TAGAYTAY HIGHLANDS INTERNATIONAL GOLF CLUB INC

VS

TAGAYTAY HIGHLANDS EMPLOYEES UNION-PGTWO

395 SCRA 699

[January 22, 2003]

NATURE

Petition for Certiorari under Rule 45 THIGCI assailing CA decision denying its petition
to annul the Department of Labor and Employment (DOLE) Resolutions of November
12, 1998 and December 29, 1998

FACTS

-October 16, 1997 > Tagaytay Highlands Employees Union (THEU), Philippine
Transport and General Workers Organization (PTGWO), Local Chapter No. 776, a
legitimate labor organization said to represent majority of the rank-and-file employees
of THIGCI, filed a petition for certification election before the DOLE Mediation-
Arbitration Unit, Regional Branch No. IV

-November 27, 1997 > opposed petition for certification election because the list of
union members submitted by it was defective and fatally flawed as it included the names
and signatures of supervisors, resigned, terminated and absent without leave (AWOL)
employees, as well as employees of The Country Club, Inc., a corporation distinct and
separate from THIGCI; and that out of the 192 signatories to the petition, only 71 were
actual rank-and-file employees of THIGCI. Also, some of the signatures in the list of
union members were secured through fraudulent and deceitful means,
and submitted copies of the handwritten denial and withdrawal of some of its employees
from participating in the petition.

-THEU asserted that it complied with all the requirements for valid affiliation and
inclusion in the roster of legitimate labor organizations pursuant to DOLE Department
Order No. 9, series of 1997, on account of which it was duly granted a Certification of
Affiliation by DOLE on October 10, 1997; and that Section 5, Rule V of said Department
Order provides that the legitimacy of its registration cannot be subject
to collateral attack, and for as long as there is no final order of cancellation, it continues
to enjoy the rights accorded to a legitimate organization. Therefore, the Med-Arbiter
should, pursuant to Article 257 of the Labor Code and Section 11, Rule XI of DOLE
Department Order No. 09, automatically order the conduct of a certification election.
-January 28, 1998 > DOLE Med-Arbiter Anastacio Bactin ordered the holding of a
certification election

-DOLE Resolution of November 12, 19981 > setting aside the June 4, 1998 Resolution
dismissing the petition for certification election. MFR denied

-CA -denied THIGCI’s Petition for Certiorari and affirmed the DOLE Resolution dated
November 12, 1998. It held that while a petition for certification election is an exception
to the innocent bystander rule, hence, the employer may pray for the dismissal of such
petition on the basis of lack of mutuality of interests of the members of the union as well
as lack of employer-employee relationship and petitioner failed to adduce substantial
evidence to support its allegations.

ISSUE

WON the withdrawal of some union members from the certification election will affect
the result

HELD:

NO

-As for petitioner’ s allegation that some of the signatures in the petition for certification
election were obtained through fraud, false statement and misrepresentation, the proper
procedure is, as reflected above, for it to file a petition for cancellation of
the certificate of registration, and not to intervene in a petition for certification election.
Regarding the alleged withdrawal of union members from participating in the
certification election, this Court’s following ruling is instructive:

“T]he best forum for determining whether there were indeed retractions from some of
the laborers is in the certification election itself wherein the workers can freely express
their choice in a secret ballot. Suffice it to say that the will of the rank-and-file
employees should in every possible instance be determined by secret ballot rather than
by administrative or quasi-judicial inquiry. Such representation and certification
election cases are not to be taken as contentious litigations for suits but as mere
investigations of a non-adversary, fact-finding character as to which of the competing
unions represents the genuine choice of the workers to be their sole and
exclusive collective bargaining representative with their employer.”

Disposition

Petition is DENIED. Let the records of the case be remanded to the office of origin, the
Mediation-Arbitration Unit, Regional Branch No. IV, for the immediate conduct of a
certification election subject to the usual pre-election conference.

G.R. No. 142000 January 22, 2003

TAGAYTAY HIGHLANDS INTERNATIONAL GOLF CLUB INCORPORATED, petitioner,
vs.
TAGAYTAY HIGHLANDS EMPLOYEES UNION-PGTWO, respondent.

CARPIO-MORALES, J.:

Before this Court on certiorari under Rule 45 is the petition of the Tagaytay Highlands International
Golf Club Incorporated (THIGCI) assailing the February 15, 2002 decision of the Court of Appeals
denying its petition to annul the Department of Labor and Employment (DOLE) Resolutions of
November 12, 1998 and December 29, 1998.

On October 16, 1997, the Tagaytay Highlands Employees Union (THEU)–Philippine Transport and
General Workers Organization (PTGWO), Local Chapter No. 776, a legitimate labor organization
said to represent majority of the rank-and-file employees of THIGCI, filed a petition for certification
election before the DOLE Mediation-Arbitration Unit, Regional Branch No. IV.

THIGCI, in its Comment1 filed on November 27, 1997, opposed THEU’s petition for certification
election on the ground that the list of union members submitted by it was defective and fatally flawed
as it included the names and signatures of supervisors, resigned, terminated and absent without
leave (AWOL) employees, as well as employees of The Country Club, Inc., a corporation distinct
and separate from THIGCI; and that out of the 192 signatories to the petition, only 71 were actual
rank-and-file employees of THIGCI.

THIGCI thus submitted a list of the names of its 71 actual rank-and-file employees which it
annexed2 to its Comment to the petition for certification election. And it therein incorporated the
following tabulation3 showing the number of signatories to said petition whose membership in the
union was being questioned as disqualified and the reasons for disqualification:

# of
Reasons for Disqualification
Signatures
13 Supervisors of THIGCI
6 Resigned employees of THIGCI
2 AWOL employees of THIGCI
53 Rank-and-file employees of The Country Club at Tagaytay
Highlands, Inc.
14 Supervisors of The Country Club at Tagaytay Highlands, Inc.
6 Resigned employees of The Country Club at Tagaytay Highlands,
Inc.
3 Terminated employees of The Country Club at Tagaytay
Highlands, Inc.
1 AWOL employees of The Country Club at Tagaytay Highlands,
Inc.
4 Signatures that cannot be deciphered
16 Names in list that were erased
2 Names with first names only

THIGCI also alleged that some of the signatures in the list of union members were secured through
fraudulent and deceitful means, and submitted copies of the handwritten denial and withdrawal of
some of its employees from participating in the petition.4Replying to THIGCI’s Comment, THEU
asserted that it had complied with all the requirements for valid affiliation and inclusion in the roster
of legitimate labor organizations pursuant to DOLE Department Order No. 9, series of 1997,5 on
account of which it was duly granted a Certification of Affiliation by DOLE on October 10, 1997;6 and
that Section 5, Rule V of said Department Order provides that the legitimacy of its registration cannot
be subject to collateral attack, and for as long as there is no final order of cancellation, it continues to
enjoy the rights accorded to a legitimate organization.

THEU thus concluded in its Reply7 that under the circumstances, the Med-Arbiter should, pursuant to
Article 257 of the Labor Code and Section 11, Rule XI of DOLE Department Order No. 09,
automatically order the conduct of a certification election.

By Order of January 28, 1998, 8 DOLE Med-Arbiter Anastacio Bactin ordered the holding of a
certification election among the rank-and-file employees of THIGCI in this wise, quoted verbatim:

We evaluated carefully this instant petition and we are of the opinion that it is complete in
form and substance. In addition thereto, the accompanying documents show that indeed
petitioner union is a legitimate labor federation and its local/chapter was duly reported
to this Office as one of its affiliate local/chapter. Its due reporting through the submission
of all the requirements for registration of a local/chapter is a clear showing that it was already
included in the roster of legitimate labor organizations in this Office pursuant to Department
Order No. 9 Series of 1997 with all the legal right and personality to institute this instant
petition. Pursuant therefore to the provisions of Article 257 of the Labor Code, as amended,
and its Implementing Rules as amended by Department Order No. 9, since the respondent’s
establishment is unorganized, the holding of a certification election is mandatory for it was
clearly established that petitioner is a legitimate labor organization. Giving due course to this
petition is therefore proper and appropriate.9 (Emphasis supplied)

Passing on THIGCI’s allegation that some of the union members are supervisory, resigned and
AWOL employees or employees of a separate and distinct corporation, the Med-Arbiter held that the
same should be properly raised in the exclusion-inclusion proceedings at the pre-election
conference. As for the allegation that some of the signatures were secured through fraudulent and
deceitful means, he held that it should be coursed through an independent petition for cancellation of
union registration which is within the jurisdiction of the DOLE Regional Director. In any event, the
Med-Arbiter held that THIGCI failed to submit the job descriptions of the questioned employees
and other supporting documents to bolster its claim that they are disqualified from joining
THEU.

THIGCI appealed to the Office of the DOLE Secretary which, by Resolution of June 4, 1998, set
aside the said Med-Arbiter’s Order and accordingly dismissed the petition for certification election on
the ground that there is a "clear absence of community or mutuality of interests," it finding that THEU
sought to represent two separate bargaining units (supervisory employees and rank-and-file
employees) as well as employees of two separate and distinct corporate entities.

Upon Motion for Reconsideration by THEU, DOLE Undersecretary Rosalinda Dimalipis-Baldoz, by

authority of the DOLE Secretary, issued DOLE Resolution of November 12, 199810 setting aside the
June 4, 1998 Resolution dismissing the petition for certification election. In the November 12, 1998
Resolution, Undersecretary Dimapilis-Baldoz held that since THEU is a local chapter, the twenty
percent (20%) membership requirement is not necessary for it to acquire legitimate status, hence,
"the alleged retraction and withdrawal of support by 45 of the 70 remaining rank-and-file members . .
. cannot negate the legitimacy it has already acquired before the petition;" that rather than disregard
the legitimate status already conferred on THEU by the Bureau of Labor Relations, the names of
alleged disqualified supervisory employees and employees of the Country Club, Inc., a separate and
distinct corporation, should simply be removed from the THEU’s roster of membership; and that
regarding the participation of alleged resigned and AWOL employees and those whose signatures
are illegible, the issue can be resolved during the inclusion-exclusion proceedings at the pre-election
stage.

The records of the case were thus ordered remanded to the Office of the Med-Arbiter for the conduct
of certification election.

THIGCI’s Motion for Reconsideration of the November 12, 1998 Resolution having been denied by
the DOLE Undersecretary by Resolution of December 29, 1998,11 it filed a petition for certiorari
before this Court which, by Resolution of April 14, 1999,12 referred it to the Court of Appeals in line
with its pronouncement in National Federation of Labor (NFL) v. Hon. Bienvenido E. Laguesma, et
al.,13 and in strict observance of the hierarchy of courts, as emphasized in the case of St. Martin
Funeral Home v. National Labor Relations Commission.14

By Decision of February 15, 2000,15 the Court of Appeals denied THIGCI’s Petition for Certiorari and
affirmed the DOLE Resolution dated November 12, 1998. It held that while a petition for certification
election is an exception to the innocent bystander rule, hence, the employer may pray for the
dismissal of such petition on the basis of lack of mutuality of interests of the members of the union
as well as lack of employer-employee relationship following this Court’s ruling in Toyota Motor
Philippines Corporation v. Toyota Motor Philippines Corporation Labor Union et al.16 and Dunlop
Slazenger [Phils.] v. Hon. Secretary of Labor and Employment et al,17 petitioner failed to adduce
substantial evidence to support its allegations.

Hence, the present petition for certiorari, raising the following

"ISSUES/ASSIGNMENT OF ERRORS:

THE COURT OF APPEALS GRIEVOUSLY ERRED IN AFFIRMING THE RESOLUTION

DATED 12 NOVEMER 1998 HOLDING THAT SUPERVISORY EMPLOYEES AND NON-
EMPLOYEES COULD SIMPLY BE REMOVED FROM APPELLEES ROSTER OF RANK-
AND-FILE MEMBERSHIP INSTEAD OF RESOLVING THE LEGITIMACY OF
RESPONDENT UNION’S STATUS

THE COURT OF APPEALS GRIEVOUSLY ERRED IN AFFIRMING THE RESOLUTION

DATED 12 NOVEMBER 1998 HOLDING THAT THE DISQUALIFIED EMPLOYEES’
STATUS COULD READILY BE RESOLVED DURING THE INCLUSION AND EXCLUSION
PROCEEDINGS

THE COURT OF APPEALS GRIEVOUSLY ERRED IN NOT HOLDING THAT THE

ALLEGATIONS OF PETITIONER HAD BEEN DULY PROVEN BY FAILURE OF
RESPONDENT UNION TO DENY THE SAME AND BY THE SHEER WEIGHT OF
EVIDENCE INTRODUCED BY PETITIONER AND CONTAINED IN THE RECORDS OF
THE CASE"18

The statutory authority for the exclusion of supervisory employees in a rank-and-file union, and vice-
versa, is Article 245 of the Labor Code, to wit:

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.

While above-quoted Article 245 expressly prohibits supervisory employees from joining a rank-and-
file union, it does not provide what would be the effect if a rank-and-file union counts supervisory
employees among its members, or vice-versa.

Citing Toyota19 which held that "a labor organization composed of both rank-and-file and supervisory
employees is no labor organization at all," and the subsequent case of Progressive Development
Corp. – Pizza Hut v. Ledesma20 which held that:

"The Labor Code requires that in organized and unorganized establishments, a petition for
certification election must be filed by a legitimate labor organization. The acquisition of rights
by any union or labor organization, particularly the right to file a petition for certification
election, first and foremost, depends on whether or not the labor organization has attained
the status of a legitimate labor organization.

In the case before us, the Med-Arbiter summarily disregarded the petitioner’s prayer that the
former look into the legitimacy of the respondent Union by a sweeping declaration that the
union was in the possession of a charter certificate so that ‘for all intents and purposes,
Sumasaklaw sa Manggagawa sa Pizza Hut (was) a legitimate organization,’"21 (Underscoring
and emphasis supplied),

petitioner contends that, quoting Toyota, "[i]t becomes necessary . . ., anterior to the granting of an
order allowing a certification election, to inquire into the composition of any labor organization
whenever the status of the labor organization is challenged on the basis of Article 245 of the Labor
Code."22

Continuing, petitioner argues that without resolving the status of THEU, the DOLE Undersecretary
"conveniently deferred the resolution on the serious infirmity in the membership of [THEU] and
ordered the holding of the certification election" which is frowned upon as the following ruling of this
Court shows:

We also do not agree with the ruling of the respondent Secretary of Labor that the infirmity
in the membership of the respondent union can be remedied in "the pre-election
conference thru the exclusion-inclusion proceedings wherein those employees who are
occupying rank-and-file positions will be excluded from the list of eligible voters." Public
respondent gravely misappreciated the basic antipathy between the interest of supervisors
and the interest of rank-and-file employees. Due to the irreconcilability of their interest we
held in Toyota Motor Philippines v. Toyota Motors Philippines Corporation Labor Union, viz:

‘x x x

"Clearly, based on this provision [Article 245], a labor organization composed of both
rank-and-file and supervisory employees is no labor organization at all. It cannot, for
any guise or purpose, be a legitimate labor organization. Not being one, an
organization which carries a mixture of rank-and-file and supervisory employees
cannot posses any of the rights of a legitimate labor organization, including the right
to file a petition for certification election for the purpose of collective bargaining. It
becomes necessary, therefore, anterior to the granting of an order allowing a
certification election, to inquire into the composition of any labor organization
whenever the status of the labor organization is challenged on the basis of Article
 245 of the Labor Code." (Emphasis by petitioner) (Dunlop Slazenger (Phils.), v.
Secretary of Labor, 300 SCRA 120 [1998]; Underscoring and emphasis supplied by
petitioner.)

The petition fails. After a certificate of registration is issued to a union, its legal personality cannot be
subject to collateral attack. It may be questioned only in an independent petition for cancellation in
accordance with Section 5 of Rule V, Book IV of the "Rules to Implement the Labor Code"
(Implementing Rules) which section reads:

Sec. 5. Effect of registration. The labor organization or workers’ association shall be deemed
registered and vested with legal personality on the date of issuance of its certificate of
registration. Such legal personality cannot thereafter be subject to collateral attack, but may
be questioned only in an independent petition for cancellation in accordance with these
Rules. (Emphasis supplied)

The grounds for cancellation of union registration are provided for under Article 239 of the Labor
Code, as follows:

Art. 239. Grounds for cancellation of union registration. The following shall constitute
grounds for cancellation of union registration:

(a) Misrepresentation, false statement or fraud in connection with the adoption or ratification
of the constitution and by-laws or amendments thereto, the minutes of ratification, and the list
of members who took part in the ratification;

(b) Failure to submit the documents mentioned in the preceding paragraph within thirty (30)
days from adoption or ratification of the constitution and by-laws or amendments thereto;

(c) Misrepresentation, false statements or fraud in connection with the election of officers,
minutes of the election of officers, the list of voters, or failure to subject these documents
together with the list of the newly elected/appointed officers and their postal addresses within
thirty (30) days from election;

(d) Failure to submit the annual financial report to the Bureau within thirty (30) days after the
losing of every fiscal year and misrepresentation, false entries or fraud in the preparation of
the financial report itself;

(e) Acting as a labor contractor or engaging in the "cabo" system, or otherwise engaging in
any activity prohibited by law;

(f) Entering into collective bargaining agreements which provide terms and conditions of
employment below minimum standards established by law;

(g) Asking for or accepting attorney’s fees or negotiation fees from employers;

(h) Other than for mandatory activities under this Code, checking off special assessments or
any other fees without duly signed individual written authorizations of the members;

(i) Failure to submit list of individual members to the Bureau once a year or whenever
required by the Bureau; and
 (j) Failure to comply with the requirements under Articles 237 and 238, (Emphasis supplied),

while the procedure for cancellation of registration is provided for in Rule VIII, Book V of the
Implementing Rules.

The inclusion in a union of disqualified employees is not among the grounds for cancellation, unless
such inclusion is due to misrepresentation, false statement or fraud under the circumstances
enumerated in Sections (a) and (c) of Article 239 of above-quoted Article 239 of the Labor
Code.

THEU, having been validly issued a certificate of registration, should be considered to have already
acquired juridical personality which may not be assailed collaterally.

As for petitioner’s allegation that some of the signatures in the petition for certification election were
obtained through fraud, false statement and misrepresentation, the proper procedure is, as reflected
above, for it to file a petition for cancellation of the certificate of registration, and not to intervene in a
petition for certification election.

Regarding the alleged withdrawal of union members from participating in the certification election,
this Court’s following ruling is instructive:

"‘[T]he best forum for determining whether there were indeed retractions from some of the
laborers is in the certification election itself wherein the workers can freely express their
choice in a secret ballot.’ Suffice it to say that the will of the rank-and-file employees should
in every possible instance be determined by secret ballot rather than by administrative or
quasi-judicial inquiry. Such representation and certification election cases are not to be taken
as contentious litigations for suits but as mere investigations of a non-adversary, fact-finding
character as to which of the competing unions represents the genuine choice of the workers
to be their sole and exclusive collective bargaining representative with their employer."23

As for the lack of mutuality of interest argument of petitioner, it, at all events, does not lie given, as
found by the court a quo, its failure to present substantial evidence that the assailed employees are
actually occupying supervisory positions.

While petitioner submitted a list of its employees with their corresponding job titles and ranks,24 there
is nothing mentioned about the supervisors’ respective duties, powers and prerogatives that would
show that they can effectively recommend managerial actions which require the use of independent
judgment.25

As this Court put it in Pepsi-Cola Products Philippines, Inc. v. Secretary of Labor:26

Designation should be reconciled with the actual job description of subject employees x x x
The mere fact that an employee is designated manager does not necessarily make him one.
Otherwise, there would be an absurd situation where one can be given the title just to be
deprived of the right to be a member of a union. In the case of National Steel Corporation vs.
Laguesma (G. R. No. 103743, January 29, 1996), it was stressed that:

What is essential is the nature of the employee’s function and not the
nomenclature or title given to the job which determines whether the employee has
rank-and-file or managerial status or whether he is a supervisory employee.
(Emphasis supplied).27
WHEREFORE, the petition is hereby DENIED. Let the records of the case be remanded to the office
of origin, the Mediation-Arbitration Unit, Regional Branch No. IV, for the immediate conduct of a
certification election subject to the usual pre-election conference.

SO ORDERED.

150-A Phil. 968

FERNANDO, J.:
The dispute in this appealed decision from the Court of First Instance of
Cebu on questions of law is between plaintiff Mactan Workers Union[1] and
intervenor Associated Labor Union. The former in its complaint on behalf
of seventy-two of its members working in defendant corporation, Cebu
Shipyard and Engineering Works, Inc.[2] did file a money claim in the
amount of P4,035.82 representing the second installment of a profit-
sharing agreement under a collective bargaining contract entered into
between such business firm and intervenor labor union as the exclusive
collective bargaining representative of its workers. The plaintiff was
successful both in the City Court of Lapulapu where such complaint was
first started as well as in the Court of First Instance of Cebu. It is from the
decision of the latter court, rendered on February 22, 1968, that this appeal
was interposed by intervenor Associated Labor Union. It must have been
an awareness on appellant's part that on the substantive aspect, the claim
of plaintiff to what was due its members under such collective bargaining
agreement was meritorious that led it to rely on alleged procedural
obstacles for the reversal sought. Intervenor, however, has not thereby
dented the judgment. As will be more fully explained, there are no
applicable procedural doctrines that stand in the way of plaintiff's suit. We
affirm. The facts are not in dispute. According to the decision: "From the
evidence presented it appears that the defendant Cebu Shipyard &
Engineering Works, Inc. in Lapulapu City is employing laborers and
employees belonging to two rival labor unions. Seventy-two of these
employees or laborers whose names appear in the complaint are affiliated
with the Mactan Workers Union while the rest are members of the
intervenor Associated Labor Union. On November 28, 1964, the defendant
Cebu Shipyard & Engineering Works, Inc. and the Associated Labor Union
entered into a 'Collective Bargaining Agreement' * * * the pertinent part of
which, Article XIII thereof, [reads thus]: '* * * . The [Company] agrees to
give a profit-sharing bonus to its employees and laborers to be taken from
ten per cent (10%) of its net profits or net income derived from the direct
operation of its shipyard and shop in Lapu-Lapu City and after deducting
the income tax and the bonus annually given to its General Manager and
the Superintendent and the members of the Board of Directors and
Secretary of the Corporation, to be payable in two (2) installments, the first
installment being payable in March and the second installment in June,
each year out of the profits in agreement. In the computation of said ten
per cent (10%) to [be] distributed as a bonus among the employees and
laborers of the [Company] in proportion to their salaries or wages, only the
income derived by the [Company] from the direct operation of its shipyard
and shop in Lapulapu City, as stated herein-above-commencing from the
earnings during the year 1964, shall be included. Said profit-sharing bonus
shall be paid by the [Company] to [Associated Labor Union] to be delivered
by the latter to the employees and laborers concerned and it shall be the
duty of the Associated Labor Union to furnish and deliver to the [Company]
the corresponding receipts duly signed by the laborers and employees
entitled to receive the profit-sharing bonus within a period of sixty (60)
days from the date of receipt by [it] from the [Company] of the profit-
sharing bonus. If a laborer or employee of the [Company] does not want to
accept the profit-sharing bonus which the said employees or laborer is
entitled under this Agreement, it shall be the duty of the [Associated Labor
Union] to return to the money received by [it] as profit-sharing bonus to
the [Company] within a period of sixty (60) days from the receipt by the
[Union] from the [Company] of the said profit-sharing bonus."[3] The
decision went on to state: "In compliance with the said collective
bargaining agreement, in March, 1965 the defendant Cebu Shipyard &
Engineering Works, Inc. delivered to the ALU for distribution to the
laborers or employees working with the defendant corporation to the
profit-sharing bonus corresponding to the first installment for the year
1965. Again in June 1965 the defendant corporation delivered to the
Associated Labor Union the profit-sharing bonus corresponding to the
second installment for the 1965. The members of the Mactan Workers
Union failed to receive their shares in the second installment of bonus
because they did not like to go to the office of the ALU to collect their
shares. In accordance with the terms of the collective bargaining after 60
days, the uncollected shares of the plaintiff union members was returned by
the ALU to the defendant corporation. At the same time the defendant
corporation was advised by the ALU not to deliver the said amount to the
members of the Mactan Workers Union unless ordered by the Court,
otherwise the ALU will take such step to protect the interest of its members
* * * . Because this warning given by the intervenor union the defendant
corporation did not pay to the plaintiffs the sum of P4,035.82 which was
returned by the Associated Labor Union, but instead, deposited the said
amount with the Labor Administrator. For the recovery of this amount this
case was filed with the lower court."[4]The dispositive portion of such
decision follows: "[Wherefore], judgment is hereby rendered ordering the
defendants to deliver to the Associated Labor Union the sum of P4,035.82
for distribution to the employees of the defendant corporation who are
members of the Mactan Workers Union; and ordering the intervenor
Associated Labor Union, immediately after receipt of the said amount, to
pay the members of the Mactan Workers Union their corresponding shares
in the profit-sharing bonus for the second installments for the year
1965."[5]It is from such a decision that an appeal was taken by intervenor
Associated Labor Union. As is quite apparent on the face of such judgment,
the lower court did nothing except to require literal compliance with the
terms of a collective bargaining contract. Nor, as will be hereafter
discussed, has any weakness thereof been demonstrated on the procedural
questions raised by appellant. To repeat, we have to affirm.
1. The terms and conditions of a collective bargaining contract constitute
the law between the parties. Those who are entitled to its benefits can
invoke its provisions. In the event that an obligation therein imposed is not
fulfilled, the aggrieved party has the right to go to court for redress.[6] Nor
does it suffice as a defense that the claim is made on behalf of non-
members of intervenor Associated Labor Union, for it is a well-settled
doctrine that the benefits of a collective bargaining agreement extend to the
laborers and employees in the collective bargaining unit, including those
who do not belong to the chosen bargaining labor organization.[7] Any
other view would be a discrimination on which the law frowns. It is
appropriate that such should be the case. As was held in United Restauror's
Employees and Labor Union vs. Torres,[8] this Court speaking through
Justice Sanchez, "the right to be the exclusive representative of all the
employees in an appropriate collective bargaining unit is vested in the labor
union 'designated or selected' for such purpose 'by the majority of the
employees' in the unit concerned."[9] If it were otherwise, the highly
salutory purpose and objective of the collective bargaining scheme to
enable labor to secure better terms in employment condition as well as
rates of pay would be frustrated insofar as non-members are concerned,
deprived as they are of participation in whatever advantages could thereby
be gained. The labor union that gets the majority vote as the exclusive
bargaining representative does not act for its members alone. It represents
all the employees in such a bargaining unit. It is not to be indulged in any
attempt on its part to disregard the rights of non-members. Yet that is what
intervenor labor union was guilty of, resulting in the complaint filed on
behalf of the laborers, who were in the ranks of plaintiff Mactan Labor
Union.
The outcome was not at all unexpected. The right being clear all that had to
be done was to see to its enforcement. Nor did the lower court in the
decision now on appeal require anything else other than that set forth in
the collective bargaining agreement. All that was done was to have the
covenants therein contained as to the profit-sharing scheme carried out and
respected. It would be next to impossible for intervenor Associated Labor
Union to point to any feature thereof that could not in any wise be objected
to as repugnant to the provisions of the collective bargaining
contract. Certainly the lower court, as did the City Court of Lapulapu,
restricted itself to compelling the parties to abide by what was agreed
upon. How then can the appealed decision be impugned?
2. Intervenor Associated Labor Union, laboring under such a predicament
had perforce to rely on what it considered procedural lapses. It would
assail the alleged lack of a cause of action, of jurisdiction of the City Court
of Lapulapu and of personality of the Mactan Workers Union to represent
its members. There is no merit to such an approach. The highly sophistical
line of argument followed in its brief as appellant does not carry a
persuasive ring. What is apparent is that intervenor was hard put to prop
up what was inherently a weak, not to say an indefensible, stand. The
impression given is that of a litigant clutching at straws.
How can the allegation of a lack of a cause of action be taken seriously when
precisely there was a right violated on the part of the members of plaintiff
Mactan Workers Union, a grievance that called for redress? The
assignment of error that the City Court of Lapulapu was bereft of
jurisdiction is singularly unpersuasive. The amount claimed by plaintiff
Mactan Workers Union on behalf of its members was P4,035.82 and if the
damages and attorneys' fees be added, the total sum was less than
P10,000.00. Section 88 of the Judiciary Act in providing for the original
jurisdiction of city courts in civil cases provides: "In all civil actions,
including those mentioned in Rules fifty-nine and sixty-two (now Rules 57
and 60) of the Rules of Court, arising in his municipality or city, and not
exclusively cognizable by the Court of First Instance, the municipal judge
and the judge of a city court shall have exclusive original jurisdiction where
the value of the subject matter or amount of the demand does not exceed
ten thousand pesos, exclusive of interests and costs."[10] It is true that if an
element of unfair labor practice may be discerned in a suit for the
enforcement of a collective bargaining contract, then the matter is solely
cognizable by the Court of Industrial Relations.[11] It is equally true that as
of the date the lower court decision was rendered, the question of such
enforcement had been held to be for the regular courts to pass
upon.[12] Counsel for intervenor Associated Labor Union was precisely the
petitioner in one of the decisions of this Court, Seno vs. Mendoza,[13] where
such a doctrine was reiterated. In the language of Justice Makalintal, the
ponente: "As the issue involved in the instant case, although arising from a
labor dispute, does not refer to one affecting an industry which is
indispensable to the national interest and certified by the President to the
Industrial Court, nor to minimum wage under the Minimum Wage Law, or
to hours of employment under the Eight-Hour Labor Law, nor to an unfair
labor practice, but seeks the enforcement of a provision of the collective
bargaining agreement, * * *, jurisdiction pertains to the ordinary courts and
not to the Industrial Court."[14] There was only a half-hearted attempt, if it
could be called that, to lend credence to the third error assigned, namely
that plaintiff Mactan Workers Union could not file the suit on behalf of its
members. That is evident by intervenor Associated Labor Union devoting
only half a page in its brief to such an assertion. It is easy to see why it
should be thus. On its face, it certainly appeared to be oblivious of how far
a labor union can go, or is expected to, in the defense of the rights of its
rank and file. There was an element of surprise, considering that such a
contention came from a labor organization, which under normal condition
should be the last to lay itself open to a charge that it is not averse to
denigrating the effectiveness of labor unions.
3. This brings us to one last point. It is quite understandable that labor
unions in their campaign for membership, for acquiring ascendancy in any
shop, plant, or industry would do what lies in their power to put down
competing groups. The struggle is likely to be marked with bitterness, no
quarter being given or expected on the part of either side. Nevertheless, it
is not to be forgotten that what is entitled to constitutional protection is
labor, or more specifically the working men and women, not labor
organizations. The latter are merely the instrumentalities through which
their welfare may be promoted and fostered. That is the raison d'etre of
labor unions. The utmost care should be taken then, lest in displaying an
unyielding, intransigent attitude on behalf of their members, injustice be
committed against opposing labor organizations. In the final analysis, they
a lone are not the sole victims, but the labor movement itself, which may
well be the recipient of a crippling blow. Moreover, while it is equally
understandable that their counsel would take advantage of every legal
doctrine deemed applicable or conjure up any defense that could serve their
cause, still, as officers of the court, there should be an awareness that resort
to such a technique does result in clogged dockets, without the least
justification especially so if there be insistence on flimsy and insubstantial
contentions just to give some semblance of plausibility to their
pleadings. Certainly, technical virtuosity, or what passes for it, is no
substitute for an earnest and sincere desire to assure that there be justice
according to law. That is a creed to which all members of the legal
profession, labor lawyers not excluded, should do their best to live by.
WHEREFORE, the decision of the lower court of February 22, 1968 is
affirmed. Costs against Associated Labor Union.
Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Ruiz Castro,
Teehankee, Barredo, Makasiar , and Antonio, JJ., concur.

[ G.R. No. L-30241 June 30, 1972] MACTAN

WORKERS UNION and TOMAS FERRER
vs.DON RAMON ABOITIZ
FACTS: Defendant Cebu Shipyard & Engineering Works, Inc. in Lapulapu City is employing laborers
and employees belonging to two rival labor unions. Seventy-two of these employees or laborers
whose names appear in the complaint are affiliated with the Mactan Workers Union while the rest
are members of the intervenor Associated Labor Union. On November 28, 1964, the defendant
Cebu Shipyard & Engineering Works, Inc. and the Associated Labor Union entered into a ‘Collective
Bargaining Agreement’ … the pertinent part of which, Article XIII thereof, [reads thus]: ‘… The
[Company] agrees to give a profit-sharing bonus to its employees and laborers, to be payable in two
(2) installments, the first installment being payable in March and the second installment in June,
each year out of the profits in agreement. Said profit-sharing bonus shall be paid by the [Company]
to [Associated Labor Union] to be delivered by the latter to the employees and laborers concerned
and it shall be the duty of the Associated Labor Union to furnish and deliver to the [Company] the
corresponding receipts duly signed by the laborers and employees entitled to receive the profit-
sharing bonus within a period of sixty (60) days from the date of receipt by [it] from the [Company] of
the profit-sharing bonus. If a laborer or employee of the [Company] does not want to accept the
profit-sharing bonus which the said employee or laborer is entitled under this Agreement, it shall be
the duty of the [Associated Labor Union] to return the money received by [it] as profit-sharing bonus
to the [Company] within a period of sixty (60) days from the receipt by the [Union] from the
[Company] of the said profit-sharing bonus.'”Defendant Cebu Shipyard & Engineering Works, Inc.
 delivered to the ALU for distribution to the laborers or employees working with the defendant
corporation to the profit-sharing bonus corresponding to the first installment for the year 1965. Again
in June 1965 the defendant corporation delivered to the Associated Labor Union the profit-sharing
bonus corresponding to the second installment for 1965. The members of the Mactan Workers
Union failed to receive their shares in the second installment of bonus because they did not like to
go to the office of the ALU to collect their shares. In accordance with the terms of the collective
bargaining after 60 days, the uncollected shares of the plaintiff union members was returned by the
ALU to the defendant corporation. Hence the collection suit before the RTC.
HELD: Nevertheless, it is not to be forgotten that what is entitled to constitutional protection is labor,
or more specifically the working men and women, not labor organizations. The latter are merely the
instrumentalities through which their welfare may be promoted and fostered. That is the raison
d’etre of labor unions. The utmost care should be taken then, lest in displaying an unyielding,
intransigent attitude on behalf of their members, injustice be committed against opposing labor
organizations. In the final analysis, they alone are not the sole victims, but the labor movement itself,
which may well be the recipient of a crippling blow. Moreover, while it is equally understandable that
their counsel would take advantage of every legal doctrine deemed applicable or conjure up any
defense that could serve their cause, still, as officers of the court, there should be an awareness that
resort to such a technique does result in clogged dockets, without the least justification especially so
if there be insistence on flimsy and insubstantial contentions just to give some semblance of
plausibility to their pleadings. Certainly, technical virtuosity, or what passes for it, is no substitute for
an earnest and sincere desire to assure that there be justice according to law. That is a creed to
which all members of the legal profession, labor lawyers not excluded, should do their best to live by.
TUNAY NA PAGKAKAISA NG MANGGAGAWA SA
ASIA BREWERY VS. ASIA BREWERY, INC G.R. No.
162025

Topic: Right to Self-Organization; Excluded Employees/ Workers; Confidential Employees

FACTS:

1) Respondent ABI entered into a CBA with Bisig at Lakas ng mga Manggagawa sa Asia-
Independent (BLMA-INDEPENDENT), the exclusive bargaining representative of ABI’s rank-and-file
employees.

2) Article I of the CBA defined the scope of the bargaining unit, as follows: The UNION shall not represent
or accept for membership employees outside the scope of the bargaining unit herein defined.
 Section 2. Bargaining Unit. The bargaining unit shall be comprised of all regular rank-and-file daily-paid
employees of the COMPANY. However, the following jobs/positions as herein defined shall
be excluded from the bargaining unit, to wit:

xxx

Confidential and Executive Secretaries

xxx

Purchasing and Quality Control Staff.

3) The CBA expressly excluded Confidential and Executive Secretaries from the rank-and-file bargaining
unit, for which reason ABI seeks their disaffiliation from petitioner. ABI’s management stopped deducting
union dues from 81 employees, believing that their membership in BLMA-INDEPENDENT violated the
CBA. 18 of these affected employees are QA Sampling Inspectors/Inspectresses and Machine Gauge
Technician (checkers) who formed part of the Quality Control Staff. The rest are secretaries/clerks directly
under their respective division managers.

4) Petitioner, however, maintains that except for those who had been promoted to monthly paid positions,
the other secretaries/clerks are deemed included among the rank-and-file employees of ABI. BLMA-
INDEPENDENT claimed that ABI’s actions restrained the employees’ right to self-organization.

5) VA ruled that the subject employees qualify under the rank-and-file category because their functions are
merely routinary and clerical. He noted that the positions occupied by the checkers and secretaries/clerks
in the different divisions are not managerial or supervisory, as evident from the duties and responsibilities
assigned to them. With respect to QA Sampling Inspectors/Inspectresses and Machine Gauge
Technician, he ruled that ABI failed to establish with sufficient clarity their basic functions as to consider
them Quality Control Staff who were excluded from the coverage of the CBA. Accordingly, the subject
employees were declared eligible for inclusion within the bargaining unit represented by BLMA-
INDEPENDENT.

6) CA reversed the VA, ruling that the 81 employees are excluded from and are not eligible for inclusion in
the bargaining unit as defined in Section 2, Article I of the CBA.

ISSUE: WON the checkers and secretaries/clerks of respondent company are rank-and-file employees
who are eligible to join the Union of the rank-and-file employees.

RULING: YES. The checkers and secretaries/clerks of respondent company are rank-and-file
employees who are eligible to join the Union of the rank-and-file employees.
Although Article 245 of the Labor Code limits the ineligibility to join, form and assist any labor
organization to managerial employees, jurisprudence has extended this prohibition to confidential
employees or those who by reason of their positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees and hence, are likewise privy to sensitive and highly
confidential records. Confidential employees are thus excluded from the rank-and-file bargaining unit. The
rationale for their separate category and disqualification to join any labor organization is similar to the
inhibition for managerial employees because if allowed to be affiliated with a Union, the latter might not be
assured of their loyalty in view of evident conflict of interests and the Union can also become company-
denominated with the presence of managerial employees in the Union membership. Having access to
confidential information, confidential employees may also become the source of undue advantage. Said
employees may act as a spy or spies of either party to a collective bargaining agreement.

Confidential employees are defined as 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 (2) 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. 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.

A perusal of the job descriptions of these secretaries/clerks reveals that their assigned duties and
responsibilities involve routine activities of recording and monitoring, and other paper works for their
respective departments while secretarial tasks such as receiving telephone calls and filing of office
correspondence appear to have been commonly imposed as additional duties. Respondent failed to
indicate who among these numerous secretaries/clerks have access to confidential data relating to
management policies that could give rise to potential conflict of interest with their Union membership. It is
not even farfetched that the job category may exist only on paper since they are all daily-paid
workers. With respect to the Sampling Inspectors/Inspectresses and the Gauge Machine Technician, the
job descriptions of these checkers showed that they perform routine and mechanical tasks preparatory to
the delivery of the finished products. No evidence was presented by the respondent to prove that these
daily-paid checkers actually form part of the company’s Quality Control Staff who as such were exposed
to sensitive, vital and confidential information about [company’s] products or have knowledge of mixtures
of the products, their defects, and even their formulas which are considered trade secrets.

DISPOSITIVE: Petitioner won.

DOCTRINE: Although Article 245 of the Labor Code limits the ineligibility to join, form and assist any
labor organization to managerial employees, jurisprudence has extended this prohibition to confidential
employees or those who by reason of their positions or nature of work are required to assist or act in a
fiduciary manner to managerial employees and hence, are likewise privy to sensitive and highly
confidential records. Confidential employees are thus excluded from the rank-and-file bargaining unit.

Tunay na Pagkakaisa ng Manggagawa sa Asia Brewery v. Asia

Brewery, Inc.

G.R. No. 162025, August 3, 2010

Villarama, Jr.

Facts: Asia Brewery entered into a Collective Bargaining Agreement with BLMA,
the exclusive bargaining representative of Asia Brewery rank-and-file employees.
Those employees explicitly excluded in the CBA are, among others, confidential
and executive secretaries and purchasing and quality control staff.

A dispute arose when Asia Brewery management stopped deducting union dues
from 81 employees, believing that their membership in the union violated the
CBA. These employees were Sampling Inspectors, Machine Gauge Technician,
both part of the Quality Control Staff, checkers assigned to different departments,
and secretaries and clerks directly under the respective division managers.

During the pendency of the case, Tunay na Pagkakaisa won in a certification

election.

Issue: Whether or not the 81 employees may be validly excluded from the
bargaining unit.

Held: No. Confidential employees are defined as 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 (2) 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.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."

There is no showing in this case that the secretaries/clerks and checkers assisted
or acted in a confidential capacity to managerial employees and obtained
confidential information relating to labor relations policies.And even assuming
that they had exposure to internal business operations of the company,
respondent claimed, this is not per se ground for their exclusion in the bargaining
unit of the daily-paid rank-and-file employees.

STANDARD CHARTERED BANK

EMPLOYEES UNION (NUBE) vs.
CONFESOR, in her capacity as
SECRETARY OF LABOR AND
EMPLOYMENT; and the STANDARD
CHARTERED BANK
OCTOBER 23, 2012 ~ VBDIAZ

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE) vs. The

Honorable MA. NIEVES R. CONFESOR, in her capacity as SECRETARY OF
LABOR AND EMPLOYMENT; and the STANDARD CHARTERED BANK

G.R. No. 114974 June 16, 2004

FACTS: Before the commencement of the negotiation for the new CBA between the
bank and the Union, 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. Meanwhile, Diokno(head of the negotiating team for the bank)
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. However, Umali was
retained as a member thereof.

There was deadlock in the negotiations. Both parties alleged ULP. Bank alleged
that 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. Union alleged unfair labor practice when the
bank allegedly 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, damage or injury to the
public interest need not be present in order for unfair labor practice to prosper. The
Union also contended that the Bank merely went through the motions of
collective bargaining without the intent to reach an agreement
ISSUE:

1. WON there was interference

2. WON the bank committed “surface bargaining”
HELD:

1. NONE
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.

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 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. Such is what appears to have happened in this case.
1. NO. Surface bargaining is defined as “going through the motions of negotiating”
without any legal intent to reach an agreement.”
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.

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.”

Hence, the parties’ failure to agree did not amount to ULP under Article 248(g) for
violation of the duty to bargain.

NOTE: (on the allegation of the bank’s refusal to give certain information) 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.
575 Phil. 306

AUSTRIA-MARTINEZ, J.:
For resolution is an appeal by certiorari filed by petitioner under Rule 45 of
the Rules of Court, assailing the Decision[1] dated October 9, 2002 and
Resolution[2] dated January 26, 2004 issued by the Court of Appeals (CA),
dismissing their petition and affirming the Secretary of Labor and
Employment's Orders dated May 31, 2001 and August 30, 2001.

Petitioner and the Standard Chartered Bank (Bank) began negotiating for a
new Collective Bargaining Agreement (CBA) in May 2000 as their 1998-
2000 CBA already expired. Due to a deadlock in the negotiations, petitioner
filed a Notice of Strike prompting the Secretary of Labor and Employment
to assume jurisdiction over the labor dispute.

On May 31, 2001, Secretary Patricia A. Sto. Tomas of the Department of

Labor and Employment (DOLE) issued an Order with the following
dispositive portion:

WHEREFORE, PREMISES CONSIDERED, the Standard Chartered Bank

and the Standard Chartered Bank Employees Union are directed to execute
their collective bargaining agreement effective 01 April 2001 until 30 March
2003 incorporating therein the foregoing dispositions and the agreements
they reached in the course of negotiations and conciliation. All other
submitted issues that were not passed upon are dismissed.

The charge of unfair labor practice for bargaining in bad faith and the claim
for damages relating thereto are hereby dismissed for lack of merit.

Finally, the charge of unfair labor practice for gross violation of the
economic provisions of the CBA is hereby dismissed for want of
jurisdiction.

SO ORDERED.[3]
Both petitioner and the Bank filed their respective motions for
reconsideration, which were denied by the Secretary per Order dated
August 30, 2001.[4]

Petitioner sought recourse with the CA via a petition for certiorari, and in
the assailed Decision dated October 9, 2002[5] and Resolution dated
January 26, 2004,[6] the CA dismissed their petition and affirmed the
Secretary's Orders.

Hence, herein petition based on the following grounds:

I.

THE COURT A QUO ERRED IN DECIDING THAT THERE WAS NO

BASIS FOR REVISING THE SCOPE OF EXCLUSIONS FROM THE
APPROPRIATE BARGAINING UNIT UNDER THE CBA.

II.

THE COURT A QUO ERRED IN DECIDING THAT A ONE-MONTH OR

LESS TEMPORARY OCCUPATION OF A POSITION (ACTING CAPACITY)
DOES NOT MERIT ADJUSTMENT IN REMUNERATION.[7]
The resolution of this case has been overtaken by the execution of the
parties' 2003-2005 CBA. While this would render the case moot and
academic, nevertheless, the likelihood that the same issues will come up in
the parties' future CBA negotiations is not far-fetched, thus compelling its
resolution. Courts will decide a question otherwise moot if it is capable of
repetition yet evading review.[8]

The CBA provisions in dispute are the exclusion of certain employees from
the appropriate bargaining unit and the adjustment of remuneration for
employees serving in an acting capacity for one month.

In their proposal, petitioner sought the exclusion of only the following

employees from the appropriate bargaining unit - all managers who are
vested with the right to hire and fire employees, confidential employees,
those with access to labor relations materials, Chief Cashiers, Assistant
Cashiers, personnel of the Telex Department and one Human Resources
(HR) staff.[9]

In the previous 1998-2000 CBA,[10] the excluded employees are as follows:

 A. All covenanted and assistant officers (now called National Officers)

B. One confidential secretary of each of the:

1. Chief Executive, Philippine Branches

2. Deputy Chief Executive/Head, Corporate Banking Group
3. Head, Finance
4. Head, Human Resources
5. Manager, Cebu
6. Manager, Iloilo
7. Coenanted Officers provided said positions shall be filled by
new recruits.

C. The Chief Cashiers and Assistant Cashiers in Manila, Cebu and Iloilo,
and in any other branch that the BANK may establish in the country.

D. Personnel of the Telex Department

E. All Security Guards

F. Probationary employees, without prejudice to Article 277 (c) of the

Labor Code, as amended by R.A. 6715, casuals or emergency
employees; and

G. One (1) HR Staff[11]

The Secretary, however, maintained the previous exclusions because

petitioner failed to show that the employees sought to be removed from the
list qualify for exclusion.[12]

With regard to the remuneration of employees working in an acting

capacity, it was petitioner's position that additional pay should be given to
an employee who has been serving in a temporary/acting capacity for one
week. The Secretary likewise rejected petitioner's proposal and instead,
allowed additional pay for those who had been working in such capacity for
one month. The Secretary agreed with the Bank's position that a restrictive
provision would curtail management's prerogative, and at the same time,
recognized that employees should not be made to work in an acting
capacity for long periods of time without adequate compensation.

The Secretary's disposition of the issues raised by petitioner were affirmed

by the CA.[13] The Court sustains the CA.

Whether or not the employees sought to be excluded from the appropriate

bargaining unit are confidential employees is a question of fact, which is
not a proper issue in a petition for review under Rule 45 of the Rules of
Court.[14] This holds more true in the present case in which petitioner failed
to controvert with evidence the findings of the Secretary and the CA.

The disqualification of managerial and confidential employees from joining

a bargaining unit for rank and file employees is already well-entrenched in
jurisprudence. While Article 245 of the Labor Code limits the ineligibility to
join, form and assist any labor organization to managerial employees,
jurisprudence has extended this prohibition to confidential employees or
those who by reason of their positions or nature of work are required to
assist or act in a fiduciary manner to managerial employees and hence, are
likewise privy to sensitive and highly confidential records.[15]

In this case, the question that needs to be answered is whether the Bank's
Chief Cashiers and Assistant Cashiers, personnel of the Telex Department
and HR staff are confidential employees, such that they should be excluded.

As regards the qualification of bank cashiers as confidential

employees, National Association of Trade Unions (NATU) - Republic
Planters Bank Supervisors Chapter v. Torres[16] declared that they 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, and therefore,
disqualified from joining or assisting a union; or joining, assisting or
forming any other labor organization.[17]

Golden Farms, Inc. v. Ferrer-Calleja[18] meanwhile stated that

"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 spy or
spies of either party to a collective bargaining agreement."[19]
Finally, in Philips Industrial Development, Inc. v. National Labor
Relations Commission,[20] the Court designated personnel staff, in which
human resources staff may be qualified, as confidential employees because
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.

Petitioner insists that the foregoing employees are not confidential

employees; however, it failed to buttress its claim. Aside from its
generalized arguments, and despite the Secretary's finding that there was
no evidence to support it, petitioner still failed to substantiate its claim.
Petitioner did not even bother to state the nature of the duties and
functions of these employees, depriving the Court of any basis on which it
may be concluded that they are indeed confidential employees. As aptly
stated by the CA:

While We agree that petitioner's proposed revision is in accordance with

the law, this does not necessarily mean that the list of exclusions
enumerated in the 1998-2000 CBA is contrary to law. As found by public
respondent, petitioner failed to show that the employees sought to
be removed from the list of exclusions are actually rank and file
employees who are not managerial or confidential in status and
should, accordingly, be included in the appropriate bargaining
unit.

Absent any proof that Chief Cashiers and Assistant Cashiers,

personnel of the Telex department and one (1) HR Staff have
mutuality of interest with the other rank and file employees,
then they are rightfully excluded from the appropriate
bargaining unit. x x x[21] (Emphasis supplied)
Petitioner cannot simply rely on jurisprudence without explaining how and
why it should apply to this case. Allegations must be supported by evidence.
In this case, there is barely any at all.

There is likewise no reason for the Court to disturb the conclusion of the
Secretary and the CA that the additional remuneration should be given to
employees placed in an acting capacity for one month. The CA correctly
stated:
Likewise, We uphold the public respondent's Order that no employee
should be temporarily placed in a position (acting capacity) for more than
one month without the corresponding adjustment in the salary. Such order
of the public respondent is not in violation of the "equal pay for equal work"
principle, considering that after one (1) month, the employee performing
the job in an acting capacity will be entitled to salary corresponding to such
position.

xxxx

In arriving at its Order, the public respondent took all the relevant evidence
into account and weighed both parties arguments extensively. Thus, public
respondent concluded that a restrictive provision with respect to employees
being placed in an acting capacity may curtail management's valid exercise
of its prerogative. At the same time, it recognized that employees should
not be made to perform work in an acting capacity for extended periods of
time without being adequately compensated. x x x[22]
Thus, the Court reiterates the doctrine that:

[T]he office of a petition for review on certiorari under Rule 45 of the Rules
of Court requires that it shall raise only questions of law. The factual
findings by quasi-judicial agencies, such as the Department of Labor and
Employment, when supported by substantial evidence, are entitled to great
respect in view of their expertise in their respective fields. Judicial review of
labor cases does not go so far as to evaluate the sufficiency of evidence on
which the labor official's findings rest. It is not our function to assess and
evaluate all over again the evidence, testimonial and documentary, adduced
by the parties to an appeal, particularly where the findings of both the trial
court (here, the DOLE Secretary) and the appellate court on the matter
coincide, as in this case at bar. The Rule limits that function of the Court to
the review or revision of errors of law and not to a second analysis of the
evidence. x x x Thus, absent any showing of whimsical or capricious
exercise of judgment, and unless lack of any basis for the conclusions made
by the appellate court be amply demonstrated, we may not disturb such
factual findings.[23]
WHEREFORE, the petition is DENIED.

SO ORDERED.
Ynares-Santiago, (Chairperson), Chico-Nazario, Nachura, and Reyes, JJ.,
concur.
ation."

Date: June 1, 2019Author: staredecisis1 Comment

CASE BrieF 2018-328

CASE: Raymond A. Son, Raymond S. Antiola, and Wilfredo E. Pollarco vs

UNIVERSITY OF SANTO TOMAS, FR. Rolando Dela Rosa, DR. Clarita Carillo, DR.
Cythia Loza, FR. Edgardo Alaurin, and the College Of Fine Arts and Design Faculty
Council (April 18, 2018 G.R. No. 211273)

PONENTE: Del Castillo, J.:

SUBJECT: Illegal Dismissal; Inexistent and Void Contracts; Estoppel

FACTS:

Raymond A. Son (Son) et. al. are full time professors of the UST Colleges of Fine Arts
and Design and Philosophy, and are members of the UST Faculty Union.

Under their appointment papers, Son et. al. were designated as “faculty members on
PROBATIONARY status,” whose “accession to tenure status is conditioned by their
meeting all the requirements provided under existing University rules and regulations and
other applicable laws including, among others, possession of the prerequisite graduate
degree before the expiration of the probationary period”

The UST-UST Faculty Union CBA provided that –

“Although a master’s degree is an entry requirement, a faculty member admitted to serve

the University without a master’s degree shall finish his master’s degree in five (5)
semesters. If he does not finish his degree in five (5) semesters, he shall be separated
from service at the end of the fifth semester; however, if he is made to serve the
University further, in spite of the lack of a master’s degree, he shall be deemed to
have attained tenure.”

Son et. al.enrolled in the Master’s program, but were unable to finish the same. In spite of
their failure to obtain the required Master’s degree, they continued to teach even beyond
the period given for completion thereof.

On March 3, 2010, then CHED Chairman Emmanuel Angeles issued a

Memorandum addressed to the Presidents of public and private higher education
institutions, directing the strict implementation of the minimum qualification for faculty
members of undergraduate programs, particularly the Master’s degree and licensure
requirements, as mandated by Memorandum Order No. 40-08.

Acting on the said Memorandum, UST wrote the Son et. al. and other affected faculty
members, informing them of the university’s decision to cease re-appointment of those
who failed to complete their Master’s degrees.

Subsequently, Son et. al. received termination/thank you letters signed by respondent Dr.
Cynthia Loza, Dean of the College of Fine Arts and Design. The reason given for non-
renewal of their appointments is their failure to obtain the required Master’s degree.

Son et. al. filed a labor case against UST for illegal dismissal claiming that since they
have already acquired tenure by default pursuant to the CBA, they could not be dismissed
for failure to complete their respective Master’s degrees. The CBA and its provision on
tenure by default prevail over CHED Memorandum Order No. 40-08, as they constitute
the law between the parties.

ISSUES:

a) Whether Son et. al. were illegally dismissed.

b) Whether UST is deemed to be in estoppel or has waived the application of the
requirement under CHED Memorandum Order No. 40-08 when it continued to hire Son
et. al.

RULING:

A. Son et. al. were not illegally dismissed.

“A void contract is equivalent to nothing; it produces no civil effect; and it does not
create, modify or extinguish a juridical relation.”
As early as in 1992, the requirement of a Master’s degree in the undergraduate program
professor’s field of instruction has been in place, through DECS Order 92 (series of 1992,
August 10, 1992) or the Revised Manual of Regulations for Private Schools. Article IX,
Section 44, paragraph 1 (a) thereof provides that college faculty members must have a
master’s degree in their field of instruction as a minimum qualification for teaching in a
private educational institution and acquiring regular status therein.

DECS Order 92, Series of 1992 was promulgated by the DECS in the exercise of its rule-
making power as provided for under Section 70 of Batas Pambansa Blg. 232, otherwise
known as the Education Act of 1982. As such, it has the force and effect of
law. In University of the East v. Pepanio, the requirement of a masteral degree for tertiary
education teachers was held to be not unreasonable but rather in accord with the public
interest.

Thus, when the CBA was executed between the parties, they had no right to include
therein the provision relative to the acquisition of tenure by default, because it is contrary
to, and thus violative of the 1992 Revised Manual of Regulations for Private Schools that
was in effect at the time. As such, said CBA provision is null and void, and can have no
effect as between the parties. “A void contract is equivalent to nothing; it produces no
civil effect; and it does not create, modify or extinguish a juridical relation.”
Under the Civil Code, Art. 1409. The following contracts are inexistent and void from the
beginning:

“(1) Those whose cause, object or purpose is contrary to law, morals, good customs,
public order or public policy;xxx”
B. UST is not estopped.
It cannot be said either that by agreeing to the tenure by default provision in the CBA,
UST is deemed to be in estoppel or has waived the application of the requirement under
CHED Memorandum Order No. 40-08. Such a waiver is precisely contrary to law.

“There could be no acquiescence – amounting to estoppel – with respect to acts which

constitute a violation of law.” There could be no acquiescence – amounting to estoppel –
with respect to acts which constitute a violation of law. “The doctrine of estoppel cannot
operate to give effect to an act which is otherwise null and void or ultra vires.” “No
estoppel can be predicated on an illegal act.”
——————————————————-
See related case: University of the East v. Pepanio

THINGS DECIDED:

A. A void contract is equivalent to nothing; it produces no civil effect; and it does not
create, modify or extinguish a juridical relation.

B. The doctrine of estoppel cannot operate to give effect to an act which is otherwise null
and void or ultra vires. No estoppel can be predicated on an illegal act.
 [ G.R. No. 233314, November 21, 2018 ]
LUNINGNING Z. BRAZIL, SALVACION L. GARCERA, AND RITA S. DE MESA,
PETITIONERS, VS. STI EDUCATION SER. GROUP, INC. AND MONICO V. JACOB,
RESPONDENTS,

DECISION
TIJAM, J.:
Enshrined in our Constitution is the State's policy to afford full protection to labor and its right to security of tenure.
This, however, must be balanced against the State's policy to protect and promote the right to quality education at all
levels as embodied in our laws and regulations prescribing qualifications for the teaching profession. Although this
Court is mindful of the plight of teachers whose security of tenure is necessarily affected by the said laws, We can
only afford relief that is within the confines of the law. Neither estoppel nor equity can contravene a clear provision of
law.

This is an appeal from the Decision[1] dated November 9, 2016 and the Resolution[2] dated June 30, 2017 of the Court
of Appeals (CA) in CA-G.R. SP No. 134584.

Facts of the Case

Petitioners were faculty members of respondent STI Education Services Group, Inc. (STI), a proprietary higher
educational institution duly organized under the Philippine laws.

Petitioner Luningning Z. Brazil (Brazil) was first employed by STI College-Legazpi (STI-Legazpi) on June 3, 1997 as a
part-time faculty member. Petitioner Salvacion L. Garcera (Garcera) and petitioner Rita S. De Mesa (De Mesa) were
next hired in June 2000 and June 2001, respectively, also as part-time faculty members by STI-Legazpi.[3]

The services of Brazil, Garcera and De Mesa (collectively referred to as petitioners) continued until June 2011, for
which they filed a Complaint for illegal constructive dismissal and non-payment of salaries/wages, separation pay and
13th month pay, with claims for moral and exemplary damages and attorney's fees before the National Labor
Relations Commission (NLRC) Regional Arbitration Branch (RAB) No. V in Legazpi City. The complaint, docketed as
NLRC RAB V Case No. 07-00153-11, was against STI and its President, respondent Monico V. Jacob (Jacob). [4]

Brazil claimed that she was hired as a "full-load faculty member" of STI-Legazpi in June 2002, when she started
receiving a fixed monthly salary. On February 1, 2004, she was regularized as evidenced by STI-Legazpi's Personnel
Action Form. Likewise, Garcera claimed that in a written evaluation of her teaching performance, acknowledged by
her on October 12, 2004, STI-Legazpi categorized her employment status as regular. Moreover, in an electronic mail
correspondence dated April 24, 2008 with Joseluis Geronimo of the STI Headquarters (HQ), the latter confirmed the
status of Brazil and Garcera as regular employees.[5]

For her part, De Mesa claimed that she was employed as a "full-load faculty member" in 2003, as indicated in her
faculty employment contract dated November 2, 2003. She further advanced that as of June 2009, she was already
considered a regular employee as she started to receive a fixed monthly salary for twelve (12) months. [6]

Petitioners alleged that they were required to submit letters of intent and to sign contracts with STI for each semester.
However, upon their alleged regularization, STI no longer required them to do so. In addition, they enjoyed the same
benefits granted to regular employees such as full payment of salary and statutory benefits during summer, semestral
and Christmas breaks.[7]

On June 3, 2011, Rusty O. Lagatic (Lagatic), the school administrator of STI-Legazpi, handed to the petitioners
separate job offers for the first semester of academic year (A.Y.) 2011-2012. The job offers for Brazil and De Mesa
were for part-time faculty members, whereas the job offer for Garcera was for
a probationary faculty member. Petitioners refused to sign the said job offers because although the same
stipulated a higher monthly salary, their security of tenure as regular employees would be taken away from them. [8]

Upon inquiry, petitioners were informed by Lagatic that their 201 files did not contain their appointment papers, and
that they failed to conform with the standards set out in the 2008 Manual of Regulations for Private Higher Education
(2008 MORPHE). Petitioners countered that Garcera already completed her Master of Arts in Education – English on
March 30, 2011, and that Brazil and De Mesa were already writing their thesis in their chosen fields, Master of Arts in
Public Administration and Master of Arts in Physics Education, respectively.[9]

Petitioners alleged that despite their repeated requests for the amendment of their respective job offers on the basis
of their belief that they are regular employees, Lagatic still handed to them the same job offers on June 8, 2011. As
they still refused to sign the said contracts, they were replaced with six (6) newly-hired faculty members on the
following day. They also did not receive any teaching load at the start of the school year on June 13, 2011, although
they still received their respective salaries for the period of June 1 to 15, 2011. [10]

In separate letters[11] dated June 24, 2011, Lagatic informed the petitioners that their respective employment
contracts were based on the 2008 MORPHE being implemented by the Commission on Higher Education (CHED)
and the General Academic Policies for Faculty Members of HQ-Owned Schools. Pertinent portion of the identical
separate letters reads:

xxx. The employment contract outlined your updated employment classification based on your existing qualifications
as provided for by the MORPHE and STI's General Academic Policies. Indicated therein is an employment offer for
you as a part-time full load faculty member [as for Brazil and De Mesa]/probationary faculty member [as for Garcera]
and an addendum that gives you an additional of two more years to comply with the minimum qualification
standards of CHED.

xxxx

I am referring you to the attached memorandum dated June 16, 2011 coming from the Vice-President for Channel
Management Division on the Compliance Consideration Program for Faculty Members Without the Minimum
Qualification of a Regular/Permanent Faculty Member for further information. [12] (Emphasis supplied)

The attached memorandum mentioned in the said letters were from Resty O. Bundoc (Bundoc), Vice-President of
Channel Management Division of STI HQ, the body of which is reproduced in its entirety as follows:

The Manual of Regulations for Private Higher Education (MORPHE), which took effect in 2008 provides for the
guidelines which an Institution of Higher Learning like STI Education Sevices Group, Inc. (STI) must follow. Based
on the MORPHE, particularly Section 36 thereof, a full time faculty or academic personnel is one who possesses at
least the minimum academic qualifications prescribed in the MORPHE, which means that the faculty member must
be a holder of a Master's Degree relevant to the field he/she is teaching. The "Manual of Regulations for
Private Schools (MRPS)" which took effect in 1992, Article IX, Section 44, Paragraph C, Sub-paragraph 1-a also
requires the same (same with MRPS 1995 Annotated, Article IX, Section 44, Paragraph C, Sub-Paragraph 1a).

Faculty members who have yet to fulfill the minimum requirements (earn a relevant master's degree in his/her field of
specialization) shall thus be considered as Part Time/Full-Load Faculty member, and will undertake a contract
appropriate to his/her qualification. This adjustment is necessary in compliance with the mandate as set forth in
the MORPHE.

STI recognizes the services and the years rendered by the faculty members that will be affected by this compliance,
and as such, continuance of the benefits they are currently enjoying shall be allowed, and the two-year compliance
consideration program shall be strictly observed to comply with the minimum requirements.

Non-signature to the Semestral Part Time (Full Load) Faculty Contract effective this School Year 2011 –
2012 waives the faculty member's right to this compliance consideration program offered by the school which may
result to severing employment with STI. Further, non-completion of the relevant master's degree on May 31, 2013
will automatically revert the faculty member's status to being a Part time faculty member losing the benefits
currently enjoyed and will enjoy under the compliance consideration program. However, the faculty member's
compliance to the minimum requirement within the given period may qualify him/her to regular/permanent
status.[13] (Emphasis and underscoring supplied)

Petitioners averred that the addendum regarding the additional two years to comply with the CHED requirement was
absent in the job offers handed to them. The memorandum also came late as classes have already started on June
13, 2011.

Since they were placed in a floating status and no longer received their salary for the period of June 16 to 30, 2011,
petitioners stopped reporting for work and filed complaints for illegal constructive dismissal with monetary claims. [14]

For their part, while respondents STI and Jacob (collectively referred to as respondents) admitted that for years,
Brazil and Garcera have been teaching in STI-Legazpi's General Education Programs, and De Mesa had been
teaching Physics, their employment as such was considered part-time only. Respondents emphasized that since
petitioners are not holders of a master's degree, they are considered part-time academic personnel under Section 36
of the 2008 MORPHE. Under Section 117 of the 2008 MORPHE, a part-time employee, such as the petitioners,
cannot acquire regular or permanent status. This explains why Brazil and De Mesa were offered part-time full-load
faculty employment; while Garcera was offered probationary faculty employment, as she obtained her master's
degree only in March 2011.[15]

In addition, respondents argued that their act of extending the part-time and probationary employment contracts to
the petitioners were validated by the CHED through an Advisory Opinion dated July 17, 2011, wherein Atty. Julito
Vitriolo, Executive Director IV of the CHED, clarified that any act of giving permanent or regular status to academic
teaching personnel who do not possess the required academic qualifications is not valid since it is contrary to the
provisions of Sections 117 and 118 of the 2008 MORPHE.[16]

Consequently, since petitioners refused to sign their respective contracts, respondents posited that there can be no
illegal dismissal to speak of. Their previous employment contracts merely expired.

Ruling of the Labor Arbiter

In a Decision[17] dated December 16, 2011, the Labor Arbiter (LA) declared petitioners as regular employees. Thus,
respondents were found guilty of illegal dismissal and were ordered to pay the petitioners their respective separation
pay in lieu of reinstatement as well as other monetary claims.

The LA ratiocinated that although the 2008 MORPHE applies in the determination of whether a faculty is a regular
employee or not, it does not apply in a case where regular employment status has already been achieved or had
already been granted to faculty members.

Aggrieved, respondents appealed to the NLRC.

Ruling of the NLRC

Initially, the NLRC partly granted the appeal of the respondents in a Decision [18] dated December 28, 2012, the
dispositive portion of which reads:

WHEREFORE, the appeal is PARTLY GRANTED. The Decision appealed from

is AFFIRMED with MODIFICATION: the complaint of Rita De Mesa is DISMISSED for lack of merit; accordingly the
awards for payment of her backwages and separation pay are vacated and the damages awarded to all appellees are
also DISMISSED for lack of merit. The attorney's fees shall be limited to 10% of the amended judgment award.

SO ORDERED.[19]

In essence, the NLRC affirmed the LA's finding of illegal dismissal except for De Mesa. Thus, it explained:

Appellees Brazil and Gargacera (sic) were regular faculty members. They were granted regular status in February 1,
2004 and April 2004, respectively. When the MORPHE took effect in 2008, they were already regular employees.
Thus, they enjoyed security of tenure.

When Brazil and Gargacera (sic) were offered employment contracts as part-time employees, they were considered
constructively dismissed.

As regards De Mesa, she cannot be considered as a regular teacher of the school. She was employed in 2001 as a
part-time faculty member, and continued as such until March 2003. In June 2003, she signed a contract as a full-load
faculty member, and signed a separate semestral contract for each semester for the next 4 years. While she claims
that in 2009, she was considered a regular teacher because she started to receive a fixed salary for 12 months, there
is no evidence that before the effectivity of the MORPHE in 2008, she had already attained regular status
similar to appellees Brazil and Gargacera (sic). The provisions of the MORPHE applied to her.[20] (Emphasis ours)

Both parties moved for the partial reconsideration of the NLRC Decision.

Petitioners reiterated their assertion that De Mesa was already considered a regular employee in June 2009 as she
was enjoying the same benefits granted to regular employees. They insisted that the fact she was granted a regular
status after the effectivity of the 2008 MORPHE is immaterial.

On the other hand, respondents contended that pursuant to the 2008 MORPHE, Brazil and Garcera could not have
become regular employees because they did not even qualified for probationary status. They argued that under the
2008 MORPHE, an academic teaching personnel cannot acquire the status of a probationary employee without first
possessing a master's degree to teach in his or her major field.

In a Resolution[21] dated December 27, 2013, the NLRC resolved the parties' respective motions for reconsideration in
favor of the respondents. It dismissed the petitioners' complaints for illegal dismissal and other claims for lack of
merit.

In the said Resolution, the NLRC declared that Brazil and De Mesa were ineligible for regularization since they were
not yet holders of a master's degree as required under the MORPHE. Thus, they are considered part-time faculty
members in June 2011.

As for Garcera, the NLRC held that she could be considered a full-time faculty member qualified for probationary
status beginning A.Y. 2011-2012, as she earned her master's degree only in March 2011.

In addition, the NLRC opined that even if the petitioners were earlier recognized as regular employees, it cannot
estop respondents from denying them such status. It cited the case of University of the East, et al. v. Pepanio, et
al.,[22] wherein this Court held that "the operation of educational institutions involves public interest, and such grant of
regular status is against the public policy embodied in the 2008 MORPHE." The NLRC thus concluded that petitioners
were not dismissed but merely separated from service by their own refusal to sign their respective job offers.

Petitioners assailed the NLRC Resolution dated December 27, 2013 before the CA by filing a petition
for certiorari under Rule 65.
 Ruling of the CA

On November 9, 2016, the CA promulgated its Decision [23] denying the petition and affirming the assailed NLRC
Resolution.

In sum, the CA ruled that the NLRC did not commit grave abuse of discretion in dismissing the petitioners' complaints
for illegal dismissal with money claims. Petitioners were merely separated from service as a result of their stubborn
refusal to sign their respective job offers which were made in accordance with the 2008 MORPHE.

Undaunted, petitioners moved for reconsideration of the CA Decision but the same was denied in a Resolution dated
June 30, 2017.

Hence, this petition.

Issue

Simply put, petitioners come to this Court to seek reliefs akin to those awarded in illegal dismissal cases, on the sole
ground that they were already granted regular status, albeit illegally, by respondents.

The issue, therefore, revolves around the nature of employment and corollary rights of faculty members who failed to
attain permanent status under the applicable law, i.e. 1992 Revised Manual of Regulations for Private Schools (1992
MORPS) and/or 2008 MORPHE, but who were voluntarily treated as regular employees by their employers.

Our Ruling

We deny the petition.

Prefatorily, the Court stresses that it is not a trier of facts. As a rule, only questions of law are examined by this Court
in a Rule 45 Petition.

Further, in labor cases, this Court reviews the Decision of the CA in a Rule 65 Petition presented to the latter. Thus,
"the Court has to examine the CA's Decision from the prism of whether the CA correctly determined the presence or
absence of grave abuse of discretion in the NLRC decision." [24]

The NLRC commits an act of grave abuse of discretion when its findings and conclusions are not supported by
substantial evidence, or that amount of relevant evidence that a reasonable mind might accept as adequate to justify
a conclusion. Stated differently, no grave abuse of discretion may be ascribed to the NLRC when its ruling has
sufficient basis in evidence, and is not contrary to law and jurisprudence. In such cases, the CA is constrained to
dismiss the petition for certiorari assailing the NLRC ruling.[25]

After applying the foregoing guidelines in Our careful review of the instant case, We find no reversible error on the
part of the CA in ruling that the NLRC did not commit any grave abuse of discretion when it dismissed the petitioners'
complaints for illegal dismissal with money claims.

We do not intend to disturb the factual antecedents of this case as found by the courts a quo. As aptly observed by
the CA, "the parties do not contest that, either expressly or impliedly, STI granted petitioners the status of a regular
faculty member."[26] As such, an examination of the evidence pertaining to how the petitioners were granted a regular
status by the STI is unnecessary.

Petitioners also do not question the applicability of the 1992 MORPS and/or the 2008 MORPHE to them and their
failure to qualify thereunder for lack of a master's degree. They merely insist that despite the application of the 2008
MORPHE, an employer educational institution that has granted or treated its employees as regular or permanent
employees can be held liable for illegal constructive dismissal, and consequently liable to pay separation pay, back
wages, etc. Subsequent compliance with the MORPHE is not an available defense for employers in such cases.

On the surface, petitioners' plea is anchored on serving the broader interests of justice and equity. Unfortunately, it
has no legal leg to stand on.

Courts may resort to application of equity only when there is insufficiency or absence of law.[27] The principle of equity
cannot prevail over the positive mandate of the law, such as the 2008 MORPHE in this case. Application of equity
"would be tantamount to overruling or supplanting the express provisions of the law."[28]

This is not a case of first impression. During the pendency of the instant petition, the Court promulgated its decision
in Raymond A. Son, et al. v. University of Santo Tomas (UST), et al., [29] the factual circumstances of which are similar
to this case.

In Son, petitioners were also faculty members of undergraduate programs who failed to obtain the required Master's
Degree under the 1992 MORPS and 2008 MORPHE. As such, their appointments were not renewed by the UST,
their employer. Petitioners therein were members of a union with which UST, at the time, had a Collective Bargaining
Agreement (CBA) that provides:

xxx Although a master's degree is an entry requirement, a faculty member admitted to serve the University without a
master's degree shall finish his master's degree in five (5) semesters. If he does not finish his degree in five (5)
semesters, he shall be separated from service at the end of the fifth semester; however, if he is made to serve the
University further, in spite of the lack of a master's degree, he shall be deemed to have attained
tenure.[30] (Emphasis ours)

Petitioners in Son were enrolled in a master's program but were unable to finish the same. However, since they
continued to teach in the UST beyond the period provided in the aforequoted CBA provision, they claimed that they
had already attained regular status. Thus, they filed for illegal dismissal upon UST's non-renewal of their
appointments.

In denying the petition, the Court ruled that the CBA provision is null and void for being violative of the 1992 MORPS
that was in effect during its execution. Thus, the provision did not produce any effect as to the parties therein. The
Court, through Justice Del Castillo, succinctly explained:

From a strict legal viewpoint, the parties are both in violation of the law: respondents, for maintaining professors
without the mandated masteral degrees, and for petitioners, agreeing to be employed despite knowledge of their lack
of the necessary qualifications. Petitioners cannot therefore insist to be employed by UST since they still do not
possess the required master's degrees; the fact that UST continues to hire and maintain professors without the
necessary master's degrees is not a ground for claiming illegal dismissal, or even reinstatement. As far as the
law is concerned, respondents are in violation of the CHED regulations for continuing the practice of hiring unqualified
teaching personnel; but the law cannot come to the aid of petitioners on this sole ground. As between the parties
herein, they are in pari delicto.

xxxx

It cannot be said either that by agreeing to the tenure by default provision in the CBA, respondents are
deemed to be in estoppel or have waived the application of the requirement under CHED Memorandum Order
No. 40-08. Such a waiver is precisely contrary to law. Moreover, a waiver would prejudice the rights of the
students and the public, who have a right to expect that UST is acting within the bounds of the law, and provides
quality education by hiring only qualified teaching personnel. Under Article 6 of the Civil Code, "[r]ights may be
waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a
third person with a right recognized by law." On the other hand, there could be no acquiescence – amounting to
estoppel – with respect to acts which constitute a violation of law. "The doctrine of estoppel cannot operate
to give effect to an act which is otherwise null and void or ultra vires." "[N]o estoppel can be predicated on
an illegal act.[31] (Emphasis ours; citations omitted)

The ruling in Son is on all fours with the instant case. Petitioners herein essentially claim estoppel on the part of the
respondents in granting them a regular status despite the clear import of the 2008 MORPHE.

In their Reply to Respondents' Comment[32] required by this Court, petitioners specifically alleged that the ruling
in Son does not apply to their petition. They argued that unlike in the case of Son, the treatment or grant of regular
employment status in their case was not pursuant to a CBA, wherein both parties agreed to the regularization of the
employees. In their case, the grant of regular status was "unilateral and not a shared endeavor." [33] Thus, the fault or
violation rests on STI alone.

We failed to see any material distinction between a CBA and an employment contract that would justify a different
ruling in this case. There is no dearth of evidence showing that petitioners voluntarily accepted the benefits from the
respondents' act of granting them a regular status. In fact, their enjoyment of such benefits are among their
allegations before the Court.

Otherwise stated, petitioners proffer that if they did not explicitly agree to the illegal terms (i.e., being treated as a
regular employee) of their employment contract, they should not bear the consequences of its illegality. In effect,
petitioners want to have their cake and eat it too.

Although petitioners failed to present their appointment papers showing that they were expressly granted regular
status by the STI, the courts a quo were unanimous in finding that STI indeed granted them such regular status,
whether expressly or impliedly.

We note, however, that even if petitioners were able to present employment contracts expressly stating their status
as regular employees, Our conclusion would still be the same.

"Basic is the rule that the nature of employment is determined by the factors set by law, regardless of any contract
expressing otherwise."[34] Ergo, a provision in an employment contract prescribing a nature of employment that is
violative of law, is deemed unwritten and has no effect as to the parties thereto.

At this juncture, it is imperative upon this Court to explain the nature of employment of a faculty who does not meet
the minimum qualifications under the 1992 MORPS and/or the 2008 MORPHE.

For purposes of clarity, there are two ways to categorize the nature of employment of a faculty in a higher education
institution.

First, a faculty may either be full-time or part-time. This manner of classification is unique to the teaching
profession. The criteria or basis for the said classification, as can be gleaned from the provisions of the 1992 MORPS
and 2008 MORPHE, primarily relates to the academic qualifications and teaching load of the faculty.

Second, a faculty's nature of employment may also be classified under the general provisions of the Labor Code and
the applicable jurisprudence. Thus, a faculty may be considered a permanent, probationary, or fixed-term
employee. In this manner of classification, the emphasis is on the rights of the faculty member as an employee,
specifically his or her right to security of tenure or the lack of it. The touchstone therefor is found not only in the 1992
MORPS and 2008 MORPHE, but in the Labor Code and other applicable laws and jurisprudence.

These two groups of categories or classifications are interrelated and does not operate to the exclusion of one
another. To Our mind, the interplay between the two may have caused confusion in determining the nature of
employment of a faculty in a higher education institution. To illustrate using the present case, the LA, in ruling for the
petitioners, opined that 2008 MORPHE is only applicable in determining whether a faculty is a regular employee or
not under the standards of CHED. Thus, it erroneously applied the general principles under the Labor Code in finding,
for instance, that petitioners, "being teachers, perform activities which are necessary and desirable in the usual
business or trade" of respondents.[35]

In this light, the Court finds it apt to discuss the interplay between the provisions under the 1992 MORPS and/or 2008
MORPHE specifically applied to faculty or academic personnel, and the Labor Code as the general law applicable to
all employees. The following discussion will be limited, however, to faculties who are teaching in undergraduate
programs.

The provisions of the 1992 MORPS[36] and the 2008 MORPHE are practically identical in terms of distinguishing
between a full-time and a part-time faculty. Thus, the 1992 MORPS provides:

Section 45. Full-time and Part-time Faculty. As a general rule, all private schools shall employ full-time academic
personnel consistent with the levels of instruction.

Full-time academic personnel are those meeting all the following requirements:

a. Who possess at least the minimum academic qualifications prescribed by the Department under this
Manual for all academic personnel;

b. Who are paid monthly or hourly, based on the regular teaching loads as provided for in the policies, rules and
standards of the Department and the school;

c. Whose total working day of not more than eight hours a day is devoted to the school;

d. Who have no other remunerative occupation elsewhere requiring regular hours of work that will conflict with the
working hours in the school; and

e. Who are not teaching full-time in any other educational institution.

All teaching personnel who do not meet the foregoing qualifications are considered part-time. (Emphasis
ours)

The minimum academic qualifications vary according to the grades and levels of instruction taught by the faculty.
Thus, Section 44 of the same Manual provides:

Section 44. Minimum Faculty Qualifications. The minimum qualifications for faculty for the different grades and levels
of instruction duly supported by appropriate credentials on file in the school shall be as follows:

xxxx

c. Tertiary

(1) For undergraduate courses, other than vocational:

(a) Holder of a master's degree, to teach largely in his major field; or, for professional courses, holder of the
appropriate professional license required for at least a bachelor's degree. Any deviation from this requirement will be
subject to regulation by the Department.[37]

On the other hand, similar provisions under 2008 MORPHE provide:

Section 35. Minimum Faculty Qualifications. – The minimum qualifications of a faculty in a higher education
institution shall be as follows:

1) For undergraduate programs:

1. Holder of a master's degree, to teach mainly in his major field and where applicable, a holder of appropriate
professional license requiring at least a bachelor's degree for the professional courses. However, in specific fields
where there is dearth of holders of Master's degree, a holder of a professional license requiring at least a bachelor's
degree may be qualified to teach. Any deviation from this requirement will be subject to regulation by the
Commission.

xxxx

Section 36. Full-time and Part-time Faculty. – As a general rule, all private higher education institutions shall
employ full-time faculty or academic personnel consistent with the levels of instruction.

A full-time faculty or academic personnel is one who meets all the following requirements:

1) Who possesses at least the minimum academic qualifications prescribed under this Manual for all academic
personnel;

2) Who is paid monthly or hourly, based on the regular teaching loads as provided for in the policies, rules and
standards of the Commission and the institution;

3) Who devotes not less than eight (8) hours of work a day to the school;

4) Who have no other remunerative occupation elsewhere requiring regular hours of work, except when permitted by
the higher education institution; and

5) Who is not teaching full-time in any other higher education institution.

All faculty or academic personnel who do not meet the foregoing qualifications are considered part-time.

Except when permitted by the higher education institution, all faculty or academic personnel who are at the same time
holding positions in the government, whether appointive or elective, shall also be considered part-time. (Emphasis
ours)

As can be gleaned from the foregoing provisions, the rule is simple – a faculty who does not meet ALL the minimum
academic qualifications is automatically a part-time faculty.

Moreover, a faculty who is deemed a full-time faculty after meeting all the minimum academic qualifications does not
perpetually become one. He or she may be reverted to being a part-time faculty for failure to comply with the
requirements on the teaching load. Thus, Section 118 of the 2008 MORPHE provides:

Section 118. Regular or Permanent Status. xxx a regular or permanent academic teaching personnel who requests a
teaching load equivalent to a part-time load, shall be considered resigned, and hence, may forfeit his/her regular or
permanent status at the discretion of the management of the higher education institution and shall thereby be
covered by a term-contract employment.

The next provision provides for the required teaching load for a full-time faculty to retain his regular or permanent
status, viz:
Section 119. Regular Teaching Load. The regular teaching load of full-time academic teaching personnel shall be
determined by the higher education institution but in no case shall exceed 24 units per semester or term.

These provisions entail that a faculty may have regular teaching load but he or she may be considered only as a part-
time faculty for failure to meet all the minimum academic qualifications. In contrast, a full-time faculty who has part-
time load ceases to become a full-time faculty even if he or she possesses all the minimum academic qualifications.
Note, however, that the requirement on the teaching load is subject to the discretion of the employer, or the higher
education institution. As such, the requirement on carrying a regular teaching load is not an absolute requirement.

We now delve into the second manner of classifying the nature of employment which is the crux of controversy in
most labor suits involving faculty members.

1. Permanent

As already settled by this Court in a plethora of cases, a faculty who does not qualify as a full-time faculty under the
1992 MORPS and/or 2008 MORPHE can never attain the status of a permanent or regular employee.[38] It
necessarily follows that only a full-time faculty can be considered a permanent or regular employee.

Note, however, that being a full-time faculty does not suffice to be considered a permanent employee. As ruled in the
landmark case of Lacuesta v. Ateneo de Manila University,[39] in order for a faculty teaching in the tertiary level to
acquire permanent employment or security of tenure, he or she must: (1) be a full-time faculty; (2) have rendered
three consecutive years of service or six consecutive semesters (i.e., the probationary period); and (3) such service
must have been satisfactory.[40]

In relation thereto, the pertinent provisions of the 1992 MORPS are as follows:

Section 92. Probationary Period. Subject in all instances to compliance with Department and school requirements,
the probationary period for academic personnel shall not be more than three (3) consecutive years of satisfactory
service for those in the elementary and secondary levels, six (6) consecutive regular semesters of satisfactory service
for those in the tertiary level, and nine (9) consecutive trimesters of satisfactory service for those in the tertiary level
where collegiate courses are offered on the trimester basis.

Section 93. Regular or Permanent Status. Those who have served the probationary period shall be made regular or
permanent. Full-time teachers who have satisfactorily completed their probationary period shall be
considered regular or permanent. (Emphasis ours)

The same rule is reiterated in the following provisions of the 2008 MORPHE:

Section 117. Probationary Period. An academic teaching personnel, who does not possess the minimum academic
qualifications prescribed under Sections 35 and 36 of this Manual shall be considered as part-time employee, and
therefore cannot avail of the status and privileges of a probationary employment. A part-time employee cannot
acquire regular permanent status, and hence, may be terminated when a qualified teacher becomes available.

The probationary employment of academic teaching personnel shall not be more than a period of six (6) consecutive
semesters or nine (9) consecutive trimesters of satisfactory service, as the case may be.

Section 118. Regular or Permanent Status. A full-time academic teaching personnel who has satisfactorily
completed his/her probationary employment, and who possesses the minimum qualifications required by the
Commission and the institution, shall acquire a regular or permanent status if he/she is re-hired or re-
appointed immediately after the end of his/her probationary employment. However, a regular or permanent
academic teaching personnel who requests a teaching load equivalent to a part-time load, shall be considered
resigned, and hence, may forfeit his/her regular or permanent status at the discretion of the management of the
higher education institution and shall thereby be covered by a term-contract employment. (Emphasis ours)

From the foregoing, a full-time faculty or one who possesses all the minimum academic qualifications may either be
permanent or probationary. He or she may also be a fixed-term employee for refusal to take full teaching load, as
previously discussed.

2. Probationary

In cases where a faculty failed to attain a regular or permanent status, the next question is, whether the said faculty
may be considered a probationary employee. Unlike a fixed-term employee, a probationary employee is entitled to
limited security of tenure.

Article 281 of the Labor Code thus provides:

ART. 281. Probationary employment. - Probationary employment shall not exceed six (6) months from the date the
employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The
services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when
he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be
considered a regular employee.

As held in Yolanda M. Mercado v. AMA Computer College-Parañaque City, Inc.,[41] the Labor Code is supplemented
by the 1992 MORPS with respect to the period of probation. [42]

Also, in Mercado, the Court reconciled the conflict arising from the grant of a probationary status under a fixed-term
employment. Thus:

The provision on employment on probationary status under the Labor Code is a primary example of the fine
balancing of interests between labor and management that the Code has institutionalized pursuant to the underlying
intent of the Constitution.

On the one hand, employment on probationary status affords management the chance to fully scrutinize the true
worth of hired personnel before the full force of the security of tenure guarantee of the Constitution comes into play.
Based on the standards set at the start of the probationary period, management is given the widest opportunity during
the probationary period to reject hirees who fail to meet its own adopted but reasonable standards. These standards,
together with the just and authorized causes for termination of employment the Labor Code expressly provides, are
the grounds available to terminate the employment of a teacher on probationary status. For example, the school may
impose reasonably stricter attendance or report compliance records on teachers on probation, and reject a
probationary teacher for failing in this regard, although the same attendance or compliance record may not be
required for a teacher already on permanent status. At the same time, the same just and authorizes causes for
dismissal under the Labor Code apply to probationary teachers, so that they may be the first to be laid-off if the
school does not have enough students for a given semester or trimester. Termination of employment on this basis is
an authorized cause under the Labor Code.

xxxx

When fixed-term employment is brought into play under the above probationary period rules, the situation – as in the
present case – may at first blush look muddled as fixed-term employment is in itself a valid employment mode under
Philippine law and jurisprudence. The conflict, however, is more apparent than real when the respective nature of
fixed-term employment and of employment on probationary status are closely examined.
The fixed-term character of employment essentially refers to the period agreed upon between the employer and the
employee; employment exists only for the duration of the term and ends on its own when the term expires. In a
sense, employment on probationary status also refers to a period because of the technical
meaning "probation" carries in Philippine labor law – a maximum period of six months, or in the academe, a period of
three years for those engaged in teaching jobs. Their similarity ends there, however, because of the overriding
meaning that being "on probation" connotes, i.e., a process of testing and observing the character or abilities of a
person who is new to a role or job.

xxxx

Given the clear constitutional and statutory intents, we cannot but conclude that in a situation where the probationary
status overlaps with a fixed-term contract not specifically used for the fixed term it offers, Article 281 should assume
primacy and the fixed-period character of the contract must give way. xxx"[43] (Citations omitted; emphasis supplied)

In addition, it bears stressing that only a full-time faculty may be granted a probationary status. As expressly provided
under Section 117 of the 2008 MORPHE, "an academic teaching personnel who does not possess the minimum
academic qualifications prescribed under Sections 35 and 36 of this Manual shall be considered part-time employee,
and therefore cannot avail of the status and privileges of a probationary employment."[44]

Although the same rule was not expressly provided under the 1992 MORPS, since employment on probation could
lead to a permanent status, it ineluctably follows that only those who may attain a permanent status can be granted a
probationary employment. A part-time faculty could never attain a permanent status for lack of academic
qualifications. Said rule is also consistent with the nature and purpose of hiring someone on a probationary period –
"to observe the fitness, propriety, and efficiency of a probationer to ascertain whether he is qualified for permanent
employment."[45] Employment on a part-time basis may be inadequate for purposes of determining if one is qualified
for permanent employment as a part-time faculty does not possess the qualifications in the first place.

Accordingly, in the recent case of De La Salle Araneta University, Inc. v. Dr. Eloisa G. Magdurulang,[46] the Court, in
counting the period served as a probationary employee for purposes of regularization, did not include appointments
on a part-time basis even those that commenced prior to 2008 or the effectivity of the 2008 MORPHE.

To further illustrate, a full-time faculty, by default, is given a probationary status unless: (1) the employer decides to
cut short the probationary period for causes provided under the law; or (2) said faculty is hired merely as a substitute
of a permanent faculty who is on leave.[47] On the other hand, a part-time faculty can never be a probationary
employee.

Consequently, if a faculty is not deemed probationary, he or she is considered a fixed-term employee.

3. Fixed-term

The validity of fixed-term employment contracts for teachers was upheld by this Court as early as 1990 in the oft-cited
case of Brent School, Inc. v. Ronalda Zamora[48] provided that:

(1) the fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force,
duress or improper pressure being brought to hear upon the employee and absent any other circumstances vitiating
his consent; and (2) where it satisfactorily appears that the employer and employee dealt with each other on more or
less equal terms with no moral dominance whatever being exercised by the former over the latter. [49]

In Mercado, the Court also enunciated the following on the nature of a fixed-term employment in contrast to
probationary employment:
To highlight what we mean by a fixed-term contract specifically used for the fixed term it offers, a replacement
teacher, for example, may be contracted for a period of one year to temporarily take the place of a permanent teacher
on a one-year study leave. The expiration of the replacement teachers contracted term, under the circumstances,
leads to no probationary status implications as she was never employed on probationary basis; her employment is
for a specific purpose with particular focus on the term and with every intent to end her teaching
relationship with the school upon expiration of this term.[50] (Emphasis supplied; underscoring ours)

In all, under a fixed-term employment, the employer-employee relationship is severed upon the expiration of the term
or period stated under the contract without the necessity of any notice to the employee. [51] Non-renewal of the
contract, by no means, equate to dismissal. In other words, there is no security of tenure in a fixed-term employment.

As such, the practice of hiring teachers per semester or school year by educational institutions is generally governed
by the rules on fixed-term employment unless the circumstances provide for either a probationary or a regular
employment status.

To recapitulate, since a part-time faculty can neither attain a probationary nor regular status due to lack of all the
academic qualifications, the only conclusion therefore is that a part-time faculty will always be a fixed-term employee.

Applying the yardsticks or guidelines as thoroughly discussed above, the petitioners in this case are clearly part-time
faculty with a fixed-term status. First, they were hired on a semestral basis. Second, they do not possess the required
master's degrees. In fact, their failure to obtain the said degrees is the same reason why they cannot attain the status
of probationary employees even for the past couple of years that they served the STI. For Garcera, however, she
would have been considered a full-time faculty with a probationary status if she signed her respective job offer as
such. Finally, there is no showing that the terms of contracts under which petitioners served as faculty in STI were
illegal according to the criteria set in Brent.

The Court also takes note of the allegation by the petitioners that the two-year compliance program was not
presented nor included in their job offers by the respondents. The said allegation, being factual in nature, requires this
Court to examine evidence adduced in the case for the purpose of ascertaining the truth of the same. Again, the
Court generally does not entertain question of facts in a Rule 45 Petition.

Nonetheless, even granting that the addendum was not present in the job offers, We reiterate the rule that under a
fixed-term employment contract, nothing binds the parties to one another after the expiration of the term of the
contract. Thus, STI was not obliged to offer the said compliance program to the petitioners. Further, to Our mind, if
indeed the addendum is material to this case, the petitioners should have communicated their interest to avail the
same to STI. No allegation to such effect was made by the petitioners.

Petitioners' allegation of bad faith that would justify an award of damages is also bereft of legal basis. STI has the
right to hire replacement faculty in light of the petitioners' refusal to be hired. Petitioners left respondents with two
options for the continuity of their institution's operations – either they give in to petitioners' demands or hire new
faculty. The former is tantamount to violating the law. Thus, bad faith cannot be imputed to the parties who merely
chose to abide by the law.

On a final note, this does not mean that the Court countenance illegal acts of STI. We are constrained to rule in favor
of the respondents as there is no relief for petitioners under the law. Anent the respondents being scathe-free, as
aptly stated by Justice Del Castillo in Son:

xxx The fact that government has not cracked down on violators, or that it chose not to strictly implement the
provision, does not erase the violations committed by erring educational institutions, including the parties herein: it
simply means that government will not punish these violations for the meantime. The parties cannot escape its
concomitant effects, nonetheless. And if respondents knew the overwhelming importance of the said provision and
the public interest involved – as they now fiercely advocate to their favor – they should have complied with the same
as soon as it was promulgated.[52]
WHEREFORE, the Petition is hereby DENIED. The November 9, 2016 Decision and the June 30, 2017 Resolution of
the Court of Appeals in CA-G.R. SP No. 134584 are hereby AFFIRMED.

SO ORDERED.

[ G.R. No. 224558, November 28, 2018 ]

UNIVERSAL ROBINA SUGAR MILLING CORPORATION,[*] PETITIONER, V.
NAGKAHIUSANG MAMUMUO SA URSUMCO-NATIONAL FEDERATION OF
LABOR (NAMA-URSUMCO-NFL), RESPONDENT.

DECISION
J. REYES, JR., J.:
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to set aside the April
15, 2015 Decision[1] and the April 21, 2016 Resolution[2] of the Court of Appeals (CA) in CA-G.R. CEB-SP. No. 06909,
which affirmed the May 30, 2012 Decision[3] of the Voluntary Arbitrator, National Conciliation and Mediation Board,
Region VII, Cebu City (VA).

Factual background
Petitioner Universal Robina Sugar Milling Corporation (URSUMCO) is a duly registered domestic corporation
engaged in sugar milling business. On the other hand, respondent Nagkahiusang Mamumuo sa URSUMCO-National
Federation of Labor (NAMA-URSUMCO-NFL) is a legitimate labor organization acting as the sole and exclusive
bargaining representative of all regular monthly paid and daily paid rank-and-file employees of URSUMCO.[4]
URSUMCO and NAMA-URSUMCO-NFL were able to successfully negotiate and enter into a Collective Bargaining
Agreement (CBA) valid from January 1, 2010 to December 31, 2014. Article VI, Section 2 of the CBA enumerated the
employment classification in URSUMCO, i.e., Permanent or Regular Employees and Regular Seasonal Employees. [5]
From August to September 2011, NAMA-URSUMCO-NFL filed several grievances on behalf of 78 URSUMCO
regular seasonal employees. It sought for the change in the employment status of the concerned employees from
regular seasonal to permanent regular and for the leveling of the salaries. After the grievance machinery failed to
resolve the issue, NAMA-URSUMCO-NFL requested that the employees' concerns be submitted to voluntary
arbitration. The VA required the parties to submit their respective position papers. [6]
In its Position Paper, NAMA-URSUMCO-NFL alleged that permanent or regular employees practically performed the
same work as the regular seasonal employees during milling season; some regular seasonal employees would
perform skilled jobs during the off-milling season, while regular or permanent employees would be assigned to utility
jobs; regular seasonal employees acted as leadmen, while regular permanent or regular employees were the helpers;
longer tenured employees were stuck as regular seasonal employees, while new hires were given regular or
permanent status; and regular seasonal employees received lower salaries than regular or permanent employees
even if they performed the same functions.[7]
On the other hand, URSUMCO countered in its Position Paper that NAMA-URSUMCO-NFL was estopped from
questioning the classification of employees agreed upon by the parties in the CBA; regular seasonal employees only
performed work during the milling season; there is no work done during the off-milling season as the period is
devoted for repairs; it assigned regular seasonal employees to repair works during the off-milling season out of its
own volition even if it could contract the same to third parties; it was a valid exercise of management prerogative to
assign some of its regular seasonal employees as regular employees during off-milling season who would, in effect,
be working as regular employees during the off-milling season; and to compel it to convert all of its regular seasonal
employees as regular or permanent employees would give rise to a situation wherein employees are hired and
classified as permanent or regular to do nothing but repair work. [8]
In its May 30, 2012 Decision, the VA sided with NAMA-URSUMCO-NFL. It held that URSUMCO's act of providing
work to regular seasonal employees for several years is deemed a waiver on its part on the effects of Article VI,
Section 2 of the CBA. The VA explained that URSUMCO's alleged generosity was immaterial as it should have
informed the concerned regular seasonal employees that performing repair works during the off-milling season did
not convert them to regular or permanent employees. It ruled:

WHEREFORE, in view of all the foregoing, judgment is hereby rendered:

1. Declaring the concerned regular seasonal employees as permanent or regular employees provided they have
rendered an accumulated service of 300 days during the period they worked during off-season.

2. Denying the prayer of the Union in the standardization of pay of employees who are holding the same positions. [9]
Aggrieved, URSUMCO appealed before the CA.

CA Decision
In its April 15, 2015 Decision, the CA affirmed the VA Decision. The appellate court stated that the concerned regular
seasonal employees were not temporarily laid off during the off-milling season as they were tasked to perform repair
and up-keep works. It explained that the tasks assigned to them during the off-milling season were necessary to
ensure the smooth and continuous operation of petitioner's machines and equipment during milling season. The CA
added that there was no showing that the regular seasonal employees in question were allowed and were able to
secure employment elsewhere during the off-milling season. The appellate court postulated that NAMA-URSUMCO-
NFL was not estopped from questioning the CBA provisions because the nature of employment is determined by law,
regardless of any contract expressing otherwise. Thus, it disposed:

WHEREFORE, the Petition is DENIED. The Decision dated 30 May 2012 rendered by the Office of the Voluntary
Arbitrator, National Conciliation and Mediation Board, Region VII, Cebu City is hereby AFFIRMED.

SO ORDERED.[10]
URSUMCO moved for reconsideration, but it was denied by the CA in its April 21, 2016 Resolution.

Hence, this present petition raising:

ISSUE
WHETHER THE COURT OF APPEALS RULED IN A MANNER THAT IS CONTRARY TO LAW AND
JURISPRUDENCE WHEN IT SUSTAINED THE VA DECISION THAT URSUMCO'S REGULAR SEASONAL
EMPLOYEES ARE ALL PERMANENT/REGULAR EMPLOYEES.[11]
URSUMCO argued that the CBA is the law between the parties and that they are bound to comply with its provisions.
It pointed out that NAMA-URSUMCO-NFL's contention to regularize all its regular seasonal employees disregards the
provisions of the CBA. URSUMCO explained that its act of magnanimity in assigning its regular seasonal employees
to repair works during the off-milling season is in consonance with the express provision of the CBA that regular
seasonal employees would be given preference in the performance of such repair jobs during the off-milling season.
It also pointed out that the regular seasonal employees concerned are hired to perform repairs which are in the
nature of specific projects or undertaking with a predetermined termination or completion at the time of the
engagement.

Further, URSUMCO lamented that the VA's sweeping declaration that all regular seasonal employees are deemed
regular or permanent employees violated its management prerogatives in determining its appropriate organizational
structure. Lastly, it noted that the complaint for regularization had been mooted by the fact that most of the concerned
employees had been regularized, while others had resigned, retired or died.

In its Comment[12] dated August 14, 2017, NAMA-URSUMCO-NFL countered that the VA never made a sweeping
declaration that all regular seasonal employees of URSUMCO are now regular or permanent employees as the VA
decision only referred to the 78 concerned employees. It elucidated that the concerned employees had been
performing tasks related to the operation of URSUMCO for the entire year as they are engaged even during the off-
milling season. NAMA-URSUMCO-NFL pointed out that the concerned employees do not fall within the purview of
regular seasonal employees as defined in the CBA because they occupied the same positions and performed the
same functions every off-milling season.
In its Reply[13] dated September 11, 2017, URSUMCO rebutted that the regular seasonal employees do not perform
work related to its regular operations during off-milling season as they are merely engaged in repairs of the
machineries and equipment. It also reiterated that the case had been mooted by the regularization or the severance
from service of the concerned employees.
The Court's Ruling
The petition is without merit.

A CBA is a negotiated contract between a legitimate labor organization and the employer concerning wages, hours of
work, and all other terms and conditions of employment in a bargaining unit — it is the law between the parties
absent any ambiguity or uncertainty.[14] Like any other contract, the parties agree on the terms and stipulations by
which their relationship is to be governed. Thus, under the CBA, the employer and the employees' representative
define the terms of employment, i.e., wages, work hours, and the like.
As defined above, the parties are given wide latitude on what may be negotiated and agreed upon in the CBA.
Nevertheless, the employment status cannot be bargained away with as the same is defined by law. [15] In other
words, notwithstanding the stipulations in an employment contract or a duly negotiated CBA, the employment status
of an employee is ultimately determined by law. Hence, URSUMCO errs in claiming that NAMA-URSUMCO-NFL is
estopped from seeking regularization of the concerned employees because the CBA had already laid out the
categories of employment in the company. It is true that the CBA between URSUMCO and NAMA-URSUMCO-NFL is
binding between the parties such that they cannot disregard the terms of employment agreed upon — the employer
cannot deny employees' benefits granted by the CBA and the employee cannot renege on the obligations imposed by
it. Nonetheless, when it comes to the employment status itself of the concerned employees, the CBA is subservient to
what the law says their employment status is.
Under Article 295 of the Labor Code, as amended, four types of employment status are enumerated: (a) regular
employees; (b) project employees; (c) seasonal employees; and (d) casual employees. Meanwhile, the landmark
case of Brent School, Inc. v. Zamora[16] identified fixed-term employment as another valid type of employment.
In the present case, URSUMCO argues that the concerned employees are regular seasonal employees as they only
perform work during the milling season, and the tasks assigned during the off-milling season are limited only to
repairs. On the other hand, NAMA-URSUMCO-NFL believes that the employees in question are regular employees
as they are not laid off during the off-milling season.

Article 295 of the Labor Code defines seasonal employees as those whose work or engagement is seasonal in nature
and the employment is only for the duration of the season. Seasonal employment becomes regular seasonal
employment when the employees are called to work from time to time. [17] On the other hand, those who are employed
only for a single season remain as seasonal employees. [18] As a consequence of regular seasonal employment, the
employees are not considered separated from service during the off-milling season, but are only temporarily laid off
or on leave until re-employed.[19] Nonetheless, in both regular seasonal employment and seasonal employment, the
employee performs no work during the off-milling season.
Here, the concerned URSUMCO employees are performing work for URSUMCO even during the off-milling season
as they are repeatedly engaged to conduct repairs on the machineries and equipment. Strictly speaking, they cannot
be classified either as regular seasonal employees or seasonal employees as their work extended even beyond the
milling season. The nature of the activities performed by the employees, considering the employer's nature of
business, and the duration and scope of work to be done factor heavily in determining the nature of employment.[20]
On the other hand, regular employees are those who are engaged to perform activities which are usually necessary
or desirable in the usual trade or business of the employer. [21] In Abasolo v. National Labor Relations
Commission,[22] the Court expounded on the standard observed in determining regular employment status, to wit:
The primary standard, therefore, of determining a regular employment is the reasonable connection between the
particular activity performed by the employee in relation to the usual business or trade of the employer. The test is
whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection
can be determined by considering the nature of the work performed and its relation to the scheme of the particular
business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the
performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the
employment is also considered regular, but only with respect to such activity and while such activity exists.

It cannot be gainsaid that the conduct of repairs on URSUMCO's machineries and equipment is reasonably
necessary and desirable in its sugar milling business. It is unreasonable to limit only to activities pertaining to the
actual milling process as those necessary in URSUMCO's usual trade or business. Without the constant repairs
conducted during the off-milling season, the equipment used during the milling season would not have worked
efficiently and productively.

URSUMCO does not deny that the concerned employees are engaged to work during the off-milling season to
conduct repairs on the machineries and equipment used in sugar milling. It, however, claims that it hired them out of
its own magnanimity as it could have outsourced the same at a cheaper cost. In addition, URSUMCO posits that the
repairs conducted fall within the purview of a "project" as defined in ALU-TUCP v. National Labor Relations
Commission[23] which is a particular job or undertaking that is not within the regular business of the corporation.
In ALU-TUCP, the Court agreed that the employees therein who were hired in connection with the Five Year
Expansion Program of the National Steel Corporation (NSC) were project employees, to wit:
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the regular business
of the corporation. Such a job or undertaking must also be identifiably separate and distinct from the ordinary or
regular business operations of the employer. The job or undertaking also begins and ends at determined or
determinable times. The case at bar presents what appears to our mind as a typical example of this kind of "project."
NSC undertook the ambitious Five[-]Year Expansion Program I and II with the ultimate end in view of expanding the
volume and increasing the kinds of products that it may offer for sale to the public. The Five[-] Year Expansion
Program had a number of component projects: e.g., (a) the setting up of a "Cold Rolling Mill Expansion Project"; (b)
the establishment of a "Billet Steel-Making Plant" (BSP); (c) the acquisition and installation of a "Five Stand TDM";
and (d) the "Cold Mill Peripherals Project." Instead of contracting out to an outside or independent contractor the
tasks of constructing the buildings with related civil and electrical works that would house the new machinery and
equipment, the installation of the newly acquired mill or plant machinery and equipment and the commissioning of
such machinery and equipment, NSC opted to execute and carry out its Five[-] Year Expansion Projects "in house,"
as it were, by administration. The carrying out of the Five[-]Year Expansion Program (or more precisely, each of its
component projects) constitutes a distinct undertaking identifiable from the ordinary business and activity of NSC.
Each component project, of course, begins and ends at specified times, which had already been determined by the
time petitioners were engaged. We also note that NSC did the work here involved — the construction of buildings and
civil and electrical works, installation of machinery and equipment and the commissioning of such machinery — only
for itself. Private respondent NSC was not in the business of constructing buildings and installing plant machinery for
the general business community, i.e., for unrelated, third party, corporations. NSC did not hold itself out to the public
as a construction company or as an engineering corporation.[24]
The repairs performed by the concerned URSUMCO employees cannot be treated similarly with the Five-Year
Expansion Program of NSC. In ALU-TUCP, the employees engaged to work in the Five-Year Expansion Program
was correctly categorized as project employees because the expansion program is separate and distinct from NSC's
steel manufacturing business. It was a singular, predetermined project with the goal of increasing NSC's business
capacity.
On the other hand, the repairs conducted by URSUMCO's regular seasonal employees during the off-milling season
are closely intertwined with its sugar milling business as they were for the upkeep and maintenance of equipment and
machineries to be used once the milling season commences anew. In addition, the concerned employees were
repeatedly and continuously tasked to handle the repairs during the off-milling season. Their repeated engagement to
conduct repairs during the off-milling season is a manifestation of the necessity and desirability of their work to
URSUMCO's business.[25] Thus, it is erroneous to label the repairs as "projects" because they were done within
URSUMCO's regular business.
Further, the fact that URSUMCO hired the regular seasonal employees to do the repairs during the off-milling season
out of its own magnanimity is immaterial. To reiterate, employment status is primarily determined by the nature of the
employer's business and the duration and connection of the tasks performed by the employee — not by the intent or
motivations of the parties.

In fact, even a plain reading of the CBA between URSUMCO and NAMA-URSUMCO-NFL would lead to a conclusion
that the concerned employees fall under the category of a regular or permanent employee and not a regular seasonal
employee. It is axiomatic that in interpreting contracts, the words shall be given their natural and ordinary meaning
unless a technical meaning was intended.[26] The CBA between URSUMCO and NAMA-URSUMCO-NFL defines a
regular employee as one who has passed the probation requirement of a job or position which is connected with the
regular operation of URSUMCO. On the other hand, a regular seasonal employee is defined as one who regularly
works only during the milling season and may be laid off during the off-milling season or is given preference to work
on tasks of variable duration.
URSUMCO, in its Reply, explained that the concerned employees cannot be considered regular employees as
repairs are not part of its regular milling operation. It added that it merely complied with the provisions of the CBA that
regular seasonal employees would be given preference for engagement for tasks of variable duration, such as repairs
that are dependent on what machines are to be fixed.

A reading of the CBA between URSUMCO and NAMA-URSUMCO-NFL would show that the definition of a regular
employee is not limited to those whose functions are related only to the milling operation of URSUMCO, but to
its regular operation. As pointed out by the VA, the concerned employees were repeatedly hired in the off-milling
season to conduct repairs on URSUMCO's machineries. Thus, it could readily be seen that the conduct of repairs is
part of URSUMCO's regular operation — albeit done only after the milling season. URSUMCO's regular operations
should not be confined to its milling operation because to do so would minimize an otherwise integral part of its
business. The repairs made on the machineries and equipment used in the milling season are necessary for their
upkeep and maintenance so that any damage or concern brought about by ordinary wear and tear of the machines
will not be a problem once the milling season comes back.
Thus, the concerned employees cannot be categorized as regular seasonal employees as defined under the law,
jurisprudence or even the parties' CBA. First, they perform work for URSUMCO even during the off-milling season
and there is no showing that they were free to work for another during the same period. Second, the tasks done are
reasonably necessary and desirable in URSUMCO's regular operation or business.
Further, URSUMCO errs in claiming that the VA Decision, as affirmed by the CA, has the effect of treating all of its
regular seasonal employees as regular or permanent employees. The ruling of the courts a quo only had an impact to
the 78 concerned employees and did not have a sweeping declaration that all of URSUMCO's regular seasonal
employees are now regular or permanent employees. As discussed above, they were correctly treated as regular
employees considering the nature and duration of the functions and tasks they performed for URSUMCO. In fact,
URSUMCO recognized that the ruling of the VA, as affirmed by the CA, did not involve all of its regular seasonal
employees when it claimed that the case had become moot and academic, since a majority of the employees had
been converted to regular or permanent status while others were no longer connected with URSUMCO due to their
voluntary retirement, resignation, or death.
WHEREFORE, the petition is DENIED.
SO ORDERED.

G.R. No. 218390, February 28, 2018

HONGKONG BANK INDEPENDENT LABOR UNION

(HBILU), Petitioner, v. HONGKONG AND SHANGHAI BANKING CORPORATION
LIMITED, Respondent.

DECISION

VELASCO JR., J.:

The Case

For consideration is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court questioning the Decision1 and Resolution of the Court of Appeals (CA), dated
October 23, 2014 and May 21, 2015, respectively, in CA-G.R. SP No. 130798. The
challenged rulings sustained the validity of the external credit check as a condition
before respondent could grant the application for salary loans of petitioner's members.
This is notwithstanding the non-mention of the said condition in the parties' Collective
Bargaining Agreement (CBA).

The Facts

In 2001, the Bangko Sentral ng Pilipinas (BSP) issued the Manual of Regulations for
Banks (MoRB). Relevant to the instant case is Section X338 thereof which reads:

Banks may provide financial assistance to their officers and employees, as part of their
fringe benefits program, to meet housing, transportation, household and personal
needs of their officers and employees. Financing plans and amendments thereto
shall be with prior approval of the BSP. (emphasis added)

Pursuant to the above-cited provision, respondent Hongkong and Shanghai Banking

Corporation Limited (HSBC), on March 12, 2003, submitted its Financial Assistance Plan
(Plan) to the BSP for approval. The Plan allegedly contained a credit checking proviso
stating that "[r]epayment defaults on existing loans and adverse information on outside
loans will be considered in the evaluation of loan applications." The BSP approved the
Plan on May 5, 2003.2 Said Plan was later amended thrice,3 all of which amendments
were approved by the BSP.4
Meanwhile, petitioner Hongkong Bank Independent Labor Union (HBILU), the
incumbent bargaining agent of HSBC's rank-and-file employees, entered into a CBA
with the bank covering the period from April 1, 2010 to March 31, 2012. Pertinent to
the instant petition is Article XI thereof, which reads:

Article XI
Salary Loans

Section 1. Housing/house Improvement Loan. The BANK, or other financial institution

when appropriate, shall extend housing loan to qualified employees with at least three
(3) YEARS OF SERVICE, UP TO One Million Five Hundred Thousand Pesos
(P1,500,000.00) payable in twenty-five (25) years or up to the retirement date of the
employee, whichever comes first. Subject to BSP approval, an additional Five Hundred
Thousand Pesos (P500,000.00) can be availed subject to the terms above with interest
rate at the BLR less 3% but not less than six percent (6%) per annum.

Section 2. Personal Loans. The BANK, or the Retirement Trust Fund Inc. or other
financial institutions, when appropriate, shall extend personal loan to qualified
employees, with at least 1 year service, up to six months basic pay of the employees at
six percent (6%) interest per annum, payable in three years.

Section 3. Car Loans. The BANK, or the Retirement Trust Fund Inc. or other financial
institutions when appropriate, shall extend a car loan to qualified employees with at
least 3 years service up to Five Hundred Fifty Thousand Pesos (PHP550,000.00) payable
in seven (7) years. Interest rate shall be six percent (6%) per annum.

Section 4. Credit Ratio. The availment of any of the foregoing loans shall be subject to
the BANK's credit ratio policy.

When the CBA was about to expire, the parties started negotiations for a new one to
cover the period from April 1, 2012 to March 31, 2017. During the said negotiations,
HSBC proposed amendments to the above quoted Article XI allegedly to align the
wordings of the CBA with its BSP approved Plan. Particularly, HSBC proposed the
deletion of Article XI, Section 4 (Credit Ratio) of the CBA, and the amendment of
Sections 1 to 3 of the same Article to read as follows:

Article XI
Salary Loans

Section 1. Housing/house Improvement Loan. Based on the Financial Assistance

Plan duly approved by Bangko Sentral ng Pilipinas (BSP), the BANK, or other
financial institution when appropriate, shall extend housing loan to qualified employees
with at least three (3) YEARS OF SERVICE UP TO One Million Five Hundred Thousand
Pesos (P1,500,000.00) payable in twenty-five (25) years or up to the retirement date of
the employee, whichever comes first, subject to employee's credit ratio. An
additional Five hundred thousand Pesos (P500,000.00) can be availed subject to the
terms above with interest rates at the BLR less 3% but not less than six percent (6%)
per annum.
Section 2. Personal Loans. Based on the financial Assistance Plan duly approved
by Bangko Sentral ng Pilipinas (BSP), the BANK, or other financial institutions when
appropriate, shall extend personal loan to qualified employees, with at least 1 year
service, up to six months basic pay of the employees at six percent (6%) interest per
annum, payable in three (3) years, subject to employee's credit ratio.

Section 3. Car loans. Based on the Financial Assistance Plan duly approved by
Bangko Sentral ng Pilipinas (BSP), the BANK, or other financial institutions when
appropriate, shall extend a car loan to qualified employees with at least three years
service, up to Five Hundred Fifty Thousand Pesos (PHP550,000.00) payable in seven (7)
years. Interest rate shall be six percent (6%) per annum. (emphasis added)

HBILU vigorously objected to the proposed amendments, claiming that their insertions
would curtail its members' availment of salary loans. This, according to the Union,
violates the existing exceptions set forth in BSP Circular 423, Series of 2004,[5 and
Section X338.3[6 of the MoRB. In view of HBILU's objection, HSBC withdrew its
proposed amendments and, consequently, Article XI remained unchanged.

Despite the withdrawal of the proposal, HSBC sent an e-mail to its employees on April
20, 2012 concerning the enforcement of the Plan, including the Credit Checking
provisions thereof. The e-mail reads:
Dear All

We wish to reiterate the following provisions included in the Financial Assistance Plan
(FAP) as approved by Bangko Sentral ng Pilipinas (BSP). Note that the FAP is the official
guideline and policy governing Staff Loans and Credit Cards.

>>>>CREDIT CHECKING

Below are the specific provisions included in the FAP regarding credit checking.

Housing Loan, Car Loan, Personal Loan & Repayment defaults on existing loans and
Computer/Club Membership/Medical Equipment adverse information considered in the
Loan evaluation of loan applications.

Credit Card Repayment defaults on existing loans and

adverse information considered in the
evaluation of loan applications.

With the strict implementation of these provisions, adverse credit findings may result to
disapproval of loan or credit card applications. These findings will include the following:

(1) Frequency of confirmed ADA failure on staff/commercial loans and credit cards (3
consecutive incidents within the past 6 months or 6 incidents within the past 12 months).
Note that applications with pending ADA for investigation will only be processed upon
 confirmation of status (Confirmed or Reprieved);

(2) Adverse findings on HSBC cards; or

(3) Adverse findings from external credit checks.[7

Thereafter, in September 2012, HBILU member Vince Mananghaya (Mananghaya)

applied for a loan under the provisions of Article XI of the CBA. His first loan application
in March 2012 was approved, but adverse findings from the external checks on his
credit background resulted in the denial of his September application.8 HBILU then
raised the denial as a grievance issue with the National Conciliation Mediation Board
(NCMB). It argued that the imposition of an additional requirement—the external credit
checking prior to approval of any loan application under Article XI of the CBA—is not
sanctioned under the CBA. The Union emphasized that under the terms of Article XI,
there is no such requirement and that it cannot, therefore, be unilaterally imposed by
HSBC.

Justifying its denial of the loan application, HSBC countered that the external credit
check conducted in line with Mananghaya's loan application was merely an
implementation of the BSP-approved Plan. The adoption of the Plan, HSBC stressed, is
a condition sine qua non for any loan grant under Section X338 of the MoRB. Moreover,
the Credit Check policy has been in place since 2003, and is a sound practice in the
banking industry to protect the interests of the public and preserve confidence in banks.

The issue was then submitted for resolution by the NCMB Panel of Accredited Voluntary
Arbitrators (the Panel).9 In the interim, the parties, on September 29, 2012, inked a
new CBA for the period covering April 1, 2012 up to March 31, 2017.10

NCMB-PVA Decision

On May 17, 2013, the Panel rendered a Decision finding for HSBC. It held that herein
respondent, as an employer, has the right to issue and implement guidelines for the
availment of loan accommodations under the CBA as part of its management
prerogative. The repeated use of the term "qualified employees" in Article XI of the CBA
was deemed indicative of room for the adoption of further guidelines in the availment of
the benefits thereunder. The Panel also agreed that HSBC's Plan is not a new policy as
it has already been approved by the BSP as early as 2003. Thus, the Panel ruled that
the salary loan provisions under Article XI of the CBA must be read in conjunction with
the provisions of the Plan.

The Panel further discussed that HSBC's adoption of the Plan was not done for any
whimsical or arbitrary reason, but because the bank was constrained to comply with
Section X338 of the MoRB. As a banking institution, HSBC cannot divorce itself from the
regulatory powers of the BSP. Observance of Section X338 of the MoRB was then
necessary before the bank could have been allowed to extend loan accommodations to
its officers and employees.
On the basis thereof, the Panel held that they are not ready to rule that HSBC's Plan
violates Article XI of the CBA.

Aggrieved, HBILU elevated the case to the CA.

CA Decision

The CA sustained the findings and conclusions of the NCMB-PVA in toto on the
ratiocination that HSBC was merely complying with Section X338 of the MoRB when it
submitted the Plan to BSP. When BSP, in turn, approved the said Plan, HSBC became
legally bound to enforce its provisions, including the conduct of external credit checks
on its loan applicants.11 The appellate court further ruled that the Plan should be
deemed incorporated in the CBA because it is a regulatory requirement of BSP without
which the salary loan provisions of the CBA are rendered inoperative.

Petitioner's motion for reconsideration having been denied by the CA thru its May 21,
2015 Resolution, HBILU now seeks recourse from this Court.

The Issues

HBILU presents the following grounds to warrant the reversal of the assailed Decision,
viz:

The decisions and resolutions of the Hon. Panel of Voluntary Arbitrators and the Hon.
Court of Appeals are tainted with grave abuse of discretion and it showed patent errors
in the appreciation of facts which led to wrong conclusions of law; or stated otherwise;

The Hon. Panel of Voluntary Arbitrators and Court of Appeals committed serious,
reversible and gross error in law in ruling that the Bank's Financial Assistance Plan as
not in violation of Article XI of the Parties' CBA revision on Salary Loans (Article XII of
the new and existing CBA)12

Simply put, the issue for Oui resolution is whether or not HSBC could validly enforce the
credit-checking requirement under its BSP-approved Plan in processing the salary loan
applications of covered employees even when the said requirement is not recognized
under the CBA.

Arguments of Petitioner

In support of its position, HBILU argues, among others, that HSBC failed to present in
court the Plan that was supposedly submitted to the BSP for approval, and to show that
the requirement of external credit checking had already been included therein.13 Too,
said Plan is not a set of policies for salary loans that came from the BSP, but was
devised solely by HSBC.14

Furthermore, HBILU claims that it is not privy to the Plan and has not been consulted,
much less informed, of the impositions therein prior to its implementation. No proof
was offered that the Plan had been disseminated to the employees prior to the April 20,
2012 e-mail blast.15
Lastly, the implementation of the Plan, according to HBILU, is tantamount to diminution
of benefits16 and a unilateral amendment of the existing CBA,17 which are both
proscribed under the Labor Code. Had the parties to the CBA intended to include the
external credit check as an additional condition to the availment of employee salary
loans, then it should have been plainly provided in their agreement.18

Arguments of Respondent

In its Comment, HSBC claims that the Plan is neither new nor was it issued on a mere
whim or caprice. On the contrary, the Plan was established as early as 2003, way
before Mananghaya's application was denied, to conform to Section X338 of the BSP
MoRB. HSBC reminds the Court that the loan and credit accommodations could have
only formed part of the employees' fringe benefit program if they were extended
through a financing scheme (i.e., the Plan) approved by the BSP.

Moreover, HSBC argues that the dissemination of the Plan via e-mail blast on April 20,
2012 was but a reiteration, as opposed to a first publication. It contends that even prior
to the establishment and approval of the Plan in 2003, the then-loan policy already
included the requirement on external credit checking. According to the bank, there was
already a provision that required the conduct of credit checking in the processing and
evaluation of loan applications in their General Policies on Loans, cascaded through the
Intranet system to HSBC employees on October 24, 2002, viz:

CREDIT CHECKING

Repayment defaults on existing loans and

adverse information on outside loans will be
considered in the evaluation of loan
applications.

The union members cannot then feign ignorance of the external credit checking
requirement in staff loan applications, according to HSBC. Consequently, petitioner's
bare denial of any knowledge about it cannot be given any credence. Considering too
that the Plan reiterating the requirement has been approved by the BSP in 2003, HBILU
slept on its rights when it questioned its strict imposition almost a decade after its
issuance.

Finally, HSBC postulates that the non-mention of the Plan in the CBA is no justification
for the bank to disregard the same in processing employee loan applications. Provisions
of applicable laws, especially those relating to matters affected with public policy, are
deemed written into the contract.19

Our Ruling

The petition is meritorious.

The constitutional right of employees

to participate in matters affecting
their benefits and the sanctity of the CBA

Preliminarily, it is crucial to stress that no less than the basic law of the land guarantees
the rights of workers to collective bargaining and negotiations as well as to participate
in policy and decision-making processes affecting their rights and benefits. Section 3,
Article XIII of the 1987 Constitution provides:

Section 3. The State shall afford full protection to labor, local and overseas, organized
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.

Pursuant to said guarantee, Article 211 of the Labor Code, as amended, declares it a
policy of the State:

(a) To promote and emphasize the primacy of free collective bargaining and
negotiations, including voluntary arbitration, mediation and conciliation, as modes of
settling labor or industrial disputes;

xxxx

(d) To promote the enlightenment of workers concerning their rights and

obligations as union members and as employees;

xxxx

(g) To ensure the participation of workers in decision and policy-making

processes affecting their rights, duties and welfare. (Emphasis ours)

Corollary thereto, Article 255 of the same Code provides:

ART. 255. EXCLUSIVE BARGAINING REPRESENTATION AND WORKERS PARTICIPATION

IN POLICY AND DECISION-MAKING.

xxxx

Any provision of law to the contrary notwithstanding, workers shall have the
right, subject to such rules and regulations as the Secretary of Labor and Employment
may promulgate, to participate in policy and decision-making process of the
establishment where they are employed insofar as said processes will directly
affect their rights, benefits and welfare. For this purpose, workers and employers
may form labor-management councils: Provided, That the representatives of the
workers in such labor management councils shall be elected by at least the majority of
all employees in said establishment. (Emphasis and underscoring ours)

We deem it necessary to remind HSBC of the basic and well entrenched rule that
although jurisprudence recognizes the validity of the exercise by an employer of its
management prerogative and will ordinarily not interfere with such, this prerogative
is not absolute and is subject to limitations imposed by law, collective bargaining
agreement, and general principles of fair play and justice.20

Indeed, being a product of said constitutionally-guaranteed right to participate, the CBA

is, therefore, the law between the parties and they are obliged to comply with its
provisions.

Unilateral amendments to the CBA

violate Article 253 of the Labor Code

A collective bargaining agreement or CBA is the negotiated contract between a

legitimate labor organization and the employer concerning wages, hours of work and all
other terms and conditions of employment in a bargaining unit. As in all contracts, the
parties in a CBA may establish such stipulations, clauses, terms and conditions as they
may deem convenient provided these are not contrary to law, morals, good customs,
public order or public policy. Thus, where the CBA is clear and unambiguous, it
becomes the law between the parties and compliance therewith is mandated by the
express policy of the law.21

In Faculty Association of Mapua Institute of Technology (FAMJT) v. Court of

Appeals,22 this Court was emphatic in its pronouncement that the CBA during its
lifetime binds all the parties. The provisions of the CBA must be respected since
its terms and conditions constitute the law between the parties. And until a
new CBA is 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 conditions
of the existing agreement.23 This finds basis under Article 253 of the Labor Code,
which states:

ARTICLE 253. Duty to bargain collectively when there exists a collective

bargaining agreement. – When there is a collective bargaining agreement, the duty
to bargain collectively shall also mean that neither party shall terminate nor modify
such agreement during its lifetime. x x x It shall be the duty of both parties to
keep the status quo and to continue in full force and effect the terms and
conditions of the existing agreement during the 60-day period and/or until a new
agreement is reached by the parties. (emphasis added)

In the present controversy, it is clear from the arguments and evidence submitted that
the Plan was never made part of the CBA. As a matter of fact, HBILU vehemently
rejected the Plan's incorporation into the agreement. Due to this lack of consensus, the
bank withdrew its proposal and agreed to the retention of the original provisions of the
CBA. The subsequent implementation of the Plan's external credit check provisions in
relation to employee loan applications under Article XI of the CBA was then an
imposition solely by HSBC.

In this respect, this Court is of the view that tolerating HSBC's conduct would be
tantamount to allowing a blatant circumvention of Article 253 of the Labor Code. It
would contravene the express prohibition against the unilateral modification of a CBA
during its subsistence and even thereafter until a new agreement is reached. It would
unduly license HSBC to add, modify, and ultimately further restrict the grant of
Salary Loans beyond the terms of the CBA by simply adding stringent
requirements in its Plan, and having the said Plan approved by BSP in the
guise of compliance with the MoRB.

HSBC's defense, that there was no modification of the CBA since the external credit
check has been a long-standing policy of the Bank applied to all of its employees, is
inconvincing. Noteworthy is that the bank failed to submit in evidence the very Plan
that was supposedly approved by the BSP in 2003. Nevertheless, even if We were to
rely on the later versions of the Plan approved by the BSP, Our ruling will not change.

The only provision relative to the credit checking requirement under the 2006 and 2011
Plans is this and nothing else:

CREDIT CHECKING

Repayment defaults on existing loans and adverse

information on outside loans will be considered m the
evaluation of loan applications.24

As for the manner in which said credit checking will be done, as well as any additional
requirements that will be imposed for the purpose, the 2006 Plan and even its later
2011 version are silent thereon.25 Nowhere in these Plans can We find the requirement
for the submission of an "Authority to Conduct Checks Form," as well as the details on
adverse credit finding, specifically:

With the strict implementation of these provisions, adverse credit findings may result to
disapproval of loan or credit card applications. These findings will include the following:

(1) Frequency of confirmed ADA failure on staff/commercial loans and credit cards (3
consecutive incidents within the past 6 months or 6 incidents within the past 12 months).
Note that applications with pending ADA for investigation will only be processed upon
confirmation of status (Confirmed or Reprieved);

(2) Adverse findings on HSBC cards; or

(3) Adverse findings from external credit checks.[26

In fact, regrettably, HSBC's only documentary basis for proving that the credit checking
requirement and the manner of its enforcement have been set in place much earlier is
the use of the term "reiterate" in its April 20, 2012 e-mail. Thus, we quote:
Dear All

We wish to reiterate the following provisions included in the Financial Assistance Plan
(FAP) as approved by Bangko Sentral ng Pilipinas (BSP).
xxx

20. Accordingly, the above email dated 20 April 2012 clearly indicates that the
dissemination therein of the FAP and its provisions is merely a reiteration, and
not a first publication as the Union now conveniently claims.27 x x x (emphasis
supplied)

What further convinces Us that the external credit check as well as the manner of its
enforcement is a new imposition by HSBC is the fact that the bank made no attempt to
rebut HBILU's evidence that the former's requirements for the grant of salary
loans changed only after the April 20, 2012 email blast. HBILU sufficiently proved
that prior to the April 20, 2012 email, members of the bargaining unit were
using only four (4) documents in applying for a loan, to wit: 1) Application for
Personal Loan Form; 2) Authority to Deduct Form; 3) Set-Off of Retirement Fund Form;
and 4) Promissory Note Form.28 Thereafter, management imposed a new set of
requirements, which includes the "Authority to Conduct Checks Form."29 As testified
to by Mananghaya, he only signed the first four (4) requirements for his March 2012
loan. However, for the September 2012 loan, he was asked to complete a new set of
documents which included the Authority to Conduct Checks Form.30 Too, even the
email itself states that said credit checking requirement, among others, is to
be strictly enforced effective May 2012.31 Though HSBC claims that credit checking
has been the bank's long-standing policy, it failed to show that it indeed required
such before its covered employees could avail of a salary loan under the CBA
prior to April 20, 2012—the date of the email blast.

Thus, no other conclusion can be had in this factual milieu other than the fact
that HSBC's enforcement of credit checking on salary loans under the CBA
invalidly modified the latter's provisions thereon through the imposition of
additional requirements which cannot be found anywhere in the CBA.

If it were true that said credit checking under the Plan covers salary loans under the
CBA, then the bank should have negotiated for its inclusion thereon as early as the April
1, 2010 to March 31, 2012 CBA which it entered into with HBILU. However, the express
provisions of said CBA inked by the parties clearly make no reference to the Plan. And
even in the enforcement thereof, credit checking was not included as one of its
requirements. This leads Us to conclude that HSBC originally never intended the credit
checking requirement under the Plan to apply to salary loans under the CBA. At most,
its application thereto is a mere afterthought, as evidenced by its sudden, belated, and
hurried enforcement on said salary loans via the disputed email blast.

In other words, it appears that, based on its actuations, HSBC never intended to apply
the credit checking item under the Plan to salary loans under the CBA. Otherwise, it
would have enforced such requirement from the moment the salary loans provisions
under the old CBA were implemented, which it did not. It may be that said requirement
was being applied to other types of loans under the Plan, but based on the evidence
presented, We cannot say the same for salary loans under the CBA.

The minority argues that primacy is being accorded to the CBA over the Plan approved
by the BSP. Such, however, is not the case. We are not saying that the Plan should
yield to the CBA. The point that we are driving at in this lengthy discussion is that on
the basis of the evidence presented, We are convinced that the credit checking
provision of the Plan was never intended to cover salary loans under the CBA.
Otherwise, HSBC would have implemented such the moment said salary loans under
the previous CBA were made available to its covered employees. Thus, HSBC cannot
now insist on its imposition on loan applications under the disputed CBA provision
without violating its duty to bargain collectively.

If We were to allow this practice of leaving to HSBC the determination, formulation, and
implementation of the guidelines, procedures, and requirements for the availment of
salary loans granted under the CBA, which guidelines, procedures, and requirements
unduly restrict the provisions of the CBA, this Court would in effect be permitting HSBC
to repeatedly violate its duty to bargain collectively under the guise of enforcing the
general terms of the Plan.

Salary loans subject of this case are

not covered by the credit checking
requirement under the MORB

In maintaining that the credit checking requirement under the MoRB should be deemed
written into the CBA, the minority makes reference to Sec. X304.1 of the 2011 MoRB in
maintaining that financial institutions must look into the obligor's repayment history,
among other things, before approving a loan application. Said provision reads:

§ X304.1 General guidelines. Consistent with safe and sound banking practices, a
bank shall grant loans or other credit accommodations only in amounts and for the
periods of time essential for the effective completion of the operation to be financed.
Before granting loans or other credit accommodations, a bank must ascertain that the
borrower, co-maker, endorser, surety, and/or guarantor, if applicable, is/are financially
capable of fulfilling his/their commitments to the bank. For this purpose, a bank shall
obtain adequate information on his/their credit standing and financial capacities x x x.

At this point it is well to draw attention to the fact that said provision is a general one
as specifically indicated thereat. It is also equally important to emphasize that Sec.
X304.1 must be interpreted in conjunction with Section X338.3, the provision which
specifically applies to salary loans under the fringe benefit program of the bank. Thus:

Subsection X338.3 Other conditions/limitations

The investment by a bank in equipment and other chattels under its fringe benefits
program for officers and employees shall be included in determining the extent of the
investment of the bank in real estate and equipment for purposes of Section 51 of R.A.
No. 8791.

The investment by a bank in equipment and other chattels contemplated under these
guidelines shall not be for the purpose of profits in the course of business for the bank.

All loans or other credit accommodations to bank officers and

employees, EXCEPT those granted under the fringe benefit program of the
bank, shall be subject to the same terms and conditions imposed on the
regular lending operations of the bank. Loans or other credit accommodations
granted to officers shall, in addition, be subject to the provisions of Section 36 of R.A.
No. 8791 and Sections X326 to X336 but not to the individual ceilings where such loans
or other credit accommodations are obtained under the bank's fringe benefits program.
(emphasis ours)

In specifying that "[a]ll loans or other credit accommodations to bank officers and
employees, except those granted under the fringe benefit program of the bank, shall be
subject to the same terms and conditions imposed on the regular lending operations of
the bank," Sec. X338.3 clearly excluded loans and credit accommodations under
the bank's fringe benefits program from the operation of Sec. X304.1. This fact
is even recognized in the dissent. To ignore this clear exception and insist on
interpreting the general guidelines under Section X304.1 would be to renege from Our
duty to apply a clear and unambiguous provision.32

It may also be argued that HSBC, being a bank, is statutorily required to conduct a
credit check on all of its borrowers, even though it be made under a loan
accommodation scheme, applying Section 40[33 of Republic Act No. (RA) 8791 (General
Banking Law of 2000). A reading of RA 8791, however, reveals that loan
accommodations to employees are not covered by said statute. Nowhere in the law
does it state that its provisions shall apply to loans extended to bank employees which
are granted under the latter's fringe benefits program. Had the law intended otherwise,
it could have easily specified such, similar to what was done for directors, officers,
stockholders and their related interests under Section 36 thereof. This conclusion is
supported by the very wording of Subsection X338.3 of the MORB. To reiterate:

Subsection X338.3 Other conditions/limitations

The investment by a bank in equipment and other chattels under its fringe benefits
program for officers and employees shall be included in determining the extent of the
investment of the bank in real estate and equipment for purposes of Section 51 of R.A.
No. 8791.

The investment by a bank in equipment and other chattels contemplated under these
guidelines shall not be for the purpose of profits in the course of business for the bank.

All loans or other credit accommodations to bank officers and employees, except those
granted under the fringe benefit program of the bank, shall be subject to the same
terms and conditions imposed on the regular lending operations of the bank. Loans or
other credit accommodations granted to officers shall, in addition, be subject
to the provisions of Section 36 of R.A. No. 8791 and Sections X326 to X336 but
not to the individual ceilings where Such loans or other credit accommodations are
obtained under the bank's fringe benefits program.
Notably, even though the provision covers loans extended to both bank officers and
employees, paragraph 3 thereof singled out loans and credit accommodations granted
to officers when it provided for the applicability of RA 8791.

What the law does not include, it excludes.

These convince Us to conclude that RA 8791 only intended to cover loans by third
persons and those extended to directors, officers, stockholders and their related
interests. Consequently, Section 40 thereof, which requires a bank to ascertain that the
debtor is capable of fulfilling his commitments to it before granting a loan or other
credit accommodation, does not automatically apply to the type of loan subject of the
instant case.

Furthermore, it is inaccurate to state that credit checking is necessary, or even

indispensable, in the grant of salary loans to the bank's employees, since the business
of banking is imbued with public interest and there is a fiduciary relationship between
the depositor and the bank. It is also incorrect to state that allowing bank employees to
borrow funds from their employer via salary loans without the prior conduct of a credit
check is inconsistent with this fiduciary obligation. This is so because there are other
ways of securing payment of said salary loans other than ascertaining whether the
borrowing employee has the capacity to pay the loan. BSP Circular 423, Series of 2004
itself provides for such, thus:

Subsection X338.1 Mechanics. The mechanics of such financing plan shall have the
following minimum features:

Participation shall be limited to full-time and permanent officers and employees of the
bank;

xxxx

The bank shall adopt measures to protect itself from losses such as by
incorporating in the plan or contract provisions requiring co-makers or co-
signor, chattel, or real estate mortgages, fire insurance, mortgage redemption
insurance, assignment of money value of leave credits, pension or retirement
benefits. (Emphasis ours)

Additionally, both the BSP Circular 423, Series of 2004 and Section X338.3 of the MoRB
provide for a safeguard in order to protect the funds of the Bank's depositors while
allowing the Bank to extend such benefits to its employees, in that both require that:

The aggregate outstanding loans and other credit accommodations granted

under the bank's fringe benefits program, inclusive of those granted to officers
in the nature of lease with option to purchase, shall not exceed five percent
(5%) of the bank's total loan portfolio.34
There are, therefore, sufficient safety nets consistent with the bank's fiduciary duty to
its depositors even without requiring the conduct of an external credit check in the
availment of salary loans under the subject CBA. As a matter of fact, there is no
showing that the bank's finances suffered because it has been granting said salary
loans under the CBA without the external credit check.

Withal, We cannot subscribe to HSBC's position that its imposition of the credit checking
requirement on salary loans granted under the CBA is valid. The evidence presented
convinces Us to hold that the credit checking requirement imposed by HSBC
under the questioned Plan which effectively and undoubtedly modified the CBA
provisions on salary loans was a unilateral imposition violative of HSBC's duty
to bargain collectively and, therefore, invalid. HSBC miserably failed to present
even an iota of concrete documentary evidence that the credit checking requirement
has been imposed on salary loans even before the signing of the CBA subject of the
instant dispute and that the Plan was sufficiently disseminated to all concerned. In
contrast, HBILU sufficiently proved that HSBC violated its duty to bargain collectively
under Article 253 of the Labor Code when it unilaterally restricted the availment of
salary loans under Article XI of the CA on the excuse of enforcing the Plan approved by
the BSP.

As this Court emphasized in Philippine Airlines, Inc. v. NLRC, industrial peace cannot be
achieved if the employees are denied their just participation in the discussion of
matters affecting their rights,35more so in the case at bar where the employees
have been led to believe that they were given the chance to participate in
HSBC's policy-formulation with respect to the subject benefit, only to find out
later that they would be deprived of the fruits of said involvement.

On interpretation of CBAs

At this point, We deem it proper to recall the basics in resolving issues relating to the
provisions and enforcement of CBAs. In United Kimberly-Clark Employees Union
Philippine Transport General Workers Organization (UKCEU-PTGWO) v. Kimberly-Clark
Philippines, Inc., this Court emphasized that:

As a general proposition, an arbitrator is confined to the interpretation and application

of the collective bargaining agreement. He does not sit to dispense his own brand of
industrial justice: his award is legitimate only in so far as it draws its essence from the
CBA, i.e., when there is a rational nexus between the award and the CBA under
consideration. It is said that an arbitral award does not draw its essence from the CBA;
hence, there is an unauthorized amendment or alteration thereof, if:

1. It is so unfounded in reason and fact;

2. It is so unconnected with the working and purpose of the agreement;
3. It is without factual support in view of its language, its context, and any
other indicia of the parties' intention;
4. It ignores or abandons the plain language of the contract;
5. It is mistakenly based on a crucial assumption which concededly is a nonfact;
6. It is unlawful, arbitrary or capricious; and
 7. It is contrary to public policy.

xxxx

If the terms of a CBA are clear and [leave] no doubt upon the intention of the
contracting parties, the literal meaning of its stipulation shall prevail. However, if, in a
CBA, the parties stipulate that the hirees must be presumed of employment
qualification standards but fail to state such qualification standards in said CBA, the VA
may resort to evidence extrinsic of the CBA to determine the full agreement
intended by the parties. When a CBA may be expected to speak on a matter,
but does not, its sentence imports ambiguity on that subject. The VA is not
merely to rely on the cold and cryptic words on the face of the CBA but is
mandated to discover the intention of the parties. Recognizing the inability of the
parties to anticipate or address all future problems, gaps may be left to be filled in by
reference to the practices of the industry, and the step which is equally a part of the
CBA although not expressed in it. In order to ascertain the intention of the
contracting parties, their contemporaneous and subsequent acts shall be
principally considered The VA may also consider and rely upon negotiating and
contractual history of the parties, evidence of past practices interpreting
ambiguous provisions. The VA has to examine such practices to determine the
scope of their agreement, as where the provision of the CBA has been loosely
formulated. Moreover, the CBA must be construed liberally rather than narrowly and
technically and the Court must place a practical and realistic construction upon
it.36 (emphasis ours)

Thus, in resolving issues concerning CBAs, We must not forget that the foremost
consideration therein is upholding the intention of both parties as stated in the
agreement itself, or based on their negotiations. Should it appear that a proposition or
provision has clearly been rejected by one party, and said provision was ultimately not
included in the signed CBA, then We should not simply disregard this fact. We are duty-
bound to resolve the question presented, albeit on a different ground, so long as it is
consistent with law and jurisprudence and, more importantly, does not ignore the
intention of both parties. Otherwise, We would be substituting Our judgment in place of
the will of the parties to the CBA.

With these, We find no need to resolve the other matters presented.

WHEREFORE, premises considered, the petition is GRANTED. The Decision dated

October 23, 2014 and Resolution dated May 21, 2015 of the Court of Appeals in CA-
G.R. SP No. 130798 are hereby REVERSED and SET ASIDE.

Respondent Hongkong and Shanghai Banking Corporation's Financial Assistance Plan,

insofar as it unilaterally imposed a credit checking proviso on the availment of Salary
Loans by its employees under Article XI of the 2010-2012 CBA, is hereby declared
legally ineffective and invalid for being in contravention of Article 253 of the Labor
Code.

SO ORDERED.
Bersamin, Martires, and Gesmundo, JJ., concur.
Leonen, J., see separate opinion.

March 20, 2018

NOTICE OF JUDGMENT

Sirs /Mesdames:

Please take notice that on February 28, 2018 a Decision, copy attached hereto, was
rendered by the Supreme Court in the above-entitled case, the original of which was
received by this Office on March 20, 2018 at 10:55 a.m.

Very truly yours,

(SGD.) WILFREDO V. LAPITAN

Division Clerk of Court

Endnotes:

1
Penned by Associate Justice Maria Elisa Sempio Diy and concurred in by Associate
Justices Ramon M. Bato, Jr. and Rodil V. Zalameda.

2 Rollo, p. 283.

3 On July 27, 2006, February 11, 2008, and on July 4, 2011.

4
Rollo, p. 128.

5
SECTION X338. Financial Assistance to Officers and Employees. Banks may provide
financial assistance to their officers and employees, as part of their fringe benefits
program, to meet the housing, transportation, household and personal needs of their
officers and employees. Financing plans and amendments thereto, shall be with prior
approval of the Bangko Sentral.

Subsection X338.1 Mechanics. The mechanics of such financing plan shall have the
following minimum features:

Participation shall be limited to full-time and permanent officers and employees of the
bank; Financial assistance shall only be for the following purposes:

(1) The acquisition of a residential house and lot, or the construction, renovation or
repair of a residential house on a lot owned and to be occupied by the officer or
employee;

(2) The acquisition of vehicles, household equipment and appliances for the personal
use of the officer or employee or his immediate family; or

(3) To meet expenses for the medical, maternity, education, emergency and other
personal needs of the officer or employee or his immediate family;

Financial assistance for purposes mentioned in Items b(1) and b(2) of this Section shall
be granted in the form of a loan, advance or other credit accommodation, installment
sale, lease with option to purchase or lease-purchase arrangement where the lessee is
obliged to purchase the real estate or equipment;

The amount and maturity of financial assistance for each purpose shall be determined
by the bank in consonance with the normal requirements thereof: Provided, That the
maximum amount shall be stated as percentage or multiple of the total monthly
compensation of the officer or employee and shall be within the paying capacity of the
borrowing officer or employee.

Total monthly compensation shall include the basic salary and all fixed and regular
monthly allowances of the officer or employee. Payments for sickness benefits and
other special emoluments which are not fixed or regular in nature, or the commutation
into cash of unused leave credits shall not be included in the computation of total
monthly compensation;

The amortization payment shall include amounts necessary to cover mortgage

redemption insurance and fire insurance premiums, taxes, special assessments, and
other related fees and charges;

Availment of the financing plan to construct or acquire a residential house and lot shall
be allowed only once during the officer's or employee's tenure with the bank, except
where the right over the real estate previously acquired or constructed under the
financing plan is absolutely transferred or assigned to another officer or employee of
the bank or to a third party: Provided, That the bank must be fully paid or reimbursed
for the outstanding availment on the financing plan before the officer/employee is
allowed to re-avail himself of the same financing plan.

An officer or employee (or his spouse) who already owns a residential house and lot
shall not be qualified to avail himself of financial assistance for purposes of acquiring a
residential house and/or lot.

These prohibitions notwithstanding, financial assistance for the repair or renovation of a

residential house may be allowed subject to such limitation as may be prescribed by the
bank pursuant to Item d of this Section;

Availment of the financing plan for the acquisition of a specific type of equipment or
appliance shall be allowed not oftener than once every three (3) years: Provided, That
re-availment shall be allowed only after previous obligations in connection with the
acquisition of the same type of equipment or appliances have been fully liquidated; and
The bank shall adopt measures to protect itself from losses such as by incorporating in
the plan or contract provisions requiring co-makers or co-signor, chattel, or real estate
mortgages, fire insurance, mortgage redemption insurance, assignment of money value
of leave credits, pension or retirement benefits.

Subsection 1338.2 Funding by Foreign Banks. In the case of local branches of foreign
banks, financial assistance for their officers and employees may be funded, through any
of the following means:

Through a local affiliate by special arrangement with the head office abroad in any of
the following forms:

(1) Inward remittance from the head office of the affiliate;

(2) Assignment to the affiliate of equivalent amounts of profits otherwise remittable

abroad under existing regulations; or

(3) Direct loans by the foreign bank to the affiliate; or

Through the local branch itself by:

(1) Segregation or transfer of undivided profits normally remitted to the head office
abroad equivalent to the loans to officers and employees which shall be lodged under
"Other Liabilities-Head Office Accounts". This account shall at all times have a balance
equivalent to the outstanding loans to officers/employees financed under this scheme;
or

(2) Inward remittance; or

Through the local branch from local sources without earmarking an equivalent amount
of undivided profits: Provided, that the aggregate ceilings on such loans as provided
under existing regulations shall apply.

Loans under Items b(1) and b(2) of this Section shall be treated in the branch books as
loans granted by its head office. The documentation and collection of such loans shall
be handled by the branch for the account of the head office.

Loans financed under Items a and b shall be subject to the reporting requirements of
Section X335 but not to the ceilings provided under Sections X330 and X331. The same
shall be excluded from the computation of the capital to risk assets ratio.

Subsection X338.3 Other conditions/limitations

The investment by a bank in equipment and other chattels under its fringe benefits
program for officers and employees shall be included in determining the extent of the
investment of the bank in real estate and equipment for purposes of Section 51 of R.A.
No. 8791.

The investment by a bank in equipment and other chattels contemplated under these
guidelines shall not be for the purpose of profits in the course of business for the bank.

All loans or other credit accommodations to bank officers and employees, except those
granted under the fringe benefit program of the bank, shall be subject to the same
terms and conditions imposed on the regular lending operations of the bank. Loans or
other credit accommodations granted to officers shall, in addition, be subject to the
provisions of Section 36 of R.A. No. 8791 and Sections X326 to X336 but not to the
individual ceilings where such loans or other credit accommodations are obtained under
the bank's fringe benefits program.

The aggregate outstanding loans and other credit accommodations granted under the
bank's fringe benefits program, inclusive of those granted to officers in the nature of
lease with option to purchase, shall not exceed five percent (5%) of the bank's total
loan portfolio. See <
http://www.bsp.gov.ph/regulations/regulations.asp?type=1&id=165 > (last visited
December 12, 2017).

6
All loans or credit accommodations to bank officers and employees, except those
granted under the fringe benefit program of the bank, shall be subject to the same
terms and conditions imposed on the regular lending operations of the bank. Loans of
other credit accommodations granted to officers shall, in addition, be subject to the
provisions of Section 36 of R.A. No. 8791 and Sections X326 and X336 but not to the
individual ceilings where such loans or other credit accommodations are obtained under
the bank's fringe benefits program.

The aggregate outstanding loans and other credit accommodations granted under the
bank's fringe benefits program, inclusive of those granted to officers in the nature of
lease with option to purchase, shall not exceed five percent (5%) of the bank's total
loan portfolio.

7Rollo,
p. 285.

8 Id.

9 Via a Notice to Arbitrate filed by HBILU on November 26, 2012.

10
Rollo, p. 95.

11
Id. at 168.

12
Id. at 90.

13 Id. at 92.

14
Id. at 101.

15
Id. at 93.

16 Id. at 98.
17
Id. at 102.

18
Id. at 98.

19
Citing Halagueña v. Philippine Airlines, Inc., G.R. No. 172013, October 2, 2009, 602
SCRA 297.

20
See Morales v. Harbour Centre Port Terminal, Inc., G.R. No. 174208, January 25,
2012, 664 SCRA 110, 119-120.

Goya, Inc. v. Goya, Inc. Employees Union-FFW, G.R. No. 170054, January 21, 2013,
21

689 SCRA 1, 15-16.

22
G.R. No. 164060, June 15, 2007, 524 SCRA 709.

23
Id.

24
Rollo, pp. 475-476.

25
Id. at 475-488.

26
Id. at 285.

27
HSBC Comment, p. 8.

28 Rollo, p. 640.

29 Id. at 642.

30
Id. at 642-643.

31
Id. at 404.

32
A cardinal rule in statutory construction is that when the law is clear and free from
any doubt or ambiguity, there is no room for construction or interpretation. There is
only room for application. Twin Ace Holdings Corporation v. Rufina and Company, G.R.
No. 160191, June 8, 2006, 490 SCRA 368, 376.

33
SECTION 40. Requirement for Grant of Loans or Other Credit Accommodations. —
Before granting a loan or other credit accommodation, a bank must ascertain that the
debtor is capable of fulfilling his commitments to the bank. Toward this end, a bank
may demand from its credit applicants a statement of their assets and liabilities and of
their income and expenditures and such information as may be prescribed by law or by
rules and regulations of Monetary Board to enable the bank to properly evaluate the
credit application which includes the corresponding financial statements submitted for
taxation purposes to the Bureau of Internal Revenue. Should such statements prove to
be false or incorrect in any material detail, the bank may terminate any loan or other
credit accommodation granted on the basis of said statements and shall have the right
to demand immediate repayment or liquidation of the obligation. In formulating rules
and regulations under this Section, the Monetary Board shall recognize the peculiar
characteristics of microfinancing, such as cash flow-based lending to the basic sectors
that are not covered by traditional collateral. (76a)

34
Supra note 5.

35 G.R. No. 85985, August 13, 1993, 225 SCRA 301, 309.

36
G.R. No. 162957, March 6, 2006, 484 SCRA 187, 200-203.

DISSENTING OPINION

LEONEN, J.:

I dissent from the ponencia insofar as it accords primacy to the Collective Bargaining
Agreement over the Financial Assistance Plan approved by the Bangko Sentral ng
Pilipinas. A collective bargaining agreement cannot amend laws, regulations, or policies,
especially when it involves the banking industry, which is impressed with public
interest.

This is a Petition for Review on Certiorari under Rule 45 questioning the Decision dated
October 23, 2014 and Resolution dated May 21, 2015 of the Court of Appeals, which
ruled as valid the requirement of an external credit check before the approval of an
employee's salary loan, although this requirement was not stated in the parties'
Collective Bargaining Agreement.

I submit that the Petition should be denied.

A collective bargaining agreement is a contract between an employer and his or her

employees, establishing particular arrangements between them with respect to wages,
hours of work, grievances, and other terms and conditions of employment.1

A collective bargaining agreement is binding and is the law between its parties. Its
terms and conditions must be respected and complied with until it expires. Article 253
of the Labor Code provides:

Article 264. [253] Duty to bargain collectively when there exists a collective bargaining
agreement. — When there is a collective bargaining agreement, the duty to bargain
collectively shall also mean that neither party shall terminate nor modify such
agreement during its lifetime. However, either party can serve a written notice to
terminate or modify the agreement at least sixty (60) days prior to its expiration date.
It shall be the duty of both parties to keep the status quo and to continue in full force
and effect the terms and conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties.

In Faculty Association of Mapua Institute of Technology v. Court of Appeals,2

Until a new CBA is 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 conditions of the
existing agreement. The law does not provide for any exception nor qualification on
which economic provisions of the existing agreement are to retain its force and effect.
Therefore, it must be understood as encompassing all the terms and conditions in the
said agreement.

The CBA during its lifetime binds all the parties. The provisions of the CBA must be
respected since its terms and conditions "constitute the law between the parties." Those
who are entitled to its benefits can invoke its provisions. In the event that an obligation
therein imposed is not fulfilled, the aggrieved party has the right to go to court and ask
redress. The CBA is the norm of conduct between petitioner and private respondent and
compliance therewith is mandated by the express policy of the law.3 (Citations omitted)

Nonetheless, a collective bargaining agreement is still subject to laws and public policy.
It is still a contract limited by Article 1306 of the Civil Code, which states:

Article 1306. The contracting parties may establish such stipulations, clauses, terms
and conditions as they may deem convenient, provided they are not contrary to law,
morals, good customs, public order, or public policy. (Emphasis supplied)

Thus, although it is not explicitly provided for, as in all contracts, laws, morals, good
customs, public order, or public policy is deemed written in collective bargaining
agreements.

In case a collective bargaining agreement runs contrary to these limitations, this Court
has the power to strike down the violative provision.

In PNCC Skyway Traffic Management and Security Division Workers Organization v.

PNCC Skyway Corp.:4

Although it is a rule that a contract freely entered into between the parties should be
respected, since a contract is the law between the parties, there are, however, certain
exceptions to the rule, specifically Article 1306 of the Civil Code, which provides:

The contracting parties may establish such stipulations, clauses, terms and conditions
as they may deem convenient, provided they are not contrary to law, morals, good
customs, public order, or public policy.

Moreover, the relations between capital and labor are not merely contractual. "They are
so impressed with public interest that labor contracts must yield to the common good .
. . ." The supremacy of the law over contracts is explained by the fact that labor
contracts are not ordinary contracts; they are imbued with public interest and therefore
are subject to the police power of the state. However, it should not be taken to mean
that provisions agreed upon in the CBA are absolutely beyond the ambit of judicial
review and nullification. If the provisions in the CBA run contrary to law, public morals,
or public policy, such provisions may very well be voided.5 (Citations omitted, emphasis
supplied)

Thus, a collective bargaining agreement cannot reign supreme where it is inconsistent

with laws and public policy. This is especially so when the laws and public policy pertain
to industries impressed with public interests and which necessarily warrant the
protection of the State, such as the banking industry.

It is of vital importance that the general public trusts and has confidence in the banking
industry. It is impressed with public interest and is so tied together with national
economy and development. Its fiduciary nature likewise requires it to be stable,
consistent, and reliable, thus, calling for high standards of integrity and performance.
Under Section 2 of Republic Act No. 8791 (General Banking Law),

Section 2. Declaration of Policy. — The State recognizes the vital role of banks in
providing an environment conducive to the sustained development of the national
economy and the fiduciary nature of banking that requires high standards of integrity
and performance. In furtherance thereof, the State shall promote and maintain a stable
and efficient banking and financial system that is globally competitive, dynamic and
responsive to the demands of a developing economy.

In Banco de Oro-EPCI Inc. v. JAPRL Development Corporation:6

Banks are entities engaged in the lending of funds obtained through deposits from the
public. They borrow the public's excess money (i.e., deposits) and lend out the same.
Banks therefore redistribute wealth in the economy by channeling idle savings to
profitable investments.

Banks operate (and earn income) by extending credit facilities financed primarily by
deposits from the public. They plough back the bulk of said deposits into the economy
in the form of loans. Since banks deal with the public's money, their viability depends
largely on their ability to return those deposits on demand. For this reason, banking is
undeniably imbued with public interest. Consequently, much importance is given to
sound lending practices and good corporate governance.

Protecting the integrity of the banking system has become, by large, the responsibility
of banks. The role of the public, particularly individual borrowers, has not been
emphasized. Nevertheless, we are not unaware of the rampant and unscrupulous
practice of obtaining loans without intending to pay the same.7 (Citations omitted)

As such, compared to other industries and businesses, the diligence required of banks
is at its highest standard in all aspects-from granting loan applications to the hiring and
supervision of its employees. In Far East Bank and Trust Co. v. Tentmakers Group,
Inc.,8
It cannot be over emphasized that the banking business is impressed with public
interest. Of paramount importance is the trust and confidence of the public in general in
the banking industry. Consequently, the diligence required of banks is more than that
of a Roman pater familias or a good father of a family. The highest degree of
diligence is expected. In handling loan transactions, banks are under obligation to
ensure compliance by the clients with all the documentary requirements pertaining to
the approval and release of the loan applications. For failure of its branch manager to
exercise the requisite diligence in abiding by the [Manual of Regulations for Banks] and
the banking rules and practices, [Far East Bank and Trust Co.] was negligent in the
selection and supervision of its employees. In Equitable PCI Bank v. Tan, the Court
ruled:

. . . Banks handle daily transactions involving millions of pesos. By the very nature of
their works the degree of responsibility, care and trustworthiness expected of their
employees and officials is far greater than those of ordinary clerks and employees.
Banks are expected to exercise the highest degree of diligence in the selection and
supervision of their employees.9 (Emphasis supplied, citations omitted)

Bangko Sentral ng Pilipinas (Bangko Sentral) is the central authority that provides
policies on money, banking, and credit, and supervises and regulates bank operations.
Republic Act No. 7653 (New Central Bank Act) states:

Section 1. Declaration of Policy. — The State shall maintain a central monetary

authority that shall function and operate as an independent and accountable body
corporate in the discharge of its mandated responsibilities concerning money, banking
and credit....

Section 2. Creation of the Bangko Sentral. — There is hereby established an

independent central monetary authority, which shall be a body corporate known as
the Bangko Sentral ng Pilipinas, hereafter referred to as the Bangko Sentral.
....

Section 3. Responsibility and Primary Objective. — The Bangko Sentral shall provide
policy directions in the areas of money, banking, and credit. It shall have supervision
over the operations of banks and exercise such regulatory powers as provided in this
Act and other pertinent laws over the operations of finance companies and non-bank
financial institutions performing quasi-banking functions, hereafter referred to as quasi-
banks, and institutions performing similar functions.

The primary objective of the Bangko Sentral is to maintain price ability conducive to a
balanced and sustainable growth of the economy. It shall also promote and maintain
monetary stability and the convertibility of the peso.10

The Bangko Sentral's supervisory powers under the General Banking Law include
issuing rules, establishing standards for the operation of financial institutions based on
sound business practice, and examining the institutions for compliance and
irregularities:
Section 4. Supervisory Powers. — The operations and activities of banks shall be
subject to supervision of the Bangko Sentral. "Supervision" shall include the following:

4.1. The issuance of rules of conduct or the establishment of standards of operation for uniform
application to all institutions or functions covered, taking into consideration the distinctive
character of the operations of institutions and the substantive similarities of specific
functions to which such rules, modes or standards are to be applied;

4.2. The conduct of examination to determine compliance with laws and regulations if the
circumstances so warrant as determined by the Monetary Board;

4.3. Overseeing to ascertain that laws and regulations are complied with;

4.4. Regular investigation which shall not be oftener than once a year from the last date of
examination to determine whether an institution is conducting its business on a safe or
sound basis: Provided, That the deficiencies/irregularities found by or discovered by an
audit shall be immediately addressed;

4.5. Inquiring into the solvency and liquidity of the institution (2-D); or

4.6. Enforcing prompt corrective action.

In line with its supervisory powers, the Bangko Sentral codified the rules, regulations,
and policies in 1996 to implement the General Banking Law and other banking laws.
The codification resulted in the Manual of Regulations of Banks (MORB).11 This was
prepared by a multi-departmental Ad Hoc Review Committee created under the Bangko
Sentral Monetary Board Resolution No. 1203 dated December 7, 1994. The MORB
serves "as the principal source of banking regulations issued by the Monetary Board
and the Governor of the Bangko Sentral and shall be cited as the authority for enjoining
compliance with the rules and regulations embodied therein."12

Pertinent to the case at bar is the following provision under the MORB:

Sec. X338 Financial Assistance to Officers and Employees. Banks may provide financial
assistance to their officers and employees, as part of their fringe benefits program, to
meet the housing, transportation, household and personal needs of their officers and
employees.
Financing plans and amendments thereto, shall be with prior approval of the Bangko
Sentral.

This provision states that banks may financially assist their employees for their housing,
transportation, household, and personal needs, provided that a financing plan is
approved first by the Bangko Sentral.13
In the case at bar, petitioner Hong Kong Bank Independent Labor Union (HBILU) insists
that respondent Hong Kong and Shanghai Banking Corporation (HSBC) is violating their
Collective Bargaining Agreement in imposing an additional credit-checking requirement
before granting a financial assistance loan to its members.

On the other hand, HSBC claims that the credit-checking requirement was provided for
in its financing plan, which was duly approved by the Bangko Sentral, even before the
execution of the parties' Collective Bargaining Agreement.

I find for HSBC.

Given the nature of the MORB, I opine that all its provisions are deemed incorporated in
all pertinent Collective Bargaining Agreements. Necessarily, the financing plans required
under the MORB and approved by the Bangko Sentral are also included in the Collective
Bargaining Agreements. A financing plan is not a mere contract of a bank with any
other entity. It is an arrangement that becomes part of the regulations of the Bangko
Sentral by which the bank is bound. This is bolstered by X339.4, which requires banks
to submit regular reports on their transactions under their financing plans:

§ X339.4 Reportorial requirements. Financing plans and amendments thereto shall be

submitted to Bangko Sentral within thirty (30) calendar days from approval thereof by
the bank's board of directors. The appropriate department of the [Supervision and
Examination Sector] may require the banks concerned to submit a regular report
monitoring the various transactions under the bank's financing plans for
officers/employees.

All banks providing financial assistance to bank officers/employees shall submit a report
on "Availments of Financial Assistance to Officers and Employees" to the Bangko
Sentral within fifteen (15) banking days after end of reference semester.

Thus, the financing plan is not only a one-sided exercise of the bank's management
prerogative. It is a requirement under the MORB by the Bangko Sentral. Thus, it takes
on the form of a regulation by which HSBC is bound and must comply with.

The same can be said of credit checks in general. Consistent with sound banking
practice and the public's interest in the banking system, banks are governed by
guidelines before granting a loan to any obligor. Included in these guidelines is the
requirement that a bank should first assess credit risks and ascertain the obligor's
capacity to pay the loan. The General Banking Law provides:

Section 40. Requirement for Grant of Loans or Other Credit Accommodations. — Before
granting a loan or other credit accommodation, a bank must ascertain that the debtor is
capable of fulfilling his commitments to the bank.

Toward this end, a bank may demand from its credit applicants a statement of their
assets and liabilities and of their income and expenditures and such information as may
be prescribed by law or by rules and regulations of Monetary Board to enable the bank
to properly evaluate the credit application which includes the corresponding financial
statements submitted for taxation purposes to the Bureau of Internal Revenue. Should
such statements prove to be false or incorrect in any material detail, the bank may
terminate any loan or other credit accommodation granted on the basis of said
statements and shall have the right to demand immediate repayment or liquidation of
the obligation.

In formulating rules and regulations under this Section, the Monetary Board shall
recognize the peculiar characteristics of microfinancing, such as cash flow-based
lending to the basic sectors that are not covered by traditional collateral. (Emphasis
supplied)

Currently, the MORB provides:

§ X178.5 Credit policies, processes and procedures. [Financial institutions] (FIs) shall
have in place a sound, comprehensive and clearly defined credit policies, processes and
procedures consistent with prudent standards, practices, and relevant regulatory
requirements adequate for the size, complexity and scope of an FI's operations. The
board-approved policies, processes and procedures shall cover all phases of the credit
risk management system.

a. FIs shall establish appropriate processes and procedures to implement the credit
policy and strategy. These processes and procedures, as well as the credit policy, shall
be documented in sufficient detail, effectively communicated throughout the
organization to provide guidance to staff, and periodically reviewed and updated to take
into account new activities and products, as well as new lending approaches.
Subsequent major changes must be approved by the board.

b. The credit policy shall likewise provide for the maintenance of an audit trail
documenting that the credit risk management process was properly observed and
identifying the unit, individual(s) and/or committee(s) providing input into the process.

c. The credit culture, which reflects the FI's credit values, beliefs and behaviors, shall
likewise be articulated in the credit policy and communicated to credit officers and staff
at all levels through the strategic plan. The credit practices shall be assessed
periodically to ensure that the officers and staff conform to the desired standard and
value.14
B. Operating Under a Sound Credit Granting Process
§ X178.6 Credit approval process. The approval process for new credits as well as the
amendment, renewal and refinancing of existing credit exposures shall be aligned with
the credit risk management structure and clearly articulated in an FI's written credit
policy. The process shall include the different levels of appropriate approving authority
and the corresponding approving authority limits, which shall be commensurate with
the risks of the credit exposures, as well as expertise of the approving individuals
involved. It shall also include an escalation process where approval for restructuring of
credits, policy exceptions or excesses in internal limits is escalated to units/officer with
higher authorities. Further, there shall be proper coordination of relevant units and
individuals and sufficient controls to ensure acceptable credit quality at origination.15

§ X178.7 Credit granting and loan evaluation/analysis process and underwriting

standards. Consistent with safe and sound banking practice, an FI shall grant credits
only in amounts and for the periods of time essential for the effective completion of the
activity to be financed and after ascertaining that the obligor is capable of fulfilling his
commitments to the Fl. Towards this end, an FI shall establish well-defined credit
granting criteria and underwriting standards, which shall include a clear indication of
the FI's target market and a thorough understanding of the obligor or counterparty, as
well as the purpose and structure of the credit and its source of repayment.

a. Fls shall conduct comprehensive assessments of the creditworthiness of their

obligors, and shall not put undue reliance on external credit assessments. Credit shall
be granted on the basis of the primary source of loan repayment or cash flow, integrity
and reputation of the obligor or counterparty as well as their legal capacity to assume
the liability.

b. Depending on the type of credit exposure and the nature of the credit relationship,
the factors to be considered and documented m approving credits shall include, but are
not limited to, the following:

(1) The purpose of the credit which shall be clearly stated in the credit application and
in the contract between the FI and the obligor;

(2) The current risk profile (including the nature and aggregate amounts of risks, risk
rating or credit score, pricing information) of the borrower, collateral, other credit
enhancements and its sensitivity to economic and market developments;

(3) The sources of repayment, repayment history and current capacity to repay based
on financial analysis from historical financial trends and indicators such as equity,
profitability, turnover, leverage, and debt servicing ability via cash flow projections,
under various scenarios;

(4) For commercial credits, the borrower's business expertise, its credit relationships
including its shareholders and company directors, as applicable, and the status of the
borrower's economic sector and its track record vis-a-vis industry peers;

(5) The proposed terms and conditions of the credit (i.e., type of financing, tenor,
repayment structure, acceptable collateral) including covenants designed to limit
changes in the future risk profile of the obligor;
....
f. When granting consumer credits, an FI shall conduct its credit assessment in a
holistic and prudent manner, taking into account all relevant factors that could influence
the prospect for the loan to be repaid according to its terms and conditions. This shall
include an appropriate consideration of the potential obligor's other debt obligations and
repayment history and an assessment of whether the loan can be expected to be repaid
from the potential obligor's own resources without causing undue hardship and over-
indebtedness. Adequate checkings, including with relevant credit bureaus, shall he
made to verify the obligor's credit applications and repayment records.16 (Emphasis
supplied, citation omitted)
At the time the subject financing plan became an issue (i.e., when HBILU Member Vince
Mananghaya applied for a loan in September 2012), the then 2011 MORB provided:

§ X304.1 General guidelines. Consistent with safe and sound banking practices, a bank
shall grant loans or other credit accommodations only in amounts and for the periods·of
time essential for the effective completion of the operation to be financed.

Before granting loans or other credit accommodations, a bank must ascertain that the
borrower, co-maker, endorser, surety and/or guarantor, if applicable, is/are financially
capable of fulfilling his/their commitments to the bank For this purpose, a bank shall
obtain adequate information on his/their credit standing and financial capacities.

These provisions, thus, show that in approving a loan in favor of an obligor, financial
institutions must look into, among other things, the obligor's repayment history,
creditworthiness, integrity, reputation, and capacity to assume the liability.

Thus, credit checks are a necessary component in loan approvals. They are required by
all financial institutions that grant loans, taking into consideration credit risks and
bearing in mind safe and sound banking practice.

Given that loans granted under a bank's fringe benefits program is not necessarily
subject to the same terms and conditions imposed on the regular lending operations of
the bank,17 the Bangko Sentral still requires that it first approve a financial plan for
such a case, thus, showing that these types of loans are still regulated.

In this case, the Bangko Sentral approved a financing plan that provides for credit
checking of covered employees.

No malice was proved to have been committed by HSBC in requiring the credit
checking. There is no showing that it was motivated by bad faith in imposing the
requirements, and it is presumed to have been done so in good faith. In implementing
the credit-checking requirement, the bank is simply guided by the financing plan
required under the MORB and approved by the Bangko Sentral.

Thus, although the credit-checking requirement is not explicitly provided for in the
parties' Collective Bargaining Agreement, it is deemed incorporated in it. Their
Collective Bargaining Agreement cannot prevail over a Bangko Sentral-approved
financing plan.

To reiterate, the signing of a collective bargaining agreement does not result in the
amendment of laws and policies, especially where the policy pertains to an industry
imbued with public interest. It cannot likewise undermine safe and sound banking
practice. To reiterate, banks play a vital role in our economy and society as they deal
with the public's money.

The ponencia cites the case of Faculty Association of Mapua Institute of Technology v.
Court of Appeals18 to support its claim that the Collective Bargaining Agreement must
be respected. That case involves an employer trying to amend a collective bargaining
agreement through the issuance of new rules and by adopting a new formula to
determine the pay of its employees. However, this case does not involve the
implementation of any law, or any conflict with any public policy.

Likewise, the ponencia cites United Kimberly-Clark Employees Union v. Kimberly-Clark

Phil., Inc.19 to support its contention on how a collective bargaining agreement must be
interpreted. However, this case does not involve a business affected with public
interest.

The cited cases do not involve the banking industry, which as stated, plays a vital role
in the State's economy as it deals with the public's money. The highest standards are
imposed on the banking industry because of its fiduciary nature and the necessity of its
integrity, reliability, and high performance. These standards do not apply in the same
manner as to other businesses. As such, the banking business is governed by more
rules that must be strictly complied with. A bank's management prerogative is further
limited by the Bangko Sentral's policies and regulations, which are issued to protect
public interests and to maintain trust and confidence in banks. As such, banks may not
simply choose to ignore these on a whim.

Thus, while the State emphasizes the primacy of free collective bargaining and
negotiations, collective bargaining agreements must still be consistent with the banking
industry's laws, standards, and policies.

Accordingly, I vote to DENY the Petition for Review on Certiorari.

Endnotes:

1
LABOR CODE, art. 263. [252] Meaning of Duty to Bargain Collectively. — The duty to
bargain collectively means the performance of a mutual obligation to meet and convene
promptly and expeditiously in good faith for the purpose of negotiating an agreement
with respect to wages, hours of work and all other terms and conditions of employment
including proposals for adjusting any grievances or questions arising under such
agreement and executing a contract incorporating such agreements if requested by
either party but such duty does not compel any party to agree to a proposal or to make
any concession.

2
552 Phil. 77 (2007) [Per J. Quisumbing, Second Division].

3 Id. at 84.

4
626 Phil. 700 (2010) [Per J. Peralta, Third Division].

5
Id. at 715-716.

6
574 Phil. 495 (2008) [Per J. Corona, First Division].

7
Id. at 506-507.

8 690 Phil. 134 (2012) [Per J. Mendoza, Third Division].

9
Id. at 145-146.

10
See also Rep. Act No. 8791, sec. 5. Policy Direction; Ratios, Ceilings and
Limitations. — The Bangko Sentral shall provide policy direction in the areas of money,
banking and credit.

For this purpose, the Monetary Board may prescribe ratios, ceilings, limitations, or
other forms of regulation on the different types of accounts and practices of banks and
quasi-banks which shall, to the extent feasible, conform to internationally accepted
standards, including those of the Bank for International Settlements (BIS). The
Monetary Board may exempt particular categories of transactions from such ratios,
ceilings and limitations, but not limited to exceptional cases or to enable a bank or
quasi-bank under rehabilitation or during a merger or consolidation to continue in
business with safety to its creditors, depositors and the general public.

11
Manual of Regulations for Banks (2017).

12
The Committee has been reconstituted several times to update the MORB and to
keep it consistent with banking legislative reforms, and its implementing rules and
regulations, and amendments to existing policies.

13
The minimum features of the financing plan is provided for in X338.1 and X338.3 of
the Manual of Regulations for Banks:

§ X338.l Mechanics. The mechanics of such financing plan shall have the following
minimum features:

a. Participation shall be limited to fulltime and permanent officers and employees of the
bank;

b. Financial assistance shall only be for the following purposes:

(1) The acquisition of a residential house and lot, or the construction, renovation or
repair of a residential house on a lot owned and to be occupied by the officer or
employee;

(2) The acquisition of vehicles, household equipment and appliances for the personal
use of the officer or employee or his immediate family; or

(3) To meet expenses for the medical, maternity, education, emergency and other
personal needs of the officer or employee or his immediate family;

c. Financial assistance for purposes mentioned in Items "b(1)" and "b(2)" of this
Subsection shall be granted in the form of a loan, advance or other credit
accommodation, installment sale, lease with option to purchase or lease-purchase
arrangement where the lessee is obliged to purchase the real estate or equipment;

d. The amount and maturity of financial assistance for each purpose shall be
detennined by the bank in consonance with the normal requirements thereof: Provided,
That the maximum amount shall be stated as percentage or multiple of the total
monthly compensation of the officer or employee and shall be within the paying
capacity of the borrowing officer or employee.

Total monthly compensation shall include the basic salary and all fixed and regular
monthly allowances of the officer or employee. Payments' for sickness benefits and
other special emoluments which are not fixed or regular in nature, or the commutation
into cash of unused leave credits shall not be included in the computation of total
monthly compensation;

e. The amortization payment shall include amounts necessary to cover mortgage

redemption insurance and fire insurance premiums, taxes, special assessments, and
other related fees and charges;

f. Availment of the financing plan to construct or acquire a residential house and lot
shall be allowed only once during the officer's or employee's tenure with the bank,
except where the right over the real estate previously acquired or constructed under
the financing plan is absolutely transferred or assigned to another officer or employee
of the bank or to a third party: Provided, That the bank must be fully paid or
reimbursed for the outstanding availment on the fmancing plan before the
officer/employee is allowed to re-avail himself of the same financing plan.

An officer or employee (or his spouse) who already owns a residential house and lot
shall not be qualified to avail himself of financial assistance for purposes of acquiring a
residential house and/or lot.

These prohibitions notwithstanding, financial assistance for the repair or renovation of a

residential house may be allowed subject to such limitation as may be prescribed by the
bank pursuant to Item "d" of this Subsection;

g. Availment of the fmancing plan for the acquisition of a specific type of equipment or
appliance shall be allowed not oftener than once every three (3) years: Provided, That
re-availment shall be allowed only after previous obligations in connection with the
acquisition of the same type of equipment or appliances have been fully liquidated; and

h. The bank shall adopt measures to protect itself from losses such as by incorporating
in the plan or contract provisions requiring co-makers or co-signor, chattel, or real
estate mortgages, fire insurance, mortgage redemption insurance, assignment of
money value of leave credits, pension or retirement benefits.

§ X338.3 Other conditions/limitations

a. The investment by a bank in equipment and other chattels under its fringe benefits
program for officers and employees shall be included in detennining the extent of the
investment of the bank in real estate and equipment for purposes of Section 51 of R.A.
No. 8791.

b. The investment by a bank in equipment and other chattels contemplated under these
guidelines shall not be for the purpose of profits in the course of business for the bank.

c. The aggregate outstanding loans and other credit accommodations granted under the
bank's fringe benefits program, inclusive of those granted to officers in the nature of
lease with option to purchase, shall not exceed five percent (5%) of the bank's total
loan portfolio.

Banks providing financial assistance to their officers/employees shall submit a regular

report on "availments offinancial assistance to officers and employees" to the BSP
within fifteen (15) banking days after end of reference semester.

The appropriate department of the [Supervision and Examination Sector] may further
require banks to submit such data or infonnation as may be necessary to facilitate
verification of such transactions by BSP examiners. (Emphasis supplied)

14
Manual of Regulations for Banks citing Circ. No. 855 (2014).

15
Manual of Regulations for Banks citing Circ. No. 855 (2014).

16
2017 Manual of Regulations for Banks citing Circ. No. 855 (2014).

17
BSP Circ. No. 423, series of 2004, subsec. X338.3 Other conditions/limitations

The investment by a bank in equipment and other chattels under its fringe benefits
program for officers and employees shall be included in determining the extent of the
investment ofthe bank in real estate and equipment for purposes of Section 51 of R.A.
No. 8791.

The investment by a bank in equipment and other chattels contemplated under these
guidelines shall not be for the purpose of profits in the course of business for the bank.

All loans or other credit accommodations to bank officers and employees, except those
granted under the fringe benefit program of the bank, shall be subject to the same
terms and conditions imposed on the regular lending operations of the bank. Loans or
other credit accommodations granted to officers shall, in addition, be subject to the
provisions of Section 36 of R.A. No. 8791 and Sections X326 to X336 but not to the
individual ceilings where such loans or other credit accommodations are obtained under
the bank's fringe benefits program.

The aggregate outstanding loans and other credit accommodations granted under the
bank's fringe benefits program, inclusive of those granted to officers in the nature of
lease with option to purchase, shall not exceed five percent (5%) of the bank's total
loan portfolio.

REYES, JR., J:
This is a Petition for Review on Certiorari[1] pursuant to Rule 45 of the
Rules of Court, as amended, seeking to reverse and set aside the
Decision[2] dated November 5, 2012 of the Court of Appeals (CA) in CA-G.R.
SP. No. 115796, dismissing the Petition for Review entitled "Philippine
Geothermal, Inc. Employees Union (PGIEU) vs. Chevron Geothermal
Phils. Holdings, Inc.'' as well as the Resolution[3] dated May 17, 2013
denying Philippine Geothermal, Inc. Employees Union's (petitioner)
Motion[4] for Reconsideration dated November 27, 2012.
The Facts
Petitioner is a legitimate labor organization and the certified bargaining
agent of the rank-and-file employees of Chevron Geothermal Phils.
Holdings, Inc. (respondent).[5]
On July 31, 2008, the petitioner and respondent formally executed a
Collective Bargaining Agreement (CBA) which was made effective for the
period from November 1, 2007 until October 31, 2012. Under Article VII,
Section 1 thereof, there is a stipulation governing salary increases of the
respondent's rank-and-file employees, as follows:
Section 1. WAGE INCREASE
The COMPANY will grant the following:
- Effective Nov. 1, 2007, P260,000.00 - lump sum payment for the 1st year
of this agreement (taxable).
- Effective Nov. 1, 2008, across the board increase on the monthly salary in
the amount of P1,500.00.
- Effective Nov. 1, 2009, across the board increase on the monthly salary in
the amount of P1,500.00.[6]
In implementing the foregoing provision, the parties agreed on the
following guidelines appended as Annex D of said CBA, viz.:
Employment Status P260K P1500 P1500
Lump (Nov. 1, (Nov. 1,
Sum 2008) 2009)
Regularized on or before April
/ / /
30, 2008
Regularized between May 1,
X / /
2008 and October 31, 2008
Regularized on or before April
X / /
30, 2009
Regularized between May 1,
X X /
2009 and October 31, 2009
Regularized on or before April
X X /
30, 2010
On October 6, 2009, a letter dated September 20, 2009 was sent by the
petitioner's President to respondent expressing, on behalf of its members,
the concern that the aforesaid CBA provision and implementing rules were
not being implemented properly pursuant to the guidelines and that, if not
addressed, might result to a salary distortion among union members.[7]
On even date, respondent responded by letter denying any occurrence of
salary distortion among union members and reiterating its remuneration
philosophy of having "similar values for similar jobs", which means that
employees in similarly-valued jobs would have similar salary rates. It
explained that to attain such objective, it made annual reviews and
necessary adjustments of the employees' salaries and hiring rates based on
the computed values for each job.[8]
Finding the explanation not satisfactory, petitioner, with respondent's
approval, referred the subject dispute to the Voluntary Arbitration of the
National Conciliation and Mediation Board (NCMB). It averred that
respondent breached their CBA provision on worker's wage increase
because it granted salary increase even to probationary employees in
contravention of the express mandate of that particular CBA article and
implementing guidelines that salary increases were to be given only to
regular employees.[9]
To cite an example, petitioner alleged that respondent granted salary
increases of One Thousand Five Hundred Pesos (P1,500.00) each to then
probationary employees Sherwin Lanao (Lanao) and Jonel Cordovales
(Cordovales) at a time when they have not yet attained regular status. They
(Lanao and Cordovales) were regularized only on January 1, 2010 and April
16, 2010, respectively, yet they were given salary increase for November 1,
2008. As a consequence of their accelerated increases, wages of said
probationary workers equated the wage rates of the regular employees,
thereby obliterating the wage rates distinction based on merit, skills and
length of service. Therefore, the petitioner insisted that its members'
salaries must necessarily be increased so as to maintain the higher strata of
their salaries from those of the probationary employees who were given the
said premature salary increases.[10]
On the other hand, respondent maintained that it did not commit any
violation of that CBA provision and its implementing guidelines; in fact, it
complied therewith. It reasoned that the questioned increases given to
Lanao and Cordovales' salaries were granted, not during their probationary
employment, but after they were already regularized. It further asseverated
that there was actually no salary distortion in this case since the disparity or
difference of salaries between Lanao and Cordovales with that of the other
company employees were merely a result of their being hired on different
dates, regularization at different occasions, and differences in their hiring
rates at the time of their employment.[11]
After due proceedings, the Voluntary Arbitrator rendered a
Decision[12] dated August 16, 2010 in favor of respondent, ruling that
petitioner failed to duly substantiate its allegations that the former
prematurely gave salary increases to its probationary employees and that
there was a resultant distortion in the salary scale of its regular
employees.[13]
Thereafter, a Petition[14] for Review under Rule 65 was filed with the CA on
September 22, 2010.
On November 5, 2012, the CA rendered its Decision.[15] It dismissed the
petition for review and sustained the Voluntary Arbitrator's decision. The
pertinent and dispositive portion of the assailed decision reads as follows:
In fine, We hold that the Voluntary Arbitrator of NCMB did not commit
grave abuse of discretion in dismissing petitioner union's complaint against
respondent company. Settled is the rule that factual findings of labor
officials who are deemed to have acquired expertise in matters within their
jurisdiction, are generally accorded not only respect but even finality, and
they are binding when supported by substantial evidence. In this case, these
findings are supported by competent and convincing evidence.
WHEREFORE, premises considered, the instant petition
is DISMISSED. The Decision dated 16 August 2010 of the Voluntary
Arbitrator of the NCMB Regional Branch No. IV is SUSTAINED.
SO ORDERED.[16]
On November 28, 2012, petitioner filed its Motion[17] for Reconsideration.
This was, however, denied by the CA in its Resolution[18] dated May 17,
2013.
Hence, this petition.
The Issues
I.
WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT
RESPONDENT DID NOT VIOLATE THE CBA IN GRANTING WAGE
INCREASE OF P1,500.00 TO LANAO AND CORDOVALES AT A TIME
WHEN THEY HAD NOT YET ATTAINED REGULAR STATUS
II.
WHETHER OR NOT THE CA GRAVELY ERRED IN HOLDING THAT
THE GRANT OF WAGE INCREASE TO LANAO AND CORDOVALES IS A
VALID EXERCISE OF MANAGEMENT PREROGATIVES BY
RESPONDENT
III.
WHETHER OR NOT THE CA ERRED IN NOT ORDERING RESPONDENT
TO LIKEWISE INCREASE THE RATES OF OTHER REGULAR
EMPLOYEES IN ORDER TO MAINTAIN THE DIFFERENCE BETWEEN
THEIR RATES AND THOSE OF THE EMPLOYEES WHO WERE
ALLEGEDLY GRANTED PREMATURE WAGE INCREASES
Ruling of the Court
The petition is devoid of merit.
Petitioner and respondent entered into an agreement whereby employees
will be granted a wage increase depending on the date of their
regularization, viz.:
Employment Status P260K P1500 P1500
Lump (Nov. 1, (Nov. 1,
Sum 2008) 2009)
Regularized on or before April
/ / /
30, 2008
Regularized between May 1,
X / /
2008 and October 31, 2008
Regularized on or before April
X / /
30, 2009
Regularized between May 1,
X X /
2009 and October 31, 2009
Regularized on or before April
X X /
30, 2010
Petitioner claims that Lanao and Cordovales having been regularized only
on January 1, 2010 and April 16, 2010, respectively, are not covered by the
P260,000.00 lump sum and the initial P1500.00 wage increase effective on
Nov. 1, 2008. It appears, however, that based on the actual pay slips of
union members, Lanao and Cordovales both received wage increase in the
amount of P1500.00 effective Nov. 1, 2008 and that such increase was
immediately granted to them at the time of their hiring which resulted to
the increase of their salaries to P36,500.00 per month.
It is further stressed by petitioner that the increase granted by respondent
to Lanao and Cordovales are violative of the terms of the CBA, specifically
Section 1, Article VII and Annex D, for the reason that these employees
have not yet attained "Regular" status at the time they were granted a wage
increase and thus resulting to a salary/wage distortion.
Respondent, for its part, claims that the alleged "increase" in the wages of
these employees was not due to application of the provisions of Article VII
and Annex D of the CBA, rather it was brought about by the increase in the
hiring rates at the time these employees were hired. As a matter of fact, a
careful scrutiny of the records reveals that respondent have complied with
the terms agreed upon in the CBA.
Notably, respondent's reply to the petitioner's letter accusing them of
violation of the terms of the CBA and holding them responsible for the
alleged wage distortion, clarified the ambiguity with regard to the hiring
rates, viz.:
As for the perceived salary distortion among Union members resulting
from the non-implementation of the guidelines on Article VH-Salaries and
Allowances, Section 1 - Wage Increase, Annex D of the CBA 2007-2012, we
would like to reiterate our discussion during the recent NLMC meeting of
September 16, on Chevron's remuneration philosophy of having "similar
value for similar jobs" which simply states that employees in similarly
valued jobs will have similar salary rates. Salaries and hiring rates are
reviewed annually and adjusted as necessary based on the computed values
of each job, an employee's tenure or seniority in his/her current position
will not influence the value of the job.[19] (Underlining Ours)
Clearly then, the increase in the salaries of Lanao and Cordovales was not
pursuant to the wage increase agreed upon in CBA 2007-2012 rather it was
the result of the increase in hiring rates at the time they were hired.
To illustrate, in its Reply,[20] respondent discussed the difference in the
hiring rates of employees Lanao and Robert Gawat, viz.:
Mr. Robert Gawat was regularized on April 16, 2007 having been hired on
October 16, 2007 while Mr. Lanao as shown in the Company's position
paper was regularized on January 1, 2010, having been hired only on July 1,
2009. At the time of Mr. Gawat's hiring, the hiring rate for Pay
Grade 12 was P31,800.00. On April 16, 2007, Mr. Gawat was given a
CBA salary increase under the 2002-2007 CBA of P1,700.00 per month
which increased his pay to P33,500.00 per month. He received another
CBA salary increase of P1,500.00 under the 2007-2012 CBA on November
1, 2008, thus increasing his pay to P35,000.00. On November 1, 2009, he
received another salary increase of P1,500.00 under the 2007-2012 CBA
which further increased his pay to P36,500.00 per month until the present.
On the other hand, when Mr. Lanao was hired on July 9, 2009, the
hiring rate at the time for employees falling under Pay Grade 12
was already P35,000.00, having been adjusted by the company in
accordance with market and industry practice. On January 1, 2010, Mr.
Lanao was regularized and as dictated by the CBA, he was given a CBA
salary increase of P1,500.00 per month effective January 1, 2010 which
increased his monthly pay at the present to P36,500.00.[21] (Emphasis and
underlining Ours)
As shown above, the respondent never violated the CBA and in fact,
complied with it to the letter. Clearly, the petitioner only used the
respondent's alleged violation of the CBA when its true gripe is related to
the respondent's prerogative of setting the hiring rate of the employees over
which the petitioner neither has the personality nor the privilege to meddle
or interfere with.[22]
The second and third issue, being interrelated, shall be discussed jointly.
Upon the enactment of Republic Act (R.A.) No. 6727 (Wage Rationalization
Act, amending among others, Article 124 of the Labor Code) on June 9,
1989, the term "Wage Distortion" was explicitly defined as "a situation
where an increase in prescribed wage rates results in the elimination or
severe contraction of intentional quantitative differences in wage or
salary rate between and among employee groups an establishment as to
effectively obliterate the distinctions embodied in such wage structure
based on skills, length of service or other logical bases of
differentiation."[23]
Contrary to petitioner's claim of alleged "wage distortion", Article 124 of the
Labor Code of the Philippines only cover wage adjustments and
increases due to a prescribed law or wage order, viz.:
Article 124. Standards/Criteria for Minimum Wage Fixing.
xxxx
Where the application of any prescribed wage increase by virtue of a
law or Wage Order issued by any Regional Board results in
distortions of the wage structure within an establishment, the employer and
union shall negotiate to correct the distortions. Any dispute arising from
the wage distortions shall be resolved through the grievance procedure
under their collective bargaining agreement and, if it remains unresolved,
through voluntary arbitration.[24] (Emphasis Ours)
Prubankers Association v. Prudential Bank and Trust Company[25] laid
down the four elements of wage distortion, to wit: (1) an existing hierarchy
of positions with corresponding salary rates; (2) a significant change in the
salary rate of a lower pay class without a concomitant increase in the salary
rate of a higher one; (3) the elimination of the distinction between the two
levels; and (4) the existence of the distortion in the same region of the
country.
The apparent increase in Lanao and Cordovales' salaries as compared to the
other company workers who also have the same salary/pay grade with them
should not be interpreted to mean that they were given a premature
increase for November 1, 2008, thus resulting to a wage distortion. The
alleged increase in their salaries was not a result of the erroneous
application of Article VII and Annex D of the CBA, rather, it was because
when they were hired by respondent in 2009, when the hiring rates were
relatively higher as compared to those of the previous years. Verily, the
setting and implementation of such various engagement rates were purely
an exercise of the respondent's business prerogative in order to attract or
lure the best possible applicants in the market and which We will not
interfere with, absent any showing that it was exercised in bad faith.
Management prerogative gives an employer freedom to regulate according
to their discretion and best judgment, all aspects of employment including
work assignment, working methods, the processes to be followed, working
regulations, transfer of employees, work supervision, lay-off of workers and
the discipline, dismissal and recall of workers.[26] This right is tempered
only by these limitations: that it must be exercised in good faith and with
due regard to the rights of the employees.[27]
Petitioner claims that the wages of other employees should also be
increased in order to maintain the difference between their salaries and
those of employees granted a "premature" wage increase. Such a situation
may be remedied if it falls under the concept of a wage distortion as defined
by Article 124 of the Labor Code of the Philippines. However, as already
discussed, there is no wage distortion in the case at bench. Not all increases
in salary which obliterate the salary differences of certain employees should
be perceived as wage distortion.
In the case of Bankard Employees Union-Workers Alliance Trade Unions
v. National Labor Relations Commission,[28] the Court discussed the
possible implication of an expanded interpretation of the concept of Wage
Distortion, to wit:
If the compulsory mandate under Article 124 to correct "wage distortion" is
applied to voluntary and unilateral increases by the employer in fixing
hiring rates which is inherently a business judgment prerogative, then the
hands of the employer would be completely tied even in cases where an
increase in wages of a particular group is justified due to a re-evaluation of
the high productivity of a particular group, or as in the present case, the
need to increase the competitiveness of Bankard's hiring rate. An employer
would be discouraged from adjusting the salary rates of a particular group
of employees for fear that it would result to a demand by all employees for a
similar increase, especially if the financial conditions the business cannot
address an across-the-board increase.[29]
The Court's ruling in the case of Bankard seek to address and resolve
conflicting opinions regarding the true concept of a wage distortion like the
one presented in this case whereby a legitimate exercise by an employer of
its management prerogative is being taken against it in the guise of an
allegation that it is circumventing labor laws. An employer should not be
held hostage by the whims and caprices of its employees especially when it
has faithfully complied with and executed the terms of the CBA.
It is the prerogative of management to regulate, according to its discretion
and judgment all aspects of employment. This flows from the established
rule that labor law does not authorize the substitution of the judgment of
the employer in the conduct of its business. Such management prerogative
may be availed of without fear of any liability so long as it is exercised in
good faith for the advancement of the employer's interest and not for the
purpose of defeating or circumventing the rights of the employees under
special laws or agreements and are not exercised in a malicious, harsh,
oppressive, vindictive or wanton manner or out of malice or spite.[30]
On a final note, the Court has ruled time and again that factual findings of
labor officials, who are deemed to have acquired expertise in matters within
their jurisdiction, are generally accorded not only respect but even finality
by the courts when supported by substantial evidence and affirmed by the
CA, in the exercise of its expanded jurisdiction to review findings of the
National Labor Relations Commission.
WHEREFORE, premises considered, the petition is DENIED. The
Decision dated November 5, 2012 of the Court of Appeals in CA-G.R. SP
No. 115796 is hereby AFFIRMED.
SO ORDERED.

[ G.R. No. 219774, July 23, 2018 ]

MANILA HOTEL CORPORATION, PETITIONER, VS. ROSITA DE LEON,

RESPONDENT.

DECISION
TIJAM, J.:
This is a petition for review on certiorari[1] under Rule 45 of the Rules of
Court over the Decision[2] dated March 19, 2015 rendered by the Court of
Appeals (CA) in CA-G.R. SP No. 132576, which set aside the
Decision[3] dated June 10, 2013 and Resolution[4] dated September 4, 2013
of the National Labor Relations Commission (NLRC) in NLRC-LAC No. 01-
000432-13 reversing the Decision[5] dated December 10, 2012 of the Labor
Arbiter (LA) in NLRC-NCR Case No. 08-12795-11, dismissing Rosita De
Leon's (respondent) complaint for illegal dismissal and the CA
Resolution[6] dated July 31, 2015 which denied Manila Hotel Corporation's
(petitioner) Motion for Partial Reconsideration.[7]

The Facts

Respondent began working for petitioner on September 1, 1976 as a

Restaurant and Bar Cashier. She was promoted to Front Office Cashier in
October 1977, as Front Office Cashier's Shift Leader in August 1986, and as
Head Cashier in January 1988. In March 1989, she assumed the post of
Income Auditor. Seven years later, she accepted the position of Assistant
Credit and Collection Manager. In March 2000, petitioner turned over to
her the functions of the General Cashier who had resigned.[8]

On June 7, 2011, respondent received petitioner's June 6, 2011 letter,

captioned as a Notice of Compulsory Retirement (Notice),[9] which read:

Re: Notice of Compulsory Retirement

Dear Ms. De Leon:

Following your verbal conversation with the Vice President of Human

Resources and Security, P/SSupt Felipe H. Buena Jr. (Ret), the
undersigned would like to formally inform you of the intention of the
Management to exercise its prerogative to compulsorily retire you having
been rendered 35 years in service from the Hotel [sic] effective at the close
of office hours of June 10, 2011. You shall, however, be paid your retirement
pay accordingly.

We thank you and wish you good luck in your future endeavors. (Emphasis
in the original)

At the time she received said Notice, respondent was 57 years old[10] and
held the position of Assistant Credit and Collection Manager/Acting
General Cashier.[11] She had by then rendered 34 years of service to
petitioner.[12]

Respondent subsequently filed against petitioner and its Chairman,

President, Vice President for Finance and Human Resources Assistant
Director (officers),[13] a Complaint for illegal dismissal, underpayment of
salaries and 13th month pay, non-payment of service charges,
transportation allowance and other related benefits, and illegal deductions,
with prayer for reinstatement without loss of seniority rights, backwages,
actual, moral and exemplary damages and attorney's fees.[14]

Respondent claimed that she had been forced to retire without due process.
She averred that petitioner gave no rational basis for her retirement or
dismissal and merely relied on management prerogative which, she
stressed, could not be utilized to circumvent the law and the public policy
on labor and social justice.[15]

Petitioner countered that there was no dismissal because respondent

voluntarily accepted its offer to avail the compulsory retirement program
under the Collective Bargaining Agreement (CBA) between petitioner and
its rank-and-file employees.[16] Under the CBA, an employee's retirement is
compulsory when he or she reaches the age of 60 or has rendered 20 years
of service, whichever comes first.[17]

Petitioner averred that when respondent received the Notice, she went
directly to the Human Resources Director to inquire about her retirement
pay, and upon learning that the same would amount to P1.5 Million, she
graciously accepted the retirement offer and even personally and eagerly
processed her Personnel Clearance. However, when notified that the release
of her retirement pay at P1,510,757.92 had been approved, respondent
refused to get her check and instead maliciously sued petitioner for illegal
dismissal.[18]

Petitioner pointed out that respondent already rendered 14 years in excess

of the 20-year cut-off period for compulsory retirement, thus, it allegedly
had all the right to terminate her services. According to petitioner, that
respondent was only 57 years of age and still willing to serve, or that her
services had been extended for 14 years, would not bar its exercise of the
management prerogative to terminate her employment, stressing that labor
law discourages interference with an employer's judgment in conducting its
business.[19]

Petitioner explained that it was implementing a cost-cutting program to

avoid heavy losses caused by the worldwide economic crisis, and the
exigencies for the continuation of respondent's employment, which it alone
could determine, no longer existed.[20]
In any case, petitioner argued, respondent could be compulsorily retired
under the CBA, being a rank-and-file employee. It averred that
respondent's work, the most crucial aspect of which was merely to count
and keep petitioner's money, was routinary and did not involve the exercise
of any discretion. Petitioner added that respondent was not a supervisory
employee as she had no staff to supervise. Furthermore, respondent had
supposedly been receiving benefits under the CBA.[21]

Petitioner, in addition, denied liability for respondent's money claims.[22]

Respondent, however, decried petitioner's claim that she graciously

accepted its retirement offer, asserting that she questioned her dismissal
from the beginning, and that her signing of the Personnel Clearance only
indicated an intention to clear all her accountabilities.[23]

Respondent also contended that petitioner's CBA with the rank-and-file

employees did not apply to her because she held a managerial or
supervisory position as shown no less by her job title. To further prove that
she was a managerial or supervisory employee, she averred that: the
Performance Appraisal Sheet for Supervisory Positions was used to rate
her; she was awarded Model Supervisor in 1992; as early as 1994, she was
entitled to the Officer's Check Privilege which was exclusively enjoyed by
employees holding managerial and supervisory positions; and the 50%
discount she enjoyed in all outlets/restaurants was a privilege given only to
petitioner's officers or managers.[24]

Respondent also submitted office memorandums purportedly negating

petitioner's claim that she did not exercise discretion or independent
judgment in discharging her functions. Pointing to documents submitted by
petitioner itself as proof that she was not a rank-and-file employee, she
argued that: the Regular Payroll Journal showed her as a confidential
employee from 1996, when she assumed the position of Assistant Credit
and Collection Manager, until June 10, 2011; the Payroll Register included
her name under "CONFI-MANA" which stood for Confidential-Manager;
and the Travelling Allowance and Certification Report applied only to
managers.[25]

Ruling of the LA

Ruling in respondent's favor, the LA held that respondent was a managerial

employee, as evinced by the Personnel Status Form and Appraisal Sheets
she submitted and based on her responsibilities and duties and the benefits
and privileges that came with her post. The LA, thus, concluded that the
CBA did not apply to respondent and her compulsory retirement resultantly
constituted constructive dismissal.[26]

The LA found merit in respondent's claims for attorney's fees and illegal
deductions but denied her claims for salary differentials and damages.[27]

The dispositive portion of the LA Decision[28] dated December 10, 2012

reads:

WHEREFORE, a Decision is hereby rendered declaring that [respondent]

was illegally dismissed. Corollarily, [petitioner] are hereby ordered to
reinstate [respondent] to her former position without loss of seniority
rights and other privileges and to pay her backwages from the time of
dismissal up to actual reinstatement, which is only up to the retirable age of
60, for which a retirement pay is hereby also ordered to be paid by the
[petitioner].

In addition, [petitioner] are hereby ordered to return the amount illegally

deducted from the [respondent]. An [sic] attorney's fees equivalent to ten
(10%) of the total award is hereby granted. Computation is as follows:

a) BACKWAGES
6/10/11- 12[/]10/12 - 16.06
mos.

P24,749.00 x
397,468.94
16.06 =

13th MONTH
PAY

P397,468.94/12
33,122.41
=

SERVICE INCENTIVE
LEAVE PAY

P24,749/26 x
6,369.00 430,961.04
5/12 x 16.06

b) ILLEGAL
DEDUCTION 72,616.77
(given)

509,577.81

10% Attorney's
50,957.78
fees

Total P560,535.59

SO ORDERED.[29]
Ruling of the NLRC

On June 10, 2013, the NLRC, in its Decision[30] granted the appeal
interposed by petitioner and its officers, disposing as follows:

WHEREFORE, premises considered, the appealed decision dated

December 10, 2012 is reversed and set aside. Accordingly, the complaint for
illegal constructive dismissal is dismissed for lack of merit.

However, [petitioner] is ordered to pay [respondent] the amount of

P72,616.77 representing its illegal deductions as previously granted and the
amount of P7,261.67 which is equivalent to 10% of the monetary award for
and by way of attorney's fees.

Likewise, [petitioner] is ordered to immediately pay [respondent] her

retirement pay and benefits based on law and the [CBA].

SO ORDERED.[31]

According to the NLRC, while managerial employees are ordinarily outside

the scope of CBA, nothing prevents employers from granting them benefits
equal to or higher than those given to union members. It held that in
extending the retirement benefits under the CBA to respondent, petitioner
was merely exercising a management prerogative, and by immediately
processing her retirement requirements, including the Personnel
Clearance, respondent accepted petitioner's offer of retirement. The NLRC
noted that respondent, as a managerial employee, was presumed to be well-
educated and to have understood the import of the Personnel Clearance
when she signed it.[32]

The NLRC thus concluded that petitioner's offer of retirement and

respondent's acceptance thereof constituted a bilateral agreement the
"applicable employment contract" on retirement sanctioned under Article
287[33] of the Labor Code, the existence of which rendered unimportant the
issue of whether respondent was a managerial employee or not. The NLRC
held that having assented to her compulsory retirement, respondent was
already estopped from contesting the same.[34]

The NLRC approved petitioner's computation of respondent's retirement

pay. It also sustained the award of attorney's fees since respondent was
compelled to litigate. Because petitioners did not challenge the award for
illegal deductions, the NLRC retained the same but held that all adjudged
liabilities shall be borne by petitioner alone.[35]

Both parties moved for reconsideration, petitioner insofar only as the

NLRC sustained the award for illegal deductions and attorney's fees.[36]

Respondent, for her part, maintained that she never assented to sever her
employment with petitioner and that she had in fact questioned the basis
for her compulsory retirement. Respondent, in particular, denied that she
personally processed her Personnel Clearance, alleging that it was the staff
from petitioner's Human Resources Division who went to the different
departments and to her own office to have the clearance signed.

On September 4, 2013, the NLRC, in its Resolution[37] denied both parties'

motions for reconsideration.

Ruling of the CA

Granting respondent's petition for certiorari, the CA rendered its

Decision[38] dated March 19, 2015, the dispositive portion of which reads:

WHEREFORE, premises considered, the PETITION is GRANTED. The

assailed 10 June 2013 Decision of the NLRC, and its assailed Resolution
promulgated on 4 September 2013, in so far as these hold that [respondent]
had been validly compulsorily retired and dismissing [respondent's]
complaint for illegal dismissal, are hereby ANNULLED and SET ASIDE.

[Petitioner] is hereby ORDERED to pay [respondent] her backwages from

the termination of her employment on 10 June 2011, her last day at work,
until the date when [respondent] has turned sixty (60) years of age, and
thereupon, to immediately pay her retirement benefits in accordance with
law.

[Petitioner] is likewise ORDERED to pay [respondent] the amount of

Php72,616.77, representing illegal deductions, as held by the NLRC and
uncontested by [petitioner], as well as Php7,261.67, representing attorney's
fees of 10% of the amount unlawfully withheld.

SO ORDERED.[39]

In its Motion for Partial Reconsideration,[40] petitioner asked that the

NLRC's ruling be affirmed. However, it was denied in the
Resolution[41] dated July 31, 2015.

Hence, this petition seeking the annulment of the CA's decision and the
reinstatement of the NLRC 's resolution.

Petitioner insists that respondent was not illegally dismissed because she
voluntarily accepted her inclusion in its compulsory retirement program,
and that by such acceptance, she made the CBA provision on retirement
applicable to her.[42]

Ruling of the Court

The petition lacks merit.

The CA held that respondent is a managerial employee, as found by the LA

and the NLRC - a finding "which (petitioner) never bothered to
contest."[43] There is, thus, no issue as to the managerial position held by
respondent in petitioner's hotel.

Because respondent is a managerial employee, petitioner's CBA with its

rank-and-file employees does not apply to her. Furthermore, as the CA
held, there is nothing in petitioner's submissions showing that respondent
had assented to be covered by the CBA's retirement provisions.

In United Pepsi-Cola Supervisory Union v. Judge Laguesma,[44] this Court

ruled:

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 employees to form, assist or join 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."

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.[45] (Citations omitted and emphasis ours)

Thus, in the absence of an agreement to the contrary, managerial

employees cannot be allowed to share in the concessions obtained by the
labor union through collective negotiation. Otherwise, they would be
exposed to the temptation of colluding with the union during the
negotiations to the detriment of the employer.[46]

Accordingly, the fact that respondent had rendered more than 20 years of
service to petitioner will not justify the latter's act of compulsorily retiring
her at age 57, absent proof that she agreed to be covered by the CBA's
retirement clause.

As amended by Republic Act No. 7641,[47] Article 287 of the Labor Code, in
pertinent part, provides:

Art. 287. Retirement. - Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided, however,
That an employee's retirement benefits under any collective bargaining
agreement and other agreements shall not be less than those provided
herein.

In the absence of a retirement plan or agreement providing for retirement

benefits of employees in the establishment, an employee upon reaching the
age of sixty (60) years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has served at least five
(5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every
year of service, a fraction of at least six (6) months being considered as one
whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2)
month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th
month pay and the cash equivalent of not more than five (5) days of service
incentive leaves.

xxxx

"Undoubtedly, under this provision, the retirement age is primarily

determined by the existing agreement or employment contract."[48] "By its
express language, the Labor Code permits employers and employees to fix
the applicable retirement age at below 60 years."[49] Absent such an
agreement, the retirement age shall be that fixed by law, and the above-
cited law mandates that the compulsory retirement age is 65 years, while
the minimum age for optional retirement is set at 60 years.[50]

Petitioner maintains that it had an implied agreement with respondent for

the latter's compulsory retirement, which constitutes a retirement contract
sanctioned under Article 287 of the Labor Code.[51] According to petitioner,
this agreement was perfected when respondent verbally accepted its
retirement offer as provided in its June 6, 2011 letter, and when she
personally and voluntarily processed her Personnel Clearance.[52]

The Court is not persuaded.

A cursory reading of petitioner's June 6, 2011 letter will readily reveal that
it was not an offer for compulsory retirement. The letter, to begin with, was
a Notice, which indicates that it merely served to notify respondent of a
decision to retire her services. It was clearly not a notice to avail of the
retirement provisions under the CBA. As said caption suggests, the
retirement was compulsory and not optional as to give respondent the
choice to decline.

The body of the letter, too, signifies that retirement was no longer a choice
or a decision to be made by respondent, as the termination of her services
was already fait accompli - an accomplished or consummated act. First, the
Notice specified the effectivity date of respondent's retirement, i.e., at "close
of office hours of June 10, 2011," or barely three days from the time she
received the Notice. Second, it also stated that the management was
exercising its prerogative to compulsorily retire respondent. Thus,
petitioner was invoking its exclusive judgment and discretion in
terminating respondent's employment through compulsory
retirement. Third, petitioner thanked respondent for her services and
wished her luck in her future endeavors, which indicates that from
petitioner's perspective, cessation of employment was certain and final, and
respondent's future was no longer as its employee.

Indeed, the Notice gave respondent no opportunity to explore a mere

possibility or option of retirement. In fact, there is nothing in the Notice
asking respondent to express her conformity to any retirement plan or offer
or suggesting that management was willing to discuss her retirement. Thus,
contrary to petitioner's claim, the Notice was not a proposal, but a
management decision, to retire respondent who then had not yet reached
the age of compulsory retirement under Article 287 of the Labor Code.
By all indications, therefore, petitioner's June 6, 2011 letter was a notice of
severance or termination of employment through compulsory retirement. It
was not, as petitioner would have this Court believe, an offer which
respondent was free to accept or decline. Petitioner had unilaterally made a
decision to retire respondent and by its Notice, imposed such decision on
her.

The conversations between respondent and petitioner's Vice President of

Human Resources and Security, P/SSupt Felipe H. Buena Jr. (Ret)
(Buena), also show that respondent had no intention to quit her job or to
retire, and that she questioned petitioner's decision to compulsorily retire
her. In her Position Paper,[53] respondent narrated:

18. On June 3, 2011, P/SSupt. Felipe H. Buena, Jr., V.P.-HRD & Security
required [respondent] to come to his office. During the middle of the
conversation, he suddenly commented "You know Rose I resigned effective
June 5, 2011 because I am not happy with my boss anymore; so same
thing with you. Why don't you just resign? With conviction he
uttered, "Rose, you have to resign.

19. [Respondent] stated in response, "I am not yet planning to resign

nor retire since I am the sole breadwinner of the family and my
son will continue his studies in college for two (2) more years,
which mainly [sic] my primary reasons why I am maintaining
love, concern, good working relationship, being hardworking
employee [sic], above all my honesty and integrity for almost
35 years of continues [sic] dedication to the company."

20. On June 4, 2011, P/SSupt. Felipe H. Buena asked [respondent] to see

him in his office. Right away he informed [respondent] that management
decided to compulsory [sic] retire her. The same was manifested by
respondent Aurora Caday, Asst. Director to HR-Legal.

21. [Respondent] asked him what was the reason and why? He said
that management opted to apply what is stated in the CBA of the
employees-"20 years of service or 50 years old whichever comes
first" and he added that this applied to all". [Respondent] simply
commented that if its [sic] true that it applies to all, how come that there
are lots of rank & file employees, supervisors and managers/officers who
are older than her and working for more than 35 years of service, are [sic]
still with the company?[54] (Emphasis in the original)

These conversations were never denied by petitioner.[55] It bears noting,

too, that petitioner itself acknowledged in its June 6, 2011 letter that Buena
had discussed with respondent her compulsory retirement, lending
credence to the above-cited exchanges. As the CA found, the June 4, 2011
exchange between respondent and Buena establish that "the information
regarding respondent's retirement was not an offer at all, but an order, and
that respondent had questioned her coverage in the CBA."[56]

Petitioner has not likewise denied that after receiving the Notice,
respondent approached its President asking for an explanation and possibly
a better package, but the latter simply answered: "Ok na yon pahinga ka
na and besides that was the decision of the management."[57] This clearly
belies petitioner's claim that there was a "meeting of the minds"[58] between
its management and respondent as regards her early retirement. In this
regard, it bears to reiterate that "company retirement plans must not only
comply with the standards set by existing labor laws, but they should also
be accepted by the employees to be commensurate to their faithful service
to the employer within the requisite period."[59]

The Court cannot subscribe to petitioner's argument that respondent's act

of signing and processing her Personnel Clearance amounts to indubitable
proof that she accepted its retirement offer. To reiterate, there was no such
offer that respondent was at liberty to consider, accept or reject; petitioner
already resolved to compulsorily retire respondent when Buena informed
her of such decision and when it formally served upon her its Notice.
Furthermore, faced with unemployment, respondent would naturally want
to have her last pay released and this requires the accomplishment of the
Personnel Clearance. As the CA aptly explained:
It is a familiar axiom that employer and employee do not stand on equal
footing, a situation which often causes an employee to act out of need
instead of any genuine acquiescence to the employer. It cannot be ignored
that [respondent] has only six days before she. is deemed "compulsorily
retired." She has appealed the decision of [petitioner] but its
representatives remained adamant. Therefore, it is unsurprising that
[respondent] would process her clearances; after all, without such
clearance, her retirement pay would not be released, and she would still be
out of work. Hence, it was not out of eagerness, excitement, and acceptance
that she attended to her retirement requirements, but only out of sheer
necessity and to assure the release of her retirement pay.[60]

Furthermore, the CA correctly observed that respondent's refusal to accept

her retirement pay and her objections to being retired early, as well as the
filing of her complaint for illegal dismissal, confirm that she did not
consent to her compulsory retirement.[61] Apropos is the following
pronouncement in Universal Robina Sugar Milling Corp. (URSUMCO)
and/or Cabatt v. Caballeda, et al.:[62]

Furthermore, the fact that respondents filed a complaint for illegal

dismissal against petitioners completely negates their claim that
respondents voluntarily retired. To note, respondents vigorously pursued
this case against petitioners, all the way up to this Court. Without doubt,
this is a manifestation that respondents had no intention of relinquishing
their employment, wholly incompatible to petitioners' assertion that
respondents voluntarily retired.[63]

Contrary to petitioner's assertion, the exercise of management prerogative

cannot justify its compulsory retirement of respondent's services. There can
be no debate that the exercise of management prerogatives cannot trounce
the requirements of the law which, in this case, demand the employee's
unequivocal agreement to an early retirement. The Court has held:

It is true that an employer is given a wide latitude of discretion in managing

its own affairs. The broad discretion includes the implementation of
company rules and regulations and the imposition of disciplinary measures
on its employees. But the exercise of a management prerogative
like this is not limitless, but hemmed in by good faith and a due
consideration of the rights of the worker. In this light, the
management prerogative will be upheld for as long as it is not wielded as
an implement to circumvent the laws and oppress
labor.[64] (Citations omitted and emphasis ours)

All told, an employee in the private sector who did not expressly agree to an
early retirement cannot be retired from the service before he reaches the
age of 65 years.[65] "Acceptance by the employee of an early retirement age
option must be explicit, voluntary, free and uncompelled."[66] "The law
demanded more than a passive acquiescence on the part of the employee,
considering that his early retirement age option involved conceding the
constitutional right to security of tenure."[67] Thus, We held that
"[r]etirement is the result of a bilateral act of the parties, a voluntary
agreement between the employer and the employee whereby the latter,
after reaching a certain age, agrees to sever his or her employment with the
former."[68]

In the instant case, respondent's early retirement arose not from a bilateral
act but a unilateral decision on the part of petitioner. Respondent's consent
was neither sought nor procured by petitioner in deciding to prematurely
retire her services. For this reason, respondent's compulsory retirement, as
imposed by petitioner in its June 6, 2011 letter, constitutes illegal dismissal.
As this Court recently held in Alfredo F. Laya, Jr. v. Philippine veterans
Bank and Ricardo A. Balbido, Jr.:[69]

Although the employer could be free to impose a retirement age lower than
65 years for as long its employees consented, the retirement of the
employee whose intent to retire was not clearly established, or
whose retirement was involuntary is to be treated as a
discharge.[70] (Citations omitted and emphasis ours)
Having been unjustly dismissed, respondent is entitled to the reliefs under
Article 279 of the Labor Code which provides:

Article 279. Security of tenure. In cases of regular employment, the

employer shall not terminate the services of an employee except for a just
cause or when authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him up to the
time of his actual reinstatement.[71]

In ICT Marketing Services, Inc. v. Sales,[72] the Court held that:

The normal consequences of respondents' illegal dismissal, then, are

reinstatement without loss of seniority rights, and payment of backwages
computed from the time compensation was withheld up to the date of
actual reinstatement. Where reinstatement is no longer viable as an option,
separation pay equivalent to one (1) month salary for every year of service
should be awarded as an alternative. The payment of separation pay is in
addition to payment ofbackwages.[73]

The CA held that reinstatement was no longer feasible as it would not work
to the best interest of the parties. It found that petitioner had consistently
objected to respondent's return to work and concluded that reintroducing
her into the workplace may initiate conflicts which would ultimately
hamper the efficient management of petitioner's hotel and foster ill feelings
and enmity between respondent and her former superiors.[74] In this light,
We hold that separation pay in lieu of actual reinstatement should be
awarded. Indeed, "[t]he accepted doctrine is that separation pay may avail
in lieu of reinstatement if reinstatement is no longer practical or in the best
interest of the parties."[75]

Accordingly, respondent is entitled to backwages and all other benefits

from June 10, 2011, when her employment was terminated,[76] until the
finality of this Decision, with interest at twelve percent (12%) per
annum from June 10, 2011 to June 30, 2013 and at six percent (6%) per
annum from July 1, 2013 until their full satisfaction.[77] Respondent shall
also receive separation pay, in lieu of reinstatement, equivalent to one (1)
month salary for every year of service,[78] which shall earn interest at six
percent (6%) per annum from the finality of this Decision until full
payment.[79] Both the separation pay and backwages shall be computed up
to the finality of the Decision as it is at that point that the employment
relationship is effectively ended.[80]

WHEREFORE, the Petition is DENIED. The Decision dated March 19,

2015 and Resolution dated July 31, 2015 of the Court of Appeals in CAG.R.
SP No. 132576 are AFFIRMED with MODIFICATIONS in that
petitioner Manila Hotel Corporation is ordered to pay respondent Rosita
De Leon:

(a) backwages and all other benefits due from June 10, 2011 until the
finality of this Decision, plus interest at twelve percent (12%) per
annum from June 10, 2011 to June 30, 2013, and at six percent (6%) per
annum from July l, 2013 until their full satisfaction; and

(b) separation pay, in lieu of reinstatement, from September 1, 1976 until

the finality of this Decision, equivalent to one (1) month pay for every year
of service, plus interest at six percent (6%) per annum from the finality of
this Decision until full payment.

SO ORDERED.

Leonardo-De Castro,* (Acting Chairperson), Del Castillo, Jardeleza,

and Gesmundo,** JJ., concur.
*Designated as Acting Chairperson per Special Order No. 2559 dated May
11, 2018.

Designated as Acting Member per Special Order No. 2560 dated May 11,
**

2018.

[1] Rollo, pp. 17-40.

Penned by Associate Justice Marlene Gonzales-Sison, concurred in by

[2]

Associate Justices Remedios A. Salazar-Fernando and Ramon A.

Cruz; rollo, pp. 314-336.

Penned by Commissioner Numeriano D. Villena, concurred in by

[3]

Commissioners Angelo Ang Palaña and Herminio V. Suelo; id. at 161-178.

[4] Id. at 214-216.

[5] Penned by Labor Arbiter Lilia S. Savari; id. at 129-143.

[6] Id. at 356-357.

[7] Id. at 337-353.

[8] Id. at 64-66 and 315.

[9] Id. at 42-A.

[10] Id. at 20.

[11] Id. at 20, 66, 122 and 315.

[12] Id. at. 20.

Emilio Yap, Rogelio Quiambao, Cecilia Go and Aurora Caday who

[13]

eventually became Human Resources Director; id. at 46-47 and 64.

[14] Id. at 64.

[15] Id. at 70 and 73.

[16] Id. at 51.

[17] Id. at 52.

[18] Id. at 48-49 and 51.

[19] Id. at 52-54.

[20] Id. at 55.

[21] Id. at 84-86.

[22] Id. at 90-92.

[23] Id. at 121-122.

[24] Id. at 122 and 125-126.

[25] Id. at 126-127.

[26] Id. at 317.

[27] Id. at 317-318.

[28] Id. at 129-143.

[29] Id. at 142-143.

[30] Id. at 161-178.

[31] Id. at 177.

[32] Id. at 319.

[33]Art. 287. Retirement. Any employee may be retired upon reaching the
retirement age established in the collective bargaining agreement or other
applicable employment contract.

In case of retirement, the employee shall be entitled to receive such

retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements: Provided, however,
That an employee's retirement benefits under any collective bargaining and
other agreements shall not be less than those provided therein.

In the absence of a retirement plan or agreement providing for retirement

benefits of employees in the establishmert, an employee upon reaching the
age of sixty (60) years or more, but not beyond sixty-five (65) years which is
hereby declared the compulsory retirement age, who has served at least five
(5) years in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every
year of service, a fraction of at least six (6) months being considered as one
whole year.

On June 7, 2011, respondent Rosita de Leon received a letter dated June 6, 2011 from petitioner Manila
Hotel Corp. advising her of the intention of the management to exercise its management prerogative to
compulsorily retire her from the service.

Petitioner relied on a provision in the collective bargain agreement (CBA) that an employees’ retirement
is compulsory when he or she reaches the age of 60 or has rendered 20 years of service, whichever comes
first. At that time respondent was 57 years old and held the position of assistant credit and collection
manager/acting general cashier. She had by then rendered 34 years of service to petitioner.

Petitioner explained that it was implementing a cost-cutting program to avoid heavy losses. Respondent
graciously accepted the retirement offer and even personally and eagerly processed her personnel
clearance.

Respondent claimed that she had been forced to retire without due process. She decried petitioner’s claim
asserting she questioned her dismissal from the beginning, and her signing of the personnel clearance only
indicated an intention to clear all her accountabilities. Thus, she filed against petitioner and its officers a
complaint for illegal dismissal with money claims with prayer for reinstatement, backwages, damages and
attorney’s fees.

Does her complaint find merit?

Ruling: Yes.

Contrary to petitioner’s assertion, the exercise of management prerogative cannot justify its compulsory
retirement of respondent’s services. There can be no debate that the exercise of management prerogatives
cannot trounce the requirements of the law which, in this case, demand the employee’s unequivocal
agreement to an early retirement. The Court has held:

It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad
discretion includes the implementation of company rules and regulations and the imposition of
disciplinary measures on its employees. But the exercise of a management prerogative like this is not
limitless, but hemmed in by good faith and a due consideration of the rights of the worker. In this light,
the management prerogative will be upheld for as long as it is not wielded as an implement to circumvent
the laws and oppress labor (Universal Robina Sugar Milling Corp. (URSUMCO) and/or Cabatt v.
Caballeda, et al., 582 Phil. 118 (2008)).

All told, an employee in the private sector who did not expressly agree to an early retirement cannot be
retired from the service before he reaches the age of 65 years. “Acceptance by the employee of an early
retirement age option must be explicit, voluntary, free and uncompelled.” “The law demanded more than
a passive acquiescence on the part of the employee, considering that his early retirement age option
involved conceding the constitutional right to security of tenure.”

Thus, we held that “retirement is the result of a bilateral act of the parties, a voluntary agreement between
the employer and the employee whereby the latter, after aching a certain age, agrees to sever his or her
employment with the former.”

In the instant case, respondent’s early retirement arose not from a bilateral act but a unilateral decision on
the part of petitioner. Respondent’s consent was neither sought nor procured by petitioner in deciding to
prematurely retire her services. For this reason, respondent’s compulsory retirement, as imposed by
petitioner in its June 6, 2011 letter, constitutes illegal dismissal. As this Court recently held in Alfredo F.
Laya, Jr. v. Philippine veterans Bank and Ricardo A. Balbido, Jr., G.R. No. 205813, January 10, 2018:

Although the employer could be free to impose a retirement age lower than 65 years for as long its
employees consented, the retirement of the employee whose intent to retire was not clearly established, or
whose retirement was involuntary is to be treated as a discharge. (Manila Hotel Corporation vs. Rosita De
Leon, G.R. No. 219774, July 23, 2018).

National Union of Workers in Hotels

V. NLRC
OCTOBER 23, 2012 ~ VBDIAZ

National Union of Workers in Hotels V. NLRC

This is a Petition for Review on Certiorari under Rule 45, assailing the Decision1
rendered
by the Court of Appeals, which affirmed the Resolution2of the National Labor
Relations
Commission, dismissing for lack of merit the complaint for unfair labor practice filed
by
petitioner National Union of Workers in Hotels, Restaurants and Allied Industries-
Manila
Pavilion Hotel (NUWHRAIN) against Manila Pavilion Hotel (the Hotel).

Petitioner NUWHRAIN is a legitimate labor organization composed of rank-and-file

employees of the Hotel,3 while respondent Acesite Philippines Hotel Corporation is
the
owner and operator of said Hotel.4

The Hotel entered into a Collective Bargaining Agreement with HI-MANILA

PAVILION
HOTEL LABOR UNION (HIMPHLU), the exclusive bargaining agent of the rank-
and-file
employees of the Hotel. Both parties consented that the representation aspect and
other
non-economic provisions of the Collective Bargaining Agreement were to be effective
for five years or until 30 June 2005; and the economic provisions of the same were to
be
effective for three years or until 30 June 2003. The parties subsequently re-negotiated
the
economic provisions of the Collective Bargaining Agreement and extended the term
of their
effectivity for another two years or until 30 June 2005.5
During the 60-day freedom period which preceded the expiration of the Collective
Bargaining Agreement, starting on 1 May 2005 and ending on 30 June 2005, the Hotel
and
HIMPHLU negotiated the extension of the provisions of the existing Collective
Bargaining
Agreement for two years, effective 1 July 2005 to 30 June 2007. The parties signed
the
Memorandum of Agreement on 20 May 2005 and the employees ratified it on 27 May
2005.6

On 21 June 2005, NUWHRAIN was accorded by the Labor Relations Division of

the Department of Labor and Employment (DOLE) the status of a legitimate labor
organization.7 Thereafter, NUWHRAIN exercised the right to challenge the majority
status of the incumbent union, HIMPHLU, by filing a Petition for Certification
Election
on 28 June 2005.8

On 5 July 2007, the Industrial Relations Division of the DOLE allowed the
registration of
the Memorandum of Agreement executed between HIMPHLU and the Hotel,
extending the
effectivity of the existing Collective Bargaining Agreement for another two years.9

After the lapse of the 60-day freedom period, but pending the disposition of the
Petition for Certification Election filed by NUWHRAIN, HIMPHLU served the Hotel
with a written demand dated 28 July 200510 for the dismissal of 36 employees
following their expulsion from HIMPHLU for alleged acts of disloyalty and violation
of its Constitution and by-laws. An Investigation Report11 was attached to the said
written demand, stating that the 36 employees, who were members of HIMPHLU,
joined NUWHRAIN, in violation of Section 2, Article IV of the Collective Bargaining
Agreement, which provided for a union security clause.12
On 1 August 2005, the Hotel issued Disciplinary Action Notices13 (Notices) to the 36
employees identified in the written demand of HIMPHLU. The Notices directed the
36
employees to submit a written explanation for their alleged acts of disloyalty and
violation of
the union security clause for which HIMPHLU sought their dismissal.

NLRC decided that there was no unfair labor practice.NUWHRAIN filed a Motion for
Reconsideration of the foregoing NLRC Resolution. It was denied by the NLRC in
another
Resolution dated 30 June 2006.20 Thus, NUWHRAIN filed a Petition for Certiorari
before
the Court of Appeals, docketed as C.A. G.R. SP No. 96171.

In the meantime, on 16 June 2006, the Certification Election for regular rank and file
employees of the Hotel was held, which HIMPHLU won. It was accordingly certified
as the exclusive bargaining agent for rank and file employees of the Hotel.21

On 30 May 2007, the Court of Appeals promulgated its Decision2 upholding the
Resolution
of the NLRC. It declared that the Hotel had acted prudently when it issued the Notices
to
the 36 employees after HIMPHLU demanded their dismissal. It clarified that these
Notices
did not amount to the termination of the employees concerned but merely sought their
explanation on why the union security clause should not be applied to them. The
appellate
court also gave credence to the denial by the officers of the respondent and the Hotel
that they made statements favoring HIMPHLU over NUWHRAIN during the
reconciliatory
conferences. The Court of Appeals further noted that the unhampered organization
and
registration of NUWHRAIN negated its allegation that the Hotel required its
employees not
to join a labor organization as a condition for their employment.

NUWHRAIN’s Motion for Reconsideration of the aforementioned Decision of the

Court of
Appeals was denied by the same court in a Resolution.23

Hence, the present Petition, in which NUWHRAIN makes the following assignment
of
errors:

ISSUE: Whether the dismissal of the subject employees in accordance with CBA’s
Union
Security Clause deemed unfair labor practice.
The instant Petition lacks merit.

NUWHRAIN maintains that the respondent committed unfair labor practice when (1)
the
Hotel issued the Notices to the 36 employees, former members of HIMPHLU, who
switched
allegiance to NUWHRAIN; and (2) the officers of the respondent and the Hotel
allegedly
uttered statements during the reconciliatory conferences indicating their preference for
HIMPHLU and their disapproval of NUWHRAIN. This argument is specious.

“Union security” is a generic term which is applied to and comprehends “closed

shop,” “union shop,” “maintenance of membership” or any other form of agreement
which imposes upon employees the obligation to acquire or retain union membership
as a condition affecting employment.25 Article 248(e) of the Labor Code recognizes
the
effectivity of a union shop clause:

The law allows stipulations for “union shop” and “closed shop” as a means of
encouraging
workers to join and support the union of their choice in the protection of their rights
and
interests vis-à-vis the employer. By thus promoting unionism, workers are able to
negotiate
with management on an even playing field and with more persuasiveness than if they
were to individually and separately bargain with the employer.26 In Villar v.
Inciong,27 this
Court held that employees have the right to disaffiliate from their union and form a
new
organization of their own; however, they must suffer the consequences of their
separation
from the union under the security clause of the Collective Bargaining Agreement.

In the present case, the Collective Bargaining Agreement includes a union security
provision.28 To avoid the clear possibility of liability for breaching the union security
clause
of the Collective Bargaining Agreement and to protect its own interests, the only
sensible
option left to the Hotel, upon its receipt of the demand of HIMPHLU for the dismissal
of the
36 employees, was to conduct its own inquiry so as to make its own findings on
whether
there was sufficient ground to dismiss the said employees who defected from
HIMPHLU.
The issuance by the respondent of the Notices requiring the 36 employees to submit
their
explanations to the charges against them was the reasonable and logical first step in a
fair
investigation. It is important to note that the Hotel did not take further steps to
terminate the
36 employees. Instead, it arranged for reconciliatory conferences between the
contending
unions in order to avert the possibility of dismissing the 36 employees for violation of
the
union security clause of the Collective Bargaining Agreement.

This Court, in Malayang Samahan ng Manggagawa sa M. Greenfield v. Ramos29

clearly
stated the general rule: the dismissal of an employee by the company pursuant to a
labor
union’s demand in accordance with a union security agreement does not constitute
unfair
labor practice. An employer is not considered guilty of unfair labor practice if it
merely
complied in good faith with the request of the certified union for the dismissal of
employees
expelled from the union pursuant to the union security clause in the Collective
Bargaining
Agreement.30 In the case at bar, there is even less possibility of sustaining a finding
of guilt
for unfair labor practice where respondent did not dismiss the 36 employees, despite
the
insistence of HIMPHLU, the sole bargaining agent for the rank and file employees of
the
Hotel, on the basis of the union security clause of the Collective Bargaining
Agreement. The
only act attributed to the respondent is its issuance of the Notices which, contrary to
being
an unfair labor practice, even afforded the employees involved a chance to be heard.

In all, respondent had not committed any act which would constitute unfair labor
practice.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The assailed

Decision
dated 30 May 2007 of the Court of Appeals in CA-G.R. SP No. 96171 is hereby
AFFIRMED.
Costs against petitioner NUWHRAIN.