Labor Law 2 (Cases)

7/27/2019 Labor Law 2 (Cases)

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60. METROLAB INDUSTRIES, INC., v. CONFESOR

FIRST DIVISION

[G.R. No. 108855. February 28, 1996]

METROLAB INDUSTRIES, INC., petitioner, vs. HONORABLE MA. NIEVES ROLDAN-CONFESOR, in hercapacity as Secretary of the Department of Labor and Employment and METRO DRUG CORPORATIONEMPLOYEES ASSOCIATION-FEDERATION OF FREE WORKERS, respondents.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF ADMINISTRATIVE AGENCIES; RULE;CASE AT BAR. - We reaffirm the doctrine that considering their expertise in their respective fields, factualfindings of administrative agencies supported by substantial evidence are accorded great respect andbinds this Court. The Secretary of Labor ruled, thus: x x x Any act committed during the pendency of thedispute that tends to give rise to further contentious issues or increase the tensions between the partiesshould be considered an act of exacerbation. One must look at the act itself, not on speculative reactions.A misplaced recourse is not needed to prove that a dispute has been exacerbated. For instance, the Unioncould not be expected to file another notice of strike. For this would depart from its theory of the casethat the layoff is subsumed under the instant dispute, for which a notice of strike had already been filed.

On the other hand, to expect violent reactions, unruly behavior, and any other chaotic or drastic actionfrom the Union is to expect it to commit acts disruptive of public order or acts that may be illegal. Undera regime of laws, legal remedies take the place of violent ones. x xx Protest against the subject layoffsneed not be in the form of violent action or any other drastic measure. In the instant case the Unionregistered their dissent by swiftly filing a motion for a cease and desist order. Contrary to petitioners

allegations, the Union strongly condemned the layoffs and threatened mass action if the Secretary ofLabor fails to timely intervene: x x x 3. This unilateral action of management is a blatant violation of theinjunction of this Office against committing acts which would exacerbate the dispute. Unless such act isenjoined the Union will be compelled to resort to its legal right to mass actions and concerted activities toprotest and stop the said management action. This mass layoff is clearly one which would result in a veryserious dispute unless this Office swiftly intervenes. x x x Metrolab and the Union were still in the processof resolving their CBA deadlock when petitioner implemented the subject layoffs. As a result, motions and

oppositions were filed diverting the parties attention, delaying resolution of the bargaining deadlock andpostponing the signing of their new CBA, thereby aggravating the whole conflict.

2. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; EXERCISE OFMANAGEMENT PREROGATIVES; NOT ABSOLUTE; SUBJECT TO EXCEPTIONS IMPOSED BY LAW. -This Court recognizes the exercise of management prerogatives and often declines to interfere with thelegitimate business decisions of the employer. However, this privilege is not absolute but subject tolimitations imposed by law. In PAL vs. NLRC, (225 SCRA 301 [1993]), we issued this reminder: ... theexercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177SCRA 565 [1989]), it was held that managements prerogatives must be without abuse of discretion ...Allthis points to the conclusion that the exercise of managerial prerogatives is not unlimited. It is

circumscribed by limi(ations found in law, a collective bargaining agreement, or the general principles offair play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]).

3. ID.; ID.; ID.; ID.; ID.; CASE AT BAR AN EXCEPTION. - The case at bench constitutes one ofthe exceptions. The Secretary of Labor is expressly given the power under the Labor Code to assumejurisdiction and resolve labor disputes involving industries indispensable to national interest. The disputedinjunction is subsumed under this special grant of authority. Art. 263 (g) of the Labor Code specificallyprovides that: x x x (g) When, in his opinion, there exists a labor dispute causing or likely to cause astrike or lockout in an industry indispensable to the national interest, the Secretary of Labor andEmployment may assume jurisdiction over the dispute and decide it or certify the same to the Commissionfor compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoiningthe intended or impending strike or lockout as specified in the assumption or certification order. If onehas already taken place at the time of assumption or certification, all striking or locked out employeesshall immediately return to work and the employer shall immediately resume operations and readmit all

workers under the same terms and conditions prevailing before the strike or lockout. The Secretary ofLabor and Employment or the Commission may seek the assistance of law enforcement agencies to ensurecompliance with this provision as well as with such orders as he may issue to enforce the same. . . . ThatMetrolabs business is of national interest is not disputed. Metrolab is one of the leading manufacturers

and suppliers of medical and pharmaceutical products to the country. Metrolabs managementprerogatives, therefore, are not being unjustly curtailed but duly balanced with and tempered by thelimitations set by law, taking into account its special character and the particular circumstances in thecase at bench.

4. ID.; LABOR RELATIONS; INELIGIBILITY OF MANAGERIAL EMPLOYEES TO JOIN, FORMAND ASSIST ANY LABOR ORGANIZATION; PROHIBITION EXTENDED TO CONFIDENTIALEMPLOYEES. - Although Article 245 of the Labor Code limits the ineligibility to join, form and assist anylabor 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 afiduciary manner to managerial employees and hence, are likewise privy to sensitive and highlyconfidential records.


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5. ID.; ID.; EXCLUSION OF CONFIDENTIAL EMPLOYEES FROM THE RANK AND FILEBARGAINING UNIT; NOT TANTAMOUNT TO DISCRIMINATION. - Confidential employees cannot beclassified as rank and file. As previously discussed, the nature of employment of confidential employees isquite distinct from the rank and file, thus, warranting a separate category. Excluding confidentialemployees from the rank and file bargaining unit, therefore, is not tantamount to discrimination.

APPEARANCES OF COUNSEL

Bautista Picazo Buyco Tan & Fider for petitioner.

The Solicitor General for public respondent.

Perfecto V. Fernandez, Jose P. Fernandez & Cristobal P. Fernandez for Metro Drug Corporation.

D E C I S I O N

KAPUNAN,J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court seeking the annulment of theResolution and Omnibus Resolution of the Secretary of Labor and Employment dated 14 April 1992 and 25January 1993, respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-9 1; NCMB-NCR-NS-09-678-91)on grounds that these were issued with grave abuse of discretion and in excess of jurisdiction.

Private respondent Metro Drug Corporation Employees Association-Federation of Free Workers (hereinafterreferred to as the Union) is a labor organization representing the rank and file employees of petitionerMetrolab Industries, Inc. (hereinafter referred to as Metrolab/MII) and also of Metro Drug, Inc.

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

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

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

WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the Labor Code, as amended,this Office hereby assumes jurisdiction over the entire labor dispute at Metro Drug, Inc. - Metro DrugDistribution Division and Metrolab Industries Inc.

Accordingly, any strike or lockout is hereby strictly enjoined. The Companies and the Metro Drug Corp.

Employees Association - FFW are likewise directed to cease and desist from committing any and all actsthat might exacerbate the situation.

Finally, the parties are directed to submit their position papers and evidence on the aforequoteddeadlocked issues to this office within twenty (20) days from receipt hereof.

SO ORDERED.i[1](Italics ours.)

On 27 December 1991, then Labor Secretary Torres issued an order resolving all the disputed items in theCBA and ordered the parties involved to execute a new CBA.

Thereafter, the Union filed a motion for reconsideration.

On 27 January 1992, during the pendency of the abovementioned motion for reconsideration, Metrolablaid off 94 of its rank and file employees.

On the same date, the Union filed a motion for a cease and desist order to enjoin Metrolab fromimplementing the mass layoff, alleging that such act violated the prohibition against committing acts thatwould exacerbate the dispute as specifically directed in the assumption order.ii[2]

On the other hand, Metrolab contended that the layoff was temporary and in the exercise of itsmanagement prerogative. It maintained that the company would suffer a yearly gross revenue loss ofapproximately sixty-six (66) million pesos due to the withdrawal of its principals in the Toll and ContractManufacturing Department. Metrolab further asserted that with the automation of the manufacture of itsproduct Eskinol, the number of workers required its production is significantly reduced.iii[3]

Thereafter, on various dates, Metrolab recalled some of the laid off workers on a temporary basis due to

availability of work in the production lines.


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On 14 April 1992, Acting Labor Secretary Nieves Confesor issued a resolution declaring the layoff ofMetrolabs 94 rank and file workers illegal and ordered their reinstatement with full backwages. The

dispositive portion reads as follows:

WHEREFORE, the Unions motion for reconsideration is granted in part, and our order of 28 December

1991 is affirmed subject to the modifications in allowances and in the close shop provision. The layoff ofthe 94 employees at MII is hereby declared illegal for the failure of the latter to comply with our injunctionagainst committing any act which may exacerbate the dispute and with the 30-day notice requirement.Accordingly, MII is hereby ordered to reinstate the 94 employees, except those who have already been

recalled, to their former positions or substantially equivalent, positions with full backwages from the datethey were illegally laid off on 27 January 1992 until actually reinstated without loss of seniority rights andother benefits. Issues relative to the CBA agreed upon by the parties and not embodied in our earlierorder are hereby ordered adopted for incorporation in the CBA. Further, the dispositions and directivescontained in all previous orders and resolutions relative to the instant dispute, insofar as not inconsistentherein, are reiterated. Finally, the parties are enjoined to cease and desist from committing any act whichmay tend to circumvent this resolution.

SO RESOLVED.iv[4]

On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration alleging that the layoff did notaggravate the dispute since no untoward incident occurred as a result thereof. It, likewise, filed a motion

for clarification regarding the constitution of the bargaining unit covered by the CBA.

On 29 June 1992, after exhaustive negotiations, the parties entered into a new CBA. The execution,however, was without prejudice to the outcome of the issues raised in the reconsideration and clarificationmotions submitted for decision to the Secretary of Labor.v[5]

Pending the resolution of the aforestated motions, on 2 October 1992, Metrolab laid off 73 of itsemployees on grounds of redundancy due to lack of work which the Union again promptly opposed on 5October 1992.

On 15 October 1992, Labor Secretary Confesor again issued a cease and desist order. Metrolab moved fora reconsideration.vi[6]

On 25 January 1993, Labor Secretary Confesor issued the assailed Omnibus Resolution containing thefollowing orders:

xxx xxx xxx.

1. MIIs motion for partial reconsideration of our 14 April 1992 resolution specifically that portion thereofassailing our ruling that the layoff of the 94 employees is illegal, is hereby denied. MII is hereby orderedto pay such employees their full backwages computed from the time of actual layoff to the time of actualrecall;

2. For the parties to incorporate in their respective collective bargaining agreements the clarifications

herein contained; and

3. MIIs motion for reconsideration with respect to the consequences of the second wave of layoff affecting73 employees, to the extent of assailing our ruling that such layoff tended to exacerbate the dispute, ishereby denied. But inasmuch as the legality of the layoff was not submitted for our resolution and noevidence had been adduced upon which a categorical finding thereon can be based, the same is herebyreferred to the NLRC for its appropriate action.

Finally, all prohibitory injunctions issued as a result of our assumption of jurisdiction over this dispute arehereby lifted.

SO RESOLVED.vii[7]

Labor Secretary Confesor also ruled that executive secretaries are excluded from the closed-shopprovision of the CBA, not from the bargaining unit.

On 4 February 1993, the Union filed a motion for execution. Metrolab opposed. Hence, the presentpetition for certiorari with application for issuance of a Temporary Restraining Order.

On 4 March 1993, we issued a Temporary Restraining Order enjoining the Secretary of Labor fromenforcing and implementing the assailed Resolution and Omnibus Resolution dated 14 April 1992 and 25January 1993, respectively.

In its petition, Metrolab assigns the following errors:

A


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THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT COMMITTED GRAVE ABUSE OFDISCRETION AND EXCEEDED HER JURISDICTION IN DECLARING THE TEMPORARY LAYOFF ILLEGAL ANDORDERING THE REINSTATEMENT AND PAYMENT OF BACKWAGES TO THE AFFECTED EMPLOYEES.*

B

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT GRAVELY ABUSED HERDISCRETION IN INCLUDING EXECUTIVE SECRETARIES AS PART OF THE BARGAINING UNIT OF RANK ANDFILE EMPLOYEES.viii[8]

Anent the first issue, we are asked to determine whether or not public respondent Labor Secretarycommitted grave abuse of discretion and exceeded her jurisdiction in declaring the subject layoffsinstituted by Metrolab illegal on grounds that these unilateral actions aggravated the conflict betweenMetrolab and the Union who were, then, locked in a stalemate in CBA negotiations.

Metrolab argues that the Labor Secretarys order enjoining the parties from committing any act that mightexacerbate the dispute is overly broad, sweeping and vague and should not be used to curtail theemployers right to manage his business and ensure its viability.

We cannot give credence to Metrolabs contention.

This Court recognizes the exercise of management prerogatives and often declines to interfere with thelegitimate business decisions of the employer. However, this privilege is not absolute but subject tolimitations imposed by law.ix[9]

In PAL v. NLRC,x[10]we issued this reminder:

xxx xxx xxx

. . .the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]), it was held that managements prerogatives must be without abuse ofdiscretion....

xxx xxx xxx

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited. It iscircumscribed by limitations found in law, a collective bargaining agreement, or the general principles offair play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]). . . . (Italics ours.)

xxx xxx xxx.

The case at bench constitutes one of the exceptions. The Secretary of Labor is expressly given the powerunder the Labor Code to assume jurisdiction and resolve labor disputes involving industries indispensableto national interest. The disputed injunction is subsumed under this special grant of authority. Art. 263(g) of the Labor Code specifically provides that:

xxx xxx xxx

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in anindustry indispensable to the national interest, the Secretary of Labor and Employment may assumejurisdiction over the dispute and decide it or certify the same to the Commission for compulsoryarbitration. Such assumption or certification shall have the effect of automatically enjoining the intendedor impending strike or lockout as specified in the assumption or certification order. If one has alreadytaken place at the time of assumption or certification, all striking or locked out employees shallimmediately return to work and the employer shall immediately resume operations and readmit allworkers under the same terms and conditions prevailing before the strike or lockout. The Secretary ofLabor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure

compliance with this provision as well as with such orders as he may issue to enforce the same. . . (Italicsours.)

xxx xxx xxx.

That Metrolabs business is of national interest is not disputed. Metrolab is one of the leadingmanufacturers and suppliers of medical and pharmaceutical products to the country.

Metro labs management prerogatives, therefore, are not being unjustly curtailed but duly balanced withand tempered by the limitations set by law, taking into account its special character and the particularcircumstances in the case at bench.

As aptly declared by public respondent Secretary of Labor in its assailed resolution:

xxx xxx xxx.


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MII is right to the extent that as a rule, we may not interfere with the legitimate exercise of managementprerogatives such as layoffs. But it may nevertheless be appropriate to mention here that one of thesubstantive evils which Article 263 (g) of the Labor Code seeks to curb is the exacerbation of a labordispute to the further detriment of the national interest. When a labor dispute has in fact occurred and ageneral injunction has been issued restraining the commission of disruptive acts, managementprerogatives must always be exercised consistently with the statutory objective.xi[11]

xxx xxx xxx.

Metrolab insists that the subject layoffs did not exacerbate their dispute with the Union since no untowardincident occurred after the layoffs were implemented. There were no work disruptions or stoppages andno mass actions were threatened or undertaken. Instead, petitioner asserts, the affected employeescalmly accepted their fate as this was a matter which they had been previously advised would beinevitable.xii[12]

After a judicious review of the record, we find no compelling reason to overturn the findings of theSecretary of Labor.

We reaffirm the doctrine that considering their expertise in their respective fields, factual findings ofadministrative agencies supported by substantial evidence are accorded great respect and binds thisCourt.xiii[13]

The Secretary of Labor ruled, thus:

xxx xxx xxx.

Any act committed during the pendency of the dispute that tends to give rise to further contentious issuesor increase the tensions between the parties should be considered an act of exacerbation. One must lookat the act itself, not on speculative reactions. A misplaced recourse is not needed to prove that a disputehas been exacerbated. For instance, the Union could not be expected to file another notice of strike. Forthis would depart from its theory of the case that the layoff is subsumed under the instant dispute, forwhich a notice of strike had already been filed. On the other hand, to expect violent reactions, unrulybehavior, and any other chaotic or drastic action from the Union is to expect it to commit acts disruptive

of public order or acts that may be illegal. Under a regime of laws, legal remedies take the place ofviolent ones.xiv[14]

xxx xxx xxx.

Protest against the subject layoffs need not be in the form of violent action or any other drastic measure.In the instant case the Union registered their dissent by swiftly filing a motion for a cease and desistorder. Contrary to petitioners allegations, the Union strongly condemned the layoffs and threatened massaction if the Secretary of Labor fails to timely intervene:

xxx xxx xxx.

3. This unilateral action of management is a blatant violation of the injunction of this Office againstcommitting acts which would exacerbate the dispute. Unless such act is enjoined the Union will becompelled to resort to its legal right to mass actions and concerted activities to protest and stop the saidmanagement action. This mass layoff is clearly one which would result in a very serious labor disputeunless this Office swiftly intervenes.xv[15]

xxx xxx xxx.

Metrolab and the Union were still in the process of resolving their CBA deadlock when petitionerimplemented the subject layoffs. As a result, motions and oppositions were filed diverting the partiesattention, delaying resolution of the bargaining deadlock and postponing the signing of their new CBA,thereby aggravating the whole conflict.

We, likewise, find untenable Metrolabs contention that the layoff of the 9 4 rank-and-file employees wastemporary, despite the recall of some of the laid off workers.

If Metrolab intended the layoff of the 94 workers to be temporary, it should have plainly stated so in thenotices it sent to the affected employees and the Department of Labor and Employment. Consider thetenor of the pertinent portions of the layoff notice to the affected employees:

xxx xxx xxx.

Dahil sa mga bagay na ito, napilitan ang ating kumpanya na magsagawa ng lay-off ng mga empleyadosa Rank & File dahil nabawasan ang trabaho at puwesto para sa kanila. Marami sa atin ang kasama sa

lay-off dahil wala nang trabaho para sa kanila. Mahirap tanggapin ang mga bagay na ito subalitkailangan nating gawin dahil hindi kaya ng kumpanya ang magbayad ng suweldo kung ang empleyado aywalang trabaho. Kung tayo ay patuloy na magbabayad ng suweldo, mas hihina ang ating kumpanya atmas marami ang maaring maapektuhan.


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Sa pagpapatupad ng lay-off susundin natin ang LAST IN-FIRST OUT policy. Ang mga empleyadong maypinakamaikling serbisyo sa kumpanya ang unang maaapektuhan. Ito ay batay na rin sa nakasaad saating CBA na ang mga huling pumasok sa kumpanya ang unang masasama sa lay-off kapag nagkaroonng ganitong mga kalagayan.

Ang mga empleyado na kasama sa lay-off ay nakalista sa sulat na ito. Ang umpisa ng lay-off ay saLunes, Enero 27. Hindi na muna sila papasok sa kumpanya. Makukuha nila ang suweldo nila sa Enero 30,1992.

Hindi po natin matitiyak kung gaano katagal ang lay-off ngunit ang aming tingin ay matatagalan bagomagkaroon ng dagdag na trabaho. Dahil dito, sinimulan na namin ang isang Redundancy Program sa

mga supervisors. Nabawasan ang mga puwesto para sa kanila, kaya sila ay mawawalan ng trabaho atbibigyan na ng redundancy pay.xvi[16](Italics ours.)

xxx xxx xxx.

We agree with the ruling of the Secretary of Labor, thus:

xxx xxx xxx.

. . .MII insists that the layoff in question is temporary not permanent. It then cites International

Hardware, Inc. vs. NLRC, 176 SCRA 256, in which the Supreme Court held that the 30-day notice requiredunder Article 283 of the Labor Code need not be complied with if the employer has no intention topermanently severe (sic) the employment relationship.

We are not convinced by this argument. International Hardware involves a case where there had been areduction of workload. Precisely to avoid laying off the employees, the employer therein opted to givethem work on a rotating basis. Though on a limited scale, work was available. This was the SupremeCourts basis for holding that there was no intention to permanently severe (sic) the employmentrelationship.

Here, there is no circumstance at all from which we can infer an intention from MII not to sever theemployment relationship permanently. If there was such an intention, MII could have made it very clear

in the notices of layoff. But as it were, the notices are couched in a language so uncertain that the onlyconclusion possible is the permanent termination, not the continuation, of the employment relationship.

MII also seeks to excuse itself from compliance with the 30-day notice with a tautology. While insistingthat there is really no best time to announce a bad news, (sic) it also claims that it broke the bad newsonly on 27 January 1992 because had it complied with the 30-day notice, it could have broken the badnews on 02 January 1992, the first working day of the year. If there is really no best time to announce abad news (sic), it wouldnt have mattered if the same was announced at the first working day ofthe year.That way, MII could have at least complied with the requirement of the law.xvii[17]

The second issue raised by petitioner merits our consideration.

In the assailed Omnibus Resolution, Labor Secretary Confesor clarified the CBA provisions on closed-shopand the scope of the bargaining unit in this wise:

xxx xxx xxx.

Appropriateness of the bargaining unit.

xxx xxx xxx.

Exclusions. In our 14 April 1992 resolution, we ruled on the issue of exclusion as follows:

These aside, we reconsider our denial of the modifications which the Union proposes to introduce on the

close shop provision. While we note that the provision as presently worded has served the relationship ofthe parties well under previous CBAs, the shift in constitutional policy toward expanding the right of all

workers to self-organization should now be formally recognized by the parties, subject to the followingexclusions only:

1. Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, Vice-President, Vice President forSales, Personnel Manager, and Director for Corporate Planning who may have access to vital laborrelations information or who may otherwise act in a confidential capacity to persons who determine orformulate management policies.

The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall thus be modified consistentlywith the foregoing.

Article I (b) of the 1988-1990 CBA provides:


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b)Close Shop. - All Qualified Employees must join the Association immediately upon regularization as acondition for continued employment. This provision shall not apply to: (i) managerial employees who areexcluded from the scope of the bargaining unit; (ii) the auditors and executive secretaries of seniorexecutive officers, such as, the President, Executive Vice-President, Vice-President for Finance, Head ofLegal, Vice-President for Sales, who are excluded from membership in the Association; and (iii) thoseemployees who are referred to in Attachment I hereof, subject, however, to the application of theprovision of Article II, par. (b) hereof. Consequently, the above-specified employees are not required tojoin the Association as a condition for their continued employment.

On the other hand, Attachment I provides:

Exclusion from the Scope of the Close Shop Provision

The following positions in the Bargaining Unit are not covered by the Close Shop provision of the CBA(Article I, par. b):

1. Executive Secretaries of Vice-Presidents, or equivalent positions.

2. Executive Secretary of the Personnel Manager, or equivalent positions.

3. Executive Secretary of the Director for Corporate Planning, or equivalent positions.

4. Some personnel in the Personnel Department, EDP Staff at Head Office, Payroll Staff at Head Office,Accounting Department at Head Office, and Budget Staff, who because of the nature of their duties andresponsibilities need not join the Association as a condition for their employment.

5. Newly-hired secretaries of Branch Managers and Regional Managers.

Both MDD and MII read the exclusion of managerial employees and executive secretaries in our 14 April1992 resolution as exclusion from the bargaining unit. They point out that managerial employees arelumped under one classification with executive secretaries, so that since the former are excluded from thebargaining unit, so must the latter be likewise excluded.

This reading is obviously contrary to the intent of our 14 April 1992 resolution. By recognizing theexpanded scope of the right to self-organization, our intent was to delimit the types of employeesexcluded from the close shop provision, not from the bargaining unit, to executive secretaries only.Otherwise, the conversion of the exclusionary provision to one that refers to the bargaining unit from onethat merely refers to the close shop provision would effectively curtail all the organizational rights ofexecutive secretaries.

The exclusion of managerial employees, in accordance with law, must therefore still carry the qualifyingphrase from the bargaining unit in Article I (b)(i) of the 1988-1990 CBA. In the same manner, theexclusion of executive secretaries should be read together with the qualifying phrase are excluded frommembership in the Association of the same Article and with the heading of Attachment I. The latterrefers to Exclusions from Scope of Close Shop Provision and provides that [t]he following positions in

Bargaining Unit are not covered by the close shop provision of the CBA.

The issue of exclusion has different dimension in the case of MII. In an earlier motion for clarification, MIIpoints out that it has done away with the positions of Executive Vice-President, Vice-President for Sales,and Director for Corporate Planning. Thus, the foregoing group of exclusions is no longer appropriate inits present organizational structure. Nevertheless, there remain MII officer positions for which there maybe executive secretaries. These include the General Manager and members of the ManagementCommittee, specifically i) the Quality Assurance Manager; ii) the Product Development Manager; iii) theFinance Director; iv) the Management System Manager; v) the Human Resources Manager; vi) the

Marketing Director; vii) the Engineering Manager; viii) the Materials Manager; and ix) the ProductionManager.

xxx xxx xxx

The basis for the questioned exclusions, it should be noted, is no other than the previous CBA betweenMII and the Union. If MII had undergone an organizational restructuring since then, this is a fact to whichwe have never been made privy. In any event, had this been otherwise the result would have been thesame. To repeat, we limited the exclusions to recognize the expanded scope of the right to self-organization as embodied in the Constitution.xviii[18]

Metrolab, however, maintains that executive secretaries of the General Manager and the executivesecretaries of the Quality Assurance Manager, Product Development Manager, Finance Director,Management System Manager, Human Resources Manager, Marketing Director, Engineering Manager,Materials Manager and Production Manager, who are all members of the companys Management

Committee should not only be exempted from the closed-shop provision but should be excluded frommembership in the bargaining unit of the rank and file employees as well on grounds that their executivesecretaries are confidential employees, having access to vital labor information.xix[19]

We concur with Metrolab.


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Although Article 245 of the Labor Codexx[20] limits the ineligibility to join, form and assist any labororganization to managerial employees, jurisprudence has extended this prohibition to confidentialemployees or those who by reason of their positions or nature of work are required to assist or act in afiduciary manner to managerial employees and hence, are likewise privy to sensitive and highlyconfidential records.

The rationale behind the exclusion of confidential employees from the bargaining unit of the rank and fileemployees and their disqualification to join any labor organization was succinctly discussed in PhilipsIndustrial Development v. NLRC:xxi[21]

xxx xxx xxx.

On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave abuse ofdiscretion in reversing the decision of the Executive Labor Arbiter and in decreeing that PIDIs ServiceEngineers, Sales Force, division secretaries, all Staff of General Management, Personnel and IndustrialRelations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank andfile bargaining unit.

In the first place, all these employees, with the exception of the service engineers and the sales forcepersonnel, 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 haveaccess 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 unionequally applies to them.

In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this Court elaborated on this rationale, thus:

x x x The rationale for this inhibition has been stated to be, because if these managerial employees wouldbelong to or be affiliated with a Union, the latter might not be assured of their loyalty to the Union in viewof evident conflict of interests. The Union can also become company-dominated with the presence ofmanagerial employees in Union membership.

In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this rationale applicable to confidentialemployees:

This rationale holds true also for confidential employees such as accounting personnel, radio and telegraphoperators, who having access to confidential information, may become the source of undue advantage.Said employee(s) may act as a spy or spies of either party to a collective bargaining agreement. This isspecially true in the present case where the petitioning Union is already the bargaining agent of the rank-and-file employees in the establishment. To allow the confidential employees to join the existing Union ofthe rank-and-file would be in violation of the terms of the Collective Bargaining Agreement wherein thiskind of employees by the nature of their functions/positions are expressly excluded.

xxx xxx xxx.

Similarly, in National Association of Trade Union - Republic Planters Bank Supervisors Chapter v.Torresxxii[22]we declared:

xxx xxx xxx.

. . . As regards the other claim of respondent Bank that Branch Managers/OICs, Cashiers and Controllersare confidential employees, having control, custody and/ or access to confidential matters, e.g., thebranchs 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 BankManual regarding joint custody, this claim is not even disputed by petitioner. A confidential employee isone entrusted with confidence on delicate matters, or with the custody, handling, or care and protection ofthe employers property. While Art. 245 of the Labor Code singles out managerial employees as ineligible

to join, assist or form any labor organization, under the doctrine of necessary, implication, confidentialemployees are similarly disqualified. . . .

xxx xxx xxx.

. . .(I)n the collective bargaining process, managerial employees are supposed to be on the side of theemployer, to act as its representatives, and to see to it that its interest are well protected. The employeris not assured of such protection if these employees themselves are union members. Collectivebargaining in such a situation can become one-sided. It is the same reason that impelled this Court toconsider the position of confidential employees as included in the disqualification found in Art. 245 as ifthe disqualification of confidential employees were written in the provision. If confidential employeescould unionize in order to bargain for advantages for themselves, then they could be governed by their

own motives rather than the interest of the employers. Moreover, unionization of confidential employeesfor the purpose of collective bargaining would mean the extension of the law to persons or individuals whoare supposed to act in the interest of the employers. It isnot farfetched that in the course of collectivebargaining, they might jeopardize that interest which they are duty-bound to protect. . . .


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xxx xxx xxx.

And in the latest case of Pier 8 Arrastre & Stevedoring Services, Inc. vs. Roldan-Confesor,xxiii[23]weruled that:

xxx xxx xxx.

Upon the other hand, legal secretaries are neither managers nor supervisors. Their work is basicallyroutinary and clerical. However, they should be differentiated from rank-and-file employees because theyare tasked with, among others, the typing of legal documents, memoranda and correspondence, thekeeping of records and files, the giving of and receiving notices, and such other duties as required by thelegal personnel of the corporation. Legal secretaries therefore fall under the category of confidentialemployees. . . .

xxx xxx xxx.

We thus hold that public respondent acted with grave abuse of discretion in not excluding the fourforemen and legal secretary from the bargaining unit composed of rank-and-file employees.

xxx xxx xxx.

In the case at bench, the Union does not disagree with petitioner that the executive secretaries areconfidential employees. It however, makes the following contentions:

xxx xxx xxx.

There would be no danger of company domination of the Union since the confidential employees would notbe members of and would not participate in the decision making processes of the Union.

Neither would there be a danger of espionage since the confidential employees would not have any conflictof interest, not being members of the Union. In any case, there is always the danger that any employeewould leak management secrets to the Union out of sympathy for his fellow rank and filer even if he werenot a member of the union nor the bargaining unit.

Confidential employees are rank and file employees and they, like all the other rank and file employees,should be granted the benefits of the Collective Bargaining Agreement. There is no valid basis fordiscriminating against them. The mandate of the Constitution and the Labor Code, primarily of protectionto Labor, compels such conclusion.xxiv[24]

xxx xxx xxx.

The Unions assurances fail to convince. The dangers sought to be prevented, particularly the threat of

conflict of interest and espionage, are not eliminated by non-membership of Metrolabs executivesecretaries or confidential employees in the Union. Forming part of the bargaining unit, the executivesecretaries stand to benefit from any agreement executed between the Union and Metrolab. Such a

scenario, thus, gives rise to a potential conflict between personal interests and their duty as confidentialemployees to act for and in behalf of Metrolab. They do not have to be union members to affect orinfluence either side.

Finally, confidential employees cannot be classified as rank and file. As previously discussed, the natureof employment of confidential employees is quite distinct from the rank and file, thus, warranting aseparate category. Excluding confidential employees from the rank and file bargaining unit, therefore, isnot tantamount to discrimination.

WHEREFORE, premises considered, the petition is partially GRANTED. The resolutions of publicrespondent Secretary of Labor dated 14 April 1992 and 25 January 1993 are hereby MODIFIED to theextent that executive secretaries of petitioner Metrolabs General Manager and the executive secretaries of

the members of its Management Committee are excluded from the bargaining unit of petitioners rank andfile employees.

SO ORDERED.

61. Baltazar Camporedondo vs National Labor Relations Commission (Digest)

On December 13, 2012

312 SCRA 47 Business Organization Corporation Law Government Owned and Controlled Corporationvs Private Corporation

Baltazar Camporedondo was the administrator of the Surigao del Norte chapter of the Philippine NationalRed Cross (PNRC). In 1995, a PNRC auditor found out that Baltazar had unremitted collections amountingto P109,000.00. Baltazar, unable to restitute said missing amount, then filed for early retirement. He laterfiled a complaint for illegal dismissal against PNRC. He filed the case with the National Labor RelationsCommission (NLRC). He averred that he was forced to retire because of the erroneous audit. The Labor


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Arbiter, affirmed by the NLRC, ruled that it has no jurisdiction over the case because PNRC is agovernment owned and controlled corporation (GOCC). Baltazar however argues that PNRC impliedlybecame a private corporation when its charter was amended to give it authority to secure loans, etc.

ISSUE: Whether or not the Philippine National Red Cross is a private corporation.

HELD: No. The simple test is to find out whether or not a corporation is public or private is to determine ifit has its own charter for the exercise of a public function or was it incorporated under the generalcorporation law. PNRC has its own charter (R.A. 95). Its subsequent amendment did not convert it into a

private corporation. As a GOCC, it is subject to its own charter and its employees are under thejurisdiction of the Civil Service Commission, and are compulsory members of the Government ServiceInsurance System.

62. COOPERATIVE RURAL BANK OF DAVAO CITY, INC., v. FERRER-CALLEJA

FIRST DIVISION

G.R. No. 77951 September 26, 1988

COOPERATIVE RURAL BANK OF DAVAO CITY, INC., petitioner,vs.

PURA FERRER-CALLEJA, DIRECTOR, BUREAU OF LABOR RELATIONS, MOLE, MANILA;FELIZARDO T. SERAPIO, MED-ARBITER DESIGNATE, REGIONAL OFFICE NO. XI, MOLE, DAVAOCITY; and FEDERATION OF FREE WORKERS,respondents.

Herbert P. Artes for petitioner.

The Solicitor General for Public respondent.

GANCAYCO,J.:

This is a Petition for certiorariunder Rule 65 of the Rules of Court where the issue is whether or not theemployees of a cooperative can organize themselves for purposes of collective bargaining.

The record of the case discloses that the herein petitioner Cooperative Rural Bank of Davao City, Inc. is acooperative banking corporation operating in Davao City. It is owned in part by the Government and itsemployees are members and co-owners of the same. The petitioner has around 16 rank-and-fileemployees. As of August, 1986, there was no existing collective bargaining agreement between the saidemployees and the establishment. On the other hand, the herein private respondent Federation of FreeWorkers is a labor organization registered with the Department of Labor and Employment. It is interestedin representing the said employees for purposes of collective bargaining.

On August 27, 1986, the private respondent filed with the Davao City Regional Office of the then Ministry

of Labor and Employment a verified Petition for certification election among the rank-and-file employeesof the petitioner. 1The same was docketed as Case No. R-325 ROXI MED-UR-73-86. On September 18,1986, the herein public respondent issued an Order granting the Petition for certification election.

On October 3, 1986, the petitioner filed an Appeal Memorandum and sought a reversal of the Order of theMed-Arbiter.2The petitioner argues therein that, among others, a cooperative is not covered by the Rulesgoverning certification elections inasmuch as it is not an institution operating for profit. The petitioner alsoadds that two of the alleged rank-and-file employees seeking the certification election are managerialemployees disqualified from joining concerted labor activities. In sum, the petitioner insists that itsemployees are disqualified from forming labor organizations for purposes of collective bargaining.

On October 8, 1986, the private respondent filed a "Motion to Dismiss the Appeal." On October 15, 1986,

the petitioner filed its opposition to the said Motion.

On February 11, 1987, the herein public respondent Bureau of Labor Relations Director Pura Ferrer-Callejaissued a Resolution affirming the Order of the Med-Arbiter and dismissing the Appeal. 3 The pertinentportions of the said Resolution are as follows

It is beyond doubt that respondent-appellant, Cooperative Rural Bank of Davao City fallswithin the purview of Article 212, paragraph C of the Labor Code, acting as such in theinterest of an employer. To argue otherwise would amount to closing one's eyes to therealities of today's cooperative banking institutions. ....

Moreover, basic is the right of every worker in any establishment whether operated for

profit or not to organize and engage in concerted activity, mutually beneficial to theirinterest. Such right is sacredly enshrined and protected in our fundamental law, grantingevery worker the right to organize into a collective group and engage in concerted activitiesfor purposes of promoting their well being, subject only to such limitations as may beprovided for by law.


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xxx xxx xxx

As this Office has consistently ruled and applied in various cases, being a member of acooperative organization does not preclude one from forming or joining a labor unionprovided that such person or persons are not among those disqualified by law. Nowhere inthe records can we find any piece of evidence showing that the signatories in the petitionare among those disqualified to form or join a union.

Finally, we cannot give credence to (the) employer's allegation that two of the signatories

thereof, are managerial employees, since no evidence showing such fact can be found fromthe records.

xxx xxx xxx

In a Motion dated March 2, 1987, the petitioner asked for a reconsideration of the said Resolution. 4Thepetitioner reiterated therein its view that its employees are disqualified from forming the labororganization so contemplated. The petitioner also called attention to an Opinion rendered by then SolicitorGeneral and Minister of Justice Estelito P. Mendoza dated August 14, 1981. 5 The Opinion states thatemployees of an electric cooperativewho are themselves members/co-owners of the same cannot form orjoin labor organizations for purposes of collective bargaining. The Opinion also states that the duty tobargain exists only between an employer and his/its employees, and that an employer has no duty to

bargain with his co-owners of a corporation who are also its employees. The petitioner submits that thesaid Opinion calls for application in the present controversy.

On March 26, 1987, director Calleja issued a Resolution denying the reconsideration sought by thepetitioner.6Thus, the certification election was scheduled in the morning of April 23, 1987.

Finding the action taken by the Bureau unsatisfactory, the petitioner brought the case directly to thisCourt on April 9, 1987 by way of the instant Petition for certiorari. The petitioner maintains that the publicrespondents both acted without jurisdiction or in excess thereof, or with grave abuse of discretionamounting to lack of jurisdiction, in allowing the certification election sought by the private respondentdespite the arguments of the petitioner in opposition thereto. The petitioner reiterates its argument thatemployees of cooperatives who are members and co-owners of the same cannot form and join labor

organizations for purposes of collective bargaining.

On April 15, 1987, this Court issued a temporary restraining order enjoining the Bureau of Labor Relationsfrom proceeding with the certification election scheduled on April 23, 1987. 7 The certification electionnonetheless pushed through as scheduled for the alleged reason that the temporary restraining order wasnot seasonably transmitted to Davao City.8

This court also required the respondents to file their Comment on the Petition. The respondents compliedas instructed. The Office of the Solicitor General represented the public respondents.

The Solicitor General intimated to this Court that the instant Petition has been rendered moot andacademic inasmuch as the certification election sought to be enjoined had already been conducted. The

Solicitor General added that the public respondents did not commit any jurisdictional error.

10

In due time, the parties submitted other pleadings. On January 6, 1988, the case was deemed submittedfor decision.

After a careful examination of the entire record of the case, We find the instant Petition meritorious.

Contrary to the view espoused by the Solicitor General, this case cannot be considered moot andacademic simply because the certification election sought to be enjoined went on as scheduled. Theinstant Petition is one for certiorari as a special civil action. Errors of jurisdiction on the part of the publicrespondents are alleged in the Petition itself. If the public respondents had indeed committed jurisdictionalerrors, the action taken by both the Med-Arbiter and the Bureau Director will be deemed null and void abinitio. 11And if this were so, the certification election would, necessarily, have no legal justification. Thearguments raised in the instant Petition strike at the very heart of the validity of the certification electionitself.

We come now to the main aspect of the case.

Article 243 of the Labor Code 12enumerates who are eligible to form, join, or assist labor organizations forpurposes of collective bargaining, to wit

ART. 243. Coverage and employees' right to self-organization. All persons employed incommercial, industrial and agricultural enterprises and in religious, charitable, medical oreducational institutions whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing forpurposes of collective bargaining. ....

The recognized exception to this enumeration is found in Article 245 of the same code, which provides forthe ineligibility of managerial employees to join any labor reorganization, viz-


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ART. 245. Ineligibility of managerial employees to join any labor organization. Managerialemployees are not eligible to join, assist or form any labor organization.

From the foregoing provisions of law it would appear at first blush that all the rank and file employees of acooperative who are not managerial employees are eligible to form, join or assist any labor organization oftheir own choosing for the purpose of collective bargaining.

However, under Section 2 of P.D. No. 175, a cooperative is defined to mean "organizations composedprimarily of small producers and of consumers who voluntarily join together to form business enterprises

which they themselves own, control, and patronize." Its creation and growth were declared as a policy ofthe State as a means of increasing the income and purchasing power of the low-income sector of thepopulation in order to attain a more equitable distribution of income and wealth . 13 The principlesgoverning it are:

a) Open membership"Should be voluntary and available without artificial restriction, orany social, political, racial or religious discrimination, to all persons who can make use of itsservices and are willing to accept responsibilities of membership;"

b) Democratic control."Irrespective of the number of shares owned, each member canonly cast one vote in deciding upon the affairs of the cooperative;"

c) Limited interests to capital. "Share capital shall earn only limited interest, themaximum rate of interest to be established by the Department of Local Government andCommunity Development from time to time;" and

d) Patronage refund "Net income after the interest on capital has been paid shall beredistributed among the members in proposition to their patronage."14

While cooperatives may exercise the same rights and privileges given to persons, partnership andcorporations provided under existing laws, operate business enterprises of all kinds, establish rural banks,enjoy all the privileges and incentives granted by the NACIDA Act and other government agencies tobusiness organizations under existing laws, to expropriate idle urban or rural lands for its purposes, toown and dispose of properties, enter into contracts, to sue and be sued and perform other acts necessary

to pursue its objectives,15

such cooperatives enjoy such privileges as:

a) Exemption from income tax and sales taxes;

b) Preferential right to supply rice, corn and other grains, and other commodities produced by them toState agencies administering price stabilization program; and

c) In appropriate cases, exemption from application of minimum wage law upon recommendation of theBureau of Cooperative Development subject to the approval of the Secretary of Labor. 16

A cooperative development loan fund has been created for the development of the cooperative movement.17

It may be, further stated that the Department of Local Govemment and Community Development throughthe Bureau of Cooperative Development is vested with full authority to promulgate rules and regulationsto cover the promotion, organization, registration, regulation and supervision of all types of cooperatives.18Electric cooperatives, however, are under the regulation and supervision of the National ElectrificationAd. Administration, 19while it is the Monetary Board of the Central Bank that has exclusive responsibilityand authority over the banking functions and operations of cooperative banks . 20

A cooperative, therefore, is by its nature different from an ordinary business concern, being run either bypersons, partnerships, or corporations. Its owners and/or members are the ones who run and operate thebusiness while the others are its employees. As above stated, irrespective of the number of shares ownedby each member they are entitled to cast one vote each in deciding upon the affairs of the cooperative.

Their share capital earn limited interests. They enjoy special privileges as exemption from income taxand sales taxes, preferential right to supply their products to State agencies and even exemption from theminimum wages laws.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke theright to collective bargaining for certainly an owner cannot bargain with himself or his co-owners. In theopinion of August 14, 1981 of the Solicitor General he correctly opined that employees of cooperativeswho are themselves members of the cooperative have no right to form or join labor organizations forpurposes of collective bargaining for being themselves co-owners of the cooperative. 21

However, in so far as it involves cooperatives with employees who are not members or co-owners thereof,certainly such employees are entitled to exercise the rights of all workers to organization, collectivebargaining, negotiations and others as are enshrined in the Constitution and existing laws of the country.

22


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The questioned ruling therefore of public respondent Pura Ferrer-Calleja must be upheld insofar as itrefers to the employees of petitioner who are not members or co-owners of petitioner. It cannot extend tothe other employees who are at the same time its members or co-owners.

The Court upholds the findings of said public respondent that no persuasive evidence has been presentedto show that two of the signatories in the petition for certification election are managerial employees whounder the law are disqualified from pursuing union activities.

WHEREFORE, the herein petition is hereby GRANTED and the resolution of public respondent Pura Ferrer-

Calleja, Director, Bureau of Labor Relations, of February 11, 1987 is hereby MODIFIED to the effect thatonly the rank and file employees of petitioner who are not its members or co-owners are entitled to self-organization, collective bargaining, and negotiations, while the other employees who are members or co-owners thereof cannot enjoy such right.

SO ORDERED.

THIRD DIVISION

Before this Court is a Petition for Review on Certiorariunder Rule 45 of the 1997 Revised Rules ofCivil Procedure seeking to annul and set aside the Decision1[1] and Resolution2[2] of the Court of Appealsin CA-G.R. SP No. 87236, dated 5 January 2006 and 20 March 2006, respectively, which annulled and setaside the Orders of the Social Security Commission (SSC) in SSC Case No. 6-15507-03, dated 17February 20043[3] and 16 September 2004,4[4] respectively, thereby dismissing the petition-complaintdated 12 June 2003 filed by herein petitioner Social Security System (SSS) against herein respondent.

Herein petitioner Republic of the Philippines is represented by the SSC, a quasi-judicial body

authorized by law to resolve disputes arising under Republic Act No. 1161, as amended by Republic Act

No. 8282.5[5] Petitioner SSS is a government corporation created by virtue of Republic Act No. 1161, as

amended. On the other hand, herein respondent Asiapro Cooperative (Asiapro) is a multi-purpose

cooperative created pursuant to Republic Act No. 69386[6] and duly registered with the Cooperative

Development Authority (CDA) on 23 November 1999 with Registration Certificate No. 0-623-2460.7[7]

63. REPUBLIC OF THE PHILIPPINES,represented by the SOCIAL SECURITYCOMMISSION and SOCIAL SECURITY

SYSTEM v. ASIAPRO COOPERATIVE


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The antecedents of this case are as follows:Respondent Asiapro, as a cooperative, is composed of

owners-members. Under its by-laws, owners-members are of two categories, to wit: (1) regular member,

who is entitled to all the rights and privileges of membership; and (2) associate member, who has no right

to vote and be voted upon and shall be entitled only to such rights and privileges provided in its by-

laws.8[8] Its primary objectives are to provide savings and credit facilities and to develop other livelihood

services for its owners-members. In the discharge of the aforesaid primary objectives, respondent

cooperative entered into several Service Contracts9[9] with Stanfilco - a division of DOLE Philippines, Inc.and a company based in Bukidnon. The owners-members do not receive compensation or wages from the

respondent cooperative. Instead, they receive a share in the service surplus10[10] which the respondent

cooperative earns from different areas of trade it engages in, such as the income derived from the said

Service Contracts with Stanfilco. The owners-members get their income from the service surplus

generated by the quality and amount of services they rendered, which is determined by the Board of

Directors of the respondent cooperative.

In order to enjoy the benefits under the Social Security Law of 1997, the owners-members of the

respondent cooperative, who were assigned to Stanfilco requested the services of the latter to register

them with petitioner SSS as self-employed and to remit their contributions as such. Also, to comply with

Section 19-A of Republic Act No. 1161, as amended by Republic Act No. 8282, the SSS contributions of

the said owners-members were equal to the share of both the employer and the employee.

On 26 September 2002, however, petitioner SSS through its Vice-President for Mindanao Division,

Atty. Eddie A. Jara, sent a letter11[11] to the respondent cooperative, addressed to its Chief Executive

Officer (CEO) and General Manager Leo G. Parma, informing the latter that based on the Service Contracts

it executed with Stanfilco, respondent cooperative is actually a manpower contractor supplying employeesto Stanfilco and for that reason, it is an employer of its owners-members working with Stanfilco. Thus,

respondent cooperative should register itself with petitioner SSS as an employer and make the

corresponding report and remittance of premium contributions in accordance with the Social Security Law

of 1997. On 9 October 2002,12[12] respondent cooperative, through its counsel, sent a reply to

petitioner SSSs letter asserting that it is not an employer because its owners -members are the

cooperative itself; hence, it cannot be its own employer. Again, on 21 October 2002,13[13] petitioner

SSS sent a letter to respondent cooperative ordering the latter to register as an employer and report its

owners-members as employees for compulsory coverage with the petitioner SSS. Respondent cooperative

continuously ignored the demand of petitioner SSS.


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Accordingly, petitioner SSS, on 12 June 2003, filed a Petition14[14] before petitioner SSC against

the respondent cooperative and Stanfilco praying that the respondent cooperative or, in the alternative,

Stanfilco be directed to register as an employer and to report respondent cooperatives owners-members

as covered employees under the compulsory coverage of SSS and to remit the necessary contributions in

accordance with the Social Security Law of 1997. The same was docketed as SSC Case No. 6-15507-03.

Respondent cooperative filed its Answer with Motion to Dismiss alleging that no employer-employee

relationship exists between it and its owners-members, thus, petitioner SSC has no jurisdiction over therespondent cooperative. Stanfilco, on the other hand, filed an Answer with Cross-claim against the

respondent cooperative.

On 17 February 2004, petitioner SSC issued an Order denying the Motion to Dismiss filed by the

respondent cooperative. The respondent cooperative moved for the reconsideration of the said Order, but

it was likewise denied in another Order issued by the SSC dated 16 September 2004.

Intending to appeal the above Orders, respondent cooperative filed a Motion for Extension of Time

to File a Petition for Review before the Court of Appeals. Subsequently, respondent cooperative filed a

Manifestation stating that it was no longer filing a Petition for Review. In its place, respondent

cooperative filed a Petition for Certioraribefore the Court of Appeals, docketed as CA-G.R. SP No. 87236,

with the following assignment of errors:

I. The Orders dated 17 February 2004 and 16 September 2004 of [hereinpetitioner] SSC were issued with grave abuse of discretion amounting to a (sic) lackor excess of jurisdiction in that:

A. [Petitioner] SSC arbitrarily proceeded with the case as if it hasjurisdiction over the petition a quo, considering that it failed to firstresolve the issue of the existence of an employer-employeerelationship between [respondent] cooperative and its owners-members.

B. While indeed, the [petitioner] SSC has jurisdiction over alldisputes arising under the SSS Law with respect to coverage, benefits,contributions, and related matters, it is respectfully submitted that[petitioner] SSC may only assume jurisdiction in cases where there isno dispute as to the existence of an employer-employee relationship.

C. Contrary to the holding of the [petitioner] SSC, the legal issue

of employer-employee relationship raised in [respondents] Motion toDismiss can be preliminarily resolved through summary hearings priorto the hearing on the merits. However, any inquiry beyond apreliminary determination, as what [petitioner SSC] wants toaccomplish, would be to encroach on the jurisdiction of the NationalLabor Relations Commission [NLRC], which is the more competentbody clothed with power to resolve issues relating to the existence ofan employment relationship.

II. At any rate, the [petitioner] SSC has no jurisdictionto take cognizance of the petition a quo.

A. [Respondent] is not an employer within the contemplation ofthe Labor Law but is a multi-purpose cooperative created pursuant toRepublic Act No. 6938 and composed of owners-members, notemployees.

B. The rights and obligations of the owners-members of[respondent] cooperative are derived from their MembershipAgreements, the Cooperatives By-Laws, and Republic Act No. 6938,and not from any contract of employment or from the Labor Laws.Moreover, said owners-members enjoy rights that are not consistent


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with being mere employees of a company, such as the right toparticipate and vote in decision-making for the cooperative.

C. As found by the Bureau of Internal Revenue [BIR], the owners-members of [respondent] cooperative are not paid any compensationincome.15[15] (Emphasis supplied.)

On 5 January 2006, the Court of Appeals rendered a Decision granting the petitionfiled by the respondent cooperative. The decretal portion of the Decision reads:

WHEREFORE, the petition is GRANTED. The assailed Orders dated [17 February 2004] and [16

September 2004], are ANNULLEDand SET ASIDEand a new one is entered DISMISSINGthe petition-

complaint dated [12 June 2003] of [herein petitioner] Social Security System.16[16]

Aggrieved by the aforesaid Decision, petitioner SSS moved for a reconsideration, but it was denied

by the appellate court in its Resolution dated 20 March 2006.

Hence, this Petition.

In its Memorandum, petitioners raise the issue of whether or not the Court of Appeals erred in

not finding that the SSC has jurisdiction over the subject matter and it has a valid basis in

denying respondents Motion to Dismiss. The said issue is supported by the following arguments:

I. The [petitioner SSC] has jurisdiction over the petition-complaint filed before it by the [petitioner SSS] under R.A. No. 8282.

II. Respondent [cooperative] is estopped from questioningthe jurisdiction of petitioner SSC after invoking its jurisdiction by filing an

[A]nswer with [M]otion to [D]ismiss before it.

III. The [petitioner SSC] did not act with grave abuse of

discretion in denying respondent [cooperatives] [M]otion to [D]ismiss.

IV. The existence of an employer-employee relationship is aquestion of fact where presentation of evidence is necessary.

V. There is an employer-employee relationship between[respondent cooperative] and its [owners-members].

Petitioners claim that SSC has jurisdiction over the petition-complaint filed before it bypetitioner SSS as it involved an issue of whether or not a worker is entitled to compulsory coverageunder the SSS Law. Petitioners avow that Section 5 of Republic Act No. 1161, as amended byRepublic Act No. 8282, expressly confers upon petitioner SSC the power to settle disputes on

compulsory coverage, benefits, contributions and penalties thereon or any other matter relatedthereto. Likewise, Section 9 of the same law clearly provides that SSS coverage is compulsoryupon all employees. Thus, when petitioner SSS filed a petition-complaint against the respondentcooperative and Stanfilco before the petitioner SSC for the compulsory coverage of respondentcooperatives owners-members as well as for collection of unpaid SSS contributions, it was veryobvious that the subject matter of the aforesaid petition-complaint was within the expertise andjurisdiction of the SSC.


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Petitioners similarly assert that granting arguendo that there is a prior need to determine the

existence of an employer-employee relationship between the respondent cooperative and its owners-

members, said issue does not preclude petitioner SSC from taking cognizance of the aforesaid petition-

complaint. Considering that the principal relief sought in the said petition-complaint has to be resolved by

reference to the Social Security Law and not to the Labor Code or other labor relations statutes, therefore,

jurisdiction over the same solely belongs to petitioner SSC.

Petitioners further claim that the denial of the respondent cooperatives Motion to Dismiss

grounded on the alleged lack of employer-employee relationship does not constitute grave abuse of

discretion on the part of petitioner SSC because the latter has the authority and power to deny the same.

Moreover, the existence of an employer-employee relationship is a question of fact where presentation of

evidence is necessary. Petitioners also maintain that the respondent cooperative is already estopped from

assailing the jurisdiction of the petitioner SSC because it has already filed its Answer before it, thus,

respondent cooperative has already submitted itself to the jurisdiction of the petitioner SSC.

Finally, petitioners contend that there is an employer-employee relationship between the

respondent cooperative and its owners-members. The respondent cooperative is the employer of its

owners-members considering that it undertook to provide services to Stanfilco, the performance of which

is under the full and sole control of the respondent cooperative.

On the other hand, respondent cooperative alleges that its owners-members own the cooperative,

thus, no employer-employee relationship can arise between them. The persons of the employer and the

employee are merged in the owners-members themselves. Likewise, respondent cooperatives owners-

members even requested the respondent cooperative to register them with the petitioner SSS as self-

employed individuals. Hence, petitioner SSC has no jurisdiction over the petition-complaint filed before it

by petitioner SSS.

Respondent cooperative further avers that the Court of Appeals correctly ruled that petitioner SSC

acted with grave abuse of discretion when it assumed jurisdiction over the petition-complaint without

determining first if there was an employer-employee relationship between the respondent cooperative and

its owners-members. Respondent cooperative claims that the question of whether an employer-employee

relationship exists between it and its owners-members is a legal and not a factual issue as the facts are

undisputed and need only to be interpreted by the applicable law and jurisprudence.

Lastly, respondent cooperative asserts that it cannot be considered estopped from assailing the

jurisdiction of petitioner SSC simply because it filed an Answer with Motion to Dismiss, especially where

the issue of jurisdiction is raised at the very first instance and where the only relief being sought is the

dismissal of the petition-complaint for lack of jurisdiction.

From the foregoing arguments of the parties, the issues may be summarized into:

I. Whether the petitioner SSC has jurisdiction over thepetition-complaint filed before it by petitioner SSS against the respondent

cooperative.

II. Whether the respondent cooperative is estopped from

assailing the jurisdiction of petitioner SSC since it had already filed anAnswer with Motion to Dismiss before the said body.

Petitioner SSCs jurisdiction is clearly stated in Section 5 of Republic Act No. 8282 as well asin Section 1, Rule III of the 1997 SSS Revised Rules of Procedure.

Section 5 of Republic Act No. 8282 provides:


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SEC. 5. Settlement of Disputes. (a) Any dispute arising under this Act with respect to

coverage, benefits, contributions and penalties thereon or any other matter related thereto, shall be

cognizable by the Commission, x x x. (Emphasis supplied.)

Similarly, Section 1, Rule III of the 1997 SSS Revised Rules of Procedure states:

Section 1. Jurisdiction. Any dispute arising under the Social Security Act with respect tocoverage, entitlement of benefits, collection and settlement of contributions and penalties thereon, or

any other matter related thereto, shall be cognizable by the Commissionafter the SSS through its

President, Manager or Officer-in-charge of the Department/Branch/Representative Office concerned had

first taken action thereon in writing. (Emphasis supplied.)

It is clear then from the aforesaid provisions that any issue regarding the compulsorycoverage of the SSS is well within the exclusive domain of the petitioner SSC. It isimportant to note, though, that the mandatory coverage under the SSS Law is premised on

the existence of an employer-employee relationship17[17] except in cases of compulsorycoverage of the self-employed.

It is axiomatic that the allegations in the complaint, not the defenses set up in the

Answer or in the Motion to Dismiss, determine which court has jurisdiction over an action;

otherwise, the question of jurisdiction would depend almost entirely upon the defendant.18[18]

Moreover, it is well-settled that once jurisdiction is acquired by the court, it remains with it until the full

termination of the case.19[19] The said principle may be applied even to quasi-judicial bodies.

In this case, the petition-complaint filed by the petitioner SSS before the petitioner SSC against the

respondent cooperative and Stanfilco alleges that the owners-members of the respondent cooperative are

subject to the compulsory coverage of the SSS because they are employees of the respondent

cooperative. Consequently, the respondent cooperative being the employer of its owners-members must

register as employer and report its owners-members as covered members of the SSS and remit the

necessary premium contributions in accordance with the Social Security Law of 1997. Accordingly, based

on the aforesaid allegations in the petition-complaint filed before the petitioner SSC, the case clearly falls

within its jurisdiction. Although the Answer with Motion to Dismiss filed by the respondent cooperative

challenged the jurisdiction of the petitioner SSC on the alleged lack of employer-employee relationship

between itself and its owners-members, the same is not enough to deprive the petitioner SSC of its

jurisdiction over the petition-complaint filed before it. Thus, the petitioner SSC cannot be faulted for

initially assuming jurisdiction over the petition-complaint of the petitioner SSS.

Nonetheless, since the existence of an employer-employee relationship between the respondent

cooperative and its owners-members was put in issue and considering that the compulsory coverage of

the SSS Law is predicated on the existence of such relationship, it behooves the petitioner SSC to

determine if there is really an employer-employee relationship that exists between the respondent

cooperative and its owners-members.


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The question on the existence of an employer-employee relationship is not within the exclusive

jurisdiction of the National Labor Relations Commission (NLRC). Article 217 of the Labor Code

enumerating the jurisdiction of the Labor Arbiters and the NLRC provides that:

ART. 217. JURISDICTION OF LABOR ARBITERS AND THE COMMISSION. - (a) x x x.

x x x x

6. Except claims forEmployees Compensation, Social Security, Medicareand maternity benefits, all other claims, arising from employer-employee relations,including those of persons in domestic or household service, involving an amountexceeding five thousand pesos (P5,000.00) regardless of whether accompanied witha claim for reinstatement.20[20]

Although the aforesaid provision speaks merely of claims for Social Security, it would necessarily

include issues on the coverage thereof, because claims are undeniably rooted in the coverage by the

system. Hence, the question on the existence of an employer-employee relationship for the purpose of

determining the coverage of the Social Security Systemis explicitly excluded from the jurisdiction of

the NLRC and falls within the jurisdiction of the SSC which is primarily charged with the duty of settling

disputes arising under the Social Security Law of 1997.

On the basis thereof, considering that the petition-complaint of the petitioner SSS involved the

issue of compulsory coverage of the owners-members of the respondent cooperative, this Court agrees

with the petitioner SSC when it declared in its Order dated 17 February 2004 that as an incident to the

issue of compulsory coverage, it may inquire into the presence or absence of an employer-employeerelationship without need of waiting for a prior pronouncement or submitting the issue to the NLRC for

prior determination. Since both the petitioner SSC and the NLRC are independent bodies and their

jurisdiction are well-defined by the separate statutes creating them, petitioner SSC has the authority to

inquire into the relationship existing between the worker and the person or entity to whom he renders

service to determine if the employment, indeed, is one that is excepted by the Social Security Law of 1997

from compulsory coverage.21[21]

Even before the petitioner SSC could make a determination of the existence of an employer-employee

relationship, however, the respondent cooperative already elevated the Order of the petitioner SSC,

denying its Motion to Dismiss, to the Court of Appeals by filing a Petition for Certiorari. As a consequence

thereof, the petitioner SSC became a party to the said Petition for Certiorari pursuant to Section

5(b)22[22] of Republic Act No. 8282. The appellate court ruled in favor of the respondent cooperative by

declaring that the petitioner SSC has no jurisdiction over the petition-complaint filed before it because

there was no employer-employee relationship between the respondent cooperative and its owners-

members. Resultantly, the petitioners SSS and SSC, representing the Republic of the Philippines, filed a

Petition for Review before this Court.


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Although as a rule, in the exercise of the Supreme Courts power of review, the Court is not a trier

of facts and the findings of fact of the Court of Appeals are conclusive and binding on the Court,23[23]

said rule is not without exceptions. There are several recognized exceptions24[24] in which factual issues

may be resolved by this Court. One of these exceptions finds application in this present case which is,

when the findings of fact are conflicting. There are, indeed, conflicting findings espoused by the petitioner

SSC and the appellate court relative to the existence of employer-employee relationship between the

respondent cooperative and its owners-members, which necessitates a departure from the oft-repeatedrule that factual issues may not be the subject of appeals to this Court.

In determining the existence of an employer-employee relationship, the following elements are

considered: (1) the selection and engagement of the workers; (2) the payment of wages by whatever

means; (3) the power of dismissal; and (4) the power to control the workers conduct, with the latter

assuming primacy in the overall consideration.25[25] The most important element is the employers

control of the employees conduct, not only as to the result of the work to be done, but also as

to the means and methods to accomplish.26[26] The power of control refers to the existence of the

power and not necessarily to the actual exercise thereof. It is not essential for the employer to actually

supervise the performance of duties of the employee; it is enough that the employer has the right to wield

that power.27[27] All the aforesaid elements are present in this case.

First. It is expressly provided in the Service Contracts that it is the respondent cooperative which

has the exclusive discretion in theselection and engagement of the owners-members as well as

its team leaders who will be assigned at Stanfilco.28[28] Second. Wages are defined as

remuneration or earnings, however designated, capable of being expressed in terms of money,

whether fixed or ascertained, on a time, task, piece or commission basis, or other method of calculatingthe same, which is payable by an employer to an employee under a written or unwritten contract

of employment for work done or to be done, or for service rendered or to be rendered .29[29]

In this case, the weeklystipends or the so-called shares in the service surplus given by the respondent

cooperative to itsowners-members were in reality wages, as the same were equivalent to an amount not

lower than that prescribed by existing labor laws, rules and regulations, including the wage order

applicable to the area and industry; or the same shall not be lower than the prevailing rates of


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wages.30[30] It cannot be doubted then that those stipends or shares in the service surplus are indeed

wages, because these are given to the owners-members as compensation in rendering services to

respondent cooperatives client, Stanfilco. Third. It is also stated in the above-mentioned Service

Contracts that it is the respondent cooperative which has the power to investigate, discipline and

remove the owners-members and its team leaderswho were rendering services at Stanfilco.31[31]

Fourth. As earlier opined, of the four elements of the employer-employee relationship, the control test

is the most important. In the case at bar, it is the respondent cooperative which has the sole

control over the manner and means of performing the services under the Service Contracts

with Stanfilco as well as the means and methods of work.32[32] Also, the respondent cooperative

is solely and entirely responsible for its owners-members, team leaders and other representatives at

Stanfilco.33[33] All these clearly prove that, indeed, there is an employer-employee relationship between

the respondent cooperative and its owners-members.

It is true that the Service Contracts executed between the respondent cooperative and Stanfilco

expressly provide that there shall be no employer-employee relationship between the respondent

cooperative and its owners-members.34[34] This Court, however, cannot give the said provision force

and effect.

As previously pointed out by this Court, an employee-employer relationship actually exists between

the respondent cooperative and its owners-members. The four elements in the four-fold test for the

existence of an employment relationship have been complied with. The respondent cooperative must not

be allowed to deny its employment relationship with its owners-members by invoking the questionable

Service Contracts provision, when in actuality, it does exist. The existence of an employer-employee

relationship cannot be negated by expressly repudiating it in a contract, when the terms andsurrounding circumstances show otherwise. The employment status of a person is defined and

prescribed by law and not by what the parties say it should be.35[35]

It is settled that the contracting parties may establish such stipulations, clauses, terms and

conditions as they want, and their agreement would have the force of law between them. However, the

agreed terms and conditions must not be contrary to law, morals, customs, public policy or

public order.36[36] The Service Contract provision in question must be struck down for being contrary

to law and public policy since it is apparently being used by the respondent cooperative merely to


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circumvent the compulsory coverage of its employees, who are also its owners-members, by the Social

Security Law.

This Court is not unmindful of the pronouncement it made in Cooperative Rural Bank of Davao City,

Inc. v. Ferrer-Calleja37[37] wherein it held that:

A cooperative, therefore, is by its nature different from an ordinary businessconcern, being run either by persons, partnerships, or corporations. Its owners and/ormembers are the ones who run and operate the business while the others are its employeesx x x.

An employee therefore of such a cooperative who is a member and co-owner thereof cannot invoke the right to collective bargaining for certainly an

owner cannot bargain with himself or his co-owners. In the opinion of August 14,1981 of the Solicitor General he correctly opined that employees of cooperatives who arethemselves members of the cooperative have no right to form or join labor organizations forpurposes of collective bargaining for being themselves co-owners of the cooperative.

However, in so far as it involves cooperatives with employees who are not membersor co-owners thereof, certainly such employees are entitled to exercise the rights of allworkers to organization, collective bargaining, negotiations and others as are enshrined inthe Constitution and existing laws of the country.

The situation in the aforesaid case is very much different from the present case. The declaration

made by the Court in the aforesaid case was made in the context of whether an employee who is also an

owner-member of a cooperative can exercise the right to bargain collectively with the employer who is the

cooperative wherein he is an owner-member. Obviously, an owner-member cannot bargain collectively

with the cooperative of which he is also the owner because an owner cannot bargain with himself. In the

instant case, there is no issue regarding an owner-members right to bargain collectively with the

cooperative. The question involved here is whether an employer-employee relationship can exist between

the cooperative and an owner-member. In fact, a closer look at Cooperative Rural Bank of Davao City,

Inc. will show that it actually recognized that an owner-member of a cooperative can be its own employee.

It bears stressing, too, that a cooperative acquires juridical personality upon its registration with

the Cooperative Development Authority.38[38] It has its Board of Directors, which directs and supervises

its business; meaning, its Board of Directors is the one in charge in the conduct and management of its

affairs.39[39] With that, a cooperative can be likened to a corporation with a personality separate and

distinct from its owners-members. Consequently, an owner-member of a cooperative can be an employee

of the latter and an employer-employee relationship can exist between them.

In the present case, it is not disputed that the respondent cooperative had registered itself with the

Cooperative Development Authority, as evidenced by its Certificate of Registration No. 0-623-2460.40[40]

Documents

Labor Law 2 (Cases)