

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

21 210 SCRA 339 (1992).

198

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SUPREME COURT REPORTS ANNOTATED

Metrolab Industries, Inc. vs. Roldan-Confesor

of General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP
and Financial Systems are included within the rank and file bargaining unit.”

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

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

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

In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this rationale applicable to
confidential employees:

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

xxx xxx xxx.

Similarly, in National Association of Trade Union-Republic Planters Bank Supervisors Chapter v.

Torres22 we declared:

________________

22 239 SCRA 546 (1994).

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Metrolab Industries, Inc. vs. Roldan-Confesor

xxx xxx xxx.

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

xxx

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

xxx xxx xxx.

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

_______________

23 241 SCRA 294 (1995).

200

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SUPREME COURT REPORTS ANNOTATED

Metrolab Industries, Inc. vs. Roldan-Confesor

xxx xxx xxx.

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

xxx

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

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

xxx xxx xxx.

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

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

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

xxx xxx xxx.

_______________

24 Rollo, pp. 192-193.

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Metrolab Industries, Inc. vs. Roldan-Confesor

The Union’s assurances fail to convince. The dangers sought to be prevented, particularly the threat
of conflict of interest and espionage, are not eliminated by non-membership of Metrolab’s executive
secretaries or confidential employees in the Union. Forming part of the bargaining unit, the executive
secretaries stand to benefit from any agreement executed between the Union and Metrolab. Such a
scenario, thus, gives rise to a potential conflict between personal interests and their duty as
confidential employees to act for and in behalf of Metrolab. They do not have to be union members
to affect or influence either side.

Finally, confidential employees cannot be classified as rank and file. As previously discussed, the
nature of employment of confidential employees is quite distinct from the rank and file, thus,
warranting a separate category. Excluding confidential employees from the rank and file bargaining
unit, therefore, is not tantamount to discrimination.

WHEREFORE, premises considered, the petition is partially GRANTED. The resolutions of public
respondent Secretary of Labor dated 14 April 1992 and 25 January 1993 are hereby MODIFIED to
the extent that executive secretaries of petitioner Metrolab’s General Manager and the executive
secretaries of the members of its Management Committee are excluded from the bargaining unit of
petitioner’s rank and file employees.

SO ORDERED.

Padilla (Chairman), Bellosillo, Vitug and Hermosisima, Jr., JJ., concur.

Petition granted, resolutions modified.

Note.—Rule is well-settled that labor laws discourage interference with an employer’s judgment in
the conduct of his business. (Maya Farms Employees Organization vs. National Labor Relations
Commission, 239 SCRA 508 [1994])

——o0o——

13. Philips Industrial Development, Inc. vs. NLRC

G.R. No. 88957. June 25, 1992.*

PHILIPS INDUSTRIAL DEVELOPMENT, INC., petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and PHILIPS EMPLOYEES ORGANIZATION (FFW), respondents.

Labor Law; Security Agencies; Guards are allowed to form or join a union.—Even if the issue was,
indeed, as perceived by the NLRC, still, a palpable error was committed by it in ruling that under the
law, all workers, except managerial employees and security personnel, are qualified to join a union,
or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-11-03936-87 was filed in 1987,
security personnel were no longer disqualified from joining or forming a union.

Same; Managerial employees and secretaries may not form or join a union.—On the main issue
raised before Us, it is quite obvious that respondent NLRC committed grave abuse of discretion in
reversing the decision of the Executive Labor Arbiter and in decreeing that PIDI’s “Service Engineers,
Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial
Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank
and file bargaining unit.” In the first place, all these employees, with the exception of the service
engineers and the sales force personnel, are confidential employees. Their classification as such is
not seriously disputed by PEO-FFW; the five (5) previous CBAs between PIDI and PEO-FFW
explicitly considered them as confidential employees. By the very nature of their functions, they
assist and act in a confidential capacity to, or have access to confidential matters of, persons who
exercise managerial functions in the field of labor relations. As such, the rationale behind the
ineligibility of

________________

* THIRD DIVISION.

340

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SUPREME COURT REPORTS ANNOTATED

Philips Industrial Development, Inc. vs. NLRC

managerial employees to form, assist or join a labor union equally applies to them.
Same; Service engineers and salesmen may form their own bargaining unit separate from rank-and-
file employees.—As regards the service engineers and the sales representatives, two (2) points
which respondent NLRC likewise arbitrarily and erroneously ruled upon, need to be discussed.
Firstly, in holding that they are included in the bargaining unit for the rank and file employees of PIDI,
the NLRC practically forced them to become members of PEO-FFW or to be subject to its sphere of
influence, it being the certified bargaining agent for the subject bargaining unit. This violates,
obstructs, impairs and impedes the service engineers’ and the sales representatives’ constitutional
right to form unions or associations and to self-organization.

PETITION for certiorari and prohibition to review the decision and resolution of the National Labor
Relations Commission.

The facts are stated in the opinion of the Court.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

Ronnie M. Nismal legal representative of private respondent.

DAVIDE, JR., J.:

In this petition for certiorari and prohibition under Rule 65 of the Rules of Court with a prayer for a
temporary restraining order and/or a writ of preliminary injunction, petitioner Philips Industrial
Development, Inc. (PIDI) seeks to set aside the Decision and Resolution, dated 16 January 1989
and 17 March 1989, respectively, of the National Labor Relations Commission (NLRC) in Case No.
NLRC-NCR-00-11-03936-87 on the ground that it committed grave abuse of discretion amounting
to lack of jurisdiction in holding that service engineers, sales representatives and confidential
employees of PIDI are qualified to be included in the existing bargaining unit.

PIDI is a domestic corporation engaged in the manufacturing and marketing of electronic products.
Since 1971, it had a total of six (6) collective bargaining agreements (CBAs) with

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Philips Industrial Development, Inc. vs. NLRC

private respondent Philips Employees Organization-FFW (PEO-FFW), a registered labor union and
the certified bargaining agent of all the rank and file employees of PIDI. In the first CBA (1971-1974),
the supervisors referred to in R.A. No. 875, confidential employees, security guards, temporary
employees and sales representatives were excluded from the bargaining unit. In the second to the
fifth CBAs (1975-1977; 1978-1980; 1981-1983; and 1984-1986), the sales force, confidential
employees and heads of small units, together with the managerial employees, temporary employees
and security personnel, were specifically excluded from the bargaining unit.1 The confidential
employees are the division secretaries of light/telecom/data and consumer electronics, marketing
managers, secretaries of the corporate planning and business manager, fiscal and financial system
manager and audit and EDP manager, and the staff of both the General Management and the
Personnel Department.2

In the sixth CBA covering the years 1987 to 1989, it was agreed upon, among others, that the subject
of inclusion or exclusion of service engineers, sales personnel and confidential employees in the
coverage of the bargaining unit would be submitted for arbitration. Pursuant thereto, on June 1987,
PEO-FFW filed a petition before the Bureau of Labor Relations (BLR) praying for an order “directing
the parties to select a voluntary arbitrator in accordance with its rules and regulations.”
As the parties failed to agree on a voluntary arbitrator, the BLR endorsed the petition to the Executive
Labor Arbiter of the National Capital Region for compulsory arbitration pursuant to Article 228 of the
Labor Code. Docketed as Case No. NLRC-NCR-00-11-03936-87, the case was assigned to
Executive Labor Arbiter Arthur Amansec.

On 17 March 1988, Labor Arbiter Amansec rendered a decision, the dispositive portion of which
states:

“In view of the foregoing, a decision is hereby rendered, ordering the respondent to conduct a
referendum to determine the will of the

________________

1 Rollo, 4.

2 Id.

342

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SUPREME COURT REPORTS ANNOTATED

Philips Industrial Development, Inc. vs. NLRC

service engineers, sales representatives as to their inclusion or exclusion in the bargaining unit.

It is hereby declared that the Division Secretaries and all Staff of general management, personnel
and industrial relations department, secretaries of audit, EDP, financial system are confidential
employees and as such are hereby deemed excluded in the bargaining unit.

SO ORDERED.”

PEO-FFW appealed from the decision to the NLRC.

On 16 January 1989, the NLRC rendered the questioned decision, the dispositive portion of which
reads:

“WHEREFORE, the foregoing premises considered, the appealed decision of the Executive Labor
Arbiter is hereby SET ASIDE and a new one entered declaring respondent company’s Service
Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and
Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems are included
within the rank and file bargaining unit.

SO ORDERED.”

The reversal is anchored on the respondent NLRC’s conclusion that based on Section 1,3 Rule II,
Book V of the Omnibus Rules Implementing the Labor Code, as amended by Section 3,
Implementing Rules of E.O. No. 111; paragraph (c), Section 2, Rule V of the same Code, as
amended by Section 64 of the Implementing Rules of E.O. No. 111; and Article 2455 of the Labor
Code, as amended:

“x x x all workers, except managerial employees and security personnel, are qualified to join or be a
part of the bargaining unit. xxx”

It further ruled that:

________________

3 On who may join labor unions.

4 On exclusion of security guards from the bargaining unit of the rank and file employees.

5 On ineligibility of managerial employees to join any labor organization.

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Philips Industrial Development, Inc. vs. NLRC

“The Executive Labor Arbiter’s directive that the service engineers and sales representatives to (sic)
conduct a referendum among themselves is erroneous inasmuch as it arrogates unto said
employees the right to define what the law means. It would not be amiss to state at this point that
there would be no one more interested in excluding the subject employees from the bargaining unit
than management and that it would not be improbable for the latter to lobby and/or exert pressure
on the employees concerned, thus agitating unrest among the rank-and-file. Likewise, the Executive
Labor Arbiter’s declaration that the Division Secretaries and all Staff of general management,
personnel and industrial relations department, secretaries of audit, EDP and financial system ‘are
confidential employees and as such are hereby deemed excluded in (sic) the bargaining unit’ is
contrary to law for the simple reason that the law, as earlier quoted, does not mention them as among
those to be excluded from the bargaining unit only (sic) managerial employees and security guards.
As a matter of fact, supervisory unions have already been dissolved and their members who do not
fall within the definition of managerial employees have become eligible to join or assist the rank-and-
file organization.”6

Its motion for the reconsideration of this decision having been denied by the NLRC in its Resolution
of 16 March 1989, a copy of which it received on 8 June 1989, petitioner PIDI filed the instant petition
on 20 July 1989, alleging that:

“I

THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF

JURISDICTION IN HOLDING THAT SERVICE ENGINEERS, SALES REPRESENTATIVES AND
CONFIDENTIAL EMPLOYEES OF PETITIONER ARE QUALIFIED TO BE PART OF THE
EXISTING BARGAINING UNIT.

II

THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF

JURISDICTION IN NOT APPLYING THE TIME HONORED ‘GLOBE DOCTRINE.’ ”7

________________

6 Rollo, 111.

7 Id., 2.

344

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Philips Industrial Development, Inc. vs. NLRC

On 31 July 1989, this Court required the respondents to comment on the petition, which PEO-FFW
complied with on 28 August 1989. Public respondent NLRC, thru its counsel, the Solicitor General,
moved for, and was granted a 30-day extension to file its Comment.

On 18 September 1989, this Court required the parties to show cause why the petition should not
be dismissed in view of the finality of the NLRC decision as provided for by the penultimate sentence
of Article 223 of the Labor Code, as amended by R.A. No. 6715. R.A. No. 6715, which amended
Article 223 of the Labor Code, was enacted on 2 March 1989 and took effect on 21 March 1989. The
parties subsequently complied with the Resolution.

On 16 May 1990, this Court required the parties to submit Memoranda explaining the effect in this
case of Article 223 of the Labor Code, as amended by Section 12 of R.A. No. 6715 with respect to
the finality of decisions of the NLRC. The parties complied separately with the same.

On 10 September 1990, this Court gave due course to the petition and required the parties to submit
their respective Memoranda. The petitioner and the Office of the Solicitor General filed their separate
Memoranda. On the other hand, PEO-FFW moved that its motion and manifestation dated 23 August
1989 be considered as its Memorandum; this Court granted the same.

As stated earlier, the principal issue in this case is whether the NLRC committed grave abuse of
discretion in holding that service engineers, sales representatives and confidential employees
(division secretaries, staff of general management, personnel and industrial relations department,
secretaries of audit, EDP and financial system) are qualified to be included in the existing bargaining
unit. Petitioner maintains that it did, and in support of its stand that said employees should not be
absorbed by the existing bargaining unit, it urges this Court to consider these points:

1) The inclusion of the group in the existing bargaining unit would run counter to the history of the
parties’ CBA. The parties’ five (5) previous CBAs consistently excluded this group of employees from
the scope of the bargaining unit. The relationale for such exclusion is that these em-
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VOL. 210, JUNE 25, 1992

345

Philips Industrial Development, Inc. vs. NLRC

ployees hold positions which are highly sensitive, confidential and of a highly fiduciary nature; to
include them in the bargaining unit may subject the company to breaches in security and the possible
revelation of highly sensitive and confidential matters. It would cripple the company’s bargaining
position and would give undue advantage to the union.

2) The absence of mutuality of interests between this group of employees and the regular rank and
file militates against such inclusion. A table prepared by the petitioner shows the disparity of interests
between the said groups:

SERVICE ENGINEERS
SALES REPRESENTATIVES

SERVICE
TECHNICIANS
AREAS OF INTEREST

(Non-Bargaining
Unit Employees)

(Bargaining
Unit Employees)

Qualifications

Professional Employees

High School/
Vocational
Grads.

Work Schedule

With Night Shift

Schedule

None

Night Shift
Differential Pay

10% of Basic Rate

None

Stand-By Call &

Allowance

On Stand-By Call with:

First Line: 15% of
basic rate

None

Second Line: 10% of

basic rate

Uniforms

None

2 sets of polo
& pants every
6 months

Retirement Benefits
15 yrs. ser. 70%

15 yrs. serv. 50%

16 75%

16 85%

17 80%

17 90%

18 85%

18 100%

19 90%

19 115%

20 100%

20 135%

Year End Performance

Evaluation

Merit Increase System

None

Sales Commission

Yes

None

Car Loan

Yes

None

Precalculated

Yes
None

Kilometer allowance

346

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SUPREME COURT REPORTS ANNOTATED

Philips Industrial Development, Inc. vs. NLRC

The Office of the Solicitor General supports the decision of the Executive Labor Arbiter and refuses
to uphold the position of the NLRC. It holds the view that the division secretaries; the staff members
of General Management, Personnel and the Industrial Relations Department; and the secretaries of
Audit, EDP and Financial Systems, are disqualified from joining the PEO-FFW as they are
confidentials employees. They cannot even form a union of their own for, as held in Golden Farms,
Inc. vs. Ferrer-Calleja,8 the rationale for the disqualification of managerial employees from joining
unions holds true also for confidential employees. As regards the sales representatives and service
engineers, however, there is no doubt that they are entitled to join or form a union, as they are not
disqualified by law from doing so. Considering that they have interests dissimilar to those of the rank
and file employees comprising the existing bargaining unit, and following the Globe Doctrine
enunciated in In Re: Globe Machine and Stamping Company 9 to the effect that in determining the
proper bargaining unit the express will or desire of the employees shall be considered, they should
be allowed to determine for themselves what union to join or form. The best way to determine their
preference is through a referendum. As shown by the records, such a referendum was decreed by
the Executive Labor Arbiter.

The petition is impressed with merit.

At the outset, We express Our agreement with the petitioner’s view that respondent NLRC did not
quite accurately comprehend the issue raised before it. Indeed, the issue is not whether the subject
employees may join or form a union, but rather, whether or not they may be part of the existing
bargaining unit for the rank and file employees of PIDI.

Even if the issue was, indeed, as perceived by the NLRC, still, a palpable error was committed by it
in ruling that under the law, all workers, except managerial employees and security personnel, are
qualified to join a union, or form part of a bargaining unit. At the time Case No. NLRC-NCR-00-11-
03936-87 was filed in 1987, security personnel were no longer disquali-

________________

8 175 SCRA 471 [1989].

9 3 NLRB 294 [1937].

347

VOL. 210, JUNE 25, 1992

347

Philips Industrial Development, Inc. vs. NLRC

fied from joining or forming a union.

Section 6 of E.O. 111, enacted on 24 December 1986, repealed the original provisions of Article 245
of the Labor Code, reading as follows:

“ARTICLE 245. Ineligibility of security personnel to join any labor organization.—Security guards and
other personnel employed for the protection and security of the person, properties and premises of
the employer shall not be eligible for membership in any labor organization.”

and substituted it with the following provision:

“ARTICLE 245. Right of employees in the public service.—”10 x x x

By virtue of such repeal and substitution, security guards became eligible for membership in any
labor organization.11

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

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

________________

10 In view of the repeal of Article 238 of the Labor Code by Section 5 of E.O. 111, this Article was
deemed renumbered as Article 244.

11 Manila Electric Co. vs. Secretary of Labor and Employment, 197 SCRA 275 [1991].

348

348

SUPREME COURT REPORTS ANNOTATED

Philips Industrial Development, Inc. vs. NLRC

the field of labor relations.12 As such, the rationale behind the ineligibility of managerial employees
to form, assist or join a labor union equally applies to them.

In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez,13 this Court elaborated on this rationale,
thus:

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

In Golden Farms, Inc. vs. Ferrer-Calleja,14 this Court explicitly made this rationale applicable to
confidential employees:
“This rationale holds true also for confidential employees such as accounting personnel, radio and
telegraph operators, who having access to confidential information, may become the source of
undue advantage. Said employee(s) may act as a spy or spies of either party to a collective
bargaining agreement. This is specially true in the present case where the petitioning Union is
already the bargaining agent of the rank-and-file employees in the establishment. To allow the
confidential employees to join the existing Union of the rank-and-file would be in violation of the
terms of the Collective Bargaining Agreement wherein this kind of employees by the nature of their
functions/positions are expressly excluded.”

As regards the service engineers and the sales representatives, two (2) points which respondent
NLRC likewise arbitrarily and erroneously ruled upon, need to be discussed. Firstly, in holding that
they are included in the bargaining unit for the rank and file employees of PIDI, the NLRC practically
forced them to become members of PEO-FFW or to be subject to its sphere of influence, it being the
certified bargaining agent for the subject bargaining unit. This violates, obstructs, impairs and
impedes the service engineers’ and the sales representa-

________________

12 PASCUAL, C., Labor Relations Law, 1986 ed., 159.

13 144 SCRA 628, 635 [1986].

14 Supra.

349

VOL. 210, JUNE 25, 1992

349

Philips Industrial Development, Inc. vs. NLRC

tives’ constitutional right to form unions or associations15 and to self-organization.16 In Victoriano

vs. Elizalde Rope Workers’ Union,17 this Court already ruled:

“x x x Notwithstanding the different theories propounded by the different schools of jurisprudence

regarding the nature and contents of a ‘right,’ it can be safely said that whatever theory one
subscribes to, a right comprehends at least two broad notions, namely: first, liberty or freedom, i.e.,
the absence of legal restraint, whereby an employee may act for himself without being prevented by
law; and second, power, whereby an employee may, as he pleases, join or refrain from joining an
association. It is, therefore, the employee who should decide for himself whether he should join or
not an association; and should he choose to join, he himself makes up his mind as to which
association he would join; and even after he has joined, he still retains the liberty and the power to
leave and cancel his membership with said organization at any time.18 It is clear, therefore, that the
right to join a union includes the right to abstain from joining any union.19 Inasmuch as what both
the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is
the ‘right’ to join associations of his choice, it would be absurd to say that the law also imposes, in
the same breath, upon the employee the duty to join associations. The law does not enjoin an
employee to sign up with any association.”

The decision then of the Executive Labor Arbiter in merely directing the holding of a referendum “to
determine the will of the service engineers, sales representatives as to their inclusion or exclusion
in (sic) the bargaining unit” is the most appropriate procedure that conforms with their right to form,
assist or join a

_________________
15 Section 8, Article III (Bill of Rights) and Section 3, Article XIII of the present Constitution.

16 Article 246, Labor Code of the Philippines, as amended.

17 59 SCRA 54, 66-67 [1974]. See also Anucension vs. National Labor Union, 80 SCRA 350 [1977];
Vassar Industries Employees Union vs. Estrella, 82 SCRA 280 [1978].

18 Citing Pagkakaisa Samahang Manggagawa ng San Miguel Brewery at mga Kasangay (PAFLU)
vs. Enriquez, 108 Phil. 1010 [1960].

19 Citing Abo vs. PHILAME (KG) Employees & Workers Union, 13 SCRA 120 [1965].

350

350

SUPREME COURT REPORTS ANNOTATED

Philips Industrial Development, Inc. vs. NLRC

labor union or organization. However, since this decision was rendered before the effectivity of R.A.
No. 6715, it must now be stressed that its future application to the private parties in this case should,
insofar as service engineers and sales representatives holding supervisory positions or functions are
concerned, take into account the present Article 24520 of the Labor Code which, as amended by
R.A. No. 6715, now reads:

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

The foregoing disquisitions render unnecessary a discussion on the second ground on the alleged
grave abuse of discretion on the part of the NLRC in not applying the “Globe Doctrine.” Suffice it to
state here that since the only issue is the subject employees’ inclusion in or exclusion from the
bargaining unit in question, and PIDI never questioned the decision of the Executive Labor Arbiter,
the Globe Doctrine finds no application. Besides, this doctrine applies only in instances of evenly
balanced claims by competitive groups for the right to be established as the bargaining unit,21 which
do not obtain in this case.

WHEREFORE, the petition is hereby GRANTED. The Decision of public respondent National Labor
Relations Commission in Case No. NLRC-NCR-00-11-03936-87, promulgated on 16 January 1989,
is hereby SET ASIDE while the Decision of the Executive Labor Arbiter in said case dated 17 March
1988 is hereby REINSTATED, subject to the modifications above indicated.

Costs against private respondent.

SO ORDERED.

________________

20 Originally Article 246.

21 Rothenberg on Labor Relations, 1949 ed., 483.

351
VOL. 210, JUNE 26, 1992

351

Travel-On, Inc. vs. Court of Appeals

Gutierrez, Jr. (Chairman), Feliciano, Bidin and Romero, JJ., concur.

Petition granted; decision set aside.

Note.—Supervisors or managerial employees can no longer form a union distinct and separate from
the duly recognized rank-and-file union (Bulletin Publishing Corporation vs. Sanchez, 144 SCRA
628).

———o0o———

14. Golden Farms, Inc. vs. Ferrer-Calleja

 G.R. No. 78755. July 19, 1989.*

GOLDEN FARMS, INC., petitioner, vs. THE HONORABLE DIRECTOR PURA FERRER-
CALLEJA, BUREAU OF LABOR RELATIONS and NATIONAL FEDERATION OF LABOR,
respondents.

Labor; Collective Bargaining Agreement; Court respects the Collective Bargaining Agreement which
was freely and voluntarily entered into as the law between the parties for the duration of the period
agreed upon.—Respondents herein do not dispute that the signatories (listed in Annex “A”, page 30,
Rollo) to the Petition for certification election subject of this case, were holding the positions of
cashier, purchasers, personnel officers, foremen and employees having access to confidential
information such as accounting personnel, radio and telegraph operators and head of various
sections. It is also a fact that respondent Union is the exclusive bargaining Unit of the rank-and-file
employees of petitioner corporation and that an existing CBA between petitioner corporation and the
Union representing these rank-and-file employees was still enforced at the time the Union filed a
petition for certification election in behalf of the aforementioned signatories. Respondents do not
dispute the existence of said collective bargaining agreement. We must therefore respect this CBA
which was freely and voluntarily entered into as the law between the parties for the duration of the
period agreed upon. Until then no one can be compelled to accept changes in the terms of the
collective bargaining agreement.

Same; Same; Managerial employees decreed as disqualified from bargaining with management;
Rationale for such ruling; Managerial employee, definition of.—Furthermore, the signatories to the
petition for certification election are the very type of employees by the nature of their positions and
functions which We have decreed as disqualified from bargaining with management in case of
Bulletin Publishing Co. Inc. vs. Hon. Augusto Sanchez, etc. (144 SCRA 628) reiterating herein the
rationale for such ruling as follows: if these managerial employees would belong to or be affiliated
with a Union, the latter might not be assured of their loyalty to the Union in view of evident conflict of
interests or that the Union can be company-dominated with the presence of managerial employees
in Union membership. A managerial employee is defined under Art. 212 (k) of the new Labor Code
as “one who is vested with powers or prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to
effectively recommend such managerial actions. All employees not falling within this definitions are
considered rank-and-file employees for purposes of this Book.”

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

473

VOL. 175, JULY 19, 1989

473

Golden Farms, Inc. vs. Ferrer-Calleja

Same; Same; Same; Same; Company foremen cannot also join the existing union of the rank-and-
file.—As to the company foremen, while in the performance of supervisory functions, they may be
the extension or alter ego of the management. Adversely, the foremen, by their actuation, may
influence the workers under their supervision to engage in slow down commercial activities or similar
activities detrimental to the policy, interest or business objectives of the company or corporation,
hence they also cannot join.

PETITION to review the resolution of the Director of the Bureau of Labor Relations.

The facts are stated in the opinion of the Court.

J.V. Yap Law Office for petitioner.

Beethoven L. Orcullo for private respondent.

PARAS, J.:

Petitioner Golden Farms, Inc., seeks a reversal of the resolution of public respondent Department of
Labor and Employment Director Pura Ferrer-Calleja in BLR Case No. A-2-56-87 which affirmed on
appeal the decision of Labor Arbiter Conrado O. Macasa, Sr., in NLRC Case No. R-418-ROXI-MED-
UR-88-86, issuing a directive as follows:

“In view of the foregoing, the herein petition for certification election filed by the National Federation
of Labor (NFL) is hereby DISMISSED; whereas, its resultant and relevant consequence of its
recognized representation of the entire rank-and-file employees of the bargaining unit should be
given life and meaning, as it is hereby directed, and Employer Golden Farms, Incorporated likewise
enjoined to negotiate for a supplementary collective bargaining agreement, or for the inclusion of the
herein monthly paid rank-and-file employees at Luna, Kapalong, Davao del Norte, and Lanang,
Davao City in the still existing negotiated contract, whichever the parties may consider just and
appropriate under the circumstances.”

SO ORDERED. (p. 29, Rollo)

The case originated as a Petition for Direct Certification Election or Recognition filed by herein private
respondent in behalf of certain office employees and foremen before Regional Office No. XI, Davao
City of the Ministry of Labor and Employment.

474

474

SUPREME COURT REPORTS ANNOTATED

Golden Farms, Inc. vs. Ferrer-Calleja

Petitioner herein opposed said petition on the ground among others that a perusal of the names
allegedly supporting the said petition showed that said persons by the nature of their jobs are
performing managerial functions and/or occupying confidential positions such that they cannot
validly constitute a separate or distinct group from the existing collective bargaining unit also
represented by private respondent.

Petitioner is a corporation engaged in the production of bananas for export. Private respondent Union
represents the employees/workers of petitioner corporation, who were the same signatories to an
earlier Petition for Certification Election filed in 1984 before the Ministry of Labor known as ROXI
Case No. UR-70-84, which was dismissed by a Resolution issued by Med-Arbiter Conchita Martinez
when it was established that a collective bargaining unit (NFL) between the Corporation and the
rank-and-file employees was and is in existence at the time of the filing of the said petition for
certification election until the present filing. However, in the order of dismissal, it was stated:

“After taking into consideration the functions exercised by the foremen as contained in their joint
affidavits (Annexes “A-1”, “A-2” & “A-3”, Petitioner’s Position Paper) apparently, they fall within the
classification of rank-and-file employees. For, as consistently ruled in a long line of decisions, mere
supervisory designations in the position titles, do not make the holders of such positions any less
rank and filers, without the convincing proof that such supervisory designations are coupled with
actual performance of managerial functions. In the cases at bar, what was submitted by the
respondent companies are only lists of employees holding the positions of foremen and confidential
positions and as such are not covered by the bargaining unit. Such piece of evidence alone does
not constitute convincing proof for us to adapt respondents’ stance (Annexes “A”, “B”, “C”, & “D”).
Comment on Petition).

(p. 13, Rollo)

Having had no opportunity to contest the abovementioned statement in the order of dismissal,
petitioner herein as private respondent therein, filed a “Manifestation” stating among others:

475

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475

Golden Farms, Inc. vs. Ferrer-Calleja

“2. That since the petitions were dismissed the herein employees make clear for the record that said
view would run counter to the provision of the pertinent Collective Bargaining Agreement whereby
the foremen were already acknowledged and agreed upon to be managerial employees and
accordingly excluded from the coverage of the said CBA;
“3. That with respect to those employees holding confidential positions, it is a basic principle that
they cannot be included in any bargaining unit, the fact being that having access to confidential
informations, said employees may be the source of undue advantage. Said employees may act as
spies for either parties to collective bargaining agreement. This is especially true in this case where
the petitioning union is already the bargaining agent of the rank-and-file employees in the
establishment. To allow confidential employees to join existing bargaining unit will defeat the very
purpose for which an employee holding confidential position was in the first place excluded.”
(p. 68, Rollo)
Private respondent herein as petitioner therein appealed the order of dismissal which was
accordingly opposed (Annex “L” p. 69, Rollo) by Golden Farms, Inc., reiterating the grounds and
arguments set forth in its Manifestation filed earlier. The appeal was dismissed and subsequently
the National Federation of Labor Union refiled the Petition for Certification in NLRC Case No. R-418-
ROX-MED-UR-88-86 which was also dismissed. Said order of dismissal is now the subject of this
review for containing directives not within the power of a Med-Arbiter to issue. Petitioner Golden
Farms, Inc., now poses the following questions:

—HAS A MED-ARBITER THE POWER OR AUTHORITYTO DIRECT MANAGEMENT TO ENTER

INTO A SUPPLEMENTAL COLLECTIVE BARGAINING AGREEMENT WITH A CONTRACTING
UNION.

II

—MAY SUPERVISORS, CASHIERS, FOREMEN, AND EMPLOYEES HOLDING

CONFIDENTIAL/MANAGERIAL FUNCTION COMPEL MANAGEMENT TO ENTER INTOA
COLLECTIVE BARGAINING AGREEMENT WITH THEM.

(p. 14, Rollo)

476

476

SUPREME COURT REPORTS ANNOTATED

Golden Farms, Inc. vs. Ferrer-Calleja

The petition merits Our consideration.

Respondents relied heavily on the alleged finding of Med-Arbiter Martinez that the employees who
were signatories to the petition for certification election and represented by respondent Union are
actually rank-and-file workers not disqualified from entering into a collective bargaining agreement
with management. In said findings of fact, Med-Arbiter Martinez singled out in her classification as
rank-and-file employees the foremen of Petitioner Corporation considered from their joint affidavits
and for lack of convincing proof that their supervisory designations are coupled with the actual
performance of managerial functions.

Whether or not such finding is supported by the evidence is beside the point. Respondents herein
do not dispute that the signatories (listed in Annex “A”, page 30, Rollo) to the Petition for certification
election subject of this case, were holding the positions of cashier, purchasers, personnel officers,
foremen and employees having access to confidential information such as accounting personnel,
radio and telegraph operators and head of various sections. It is also a fact that respondent Union
is the exclusive bargaining Unit of the rank-and-file employees of petitioner corporation and that an
existing CBA between petitioner corporation and the Union representing these rank-and-file
employees was still enforced at the time the Union filed a petition for certification election in behalf
of the aforementioned signatories. Under the terms of said CBA (Annex “E”, p. 40, Rollo) it is
expressly provided that:

“Section 1. The COMPANY and the UNION hereby agree that the recognized bargaining unit for
purposes of this agreement shall consist of regular rank-and-file workers employed by the
COMPANY at the plantation presently situated at Alejal, Carmen, Davao. Consequently, all
managerial personnel like, superintendents, supervisor, foremen, administrative, professional and
confidential employees, and those temporary, casual, contractual, and seasonal workers are
excluded from the bargaining unit and therefore, not covered by this agreement.”

(p. 41, Rollo)

477

VOL. 175, JULY 19, 1989

477

Golden Farms, Inc. vs. Ferrer-Calleja

Respondents do not dispute the existence of said collective bargaining agreement. We must
therefore respect this CBA which was freely and voluntarily entered into as the law between the
parties for the duration of the period agreed upon. Until then no one can be compelled to accept
changes in the terms of the collective bargaining agreement.

Furthermore, the signatories to the petition for certification election are the very type of employees
by the nature of their positions and functions which We have decreed as disqualified from bargaining
with management in case of Bulletin Publishing Co. Inc. vs. Hon. Augusto Sanchez, etc. (144 SCRA
628) reiterating herein the rationale for such ruling as follows: if these managerial employees would
belong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in
view of evident conflict of interests or that the Union can be company-dominated with the presence
of managerial employees in Union membership. A managerial employee is defined under Art. 212
(k) of the new Labor Code as “one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions. All employees not falling within
this definitions are considered rank-and-file employees for purposes of this Book.”

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

As to the company foremen, while in the performance of supervisory functions, they may be the
extension or alter ego of the management. Adversely, the foremen, by their actuation,

478

478

SUPREME COURT REPORTS ANNOTATED

Golden Farms, Inc. vs. Ferrer-Calleja

may influence the workers under their supervision to engage in slow down commercial activities or
similar activities detrimental to the policy, interest or business objectives of the company or
corporation, hence they also cannot join.

WHEREFORE, finding the assailed directive of Med-Arbiter Conrado O. Macasa, Sr. which was
affirmed by Director Pura Ferrer-Calleja reiterating the directive of Med-Arbiter Conchita Martinez “to
negotiate for a supplementary collective bargaining agreement, or for the inclusion of the herein
monthly paid rank-and-file employees” to be erroneous as it is in complete disregard of the terms of
the collective bargaining agreement, the same is hereby DECLARED to be without force and effect.

SO ORDERED.

Melencio-Herrera, (Chairman), Padilla, Sarmiento and Regalado, JJ., concur.

Directive declared to be without force and effect.

Notes.—Collective bargaining which is defined as negotiations towards a collective agreement, is

one of the democratic frameworks under the New Labor Code, designed to stabilize the relation
between labor and management and to create a climate of sound and stable industrial peace. (Kiok
Loy vs. National Labor Relations Commission, 141 SCRA 179.)

Collective bargaining agreement constitutes the law between the parties. (Fegurin vs. NLRC, 120
SCRA 910.)

——o0o——
15. United Pepsi-Cola Supervisory Union (UPSU) vs. Laguesma

G.R. No. 122226. March 25, 1998.*

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

LAGUESMA and PEPSI-COLA PRODUCTS, PHILIPPINES, INC., respondents.

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

Same; Same; Court finds that only those employees occupying the position of route manager and
accounting manager are managerial employees.—In Case No. OS-MA-10-318-91, entitled Worker’s
Alliance Trade Union (WATU) v. Pepsi-Cola Products Philippines, Inc., decided on November 13,
1991, the Secretary of Labor found: We examined carefully the pertinent job descriptions of the
subject employees and other documentary evidence on record vis-a-vis paragraph (m), Article 212
of the Labor Code, as amended, and we find that only those employees occupying the position of
route manager and accounting manager are managerial employees. The rest, i.e., quality control
manager, yard/transport manager and warehouse operations manager are supervisory employees.

Same; Same; In the case of Workers Alliance Trade Unions (WATU) vs. Pepsi Cola Products, Phils.,
Inc. (OS-MA-10-318-91), Court ruled that a route manager is a managerial employee within the
context of the definition of the law, and hence, ineligible to join, form or assist a union.—The issue
brought before us is not of first impression. At one time, we had the occasion to rule upon the status
of route manager in the same company vis-a-vis the issue as to whether or not it is supervisory
employee or a managerial employee. In the case of Workers Alliance Trade Unions (WATU) vs.
Pepsi Cola Products, Phils., Inc. (OS-MA-10-318-91), 15 November 1991, we ruled that a route
manager is a managerial employee within the context of the definition of the law, and hence, ineligible
to join, form or assist a union. We have once more passed upon the logic of our Decision aforecited
in the light of the issues raised in the instant appeal, as well as the available documentary evidence
on hand, and have come to the view that there is no cogent reason to depart from

17

VOL. 288, MARCH 25, 1998

17

United Pepsi-Cola Supervisory Union (UPSU) vs. Laguesma

our earlier holding. Route Managers are, by the very nature of their functions and the authority they
wield over their subordinates, managerial employees. The prescription found in Art. 245 of the Labor
Code, as amended therefore, clearly applies to them.

Same; Same; Route managers cannot thus possibly be classified as mere supervisors.—The route
managers cannot thus possibly be classified as mere supervisors because their work does not only
involve, but goes far beyond, the simple direction or supervision of operating employees to
accomplish objectives set by those above them. They are not mere functionaries with simple
oversight functions but business administrators in their own right. An idea of the role of route
managers as managers per se can be gotten from a memo sent by the director of metro sales
operations of respondent company to one of the route managers.

Same; Same; Court upheld in several of its decisions the right of supervisors to organize for purposes
of labor relations.—For its part, the Supreme Court upheld in several of its decisions the right of
supervisors to organize for purposes of labor relations.

Same; Same; The guarantee of organizational right in Art. 111, §8 not infringed by a ban against
managerial employees forming a union; There is a rational basis for prohibiting managerial
employees from forming or joining labor organizations.—Nor is the guarantee of organizational right
in Art. III, §8 infringed by a ban against managerial employees forming a union. The right guaranteed
in Art. III, §8 is subject to the condition that its exercise should be for purposes “not contrary to law.”
In the case of Art. 245, there is a rational basis for prohibiting managerial employees from forming
or joining labor organizations. As Justice Davide, Jr., himself a constitutional commissioner, said in
his ponencia in Philips Industrial Development, Inc. v. NLRC: In the first place, all these employees,
with the exception of the service engineers and the sales force personnel, are confidential
employees. Their classification as such is not seriously disputed by PEO-FFW; the five (5) previous
CBAs between PIDI and PEO-FFW explicitly considered them as confidential employees. By the
very nature of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of labor relations. As
such, the rationale behind the ineligibility of managerial

18

18

SUPREME COURT REPORTS ANNOTATED

United Pepsi-Cola Supervisory Union (UPSU) vs. Laguesma

employees to form, assist or joint a labor union equally applies to them.

Remedial Law; Res Judicata; The doctrine of res judicata certainly applies to adversary
administrative proceedings; Proceedings for certification election are quasi judicial in nature and
therefore decisions rendered in such proceedings can attain finality.—But the doctrine of res judicata
certainly applies to adversary administrative proceedings. As early as 1956, in Brillantes v. Castro,
we sustained the dismissal of an action by a trial court on the basis of a prior administrative
determination of the same case by the Wage Administration Service, applying the principle of res
judicata. Recently, in Abad v. NLRC we applied the related doctrine of stare decisis in holding that
the prior determination that certain jobs at the Atlantic Gulf and Pacific Co. were project employments
was binding in another case involving another group of employees of the same company. Indeed, in
Nasipit Lumber Co., this Court clarified toward the end of its opinion that “the doctrine of res judicata
applies . . . to judicial or quasi judicial proceedings and not to the exercise of administrative powers.”
Now proceedings for certification election, such as those involved in Case No. OS-MA-A-10-318-91
and Case No. OS-A-3-71-92, are quasi judicial in nature and, therefore, decisions rendered in such
proceedings can attain finality.

DAVIDE, JR., J.: Concurring and Dissenting Opinion

Labor Law; Labor Unions; Constitutional Law; The first sentence of the present Article 245 of the
Labor Code must be struck down as unconstitutional; Managerial employees may only be eligible to
join, assist or form unions or labor organizations of their own rank, and not those of the supervisory
employees nor the rank-and-file employees.—With the abrogation of the former Article 246 of the
Labor Code, and the constitutional prohibition against any law prohibiting managerial employees
from joining, assisting or forming unions or labor organizations, the first sentence then of the present
Article 245 of the Labor Code must be struck down as unconstitutional. However, due to an obvious
conflict of interest—being closely identified with the interests of management in view of the inherent
nature of their functions, duties and responsibilities—managerial employees may only be eligible to
join, assist or form unions or labor organizations of their own rank, and not those of the supervisory
employees nor the rank-and-file employees.

19

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Same; Same; Same; The route managers who are managerial employees, cannot join or assist
UPSU.—In the instant case, the petitioner’s name—United Pepsi-Cola Supervisory Union (UPSU)—
indubitably attests that it is a union of supervisory employees. In light of the earlier discussion, the
route managers who are managerial employees, cannot join or assist UPSU. Accordingly, the Med-
Arbiter and public respondent Laguesma committed no error in denying the petition for direct
certification or for certification election.

PUNO, J.: Separate Concurring Opinion

Labor Law; Labor Unions; Managerial employees are the very type of employees who, by the nature
of their positions and functions, have been decreed disqualified from bargaining with management.—
In the same Bulletin case, the Court applied Article 246 and held that managerial employees are the
very type of employees who, by the nature of their positions and functions, have been decreed
disqualified from bargaining with management. This prohibition is based on the rationale that if
managerial employees were to belong or be affiliated with a union, the union might not be assured
of their loyalty in view of evident conflict of interest or that the union can be company-dominated with
the presence of managerial employees in the union membership. In the collective bargaining
process, managerial employees are supposed to be on the side of the employer, to act as its
representative, and to see to it that its interests are well protected. The employer is not assured of
such protection if these employees themselves become union members.

Same; Same; R.A. 6715 did not abrogate, much less amend the prohibition on managerial
employees to join labor organizations.—The prohibition on managerial employees to join, assist or
form labor organizations was retained in the Labor Code despite substantial amendments made in
1989 by R.A. 6715, the Herrera-Veloso Law. R.A. 6715 was passed after the effectivity of the 1987
Constitution and this law did not abrogate, much less amend the prohibition on managerial
employees to join labor organizations. The express prohibition in Article 246 remained. However, as
an addendum to this same Article, R.A. 6715 restored to supervisory employees the right to join
labor organizations of their own.

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Same; Same; Managerial employees may form associations or organizations so long as they are
not labor organizations.—Notably, however, Article 245 does not absolutely disqualify managerial
employees from exercising their right of association. What it prohibits is merely the right to join labor
organizations. Managerial employees may form associations or organizations so long as they are
not labor organizations. The freedom of association guaranteed under the Constitution remains and
has not been totally abrogated by Article 245.

MOTION FOR RECONSIDERATION in the Supreme Court.

The facts are stated in the opinion of the Court.

Jose C. Espinas for petitioner.

Fernandez, Zarsadias and Associate Law Offices for private respondent.

MENDOZA, J.:

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

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

Petitioner brought this suit challenging the validity of the order dated August 31, 1995, as reiterated
in the order dated September 22, 1995, of the Secretary of Labor and Employ-

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ment. Its petition was dismissed by the Third Division for lack of showing that respondent committed
grave abuse of discretion. But petitioner filed a motion for reconsideration, pressing for resolution its
contention that the first sentence of Art. 245 of the Labor Code, so far as it declares managerial
employees to be ineligible to form, assist or join unions, contravenes Art. III, §8 of the Constitution
which provides:

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

For this reason, the petition was referred to the Court en banc.

The Issues in this Case

Two questions are presented by the petition: (1) whether the route managers at Pepsi-Cola Products
Philippines, Inc. are managerial employees; and (2) whether Art. 245, insofar as it prohibits
managerial employees from forming, joining or assisting labor unions, violates Art. III, §8 of the
Constitution.

In resolving these issues it would be useful to begin by defining who are “managerial employees”
and considering the types of “managerial employees.”

Types of Managerial Employees

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

______________

1 JAMES A.F. STONER & CHARLES WANKEL, MANAGEMENT 11 (3rd. ed., 1987).

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Top management

———————————————

Middle
Management

——————————————————

First-Line
Management
(also called Supervisor)

———————————————————
———————————————————

Operatives
or
Operating
Employees

FIRST-LINE MANAGERS—The lowest level in an organization at which individuals are responsible

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

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

TOP MANAGERS—Composed of a comparatively small group of executives, top management is

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

_______________

2 Id. (emphasis added).

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As can be seen from this description, a distinction exists between those who have the authority to
devise, implement and control strategic and operational policies (top and middle managers) and
those whose task is simply to ensure that such policies are carried out by the rank-and-file employees
of an organization (first-level managers/supervisors). What distinguishes them from the rank-and-
file employees is that they act in the interest of the employer in supervising such rank-and-file
employees.

“Managerial employees” may therefore be said to fall into two distinct categories: the “managers” per
se, who compose the former group described above, and the “supervisors” who form the latter group.
Whether they belong to the first or the second category, managers, vis-a-vis employers, are,
likewise, employees.3

The first question is whether route managers are managerial employees or supervisors.

Previous Administrative Determinations of

the Question Whether Route Managers
are Managerial Employees
It appears that this question was the subject of two previous determinations by the Secretary of
Labor and Employment, in accordance with which this case was decided by the med-arbiter.

In Case No. OS-MA-10-318-91, entitled Worker’s Alliance Trade Union (WATU) v. Pepsi-Cola
Products Philippines, Inc., decided on November 13, 1991, the Secretary of Labor found:

We examined carefully the pertinent job descriptions of the subject employees and other
documentary evidence on record vis-a-vis paragraph (m), Article 212 of the Labor Code, as
amended, and we find that only those employees occupying the position of route manager and
accounting manager are managerial employees. The

______________

3 Atlantic Gulf & Pac. Co. of Manila v. CIR, 113 Phil. 650 (1961).

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rest, i.e., quality control manager, yard/transport manager and warehouse operations manager are
supervisory employees.

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

As to the route managers and accounting manager, we are convinced that they are managerial
employees. Their job descriptions clearly reveal so.

On July 6, 1992, this finding was reiterated in Case No. OS-A-3-71-92, entitled In Re: Petition for
Direct Certification and/or Certification Election-Route Managers/Supervisory Employees of Pepsi-
Cola Products Phils., Inc., as follows:
The issue brought before us is not of first impression. At one time, we had the occasion to rule upon
the status of route manager in the same company vis a vis the issue as to whether or not it is
supervisory employee or a managerial employee. In the case of Workers Alliance Trade Unions
(WATU) vs. Pepsi Cola Products, Phils., Inc. (OS-MA-10-318-91), 15 November 1991, we ruled that
a route manager is a managerial employee within the context of the definition of the law, and hence,
ineligible to join, form or assist a union. We have once more passed upon the logic of our Decision
aforecited in the light of the issues raised in the instant appeal, as well as the available documentary
evidence on hand, and have come to the view that there is no cogent reason to depart from our
earlier holding. Route Managers are, by the very nature of their functions and the authority they wield
over their subordinates, managerial

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employees. The prescription found in Art. 245 of the Labor Code, as amended therefore, clearly
applies to them.4

Citing our ruling in Nasipit Lumber Co. v. National Labor Relations Commission,5 however, petitioner
argues that these previous administrative determinations do not have the effect of res judicata in this
case, because “labor relations proceedings” are “non-litigious and summary in nature without regard
to legal technicalities.”6 Nasipit Lumber Co. involved a clearance to dismiss an employee issued by
the Department of Labor. The question was whether in a subsequent proceeding for illegal dismissal,
the clearance was res judicata. In holding it was not, this Court made it clear that it was referring to
labor relations proceedings of a non-adversary character, thus:

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

But the doctrine of res judicata certainly applies to adversary administrative proceedings. As early
as 1956, in Brillan-

______________

4 Record, pp. 53-54.

5 177 SCRA 93 (1989).

6 Id., p. 100.

7 Nasipit Lumber Co. v. National Labor Relations Commission, 177 SCRA 93, 100 (1989).

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tes v. Castro,8 we sustained the dismissal of an action by a trial court on the basis of a prior
administrative determination of the same case by the Wage Administration Service, applying the
principle of res judicata. Recently, in Abad v. NLRC9 we applied the related doctrine of stare decisis
in holding that the prior determination that certain jobs at the Atlantic Gulf and Pacific Co. were
project employments was binding in another case involving another group of employees of the same
company. Indeed, in Nasipit Lumber Co., this Court clarified toward the end of its opinion that “the
doctrine of res judicata applies . . . to judicial or quasi judicial proceedings and not to the exercise of
administrative powers.”10 Now proceedings for certification election, such as those involved in Case
No. OS-MA-10-318-91 and Case No. OS-A-3-71-92, are quasi judicial in nature and, therefore,
decisions rendered in such proceedings can attain finality.11

Thus, we have in this case an expert’s view that the employees concerned are managerial
employees within the purview of Art. 212 which provides:

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

______________

8 99 Phil. 497 (1956).

9 G.R. No. 108996, Feb. 20, 1998.

10 Nasipit Lumber Co. v. National Labor Relations Commission, supra, note 7.

11 B.F. Goodrich Philippines, Inc. v. B.F. Goodrich (Marikina Factory) Confidential and Salaries
Employees Union-NATU, 49 SCRA 532 (1973).

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At the very least, the principle of finality of administrativedetermination compels respect for the
finding of the Secretaryof Labor that route managers are managerial employees asdefined by law in
the absence of anything to show that suchdetermination is without substantial evidence to support
it.Nonetheless, the Court, concerned that employees who areotherwise supervisors may wittingly or
unwittingly be classified as managerial personnel and thus denied the right of self-organization, has
decided to review the record of this case.
DOLE’s Finding that Route Managers are
Managerial Employees Supported by
Substantial Evidence in the Record

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

A. BASIC PURPOSE
A Manager achieves objectives through others.

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

These then are your functions as Pepsi-Cola Route Manager. Within these functions—managing
your job and managing your people—you are accountable to your District Manager for the execution
and completion of various tasks and activities which will make it possible for you to achieve your
sales objectives.

B. PRINCIPAL ACCOUNTABILITIES
1.0MANAGING YOUR JOB
The Route Manager is accountable for the following:

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1.1SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal contacts with dealers.
1.1.4 Inspect and ensure that all merchandizing [sic] objectives are achieved in all outlets.
1.1.5 maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to
maximize utilization of resources.
1.2Administration
1.2.1 Ensure the proper loading for route trucks before check-out and the proper sorting of bottles
before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required
on an accurate and timely basis.
1.2.3 Ensure proper implementation of the various company policies and procedures incl. but not
limited to shakedown; route shortage; progressive discipline; sorting; spoilages; credit/collection;
accident; attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:

2.1Route Sales Team Development

2.1.1 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at
least 3 days a week, to be supported by required route ride documents/reports & back check/spot
check
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at least 2 days a week to be supported by required documents/reports.

2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of
effective sales and merchandizing [sic] techniques of the salesmen and helpers. Conduct group
training at least 1 hour each week on a designated day and of specific topic.
2.2Code of Conduct
2.2.1 Maintain the company’s reputation through strict adherence to PCPPI’s code of conduct and
the universal standards of unquestioned business ethics.12
Earlier in this opinion, reference was made to the distinction between managers per se (top
managers and middle managers) and supervisors (first-line managers). That distinction is evident in
the work of the route managers which sets them apart from supervisors in general. Unlike
supervisors who basically merely direct operating employees in line with set tasks assigned to them,
route managers are responsible for the success of the company’s main line of business through
management of their respective sales teams. Such management necessarily involves the planning,
direction, operation and evaluation of their individual teams and areas which the work of supervisors
does not entail.

The route managers cannot thus possibly be classified as mere supervisors because their work does
not only involve, but goes far beyond, the simple direction or supervision of operating employees to
accomplish objectives set by those above them. They are not mere functionaries with simple
oversight functions but business administrators in their own right. An idea of the role of route
managers as managers per se can be gotten from a memo sent by the director of metro

______________

12 DOLE Record, pp. 144-145.

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sales operations of respondent company to one of the route managers. It reads:13

03 April 1995

To : CESAR T. REOLADA
From : REGGIE M. SANTOS
Subj : SALARY INCREASE

Effective 01 April 1995, your basic monthly salary of P11,710 will be increased to P12,881 or an
increase of 10%. This represents the added managerial responsibilities you will assume due to the
recent restructuring and streamlining of Metro Sales Operations brought about by the continuous
losses for the last nine (9) months.

Let me remind you that for our operations to be profitable, we have to sustain the intensity and
momentum that your group and yourself have shown last March. You just have to deliver the desired
volume targets, better negotiated concessions, rationalized sustaining deals, eliminate or reduced
overdues, improved collections, more cash accounts, controlled operating expenses, etc. Also,
based on the agreed set targets, your monthly performance will be closely monitored.
You have proven in the past that your capable of achieving your targets thru better planning,
managing your group as a fighting team, and thru aggressive selling. I am looking forward to your
success and I expect that you just have to exert your doubly best in turning around our operations
from a losing to a profitable one! Happy Selling!!

(Sgd.) R.M. SANTOS

The plasticized card given to route managers, quoted in the separate opinion of Justice Vitug,
although entitled “RM’s Job Description,” is only a summary of performance standards. It does not
show whether route managers are managers per se or supervisors. Obviously, these performance
standards have to be related to the specific tasks given to route managers in the four-page “Route
Manager Position Description,” and,

______________

13 Rollo, p. 46 (emphasis in original).

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when this is done, the managerial nature of their jobs is fully revealed. Indeed, if any, the card
indicates the great latitude and discretion given to route managers—from servicing and enhancing
company goodwill to supervising and auditing accounts, from trade (new business) development to
the discipline, training and monitoring of performance of their respective sales teams, and so forth,—
if they are to fulfill the company’s expectations in the “key result areas.”

Article 212(m) says that “supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment.” Thus, their only power
is to recommend. Certainly, the route managers in this case more than merely recommend effective
management action. They perform operational, human resource, financial and marketing functions
for the company, all of which involve the laying down of operating policies for themselves and their
teams. For example, with respect to marketing, route managers, in accordance with B.1.1.1 to
B.1.1.9 of the Route Managers Job Description, are charged, among other things, with expanding
the dealership base of their respective sales areas, maintaining the goodwill of current dealers, and
distributing the com-pany’s various promotional items as they see fit. It is difficult to see how
supervisors can be given such responsibility when this involves not just the routine supervision of
operating employees but the protection and expansion of the company’s business vis-a-vis its
competitors.

While route managers do not appear to have the power to hire and fire people (the evidence shows
that they only “recommended” or “endorsed” the taking of disciplinary action against certain
employees), this is because this is a function of the Human Resources or Personnel Department of
the company.14 And neither should it be presumed that just because they are given set benchmarks
to observe, they are ipso facto supervisors. Adequate control methods (as embodied in such

______________

14 Record, pp. 133-141.

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concepts as “Management by Objectives [MBO]” and “performance appraisals”) which require a

delineation of the functions and responsibilities of managers by means of ready reference cards as
here, have long been recognized in management as effective tools for keeping businesses
competitive.

This brings us to the second question, whether the first sentence of Art. 245 of the Labor Code,
prohibiting managerial employees from forming, assisting or joining any labor organization, is
constitutional in light of Art. III, §8 of the Constitution which provides:

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

As already stated, whether they belong to the first category (managers per se) or the second
category (supervisors), managers are employees. Nonetheless, in the United States, as Justice
Puno’s separate opinion notes, supervisors have no right to form unions. They are excluded from
the definition of the term “employee” in §2(3) of the Labor-Management Relations Act of 1947.15 In
the Philippines, the question whether

______________

15 The rationale for excluding supervisors in the United States is given in the Report of the
Committee on Education and Labor of the U.S. House of Representatives, quoted in NLRB v. Bell
Aerospace Co., 416 U.S. 267, 281, n. 11, 40 L.Ed.2d 134, 147, n. 11 (1974), thus:

Supervisors are management people. They have distinguished themselves in their work. They have
demonstrated their ability to take care of themselves without depending upon the pressure of
collective action. No one forced them to become supervisors. They abandoned the “collective
security” of the rank and file voluntarily, because they believed the opportunities thus opened to them
to be more valuable to them than such “security.” It seems wrong, and it is wrong, to subject people
of this kind, who have demonstrated their initiative, their ambition and their ability to get ahead, to
the leveling processes of seniority, uniformity and standardization

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managerial employees have a right of self-organization has arisen with respect to first-level
managers or supervisors, as shown by a review of the course of labor legislation in this country.

Right of Self-Organization of Managerial

Employees under Pre-Labor Code Laws
Before the promulgation of the Labor Code in 1974, the field of labor relations was governed by the
Industrial Peace Act (R.A. No. 875).

In accordance with the general definition above, this law defined “supervisor” as follows:

SECTION 2. . . .
(k) “Supervisor” means any person having authority in the interest of an employer, to hire, transfer,
suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or responsibly
to direct them, and to adjust their grievances, or effectively to recommend such acts, if, in connection
with the foregoing, the exercise of such authority is not of a merely routinary or clerical nature but
requires the use of independent judgment.16

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

SEC. 3. Employees’ Right to Self-Organization.—Employees shall have the right to self-organization

and to form, join or assist labor organizations of their own choosing for the purpose of collective
bargaining through representatives of their own choosing and to

______________

that the Supreme Court recognizes as being fundamental principles of unionism. (J.I. Case Co. v.
National Labor Relations Board, 321 U.S. 332, 88 L.Ed. 762, 64 S. Ct. 576 [1944]). It is wrong for
the foremen, for it discourages the things in them that made them foremen in the first place. For the
same reason, that it discourages those best qualified to get ahead, it is wrong for industry, and
particularly for the future strength and productivity of our country.

16 R.A. No. 875 (1953), §2(k).

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engage in concerted activities for the purpose of collective bargaining and other mutual aid and
protection. Individuals employed as supervisors shall not be eligible for membership in a labor
organization of employees under their supervision but may form separate organizations of their
own.17

For its part, the Supreme Court upheld in several of its decisions the right of supervisors to organize
for purposes of labor relations.18

Although it had a definition of the term “supervisor,” the Industrial Peace Act did not define the term
“manager.” But, using the commonly-understood concept of “manager,” as above stated, it is
apparent that the law used the term “supervisors” to refer to the sub-group of “managerial
employees” known as front-line managers. The other sub-group of “managerial employees,” known
as managers per se, was not covered.

However, in Caltex Filipino Managers and Supervisors Association v. Court of Industrial Relations,19
the right of all managerial employees to self-organization was upheld as a general proposition, thus:

It would be going too far to dismiss summarily the point raised by respondent Company—that of the
alleged identity of interest between the managerial staff and the employing firm. That should
ordinarily be the case, especially so where the dispute is between management and the rank and
file. It does not necessarily follow though that what binds the managerial staff to the corporation
forecloses the possibility of conflict between them. There could be a real difference between what
the welfare of such group requires and the concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of their own. Nor

______________
17 Id., §3.

18 E.g., Filoil Refinery Corp. v. Filoil Supervisory and Confidential Employees Association, 6 SCRA
522 (1972); Kapisanan ng mga Manggagawa sa Manila Railroad Co. v. CIR, 106 Phil. 607 (1959).

19 47 SCRA 112 (1972) (res. on motion for reconsideration, per Fernando, J.)

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is this to indulge in empty theorizing. The record of respondent Company, even the very case cited
by it, is proof enough of their uneasy and troubled relationship. Certainly the impression is difficult to
erase that an alien firm failed to manifest sympathy for the claims of its Filipino executives. To
predicate under such circumstances that agreement inevitably marks their relationship, ignoring that
discord would not be unusual, is to fly in the face of reality.

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

Actually, the case involved front-line managers or supervisors only, as the plantilla of employees,
quoted in the main opinion,21 clearly indicates:

CAFIMSA members holding the following Supervisory Payroll Position Title are Recognized by the
Company

Payroll Position Title

Assistant to Mgr.—National Acct. Sales

Staff Asst.—0 Marketing

Jr. Sales Engineer

Sales Supervisor

Retail Development Asst.

Supervisory Assistant

______________

20 47 SCRA at 115-117.
21 44 SCRA 350, 363, n. 3 (1972) (per Villamor, J.) (emphasis added).

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Jr. Supervisory Assistant

Credit Assistant

Lab. Supvr.—Pandacan

Jr. Sales Engineer B

Operations Assistant B

Field Engineer

Sr. Opers. Supvr.—MIA A/S

Purchasing Assistant

Jr. Construction Engineer

St. Sales Supervisor

Deport Supervisor A

Terminal Accountant B

Merchandiser

Dist. Sales Prom. Supvr.

Instr.—Merchandising

Asst. Dist. Accountant B

Sr. Opers. Supervisor

Jr. Sales Engineer A

Asst. Bulk Ter. Supt.

Sr. Opers. Supvr.

Credit Supervisor A

Asst. Stores Supvr. A

Ref. Supervisory Draftsman

Refinery Shift Supvr. B

Asst. Lab. Supvr. A—Operations (Refinery)

Refinery Supvr. B

Asst. Lab. Supvr. A (Refinery)

St. Process Engineer B (Refinery)

Asst. Supvr. A—Maintenance (Refinery)

Asst. Supvr. B—Maintenance (Refinery)

Supervisory Accountant (Refinery)

Communications Supervisor (Refinery)

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

Right of Self-Organization of Managerial

Employees under the Labor Code
Thus, the dictum in the Caltex case which allowed at least for the theoretical unionization of top and
middle managers

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

ART. 212. Definitions. . . .

(k) “Managerial Employee” is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline
employees, or to effectively recommend such managerial actions. All employees not falling within
this definition are considered rank and file employees for purposes of this Book.22

The definition shows that it is actually a combination of the commonly understood definitions of both
groups of managerial employees, grammatically joined by the phrase “and/or.”

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

Supervisory unions and unions of security guards to cease operation.—All existing supervisory
unions and unions of security

______________

22 LABOR CODE, ART. 212(m).

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

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

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

Real Intent of the 1986 Constitutional Commission

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

MR. LERUM. My amendment is on Section 7, page 2, line 19, which is to insert between the words
“people” and “to” the following: WHETHER EMPLOYED BY THE STATE OR PRIVATE
ESTABLISHMENTS. In other words, the section will now read as follows: “The right of the people
WHETHER EMPLOYED BY THE STATE

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OR PRIVATE ESTABLISHMENTS to form associations, unions, or societies for purposes not
contrary to law shall not be abridged.”23

Explaining his proposed amendment, he stated:

MR. LERUM. Under the 1935 Bill of Rights, the right to form associations is granted to all persons
whether or not they are employed in the government. Under that provision, we allow unions in the
government, in government-owned and controlled corporations and in other industries in the private
sector, such as the Philippine Government Employees’ Association, unions in the GSIS, the SSS,
the DBP and other government-owned and controlled corporations.

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

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

Notwithstanding any provision of this article, the right to self-organization shall not be denied to
government employees.

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

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

THE PRESIDENT. What does the Committee say?

FR. BERNAS. Certainly, the sense is very acceptable, but the point raised by Commissioner Rodrigo
is well-taken. Perhaps, we

______________

23 I RECORD OF THE CONSTITUTIONAL COMMISSION 761 (Session of July 18, 1986).

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can lengthen this a little bit more to read: “The right of the people WHETHER UNEMPLOYED OR
EMPLOYED BY STATE OR PRIVATE ESTABLISHMENTS.”

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

MR. DE LOS REYES. Will the proponent accept an amendment to the amendment, Madam
President?
MR. LERUM. Yes, as long as it will carry the idea that the right of the employees in the private sector
is recognized.24

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

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

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

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

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

FR. BERNAS. The Committee accepts.

_______________

24 Id. (emphasis added).

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

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

The question is what Commissioner Lerum meant in seeking to “automatically abolish” the then Art.
246 of the Labor Code. Did he simply want “any kind of wording as long as it will amount to absolute
recognition of private sector employees, without exception, to organize?”26 Or, did he instead intend
to have his words taken in the context of the cause which moved him to propose the amendment in
the first place, namely, the denial of the right of supervisory employees to organize, because he said,
“We are afraid that without any corresponding provision covering the private sector, security guards,
supervisory employees or majority [of] employees will still be excluded, and that is the purpose of
this amendment?”27

It would seem that Commissioner Lerum simply meant to restore the right of supervisory employees
to organize. For even though he spoke of the need to “abolish” Art. 246 of the Labor Code which, as
already stated, prohibited “managerial employees” in general from forming unions, the fact was that
in explaining his proposal, he repeatedly referred to “supervisory employees” whose right under the
Industrial Peace Act to organize had been taken away by Art. 246. It is noteworthy that Commissioner
Lerum never referred to the then definition of “managerial employees” in Art. 212(m) of the Labor
Code which put together, under the broad phrase “managerial employees,” top and middle managers
and supervisors. Instead, his repeated use of the term “supervisory employees,” when such term
then was no longer in the statute books, suggests a frame of mind that remained grounded in the
language of the Industrial Peace Act.

______________

25 Id., p. 762 (emphasis added).

26 Id. at 761.

27 Ibid.

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Nor did Lerum ever refer to the dictum in Caltex recognizing the right of all managerial employees to
organize, despite the fact that the Industrial Peace Act did not expressly provide for the right of top
and middle managers to organize. If Lerum was aware of the Caltex dictum, then his insistence on
the use of the term “supervisory employees” could only mean that he was excluding other managerial
employees from his proposal. If, on the other hand, he was not aware of the Caltex statement
sustaining the right to organize to top and middle managers, then the more should his repeated use
of the term “supervisory employees” be taken at face value, as it had been defined in the then
Industrial Peace Act.

At all events, that the rest of the Commissioners understood his proposal to refer solely to
supervisors and not to other managerial employees is clear from the following account of
Commissioner Joaquin G. Bernas, who writes:

In presenting the modification on the 1935 and 1973 texts, Commissioner Eulogio R. Lerum
explained that the modification included three categories of workers: (1) government employees, (2)
supervisory employees, and (3) security guards. Lerum made of record the explicit intent to repeal
provisions of P.D. 442, the Labor Code. The provisions referred to were:

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

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

Implications of the Lerum Proposal

In sum, Lerum’s proposal to amend Art. III, §8 of the draft Constitution by including labor unions in
the guarantee of organizational right should be taken in the context of state-

______________

28 THE 1987 CONSTITUTION OF THE REPUBLIC OF THE PHILIPPINES: A COMMENTARY 340-

341 (1996).

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ments that his aim was the removal of the statutory ban against security guards and supervisory
employees joining labor organizations. The approval by the Constitutional Commission of his
proposal can only mean, therefore, that the Commission intended the absolute right to organize of
government workers, supervisory employees, and security guards to be constitutionally guaranteed.
By implication, no similar absolute constitutional right to organize for labor purposes should be
deemed to have been granted to top-level and middle managers. As to them the right of self-
organization may be regulated and even abridged conformably to Art. III, §8.

Constitutionality of Art. 245

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

ART. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees.—Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-
file employees but may join, assist or form separate labor organizations of their own.29

This provision is the result of the amendment of the Labor Code in 1989 by R.A. No. 6715, otherwise
known as the Herrera-Veloso Law. Unlike the Industrial Peace Act or the provisions of the Labor
Code which it superseded, R.A. No. 6715 provides separate definitions of the terms “managerial”
and “supervisory employees,” as follows:

ART. 212. Definitions. . . .

(m) “managerial employee” is one who is vested with powers or prerogatives to lay down and execute
management policies and/or to hire transfer, suspend, lay off, recall, discharge, assign or disci-

______________

29 LABOR CODE, ART. 245, as amended by R.A. No. 6715, §18.

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pline employees. Supervisory employees are those who, in the interest of the employer, effectively
recommend such managerial actions if the exercise of such authority is not merely routinary or
clerical in nature but requires the use of independent judgment. All employees not falling within any
of the above definitions are considered rank-and-file employees for purposes of this Book.

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

In the first place, all these employees, with the exception of the service engineers and the sales force
personnel, are confidential employees. Their classification as such is not seriously disputed by PEO-
FFW; the five (5) previous CBAs between PIDI and PEO-FFW explicitly considered them as
confidential employees. By the very nature of their functions, they assist and act in a confidential
capac-

______________

30 2 CESARIO A. AZUCENA, THE LABOR CODE WITH COMMENTS AND CASES 172-173
(1996).

31 210 SCRA 339 (1992).

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ity to, or have access to confidential matters of, persons who exercise managerial functions in the
field of labor relations. As such, the rationale behind the ineligibility of managerial employees to form,
assist or joint a labor union equally applies to them.

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

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

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

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Narvasa (C.J.), Regalado, Romero, Bellosillo, Martinez and Purisima, JJ., concur.

Davide, Jr., J., Please see concurring and dissenting opinion.

 Melo, J., I join in the concurring and dissenting opinion of Justice Vitug.

Puno, J., Pls. see separate opinion.

______________

32 Id., at 347-348.

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Vitug, J., Pls. see separate opinion.

Kapunan, J., I join Mr. Justice Vitug in his separate concurring and dissenting opinion.

Panganiban, J., I join the separate opinion of Mr. Justice Vitug.

Quisumbing, J., I join in the separate opinion of Justice Vitug (Concurring and Dissenting).

CONCURRING AND DISSENTING OPINION

DAVIDE, JR., J.:

I concur with the majority that the “route managers” of private respondent Pepsi-Cola Products
Philippines, Inc. are managerial employees. However, I respectfully submit that contrary to the
majority’s holding, Article 245 of the Labor Code is unconstitutional, as it abridges Section 8, Article
III of the Constitution.

Section 8, Article III of the 1987 Constitution was taken from Section 7, Article IV of the 1973
Constitution which, in turn, was lifted from Section 6, Article III of the 1935 Constitution. Section 7 of
the 1973 Constitution provided as follows:

SEC. 7. The right to form associations or societies for purposes not contrary to law shall not be
abridged.

This Section was adopted in Section 7 of Proposed Resolution No. 486 of the 1986 Constitutional
Commission, entitled Resolution to Incorporate in the New Constitution an Article on the Bill of
Rights,1 submitted by the Committee on Citizenship, Bill of Rights, Political Rights and Obligations,
and Human Rights, with a modification, however, consisting of the insertion of the word union
between the words “associations” and “societies.” Thus the proposed Section 7 provided as follows:

______________

1 I Record of the Constitutional Commission, 672-673.

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SEC. 7. The right of the people to form associations, unions, or societies for purposes not contrary
to law shall not be abridged (italics supplied).

Commissioner Joaquin G. Bernas, in his sponsorship speech on the proposed Article on the Bill of
Rights, expounded on the nature of the proposed provision, in this wise:

Section 7 preserves the old provision not because it is strictly needed but because its removal might
be subject to misinterpretation. It reads:

xxx

It strictly does not prepare the old provision because it adds the word UNION, and in the explanation
we received from Commissioner Lerum, the term envisions not just unions in private corporations
but also in the government. This preserves our link with the Malolos Constitution as far as the right
to form associations or societies for purposes not contrary to law is concerned.2

During the period of individual amendments, Commissioner Lerum introduced an amendment to the
proposed section consisting of the insertion of the clause “WHETHER EMPLOYED BY THE STATE
OR PRIVATE ESTABLISHMENTS, which, after consulting other Commissioners, he modified his
proposed amendment to read: “INCLUDING THOSE EMPLOYED IN THE PUBLIC AND PRIVATE
SECTORS.” At that time, the section read:

SEC. 7. The right of the people including those employed in the public and private sectors to form
associations, unions or societies for purposes not contrary to law shall not be abridged.

Pertinently to this dispute Commissioner Lerum’s intention that the amendment “automatically
abolish” Articles 245 and 246 of the Labor Code. The Committee accepted the amendment, and
there having been no objection from the floor, the Lerum amendment was approved, thus:

______________

2 I Record of the Constitutional Commission, 675.

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MR. LERUM: . . . In proposing that amendment I ask to make of record that I want the following
provisions of the Labor Code to be automatically abolished, which read:

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

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

THE PRESIDING OFFICER (Mr. Bengzon):

What does the Committee say?

FR. BERNAS: The Committee accepts.

THE PRESIDING OFFICER (Mr. Bengzon):

The Committee has accepted the amendment, as amended.

Is there any objection? (Silence) The Chair hears none; the amendment, as amended, is approved.3

The Committee on Style then recommended that commas be placed after the words people and
sectors, while Commissioner Lerum likewise moved to place the word unions before the word
associations.4 Section 7, which was subsequently renumbered as Section 8 as presently appearing
in the text ratified in the plebiscite of 2 February 1987, then read as follows:

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

It is then indubitably clear from the foregoing that the intent of the Constitutional Commission was to
abrogate the law prohibiting managerial employees from joining, assisting,

______________

3 I Record of the Constitutional Commission, 762. See also JOAQUIN G. BERNAS, THE INTENT
OF THE 1986 CONSTITUTION WRITERS 188-189 (1995 ed.).

4 V Record of the Constitutional Commission, 717-718.

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or forming unions or labor organizations. In this regard, there is absolutely no need to decipher the
intent of the framers of the 1987 Constitution vis-a-vis Article 245 (originally 246) of the Labor Code,
there being no ambiguity or vagueness in the wording of the present Section 8, Article III of the 1987
Constitution. The provision is clear and written in simple language; neither were there any confusing
debates thereon. More importantly, the purpose of Commissioner Lerum’s amendments was
unequivocal: he did not merely intend an implied repeal, but an express repeal of the offending article
of the Labor Code. The approval of the amendments left no doubt whatsoever, as faithfully disclosed
in the Records of the Constitutional Commission, that all employees meaning rank-and-file,
supervisory and managerial—whether from the public or the private sectors, have the right to form
unions for purposes not contrary to law.

The Labor Code referred to by Commissioner Lerum was P.D. No. 442, promulgated on 1 May 1974.
With the repeal of Article 239 by Executive Order No. 111 issued on 24 December 1986,5 Article
246 (as mentioned by Commissioner Lerum) became Article 245. Thereafter, R.A. No. 67156
amended the new Article 245 (originally Article 246) to read, as follows:

SEC. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees.—Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in

______________
5 83 O.G. No. 7, 16 February 1987, 577-579.

6 Entitled An Act to Extend Protection to Labor, Strengthen the Constitutional Rights of Workers to
Self-Organization, Collective Bargaining and Peaceful Concerted Activities, Foster Industrial Peace
and Harmony, Promote the Preferential Use of Voluntary Modes of Settling Labor Disputes, and
Reorganize the National Labor Relations Commission, Amending for These Purposes Certain
Provisions of Presidential Decree No. 442, as Amended, Otherwise Known as The Labor Code of
the Philippines, Appropriating Funds Therefor, and For Other Purposes.

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a labor organization of the rank-and-file employees but may join, assist or form separate labor
organizations of their own.7

With the abrogation of the former Article 246 of the Labor Code,8 and the constitutional prohibition
against any law prohibiting managerial employees from joining, assisting or forming unions or labor
organizations, the first sentence then of the present Article 245 of the Labor Code must be struck
down as unconstitutional.9 However, due to an obvious conflict of interest—being closely identified
with the interests of management in view of the inherent nature of their functions, duties and
responsibilities—managerial employees may only be eligible to join, assist or form unions or labor
organizations of their own rank, and not those of the supervisory employees nor the rank-and-file
employees.

In the instant case, the petitioner’s name—United Pepsi-Cola Supervisory Union (UPSU)—
indubitably attests that it is a union of supervisory employees. In light of the earlier discussion, the
route managers who are managerial employees, cannot join or assist UPSU. Accordingly, the Med-
Arbiter and public respondent Laguesma committed no error in denying the petition for direct
certification or for certification election.

I thus vote to GRANT, IN PART, the instant petition. That portion of the challenged resolution of
public respondent holding that since the route managers of private respondent Pepsi-Cola Products
Philippines, Inc., are managerial employees, they are “not eligible to assist, join or form a union or
any other organization” should be SET ASIDE for being violative

______________

7 Section 18, R.A. No. 6715.

8 As well as the original Article 245 thereof.

9 The second paragraph, Section 3, Article XIII, Constitution provides, in part:

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law.

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of Section 8 of Article III of the Constitution, while that portion thereof denying petitioner’s appeal
from the MedArbiter’s decision dismissing the petition for direct certification or for a certification
election should be AFFIRMED.

SEPARATE CONCURRING OPINION

PUNO, J.:

With due respect, it is my submission that Article 245 of the Labor Code was not repealed by section
8, Article III of the 1987 Constitution for reasons discussed below.

A. Types of Employees.
For purposes of applying the law on labor relations, the Labor Code in Article 212 (m) defines three
(3) categories of employees. They are managerial, supervisory and rank-and-file, thus:

“Art. 212 (m). “Managerial Employee” is one who is vested with powers or prerogatives to lay down
and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign
or discipline employees. “Supervisory employees” are those who, in the interest of the employer,
effectively recommended such managerial actions if the exercise of such authority is not merely
routinary or clerical in nature but requires the use of independent judgment. All employees not falling
within any of the above definitions are considered rank-and-file employees for purposes of this
Book.”

The test of “managerial” or “supervisory” status depends on whether a person possesses authority
to act in the interest of his employer and whether such authority is not routinary or clerical in nature
but requires the use of independent judgment.1 The rank-and-file employee performs work that is
routinary and clerical in nature. The distinction between these employees is significant because
supervisory and rank-

______________

1 Franklin Baker Co. v. Trajano, 157 SCRA 416, 422 [1988].

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and-file employees may form, join or assist labor organizations. Managerial employees cannot.

B. The Exclusion of Managerial Employees:

Its Historical Roots in the United States.
The National Labor Relations Act (NLRA), also known as the Wagner Act, enacted by the U.S.
Congress in 1935, was the first law that regulated labor relations in the United States and embodied
its national labor policy.2 The purpose of the NLRA was to eliminate obstructions to the free flow of
commerce through the practice of collective bargaining. The NLRA also sought to protect the
workers’ full freedoms of association, self-organization, and designation of representatives of their
own choosing, for the purpose of negotiating the terms and conditions of their employment or other
mutual aid and protection.3 The NLRA established the right of employees to organize, required
employers to bargain with employees collectively through employee-elected representatives, gave
employees the right to engage in concerted activities for collective bargaining purposes or other
mutual aid or protection, and created the National Labor Relations Board (NLRB) as the regulatory
agency in labor-management matters.4
The NLRA was amended in 1947 by the Labor Management Relations Act (LMRA), also known as
the Taft-Hartley Act. This Act sought to lessen industrial disputes and placed employers in a more
nearly equal position with unions in bargaining and labor relations procedures.5

The NLRA did not make any special provision for “managerial employees.”6 The privileges and
benefits of the Act were conferred on “employees.” Labor organizations thus

______________

2 48 Am Jur 2d, “Labor and Labor Relations,” Sec. 1 [1994].

3 Id.

4 Id., Sec. 2.

5 Id., Sec. 3.

6 International Ladies’ Garment Workers’ Union v. N.L.R.B., 339 F. 2d 116, 123 [1964].

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clamored for the inclusion of supervisory personnel in the coverage of the Act on the ground that
supervisors were also employees. Although traditionally, supervisors were regarded as part of
management, the NLRB was constrained to recognize supervisors as employees under the
coverage of the law. Supervisors were then granted collective bargaining rights.7 Nonetheless, the
NLRB refused to consider managers as covered by the law.8

The LMRA took away the collective bargaining rights of supervisors. The sponsors of the amendment
feared that their unionization would break down industrial discipline as it would blur the traditional
distinction between management and labor. They felt it necessary to deny supervisory personnel the
right of collective bargaining to preserve their loyalty to the interests of their employers.9

Several amendments were later made on the NLRC but the exclusion of managers and supervisors
from its coverage was preserved. Until now managers and supervisors are excluded from the law.10
Their exclusion hinges on the theory that the employer is entitled to the full loyalty of those whom it
chooses for positions of responsibility, entailing action on the employers’ behalf. A supervisor’s and
manager’s ability to control the work of others would be compromised by his sharing of employee
status with them.11

______________

7 This was declared by the National Labor Relations Board in 1945 and upheld by the U.S. Supreme
Court in Packard Motor Co. v. N.L.R.B., 330 U.S. 485, 91 L.Ed. 1040 [1947]—See also Footnote 2
in L.A. Young Spring & Wire Corporation v. N.L.R.B., 163 F.2d 905, 906-907 [1947].

8 International Ladies’ Garment Workers’ Union v. N.L.R.B., 339 F. 2d 116, 123 [1964] citing Ford
Motor Co., 66 N.L.R.B. 1317, 1322 [1946] and Palace Laundry Dry Cleaning Corp., 75 N.L.R.B. 320,
323 [1947]; also cited in 51 C.J.S. “Labor Relations,” Sec. 41.

9 International Ladies’ Garment Workers’ Union v. N.L.R.B., supra, at 122.

10 48 Am Jur 2d, “Labor and Labor Relations,” Secs. 1048, 1113 [1994 ed.].

11 Id., at Sec. 1048.

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C. Historical Development in the Philippines.

Labor-management relations in the Philippines were first regulated under the Industrial Peace Act12
which took effect in 1953. Hailed as the Magna Carta of Labor, it was modelled after the NLRA and
LMRA of the United States.13 Most of the basic principles of the NLRA have been carried over to
the Industrial Peace Act and the Labor Code.14 This is significant because we have ruled that where
our labor statutes are based on statutes in foreign jurisdiction, the decisions of the high courts in
those jurisdictions construing and interpreting the Act are given persuasive effects in the application
of Philippine law.15

The Industrial Peace Act did not carry any provision prohibiting managerial employees from joining
labor organizations. Section 3 of said law merely provided:

“Sec. 3. Employees’ Right to Self-Organization.—Employees shall have the right to self-organization

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

Significantly, the Industrial Peace Act did not define a manager or managerial employee. It defined
a “supervisor” but not a “manager.” Thus:

______________

12 R.A. 873.

13 Azucena, The Labor Code with Comments and Cases, vol. 1, p. 16 [1996]; Pascual, Labor
Relations Law, p. 13 [1986].

14 Azucena, supra.

15 Atlantic Gulf & Pacific Co., 33 Phil. 425, 428-429 [1916]; Boy Scouts of the Philippines v. Araos,
102 Phil. 1080 [1958].

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“Sec. 2. x x x
(k) “Supervisor” means any person having authority in the interest of an employer, to hire, transfer,
suspend, lay-off, recall, discharge, assign, recommend, or discipline other employees, or responsibly
to direct them, and to adjust their grievances, or effectively to recommend such acts, if, in connection
with the foregoing, the exercise of such authority is not of a merely routinary or clerical nature but
requires the use of independent judgment.”

In 1972, we interpreted Section 3 of the Industrial Peace Act to give supervisors the right to join and
form labor organizations of their own.16 Soon we grappled with the right of managers to organize.
In a case involving Caltex managers, we recognized their right to organize, viz:

“It would be going too far to dismiss summarily the point raised by respondent company, that of the
alleged identity of interest between the managerial staff and the employing firm. That should
ordinarily be the case, specially so where the dispute is between management and the rank-and-file.
It does not necessarily follow though that what binds the managerial staff to the corporation
forecloses the possibility of conflict between them. There could be a real difference between what
the welfare of such group requires and the concessions the firm is willing to grant. Their needs might
not be attended to then in the absence of any organization of their own. Nor is this to indulge in
empty theorizing. The records of respondent company, even the very case cited by it, is proof enough
of their uneasy and troubled relationship. Certainly the impression is difficult to erase that an alien
firm failed to manifest sympathy for the claims of its Filipino executives.”17

The Industrial Peace Act was repealed in 1975 by P.D. 442, the Labor Code of the Philippines. The
Labor Code changed existing jurisprudence when it prohibited supervisory and managerial
employees from joining labor organizations. Su-

______________

16 Filoil Refinery Corporation v. Filoil Supervisory & Confidential Employees Association, 46 SCRA
512, 519 [1972].

17 Caltex Filipino Managers and Supervisors Association v. Court of Industrial Relations, 47 SCRA
112, 115 [1972].

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pervisory unions were no longer recognized nor allowed to exist and operate as such.18 We affirmed
this statutory change in Bulletin Publishing Corp. v. Sanchez.19 Similarly, Article 246 of the Labor
Code expressly prohibited managerial employees from forming, assisting and joining labor
organizations, to wit:

“Art. 246. Ineligibility of managerial employees to join any labor organization.—Managerial

employees are not eligible to join, assist or form any labor organization.”

In the same Bulletin case, the Court applied Article 246 and held that managerial employees are the
very type of employees who, by the nature of their positions and functions, have been decreed
disqualified from bargaining with management. This prohibition is based on the rationale that if
managerial employees were to belong or be affiliated with a union, the union might not be assured
of their loyalty in view of evident conflict of interest or that the union can be company-dominated with
the presence of managerial employees in the union membership.20 In the collective bargaining
process, managerial employees are supposed to be on the side of the employer, to act as its
representative, and to see to it that its interests are well protected. The employer is not assured of
______________

18 Section 11, Rule II, Book V of the Omnibus Rules Implementing the Labor Code provided:

“Sec. 11. All existing supervisory unions and unions of security guards shall, upon effectivity of the
Code, cease to operate as such and their registration certificates shall be deemed automatically
cancelled. x x x Members of supervisory unions who do not fall within the definition of managerial
employees shall become eligible to join or assist the rank-and-file labor organization, and if none
exists, to form or assist in the forming of such rank-and-file organizations.”

19 144 SCRA 628, 634 [1986].

20 Golden Farms, Inc. v. Calleja, 175 SCRA 471, 477 [1989]; Bulletin Publishing Corp. v. Sanchez,
144 SCRA 628, 635 [1986].

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such protection if these employees themselves become union members.21

The prohibition on managerial employees to join, assist or form labor organizations was retained in
the Labor Code despite substantial amendments made in 1989 by R.A. 6715, the Herrera-Veloso
Law. R.A. 6715 was passed after the effectivity of the 1987 Constitution and this law did not abrogate,
much less amend the prohibition on managerial employees to join labor organizations. The express
prohibition in Article 246 remained. However, as an addendum to this same Article, R.A. 6715
restored to supervisory employees the right to join labor organizations of their own.22 Article 246
now reads:

“Article 246. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees.—Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-
file employees but may join, assist or form separate labor organizations of their own.”

Article 246 became Article 245 after then Article 244 was repealed by E.O. 111. Article 246 is
presently Article 245 of the Labor Code.

Indeed, Article 245 of the Labor Code prohibiting managerial employees from joining labor
organizations has a social and historical significance in our labor relations law. This significance
should be considered in deciphering the intent of the framers of the 1987 Constitution vis-a-vis the
said Article. With due respect, I do not subscribe to the view that section 8, Article III of the
Constitution abrogated Article 245 of the Labor Code. A textual analysis of Section 8, Article III of
the Constitution will not justify this conclusion. With due respect, the resort by Mr. Justice Davide to
the deliberations of the Constitutional Commission does not suffice. It is generally

______________

21 National Association of Trade Unions-Republic Planters’ Bank Supervisors Chapter v. Torres,

239 SCRA 546, 559 [1994].

22 Azucena, supra, at 129-132.

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recognized that debates and other proceedings in a constitutional convention are of limited value
and are an unsafe guide to the intent of the people.23 Judge Cooley has stated that:

“When the inquiry is directed to ascertaining the mischief designed to be remedied, or the purpose
sought to be accomplished by a particular provision, it may be proper to examine the proceedings of
the convention which framed the instrument. Where the proceedings clearly point out the purpose of
the provision, the aid will be valuable and satisfactory; but where the question is one of abstract
meaning, it will be difficult to derive from this source much reliable assistance in interpretation. Every
member of such a convention acts upon such motives and reasons as influence him personally, and
the motions and debates do not necessarily indicate the purpose of a majority of a convention in
adopting a particular clause. It is quite possible for a particular clause to appear so clear and
unambiguous to the members of the convention as to require neither discussion nor illustration; and
the few remarks made concerning it in the convention might have a plain tendency to lead directly
away from the meaning in the minds of the majority. It is equally possible for a part of the members
to accept a clause in one sense and a part in another. And even if we were certain we had attained
to the meaning of the convention, it is by no means to be allowed a controlling force, especially if
that meaning appears not to be the one which the words would most naturally and obviously convey.
For as the constitution does not derive its force from the convention which framed, but from the
people who ratified it, the intent to be arrived at is that of the people, and it is not to be supposed
that they have looked for any dark and abstruse meaning in the words employed, but rather that they
have accepted them in the sense most obvious to the common understanding, and ratified the
instrument in the belief that that was the sense designed to be conveyed.”24

It is for this reason that proceedings of constitutional conventions are less conclusive of the proper
construction of the instrument than are legislative proceedings of the proper

______________

23 Gonzales, Philippine Constitutional Law, p. 30 [1969].

24 Cooley, Treatise on Constitutional Limitations, vol. 1, pp. 142-143 [1927]; Also cited in Willoughby,
The Constitutional Law of the United States, Sec. 32, pp. 54-55, vol. 1 [1929].

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construction of the statute.25 In statutes, it is the intent of the legislature that is being sought, while
in constitutions, it is the intent of the people that is being ascertained through the discussions and
deliberations of their representatives.26 The proper interpretation of constitutional provisions
depends more on how it was understood by the people adopting it than in the framers’ understanding
thereof.27

Thus, debates and proceedings of the constitutional convention are never of binding force. They
may be valuable but are not necessarily decisive.28 They may shed a useful light upon the purpose
sought to be accomplished or upon the meaning attached to the words employed. And the courts
are free to avail themselves of any light that may be derived from such sources, but they are not
bound to adopt it as the sole ground of their decision.29

Clearly then, a statute cannot be declared void on the sole ground that it is repugnant to a supposed
intent or spirit declared in constitutional convention proceedings.

______________

25 Vera v. Avelino, 77 SCRA 192, 215 [1946].

26 Id.

27 Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 337-338 [1991]; See also J.M.
Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, 425 [1970].

28 J.M. Tuason & Co., Inc. v. Land Tenure Administration, supra; Aglipay v. Ruiz, 64 Phil. 201 [1937].

29 Debates and proceedings in the constitutional convention “are of value as showing the views of
the individual members, and as indicating the reasons for their votes, but they give us no light as to
the views of the large majority who did not talk, much less of the mass of our fellow citizens whose
votes at the polls gave that instrument the force of the fundamental law. We think it safer to construe
the Constitution from what appears upon its face.” (Commonwealth v. Balph, 111 Pa. 365, 3 Atl. 220,
cited in Black, Handbook on the Construction and Interpretation of the Laws, Sec. 44, p. 122 [1911]).

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D. Freedom of Association
The right of association flows from freedom of expression.30 Like the right of expression, the
exercise of the right of association is not absolute. It is subject to certain limitations. Article 243 of
the Labor Code reiterates the right of association of people in the labor sector. Article 243 provides:

“Art. 243. Coverage of employees’ right to self-organization.—All persons employed in commercial,

industrial and agricultural enterprises and in religious, charitable, medical, or educational institutions
whether operating for profit or not, shall have the right to self-organization and to form, join, or assist
labor organizations of their own choosing for purposes of collective bargaining. Ambulant,
intermittent and itinerant workers, self-employed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and protection.”

Article 243 guarantees the right to self-organization and association to “all persons.” This seemingly
all-inclusive coverage of “all persons,” however, actually admits of exceptions.

Article 24431 of the Labor Code mandates that all employees in the civil service, i.e., those not
employed in government corporations established under the Corporation Code, may only form
associations but may not collectively bargain on terms and conditions fixed by law. An employee of
a cooperative who is a member and co-owner thereof cannot invoke the right of collective bargaining
and negotiation vis-a-vis the cooperative.32 An owner cannot bargain with himself or his co-

______________

30 Cruz, Constitutional Law, p. 227 [1991].

31 See also E.O. 180.

32 San Jose Electric Cooperative, Inc. v. Ministry of Labor, 173 SCRA 697, 703 [1989]; Benguet
Electric Cooperative, Inc. v. Ferrer-Calleja, 180 SCRA 740, 745 [1989].

Member-employees of a cooperative may, however, withdraw as members of the cooperative in

order to join a labor union (Central Negros Electric Corp. v. Sec. of Labor, 201 SCRA 584, 591
[1991]).

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owners.33 Employees in foreign embassies or consulates or in foreign international organizations

granted international immunities are also excluded from the right to form labor organizations.34
International organizations are organized mainly as a means for conducting general international
business in which the member-states have an interest and the immunities granted them shield their
affairs from political pressure or control by the host country and assure the unimpeded performance
of their functions.35

Confidential employees have also been denied the right to form labor-organizations. Confidential
employees do not constitute a distinct category for purposes of organizational right. Confidentiality
may attach to a managerial or non-managerial position. We have, however, excluded confidential
employees from joining labor organizations following the rationale behind the disqualification of
managerial employees in Article 245. In the case of National Association of Trade Unions-Republic
Planters’ Bank Supervisors Chapter v. Torres,36 we held:

“In the collective bargaining process, managerial employees are supposed to be on the side of the
employer, to act as its representatives, and to see to it that its interests are well protected. The
employer is not assured of such protection if these employees themselves are union members.
Collective bargaining in such a situation can become one-sided. It is the same reason that impelled
this Court to consider the position of confidential employees as included in the disqualification found
in Article 245 as if the disqualification of confidential employees were written in the provision. If
confidential employees could unionize in order to bargain for advantages for themselves, then they
could be governed by their own motives rather than the interest of the employers. Moreover,
unionization of confidential employees for the purpose of collective bargaining would

______________

33 Id.

34 International Catholic Migration Commission v. Calleja, 190 SCRA 130, 143 [1990].

35 Id.

36 239 SCRA 546 [1994].

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mean the extension of the law to persons or individuals who are supposed to act “in the interest of”
the employers. It is not farfetched that in the course of collective bargaining, they might jeopardize
that interest which they are duty-bound to protect.”37

E. The disqualification extends only to labor organizations.

It must be noted that Article 245 of the Labor Code deprives managerial employees of their right to
join “labor organizations.” A labor organization is defined under the Labor Code as:

“Article 212 (g). “Labor organization” means any union or association of employees which exists in
whole or in part for the purpose of collective bargaining or of dealing with the employer concerning
terms and conditions of employment.”

A labor organization has two broad rights: (1) to bargain collectively and (2) to deal with the employer
concerning terms and conditions of employment. To bargain collectively is a right given to a labor
organization once it registers itself with the Department of Labor and Employment (DOLE). Dealing
with the employer, on the other hand, is a generic description of interaction between employer and
employees concerning grievances, wages, work hours and other terms and conditions of
employment, even if the employees’ group is not registered with the DOLE.38 Any labor organization
which may or may not be a union may deal with the employer. This explains why a workers’
organization does not always have to be a labor union and why employer-employee collective
interactions are not always collective bargaining.39

In the instant case, it may be argued that managerial employees’ labor organization will merely “deal
with the em-

_______________

37 At 551.

38 Azucena, The Labor Code with Comments and Cases, vol. 2, p. 127 [1996]; Pascual, Labor
Relations Law, pp. 35-36 [1986].

39 Id.

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ployer concerning terms and conditions of employment” especially when top management is
composed of aliens, following the circumstances in the Caltex case.

Although the labor organization may exist wholly for the purpose of dealing with the employer
concerning terms and conditions of employment, there is no prohibition in the Labor Code for it to
become a legitimate labor organization and engage in collective bargaining. Once a labor
organization registers with the DOLE and becomes legitimate, it is entitled to the rights accorded
under Articles 242 and 263 (b) of the Labor Code. And these include the right to strike and picket.

Notably, however, Article 245 does not absolutely disqualify managerial employees from exercising
their right of association. What it prohibits is merely the right to join labor organizations. Managerial
employees may form associations or organizations so long as they are not labor organizations. The
freedom of association guaranteed under the Constitution remains and has not been totally
abrogated by Article 245.

To declare Article 245 of the Labor Code unconstitutional cuts deep into our existing industrial life
and will open the floodgates to unionization at all levels of the industrial hierarchy. Such a ruling will
wreak havoc on the existing set-up between management and labor. If all managerial employees
will be allowed to unionize, then all who are in the payroll of the company, starting from the president,
vice-president, general managers and everyone, with the exception of the directors, may go on strike
or picket the employer.40 Company officers will join forces with the supervisors and rank-and-file.
Management and labor will become a solid phalanx with bargaining rights that could be enforced
against the owner of the

______________

40 Dissenting opinion of Justice Douglas in Packard Motor Co. v. N.L.R.B., 330 U.S. 492, 91 L ed.
1040, 1052 [1946]. This dissent became one of the bases for the passage of the LMRA (Taft-Hartley
Act) which abolished the right of supervisors to form unions (Footnote 2, L.A. Young Spring & Wire
Corp. v. N.L.R.B., 163 F. 2d 905, 906-907 [1947].

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company.41 The basic opposing forces in the industry will not be management and labor but the
operating group on the one hand and the stockholder and bondholder group on the other.

The industrial problem defined in the Labor Code comes down to a contest over a fair division of the
gross receipts of industry between these two groups.42 And this will certainly bring ill-effects on our
economy.

The framers of the Constitution could not have intended a major upheaval of our labor and socio-
economic systems. Their intent cannot be made to override substantial policy considerations and
create absurd or impossible situations.43 A constitution must be viewed as a continuously operative
charter of government. It must not be interpreted as demanding the impossible or the impracticable;
or as effecting the unreasonable or absurd.44 Courts should always endeavour to give such
interpretation that would make the constitutional provision and the statute consistent with reason,
justice and the public interest.45

I vote to dismiss the petition.

SEPARATE (CONCURRING & DISSENTING) OPINION

VITUG, J.:

The pivotal issues raised in the case at bar, aptly stated by the Office of the Solicitor General, are:

(1) Whether or not public respondent, Undersecretary of the Department of Labor and Employment
(“DOLE”) Bien-
______________

41 Id.

42 Id.
43 Pritchard v. Republic, 81 Phil. 244, 252 [1948].

44 Civil Liberties Union v. Executive Secretary, 194 SCRA 317, 332 [1991].

45 Co Kim Cham v. Valdez Tan Keh, 75 Phil. 113, 132 [1945]; See also Agpalo, Statutory
Construction, pp. 119-120 [1995]; Black, Handbook on the Construction and Interpretation of the
Laws, Sec.

44, p. 122 [1911].

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venido E. Laguesma, gravely abused his discretion in categorizing the members of petitioner union
to be managerial employees and thus ineligible to form or join labor organizations; and
(2) Whether or not the provision of Article 245 of the Labor Code, disqualifying managerial
employees from joining, assisting or forming any labor organization, violates Section 8, Article III, of
the 1987 Constitution, which expresses that “(t)he right of the people, including those employed in
public and private sectors to form unions, associations or societies for purposes not contrary to law
shall not be abridged.”
The case originated from a petition for direct certification or certification election among route
managers/supervisory employees of Pepsi-Cola Products Phils., Inc. (“Pepsi”), filed by the United
Pepsi-Cola Supervisory Union (“Union”), claiming to be a legitimate labor organization duly
registered with the Department of Labor and Employment under Registration Certificate No. NCR-
UR-3-1412-95. Pepsi opposed the petition on the thesis that the case was no more than a mere
duplication of a previous petition for direct certification1 filed by the same route managers through
the Pepsi-Cola Employees Association (PCEA-Supervisory) which petition had already been denied
by Undersecretary Laguesma. The holding reiterated a prior decision in Workers Alliance Trade
Unions (“WATU”) vs. Pepsi-Cola Products Phils., Inc.,2 that route managers were managerial
employees.

In its decision, dated 05 May 1995, Med-Arbiter Brigida C. Fadrigon dismissed for lack of merit the
petition of the Union, stating that the issue on the proper classification and status of route managers
had already been ruled with finality in the previous decisions, aforementioned, rendered by DOLE.

______________

1 In Re: Petition for Direct Certification and/or Certification Election-Route Managers/Supervisory

Employees of the Pepsi-Cola Products Phils., Inc., OS-A-3-71-92; NCR-OD-A-91-10-055.

2 OS-MA-10-318-91; ROX Case No. R-1000-9002-Ru-007.

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The union appealed the decision. In his resolution of 31 August 1995, Undersecretary Laguesma
dismissed the appeal, saying that there was no compelling reason to abandon the ruling in the two
old cases theretofore decided by DOLE. In his order of 22 September 1995, Undersecretary
Laguesma denied the Union’s motion for reconsideration.

The Union went to this Court, via a petition for certiorari, assailing the cancellation of its certificate of
registration. The Court, after considering the petition and the comments thereon filed by both public
and private respondents, as well as the consolidated reply of petitioner, dismissed the case in its
resolution of 08 July 1996 on the premise that no grave abuse of discretion had been committed by
public respondent.

Undaunted, the Union moved, with leave, for the reconsideration of the dismissal of its petition by
the Court En Banc. In its resolution of 16 June 1997, the case was referred to the Court En Banc en
consulta with the movant’s invocation of unconstitutionality of Article 245 of the Labor Code vis-a-vis
Section 8, Article III, of the 1987 Constitution.

There is merit, in my view, in petitioner’s motion for reconsideration but not on constitutional grounds.

There are, in the hierarchy of management, those who fall below the level of key officers of an
enterprise whose terms and conditions of employment can well be, indeed are not infrequently,
provided for in collective bargaining agreements. To this group belong the supervisory employees.
The “managerial employees,” upon the other hand, and relating the matter particularly to the Labor
Code, are those “vested with powers or prerogatives to lay down and execute management policies
and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees” as
distinguished from the supervisory employees whose duties in these areas are so designed as to
verily be implementary to the policies or rules and regulations already outstanding the priorly taken
up and passed upon by management. The managerial level is the source, as well as prescribes the
compliance, of broad mandates which, in the field of labor relations, are to be carried out through
the next rank of employees charged with

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actually seeing to the specific personnel action required. In fine, the real authority, such as in hiring
or firing of employees, comes from management and exercised by means of instructions, given in
general terms, by the “managerial employees”; the supervisory employees, although ostensibly
holding that power, in truth, however, only act in obedience to the directives handed down to them.
The latter unit, unlike the former, cannot be considered the alter ego of the owner of enterprise.

The duties and responsibilities of the members of petitioner union, shown by their “job description”
below—

PCPPI
RM’s JOB DESCRIPTION

A. GENERAL/OVERALL OBJECTIVE OF THIS POSITION

To contribute to the growth and profitability of PCPPI via well-selected, trained and motivated
Route Sales Team who sell, collect and merchandise, following the Pepsi Way, and consistent with
Company policies and procedures as well as the corporate vision of Customer Satisfaction.

B. SPECIFIC JOB DESCRIPTION:

KEY RESULT AREAS

STANDARD OF PERFORMANCE

SALES VOLUME

100% vs. NRC Target

___% NTG

DISTRIBUTION

*Product Availability

70% Pepsi

80% Seven-Up

40% Mirinda

65% Mt. Dew

5% Out of Stock

ACCOUNTS RECEIVABLE MANAGEMENT

65% Current (Incl. Legal & Col.) 80:20 Cash to Credit Ratio DSO—assigned Std. to Division by the
District

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ASSET MANAGEMENT

30 cases for ice-coolers

80 cases for electric
coolers BLOWAGA on
Division Vehicles 60
cases on Rolling/
Permanent Kiosks
TRADE DEVELOPMENT

100% Buying Customers

Based on master list
that bought once 5
months payback on
concessions 4 CED’s/Rte.

EXPENSE MANAGEMENT

a). 5% Absentism rate Excl. VL

b). 280 cases/route/day
c). 15% cost-to-sales ratio

ROUTE MANAGEMENT

3 Days on RR/Wk
- Days on BC-SC
Financial & Co. Assets
- Days on TD
75% Load Factor
18 Productive Calls

CUSTOMER SATISFACTION

Customer Complaints
attended to within the
next working day

HUMAN RESOURCE MANAGEMENT

5% Absentism Excl. VL
(approved) 3 Documented
RR/Week using SLM’s
Training Log

ADMINISTRATIVE MANAGEMENT

- Complete, timely and

accurate reports.

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United Pepsi-Cola Supervisory Union (UPSU) vs. Laguesma

PCPPI RM’s BASIC DAILY ACTIVITIES

A.

AT THE SALES OFFICE

1. PRACTICES BLOWAGA ON SERVICE VEHICLE (AT-HOME)

2. REPORTS FOR WORK ON OR BEFORE 6:15 A.M.

3. REPORTS IN CLEAN AND NEAT UNIFORM (GOOD GROOMING)

4. DAILY BRIEFING WITH THE DM

5. CONDUCTS SKILLS ENHANCEMENT OR HUDDLES WITH RST’s

a). ATTENDANCE/GROOMING

b). OPERATIONAL DIRECTIONS & PRIORITIES

c). ANNOUNCEMENT

6. RM’s PRESENCE DURING CHECK-OUT

a). SLM PRACTICES BLOWAGA ON ROUTE TRUCK

b). PRIVATE COUNSELING WITH RST (AM & PM IF NECESSARY)

c). PROPER HANDLING OF SELLING/MDSG. MATERIALS

d). YESTERDAY’s FINAL SETTLEMENT REVIEW

7. UPDATE REPORTS, MONITORS, DOCUMENTS & TELEPHONE CONMATION

8. ATTENDS TO PRODUCT COMPLAINTS (GFM)

9. CONDUCTS ADMINISTRATIVE INVESTIGATION OR ATTENDS DM’s MEETING (on Saturdays)

B.

FIELD WORK

ROUTE RIDE

1. CHECKS SLMS. TRAINING LOG (PROGRESS & DEV’T.)

2. SALESMAN’s CPC

3. ROUTE COVERAGE EVALUATION

4. LOAD FACTOR

5. SALESMAN’s ROUTING SYSTEM EVALUATION

BC/SC
1. FINANCIAL & ASSET VERIFICATION, CONFIRMATION & AUDIT

2. BACKCHECKS FIRST 5 CUSTOMERS SERVED FOR THE DAY

a). MERCHANDISING

b). SERVICING

c). RM’s TERRITORY FAMILIARITY

d). KEY ACCOUNTS GOODWILL

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TRADE DEVELOPMENT

1. PREPARATION PRIOR TO CALL

2. ACTUAL CALL

3. POST CALL ANALYSIS

(HOW DID I FARE? WHY? WHAT ACTIONS TO TAKE)

4. FOLLOW-UP ACTION

C.

AT CLOSE OF DAY
1. MAINTAINS & UPDATES CORRECT & ACCURATE RECORDS & REPORTS

2. RM-SLM DEBRIEFING

3. SLR DISCUSSION (BASED ON A.M. SLR)

4. COORDINATES WITH DM ON PLANS & PROGRAMS

5. PREPARATIONS FOR NEXT DAY’s ACTIVITIES3

—convey no more than those that are aptly consigned to the “supervisory” group by the relatively
small unit of “manage-rial” employees. Certain portions of a pamphlet, the so-called “Route Manager
Position Description” referred to by Mr. Justice Vicente Mendoza, in his ponencia, hereunder
reproduced for easy reference, thus—

“A.BASIC PURPOSE
A Manager achieves objectives through others.

As a Route Manager, your purpose is to meet the sales plan; and you achieve this objective through
the skillful management of your job and the management of your people.

These then are your functions as Pepsi-Cola Route Manager. Within these functions—managing
your job and managing your people—you are accountable to your District Manager for the execution
and completion of various tasks and activities which will make it possible for you to achieve your
sales objectives.

“B.PRINCIPAL ACCOUNTABILITIES
1.0MANAGING YOUR JOB
The Route Manager is accountable for the following:

_______________

3 Rollo, pp. 68-69.

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1.1.SALES DEVELOPMENT
1.1.1 Achieve the sales plan.
1.1.2 Achieve all distribution and new account objectives.
1.1.3 Develop new business opportunities thru personal contacts with dealers.
1.1.4 Inspect and ensure that all merchandising objectives are achieved in all outlets.
1.1.5 Maintain and improve productivity of all cooling equipment and kiosks.
1.1.6 Execute and control all authorized promotions.
1.1.7 Develop and maintain dealer goodwill.
1.1.8 Ensure all accounts comply with company suggested retail pricing.
1.1.9 Study from time to time individual route coverage and productivity for possible adjustments to
maximize utilization of resources.
1.2Administration
1.2.1 Ensure the proper loading of route trucks before check-out and the proper sorting of bottles
before check-in.
1.2.2 Ensure the upkeep of all route sales reports and all other related reports and forms required
on an accurate and timely basis.
1.2.3 Ensure proper implementation of the various company policies and procedures include but not
limited to shakedown; route shortage; progressive discipline; sorting; spoilages; credit/collection;
accident; attendance.
1.2.4 Ensure collection of receivables and delinquent accounts.
2.0MANAGING YOUR PEOPLE
The Route Manager is accountable for the following:

2.1Route Sales Team Development

2.1.1 Conduct route rides to train, evaluate and develop all assigned route salesmen and helpers at
least 3 days a week, to be supported by required route ride documents/reports & back check/spot
check
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at least 2 days a week to be supported by required documents/reports.

2.1.2 Conduct sales meetings and morning huddles. Training should focus on the enhancement of
effective sales and merchandising techniques of the salesmen and helpers. Conduct group training
at least 1 hour each week on a designated day and of specific topic.
2.2 Code of Conduct
2.2.1 Maintain the company’s reputation through strict adherence to PCPPI’s code of conduct and
the universal standards of unquestioned business ethics.”—
offer nothing at all that can approximate the authority and functions of those who actually and
genuinely hold the reins of management.

I submit, with due respect, that the members of petitioning union, not really being “managerial
employees” in the true sense of the term, are not disqualified from forming or joining labor
organizations under Article 245 of the Labor Code. I shall now briefly touch base on the constitutional
question raised by the parties on Article 245 of the Labor Code.

The Constitution acknowledges “the right of the people, including those employed in the public and
private sectors, to form unions, associations or societies for purposes not contrary to law x x x.”4
Perforce, petitioner claims, that part of Article 2455 of the Labor Code which states: “Managerial
employees

______________

4 Article III, Section 8, 1987 Constitution provides: Sec. 8. The right of the people, including those
employed in the public and private sectors, to form unions, associations, or societies for purposes
not contrary to law shall not be abridged.
5 Art. 245. Ineligibility of managerial employees to join any labor organization; right of supervisory
employees.—Managerial employees are not eligible to join, assist or form any labor organization.
Supervisory employees shall not be eligible for membership in a labor organization of the rank-and-
file employees but may join, assist or form separate organizations of their own.

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are not eligible to join, assist or form any labor organization,” being in direct collision with the
Constitutional provision, must now be declared abrogated in the law.

Frankly, I do not see such a “direct collision.” The Constitution did not obviously grant a limitless right
“to form unions, associations or societies” for it has clearly seen it fit to subject its exercise to possible
legislative judgment such as may be appropriate or, to put it in the language of the Constitution itself,
to “purposes not contrary to law.”

Freedom of association, like freedom of expression, truly occupies a choice position in the hierarchy
of constitutional values. Even while the Constitution itself recognizes the State’s prerogative to
qualify this right, heretofore discussed, any limitation, nevertheless, must still be predicated on the
existence of a substantive evil sought to be addressed.6 Indeed, in the exercise of police power, the
State may, by law, prescribe proscriptions, provided reasonable and legitimate of course, against
even the most basic rights of individuals.

The restriction embodied in Article 245 of the Labor Code is not without proper rationale.
Concededly, the prohibition to form labor organizations on the part of managerial employees narrows
down their freedom of association. The very nature of managerial functions, however, should
preclude those who exercise them from taking a position adverse to the interest they are bound to
serve and protect. The mere opportunity to undermine that interest can validly be restrained. To say
that the right of managerial employees to form a “labor organization” within the context and ambit of
the Labor Code should be deemed totally separable from the right to bargain collectively is not
justified by related provisions of the Code. For instance—

“ART. 212. Definitions.7—x x x

“(g) ‘Labor organization’ means any union or association of employees which exists in whole or in
part for the purpose of collec-

______________

6 See People vs. Ferrer, 48 SCRA 382.

7 As amended by Sec. 3, RA 6715.

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United Pepsi-Cola Supervisory Union (UPSU) vs. Laguesma

tive bargaining or of dealing with employers concerning terms and conditions of employment.
“x x x xxx x x x.

“(m) ‘Managerial employee’ is one who is vested with powers or prerogatives to lay down and
execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees. Supervisory employees are those who, in the interest of the employer,
effectively recommend such managerial actions if the exercise of such authority is not merely
routinely or clerical in nature but requires the use of independent judgment. All employees not falling
within any of the above definitions are considered rank-and-file employees for purposes of this
Book.”

“ART. 263. x x x

“(b) Workers shall have the right to engage in concerted activities for purposes of collective
bargaining or for their mutual benefit and protection. The right of legitimate labor organizations to
strike and picket and of employers to lockout, consistent with the national interest, shall continue to
be recognized and respected.”

The maxim “ut res magis quam pereat” requires not merely that a statute should be given such a
consequence as to be deemed whole but that each of its express provisions equally should be given
the intended effect.

I find it hard to believe that the fundamental law could have envisioned the use by managerial
employees of coercive means against their own employers over matters entrusted by the latter to
the former. Whenever trust and confidence is a major aspect of any relationship, a conflict of interest
on the part of the person to whom that trust and confidence is reposed must be avoided and when,
unfortunately, it does still arise its containment can rightly be decreed.

Article 245 of the Labor Code indeed aligns itself to the Corporation Code, the basic law on by far
the most commonly used business vehicle—the corporation—which prescribes the tenure of office,
as well as the duties and functions, including terms of employment (governed in most part by the
Articles of Incorporation, the By-laws of the Corporation, or resolutions of the Board of Directors), of
corporate officers for both the statutory officers, i.e., the president, the treasurer ad the

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corporate secretary, and the non-statutory officers, i.e., those who occupy positions created by the
corporate by-laws who are deemed essential for effective management of the enterprise. I cannot
imagine these officers as being legally and morally capable of associating themselves into a labor
organization and asserting collective bargaining rights against the very entity in whose behalf they
act and are supposed to act.

I submit, accordingly, that, firstly, the members of petitioner union or the so-called route managers,
being no more than supervisory employees, can lawfully organize themselves into a labor union
within the meaning of the Labor Code, and that, secondly, the questioned provision of Article 245 of
the Labor Code has not been revoked by the 1987 Constitution.

WHEREFORE, I vote, given all the foregoing, for the reversal of the resolution of 31 August 1995,
and the order of 22 September 1995, of public respondent.

Petition dismissed.
Note.—Prohibition to join labor organization extends to confidential employees or those who by
reason of their positions or nature of work are required to assist or act in a fiduciary manner to
managerial employees. (Metrolab Industries, Inc. vs. Roldan-Confesor, 254 SCRA 182 [1996])

——o0o——

16. Laguna College vs. Court of Industrial Relations

No. L-28927. September 25, 1968.

LAGUNA COLLEGE, petitioner, vs. COURT OF INDUSTRIAL RELATIONS, LAGUNA

COLLEGE TEACHERS ASSOCIATION (LACTA)-CCLU, and THE DIRECTOR, BUREAU OF
LABOR RELATIONS, respondents.

Labor law Strike; Return-to-work agreement; When factual findings of CIR are not subject to review
on appeal; Case at bar.—The main issue in the case at bar refers to the classification of the following
employees in the rank-and-file category: Marcelo Almanzor, Eduardo R. Lainez, Adventor C. Neri,
Moises Belen, Gregorio Briones, Olimpio Cortez, Sr., Guillermo Pisigan and Pantaleon Torres.
Petitioner claims that these eight are supervisors. and therefore should not have been considered
as eligible to vote in the selection of the appropriate bargaining unit.
The issue, however, is mainly one of fact. In his resolution thereof the trial Judge analyzed in detail
the evidence before it, both oral and documentary. The analysis shows that there is substantial
support for the conclusion reached, and the substantial-evidence rule applicable to cases like the
present precludes our reviewing the matter on appeal.
What is more, in the return-to-work agreement entered into by the parties on January 4, 1968, to -
settle the strike declared by LACTA on January 2, 1968, they both waived the right to appeal, except
on questions of law, from any decision or order that might be rendered by the trial Court in the case
then pending, No. 2037-MC. The question of whether the eight employees aforementioned were
supervisors or belonged to the rank and f ile was one of f act and consequently was covered by the
waiver.

REVIEW of certain orders of the Court of Industrial Relations.

The facts are stated in the opinion of the Court.

De Lara, Puno & Pampolina for petitioner.

Oliver B. Gesmundo for respondent Laguna College Teachers Association.

MAKALINTAL, J.:

This case started with a petition for certification election filed by the Laguna College, also petitioner
before us, in the Court of Industrial Relations on October 20, 1967 (Case No. 2037-MC). The purpose
was "to determine whether the Laguna College Teachers Association (LACTA) or any other labor
organization is the true and voluntary choice of the majority of the teachers working in petitioner's
establishment, as the sole and exclusive bargaining representative."

LACTA intervened and filed an answer on November 18, 1967, praying that the petition for
certification election be dismissed and that it be directly certified as the sole and exclusive bargaining
representative of all the teachers, excluding "those occupying supervisory and con-

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Laguna College vs. Court of Industrial Relations

fidential positions (as) defined and settled by jurisprudence."

While the certification proceeding was pending before the Industrial Court, specifically on January 2,
1968, LACTA staged a strike, but the same was settled by a return-to-work agreement executed by
union and management on January 4, 1968. One of the stipulations in the said agreement is as
follows: "That, except on questions of law, both parties hereby waive the right to appeal any decision
or order that may be rendered by the Trial Court of the Court of Industrial Relations (not Court en
banc) in case 2037-MC pending in said Court"

On March 11, 1968 the trial Judge, Hon. Ansberto P. Paredes, issued an order of which the
dispositive part reads as follows:

"WHEREFORE, the propriate collective bargaining unit is hereby declared to be the employer unit
comprising all the teachers of the Laguna College of San Pablo City; the certification election prayed
for is hereby granted; Trinidad Alvera, Palermo Bañagale, Severo Belarmino, Eden Brion, Teofilo
Desamero, Senen Faylon, Natividad Evangelista, Juan B. Hernandez, Ricardo Maala, Vicente
Maneso, Wenceslao Retizos, and Julio Tunguhan, being supervisors and/or holding confidential
positions, are excluded from the bargaining unit and therefore ineligible to vote; Moises Belen,
Eduardo Lainez, Gregorio Briones, Olimpio Cortez, Sr., Adventor Neri, Guillermo Pisigan, Marcelo
Almanzor and Pantaleon Torres are hereby declared rank-and-file employees; Yolanda Almeda,
Gertrudis Evangelista and Marlita Evangelista are hereby declared within the employer unit and they,
together with the teachers whose names are listed in Annex "A" herewith attached, are hereby
declared eligible to vote; and the Department of Labor or its authorized representative or
representatives are hereby requested to conduct the certification election with the choice limited to
Laguna College Teachers Association, LACTA for short, c/o Atty. Oliver B. Gesmundo, 303 Free
Press Bldg., Manila. and NO UNION, and thereafter, to submit the results thereof for further
disposition by the Court."

Petitioner thereafter elevated the case to the court en banc on motion for reconsideration insofar as
the decision (1) authorized the inclusion of eight teachers as rank and file employees and therefore
declared them eligible to vote in the certification election, and (2) authorized only one (LACTA)
instead of two bargaining units to be voted

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Laguna College vs. Court of Industrial Relations

upon. LACTA interposed its opposition to the motion. In the meantime the Bureau of Labor Relations
scheduled the election for March 26, 1968, but upon petitioner's motion respondent Court suspended
it until further orders. The motion for reconsideration was denied by the Court en banc on April 5,
1968, and the Director of Labor Relations thereupon reset the election for April 22.

On April 20, 1968 petitioner came to this Court on a petition for review of the orders of March 11 and
April 5, seeking a modification thereof so that employees "holding supervisory and/or confidential
positions x x x (May) be excluded f rom whatever appropriate bargaining unit or units may be finally
determined," and praying that a restraining order be issued by this Court to stop respondents from
implementing the orders appealed from. This Court, however, while it gave due course to the petition,
did not issue the restraining order prayed for.

On April 26, 1968 respondent LACTA filed a motion to dismiss the petition on two grounds, namely:
"(1) the appeal is (a) dilatory and not conducive to industrial peace; (b) has become moot and
academic, with petitioner having actively participated in the election and is therefore already in
estoppel; and (c) raises flimsy and unsubstantial issues; and (2) the petition raises questions of fact
(and), aside from the agreement between petitioner and LACTA that they would not appeal the order
of the trial Court of the Court of Industrial Relations; this Honorable Court, therefore, has no
jurisdiction over the present appeal (sic)." A supplemental motion to dismiss followed, after which
petitioner submitted its comment.

The main issue raised in the petition refers to the classification of the following employees in the
rank-and-file category: Marcelo Almanzor, Eduardo R. Lainez, Adventor C. Neri, Moises Belen,
Gregorio Briones, Olimpio Cortez, Sr., Guillermo Pisigan and Pantaleon Torres. Petitioner claims
that these eight are supervisors and therefore should not have been considered as eligible to vote
in the selection of the appropriate bargaining unit.

The issue, however, is mainly one of fact. In his resolution thereof the trial Judge analyzed in detail
the evi-

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Laguna College vs. Court of Industrial Relations

dence before it, both oral and documentary. The analysis shows that there is substantial support for
the conclusion reached, and the substantial-evidence rule applicable to cases like the present
precludes our reviewing the matter on appeal. The trial Judge, in his order of March 11, 1968, found
as follows:

"On the issue as to whether the eight named teachers are supervisors or not, there is, in the first
place, no evidence adduced to show that Almanzor is a supervisor. With respect to Pisigan, the only
evidence offered to show that he is a supervisor is Exhibit "R" which is nothing more than his
designation as "x x x Moderator and/or Adviser of the Sampaloc Lake News, School Organ of the
Students of the Laguna College, San Pablo City". From this document, it is shown that the principal
functions of Pisigan are to select, by competitive examinations, the students who will occupy the
positions of editor-inchief, associate editor, news-in-charge, feature-in-charge, literary-in-charge;
and to tone down, or totally disapprove publication of articles which, in his opinion, are derogatory to
the good name of any person or institution. These functions and the others enumerated in Exhibit
"R" are not within the purview of the definition of supervisor as provided in Section 2(k) of R.A. 875.
So is the case of Pantaleon Torres. Being a consultant of the College Organ, the Sampaloc Lake
News, and have (sic) duties as enumerated in Exhibit "S", do not make him a supervisor. This is
specially true when his testimony was not denied or rebutted, disclosing that he is not an area
supervisor; that there are no teachers under him (p. 153, t.s.n. December 14, 1967); and that he
does not have the power to hire, fire, layoff, discharge, suspend, transfer, discipline (p. 151, t.s.n.,
December 14, 1967), or adjust the grievances of any teacher of the Laguna College (p. 152, t.s.n.,
December 14, 1967). The case of Belen Briones, Cortez, Sr., Lainez, and Neri are no different.
Although they are area supervisors they do not exercise any of the attributes or functions of a
supervisor as defined in Section 2(k) of R.A. 875. To better understand their functions, it is best to
know what is an area supervisor. The word "area" in the designation refers to a particular subject,
like English, Mathematics and Physics, Filipino, General Science, Biology and Chemistry, and Social
Science-History and Economics. It is a fact that not one of these area supervisors has the power to
hire or fire, lay-off, suspend, discharge or discipline the teachers under them or adjust their
grievances. The power to rate the efficiency of the teachers under them is even subject to review or
revision by the principal, Mr. Wenceslao Retizos (pp. 30 to 40, t.s.n., December 14, 1967). As a
matter of fact,

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Laguna College vs. Court of Industrial Relations

their functions are but recommendatory (p. 48, t.s.n., December 14, 1967). Thus, the assistant
principal and general supervisor admitted that the recommendations of the area supervisors are
subject to evaluation, review and final approval by the principal, as "x x x most recommendations of
area supervisors are considered with a grain of salt." (pp. 17 to 18, t.s.n., December 27, 1967.) It is
established by the evidence that even as the efficiency ratings given by Lainez, an area supervisor,
is (sic) based on his own observations of the teachers under him, he was prevailed upon by the
principal to change them (p. 65, t.s.n., December 14, 1967), which he did, and that his remarks and
observations of some of the teachers under him made in Exhibit "G" were deleted in the copy
furnished the Bureau of Private Education (pp. 82 to 84, t.s.n., December 14, 1967). In the case of
area supervisor Neri, as was admitted by the assistant principal and general supervisor, his
recommendations, indeed, are considered with a grain of salt. Neri's testimony is not denied that
when he recommended a teacher to teach biology, his recommendation was rejected (p. 108, t.s.n.,
December 14, 1967); and when he assigned a teacher to teach Science, without so much as notifying
him, the teacher was given Arithmetic (p. 109, t.s.n., December 14, 1967). The preparation of
program of supervision by area supervisors is, likewise, not indicative that they are supervisors, for,
as testified to by Lainez, which testimony is not rebutted, it is nothing more than the enumerations
of activities in the area, many of them merely routinary, as for instance, the checking of the formal
themes, notebooks, survey of textbooks, and regulating the number of students in a class (p. 52,
t.s.n,, December 14, 1967). For all the foregoing reasons, it is believed that Lainez, Belen, Neri,
Briones, Cortez, Sr., Torres, Pisigan and Almanzor are not supervisors."

What is more, in the return-to-work agreement entered into by the parties on January 4, 1968, to
settle the strike declared by LACTA on January 2, 1968, they both waived the right to appeal, except
on questions of law, from any decision or order that might be rendered by the trial Court in the case
then pending, No. 2037-MC. The question of whether the eight employees aforementioned were
supervisors or belonged to the rank and file was one of fact and consequently was covered by the
waiver.

The second issue raised in the instant petition concerns the declaration in the order of March 11,
1968 that only one bargaining unit should represent all the teachers em-

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Laguna College vs. Court of Industrial Relations

ployed in the Laguna College. Petitioner insists that there should be two units, one f or college prof
essors and another for high school teachers. This is a matter that is addressed to the sound
discretion of respondent Court, upon its own consideration of all the pertinent circumstances; and
unless such discretion has been gravely abused there is no justification to rule otherwise. The
following rationale of the court's decision appears to be well-advised, and the allegations in the
petition do not make out a sufficient case for the review thereof.

"On the appropriate bargaining unit, petitioner, changing its original stand, proposed two separate
units, namely, college unit composed of the professors and instructors in the College, and high
school units comprising the high school teachers. On the other hand, LACTA proposed only one
unit—the employer unit composing of all the teachers in the entire Laguna College. From the
evidence adduced, it is believed that the factors in favor of employer unit far outweight the reasons
for the establishment of two separate bargaining units as proposed by petitioner. It is not denied that
college teachers are governed by rules and regulations of the Bureau of Private Education, which
are different from the rules and regulations for high school teachers; that the high school department
of petitioner was organized at a different time from the college department; that the set-up in the two
departments are different; and that the high school teachers are paid per period or subject, while the
college teachers are paid on the hourly basis. But it is also not denied that these two departments
are under the control of only one board of trustees; that they are housed in one and the same building
(p. 68, t.s.n., December 8, 1967); that there is but one cashier and only one registrar who himself is
the administrative officer of the whole Laguna College (pp. 68 and 70, t.s.n., December 8, 1967). As
a matter of fact the function of the Administrative Officer who is no other than Wenceslao Retizos
extends even to the high school department (pp. 71-73, t.s.n., December 8, 1967). It is a fact that
there are some teachers involved in this case who are teaching both in the college and high school
departments (pp. 69 to 70, t.s.n., December 8, 1967; pp. 28, 111 and 131, December 14, 1967),
which is a decisive proof of the community of interest of these teachers and which negates the
establishment of two bargaining units. Besides, in the proposed two separate bargaining units, the
elementary teachers of the petitioner will be left out without a bargaining representative. Moreover,
considering that

174

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Laguna College vs. Court of Industrial Relations

there are only one-hundred-and-thirty (130) teachers involved in this proceedings, af ter twelve of
the teachers were considered supervisors and/or holding confidential positions, to divide the
collective bargaining unit into two would assuredly be dissipating their strength for collective
bargaining purposes. Furthermore, the proposition would not be conducive to industrial peace for
the possibility is great that, with the establishment of two bargaining units, petitioner would be
contending with two different unions vying against each other for better benefits to gain more
members."

Respondent LACTA avers in its answer that the certification election authorized by respondent court
has actually been held. The instant petition, therefore, insofar as it seeks to enjoin said election has
already become moot, particularly in view of the fact that petitioner participated therein actively, as
also alleged in the same answer and nowhere denied by petitioner. Whatever other questions there
are relative to the conduct of such election may be ventilated before respondent Court, which has
jurisdiction over the main case.

In a supplemental petition filed on August 12, 1968, petitioner alleges that respondents acted with
grave abuse of discretion in ordering the certification election to be held on April 22, 1968, before
the lapse of the "ten-day period" for review of the resolution of respondent Court dated April 5, 1968,
copy of which was received by petitioners on the following April 15. This new allegation deserves no
serious consideration. In the first place, it is a new matter which should have been included in the
original petition f iled on April 20, 1968, wherein the prayer was that the certification election
scheduled for April 22 be suspended so that the matter of excluding certain employees from voting
therein could first be settled. No reference whatsoever was made to the fact that the election, if held
as thus scheduled, would be premature for the reason now advanced. To admit the supplemental
petition would in effect be to authorize an appeal beyond the 30-day reglementary period. Secondly,
the supplemental petition has not cited any specific rule to the effect that a certification election may
not be held until after the expiration of 10 days from receipt by the parties of

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Maliwanag vs. Herrera

the enabling resolution of the Industrial Court, Finally, as already adverted to, petitioner took part
actively in the election, and in fact challenged the right of 59 LACTA members to vote therein, raising
no objection with respect to the others.

Regarding the allegation that the strike staged on April 3, 1968 was illegal and hence rendered the
strikers disqualified to vote, this is a matter that properly pertains to the ULP charge filed by petitioner
precisely questioning the legality of said strike, but which charge, according to respondents, has up
to the present not resulted in the filing of a formal complaint by the prosecuting officers of the Court
of Industrial Relations. Besides, as likewise alleged by respondents in their opposition to the
supplemental petition, the strikers returned to work on May 6, 1968 and were accepted back by
petitioner, thus rendering the issue of illegality moot and academic.

WHEREFORE, the petition is dismissed, without pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Sanchez, Castro, Angeles, Fernando and Capistrano,
JJ., concur.

Zaldivar, J., is on official leave.

Petition dismissed.

________________
17. San Miguel Corp. Supervisors and Exempt Employees Union vs. Laguema

G.R. No. 110399. August 15, 1997.*

SAN MIGUEL CORPORATION SUPERVISORS AND EXEMPT EMPLOYEES UNION AND

ERNESTO L. PONCE, President, petitioners, vs. HONORABLE BIENVENIDO E. LAGUESMA
IN HIS CAPACITY AS UNDERSECRETARY OF LABOR AND EMPLOYMENT, HONORABLE
DANILO L. REYNANTE IN HIS CAPACITY AS MED-ARBITER AND SAN MIGUEL
CORPORATION, respondents.

Labor Law; Labor Unions; Criteria to Determine who are Confidential Employees.—Confidential
employees are those who (1) assist or act in a confidential capacity, (2) to persons who formulate,
determine, and effectuate management policies in the field of labor relations. The two criteria are
cumulative, and both must be met if an employee is to be considered a confidential employee—that
is, the confidential relationship must exist between the employee and his supervisor, and the
supervisor must handle the prescribed responsibilities relating to labor relations.

Same; Same; Reason behind the confidential employee rule.—The exclusion from bargaining units
of employees who, in the normal course of their duties, become aware of management policies
relating to labor relations is a principal objective sought to be accomplished by the “confidential
employee rule.” The broad rationale behind this rule is that employees should not be placed in a
position involving a potential conflict of interests. “Management should not be required to handle
labor relations matters through employees who are represented by the union with which the company
is required to deal and who in the normal performance of their duties may obtain advance information
of the company’s position with regard to contract negotiations, the disposition of grievances, or other
labor relations matters.”

Same; Same; Same; In determining the confidentiality of certain employees, a key question
frequently considered is the employee’s necessary access to confidential labor relations
information.—An important element of the “confidential employee rule” is the employee’s need to
use labor relations information. Thus, in determin-

______________________

* SECOND DIVISION.

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Union vs. Laguesma

ing the confidentiality of certain employees, a key question frequently considered is the employee’s
necessary access to confidential labor relations information.

Same; Same; Same; An employee may not be excluded from appropriate bargaining unit merely
because he has access to confidential information concerning employer’s internal business
operations and which is not related to the field of labor relations.—It is evident that whatever
confidential data the questioned employees may handle will have to relate to their functions. From
the foregoing functions, it can be gleaned that the confidential information said employees have
access to concern the employer’s internal business operations. As held in Westinghouse Electric
Corporation v. National Labor Relations Board, “an employee may not be excluded from appropriate
bargaining unit merely because he has access to confidential information concerning employer’s
internal business operations and which is not related to the field of labor relations.”

Same; Same; Same; Confidential employees who may be excluded from bargaining unit must be
strictly defined so as not to needlessly deprive many employees of their right to bargain collectively
through representatives of their choosing.—It must be borne in mind that Section 3 of Article XIII of
the 1987 Constitution mandates the State to guarantee to “all” workers the right to self-organization.
Hence, confidential employees who may be excluded from bargaining unit must be strictly defined
so as not to needlessly deprive many employees of their right to bargain collectively through
representatives of their choosing.

Same; Same; Appropriate Bargaining Unit Defined.—An appropriate bargaining unit may be defined
as “a group of employees of a given employer, comprised of all or less than all of the entire body of
employees, which the collective interest of all the employees, consistent with equity to the employer,
indicate to be best suited to serve the reciprocal rights and duties of the parties under the collective
bargaining provisions of the law.”

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court.

Benigno L. Vivar, Jr. for petitioners.

372

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Union vs. Laguema

Siguion Reyna, Montecillo & Ongsiako for private respondent.

ROMERO, J.:

This is a Petition for Certiorari with Prayer for the Issuance of Preliminary Injunction seeking to
reverse and set aside the Order of public respondent, Undersecretary of the Department of Labor
and Employment, Bienvenido E. Laguesma, dated March 11, 1993, in Case No. OS MA A-2-70-911
entitled “In Re: Petition for Certification Election Among the Supervisory and Exempt Employees of
the San Miguel Corporation Magnolia Poultry Products Plants of Cabuyao, San Fernando and Otis,
San Miguel Corporation Supervisors and Exempt Employees Union, Petitioner.” The Order excluded
the employees under supervisory levels 3 and 4 and the socalled exempt employees from the
proposed bargaining unit and ruled out their participation in the certification election.

The antecedent facts are undisputed:

On October 5, 1990, petitioner union filed before the Department of Labor and Employment (DOLE)
a Petition for Direct Certification or Certification Election among the supervisors and exempt
employees of the SMC Magnolia Poultry Products Plants of Cabuyao, San Fernando and Otis.

On December 19, 1990, Med-Arbiter Danilo L. Reynante issued an Order ordering the conduct of
certification election among the supervisors and exempt employees of the SMC Magnolia Poultry
Products Plants of Cabuyao, San Fernando and Otis as one bargaining unit.

On January 18, 1991, respondent San Miguel Corporation filed a Notice of Appeal with Memorandum
on Appeal, pointing out, among others, the Med-Arbiter’s error in grouping together all three (3)
separate plants, Otis, Cabuyao and San Fernando, into one bargaining unit, and in including supervi-
sory levels 3 and above whose positions are confidential in nature.

_____________________

1 NCR-OD-M-90-10-01.

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On July 23, 1991, the public respondent, Undersecretary Laguesma, granted respondent company’s
Appeal and ordered the remand of the case to the Med-Arbiter of origin for determination of the true
classification of each of the employees sought to be included in the appropriate bargaining unit.

Upon petitioner-union’s motion dated August 7, 1991, Undersecretary Laguesma granted the
reconsideration prayed for on September 3, 1991 and directed the conduct of separate certification
elections among the supervisors ranked as supervisory levels 1 to 4 (S1 to S4) and the exempt
employees in each of the three plants at Cabuyao, San Fernando and Otis.

On September 21, 1991, respondent company, San Miguel Corporation filed a Motion for
Reconsideration with Motion to suspend proceedings.

On March 11, 1993, an Order was issued by the public respondent granting the Motion, citing the
doctrine enunciated in Philips Industrial Development, Inc. v. NLRC2 case. Said

Order reads in part:

“x x x Confidential employees, like managerial employees, are not allowed to form, join or assist a
labor union for purposes of collective bargaining.

In this case, S3 and S4 Supervisors and the so-called exempt employees are admittedly confidential
employees and therefore, they are not allowed to form, join or assist a labor union for purposes of
collective bargaining following the above court’s ruling. Consequently, they are not allowed to
participate in the certification election.
WHEREFORE, the Motion is hereby granted and the Decision of this Office dated 03 September
1991 is hereby modified to the extent that employees under supervisory levels 3 and 4 (S3 and S4)
and the so-called exempt employees are not allowed to join the proposed bargaining unit and are
therefore excluded from those who could participate in the certification election.”3

Hence this petition.

_____________________

2 210 SCRA 339 (1992).

3 Rollo, pp. 45-46.

374

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SUPREME COURT REPORTS ANNOTATED

San Miguel Corp. Supervisors and Exempt Employees

Union vs. Laguema

For resolution in this case are the following issues:

1. Whether Supervisory employees 3 and 4 and the exempt employees of the company are
considered confidential employees, hence ineligible from joining a union.
2. If they are not confidential employees, do the employees of the three plants constitute an
appropriate single bargaining unit.
On the first issue, this Court rules that said employees do not fall within the term “confidential
employees” who may be prohibited from joining a union.

There is no question that the said employees, supervisors and the exempt employees, are not vested
with the powers and prerogatives to lay down and execute management policies and/or to hire,
transfer, suspend, layoff, recall, discharge or dismiss employees. They are, therefore, not qualified
to be classified as managerial employees who, under Article 2454 of the Labor Code, are not eligible
to join, assist or form any labor organization. In the very same provision, they are not allowed
membership in a labor organization of the rank-and-file employees but may join, assist or form
separate labor organizations of their own. The only question that need be addressed is whether
these employees are properly classified as confidential employees or not.

Confidential employees are those who (1) assist or act in a confidential capacity, (2) to persons who
formulate, determine, and effectuate management policies in the field of labor relations.5 The two
criteria are cumulative, and both must be met if an employee is to be considered a confidential
employee—that is, the confidential relationship must exist between the employee and his supervisor,
and the supervisor

_____________________

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

5 Westinghouse Electric Corp. v. NLRB (CA6) 398 F2d 669 (1968); Ladish Co., 178 NLRB 90 (1969).

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must handle the prescribed responsibilities relating to labor relations.6

The exclusion from bargaining units of employees who, in the normal course of their duties, become
aware of management policies relating to labor relations is a principal objective sought to be
accomplished by the “confidential employee rule.” The broad rationale behind this rule is that
employees should not be placed in a position involving a potential conflict of interests.7
“Management should not be required to handle labor relations matters through employees who are
represented by the union with which the company is required to deal and who in the normal
performance of their duties may obtain advance information of the company’s position with regard
to contract negotiations, the disposition of grievances, or other labor relations matters.”8

There have been ample precedents in this regard, thus in Bulletin Publishing Company v. Hon.
Augusto Sanchez,9 the Court held that “if these managerial employees would belong to or be
affiliated with a Union, the latter might not be assured of their loyalty to the Union in view of evident
conflict of interest. The Union can also become company-dominated with the presence of managerial
employees in Union membership.” The same rationale was applied to confidential employees in
“Golden Farms, Inc. v. Ferrer-Calleja”10 and in the more recent case of “Philips Industrial
Development, Inc. v.

___________________

6 B.F. Goodrich Co., 115 NLRB 722 (1956).

7 Westinghouse Electric Corporation v. NLRB, supra; citing Retail Clerks International Assn. v.
NLRB, 125 US App. D.C. 63, 366 F2d 642, 645 n. 7 (1966).

8 In the Matter of The Hoover Company and United Electrical, Radio and Machine Workers of
America, 55 NLRB 1321 (1941); Philippine Phosphate Fertilizer Corporation v. Hon. Ruben Torres,
et al. 231 SCRA 335 (1994); National Association of Trade Unions, etc. v. Hon. R. Torres, et al., 239
SCRA 546 (1994).

9 144 SCRA 682 (1986).

10 175 SCRA 471 (1989).

376

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San Miguel Corp. Supervisors and Exempt Employees

Union vs. Laguema

NLRC”11 which held that confidential employees, by the very nature of their functions, assist and
act in a confidential capacity to, or have access to confidential matters of, persons who exercise
managerial functions in the field of labor relations. Therefore, the rationale behind the ineligibility of
managerial employees to form, assist or join a labor union was held equally applicable to them.12

An important element of the “confidential employee rule” is the employee’s need to use labor
relations information. Thus, in determining the confidentiality of certain employees, a key question
frequently considered is the employees’ necessary access to confidential labor relations
information.13

It is the contention of respondent corporation that Supervisory employees 3 and 4 and the exempt
employees come within the meaning of the term “confidential employees” primarily because they
answered in the affirmative when asked “Do you handle confidential data or documents?” in the
Position Questionnaires submitted by the Union.14 In the same questionnaire, however, it was also
stated that the confidential information handled by questioned employees relate to product
formulation, product standards and product specification which by no means relate to “labor
relations.”15

Granting arguendo that an employee has access to confidential labor relations information but such
is merely incidental to his duties and knowledge thereof is not necessary in the performance of such
duties, said access does not render the employee a confidential employee.16 “If access to
confidential labor relations information is to be a factor in the determina-

___________________

11 Supra.

12 Philips Industrial Development, Inc. v. NLRC, supra.

13 NLRB v. Swift and Co. (CA1), 292 F2d 561; citing Pullman Standard Div., Pullman, Inc., 214
NLRB 762, 1974-1975; Kieckhefer Container Co., 118 NLRB 950, 1957-1958.

14 Rollo, p. 86.

15 Rollo, p. 131.

16 Chrysler Corp., 173 NLRB 1046 (1968); Standard Oil Co., 127 NLRB 656 (1960).

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tion of an employee’s confidential status, such information must relate to the employer’s labor
relations policies. Thus, an employee of a labor union, or of a management association, must have
access to confidential labor relations information with respect to his employer, the union, or the
association, to be regarded a confidential employee, and knowledge of labor relations information
pertaining to the companies with which the union deals, or which the association represents, will not
cause an employee to be excluded from the bargaining unit representing employees of the union or
association.”17 “Access to information which is regarded by the employer to be confidential from the
business standpoint, such as financial information18 or technical trade secrets, will not render an
employee a confidential employee.”19

Herein listed are the functions of supervisors 3 and higher:

1. To undertake decisions to discontinue/temporarily stop shift operations when situations require.

2. To effectively oversee the quality control function at the processing lines in the storage of chicken
and other products.
3. To administer efficient system of evaluation of products in the outlets.
4. To be directly responsible for the recall, holding and rejection of direct manufacturing materials.
5. To recommend and initiate actions in the maintenance of sanitation and hygiene throughout the
plant.20
______________________

17 Pacific Maritime Assn., 185 NLRB 780 (1970); Air Line Pilots Asso., 97 NLRB 929 (1951).

18 Westinghouse Electric Corp. v. NLRB, supra, citing NLRB v. Armour and Co. (CA10) 154 F2d
570, 169 ALR 421, cert den 329 US 732, 91 L Ed 633, 67 S Ct 92; NLRB v. Poultrymen’s Service
Corp. (CA3) 138 F2d 204; Pacific Far East Line, Inc., 174 NLRB 1168 (1969), Dun and Bradstreet,
Inc., 194 NLRB 9 (1972); Fairfax Family Fund, Inc., 195 NLRB 306 (1972).

19 Lykiens Hosiery Mills, Inc., 82 NLRB 981 (1948); Janowski, 83 NLRB 273 (1948).

20 Rollo, p. 157.

378

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SUPREME COURT REPORTS ANNOTATED

San Miguel Corp. Supervisors and Exempt Employees

Union vs. Laguema

It is evident that whatever confidential data the questioned employees may handle will have to relate
to their functions. From the foregoing functions, it can be gleaned that the confidential information
said employees have access to concern the employer’s internal business operations. As held in
Westing-house Electric Corporation v. National Labor Relations Board,21 “an employee may not be
excluded from appropriate bargaining unit merely because he has access to confidential information
concerning employer’s internal business operations and which is not related to the field of labor
relations.”

It must be borne in mind that Section 3 of Article XIII of the 1987 Constitution mandates the State to
guarantee to “all” workers the right to self-organization. Hence, confidential employees who may be
excluded from bargaining unit must be strictly defined so as not to needlessly deprive many
employees of their right to bargain collectively through representatives of their choosing.22

In the case at bar, supervisors 3 and above may not be considered confidential employees merely
because they handle “confidential data” as such must first be strictly classified as pertaining to labor
relations for them to fall under said restrictions. The information they handle are properly classifiable
as technical and internal business operations data which, to our mind, has no relevance to
negotiations and settlement of grievances wherein the interests of a union and the management are
invariably adversarial. Since the employees are not classifiable under the confidential type, this Court
rules that they may appropriately form a bargaining unit for purposes of collective bargaining.
Furthermore, even assuming that they are confidential employees, jurisprudence has established
that there is no legal prohibition against confiden-

_____________________

21 Supra.

22 Ford Motor Co., 66 NLRB 1317, 1322 (1946); B.F. Goodrich Co., supra; Vulcanized Rubber and
Plastics Co., Inc., 129 NLRB 1256 (1961).

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tial employees who are not performing managerial functions to form and join a union.23

In this connection, the issue of whether the employees of San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis constitute a single bargaining unit needs to be
threshed out.

It is the contention of the petitioner union that the creation of three (3) separate bargaining units, one
each for Cabuyao, Otis and San Fernando as ruled by the respondent Undersecretary, is contrary
to the one-company, one-union policy. It adds that Supervisors level 1 to 4 and exempt employees
of the three plants have a similarity or a community of interests.

This Court finds the contention of the petitioner meritorious.

An appropriate bargaining unit may be defined as “a group of employees of a given employer,

comprised of all or less than all of the entire body of employees, which the collective interest of all
the employees, consistent with equity to the employer, indicate to be best suited to serve the
reciprocal rights and duties of the parties under the collective bargaining provisions of the law.”24

A unit to be appropriate must effect a grouping of employees who have substantial, mutual interests
in wages, hours, working conditions and other subjects of collective bargaining.25

It is readily seen that the employees in the instant case have “community or mutuality of interests,”
which is the standard in determining the proper constituency of a collec-

___________________

23 National Association of Trade Unions v. Hon. Ruben Torres, et al., supra.

24 University of the Philippines v. Calleja-Ferrer, 211 SCRA 464 (1992); citing Rothenberg on Labor
Relations, p. 482.

25 Democratic Labor Association v. Cebu Stevedoring Co., Inc., et al., G.R. No. L-10321, February
28, 1958, citing Smith on Labor Laws, 316-317; Francisco, Labor Laws, 162.

380

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SUPREME COURT REPORTS ANNOTATED

San Miguel Corp. Supervisors and Exempt Employees

Union vs. Laguema

tive bargaining unit.26 It is undisputed that they all belong to the Magnolia Poultry Division of San
Miguel Corporation.

This means that, although they belong to three different plants, they perform work of the same nature,
receive the same wages and compensation, and most importantly, share a common stake in
concerted activities. In light of these considerations, the Solicitor General has opined that separate
bargaining units in the three different plants of the division will fragmentize the employees of the said
division, thus greatly diminishing their bargaining leverage. Any concerted activity held against the
private respondent for a labor grievance in one bargaining unit will, in all probability, not create much
impact on the operations of the private respondent. The two other plants still in operation can well
step up their production and make up for the slack caused by the bargaining unit engaged in the
concerted activity. This situation will clearly frustrate the provisions of the Labor Code and the
mandate of the Constitution.27

The fact that the three plants are located in three different places, namely, in Cabuyao, Laguna, in
Otis, Pandacan, Metro Manila, and in San Fernando, Pampanga is immaterial. Geographical location
can be completely disregarded if the communal or mutual interests of the employees are not
sacrificed as demonstrated in UP v. Calleja-Ferrer where all non-academic rank and file employees
of the University of the Philippines in Diliman, Quezon City, Padre Faura, Manila, Los Baños, Laguna
and the Visayas were allowed to participate in a certification election. We rule that the distance
among the three plants is not productive of insurmountable difficulties in the administration of union
affairs. Neither are

___________________

26 Supra; National Association of Free Trade Unions v. Mainit Lumber Development Company
Workers Union-United Lumber and General Workers of the Philippines, 192 SCRA 598 (1990);
Philippine Land-Air-Sea Labor Union v. Court of Industrial Relations, 110 Phil. 176.

27 Rollo, pp. 136-137.

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People vs. Ordoña

there regional differences that are likely to impede the operations of a single bargaining
representative.

WHEREFORE, the assailed Order of March 11, 1993 is hereby SET ASIDE and the Order of the
Med-Arbiter on December 19, 1990 is REINSTATED under which a certification election among the
supervisors (level 1 to 4) and exempt employees of the San Miguel Corporation Magnolia Poultry
Products Plants of Cabuyao, San Fernando, and Otis as one bargaining unit is ordered conducted.

SO ORDERED.

Regalado (Chairman), Puno, Mendoza and Torres, Jr., JJ., concur.

Order of March 11, 1993 set aside, that of the Med-Arbiter on Decemebr 19, 1990 reinstated.

Note.—The labor organization designated or solicited by the majority of the employees in an

appropriate collective bargaining unit shall be the exclusive representative of the employees in such
unit for the purpose of collective bargaining. (Militante vs. National Labor Relations Commission, 246
SCRA 365 [1995])

——o0o——

End. OUR LABOR IS NOT IN VAIN. 😆