Labor Relations 13 Cases

Labor Relations Cases

G.R. No. L-12503 April 29, 1960

CONFEDERATED SONS OF LABOR, petitioner,vs.ANAKAN LUMBER COMPANY, UNITED WORKERS' UNION and COURT OF INDUSTRIAL RELATIONS, respondents.

Gregorio E. Fajardo for petitioner.Banaag, Boquirin and Morabe for respondent Lumber Co.Pablo S. Reyes for respondent Union.Joaquin M. Salvador for respondent Court of Industrial Relations.

CONCEPCION, J.:

This is an unfair labor practice case instituted at the instance of the Confederated Sons of Labor against the Anakan Lumber Company and the United Workers' Union, hereafter referred to as the petitioner, the company and respondent union, respectively. The amended complaint filed with the Court of Relations charged said respondents with unfair labor practices committed by

A. Anakan Lumber Company —

1. "by dominating, assisting and interferring with the administration of the respondent United Workers' Union and by contributing financial and other support to it, . . . .

2. "in discriminating in regards to hire or tenure of employment for the purpose of encouraging membership in the respondent United Workers' Union and/or discouraging membership in the complainant Confederated Sons of Labor or because of union membership or activity by dismissing and in fact did dismiss without cause all its workers affiliated with the complainant union and replaced by new ones, . . . .

B. United Workers' Union —

in causing the respondent Anakan Company to discriminate against the workers mentioned in Paragraph IV of the foregoing complaint in violation of Section 4 (a), subparagraph 4 of the Act by demanding from the respondent Anakan Lumber Company the dismissal of said workers from their work therein, or in discriminating against them to whom membership in the respondent United Workers' Union have been terminated on grounds other than the usual terms and conditions of membership made available to other members by expelling them as members from the said Union in violation of the respondent union's Constitution and By-laws and who were subsequently dismissed by the respondent Anakan Lumber Company on demand by the respondent United Workers' Union, in violation of Section 4(b), sub-paragraph 2 of Republic Act No. 875.

On motion of petitioner and with the conformity of respondents, the Court of Industrial Relations issued, in the course of the trial, an order dismissing the charge of union domination against the company. Subsequently, upon submission of the case for decision on the merits, the presiding judge of said court issued an order, dated October 4, 1956, absolving respondent union, but finding the company guilty of unfair labor practices in dismissing 46 employees thereof and ordering said company "to cease and desist from engaging in unfair labor practice and to reinstate the 46 employees concerned, with back wages from the date of their separation from its service until reinstated." On motion for reconsideration filed by respondents, a majority of the members of the court, sitting in banc, reversed said order and dismissed the complaint, in a resolution dated December 28, 1956. Hence, this petition for review by certiorari filed by petitioner herein.

It appears that respondent union has a membership of more than 1,000 laborers and employees of the company, with whom it entered, on January 23, 1955, into a contract entitled "Collective Bargaining and Closed Shop Agreement". Subsequently, 46 employees of the company and members of respondent union joined petitioner herein, which is another labor organization. As a consequence, said 46 employees were expelled from respondent union, pursuant to its constitution and by-laws. Thereafter, respondent union demanded from the company the dismissal of these 46 employees, upon the authority of Article II of said "Collective Bargaining and Closed Shop Agreement", and claiming to act in pursuance of such Article II and in compliance with the aforementioned agreement, the company dismissed said 46 employees. Inasmuch as they are members of petitioner herein, the latter caused this unfair labor practice proceedings to be instituted.

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The main issue in the case at bar is whether the company was bound to expel the aforementioned 46 employees under the provisions of said Article II of its collective bargaining agreement with respondent union reading:

That the UNION shall have the exclusive right, and privilege to supply the COMPANY with such laborers, employees and workers as are necessary in the logging, mechanical, sawmill, office, logponds, motor pools, security guards and all departments in its many phases of operations, excepting such positions which are highly technical and confidential in character and/or such positions which carry the exercise of authority in the interest of the COMPANY which exercise is not merely clerical or routinary within the contemplation of the law, and that the COMPANY agrees to employ or hire in any of its departments only such person or persons who are members of the UNION.

Respondents maintain that since respondent union is thus given "the exclusive right and privilege to supply the company with such laborers, employees and workers are as necessary" for the activities specified in said Article II and the company had agreed "to employ or hire in any of its departments only such persons who are members of the union", it follows that such laborers, employees and workers of the company as may cease to be members of the respondent union must be expelled from the company. Upon mature deliberation, the Court is of the opinion that respondents' pretense cannot be sustained.

At the outset, respondents labor evidently under the impression that said Article II of their contract establishes a "closed shop" agreement, which is erroneous for, as held by this Court.

Closed-Shop agreement is an agreement whereby an employer binds himself to hire only members of the contracting union who must continue to remain members in good standing to keep their job. (National Labor Union vs. Aguinaldo's Echague, Inc., 51 Off. Gaz. No. 6, p. 2899, cited in Bacolod-Murcia Milling Co., Inc. and Alfredo T. Garcia vs. National Employees-Workers Security Union, 53 Off. Gaz., 615; Emphasis ours.)

Rothenberg, in his work on Labor Relations, has the following to say about "closed shop":

A "closed shop" may be defined as an enterprise in which, agreement between the employer and his employees or their representatives, no person may be employed in any or certain agreed departments of the enterprise unless he or she is, becomes, and, for duration of the agreement, remains a member in good standing for a union entirely comprised of or of which the employees in interest are a part. (Rothenberg on Labor Relations, p. 48; Emphasis ours.)

Inasmuch as Article II above quoted does not provide that employees "must continue to remain members in good standing" of respondent union "to keep their jobs," the collective bargain-agreement between them does not establish a 'closed shop," except in a very limited sense, namely, that the laborers, employees and workers engaged by the company after the signing of the agreement on January 23, 1955, must be members of respondent union. The agreement does not affect the right of the company to retain those already working therefor on or before said date, or those hired or employed subsequently thereto, while they were members of respondent union, but who, thereafter, resign or are expelled therefrom.

In order that an employer may be deemed bound, under a collective bargaining agreement, to dismiss employees for non-union membership, the stipulation to this effect must be so clear and unequivocal as to leave no room for doubt thereon. An undertaking of this nature is so harsh that it must be strictly construed, and doubts must be resolved against the existence of "closed shop". Referring particularly to the above-quoted Article II, we note that the same establishes the exclusive right of respondent union to "supply" laborers etc., and limits the authority of the company to "employ or hire" them. In other words, it requires that the laborers, employees and workers hired or employed by the company be members of respondent union at the time of the commencement of the employer-employee relation. Membership respondent union is not a condition for the continuation of said relation or for the retention of a laborer or employee engaged either before said agreement or while he was a member of said union.

Indeed, Article III-A of the agreement provides:

That the COMPANY may dismiss or otherwise remove from employments any employee or laborer for gross inefficiency, misconduct, gross disrespect to the manager, misbehavior, or culpable negligence in the office, commission of any crime or misdemeanor while in the course of his employment or work or office, only upon report of the same in writing duly signed by the supervisor or company official directly responsible over such employee or laborer to the Manager of the COMPANY which report shall contain in concise form the facts and circumstances upon which such removal or dismissal is based, furnishing therewith in the form of notice the President of the UNION within 3 days before such dismissal or removal is effected, the latter

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upon receipt thereof shall give his consent or dissent thereto in writing, which in case of dissent shall be considered a formal request for reconsideration of the cause of each individual case or removal or dismissal by the COMPANY.

If the parties to the agreement intended to establish a "closed shop", in the strict sense of the phrase, they would have inserted in said Article III-a, among the grounds for dismissal by the company therein specified the discontinuance of membership in respondent union. Their failure to make such insertion strongly indicates that said discontinuance of membership was not understood to be a ground for dismissal.

Further confirmation of this view is the fact that on August 24, 1955, or after the dismissal of all of the employees above mentioned--except one who was dismissed on August 30, 1955 — Article II of the agreement was amended to read as follows:

That the UNION shall have the exclusive right and privilege to supply the COMPANY with such skilled and/or unskilled laborers, employees and workers as are necessary in the logging, mechanical, sawmill, office, log ponds, motor pool, security guards and all departments in its many phases of operation whether on an apprenticeship or temporary status, excepting such positions which are highly technical and confidential in character and/or such positions which carry the exercise of authority in the interest of the COMPANY which exercise is not merely clerical or routinary within the contemplation of the law, and that the COMPANY agrees to comply or hire in any of its department only such person or persons who are members of the union and to retain in its employ only such employees or laborers who remain members of good standing of the Union; subject to the following limitations or conditions, to wit:

1. An apprentice shall, after serving 78 working days, be automatically classified as temporary employee or laborer.

2. A temporary employee becomes automatically permanent and regular after working 152 working days.

The addition, to the last part of the original Article II, of the clause "and to retain in its employ only such employees or laborers who remain members of good standing of the union," indicates that the company was not prohibited prior thereto from retaining in its employ such laborers as do not remain members of good standing of respondent union.

In short, the dismissal of 45 out of the 46 laborers in question, prior to said amendment of Article II, was illegal, and, hence, said 45 laborers should be reinstated. Considering, however, that the agreement was entitled "Closed Shop" and that there is no local decision squarely in point, the Court is inclined to give the company the benefit of doubt as regards its claim that it acted under the honest belief that it was bound to dismiss them pursuant to said agreement.

Wherefore, the resolution appealed from is hereby affirmed, insofar only as the aforementioned 45 laborers and employees are concerned, and another one shall be entered directing the reinstatement of said 45 laborers and employees, with costs against the respondents. It is so ordered.

Paras, C.J., Bengzon, Montemayor, Bautista Angelo, Labrador, Reyes, J.B.L., Endencia and Gutierrez David, JJ., concur.

G.R. No. 151021 May 4, 20063


CAINTA CATHOLIC SCHOOL and MSGR. MARIANO T. BALBAGO, Petitioners,vs.CAINTA CATHOLIC SCHOOL EMPLOYEES UNION (CCSEU), Respondent.

D E C I S I O N

Tinga, J.:

The main issue for resolution hinges on the validity of a stipulation in a Collective Bargaining Agreement (CBA) that allows management to retire an employee in its employ for a predetermined lengthy period but who has not yet reached the minimum compulsory retirement age provided in the Labor Code. Jurisprudence has answered the question in the affirmative a number of times and our duty calls for the application of the principle of stare decisis. As a consequence, we grant the petition and reverse the Court of Appeals.

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Decision[1] dated 20 August 2001 of the Court of Appeals in CA-G.R. SP No. 50851, which reversed the Resolutions dated 31 January 1997,[2] and 30 April 1997[3] of the National Labor Relations Commission (NLRC), Third Division in NLRC NCR CC No. L-000028-93 (NLRC RAB-IV-7-6827-94-R), as well as the Resolution[4] dated 6 December 2001.

The antecedent facts follow:

On 6 March 1986, a Collective Bargaining Agreement (CBA) was entered into between Cainta Catholic School (School) and the Cainta Catholic School Employees Union (Union) effective 1 January 1986 to 31 May 1989. This CBA provided, among others, that:

ARTICLE IX

DURATION OF AGREEMENT

This Collective Bargaining Agreement shall become effective and binding upon the parties from January 1, 1986 up to May 31, 1989. At least sixty (60) days before the expiration of this Agreement, the parties hereto shall submit written proposals which shall be made the basis of negotiations for the execution of a new agreement.

If no new agreement is reached by the parties at the expiration of this agreement, all the provisions of this Agreement shall remain full force and in effect, up to the time a new Agreement shall be executed.[5]

Msgr. Mariano Balbago (Balbago) was appointed School Director in April 1987. From this time, the Union became inactive.

It was only in 10 September 1993 that the Union held an election of officers, with Mrs. Rosalina Llagas (Llagas) being elected as President; Paz Javier (Javier), Vice-President; Fe Villegas (Villegas), Treasurer; and Maria Luisa Santos (Santos), Secretary. Llagas was then the Dean of the Student Affairs while Villegas and Santos were Year-Level Chairmen. The other elected officers were Rizalina Fernandez, Ester Amigo, secretaries; Nena Marvilla, treasurer; Gilda Galange and Jimmy del Rosario, auditors; Filomeno Dacanay and Adelina Andres, P.R.O.s; and Danilo Amigo and Arturo Guevarra, business managers.[6]

On 15 October 1993, the School retired Llagas and Javier, who had rendered more than twenty (20) years of continuous service, pursuant to Section 2, Article X of the CBA, to wit:

An employee may be retired, either upon application by the employee himself or by the decision of the Director of the School, upon reaching the age of sixty (60) or after having rendered at least twenty (20) years of service to the School the last three (3) years of which must be continuous.[7]

Three (3) days later, the Union filed a notice of strike with the National Conciliation and Mediation Board (NCMB) docketed as NCMB-RB-12-NS-10-124-93. On 8 November 1993, the Union struck and picketed the School’s entrances.

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On 11 November 1993, then Secretary of Labor Ma. Nieves R. Confesor issued an Order certifying the labor dispute to the National Labor Relations Commission (NLRC). The dispositive portion reads:

“WHEREFORE, PREMISES CONSIDERED, this Office hereby certifies the labor dispute at the Cainta Catholic School to the National Labor Relations Commission for compulsory arbitration, pursuant to Article 263(g) of the Labor Code as amended.”

“Accordingly, all striking teachers and employees are directed to return to work within 24 hours from receipt of this Order and the School Administrator to accept all returning employees under the same terms and conditions prevailing prior to the strike.”

“Furthermore, the effects of the termination of Ms. Rosalinda Llagas and Paz A. Javier are hereby suspended. In line with this Order, the School Administration is ordered to reinstate them to their former positions without loss of seniority rights and privileges pending determination of the validity of their dismissal.”

“Both parties are further directed to cease and desist from committing any acts that might aggravate the situation.”

“SO ORDERED.”[8]

On 20 December 1993, the School filed a petition directly with the NLRC to declare the strike illegal.

On 27 July 1994, the Union filed a complaint[9] for unfair labor practice before the NLRC docketed as NLRC Case No. RAB-IV-7-6827-94-R, entitled, “Cainta Catholic School Employees Union v. Cainta Catholic School, et. al.,” before Arbitration Branch IV. Upon motion, then Labor Arbiter Oswald Lorenzo ordered the consolidation of this unfair labor practice case with the above-certified case.

On 31 January 1997, the NLRC rendered a Resolution favoring the School.

Three (3) issues were passed upon by the NLRC, namely: (1) whether the retirement of Llagas and Javier is legal; (2) whether the School is guilty of unfair labor practice; and (3) whether the strike is legal.

The NLRC ruled that the retirement of Llagas and Javier is legal as the School was merely exercising an option given to it under the CBA.[10] The NLRC dismissed the unfair labor practice charge against the School for insufficiency of evidence. Furthermore, it was found that the strike declared by the Union from 8 to 12 November 1993 is illegal, thereby declaring all union officers to have lost their employment status.[11]

The Union moved for reconsideration but it was denied in a Resolution dated 30 April 1997.

Hence, on 9 July 1997, the Union filed a petition for certiorari before this Court docketed as G.R. No. 129548. The Court issued a temporary restraining order (TRO) against the enforcement of the subject resolutions effective as of 23 July 1997. The School, however, filed a motion for clarification considering that it had already enforced the 31 January 1997 NLRC Resolution.

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On 28 July 1997, ten (10) regular teachers, who were declared to have lost their employment status under the aforesaid NLRC Resolution reported back to work but the School refused to accept them by reason of its pending motion for clarification. This prompted the Union to file a petition for contempt against Balbago and his agents before this Court, docketed as G.R. No. 130004, which was later on consolidated with G.R. No. 129548.

Pursuant to the ruling of this Court in St. Martin Funeral Homes v. NLRC,[12] the case was referred to the Court of Appeals and re-docketed as CA-G.R. SP No. 50851.

On 20 August 2001, the Court of Appeals rendered a decision giving due course and granting the petition to annul and set aside the 31 January 1997 and 30 April 1997 Resolutions of the NLRC; while dismissing the petition for contempt for lack of merit. The decretal portion of the decision reads:

WHEREFORE, premises considered, the petition to annul and set aside the 31 January 1997 and the 30 April 1997 resolutions of the National Labor Relations Commission is GRANTED. Judgment is hereby RENDERED directing private respondents: 1) to REINSTATE the terminated union officers, except Rosalinda Llagas, Paz Javier, Gilda Galange and Ester Amigo, to their former positions without loss of seniority rights and other privileges with full backwages, inclusive of allowances and other benefits or their monetary equivalent from 9 June 1997 up to the time of their actual reinstatement; 2) to pay Rosalinda Llagas: a) separation pay equivalent to one (1) month pay for every year of service, in lieu of reinstatement, with full backwages, inclusive of allowances and other benefits or their monetary equivalent from 9 June 1997 up to the time of the finality of this decision; b) moral and exemplary damages in the amount of ten thousand pesos (P10,000.00) and five thousand (P5,000.00), respectively; 3) to pay Paz Javier, or her heirs: a) unpaid salaries, inclusive of allowances and other benefits, including death benefits, or their monetary equivalent from the time her compensation was withheld from her up to the time of her death; b) separation pay equivalent to one (1) month’s salary for every year of service; and c) moral and exemplary damages in the amount of ten thousand pesos (P10,000.00) and five thousand pesos (P5,000.00), respectively.

Private respondents are also ordered to pay petitioner union attorney’s fees equivalent to five percent (5%) of the total judgment award.

The petition for contempt, however, is DISMISSED for lack of merit.

No pronouncement as to costs.

SO ORDERED.[13]

In reversing the decision of the NLRC, the Court of Appeals construed the retirement of Llagas and Javier as an act amounting to unfair labor practice when viewed against the backdrop of the relevant circumstances obtaining in the case. The appellate court pointed out, thus:

The two happened to be the most vocal, dynamic and influential of all union officers and members and they held considerable suasion over the other employees. Rosalinda Llagas objected to the signing of the prepared form distributed by the school, as a consequence of which, no one accomplished the form, and opposed the formation of the high school faculty club as the teachers already had sufficient representation through the union. Paz Javier, on the other hand, demanded that she be given the floor during the faculty club organizational meeting and went on to win the presidency of the faculty club, conclusively showing that she enjoyed the support of the high school teachers. They were therefore a new and different breed of union leaders – assertive, militant and independent – the exact opposite of former union president Victor Javier who seemed to be passive, cooperative and pacific. The school saw the two as threats which it could not control, and faced with a very uncomfortable situation of having to contend with an aggressive union which just dominated the high school faculty club (except for Joel Javeniar, all of the faculty club’s officers were union members; Rollo, p. 418), the school decided to “nip in the bud” the reactivated union by retiring its most prominent leaders.

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x x x x

It is not difficult to see the anti-union bias of the school. One of the first acts of private respondent Msgr. Balbago immediately after his assumption of office as school director was to ask for a moratorium on all union activities. With the union in inactive status, the school felt secure and comfortable but when the union reactivated, the school became apprehensive and reacted by retiring the union’s two topmost officers by invoking the provisions of the CBA. When the union furnished the school, through counsel, a copy of a proposed CBA on 3 November 1993, the school in a cavalier fashion ignored it on the pretext that the union no longer enjoyed the majority status among the employees x x x[14]

The appellate court concluded that the retirement of the two (2) union officers was clearly to bust the reactivated union.

Having established that the School committed unfair labor practice, the Court of Appeals declared that the “no-strike, no-lockout clause” in the CBA was not violated when the union members staged a strike from 8 to 12 November 1993.[15] It further held that minor disorders or isolated incidents of perceived coercion attending the strike do not categorize it as illegal:

We studied carefully the available records and found that the existence of force during the strike was certainly not pervasive and widespread, or consistently and deliberately resorted to as a matter of policy, so as to stamp the strike with illegality, or to cause the loss of employment of the guilty party x x x [16]

The motion for reconsideration subsequently filed by the School was denied in a Resolution dated 6 December 2001, save in case of some union officers where the appellate court modified its ruling granting them separation pay instead of reinstatement because of their retirement or death.[17]

Thereafter, petitioners filed this petition for review on certiorari raising three main issues, summarized as: (1) whether the School’s decision to retire Llagas and Javier constitutes unfair labor practice; (2) whether the strike was legal; and (3) whether some union officers ordered dismissed are entitled to backwages.[18]

The School avers that the retirement of Llagas and Javier was clearly in accordance with a specific right granted under the CBA. The School justifies its actions by invoking our rulings in Pantranco North Express, Inc. v. NLRC[19] and Bulletin Publishing Corporation v. Sanchez[20] that no unfair labor practice is committed by management if the retirement was made in accord with management prerogative or in case of voluntary retirement, upon approval of management.

The Union, relying on the findings made by the Court of Appeals,[21] argues that the retirement of the two union officers is a mere subterfuge to bust the union.[22]

The NLRC, however, gave another justification to sustain the validity of the two union officers’ forcible retirement, viz:

The retirement of Rosalinda Llagas has become inevitable because, being a managerial employee by reason of her position as Dean of Student Affairs, she accepted the Union presidency. She lost the trust and confidence on her by the SCHOOL as she occupied a managerial position as Dean of Student Affairs. . . Being also the union president, she has allowed her loyalties to be divided between the administration and the union.

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As to Paz Javier, her retirement was decided upon after an evaluation shows that she was not performing well as her students were complaining about her brusque attitude and bad language, aside from being habitually absent and late. [23]

At the outset, only questions of law are entertained by this Court through a petition for review on certiorari. There are, however, well-recognized exceptions such as in this case when the factual findings of the NLRC and the Court of Appeals are contradictory.[24] A re-evaluation of the records of this case is necessary for its proper resolution.

The key issue remains whether the forced retirement of Llagas and Javier was a valid exercise of management prerogative. Undoubtedly, the retirement of the two (2) union officers triggered the declaration of strike by the Union, and the ruling on whether the strike was legal is highly dependent on whether the retirement was valid.

We are impelled to reverse the Court of Appeals and affirm the validity of the termination of employment of Llagas and Javier, arising as it did from a management prerogative granted by the mutually-negotiated CBA between the School and the Union.

Pursuant to the existing CBA,[25] the School has the option to retire an employee upon reaching the age limit of sixty (60) or after having rendered at least twenty (20) years of service to the School, the last three (3) years of which must be continuous. Retirement is a different specie of termination of employment from dismissal for just or authorized causes under Articles 282 and 283 of the Labor Code. While in all three cases, the employee to be terminated may be unwilling to part from service, there are eminently higher standards to be met by the employer validly exercising the prerogative to dismiss for just or authorized causes. In those two instances, it is indispensable that the employer establish the existence of just or authorized causes for dismissal as spelled out in the Labor Code. Retirement, on the other hand, 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 and/or consents to sever his employment with the former.[26]

Article 287 of the Labor Code, as amended, governs retirement of employees, stating:

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.

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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.

The CBA in the case at bar established 60 as the compulsory retirement age. However, it is not alleged that either Javier or Llagas had reached the compulsory retirement age of 60 years, but instead that they had rendered at least 20 years of service in the School, the last three (3) years continuous. Clearly, the CBA provision allows the employee to be retired by the School even before reaching the age of 60, provided that he/she had rendered 20 years of service. Would such a stipulation be valid? Jurisprudence affirms the position of the School.

Pantranco North Express, Inc. v. NLRC, cited by petitioners, finds direct application in this case. The CBA involved in Pantranco allowed the employee to be compulsorily retired upon reaching the age of 60 “or upon completing [25] years of service to [Pantranco].” On the basis of the CBA, private respondent was compulsorily retired by Pantranco at the age of 52, after 25 years of service. Interpreting Article 287, the Court ruled that the Labor Code permitted employers and employees to fix the applicable retirement age at below 60 years of age. Moreover, the Court also held that there was no illegal dismissal since it was the CBA itself that incorporated the agreement reached between the employer and the bargaining agent with respect to the terms and conditions of employment; hence, when the private respondent ratified the CBA with his union, he concurrently agreed to conform to and abide by its provisions. Thus, the Court asserted, “[p]roviding in a CBA for compulsory retirement of employees after twenty-five (25) years of service is legal and enforceable so long as the parties agree to be governed by such CBA.”[27]

A similar set of facts informed our decision in Progressive Development Corporation v. NLRC.[28] The CBA therein stipulated that an employee “with [20] years of service, regardless of age, may be retired at his option or at the option of the company.” The stipulation was used by management to compulsorily retire two employees with more than 20 years of service, at the ages of 45 and 38. The Court affirmed the validity of the stipulation on retirement as consistent with Article 287 of the Labor Code.

Philippine Airlines, Inc. v. Airline Pilots Association of the Phils.[29] further bolsters the School’s position. At contention therein was a provision of the PAL-ALPAP Retirement Plan, the Plan having subsequently been misquoted in the CBA mutually negotiated by the parties. The Plan authorized PAL to exercise the option of retirement over pilots who had chosen not to retire after completing 20 years of service or logging over 20,000 hours for PAL. After PAL exercised such option over a pilot, ALPAP charged PAL with illegal dismissal and union-busting. While the Secretary of Labor upheld the unilateral retirement, it nonetheless ruled that PAL should first consult with the pilot to be retired before it could exercise such option. The Court struck down that proviso, ruling that “the requirement to consult the pilots prior to their retirement defeats the exercise by management of its option to retire the said employees, [giving] the pilot concerned an undue prerogative to assail the decision of management.”

By their acceptance of the CBA, the Union and its members are obliged to abide by the commitments and limitations they had agreed to cede to management. The questioned retirement provisions cannot be deemed as an imposition foisted on the Union, which very well had the right to have refused to agree to allowing management to retire retire employees with at least 20 years of service.

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It should not be taken to mean that retirement provisions agreed upon in the CBA are absolutely beyond the ambit of judicial review and nullification. A CBA, as a labor contract, is not merely contractual in nature but impressed with public interest. If the retirement provisions in the CBA run contrary to law, public morals, or public policy, such provisions may very well be voided. Certainly, a CBA provision or employment contract that would allow management to subvert security of tenure and allow it to unilaterally “retire” employees after one month of service cannot be upheld. Neither will the Court sustain a retirement clause that entitles the retiring employee to benefits less than what is guaranteed under Article 287 of the Labor Code, pursuant to the provision’s express proviso thereto in the provision.

Yet the CBA in the case at bar contains no such infirmities which must be stricken down. There is no essential difference between the CBA provision in this case and those we affirmed in Pantranco and Progressive. Twenty years is a more than ideal length of service an employee can render to one employer. Under ordinary contemplation, a CBA provision entitling an employee to retire after 20 years of service and accordingly collect retirement benefits is “reward for services rendered since it enables an employee to reap the fruits of his labor — particularly retirement benefits, whether lump-sum or otherwise — at an earlier age, when said employee, in presumably better physical and mental condition, can enjoy them better and longer.”[30]

We affirm the continued validity of Pantranco and its kindred cases, and thus reiterate that under Article 287 of the Labor Code, a CBA may validly accord management the prerogative to optionally retire an employee under the terms and conditions mutually agreed upon by management and the bargaining union, even if such agreement allows for retirement at an age lower than the optional retirement age or the compulsory retirement age. The Court of Appeals gravely erred in refusing to consider this case from the perspective of Pantranco, or from the settled doctrine enunciated therein.

What the Court of Appeals did instead was to favorably consider the claim of the Union that the real purpose behind the retirement of Llagas and Javier was to “bust” the union, they being its president and vice-president, respectively. To that end, the appellate court favorably adopted the citation by the Union of the American

case of NLRB v. Ace Comb, Co.,[31] which in turn was taken from a popular local labor law textbook. The citation stated that “[f]or the purpose of determining whether or not a discharge is discriminatory, it is necessary that the underlying reason for the discharge be established. The fact that a lawful cause for discharge is available is not a defense where the employee is actually discharged because of his union activities.”[32]

Reliance on NLRB v. Ace Comb, Co. was grossly inapropos. The case did not involve an employee sought to be retired, but one who cited for termination from employment for cause, particularly for violating Section 8(a)(3) of the National Labor Relations Act, or for insubordination. Moreover, the United States Court of Appeals Eighth Circuit, which decided the case, ultimately concluded that “here the evidence abounds that there was a justifiable cause for [the employee’s] discharge,”[33] his union activities notwithstanding. Certainly, the Union and the Court of Appeals would have been better off citing a case wherein the decision actually concluded that the employee was invalidly dismissed for union activities despite the ostensible existence of a valid cause for termination.

Nonetheless, the premise warrants considering whether management may be precluded from retiring an employee whom it is entitled to retire upon a determination that the true cause for compulsory retirement is the employee’s union activities.

The law and this Court frowns upon unfair labor practices by management, including so-called union-busting. Such illegal practices will not be sustained by the Court, even if guised under ostensibly legal premises. But with respect to an active unionized employee who claims having lost his/her job for union activities, there are different considerations presented if the termination is justified under just or authorized cause under the Labor Code; and if separation from service is effected through

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the exercise of a duly accorded management prerogative to retire an employee. There is perhaps a greater imperative to recognize the management prerogative on retirement than the prerogative to dismiss employees for just or authorized causes. For one, there is a greater subjectivity, not to mention factual dispute, attached to the concepts of just or authorized cause than retirement which normally contemplates merely the attainment of a certain age or a certain number of years in the service. It would be easier for management desirous to eliminate pesky union members to abuse the prerogative of termination for such purpose since the determination of just or authorized cause is rarely a simplistic question, but involves facts highly prone to dispute and subjective interpretation.

On the other hand, the exercise by management of its retirement prerogative is less susceptible to dubitability as to the question whether an employee could be validly retired. The only factual matter to consider then is whether the employee concerned had attained the requisite age or number of years in service pursuant to the CBA or employment agreement, or if none, pursuant to Article 287 of the Labor Code. In fact, the question of the amount of retirement benefits is more likely to be questioned than the retirement itself. Evidently, it more clearly emerges in the case of retirement that management would anyway have the right to retire an employee, no matter the degree of involvement of said employee in union activities.

There is another point that militates against the Union. A ruling in its favor is tantamount to a concession that a validly drawn management prerogative to retire its employees can be judicially interfered on a showing that the employee in question is highly valuable to the union. Such a rule would be a source of mischief, even if narrowly carved out by the Court, for it would imply that an active union member or officer may be, by reason of his/her importance to the union, somehow exempted from the normal standards of retirement applicable to the other, perhaps less vital members of the union. Indeed, our law’s protection of the right to organize labor does not translate into perpetual job security for union leaders by reason of their leadership role alone. Should we entertain such a notion, the detriment is ultimately to the union itself, promoting as it would a stagnating entrenched leadership.

We can thus can comfortably uphold the principle, as reiterated in Philippine Airlines,[34] that the exercise by the employer of a valid and duly established prerogative to retire an employee does not constitute unfair labor practice.

There are other arguments raised by petitioners. We need to discuss them only in brief, as they are no longer central to the resolution of this case.

The School insisted that Llagas and Javier were actually managerial employees, and it was illegal for the Union to have called a strike on behalf of two employees who were not legally qualified to be members of the Union in the first place.[35] The Union, on the other hand, maintains that they are rank-and-file employees.

Article 212(m) of the Labor Code defines a managerial employee as "one who is vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees, or to effectively recommend such managerial actions." The functions of the Dean of Student Affairs, as occupied by Llagas, are enumerated in the Faculty Manual. The salient portions are hereby enumerated:

11


a. Manages the High School Department with the Registrar and Guidance Counselors (acting as a COLLEGIAL BODY) in the absence of the Director or Principal.

b. Enforces the school rules and regulations governing students to maintain discipline.

x x x x

g. Plans with the Guidance Counselors student leadership training programs to encourage dynamic and responsible leadership among the students and submits the same for the approval of the Principal/Director.

x x x x

i. Studies proposals on extra-curricular or co-curricular activities and projects proposed by teachers and students and recommends to the Principal/Director the necessary approval.

j. Implements and supervises activities and projects approved by the Principal/Director so that the activities and projects follow faithfully the conditions set forth by the Principal/Director in the approval.

k. Assists in the planning, supervising and evaluating of programs of co-curricular activities in line with the philosophy and objectives of the School for the total development of the students.

l. Recommends to the Principal policies and rules to serve as guides to effective implementation of the student activity program.[36]

x x x x

It is fairly obvious from a perusal of the list that the Dean of Student Affairs exercises managerial functions, thereby classifying Llagas as a managerial employee.

Javier was occupying the position of Subject Area Coordinator. Her duties and responsibilities include:

1. Recommends to the principal’s consideration the appointment of faculty members in the department, their promotion, discipline and even termination;2. Recommends advisory responsibilities of faculty members;3. Recommends to the principal curricular changes, purchase the books and periodicals, supplies and equipment for the growth of the school;4. Recommends his/her colleagues and serves as channel between teachers in the department the principal and/or director.[37]

Supervisory employees, as defined in Article 212(m) are those who, in the interest of the employer, effectively recommend such managerial actions if the exercise of such authority is not merely routinary or clerical in nature but requires the use of independent judgment.

In the same vein, a reading of the above functions leads us to conclude that Javier was a supervisory employee. Verily, Javier made recommendations as to what actions to take in hiring, termination, disciplinary actions, and management policies, among others.

We can concede, as the Court of Appeals noted, that such job descriptions or appellations are meaningless should it be established that the actual duties performed by the employees concerned are neither managerial nor supervisory in nature. Yet on this point, we defer to the factual finding of the NLRC, the proximate trier of facts, that Llagas and Javier were indeed managerial and supervisory employees, respectively.

12


Having established that Llagas is a managerial employee, she is proscribed from joining a labor union,[38] more so being elected as union officer. In the case of Javier, a supervisory employee, she may join a labor union composed only of supervisory employees.[39] Finding both union officers to be employees not belonging to the rank-and-file, their membership in the Union has become questionable, rendering the Union inutile to represent their cause.

Since the strike has been declared as illegal based on the foregoing discussion, we need not dwell on its legality with respect to the means employed by the Union.

Finally, there is neither legal nor factual justification in awarding backwages to some union officers who have lost their employment status, in light of our finding that the strike is illegal. The ruling of the NLRC is thus upheld on this point. We are also satisfied with the disposition of the NLRC that mandates that Llagas and Javier (or her heirs) receive their retirement benefits.

WHEREFORE, the petition is GRANTED. The Resolution dated 31 January 1997 of the National Labor Relations Commission in NLRC NCR CC No. L-000028-93 is REINSTATED.

SO ORDERED.

DANTE O. TINGA Associate Justice

G.R. No. 142399 March 12, 2008

PHILIPPINE AIRLINES, INCORPORATED, Petitioner,vs.PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA), Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

This Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended, seeks to set aside the 30 April 1999 Decision1 and 10 March 2000 Resolution2 of the Court of Appeals in CA-G.R. SP No. 50161 entitled, "Philippine Airlines, Inc. v. National Labor Relations Commission and Philippine Airlines Employees Association (PALEA)." In the assailed decision, the appellate court dismissed the petition filed by petitioner Philippine Airlines, Inc. (PAL) and affirmed the 28 January 1998

13


Decision3 and 23 June 1998 Resolution,4 both of the First Division of the National Labor Relations Commission (NLRC) wherein the said Commission reversed and set aside the 12 March 1990 Decision5 of the Labor Arbiter in NLRC NCR No. 00-03-01134-89 dismissing the labor complaint filed by Philippine Airlines Employees Association (PALEA), the collective bargaining agent of the rank and file employees of petitioner PAL.

The present petition arose from a labor complaint,6 filed by respondent PALEA against petitioners PAL and one Mary Anne del Rosario, Director of Personnel of petitioner PAL, on 1 March 1989. The labor complaint charged both petitioners with unfair labor practice for the alleged non-payment of the 13th month pay of petitioner PAL’s employees who had not been regularized as of the 30 of April 1988, allegedly in contravention of the Collective Bargaining Agreement (CBA) entered into by petitioner PAL and respondent PALEA.

The facts are undisputed.

On 6 February 1987, petitioner PAL and respondent PALEA entered into a CBA7 covering the period of 1986-1989, to be applied, thus:

Section 3 – Application

All the terms and conditions of employment of employees within the bargaining unit are embodied in this Agreement, and the same shall govern the relationship between the Company and such employees. On the other hand, all such benefits and/or privileges as are not expressly provided for in this Agreement but which are now being accorded in accordance with the PAL Personnel Policies and Procedures Manual, shall be deemed also part and parcel of the terms and conditions of employment, or of this Agreement.8

Part of said agreement required petitioner PAL to pay its rank and file employees the following bonuses:

Section 4 – 13th Month Pay (Mid-year Bonus)

A 13th month pay, equivalent to one month’s current basic pay, consistent with the existing practice shall be paid in advance in May.

Section 5 – Christmas Bonus

The equivalent of one month’s current basic pay as of November 30, shall be paid in December as a Christmas bonus. Payment may be staggered in two (2) stages. It is distinctly understood that nothing herein contained shall be construed to mean that the Company may not at its sole discretion give an additional amount or increase the Christmas bonus.9

On 22 April 1988, prior to the payment of the 13th month pay (mid-year bonus), petitioner PAL released a guideline10 implementing the aforequoted provision, to wit:

1) Eligibility

a) Ground employees in the general payroll who are regular as of April 30, 1988;

b) Other ground employees in the general payroll, not falling within category a) above shall receive their 13th Month Pay on or before December 24, 1988;

2) Amount

a) For category a) above, one month basic salary as of April 30, 1988;

b) Employees covered under 1 b) above shall be paid not less than 1/12 of their basic salary for every month of service within the calendar year.

3) Payment Date: May 9, 1988 for category 1 a) above.11

14


Respondent PALEA assailed the implementation of the foregoing guideline on the ground that all employees of PAL, regular or non-regular, must be paid their 13th month pay. In fact, in a letter dated 16 December 1988, respondent PALEA, through Herbert C. Baldovino,12 informed petitioner PAL that the following regular employees failed to receive their 13th Month Pay as of the date of the correspondence. Said letter reads in part:

16 December 1988

To : Ms. Marie Anne E. Del Rosario Director-Personnel Services

From : PALEA Board Member-Engineering

Subject : 13th Month Pay

Please be informed that the following regular employees have not received their 13th month pay as of today.

NAME Date Employed Date Regularized

1. Renato C. Buenaventura -Nov. 17, 1987 May 17, 1988

2. Rene Zaragoza -Dec. 1, 1987 June 1, 1988

3. Ronald Lumibao -Dec. 1, 1987 June 1, 1988

4. Ruel Villa-real -Dec. 1, 1987 June 1, 1988

5. Rene Philip Banzon -Dec. 1, 1987 June 1, 1988

We feel that these employees are entitled to the 13th month pay in accordance with the guidelines issued by your office last 22 April 1988. (Copy attached.)

May we request your good office to do the necessary to effect payment of the 13th month pay to the above listed regular employees in the next regular payroll.

Praying for usual prompt attention.

(Sgd.) HERBERT C. BALDOVINO13

In response thereto, petitioner PAL informed respondent PALEA that rank and file employees who were regularized after 30 April 1988 were not entitled to the 13th month pay as they were already given their Christmas bonuses on 9 December 1988 per the Implementing Rules of Presidential Decree No. 851.14 Petitioner PAL’s response is hereunder quoted in full –

January 2, 1989

Mr. Herbert C. Baldovino PALEA Board Member and

Mr. George M. Pulido PALEA President 2nd Floor, Philbanking Bldg. Baclaran, Parañaque, M.M.

Dear Messrs. Baldovino and Pulido:

This pertains to your letter which we received on December 19, 1988 requesting for payment of 13th month pay to employees: Renato Buenaventura, Rene Zaragoza, Ronald Lumibao, Ruel Villareal and Rene Philip Banzon.

15


We would like to clarify the following:

1. The above-mentioned employees and other similarly situated employees were not paid the 13th month pay on May 9, 1988 because they were not qualified regular employees as of April 30, 1988. However, the guidelines provide that they should be granted their 13th month pay on or before December 24, 1988.

2. The guideline providing for the payment of the 13th month pay on or before December 24, 1988 for those who were not entitled to receive such in May is anchored on the Company’s compliance with the Rules and Regulations Implementing PD 851 (pp. 236-237, Labor Code of the Philippines 1988 Edition), to wit:

"Sec. 3. Employees covered – the Decree shall apply to all employees except to: x x x

c) Employers already paying their employees 13-month pay or more in a calendar year or its equivalent at the time of this issuance; x x x the term "its equivalent" as used in paragraph (c) hereof shall include Christmas bonus, mid-year bonus, profit-sharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits."

3. In accordance with 1 and 2, the above-mentioned employees were paid the equivalent of their 13th month pay in the form of the Christmas bonus granted by the Company on December 9, 1988. The same was applied to similarly situated employees in compliance with pertinent provisions of the 1986-1989 PAL-PALEA CBA and the Labor Code of the Philippines.

(SGD.) MARIE ANNE E. DEL ROSARIO15

Disagreeing with petitioner PAL, respondent PALEA filed a labor complaint16 for unfair labor practice against petitioner PAL before the NLRC on 1 March 1989. The complaint interposed that "the cut-off period for regularization should not be used as the parameter for granting [the] 13th month pay considering that the law does not distinguish the status of employment but (sic) the law covers all employees."

In its Position Paper submitted before the Labor Arbiter, petitioner PAL countered that those rank and file employees who were not regularized by 30 April of a particular year are, in principle, not denied their 13th month pay considering they receive said mandatory bonus in the form of the Christmas Bonus; that the Christmas Bonus given to all its employees is deemed a compliance with Presidential Decree No. 851 and the latter’s implementing rules; and that the foregoing has been the practice formally adopted in previous CBAs’ as early as 1970.

On 12 March 1990, the Labor Arbiter rendered a Decision dismissing the respondent PALEA’s complaint for lack of merit. The Labor Arbiter ruled that petitioner PAL was not guilty of unfair labor practice in withholding the grant of the 13th Month Pay or Mid Year Bonus to the concerned employees. The giving of the particular bonus was said to be merely an additional practice made in the past, "such being the case, it violated no agreement or existing practice or committed unfair labor practice, as charged."17 The decretal part of said ruling reads:

WHEREFORE, decision is hereby issued ordering the dismissal of the complaint.18

Respondent PALEA appealed to the NLRC. In a Decision dated 28 January 1998, the Commission reversed the Decision of the Arbiter. The fallo of said decision is quoted hereunder:

WHEREFORE, finding the appeal well-impressed with merit, the decision appealed from is REVERSED and SET ASIDE and a new one ENTERED ordering [herein petitioner] PAL to pay the 13th month pay or mid-year bonus of the members as discussed above.19

The NLRC held that after going through the documents submitted by respondent PALEA in support of its contention, the Commission is convinced that the 13th month pay or mid-year bonus is distinct from the Christmas Bonus, and although petitioner PAL already paid its employees the latter, it must likewise pay them the former. Petitioner PAL moved for reconsideration of the NLRC Decision but this was denied in a Resolution dated 23 June 1998.

16


Undaunted, petitioner PAL went directly to this Court via a Petition for Review on Certiorari. In view of this Court’s decision in St. Martin Funeral Homes v. National Labor Relations Commission,20 however, the Petition was referred to the Court of Appeals for proper disposition. The case was docketed therein as CA-G.R. SP No. 50161.

On 30 April 1999, the Court of Appeals promulgated its Decision dismissing the Petition filed by petitioner PAL, hence, affirming the 28 January 1998 Decision of the NLRC. The dismissal reads –

WHEREFORE, premises considered, the instant petition is hereby DISMISSED for lack of merit.21

The Court of Appeals held that "from the x x x provision of the said inter-office memo, employees who are regular as of 30 April 1988 and those regularized thereafter, are entitled for (sic) the payment of the non-regular employees as provided for under letter (c) of the Guidelines issued."22 It reasoned that "if the intention is not to include employees regularized beyond 30 April 1988, they would not have placed letter (c)."23 The Court of Appeals further rationalized that "well-settled is the rule that all doubts should be resolved in favor of labor. To rule otherwise is a betrayal of our zealous commitment to uphold the constitutional provision affording protection to labor."24

Petitioner PAL seasonably moved for the reconsideration of the aforequoted Court of Appeals Decision, but was also denied in a Resolution dated 10 March 2000.1avvphi1

Hence, the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended.

In a Resolution25 dated 19 June 2007, We resolved to suspend the proceedings of the case at bar in view of the on-going rehabilitation of petitioner PAL as mandated by the Securities and Exchange Commission. On 28 September 2007, however, the SEC issued an Order26 granting petitioner PAL’s request to exit from rehabilitation after successfully stabilizing its financial operations. Hence, the suspension earlier issued by this Court is hereby lifted, making the present Petition ripe for resolution.

In refusing payment of the mid-year bonus, petitioner PAL argues that 1) the CBA does not apply to non-regular employees such that any benefits arising from said agreement cannot be made to apply to them, including the mid-year bonus; and 2) it has always been the company practice not to extend the mid-year bonus to those employees who have not attained regular status prior to the month of May, when payment of the particular bonus accrues.

Respondent PALEA, however, disputes petitioner PAL’s allegations and maintains that "the benefits to all employees in the collective bargaining unit, including those who do not belong to the chosen bargaining labor organization, applies."27 Put in another way, "[a]ll employees in PAL are entitled to the same benefit as they are within the same collective bargaining unit and the entitlement to such benefit spills over to even non-union members."28 Anent the supposed company practice of petitioner PAL not to extend the payment of the 13th month pay or mid-year bonus to non-regular employees, respondent PALEA contends that non-payment of said benefit is considered a diminution of privileges or benefits proscribed by Presidential Decree No. 851; that petitioner PAL misrepresented that the 13th month pay or mid-year bonus is the same as the Christmas bonus when, in actuality, the latter is entirely different as it is a benefit paid under the provisions of the CBA, while the former is one mandated by law, Presidential Decree No. 851, in particular.

The sole issue for resolution of this Court is whether or not the Court of Appeals committed reversible error in affirming the order of the NLRC for the payment of the 13th month pay or mid-year bonus to its employees regularized after 30 April 1988. We rule in the negative.

Petitioner PAL maintains that in extending the grant of the 13th month pay or mid-year bonus to employees who are not covered by the CBA, the Court of Appeals, in effect, "modified or altered the terms of said agreement and expanded its coverage to non-regular employees who are not covered by the bargaining unit."29 The issue on modification or alteration of the CBA, however, was raised by petitioner PAL rather belatedly and invoked for the first time on appeal. This being the case, We are barred from taking cognizance of and resolving the issue for it would be violative of the proscription against the presentation of new issues on appeal. To do otherwise would be offensive to the basic rules of fair play, justice and due process.30

Be that as it may, a cursory reading of the 1986-1989 CBA of the parties herein will instantly reveal that Art. I, Sec. 3 of said agreement made its provision applicable to all employees in the bargaining unit. The particular section specifically defined the scope of application of the CBA, thus:

17


Section 3 – Application. All the terms and conditions of employment of employees within the bargaining unit are embodied in this Agreement, and the same shall govern the relationship between the Company and such employees. On the other hand, all such benefits and/or privileges as are not expressly provided for in this Agreement but which are now being accorded in accordance with the PAL Personnel Policies and Procedures Manual, shall be deemed also part and parcel of the terms and conditions of employment, or of this Agreement.

without distinguishing between regular and non-regular employees. As succinctly put by respondent PALEA in its Memorandum:

All employees in (sic) PAL are entitled to the same benefit as they are within the same collective bargaining unit and the entitlement to such benefit spills over to even non-union members.31

It is a well-settled doctrine that the benefits of a CBA extend to the laborers and employees in the collective bargaining unit, including those who do not belong to the chosen bargaining labor organization.32 Otherwise, it would be a clear case of discrimination.

Hence, to be entitled to the benefits under the CBA, the employees must be members of the bargaining unit, but not necessarily of the labor organization designated as the bargaining agent. A "bargaining unit" has been defined as a group of employees of a given employer, comprised of all or less than all of the entire body of employees, which the collective interest of all the employees, consistent with equity to the employer, indicates to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law.33 At this point, the allegation of petitioner PAL that the non-regular employees do not belong to the collective bargaining unit and are thus not covered by the CBA is unjustified and unsubstantiated. It is apparent to us that petitioner PAL excludes certain employees from the benefits of the CBA only because they have not yet achieved regular status by the cut-off date, 30 April 1988. There is no showing that the non-regular status of the concerned employees by said cut-off date sufficiently distinguishes their interests from those of the regular employees so as to exclude them from the collective bargaining unit and the benefits of the CBA.

Having ruled that the benefits provided by the subject CBA are applicable even to non-regular employees who belong to the bargaining unit concerned, the next and crucial query to be addressed is whether the 13th month pay or mid-year bonus can be equated to the Christmas bonus.

Petitioner PAL equates the 13th month pay, also referred to as the mid-year bonus in the CBA, to the Christmas bonus. It insists that "[u]nder the 13th Month Pay Law (P.D. 851, as amended), the 13th Month Pay is due on or before December 24th of the year. Therefore, non-regular employees are entitled to their 13th Month Pay, not in the month of May, but in the month of December when the Christmas Bonus becomes due. The Christmas bonus becomes their 13th Month Pay, by express provision of Section 2, Presidential Decree 851."34 Simply put, as far as non-regular employees are concerned, petitioner PAL alleges that their 13th month pay shall be the same as their Christmas bonus and will be paid according to the terms governing the latter.

We do not agree. From the facts of the present Petition, it is crystal clear that petitioner PAL is claiming an exemption from payment of the 13th month pay or mid-year bonus provided in the CBA under the guise of paying the Christmas bonus which it claims to be the equivalent of the 13th month pay under Presidential Decree No. 851.

Presidential Decree No. 851 mandates that all employers must pay all their employees receiving a basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than 24 December of every year. Memorandum Order No. 28,35 dated 13 August 1986, removed the salary ceiling, generally making all employees entitled to the 13th month pay regardless of the amount of their basic salary, designation or employment status, and irrespective of the method by which their wages are paid, provided that they have worked for at least one (1) month during a calendar year.36 Presidential Decree No. 851, as amended, does admit of certain exceptions or exclusions from its coverage, among which is:

Sec. 3(c). Employers already paying their employees 13-month pay or more in a calendar year or its equivalent at the time of this issuance.

While employers already paying their employees a 13th month pay or more in a calendar year or its equivalent at the time of the issuance of Presidential Decree No. 851 are already exempted from the mandatory coverage of said law, petitioner PAL cannot escape liability in this case by virtue thereof.

It must be stressed that in the 1986-1989 CBA, petitioner PAL agreed to pay its employees 1) the 13th month pay or the mid-year bonus, and 2) the Christmas bonus. The 13th month pay, guaranteed by Presidential Decree No. 851, is explicitly covered or

18


provided for as the mid-year bonus in the CBA, while the Christmas bonus is evidently and distinctly a separate benefit. Petitioner PAL may not be allowed to brush off said distinction, and unilaterally and arbitrarily declare that for non-regular employees, their Christmas bonus is the same as or equivalent to the 13th month pay.

Presidential Decree No. 851 mandates the payment of the 13th month pay to uniformly provide the low-paid employees with additional income. It but sets a minimum requirement that employers must comply with. It does not intend, however, to preclude the employers from voluntarily granting additional bonuses that will benefit their employees. A bonus is an amount granted and paid to an employee for his industry and loyalty which contributed to the success of the employer's business and made possible the realization of profits. It is an act of generosity of the employer for which the employee ought to be thankful and grateful. It is also granted by an enlightened employer to spur the employee to greater efforts for the success of the business and realization of bigger profits.37 We deem that the Christmas bonus in this case is of this nature, although, by virtue of its incorporation into the CBA, it has become more than just an act of generosity on the part of petitioner PAL, but a contractual obligation it has undertaken.

The inclusion of a provision for the continued payment of the Christmas bonus in the 1986-1989 CBA between respondent PALEA and petitioner PAL contradicts the company’s claim that the grant of such benefit was intended to be credited as compliance with the statutory mandate to give the 13th month pay. Memorandum Order No. 28, extending Presidential Decree No. 851 to all employees regardless of the amount of their monthly salaries, was issued on 13 August 1986. As early as said date, therefore, petitioner PAL was already fully aware that it was lawfully compelled to accord all its employees a 13th month pay. Accordingly, if petitioner PAL truly intended that the Christmas bonus be treated as the "equivalent" of the 13th month pay required by law, then said intention should have been expressly declared in their 1986-1989 CBA, or the separate provision therein on the Christmas bonus should have been removed because it would only be superfluous.381avvphil.zw+

In United CMC Textile Workers Union v. The Labor Arbiter,39 one of the issues passed upon by the Court was whether or not an employer who was already paying Christmas bonus pursuant to a CBA, was still bound to pay the 13th month pay pursuant to Presidential Decree No. 851. Finding that the intention of the parties to the CBA was that the Christmas bonus was meant to be on top of the 13th month pay, the Court ordered the employer to pay the employees both. The Court ratiocinated:

If the Christmas bonus was included in the 13th month pay, then there would be no need for having a specific provision on Christmas bonus in the CBA. But is did provide for a bonus in graduated amounts depending on the length of service of the employee. The intention is clear therefore that the bonus provided in the CBA was meant to be in addition to the legal requirement. x x x A bonus under the CBA is an obligation created by the contract between the management and workers while the 13th month pay is mandated by the law (P.D. 851).

In the case under consideration, the provision for the payment of the Christmas bonus, apart from the 13th month pay, was incorporated into the 1986-1989 CBA between respondent PALEA and petitioner PAL without any condition. The Christmas bonus, payable in December of every year, is distinguished from the 13th month pay, due yearly in May, for which reason it was denominated as the mid-year bonus. Such being the case, the only logical inference that could be derived therefrom is that petitioner PAL intended to give the members of the bargaining unit, represented by respondent PALEA, a Christmas bonus over and above its legally mandated obligation to grant the 13th month pay.

The non-regular rank and file employees of petitioner PAL as of 30 April 1988, are not actually seeking more benefits than what the other member-employees of the same bargaining unit are already enjoying. They are only requesting that all members of the bargaining unit be treated equally and afforded the same privileges and benefits as agreed upon between respondent PALEA and petitioner PAL in the CBA. Petitioner PAL is committing a patent act of inequity that is grossly prejudicial to the non-regular rank and file employees there being no rational basis for withholding from the latter the benefit of a Christmas bonus besides the 13th month pay or mid-year bonus, while the same is being granted to the other rank and file employees of petitioner PAL who have been regularized as of 30 April 1988, although both types of employees are members of the same bargaining unit. As it had willfully and intentionally agreed to under the terms of the CBA, petitioner PAL must pay its regular and non-regular employees who are members of the bargaining unit represented by respondent PALEA their 13th month pay or mid-year bonus separately from and in addition to their Christmas bonus.

A collective bargaining agreement refers to 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.40 As in all other contracts, the parties to 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.41 Thus, where the CBA is clear and

19


unambiguous, it becomes the law between the parties, and compliance therewith is mandated by the express policy of the law.42

WHEREFORE, premises considered, the petition is hereby DENIED. The Decision of the Court of Appeals promulgated on 30 April 1999, and its Resolution dated 10 March 2000, are hereby AFFIRMED. Costs against petitioner Philippine Airlines, Inc.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

G.R. No. 156260. March 10, 2005

BABCOCK-HITACHI (PHILS.), INC., Petitioners,vs.BABCOCK-HITACHI (PHILS.), INC., MAKATI EMPLOYEES UNION (BHPIMEU), Respondents.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

At bar is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, assailing the Decision1 dated May 14, 2002 and Resolution2 dated November 26, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 65260, entitled "Babcock-Hitachi (Phils.), Inc. vs. Babcock-Hitachi (Phils.), Inc., Makati Employees Union (BHPIMEU)."

The facts as borne by the records are:

Babcock-Hitachi (Phils.), Inc., petitioner, is a manufacturing corporation, with branches at Makati City and Bauan, Batangas.

20


Sometime in December 1997, petitioner, to improve the operating efficiency and coordination among its various departments, formulated a plan to transfer the Design Department from its Makati office to Bauan, Batangas.

With this development, petitioner, on February 24, 1999, sent separate notices to Justiniano G. Iniego, Xavier Aguila and Bonifacio B. Vergara, who occupied Engineer 1 positions at the Design Department, of their re-assignment and transfer to Bauan, Batangas effective April 1, 1999. This prompted them to claim for their relocation allowance provided by Sections 1 and 2, Article XXI of the collective bargaining agreement (CBA).3

However, petitioner refused to implement the CBA, claiming that the affected employees are not entitled to relocation allowance under Policy Statement No. BHPI-G-044A dated October 1, 19964 considering that they are residents of Bauan or its adjacent towns.5

Thus, the affected union members (Justiniano Iniego, et al.), represented by Babcock-Hitachi (Phils.), Inc., Makati Employees Union, respondent, filed with the National Conciliation and Mediation Board (NCMB) a complaint for payment of relocation allowance against petitioner. In a Submission Agreement dated March 18, 1999, the parties stipulated to submit the case for voluntary arbitration.

On July 25, 2000, after the parties submitted their pleadings and position papers, the Voluntary Arbitrator rendered a Decision ordering petitioner to pay respondent’s concerned members their relocation allowances. Petitioner then filed a motion for reconsideration but was denied in a Resolution dated May 30, 2001.

Thereafter, petitioner filed with the Court of Appeals a petition for review with prayer for issuance of a temporary restraining order and/or writ of preliminary injunction.

On May 14, 2002, the Appellate Court promulgated its Decision affirming the Voluntary Arbitrator’s assailed Decision. The Court of Appeals ratiocinated as follows:

"After a thorough study of the case at hand, we are convinced that the affected employees are entitled to the relocation allowance provided for in the Collective Bargaining Agreement (CBA) entered into and signed by both the Union and petitioner Company on July 18, 1997. We share the posture adopted by the Voluntary Arbitrator in rejecting petitioner’s arguments that the affected employees are not entitled to relocation allowance. Pursuant to the basic and irrefragable rule that in carrying out and interpreting the provisions of the Labor Code and its implementing rules and regulations, the workingman’s welfare should be the primordial and paramount consideration. Undoubtedly, this rule must likewise find application in the interpretation and meaning of the CBA entered into by both the parties, for the same is the law between the parties. x x x.

x x x x x x

In the case before this Court, petitioner Company’s contention that the policy statement they issued still finds application in the present CBA is misplaced. With the advent of the new CBA dated July 18, 1997, the policy statement, which previously finds application can no longer be controlling in the present situation. Had it been the intent of the proponents of the CBA, then it could have been incorporated in the agreement or contract, otherwise, it contravenes the very essence and purpose of the CBA. Obviously, the purpose of collective bargaining agreement is the reaching of an agreement resulting in a contract binding on the parties.

Moreover, the policy statement being invoked by petitioner Company is not a part of the contract or CBA, thus, it cannot remain in full force and effect even beyond the stipulated term, especially, in the light of the present CBA. Under the circumstances, the policy statement issued by the petitioner company is a unilateral policy, which is contrary to the provisions of the CBA. The CBA operates as the law that governs the employer-employee relationship of herein petitioner Company and the Union.

Second. Petitioner Company contends that the rationale behind the CBA provision on relocation allowance is clearly spelled out in the company policy on relocation allowance.

Under the circumstances obtaining in this case, petitioner Company’s argument falters. The benefits available in the present CBA (dated July 18, 1997) does not provide for any qualification, it was written in straight and unequivocal terms, not susceptible to any other interpretation. x x x.

x x x x x x21


WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED for lack of merit.

SO ORDERED."

On November 26, 2002, the Court of Appeals issued a Resolution denying petitioner’s motion for reconsideration.

Hence, this petition for review on certiorari.

Petitioner contends that the Court of Appeals, in affirming the Voluntary Arbitrator’s Decision, erred in relying solely upon the parties’ CBA providing that employees transferred from Makati to Bauan, Batangas are entitled to relocation allowance equivalent to P1,500.00. Petitioner invokes Policy Statement No. BHPI-G-044A (earlier quoted) expressly providing that employees, who are "residents of Bauan or adjacent Batangas towns and assigned permanently back to the Bauan Plant," are not entitled to relocation allowance.

Petitioner’s contention lacks merit.

The basic issue for our resolution is whether union members are entitled to relocation allowance in light of the CBA between the parties.

To begin with, any doubt or ambiguity in the contract between management and the union members should be resolved in favor of the latter. This is pursuant to Article 1702 of the Civil Code which provides: "(I)n case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer."6

Pertinent are Sections 1 and 2, Article XXI of the CBA which provide:

"Section 1. The COMPANY shall provide a relocation allowance of ONE THOUSAND EIGHT HUNDRED PESOS (P1,800.00) per month for employees who will be transferred from Bauan to Makati. For employees who will be transferred from Makati to Bauan, the relocation assistance shall be ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00).

Section 2. Employees can avail this provision provided their transfer is on a permanent basis or for a duration exceeding one (1) month."

The above provisions state that employees transferred from Makati City to Bauan, Batangas are entitled to a monthly relocation allowance of P1,500.00, provided their transfer is permanent or for a period exceeding one month. Such provisions need no interpretation for they are clear. Contracts which are not ambiguous are to be interpreted according to their literal meaning and not beyond their obvious intendment. 7

In Mactan Workers Union vs. Aboitiz,8 we held that "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."

Finally, we sustain the finding of the Court of Appeals that the policy statement being invoked by petitioner is not a part of the CBA which is the law between the parties.

Thus, the Court of Appeals did not commit any error when it rendered the assailed Decision and Resolution, the same being consistent with law and jurisprudence.

WHEREFORE, the petition is DENIED. The assailed Decision dated May 14, 2002 and Resolution dated November 26, 2002 rendered by the Court of Appeals in CA-G.R. SP No. 65260 are AFFIRMED. Costs against petitioner.

SO ORDERED.

Panganiban, (Chairman), Corona, and Garcia, JJ., concur.

Carpio-Morales, J., on leave.

22


G.R. No. L-77282 May 5, 1989

ASSOCIATED LABOR UNIONS (ALU) petitioner,vs.HON. PURA FERRER-CALLEJA, as Director of the Bureau of Labor Relations, Ministry of Labor and Employment; PHILIPPINE SOCIAL SECURITY LABOR UNION (PSSLU); SOUTHERN PHILIPPINES FEDERATION OF LABOR (SPFL) and GAW TRADING, INC., respondents.

Romeo S. Occena, Leonard U. Sawal, Edgemelo C. Rosales and Ernesto Carreon for petitioner.

Henrick F. Gingoyon for respondent SPFL.

Wilfredo L. Orcullo for respondent Southern Philippines Federation of Labor.

Miguel A. Enrique, Jr. for respondent GAW Trading, Inc.

REGALADO, J.:

Petitioner Associated Labor Unions (ALU, for brevity) instituted this special civil action for certiorari and prohibition to overturn the decision of the respondent direcstor 1 dated December 10, 1986, which ordered the holding of a certification election

23


among the rank-and-file workers of the private respondent GAW Trading, Inc. The averments in the petition therefor, which succinctly but sufficiently detail the relevant factual antecedents of this proceedings, justify their being quoted in full, thus:

1. The associated Labor Unions (ALU) thru its regional Vice-Presidents Teofanio C. Nuñez, in a letter dated May 7, 1986 (ANNEX C) informed GAW Trading, Inc. that majority of the latter's employees have authorized ALU to be their sole and exclusive bargaining representative, and requested GAW Trading Inc., in the same Letter for a conference for the execution of an initial Collective Bargaining Agreement (CBA);

2. GAW Trading Inc. received the Letter of ALU aforesaid on the same day of May 7, 1986 as acknowledged thereunder and responded (sic) ALU in a letter dated May 12, 1986 (Annex D) indicating its recognition of ALU as the sole and exclusive bargaining agent for the majority of its employees and for which it set the time for conference and/or negotiation at 4:00 P.M. on May 12, 1986 at the Pillsbury Office, Aboitiz Building Juan Luna Street, Cebu City;

3. On the following day of May13, 1986, ALU in behalf of the majority of the employees of GAW Trading Inc. signed and excuted the Collective Bargaining (ANNEX F) ...

4. On May 15, 1986, ALU in behalf of the majority of the employees of GAW Trading Inc. and GAW Trading Inc. signed and executed the Collective Bargaining Agreements (ANNEX F) . . . .

5. In the meantime, at about 1:00 P.M. of May 9, 1986, the Southern Philippines Federation of Labor (SPFL) together with Nagkahiusang Mamumuo sa GAW (NAMGAW) undertook a ... Strike ... after it failed to get the management of GAW Trading Inc. to sit for a conference respecting its demands presented at 11: A.M. on the same day in an effort to pressure GAW Trading Inc. to make a turnabout of its standign recognition of ALU as the sole and exclusive bargaining representative of its employees, as to which strike GAW Trading Inc. filed a petition for Restraining Order/Preliminary Injunction, dfated June 1, 1986 (Annex H) and which strike Labor Arbiter Bonifacio B. Tumamak held as illegal in a decision dated August 5, 1986 (ANNEX I);

6. On May 19, 1986, GAW Lumad Labor Union (GALLU-PSSLU) Federation ... filed a Certification Election petition (ANNEX J), but as found by Med-Arbiter Candido M. Cumba in its (sic) Order dated Ju ne 11, 1986 (ANNEX K), without having complied (sic) the subscription requirement for which it was merely considered an intervenor until compliance thereof in the other petition for direct recogbnition as bargaining agent filed on MAy 28, 1986 by southern Philippines Federation of Labor (SPFL) as found in the same order (ANNEX K);

7. Int he meantime, the Collective Bargaining Agreement executed by ALU and GAW Trading Inc. (ANNEX F) was duly filed May 27, 1986 with the Ministry of Labor and Employment in Region VII, Cebu city;8. Nevertheless, Med-Arbiter Candido M. Cumba in his order of June 11, 1986 (Annex K) ruled for the holding of a ceritfication election in all branches of GAW Trading Inc. in Cebu City, as to which ALU filed a Motion for Reconsideration dated June 19, 1986 (ANNEX L) which was treated as an appeal on that questioned Order for which reason the entire record of subject certification case was forwarded for the Director, Bureau of LAbor Relations, Ministry of Labor and Employment, Manila (ANNEX M);

9. Bureau of Labor Relations Director Cresencio B. Trajano, rendered a Decision on August 13, 1986 (Annex B) granting ALU's appeal (Motion for Reconsideration) and set aside the questioned Med-Arbiter Order of June 11, 1986 (Annex K), on the ground that the CBA has been effective and valid and the contract bar rule applicable;

10. But the same Decision of Director Crecensio B. Trajano was sought for reconsideratrion both by Southern Philippines Federation of Labor (SPFL) on August 26, 1986 (ANNEX N), supplemented by the 'SUBMISSION OD ADDITIONAL EVIDENCE' dated September 29, 1986 (ANNEX O), and the Philppine Social Security Labor Union (PSSLU) on October 2, 1986 (ANNEX P), which were opposed by both GAW Trading, Inc. on September 2, 1986 (ANNEX Q) and ALU on September 12, 1986 (ANNEX R); 2

The aforesaid decision of then Director Trajano was thereafter reversed by respondent director in her aforecited decision which is now assailed in this action. A motion for reconsideration of ALU 3 appears to have been disregarded, hence, its present resort grounded on grave abuse of discretion by public respondent.

Public respondent ordered the holding of a certification election ruling that the "contract bar rule" relied upon by her predecessor does not apply in the present controversy. According to the decision of said respondent, the collective bargaining agreement involved herein is defective because it "was not duly submitted in accordance with Section I, Rule IX, Book V of the Implementing Rules of Batas Pambansa Blg. 130." It was further observed that "(t)here is no proof tending to show that the CBA

24


has been posted in at least two conspicuous places in the 1 establishment at least five days before its ratification and that it has been ratified by the majority of the employees in the bargaining unit."

We find no reversible error in the challenged decision of respondent director. A careful consideration of the facts culled from the records of this case, especially the allegations of petitioner itself as hereinabove quoted, yields the conclusion that the collective bargaining agreement in question is indeed defective hence unproductive of the legal effects attributed to it by the former director in his decision which was subsequently and properly reversed.

We have previously held that the mechanics of collective bargaining are set in motion only when the following jurisdictional preconditions are present, namely, (1) possession of the status of majority representation by the employees' representative in accordance with any of the means of selection and/or designation provided for by the Labor Code; (2) proof of majority representation; and (3) a demand to bargain under Article 251, paragraph (a), of the New Labor Code. 4 In the present case, the standing of petitioner as an exclusive bargaining representative is dubious, to say the least. It may be recalled that respondent company, in a letter dated May 12, 1986 and addressed to petitioner, merely indicated that it was "not against the desire of (its) workers" and required petitioner to present proof that it was supported by the majority thereof in a meeting to be held on the same date. 5 The only express recognition of petitioner as said employees' bargaining representative that We see in the records is in the collective bargaining agreement entered into two days thereafter. 6 Evidently, there was precipitate haste on the part of respondent company in recognizing petitioner union, which recognition appears to have been based on the self-serving claim of the latter that it had the support of the majority of the employees in the bargaining unit. Furthermore, at the time of the supposed recognition, the employer was obviously aware that there were other unions existing in the unit. As earlier stated, respondent company's letter is dated May 12, 1986 while the two other unions, Southern Philippine Federation of Labor (hereafter, SPFL and Philippine Social Security Labor Union (PSSLU, for short), went on strike earlier on May 9, 1986. The unusual promptitude in the recognition of petitioner union by respondent company as the exclusive bargaining representative of the workers in GAW Trading, Inc. under the fluid and amorphous circumstances then obtaining, was decidedly unwarranted and improvident.

It bears mention that even in cases where it was the then Minister of Labor himself who directly certified the union as the bargaining representative, this Court voided such certification where there was a failure to properly determine with legal certainty whether the union enjoyed a majority representation. In such a case, the holding of a certification election at a proper time would not necessarily be a mere formality as there was a compelling reason not to directly and unilaterally certify a union.

An additional infirmity of the collective bargaining agreement involved was the failure to post the same in at least two (2) conspicuous places in the establishment at least five days before its ratification. 8 Petitioners rationalization was that "(b)ecause of the real existence of the illegal strike staged by SPFL in all the stores of GAW Trading, Inc. it had become impossible to comply with the posting requirement in so far as the realization of tits purpose is concerned as there were no impartial members of the unit who could be appraised of the CBA's contents. " 9 This justification is puerile and unacceptable.

In the first place, the posting of copies of the collective bargaining agreement is the responsibility of the employer which can easily comply with the requirement through a mere mechanical act. The fact that there were "no impartial members of the unit" is immaterial. The purpose of the requirement is precisely to inform the employees in the bargaining unit of the contents of said agreement so that they could intelligently decide whether to accept the same or not. The assembly of the members of ALU wherein the agreement in question was allegedly explained does not cure the defect. The contract is intended for all employees and not only for the members of the purpoted representative alone. It may even be said the the need to inform the non-members of the terms thereof is more exigent and compelling since, in all likehood, their contact with the persons who are supposed to represent them is limited. Moreover, to repeat, there was an apparent and suspicious hurry in the formulation and finalization of said collective bargaining accord. In the sforementioned letter where respondent company required petitioner union to present proof of its support by the employees, the company already suggested that petitioner ALU at the same time submit the proposals that it intended to embody in the projected agreement. This was on May 12, 1986, and prompltly on thre following day the negoltiation panel; furnish respondent company final copies of the desired agreement whcih, with equal dispatch, was signed on May 15, 1986.

Another potent reason for annulling the disputed collective bargaining is the finding of respondent director that one hundred eighty-one( 181) of the two hundred eighty-one (281) workers who "ratified" the same now " strongly and vehemently deny and/or repudiate the alleged negotiations and ratification of the CBA. " 10 Although petitioner claims that only sev en (7) of the repudiating group of workers belong to the total number who allegedly ratified the agreement, nevertheless such substantiated contention weighed against the factujal that the controverted contract will not promote industrial stability . The Court has long since declared that:

25


... Basic to the contract bar rule is the proposition that the delay of the right to select represen tatives can be justified only where stability is deemed paramount. Excepted from the contract which do not foster industrial stability, such as contracts where the identity of the representative is in doubt. Any stability derived from such contracts must be subordinated to the employees' freedom of choice because it does nto establish the type of industrial peace contemplated by the law. 11

At this juncture, petitioner should be reminded that the technical rules of rpocedure do not strictly apply in the adjudication of labor disputes. 12 Consequently, its objection that the evidence with respect to the aforesaid repudiiation of the supposed collective bargaining agreement cannot be considered for the first time on appeal on the Bureau of Labor Relations should be disregarded, especially considering the weighty significance thereof.

Both petitioner and private respondent GAW Trading, Inc. allege that the employees of the latter are now enjoying the benefits of the collective bargaining agreement that both parties had forged. However, We cannot find sufficient evidence of record to support this contention. The only evidence cited by petitioner is supposed payment of union fees by said employees, a premise too tenuous to sustain the desired conclusion. Even the actual number of workers in the respondent company is not clear from the records. Said private respondent claims that it is two hundred eighty-one (281) 13 but petitioner suggests that it is more than that number. The said parties should be aware that this Court is not an adjudicator of facts. Worse, to borrow a trite but apt phrase, they would heap the Ossa of confusion upon the Pelion of uncertainty and still expect a definitive ruling on the matter thus confounded.

Additionally, the inapplicability of the contract bar rule is further underscored by the fact that when the disputed agreement was filed before the Labor Regional Office on May 27, 1986, a petition for certification election had already been filed on May 19, 1986. Although the petition was not supported by the signatures of thirty percent (30%) of the workers in the bargaining unit, the same was enough to initiate said certification election.

WHEREFORE, the order of the public respondent for the conduct of a certification election among the rank-and-file workers of respondent GAW Trading Inc. is AFFIRMED. The temporary restraining order issued in this case pursuant to the Resolution of March 25, 1987 is hereby lifted.

SO ORDERED.

Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.G.R. No. 146650 January 13, 2003

DOLE PHILIPPINES, INC., petitioner,vs.PAWIS NG MAKABAYANG OBRERO (PAMAO-NFL), respondent.

CORONA, J.:

Before us is a petition for review filed under Rule 45 of the 1997 Rules of Civil Procedure, assailing the January 9, 2001 resolution of the Court of Appeals which denied petitioner’s motion for reconsideration of its September 22, 2000 decision1 which in turn upheld the Order issued by the voluntary arbitrator2 dated 12 October 1998, the dispositive portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the complainant. Respondent is hereby directed to extend the "free meal" benefit as provided for in Article XVIII, Section 3 of the collective bargaining agreement to those employees who have actually performed overtime works even for exactly three (3) hours only.

SO ORDERED. 3

The core of the present controversy is the interpretation of the provision for "free meals" under Section 3 of Article XVIII of the 1996-2001 Collective Bargaining Agreement (CBA) between petitioner Dole Philippines, Inc. and private respondent labor union PAMAO-NFL. Simply put, how many hours of overtime work must a Dole employee render to be entitled to the free meal under Section 3 of Article XVIII of the 1996-2001 CBA? Is it when he has rendered (a) exactly, or no less than, three hours of actual overtime work or (b) more than three hours of actual overtime work?

26


The antecedents are as follows:

On February 22, 1996, a new five-year Collective Bargaining Agreement for the period starting February 1996 up to February 2001, was executed by petitioner Dole Philippines, Inc., and private respondent Pawis Ng Makabayang Obrero-NFL (PAMAO-NFL). Among the provisions of the new CBA is the disputed section on meal allowance under Section 3 of Article XVIII on Bonuses and Allowances, which reads:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of TEN PESOS (P10.00) to all employees who render at least TWO (2) hours or more of actual overtime work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY FIVE PESOS (P25.00) after THREE (3) hours of actual overtime work.4

Pursuant to the above provision of the CBA, some departments of Dole reverted to the previous practice of granting free meals after exactly three hours of actual overtime work. However, other departments continued the practice of granting free meals only after more than three hours of overtime work. Thus, private respondent filed a complaint before the National Conciliation and Mediation Board alleging that petitioner Dole refused to comply with the provisions of the 1996-2001 CBA because it granted free meals only to those who rendered overtime work for more than three hours and not to those who rendered exactly three hours overtime work.

The parties agreed to submit the dispute to voluntary arbitration. Thereafter, the voluntary arbitrator, deciding in favor of the respondent, issued an order directing petitioner Dole to extend the "free meal" benefit to those employees who actually did overtime work even for exactly three hours only.

Petitioner sought a reconsideration of the above order but the same was denied. Hence, petitioner elevated the matter to the Court of Appeals by way of a petition for review on certiorari.

On September 22, 2000, the Court of Appeals rendered its decision upholding the assailed order.

Thus, the instant petition.

Petitioner Dole asserts that the phrase "after three hours of actual overtime work" should be interpreted to mean after more than three hours of actual overtime work.

On the other hand, private respondent union and the voluntary arbitrator see it as meaning after exactly three hours of actual overtime work.

The "meal allowance" provision in the 1996-2001 CBA is not new. It was also in the 1985-1988 CBA and the 1990-1995 CBA. The 1990-1995 CBA provision on meal allowance was amended by the parties in the 1993-1995 CBA Supplement. The clear changes in each CBA provision on meal allowance were in the amount of the meal allowance and free meals, and the use of the words "after" and "after more than" to qualify the amount of overtime work to be performed by an employee to entitle him to the free meal.

To arrive at a correct interpretation of the disputed provision of the CBA, a review of the pertinent section of past CBAs is in order.

The CBA covering the period 21 September 1985 to 20 September 1988 provided:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of FOUR (P4.00) PESOS to all employees who render at least TWO (2) hours or more of actual overtime work on a workday, and FREE MEALS, as presently practiced, after THREE (3) hours of actual overtime work."5

The CBA for 14 January 1990 to 13 January 1995 likewise provided:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of EIGHT PESOS (P8.00) to all employees who render at least TWO (2) hours or more of actual overtime work on a workday, and FREE MEALS, as presently practiced, not exceeding SIXTEEN PESOS (P16.00) after THREE (3) hours of actual overtime work."6

27


The provision above was later amended when the parties renegotiated the economic provisions of the CBA pursuant to Article 253-A of the Labor Code. Section 3 of Article XVIII of the 14 January 1993 to 13 January 1995 Supplement to the 1990-1995 CBA reads:

Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL SUBSIDY of NINE PESOS (P9.00) to all employees who render at least TWO (2) hours or more of actual overtime work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY ONE PESOS (P21.00) after more than THREE (3) hours of actual overtime work (Section 3, as amended)."7

We note that the phrase "more than" was neither in the 1985-1988 CBA nor in the original 1990-1995 CBA. It was inserted only in the 1993-1995 CBA Supplement. But said phrase is again absent in Section 3 of Article XVIII of the 1996-2001 CBA, which reverted to the phrase "after three (3) hours".

Petitioner asserts that the phrase "after three (3) hours of actual overtime work" does not mean after exactly three hours of actual overtime work; it means after more than three hours of actual overtime work. Petitioner insists that this has been the interpretation and practice of Dole for the past thirteen years.

Respondent, on the other hand, maintains that "after three (3) hours of actual overtime work" simply means after rendering exactly, or no less than, three hours of actual overtime work.

The Court finds logic in private respondent’s interpretation.

The omission of the phrase "more than" between "after" and "three hours" in the present CBA spells a big difference.

No amount of legal semantics can convince the Court that "after more than" means the same as "after".

Petitioner asserts that the "more than" in the 1993-1995 CBA Supplement was mere surplusage because, regardless of the absence of said phrase in all the past CBAs, it had always been the policy of petitioner corporation to give the meal allowance only after more than 3 hours of overtime work. However, if this were true, why was it included only in the 1993-1995 CBA Supplement and the parties had to negotiate its deletion in the 1996-2001 CBA?

Clearly then, the reversion to the wording of previous CBAs can only mean that the parties intended that free meals be given to employees after exactly, or no less than, three hours of actual overtime work.

The disputed provision of the CBA is clear and unambiguous. The terms are explicit and the language of the CBA is not susceptible to any other interpretation. Hence, the literal meaning of "free meals after three (3) hours of overtime work" shall prevail, which is simply that an employee shall be entitled to a free meal if he has rendered exactly, or no less than, three hours of overtime work, not "after more than" or "in excess of" three hours overtime work.

Petitioner also invokes the well-entrenched principle of management prerogative that "the power to grant benefits over and beyond the minimum standards of law, or the Labor Code for that matter, belongs to the employer x x x". According to this principle, even if the law is solicitous of the welfare of the employees, it must also protect the right of the employer to exercise what clearly are management prerogatives.8 Petitioner claims that, being the employer, it has the right to determine whether it will grant a "free meal" benefit to its employees and, if so, under what conditions. To see it otherwise would amount to an impairment of its rights as an employer.

We do not think so.

The exercise of management prerogative is not unlimited. It is subject to the limitations found in law, a collective bargaining agreement or the general principles of fair play and justice.9 This situation constitutes one of the limitations. The CBA is the norm of conduct between petitioner and private respondent and compliance therewith is mandated by the express policy of the law.10

Petitioner Dole cannot assail the voluntary arbitrator’s interpretation of the CBA for the supposed impairment of its management prerogatives just because the same interpretation is contrary to its own.

WHEREFORE, petition is hereby denied.28


SO ORDERED.

Puno, (Chairman), Panganiban, Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

G.R. No. 158930-31 August 22, 2006

UNION OF FILIPRO EMPLOYEES - DRUG, FOOD AND ALLIED INDUSTRIES UNIONS - KILUSANG MAYO UNO (UFE-DFA-KMU), Petitioner,vs.NESTLÉ PHILIPPINES, INCORPORATED, Respondent.

x-----------------------------------x

G.R. No. 158944-45 August 22, 2006

NESTLÉ PHILIPPINES, INCORPORATED Petitioner,vs.UNION OF FILIPRO EMPLOYEES - DRUG, FOOD AND ALLIED INDUSTRIES UNIONS - KILUSANG MAYO UNO (UFE-DFA-KMU), Respondent.

D E C I S I O N

CHICO-NAZARIO, J.:

The Case

Before the Court are two (2) petitions for review on certiorari under Rule 45 of the Rules of Court, as amended. Both seek to annul and set aside the joint: (1) Decision1 dated 27 February 2003, and (2) Resolution2 dated 27 June 2003, of the Court of Appeals in CA-G.R. SP No. 698053 and No. 71540.4

29


G.R. No. 158930-31 was filed by Union of Filipro Employees – Drug, Food and Allied Industries Unions – Kilusang Mayo Uno (UFE-DFA-KMU) against Nestlé Philippines, Incorporated (Nestlé) seeking the reverse of the Court of Appeals Decision in so far as the latter’s failure to adjudge Nestlé guilty of unfair labor practice is concerned, as well as the Resolution of 27 June 2003 denying its Partial Motion for Reconsideration; G.R. No. 158944-45 was instituted by Nestlé against UFE-DFA-KMU similarly seeking to annul and set aside the Decision and Resolution of the Court of Appeals declaring 1) the Retirement Plan a valid collective bargaining issue; and 2) the scope of assumption of jurisdiction power of the Secretary of the DOLE to be limited to the resolution of questions and matters pertaining merely to the ground rules of the collective bargaining negotiations to be conducted between the parties.

In as much as the cases involve the same set of parties; arose from the same set of circumstances, i.e., from several Orders issued by then Secretary of the Department of Labor and Employment (DOLE), Hon. Patricia A. Sto. Tomas, respecting her assumption of jurisdiction over the labor dispute between Nestlé and UFE-DFA-KMU, Alabang and Cabuyao Divisions;5 and likewise assail the same Decision and Resolution of the Court of Appeals, the Court ordered the consolidation of the two petitions.6

The Facts

From the record and the pleadings filed by the parties, we cull the following material facts in this case:

On 4 April 2001, in consideration of the impending expiration of the existing collective bargaining agreement (CBA) between Nestlé and UFE-DFA-KMU7 on 5 June 2001,8 in a letter denominated as a Letter of Intent, the Presidents of the Alabang and Cabuyao Divisions of UFE-DFA-KMU, Ernesto Pasco and Diosdado Fortuna, respectively, informed Nestlé of their intent to "open our new Collective Bargaining Negotiation for the year 2001-2004 x x x as early as June 2001."9

In a letter10 dated 10 April 2001, Nestlé acknowledged receipt of the aforementioned letter. It also informed UFE-DFA-KMU that it was preparing its own counter-proposal and proposed ground rules that shall govern the conduct of the collective bargaining negotiations.

On 29 May 2001, in another letter addressed to the UFE-DFA-KMU (Cabuyao Division), Nestlé underscored its position that "unilateral grants, one-time company grants, company-initiated policies and programs, which include, but are not limited to the Retirement Plan, Incidental Straight Duty Pay and Calling Pay Premium, are by their very nature not proper subjects of CBA negotiations and therefore shall be excluded therefrom."11 In addition, it clarified that with the closure of the Alabang Plant, the CBA negotiations will only be applicable to the covered employees of the Cabuyao Plant; hence, the Cabuyao Division of UFE-DFA-KMU became the sole bargaining unit involved in the subject CBA negotiations.

Thereafter, dialogue between the company and the union ensued.

In a letter dated 14 August 2001, Nestlé, claiming to have reached an impasse in said dialogue, requested12 the National Conciliation and Mediation Board (NCMB), Regional Office No. IV, Imus, Cavite, to conduct preventive mediation proceedings between it and UFE-DFA-KMU. Nestlé alleged that despite fifteen (15) meetings between them, the parties failed to reach any agreement on the proposed CBA. The request was docketed as NCMB-RBIV-CAB-PM-08-035-01.

Conciliation proceedings nevertheless proved ineffective. Complaining, in essence, of bargaining deadlock – pertaining to economic issues, i.e., "retirement (plan), panel composition, costs and attendance, and CBA,"13 UFE-DFA-KMU filed a Notice of Strike14 on 31 October 2001 with the NCMB docketed as NCMB-RBIV-LAG-NS-10-037-01. One week later, or on 07 November 2001, another Notice of Strike15 was filed by the UFE-DFA-KMU docketed as NCMB-RBIV-LAG-NS-11-10-039-01, this time predicated on Nestlé’s alleged unfair labor practices i.e., bargaining in bad faith in that it was setting pre-conditions in the ground rules by refusing to include the issue of the Retirement Plan in the CBA negotiations. A strike vote was then conducted by UFE-DFA-KMU on 22 November 2001. The result was an overwhelming approval of the decision to hold a strike.16

On 26 November 2001, in view of the looming strike, Nestlé filed with the DOLE a Petition for Assumption of Jurisdiction,17 docketed as OS-AJ-0023-01, fundamentally praying that the Secretary of the DOLE, Hon. Patricia A. Sto. Tomas, assume jurisdiction over the current labor dispute as mandated by Article 263 (g) of the Labor Code, as amended, thereby effectively enjoining any impending strike at the Nestlé Cabuyao Plant in Laguna.

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On 29 November 2001, Sec. Sto. Tomas issued an Order18 in OS-AJ-0023-01, NCMB-RBIV-CAV-PM-08-035-01, NCMB-RBIV-LAG-NS-10-037-01 & NCMB-RBIV-LAG-NS-11-10-039-01 assuming jurisdiction over the subject labor dispute between the parties, the fallo thereof stating that:

CONSIDERING THE FOREGOING, this Office hereby assumes jurisdiction over the labor dispute at the Nestlé Philippines, Inc. (Cabuyao Plant) pursuant to Article 263 (g) of the Labor Code, as amended.

Accordingly, any strike or lockout is hereby enjoined. The parties are directed to cease and desist from committing any act that might lead to the further deterioration of the current labor relations situation.

The parties are further directed to meet and convene for the discussion of the union proposals and company counter-proposals before the National Conciliation and Mediation Board (NCMB) who is hereby designated as the delegate/facilitator of this Office for this purpose. The NCMB shall report to this Office the results of this attempt at conciliation and delimitation of the issues within thirty (30) days from the parties’ receipt of this Order, in no case later than December 31, 2001. If no settlement of all the issues is reached, this Office shall thereafter define the outstanding issues and order the filing of position papers for a ruling on the merits.

UFE-DFA-KMU sought reconsideration19 of the abovequoted Assumption of Jurisdiction Order on the assertion that:

i. Article 263 (g) of the Labor Code, as amended, is invalid and unconstitutional as it is in derogation of the provisions dealing on protection to labor, social justice, the bill of rights, and, generally accepted principle of international law;

ii. compulsory arbitration as a mode of dispute settlement provided for in the Labor Code and sourced from the 1935 and 1973 constitutions has been discarded and deleted by the New Charter which instituted in its stead free collective bargaining;

iii. that ILO condemns the continuous exercise by the Secretary of Labor of the power of compulsory arbitration;

iv. granting that the law is valid, the Secretary has unconstitutionally applied the law;

v. that the company is a business enterprise not belonging to an industry indispensable to the national interest considering that it is only one among a number of companies in the country producing milk and nutritional products; that the Cabuyao plant is only one of the six (6) Nestle plants in the country and could rely on its highly automated Cagayan de Oro plant for buffer stocks;

vi. that the Secretary acted with grave abuse of discretion in issuing the assailed order without the benefit of a prior notice and inquiry.

In the interregnum, the union interposed a motion for extension of time20 to file its position paper as directed by the Assumption of Jurisdiction Order of 29 November 2001.

In an Order21 dated 14 January 2002, Sec. Sto. Tomas denied the aforequoted motion for reconsideration in this wise:

This is not the first time that this Office had occasion to resolve the grounds and arguments now being raised x x x. In a more recent case – In re: labor dispute at Toyota Motor Philippines Corporation x x x this Office ruled:

The constitutionality of the power of the Secretary of Labor under Article 263 (g) of the Labor Code to assume jurisdiction over a labor dispute in an industry indispensable to the national interest has been upheld as an exercise of police power of the constitution. x x x.

x x x x

As ruled by the Supreme Court in the Philtread case:

Article 263 (g) of the Labor Code does not violate the worker’s constitutional right to strike.

x x x x x x

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The foregoing article clearly does not interfere with the worker’s right to strike but merely regulates it, when in the exercise of such right, national interests will be affected.

On 15 January 2002, despite the injunction22 contained in Sec. Sto. Tomas’ Assumption of Jurisdiction Order and conciliation efforts by the NCMB, the employee members of UFE-DFA-KMU at the Nestlé Cabuyao Plant went on strike.

On 16 January 2002, in consideration of the above, Sec. Sto. Tomas issued yet another Order23 directing: (1) the members of UFE-DFA-KMU to return-to-work within twenty-four (24) hours from receipt of such Order; (2) Nestlé to accept back all returning workers under the same terms and conditions existing preceding to the strike; (3) both parties to cease and desist from committing acts inimical to the on-going conciliation proceedings leading to the further deterioration of the situation; and (4) the submission of their respective position papers within ten (10) days from receipt thereof.

Notwithstanding the Return-To-Work Order, the members of UFE-DFA-KMU continued with their strike and refused to go back to work as instructed. Thus, Sec. Sto. Tomas sought the assistance of the Philippine National Police (PNP) for the enforcement of said order.

At the hearing called on 7 February 2002, Nestlé and UFE-DFA-KMU filed their respective position papers. In its position paper,24 Nestlé addressed several issues allegedly pertaining to the current labor dispute, i.e., economic provisions of the CBA as well as the non-inclusion of the issue of the Retirement Plan in the collective bargaining negotiations. UFE-DFA-KMU, in contrast, limited itself to tackling the solitary issue of whether or not the retirement plan was a mandatory subject in its CBA negotiations with the company on the contention "that the Order of Assumption of Jurisdiction covers only the issue of Retirement Plan."25

On 8 February 2002, Nestlé moved that UFE-DFA-KMU be declared to have waived its right to present arguments respecting the other issues raised by the company on the ground that the latter chose to limit itself to discussing only one (1) issue. Sec. Sto. Tomas, in an Order26 dated 11 February 2002, however, did not see fit to grant said motion. She instead allowed UFE-DFA-KMU the chance to tender its stand on the other issues raised by Nestlé but not covered by its initial position paper paper by way of a Supplemental Position Paper.

UFE-DFA-KMU afterward filed several pleadings: (1) an Urgent Motion to File a Reply dated 13 February 2002; (2) a Motion for Time to File Supplemental Position Paper dated 22 February 2002; and (3) a Manifestation with Motion for Reconsideration of the Order dated February 11, 2002 dated 27 February 2002. The latter pleading was an absolute contradiction of the second one praying for additional time to file the subject supplemental position paper. In said Manifestation, UFE-DFA-KMU explained that it "realized that the Order of February 11, 2002 appears to be contrary to law and jurisprudence and is not in conformity with existing laws and the evidence on record,"27 as the Secretary of the DOLE "could only assume jurisdiction over the issues mentioned in the notice of strike subject of the current dispute."28 UFE-DFA-KMU then went on to clarify that the Amended Notice of Strike did not cite, as one of the grounds, the CBA deadlock.

On 8 March 2002, Sec. Sto. Tomas denied the motion for reconsideration of UFE-DFA-KMU.

Frustrated with the foregoing turn of events, UFE-DFA-KMU filed a petition for certiorari29 with application for the issuance of a temporary restraining order or a writ of preliminary injunction before the Court of Appeals. The petition was predicated on the question of whether or not the DOLE Secretary committed grave abuse of discretion in issuing the Orders of 11 February 2002 and 8 March 2002.

Meanwhile, in an attempt to finally resolve the crippling labor dispute between the parties, then Acting Secretary of the DOLE, Hon. Arturo D. Brion, came out with an Order30 dated 02 April 2002, in the main, ruling that:

a. we hereby recognize that the present Retirement Plan at the Nestlé Cabuyao Plant is a unilateral grant that the parties have expressly so recognized subsequent to the Supreme Court’s ruling in Nestlé, Phils. Inc. vs. NLRC, G.R. No. 90231, February 4, 1991, and is therefore not a mandatory subject for bargaining;

b. the Union’s charge of unfair labor practice against the Company is hereby dismissed for lack of merit;

c. the parties are directed to secure the best applicable terms of the recently concluded CBs between Nestlé Phils. Inc. and it eight (8) other bargaining units, and to adopt these as the terms and conditions of the Nestlé Cabuyao Plant CBA;

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d. all union demands that are not covered by the provisions of the CBAs of the other eight (8) bargaining units in the Company are hereby denied;

e. all existing provisions of the expired Nestlé Cabuyao Plant CBA without any counterpart in the CBAs of the other eight bargaining units in the Company are hereby ordered maintained as part of the new Nestlé Cabuyao Plant CBA;

f. the parties shall execute their CBA within thirty (30) days from receipt of this Order, furnishing this Office a copy of the signed Agreement;

g. this CBA shall, in so far as representation is concerned, be for a term of five (5) years; all other provisions shall be renegotiated not later than three (3) years after its effective date which shall be December 5, 2001 (or on the first day six months after the expiration on June 4, 2001 of the superceded CBA).

Not surprisingly, UFE-DFA-KMU moved to reconsider the aforequoted position of the DOLE.

On 6 May 2002, the Secretary of the DOLE, Hon. Sto. Tomas, issued the last of the assailed Orders.31 This order resolved to deny the preceding motion for reconsideration of UFE-DFA-KMU.

Undaunted still, UFE-DFA-KMU, for the second time, went to the Court of Appeals likewise via a petition for certiorari seeking to annul, on the ground of grave abuse of discretion, the Orders of 02 April 2002 and 06 May 2002 of the Secretary of the DOLE.

The Court of Appeals, acting on the twin petitions for certiorari, determined the issues in favor of UFE-DFA-KMU in a joint Decision dated 27 February 2003. The dispositive part thereof states that:

WHEREFORE, in view of the foregoing, there being grave abuse on the part of the public respondent in issuing all the assailed Orders, both petitions are hereby GRANTED. The assailed Orders dated February 11, 2001, and March 8, 2001 (CA-G.R. SP No. 69805), as well as the Orders dated April 2, 2002 and May 6, 2002 (CA-G.R. SP No. 71540) of the Secretary of Labor and Employment in the case entitled: "IN RE: LABOR DISPUTE AT NESTLE PHILIPPINES INC. (CABUYAO FACTORY)" under OS-AJ-0023-01 (NCMB-RBIV-CAV-PM-08-035-01, NCMB-RBIV-LAG-NS-10-037-01, NCMB-RBIV-LAG-NS-11-10-039—01) are hereby ANNULLED and SET ASIDE. Private respondent is hereby directed to resume the CBA negotiations with the petitioner.32

Dissatisfied, both parties separately moved for the reconsideration of the abovequoted decision – with Nestlé basically assailing that part of the decision finding the DOLE Secretary to have gravely abused her discretion when she ruled that the Retirement Plan is not a valid issue for collective bargaining negotiations; while UFE-DFA-KMU questions, in essence, the appellate court’s decision in absolving Nestlé of the charge of unfair labor practice.

The parties’ efforts were all for naught as the Court of Appeals stood pat in its earlier pronouncements and denied the motions for reconsideration in a joint Resolution dated 27 June 2003.

Hence, these petitions for review on certiorari separately filed by the parties. Said petitions were ordered consolidated in a Supreme Court Resolution dated 29 March 2004.

The Issues

UFE-DFA-KMU’s petition for review docketed as G.R. No. 158930-31, is predicated on the following alleged errors:

I.

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN NOT HOLDING THAT RESPONDENT IS GUILTY OF UNFAIR LABOR PRACTICE IN REFUSING TO PROCEED WITH THE CBA NEGOTIATIONS UNLESS PETITIONER FIRST ADMITS THAT THE RETIREMENT PLAN IN THE COMPANY IS A NON-CBA MATTER; and

II.

THE CONTENTION THAT THERE IS NO EVIDENCE OF UNFAIR LABOR PRACTICE ON RESPONDENT NESTLÉ’S PART AND THAT PETITIONER DID NOT RAISE THE ISSUE OF ULP IN ITS ARGUMENTS BEFORE THE COURT OF APPEALS IS GROSSLY ERRONEOUS.33

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Whereas in G.R. No. 158944-45, petitioner Nestlé challenges the conclusion of the Court of Appeals on the basis of the following issues:

I.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN HOLDING THAT THE POWERS GRANTED TO THE SECRETARY OF LABOR TO RESOLVE NATIONAL INTEREST DISPUTES UNDER ARTICLE 263 (G) OF THE LABOR CODE MAY BE LIMITED BY A (SECOND) NOTICE OF STRIKE; and

II.

WHETHER OR NOT THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN ANNULING THE SECRETARY OF LABOR’S JUDGMENT ON THE RETIREMENT PLAN ISSUE WHICH WAS MERELY A PART OF THE COMPLETE RESOLUTION OF THE LABOR DISPUTE.34

On the whole, the consolidated cases only raise three (3) fundamental issues for deliberation by this Court, that is, whether or not the Court of Appeals committed reversible error, first, in finding the Secretary of Labor and Employment to have gravely abused her discretion in her pronouncement that the Retirement Plan was not a proper subject to be included in the CBA negotiations between the parties; hence, non-negotiable; second, in holding that the assumption powers of the Secretary of Labor and Employment should have been limited merely to the grounds alleged in the second Notice of Strike; and third, in not ruling that Nestlé was guilty of unfair labor practice despite allegedly setting a pre-condition to bargaining – the non-inclusion of the Retirement Plan as an issue in the collective bargaining negotiations.

The Court’s Ruling

Foremost for our resolution is the matter of the non-inclusion of the Retirement Plan in the CBA negotiations between Nestlé and UFE-DFA-KMU (Cabuyao Division).

In finding the Secretary of the DOLE to have gravely abused her discretion in holding that the Retirement Plan is not a valid CBA issue, the Court of Appeals explained that:

Although the Union, thru its President Diosdado Fortuna, signed a Memorandum of Agreement dated October 8, 1998 together with the private respondent which clearly states that the "Company agree to extend the following unilateral grants which shall not form part of the CBA" (citation omitted) however, the same document made a proviso that "reference on the Retirement Plan in the CBA signed on July 4, 1995, shall be maintained," x x x thus, this Court is of the belief and so holds that the Retirement Plan is still a valid CBA issue, hence, it could not be argued that the true intention of the parties is that the Retirement Plan, although referred in the CBA, would not in any way form part of the CBA (citation omitted) as it could be clearly inferred by this Court that it is to be used as an integral part of the CBA and to be used as a topic for future bargaining, in consonance with the ruling of the Supreme Court in the previous Nestlé Case that "the Retirement Plan was a collective bargaining issue right from the start."35

In filing the present petition, Nestle is of the view that after the 1991 Supreme Court Decision was promulgated, there was obviously an agreement by the parties to no longer consider the Retirement Plan as a negotiable item subject to bargaining. Rather, said benefit would be regarded as a unilateral grant outside the ambit of negotiation. Nestlé justifies such contention by directing the Court’s attention to the Ground Rules for 1998 Alabang/Cabuyao Factories’ CBA Negotiation (citation omitted) signed by it and the representatives of UFE-DFA-KMU where both sides "expressly" recognized Nestlé’s prerogative to initiate unilateral grants which are ‘not negotiable.’ It likewise cited the Memorandum of Agreement36 entered into by the parties on 08 October 1998, which also "categorically" referred to the Retirement Plan as one of the unilateral grants alluded to in the aforementioned Ground Rules. Nestle then concluded that:

Indeed, the foregoing uncontroverted documents very clearly established the clear agreement of the parties, after the 1991 Supreme Court Decision, to remove the Retirement Plan from the scope of bargaining negotiation, and leave the matter upon the sole initiative and discretion of Nestlé.37

In contrast, UFE-DFA-KMU posits that there is nothing in either of the documents aboveclaimed that proves that it agreed "to treat the Retirement Plan as a unilateral grant of the company which is outside the scope of the CBA and hence, not a proper

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subject of bargaining." It explained that the MOA alluded to by Nestlé merely speaks of the improvement38 or the review for the improvement39 of the current Retirement Plan and nothing else. UFE-DFA-KMU rationalizes that:

Had the objective of the parties been to consider the Retirement Plan as not a subject for collective bargaining, they would have stated so in categorical terms. Or, they could have deleted the said benefit from the CBA.

Unfortunately for petitioner, the documents relied upon by it do not state that the Retirement Plan is no longer a bargainable item. The said benefit was not also removed or deleted from the CBA.

If ever, what was "unilaterally granted" by petitioner company as appearing on the above-stated letter and MOA were the "improvements" on the Retirement Plan. The Retirement Plan could not have been unilaterally granted by the said letter and MOA since the said Plan predates the said letter and MOA by over two decades.

UFE-DFA-KMU concludes that "[s]ince the Retirement Plan did not derive its existence from the letter and MOA x x x, the nature of the Retirement Plan was not altered or changed by the subsequent issuance by petitioner company of the said letter and MOA. The Retirement Plan remained a CBA item which is a proper subject of collective bargaining pursuant to the 1991 ruling of this Honorable Court."40

We agree.

The present issue is not one of first impression. In Nestlé Philippines, Inc. v. NLRC,41 ironically involving the same parties herein, this Court has had the occasion to affirm that a retirement plan is consensual in nature.

By way of background, the parties therein resorted to a "slowdown" and walked out of the factory prompting the management to shut down its operations. Collective bargaining negotiations were conducted but a deadlock was subsequently declared. The Secretary of Labor assumed jurisdiction over the labor dispute and issued a return-to-work order. The NLRC thereafter issued its resolution modifying Nestlé’s existing "non-contributory" Retirement Plan. The company filed a petition for certiorari alleging grave abuse of discretion on the part of the NLRC as Nestlé was arguing that since its Retirement Plan is non-contributory, it should be a non-issue in CBA negotiations. Nestlé had the sole and exclusive prerogative to define the terms of the plan as the employees had no vested and demandable rights thereon – the grant of such not being a contractual obligation but simply gratuitous. In a ruling contrary to Nestlé’s position, this Court, through Madame Justice Griño-Aquino, declared that:

The company’s [Nestlé] contention that its retirement plan is non-negotiable, is not well-taken. The NLRC correctly observed that the inclusion of the retirement plan in the collective bargaining agreement as part of the package of economic benefits extended by the company to its employees to provide them a measure of financial security after they shall have ceased to be employed in the company, reward their loyalty, boost their morale and efficiency and promote industrial peace, gives "a consensual character" to the plan so that it may not be terminated or modified at will by either party (citation omitted).

The fact that the retirement plan is non-contributory, i.e., that the employees contribute nothing to the operation of the plan, does not make it a non-issue in the CBA negotiations. As a matter of fact, almost all of the benefits that the petitioner has granted to its employees under the CBA – salary increases, rice allowances, midyear bonuses, 13th and 14th month pay, seniority pay, medical and hospitalization plans, health and dental services, vacation, sick & other leaves with pay – are non-contributory benefits. Since the retirement plan has been an integral part of the CBA since 1972, the Union’s demand to increase the benefits due the employees under said plan, is a valid CBA issue. x x x

x x x x

x x x [E]mployees do have a vested and demandable right over existing benefits voluntarily granted to them by their employer. The latter may not unilaterally withdraw, eliminate or diminish such benefits (Art. 100, Labor Code; other citation omitted). [Emphases supplied.]42

In the case at bar, it cannot be denied that the CBA that was about to expire at that time contained provisions respecting the Retirement Plan. As the latter benefit was already subject of the existing CBA, the members of UFE-DFA-KMU were only exercising their prerogative to bargain or renegotiate for the improvement of the terms of the Retirement Plan just like they would for all the other economic, as well as non-economic benefits previously enjoyed by them. Precisely, the purpose of collective bargaining is the acquisition or attainment of the best possible covenants or terms relating to economic and non-economic benefits granted by employers and due the employees. The Labor Code has actually imposed as a mutual obligation of

35


both parties, this duty to bargain collectively. The duty to bargain collectively is categorically prescribed by Article 252 of the said code. It states:

ART. 252. MEANING OF DUTY TO BARGAIN COLLECTIVELY. – The duty to bargain collectively means the performance of a mutual obligation to meet and confer promptly and expeditiously and 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 agreement if requested by either party, but such duty does not compel any party to agree to a proposal or to make any concession.

Further, Article 253, also of the Labor Code, defines the parameter of said obligation when there already exists a CBA, viz:

ART. 253. DUTY TO BARGAIN COLLECTIVELY WHEN THERE EXISTS A COLLECTIVE BARGAINING AGREEMENT. – The duty to bargain collectively shall also mean that either party shall not 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 sixty day period and/or until a new agreement is reached by the parties.

And, in demanding that the terms of the Retirement Plan be opened for renegotiation, the members of UFE-DFA-KMU are acting well within their rights as we have, indeed, declared that the Retirement Plan is consensual in character; and so, negotiable.

Contrary to the claim of Nestlé that the categorical mention of the terms ‘unilateral agreement’ in the letter and the MOA signed by the representatives of UFE-DFA-KMU, had, for all intents and purposes worked to estop UFE-DFA-KMU from raising it as an issue in the CBA negotiations, our reading of the same, specifically Paragraph 6 and subparagraph 6.2:

6. Additionally, the COMPANY agree to extend the following unilateral grants which shall not form part of the Collective Bargaining Agreement (CBA):

x x x x

6.2. Review for improvement of the COMPANY’s Retirement Plan and the reference on the Retirement Plan in the Collective Bargaining Agreement signed on 4 July 1995 shall be maintained. 43

hardly persuades us that the members of UFE-DFA-KMU have agreed to treat the Retirement Plan as a benefit the terms of which are solely dependent on the inclination of the Nestlé and remove the subject benefit from the ambit of the CBA. The characterization unilaterally imposed by Nestlé on the Retirement Plan cannot operate to divest the employees of their "vested and demandable right over existing benefits voluntarily granted by their employer."44 Besides, the contention that UFE-DFA-KMU has "abandoned" or forsaken our earlier pronouncement vis-à-vis the consensual nature of a retirement plan is quite inconsistent with, nay, is negated by its conduct in doggedly asking for a renegotiation of said benefit.

Worth noting, at this point, is the fact that the aforequoted paragraph 6 and its subparagraphs, particularly subparagraph 6.2, highlights an undeniable fact – that Nestlé recognizes that the Retirement Plan is part of the existing Collective Bargaining Agreement.

Nestlé further rationalizes that a ruling declaring the Retirement Plan a valid CBA negotiation issue will inspire other bargaining units to demand for greater benefits in accordance with their respective appetites. Suffice it to say that the consensual nature of the Retirement Plan neither gives the union members the unfettered right nor the unbridled prerogative to demand more than what the company can viably give.

As regards the scope of the assumption powers of the Secretary of the DOLE, the appellate court ruled that Sec. Sto. Tomas’ assumption of jurisdiction powers should have been limited to the disagreement on the ground rules of the collective bargaining negotiations. The Court of Appeals referred to the minutes of the meeting held on 30 October 2001. That the representative Nestlé was recorded to have stated that "we are still discussing ground rules and not yet on the CBA negotiations proper, a deadlock cannot be declared,"45 was a telling fact. The Court of Appeals, thus, declared that the Secretary "should not have ruled on the questions and issues relative to the substantive aspect of the CBA simply because there was no conflict on the CBA yet."46

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UFE-DFA-KMU agrees in the above and contends that the requisites of judicial inquiry require, first and foremost the presence of an actual case controversy. It then concludes that "[i]f the courts of law cannot act and decide in the absence of an actual case or controversy, so should be (sic) also the Honorable DOLE Secretary."47

Nestle, however, contradicts the preceding disquisitions on the ground that such referral to the minutes of the meeting was erroneous and misleading. It avers that the Court of Appeals failed to consider the circumstance surrounding said utterance – that the statement was made during the preventive mediation proceedings and the UFE-DFA-KMU had not yet filed any notice of strike. It further emphasizes that it was UFE-DFA-KMU who first alleged bargaining deadlock as the basis for the filing of its Notice of Strike. Finally, Nestlé clarifies that before the first Notice of Strike was filed, several conciliation conferences had already been undertaken where both parties had exchanges of their respective CBA proposals.

In this, we agree with Nestlé. Declaring the Secretary of the DOLE to have acted with grave abuse of discretion for ruling on substantial matters or issues and not restricting itself merely on the ground rules, the appellate court and UFE-DFA-KMU would have us treat the subject labor dispute in a piecemeal fashion.

The power granted to the Secretary of the DOLE by Paragraph (g) of Article 263 of the Labor Code, to wit:

ART. 263. STRIKES, PICKETING, AND LOCKOUTS. –

x x x x

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same.

x x x x

authorizes her to assume jurisdiction over a labor dispute, causing or likely to cause a strike or lockout in an industry indispensable to the national interest, and correlatively, to decide the same.

In the case at bar, the Secretary of the DOLE simply relied on the Notices of Strike that were filed by UFE-DFA-KMU as stated in her Order of 08 March 2002, to wit:

x x x The records disclose that the Union filed two Notices of Strike. The First is dated October 31, 2001 whose grounds are cited verbatim hereunder:

"A. Bargaining Deadlock

1. Economic issues (specify)

1. Retirement

2. Panel Composition

3. Costs and Attendance

4. CBA"

The second Notice of Strike is dated November 7, 2001 and the cited ground is like quoted verbatim below:

"B. Unfair Labor Practices (specify)

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Bargaining in bad faith –

Setting pre-condition in the ground rules (Retirement issue)"

Nowhere in the second Notice of Strike is it indicated that this Notice is an amendment to and took the place of the first Notice of Strike. In fact, our Assumption of Jurisdiction Order dated November 29, 2001 specifically cited the two (2) Notices of Strike without any objection on the part of the Union x x x.48

Thus, based on the Notices of Strike filed by UFE-DFA-KMU, the Secretary of the DOLE rightly decided on matters of substance. Further, it is a fact that during the conciliation meetings before the NCMB, but prior to the filing of the notices of strike, the parties had already delved into matters affecting the meat of the collective bargaining agreement. The appellate court’s reliance on the statement49 of the representative of Nestlé in ruling that the labor dispute had yet to progress from the discussion of the ground rules of the CBA negotiations is clearly misleading; hence, erroneous.

Nevertheless, granting for the sake of argument that the meetings undertaken by the parties had not gone beyond the discussion of the ground rules, the issue of whether or not the Secretary of the DOLE could decide issues incidental to the subject labor dispute had already been answered in the affirmative. The Secretary’s assumption of jurisdiction power necessarily includes matters incidental to the labor dispute, that is, issues that are necessarily involved in the dispute itself, not just to those ascribed in the Notice of Strike; or, otherwise submitted to him for resolution. As held in the case of International Pharmaceuticals, Inc. v. Sec. of Labor and Employment,50 "x x x [t]he Secretary was explicitly granted by Article 263 (g) of the Labor Code the authority to assume jurisdiction over a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, and decide the same accordingly. Necessarily, this authority to assume jurisdiction over the said labor dispute must include and extend to all questions and controversies arising therefrom, including cases over which the Labor Arbiter has exclusive jurisdiction."51 Accordingly, even if not exactly on the ground upon which the Notice of Strike is based, the fact that the issue is incidental to the resolution of the subject labor dispute or that a specific issue had been submitted to the Secretary of the DOLE for her resolution, validly empowers the latter to take cognizance of and resolve the same.

Secretary Sto. Tomas correctly assumed jurisdiction over the questions incidental to the current labor dispute and those matters raised by the parties. In any event, the query as to whether or not the Retirement Plan is to be included in the CBA negotiations between the parties ineluctably dictates upon the Secretary of the DOLE to go into the substantive matter of the CBA negotiations.

Lastly, the third issue pertains to the alleged reversible error committed by the Court of Appeals in holding, albeit impliedly, Nestlé free and clear from any unfair labor practice. UFE-DFA-KMU argues that Nestlé’s "refusal to bargain on a very important CBA economic provision constitutes unfair labor practice."52 It explained that Nestlé set as a precondition for the holding of collective bargaining negotiations the non-inclusion of the issue of Retirement Plan. In its words, "respondent Nestlé Phils., Inc. insisted that the Union should first agree that the retirement plan is not a bargaining issue before respondent Nestlé would agree to discuss other issues in the CBA."53 It then concluded that "the Court of Appeals committed a legal error in not ruling that respondent company is guilty of unfair labor practice. It also committed a legal error in failing to award damages to the petitioner for the ULP committed by the respondent."54

Nestlé refutes the above argument and asserts that it was only before the Court of Appeals, and in the second Petition for Certiorari at that, did UFE-DFA-KMU raise the matter of unfair labor practice. It reasoned that the subject of unfair labor practice should have been threshed out with the appropriate labor tribunal. In justifying the failure of the Court of Appeals to find it guilty of unfair labor practice, it stated that:

Under the circumstances, therefore, there was no way for the Court of Appeals to make a ruling on the issues of unfair labor practice and damages, simply because there was nothing to support or justify such action. Although petitioner was afforded by the Secretary the opportunity to be heard and more, it simply chose to omit the said issues in the proceedings below.55

We are persuaded.

The concept of "unfair labor practice" is defined by the Labor Code as:

ART. 247. CONCEPT OF UNFAIR LABOR PRACTICE AND PROCEDURE FOR PROSECUTION THEREOF. – Unfair labor practices violate the constitutional right of workers and employees to self-organization, are inimical to the legitimate interests of both labor and

38


management, including their right to bargain collectively and otherwise deal with each other in an atmosphere of freedom and mutual respect, disrupt industrial peace and hinder the promotion of healthy and stable labor-management relations.

x x x x.

The same code likewise provides the acts constituting unfair labor practices committed by employers, to wit:

ART. 248. UNFAIR LABOR PRACTICES OF EMPLOYERS. – It shall be unlawful for an employer to commit any of the following unfair labor practices:

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

(b) To require as a condition of employment that a person or an employee shall not join a labor organization or shall withdraw from one to which he belongs;

(c) To contract out services or functions being performed by union members when such will interfere with, restrain or coerce employees in the exercise of their right to self-organization;

(d) To initiate, dominate, assist or otherwise interfere with the formation or administration of any labor organization, including the giving of financial or other support to it or its organizers or supporters;

(e) To discriminate in regard to wages, hours of work, and other terms and conditions of employment in order to encourage or discourage membership in any labor organization. Nothing in this Code or in any other law shall stop the parties from requiring membership in a recognized collective bargaining agent as a condition for employment, except those employees who are already members of another union at the time of the signing of the collective bargaining agreement.

Employees of an appropriate collective bargaining unit who are not members of the recognized collective bargaining agent may be assessed a reasonable fee equivalent to the dues and other fees paid by members of the recognized collective bargaining agent, if such non-union members accept the benefits under the collective agreement. Provided, That the individual authorization required under Article 242, paragraph (o) of this Code shall not apply to the nonmembers of the recognized collective bargaining agent; [The article referred to is 241, not 242. – CAA]

(f) To dismiss, discharge, or otherwise prejudice or discriminate against an employee for having given or being about to give testimony under this Code;

(g) To violate the duty to bargain collectively as prescribed by this Code;

(h) To pay negotiation or attorney’s fees to the union or its officers or agents as part of the settlement of any issue in collective bargaining or any other dispute; or

(i) To violate a collective bargaining agreement.

The provisions of the preceding paragraph notwithstanding, only the officers and agents of corporations associations or partnerships who have actually participated, authorized or ratified unfair labor practices shall be held criminally liable. [Emphasis supplied.]

Herein, Nestlé is accused of violating its duty to bargain collectively when it purportedly imposed a pre-condition to its agreement to discuss and engage in collective bargaining negotiations with UFE-DFA-KMU.

A meticulous review of the record and pleadings of the cases at bar shows that, of the two notices of strike filed by UFE-DFA-KMU before the NCMB, it was only on the second that the ground of unfair labor practice was alleged. Worse, the 7 November 2001 Notice of Strike merely contained a general allegation that Nestlé committed unfair labor practice by bargaining in bad faith for supposedly "setting pre-condition in the ground rules (Retirement issue)."56 On the contrary, Nestlé, in its Position Paper, did not confine itself to the issue of the non-inclusion of the Retirement Plan but extensively discussed its stance on other economic matters pertaining to the CBA.

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Basic is the principle that good faith is presumed and he who alleges bad faith has the duty to prove the same.57 By imputing bad faith unto the actuations of Nestlé, it was UFE-DFA-KMU, therefore, who had the burden of proof to present substantial evidence to support the allegation of unfair labor practice. A perusal of the allegations and arguments raised by UFE-DFA-KMU in the Memorandum (in G.R. Nos. 158930-31) will readily disclose that it failed to discharge said onus probandi as there is still a need for the presentation of evidence other than its bare contention of unfair labor practice in order to make certain the propriety or impropriety of the unfair labor practice charge hurled against Nestlé. Under Rule XIII, Sec. 4, Book V of the Implementing Rules of the Labor Code:

x x x. In cases of unfair labor practices, the notice of strike shall as far as practicable, state the acts complained of and the efforts to resolve the dispute amicably." [Emphasis supplied.]

Except for the assertion put forth by UFE-DFA-KMU, neither the second Notice of Strike nor the records of these cases substantiate a finding of unfair labor practice. It is not enough that the union believed that the employer committed acts of unfair labor practice when the circumstances clearly negate even a prima facie showing to warrant such a belief.58 In its letter59 to UFE-DFA-KMU of 29 May 2001, though Nestlé underscored its position that "unilateral grants, one-time company grants, company-initiated policies and programs, which include, but are not limited to the Retirement Plan, Incidental Straight Duty Pay and Calling Pay Premium, are by their very nature not proper subjects of CBA negotiations and therefore shall be excluded therefrom," such attitude is not tantamount to refusal to bargain. This is especially true when it is viewed in the light of the fact that eight out of nine bargaining units have allegedly agreed to treat the Retirement Plan as a unilateral grant. Nestlé, therefore, cannot be faulted for considering the same benefit as unilaterally granted. To be sure, it must be shown that Nestlé was motivated by ill will, "bad faith, or fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy, and, of course, that social humiliation, wounded feelings, or grave anxiety resulted x x x"60 in disclaiming unilateral grants as proper subjects in their collective bargaining negotiations.

There is no per se test of good faith in bargaining.61 Good faith or bad faith is an inference to be drawn from the facts,62 to be precise, the crucial question of whether or not a party has met his statutory duty to bargain in good faith typically turns on the facts of the individual case. Necessarily, a determination of the validity of the Nestlé’s proposition involves an appraisal of the exercise of its management prerogative.

Employers are accorded rights and privileges to assure their self-determination and independence and reasonable return of capital.63 This mass of privileges comprises the so-called management prerogatives.64 In this connection, the rule is that good faith is always presumed. As long as the company’s exercise of the same is in good faith to advance its interest and not for purpose of defeating or circumventing the rights of employees under the law or a valid agreement, such exercise will be upheld.65

Construing arguendo that the content of the aforequoted letter of 29 May 2001 laid down a pre-condition to its agreement to bargain with UFE-DFA-KMU, Nestlé’s inclusion in its Position Paper of its proposals affecting other matters covered by the CBA contradicts the claim of refusal to bargain or bargaining in bad faith. Accordingly, since UFE-DFA-KMU failed to proffer substantial evidence that would overcome the legal presumption of good faith on the part of Nestlé, the award of moral and exemplary damages is unavailing.

It must be remembered at all times that the Philippine Constitution, while inexorably committed towards the protection of the working class from exploitation and unfair treatment, nevertheless mandates the policy of social justice so as to strike a balance between an avowed predilection for labor, on the one hand, and the maintenance of the legal rights of capital, the proverbial hen that lays the golden egg, on the other. Indeed, we should not be unmindful of the legal norm that justice is in every case for the deserving, to be dispensed with in the light of established facts, the applicable law, and existing jurisprudence.66

In sum, from the facts and evidence extant in the records of these consolidated petitions, this Court finds that 1) the Retirement Plan is still a valid issue for herein parties collective bargaining negotiations; 2) the Court of Appeals committed reversible error in limiting to the issue of the ground rules the scope of the power of the Secretary of Labor to assume jurisdiction over the subject labor dispute; and 3) Nestlé is not guilty of unfair labor practice. As no other issues are availing, this ponencia writes finis to the protracted labor dispute between Nestlé and UFE-DFA-KMU (Cabuyao Division).

WHEREFORE, in view of the foregoing, the Petition in G.R. No. 158930-31 seeking that Nestlé be declared to have committed unfair labor practice in allegedly setting a precondition to bargaining is DENIED. The Petition in G.R. No. 158944-45, however, is PARTLY GRANTED in that we REVERSE the ruling of the Court of Appeals in CA G.R. SP No. 69805 in so far as it ruled that the Secretary of the DOLE gravely abused her discretion in failing to confine her assumption of jurisdiction power over the ground

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rules of the CBA negotiations; but the ruling of the Court of Appeals on the inclusion of the Retirement Plan as a valid issue in the collective bargaining negotiations between UFE-DFA-KMU and Nestlé is AFFIRMED. The parties are directed to resume negotiations respecting the Retirement Plan and to take action consistent with the discussions hereinabove set forth. No costs.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice

G.R. No. 111836 February 1, 1996

PAMBANSANG KAPATIRAN NG MGA ANAK PAWIS SA FORMEY PLASTIC NATIONAL WORKERS BROTHERHOOD, petitioner,vs.SECRETARY OF LABOR, SECRETARY BIENVENIDO LAGUESMA, FORMEY PLASTIC, INC., KALIPUNAN NG MANGGAGAWANG PILIPINO (KAMAPI) and MED-ARBITER RASIDALI C. ABDULLAH, respondents.

D E C I S I O N

BELLOSILLO, J.:

The rank and file workers of Formey Plastic, Inc. (FORMEY), formed a local union known as Pambansang Kapatiran ng mga Anak Pawis sa Formey Plastic (KAPATIRAN) under the auspices of the National Workers Brotherhood (NWB). They ratified their Constitution and By-Laws on 4 April 1993.

On 22 April 1993 KAPATIRAN filed a Petition for Certification Election 1 with the Department of Labor and Employment Med-Arbiter Division alleging that there was no existing and effective Collective Bargaining Agreement (CBA) between FORMEY and any union; neither was there any recognized union within the company.

FORMEY moved to dismiss the petition 2 while Kalipunan ng Manggagawang Pilipino (KAMAPI) intervened and likewise moved to dismiss3 on the ground that there was already a duly registered CBA covering the period 1 January 1992 to 31 December 1996 hence the "contract bar rule" 4 would apply. KAPATIRAN opposed both motions to dismiss 5 with an Addendum 6 thereto claiming that the CBA executed between FORMEY and KAMAPI was fraudulently registered with the Department of Labor and Employment and that it was defective since what was certified as bargaining agent was KAMAPI which, as a federation, only served as mere agent of the local union hence without any legal personality to sign in behalf of the latter.

Med-Arbiter Rasidali C. Abdullah found that a valid and existing CBA between FORMEY and KAMAPI effectively barred the filing of the petition for certification election. 7

KAPATIRAN appealed 8 imputing grave abuse of discretion to the Med-Arbiter in applying the "contract bar rule" and in not adopting the case of Progressive Development Corporation v. Secretary, Department of Labor and Employment, 9 as authority to disregard the CBA between FORMEY and KAMAPI. The Secretary of Labor acting through Undersecretary Bienvenido E. Laguesma upheld the decision of the Med-Arbiter. 10 The Motion for Reconsideration having been denied 11 KAPATIRAN now files this Petition for Certiorari 12 charging the Secretary of Labor with grave abuse of discretion in applying the "contract bar rule" literally and in ruling that the Progressive Development Corporation 13 case could not be invoked.

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Pending resolution of the petition KAMAPI filed an Urgent Motion to Dismiss 14 the instant petition contending that it had become moot and academic due to the cancellation of NWB's 15 certificate of registration and its delisting from the roll of labor federations. 16 KAPATIRAN opposed the motion 17 claiming that the cancellation and delisting were not yet final and executory considering that it had filed a motion for reconsideration 18 with the Bureau of Labor Relations.

The rule is that findings of facts of quasi-judicial agencies will not be disturbed unless there is a showing of grave abuse of discretion. We find none in the case at bench. We therefore affirm that there is a validly executed collective bargaining agreement between FORMEY and KAMAPI.

Art. 253-A of the Labor Code provides that "(n)o petition questioning the majority status of the incumbent bargaining agent shall be entertained and no certification election shall be conducted by the Department of Labor and Employment outside of the sixty (60) day period immediately before the date of expiry of such five-year term of the collective bargaining agreement." Sec. 3, Rule V, Book V of the Omnibus Rules Implementing the Labor Code provides that ". . . (i)f a collective bargaining agreement has been duly registered in accordance with Article 231 of the Code, a petition for certification election or a motion for intervention can only be entertained within sixty (60) days prior to the expiry date of such agreement."

The subject agreement was made effective 1 January 1992 and is yet to expire on 31 December 1996. The petition for certification election having been filed on 22 April 1993 it is therefore clear that said petition must fail since it was filed before the so-called 60-day freedom' period. KAPATIRAN insists that the CBA was a fake it having been surreptitiously registered with the Department of Labor and Employment..

The resolution of this issue hinges on the determination of factual matters which certainly is not within the ambit of the present petition for certiorari. Besides, the contention is without any legal basis at all; it is purely speculative and bereft of any documentary support. Petitioner itself even admitted the existence of an agreement but argued that its provisions were not being implemented nor adhered to at all. Suffice it to mention that the filing of the petition for certification election is not the panacea to this allegedly anomalous situation. Violations of collective bargaining agreements constitute unfair labor practice as provided for under Art. 248, par. (i), of the Labor Code. In consonance thereto, Art. 261 equips petitioner with the proper and appropriate recourse

Art. 261. The Voluntary Arbitrator or panel of Voluntary Arbitrators shall have original and exclusive jurisdiction to hear and decide all unresolved grievances arising from the interpretation or implementation of the Collective Bargaining Agreement . . . . Accordingly, violations of a Collective Bargaining Agreement, except those which are gross in character, shall no longer be treated as unfair labor practice and shall be resolved under the Collective Bargaining Agreement. For purposes of this article, gross violations of Collective Bargaining Agreement shall mean flagrant and/or malicious refusal to comply with the economic provisions of such agreement.

The CBA entered into between FORMEY and KAMAPI stipulates among others

Article IX GRIEVANCE PROCEDURE

Sec. 1. Any complaint, grievance, difficulty, disagreement or dispute arising out of any section taken (sic) by the Company and/or by the Union concerning the interpretation of the terms and conditions of the agreement and/or which may arise regarding (sic) the terms and conditions of employment shall be settled in the manner provided for under this Article.

Sec. 2. The Company and the Union agree to create and establish a Grievance Committee composed of two (2) representatives from the Company and two (2) from the Union to receive complaint, grievance or dispute from the workers and/or from the Company with the view to settle it amicably.

Sec. 3. In case a complaint or grievance has been filed by either the Union or the Company, the grievance committee shall discuss the same and have (sic) to settle it. If after the meeting of the grievance committee no satisfactory settlement is reached the matter shall be referred to the top officers of the Union and the Company for the settlement of the said grievance or dispute.

Sec. 4. Within five (5) days from the time the top officers of the Union and the Company has (sic) failed to reach an amicable settlement of the grievance or dispute, the same shall be submitted for voluntary arbitration. The arbitrator or arbitrators shall be chosen by lottery and the union and the Company shall avail (sic) the list of arbitrators of the Honorable Bureau of Labor Relations.

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Sec. 5. The mutually agreed or chosen arbitrator shall proceed to try and hear the case and for (sic) the reception of evidence and to call witnesses to testify and after the submission of the case by both parties an award or order shall be issued in accordance with the rules and guidelines promulgated by the Honorable Department of Labor and Employment based on the pertinent laws and established jurisprudence. The expenses of the arbitration proceedings shall be borned (sic) equally by the Company and the Union. 19

By filing the petition for certification election it is clear that KAPATIRAN did not avail of the abovementioned grievance procedure.

It is further argued that the CBA has no binding force since it was entered into by KAMAPI as a federation and not by the local union. Perusal of the agreement proves the contention flawed. The signatories for KAMAPI consisted of its national president and of the duly elected officers of the local union. Thus the fact that KAMAPI was particularly mentioned as the bargaining party without specifying the local union cannot strip it of its authority to participate in the bargaining process. The local union maintains its separate personality despite affiliation with a larger national federation. 20

The doctrine laid down in Progressive Development Corporation 21 is a mere clarification of the principle enunciated in Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc. 22 Both cases have provided that "the mother union acting for and in behalf of its affiliate ha(s) the status of an agent while the local union remained the basic unit of the association free to serve the common interest of all its members subject only to the restraints imposed by the Constitution and By-Laws of the association." Nonetheless, the facts and principles laid down in both cases do not jibe squarely with the case at bench. The controversy in Progressive Development Corporation 23 centered on the requirements before a local or chapter of a federation may file a petition for certification election and be certified as the sole and exclusive bargaining agent, while in Liberty Cotton Mills Workers 24 the issue involved was the disaffiliation of the local union from the federation. The question of whether there was a valid and existing CBA, which is the question being resolved in the case at bench, was never raised in the two cited cases since it was already an accepted fact that the CBA was validly executed and existing.

Anent the Urgent Motion to Dismiss 25 filed by KAMAPI on the ground that the instant petition had become moot and academic due to the cancellation by the Bureau of Labor Relations of NWB's certificate of registration and its consequent delisting from the roll of labor federations, suffice it to state that at this juncture we cannot .properly rule on the issue considering that KAMAPI has not proven that the decision of the Bureau of Labor Relations has become final and executory taking into account KAPATIRAN's filing of a motion for reconsideration with the Bureau. This notwithstanding, Sec. 9, Rule II, Book V of the Omnibus Rules Implementing the Labor Code requires that an appeal be filed with the Bureau, or in case of cancellation by the Bureau, with the Secretary of Labor and Employment whose decision shall become final and no longer subject of appeal.

WHEREFORE, the petition is DENIED. The decision of the Secretary of Labor and Employment dated 15 August 1993 sustaining the order of the Med-Arbiter dated 31 May 1993 is AFFIRMED.

SO ORDERED.

Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

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G.R. No. 110007 October 18, 1996

HOLY CROSS OF DAVAO COLLEGE, INC., petitioner,vs.HON. JEROME JOAQUIN, in his capacity as Voluntary Arbitrator, and HOLY CROSS OF DAVAO COLLEGE UNION-KALIPUNAN NG MANGGAGAWANG PILIPINO (KAMAPI), respondents.

NARVASA, C.J.:p

A collective bargaining agreement, effective from June 1, 1986 to May 31, 1989 was entered into between petitioner Holy Cross of Davao College, Inc. (hereafter Holy Cross), an educational institution, and the affiliate labor organization representing its employees, respondent Holy Cross of Davao College Union-KAMAPI (hereafter KAMAPI). Shortly before the expiration of the agreement, KAMAPI President, Jose Lagahit, wrote Holy Cross under date of April 12, 1989 expressing his union's desire to renew the agreement, withal seeking its extension for two months, or until July 31, 1989, on the ground that the teachers were still on summer vacation and union activities necessary or incident to the negotiation of a new agreement could not yet be conducted. 1 Holy Cross President Emilio P. Palma-Gil replied that he had no objection to the extension sought, it being allowable under the collective bargaining agreement. 2

On July 24, 1989, Jose Lagahit convoked a meeting of the KAMAPI membership for the purpose of electing a new set of union officers, at which Rodolfo Gallera won election as president. To the surprise of many, and with resultant dissension among the membership, Gallera forthwith initiated discussions for the union's disaffiliation from the KAMAPI Federation.

Gallera's group subsequently formed a separate organization known as the Holy Cross of Davao College Teachers Union, and elected its own officers. For its part, the existing union, KAMAPI, sent to the School its proposals for a new collective bargaining contract; this it did on July 31, 1989, the expiry date of the two-month extension it had sought. 3

Holy Cross thereafter stopped deducting from the salaries and wages of its teachers and employees the corresponding union dues and special assessments (payable by union members), and agency fees (payable by non-members), in accordance with the check-off clause of the CBA, 4 prompting KAMAPI, on September 1, 1989, to demand an explanation.

In the meantime, there ensued between the two unions a full-blown action on the basic issue of representation, which was to last for some two years. It began with the filing by the new union (headed by Gallera) of a petition for certification election in the Office of the Med-Arbiter. 5 KAMAPI responded by filing a motion asking the Med-Arbiter to dismiss the petition. On August 31, 1989, KAMAPI also advised Holy Cross of the election of a new set officers who would also comprise its negotiating panel. 6

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The Med-Arbiter denied KAMAPI's motion to dismiss, and ordered the holding of a certification election. On appeal, however, the Secretary of Labor reversed the Med-Arbiter's ruling and ordered the dismissal of the petition for certification election, which action was eventually sustained by this Court in appropriate proceedings.

After its success in the certification election case KAMAPI presented, on April 11, 1991, revised bargaining proposals to Holy Cross; 7 and on July 11, 1991, it sent a letter to the School asking for its counter-proposals. The School replied, that it did not know if the Supreme Court had in fact affirmed the Labor Secretary's decision in favor of KAMAPI as the exclusive bargaining representative of the School employees, whereupon KAMAPI's counsel furnished it with a copy of the Court's resolution to that effect; and on September 7, 1991, KAMAPI again wrote to Holy Cross asking for its counter-proposals as regards the terms of a new CBA.

In response, Holy Cross declared that it would take no action towards a new CBA without a "definitive ruling" on the proper interpretation of Article I of the old CBA which should have expired on May 31, 1989 (but, as above stated, had been extended for two months at the KAMAPI's request). Said Article provides inter alia for the automatic extension of the CBA for another period of three (3) years counted from its expiration, if the parties fail to agree on a renewal, modification or amendment thereof. It appears, in fact, that the opinion of the DOLE Regional Director on the meaning and import of said Article I had earlier been sought by the College president, Emilio Palma Gil. 8

KAMAPI then sent another letter to Holy Cross, this time accusing it of unfair labor practice for refusing to bargain despite the former's repeated demands; and on the following day, it filed a notice of strike with the National Mediation and Conciliation Board. 9

KAMAPI and Holy Cross were ordered to appear before Conciliator-Mediator Agapito J. Adipen on October 2, 1991. Several conciliation meetings were thereafter held between them, and when these failed to bring about any amicable settlement, the parties agreed to submit the case to voluntary arbitration. 10 Both parties being of the view that the dispute did indeed revolve around the interpretation of §1 and §2 of Article I of the CBA, they submitted position papers explicitly dealing with the following issues presented by them for resolution to the voluntary arbitrator:

a. Whether or not the CBA which expired on May 31, 1989 was automatically renewed and did not serve merely as a holdover CBA; and

b. Whether or not there was refusal to negotiate on the part of the Holy Cross of Davao College.

On both issues, Voluntary Arbitrator Jerome C. Joaquin found in favor of KAMAPI.

Respecting the matter of the automatic renewal of the bargaining agreement, the Voluntary Arbitrator ruled that the request for extension filed by KAMAPI constituted seasonable notice of its intention to renew, modify or amend the agreement, which it could not however pursue because of the absence of the teachers who were then on summer vacation. 11 He rejected the contention of Holy Cross that KAMAPI had unreasonably delayed (until July 31, 1989) the submission of bargaining proposals, opining that the delay was partly attributable to the School's prolonged inaction on KAMAPI's request for extension of the CBA. He also ruled that Holy Cross was estopped from claiming automatic renewal of the CBA because it ceased to implement the check-off provision embodied in the CBA, declaring said School's argument — that a "definitive ruling" by the DOLE on the correct interpretation of the automatic-extension clause of the old CBA was a condition precedent to negotiations for a new CBA — to be a mere afterthought set up to justify its refusal to bargain with KAMAPI after the latter had proven that it was the legally-empowered bargaining agent of the school employees. In the dispositive portion of his award, the Voluntary Arbitrator ordered Holy Cross to:

1. sit down, negotiate and conclude (an agreement) with the Holy Cross of Davao College Faculty Union-KAMAPI, which, by Resolution of the Supreme Court, remains the collective bargaining agent of the permanent and regular teachers of said educational institution; (and)

2. pay to the Union the amount equivalent to the uncollected union dues from August 1989 up to the time respondent shall have concluded a new CBA with the Union, it appearing that respondent stopped complying with the CBA's check-off provisions as of said date. 12

The Voluntary Arbitrator also requested the Fiscal Examiner of the NLRC, Region XI, Davao City, to make the proper computation of the union dues to be paid by management to the complainant union.

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Dissatisfied, Holy Cross filed the petition at bar, challenging the Voluntary Arbitrator's decision on the following grounds, viz.: 13

1. That the voluntary arbitrator erred and acted in grave abuse of discretion amounting to lack or excess of jurisdiction in ordering petitioner to pay the union the uncollected union dues to private respondent which was not even an issue submitted for voluntary arbitration, resulting in serious violation of due process.

2. That the voluntary arbitrator erred in considering that petitioner refused to negotiate with (the) Union, contrary to the records and evidence presented in the case.

The Voluntary Arbitrator's conclusion — that petitioner Holy Cross had, in light of the evidence on record, failed to negotiate with KAMAPI, adjudged as the collective bargaining agent of the school's permanent and regularteachers — is a conclusion of fact that the Court will not review, the inquiry at bar being limited to the issue of whether or not said Voluntary Arbitrator had acted without or in excess of his jurisdiction, or with grave abuse of discretion; nor does the Court see its way clear, after analyzing the record, to pronouncing that reasoned conclusion to have been made so whimsically, capriciously, oppressively, or unjustifiably — in other words, attended by grave abuse of discretion amounting to lack or excess of jurisdiction — as to call for extension of the Court's correcting hand through the extraordinary writ of certiorari. Said finding should therefore be, and is hereby, sustained.

Now, concerning its alleged failure to observe the check-off provisions of the collective bargaining agreement, Holy Cross contends that this was not one of the issues raised in the arbitration proceedings; that said issue was therefore extraneous and improper; and that even assuming the contrary, it (Holy Cross) had not in truth violated the CBA.

Holy Cross asserts that it could not comply with the check-off provision because contrary to established practice prior to August, 1989, KAMAPI failed to submit to the college comptroller every 8th day of the month, a list of employees from whom union dues and the corresponding agency fees were to be deducted; further, that there was an uncertainty as to the recognized bargaining agent with whom it would deal — a matter settled only upon its receipt of a copy of this Court's Resolution on July 18, 1991 — and in any case, the Voluntary Arbitrator's order for it to pay to the union the uncollected employees' dues or agency fees — would amount to the union's unjust enrichment. 14

KAMAPI maintains, on the other hand, that the check-off issue was raised in the position paper it submitted in the voluntary arbitration proceedings; and that in any case, the issue was intimately connected with those submitted for resolution and necessary for complete adjudication of the rights and obligations of the parties; 15 and that said position paper had alleged the manifest bad faith of management in not providing information as to who were regular employees, thereby precluding determination of teachers eligible for union membership.

Disregarding the objection of failure to seasonably set up the check-off question — the factual premises thereof not being indisputable, and technical objections of this sort being generally inconsequential in quasi-judicial proceedings — the issues here ultimately boil down to whether or not an employer is liable to pay to the union of its employees, the amounts it failed to deduct from their salaries — as union dues (with respect to union members) or agency fees (as regards those not union members) — in accordance with the check-off provisions of the collective bargaining contract (CBA) which it claims to have been automatically extended.

A check-off is a process or device whereby the employer, on agreement with the union recognized as the proper bargaining representative, or on prior authorization from its employees, deducts union dues or agency fees from the latter's wages and remits them directly to the union. 16 Its desirability to a labor organization is quite evident; by it, it is assured of continuous funding. Indeed, this Court has acknowledged that the system of check-off is primarily for the benefit of the union and, only indirectly, of the individual laborers. 17 When so stipulated in a collective bargaining agreement, or authorized in writing by the employees concerned — the Labor Code and its Implementing Rules recognize it to be the duty of the employer to deduct sums equivalent to the amount of union dues from the employees' wages for direct remittance to the union, in order to facilitate the collection of funds vital to the role of the union as representative of employees in a bargaining unit if not, indeed, to its very existence. And it may be mentioned in this connection that the right to union dues deducted pursuant to a check-off, pertains to the local union which continues to represent the employees under the terms of a CBA, and not to the parent association from which it has disaffiliated. 18

The legal basis of check-off is thus found in statute or in contract. 19 Statutory limitations on check-offs generally require written authorization from each employee to deduct wages; however, a resolution approved and adopted by a majority to the union

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members at a general meeting will suffice when the right to check-off has been recognized by the employer, including collection of reasonable assessments in connection with mandatory activities of the union, or other special assessments and extraordinary fees. 20

Authorization to effect a check-off of union dues is co-terminous with the union affiliation or membership of employees. 21 On the other hand, the collection of agency fees in an amount equivalent to union dues and fees, from employees who are not union members, is recognized by Article 248 (e) of the Labor Code. No requirement of written authorization from the non-union employee is imposed. The employee's acceptance of benefits resulting from a collective bargaining agreement justifies the deduction of agency fees from his pay and the union's entitlement thereto. In this aspect, the legal basis of the union's right to agency fees is neither contractual nor statutory, but quasi-contractual, deriving from the established principle that non-union employees may not unjustly enrich themselves by benefiting from employment conditions negotiated by the bargaining union. 22

No provision of law makes the employer directly liable for the payment to the labor organization of union dues and assessments that the former fails to deduct from its employees' salaries and wages pursuant to a check-off stipulation. The employer's failure to make the requisite deductions may constitute a violation of a contractual commitment for which it may incur liability for unfair labor practice. 23 But it does not by that omission, incur liability to the union for the aggregate of dues or assessments uncollected from the union members, or agency fees for non-union employees.

Check-offs in truth impose an extra burden on the employer in the form of additional administrative and bookkeeping costs. It is a burden assumed by management at the instance of the union and for its benefit, in order to facilitate the collection of dues necessary for the latter's life and sustenance. But the obligation to pay union dues and agency fees obviously devolves not upon the employer, but the individual employee. It is a personal obligation not demandable from the employer upon default or refusal of the employee to consent to a check-off. The only obligation of the employer under a check-off is to effect the deductions and remit the collections to the union. The principle of unjust enrichment necessarily precludes recovery of union dues — or agency fees — from the employer, these being, to repeat, obligations pertaining to the individual worker in favor of the bargaining union. Where the employer fails or refuses to implement a check-off agreement, logic and prudence dictate that the union itself undertake the collection of union dues and assessments from its members (and agency fees from non-union employees); this, of course, without prejudice to suing the employer for unfair labor practice.

There was thus no basis for the Voluntary Arbitrator to require Holy Cross to assume liability for the union dues and assessments, and agency fees that it had failed to deduct from its employees' salaries on the proffered plea that contrary to established practice, KAMAPI had failed to submit to the college comptroller every 8th day of the month, a list of employees from whose pay union dues and the corresponding agency fees were to be deducted.

WHEREFORE, the requirement imposed on petitioner Holy Cross by the challenged decision of the Voluntary Arbitrator, to pay respondent KAMAPI the amount equivalent to the uncollected union dues and agency fees from August 1989 up to the time a new collective bargaining agreement is concluded, is NULLIFIED and SET ASIDE; but in all other respects, the decision of the Voluntary Arbitrator is hereby AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo, Francisco and Panganiban, JJ., concur.

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G.R. No. 81144 May 7, 1990

MEYCAUAYAN COLLEGE, petitioner,vs.HONORABLE FRANKLIN M. DRILON, in his capacity as Secretary of the Department of Labor and Employment and MEYCAUAYAN COLLEGE FACULTY AND PERSONNEL ASSOCIATION (MCFPA), respondents.

Froilan M. Bacungan & Associates for petitioner.

Rodel Gil B. Villarico for private respondent.

FERNAN, C.J.:

The pivotal issue in this petition for certiorari is whether increases in employees' salaries resulting from the implementation of presidential decrees and wage orders, which are over and above the agreed salary scale contracted for between the employer and the employees in a collective bargaining agreement, preclude the employees from claiming the difference between their old salaries and those provided for under said salary scale.

Petitioner is a private educational institution duly organized and existing under Philippine laws, and operating in Meycauayan, Bulacan. On January 16, 1987, its board of trustees recognized the Meycauayan College Faculty and Personnel Association as the employees' union in the Meycauayan College.

Prior to said recognition or on July 17, 1983, petitioner and the union, then headed by Mrs. Teresita V. Lim, entered into a collective bargaining agreement for 1983-1986. Article IV thereof provides:

SALARY SCALE

IV. 4.0 ANG ANTAS NG PAGPAPASUWELDO SA MGA GURO SA MATAAS NG PAARALAN AY UMAALINSUNOD SA PARAAN NG PAGRARANGGONG KALAKIP NITO BILANG "TAKDA" AT AYON PA RIN SA SUMUSUNOD NA HALAGA NG PAGPAPASUWELDO (IPATUTUPAD SA AÑO-ESCOLAR 1983-1986):

PAGSUBOK A (1-3 TAON) P51.50

KLASE 1 (4-5 TAON) P52.00

(6-8 TAON) P53.00

KLASE II (9-12 TAON) P54.00

KLASE III (13-14 TAON) P57.00

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KLASE IV (15-17 TAON) P60.00

KLASE V (18-21 TAON) P63.00

(22 PATAAS) P70.00

When the collective bargaining agreement was entered into, the following presidential decrees were in effect: (a) P.D No. 1389 dated May 29, 1978 adjusting the existing statutory minimum wages; (b) P.D. No. 1713 dated August 18, 1980 providing for an increase in the minimum daily wage rates and for additional mandatory living allowances, and (c) P.D. No. 1751 dated May 14, 1980 increasing the statutory daily minimum wage at all levels by P4.00 after integrating the mandatory emergency living allowance under P.D. Nos. 525 and 1123 into the basic pay of all covered workers. Wage Order No. 2 increasing the mandatory basic minimum wage and living allowance was also issued on July 6, 1983 just before the collective bargaining agreement herein involved was entered into.

During the lifetime of the collective bargaining agreement, the following were issued: (a) Wage Order No. 3 dated November 7, 1983 increasing the minimum daily living allowance in the private sector; (b) Wage Order No. 4 dated May 1, 1984 integrating as of said date the emergency cost of living allowances under P.D. Nos. 1614, 1634 and 1713 into the basic pay of covered workers in the private sector; (c) Wage Order No. 5 dated June 11, 1984 increasing the cost of living allowance of workers in the private sector whose basic salary or wage is not more than P1,800 a month; and (d) Wage Order No. 6 dated October 26, 1984 increasing the daily living allowances.

The union admits herein that its members were paid all these increases in pay mandated by law. It appears, however, that in 1987, shortly after union president Mrs. Teresita V. Lim, who held the managerial position of registrar of the college, had turned over the presidency of the union to Mrs. Fe Villarico, the latter unintentionally got a copy of the collective bargaining agreement and discovered that Article IV thereof had not been implemented by the petitioner. 1

Consequently, on March 27, 1987, the union filed with the Department of Labor and Employment, Regional Office No. III in San Fernando, Pampanga, a notice of strike on the ground of unfair labor practice alleging therein violation of the collective bargaining agreement particularly the provisions of Article IV thereof on salary scale. 2

The union having struck and picketed the petitioner's premises on May 20, 1987, the Secretary of Labor assumed jurisdiction over the labor dispute and, in his order of May 26, 1987, instructed Regional Office No. III to hear and receive the evidence of the parties and to submit a report thereon.

In his report, the Director of Regional Office No. III stated that the management had indeed complied with the salary and allowance increases ordained by law. However, he observed that the college's compliance with said increases in salary and allowance were "not an ipso facto compliance with the collective bargaining agreement without violating the very aims and purpose of free collective bargaining for better terms and conditions of employment." According to the Director, the two should be distinguished from each other. Thus, while compliance with increases provided by law was mandatory, compliance with the provisions of a collective bargaining agreement was contractual and obligatory.

He added: "Non-compliance with the mandate of a standards law or decree may give rise to an ordinary action for recovery while violation of a collective bargaining agreement may even give rise to a criminal action for unfair labor practice. And while the relief sought for violation of a standards law or decree is primarily for restitution of (an) unpaid benefits, the relief sought for violating a CBA is ordinarily for compliance and desistance. Moreover, there is no provision in the aforecited Presidential Decrees providing that compliance thereto is sufficient compliance with a provision of a collective bargaining agreement and vice-versa."

To illustrate his finding that the collective bargaining agreement had not been complied with by the college, the Director cited the example of a union member who had been with the college for twenty years. Under the standards law, she was entitled to a rate of P58.65 per period whereas under the collective bargaining agreement, she should receive P63.00 per period considering that the ranking system is observed therein.

Accordingly, the Director recommended that the management of Meycauayan College be directed to immediately comply with the salary scale provision of the collective bargaining agreement and "to pay all covered union members their salary differential both during regular classes and summer vacations as well as the 13th month differential pay for the school years 1983-1984, 1984-1985 and 1985-1986 utilizing the computations" mentioned in the report. 3

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Upon review of said report and the record of the case, the Secretary of Labor agreed with the Director's findings noting further that the college "failed to controvert the assertion of the faculty members that: (a) the salary period being paid to them is always P7.00 less than that provided for in the CBA; (b) the salary for the extra period handled is almost always P4.00 more than the salary per period but still less than P3.00 as provided in the CBA. 4 The dispositive portion of the Secretary's order of September 9, 1987 states:

WHEREFORE, the Management of Meycauayan College is hereby ordered to:

1) Strictly effect the payment of salaries of the union members in accordance with the provisions of the collective bargaining agreement;

2) Pay the covered union members salary differential computed by subtracting the salary actually paid and received by them per period provided in the collective bargaining agreement for school years 1983-1984; 1984-1985 and 1985-1986 including the differential for the 13th month pay for the same period. 5

Its motion for reconsideration having been denied on December 3, 1987, Meycauayan College filed the instant petition for certiorari with prayer for the issuance of a writ of preliminary injunction and/or a temporary restraining order enjoining the Secretary of Labor from enforcing his orders of September 9, 1987 and December 3, 1987. On February 15, 1988, the Court issued said temporary restraining order. 6

In this petition, Meycauayan College contends that the Secretary of Labor abused his discretion when he ruled that "the college did not pay its teachers what was due them under the collective bargaining agreement" and when, in the "unfair labor practice strike case," he promulgated a decision "with a retroactive effect beyond the one-year period provided in Art. 290 of the Labor Code." 7

The petition has no merit.

As correctly ruled by public respondent, a collective bargaining agreement is a contractual obligation. It is distinct from an obligation imposed by law. The terms and conditions of a collective bargaining contract constitute the law between the parties. Beneficiaries thereof are therefore, by right, entitled to the fulfillment of the obligation prescribed therein. 8 Consequently, to deny binding force to the collective bargaining agreement would place a premium on a refusal by a party thereto to comply with the terms of the agreement. Such refusal would constitute an unfair labor practice. 9

Moreover, compliance with a collective bargaining agreement is mandated by the expressed policy to give protection to labor. 10 Unless otherwise provided by law, said policy should be given paramount consideration. Hence, inasmuch as the petitioner has failed to point to any provision of law or even of the collective bargaining agreement itself to the effect that benefits provided by the former encompass those provided by the latter, benefits derived from either the law of a contract should be treated as distinct and separate from each other.

What seems to be the life-force of petitioner's case is its contention that an agreement on a salary scale should be distinguished from an agreement on a salary increase. Thus, it argues in fine that an agreement on a salary scale should be considered as an addition to the salary increase imposed by law and viceversa. 11 This contention is fallacious.

Increments to the laborers' financial gratification, be they in the form of salary increases or changes in the salary scale are aimed at one thing — improvement of the economic predicament of the laborers. As such, they should be viewed in the light of the State's avowed policy to protect labor. Thus, having entered into an agreement with its employees, an employer may not be allowed to renege on its obligation under a collective bargaining agreement should, at the same time, the law grant the employees the same or better terms and conditions of employment. Employee benefits derived from law are exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the agreement itself or by law. 12

Nevertheless, as the key to the interpretation of contracts, including collective bargaining agreements, is the intention of the parties, 13 we examined the record and found the undisputed allegation of private respondent that the collective bargaining agreement herein involved was entered into by the parties to improve the plight of the teachers by increasing their salary. The parties increased the teachers' salary or rate per period, by drafting a salary scale "based on the length of service" of the teachers and eventually came up with Article IV aforequoted. 14 From this unrebutted allegation, it is clear that the parties

50


wanted to attain one goal — increase the salaries of the teachers on the basis of their length of service. Hence, it is immaterial that the means by which said goal is achieved is through the alteration of the salary scale.

On the issue of prescription, Article 291 (now Art. 290) of the Labor Code herein invoked by petitioner, provides:

Offenses. — Offenses penalized under this Code and the rules and regulations issued pursuant thereto shall prescribe in three (3) years.

All unfair labor practices arising from Book V shall be filed with the appropriate agency within one (1) year from accrual of such unfair labor practice; otherwise, they shall be forever barred.

Petitioner herein asserts that under said article, the Secretary of Labor abused his discretion when he promulgated a decision applicable even to school years 1983-1984 and 1984-1985 when in fact he assumed jurisdiction over the strike only on May 26, 1987 or more than a year from the accrual of the unfair labor practice. It further avers that the labor dispute herein involved was not presented by the union "as a money claim which would make the strike illegal since a money claim is not a strikable issue under the Labor Code, nor is it under the original jurisdiction of the Secretary of Labor." 15

The one-year prescriptive period is inapplicable in this case because of peculiar factual circumstances which petitioner has not denied. Although the collective bargaining agreement covers school years 1983 to 1986, a copy of the agreement was only made available to the union in 1987. Immediately thereafter, the union sought its implementation. The union members might have been aware of the existence of the collective bargaining agreement but that fact that their president was actually a management employee being petitioner's registrar, they must have been deterred from demanding its implementation earlier. Hence, to apply the provisions of Article 290 (Art. 291) would be unfair and prejudicial to the union members particularly those who have served petitioner for a number of years who stand to benefit most from the salary scale.

Article 264(g), now Article 263(g) of the Labor Code is broad enough to give the Secretary of Labor the power to take jurisdiction over what appears at first blush to be an ordinary money claim. Claims for pay differentials may have that character but, as earlier stated, if they arise out of a violation of a collective bargaining agreement, they assume the character of an unfair labor practice and are, therefore, well within the ambit of the jurisdiction of the Secretary of Labor to decide.

WHEREFORE, the decision of the Secretary of Labor is hereby AFFIRMED and the temporary restraining order of February 15,1989 is LIFTED.

This decision is immediately executory. Costs against the petitioner.

SO ORDERED.

Gutierrez, Jr., Feliciano, Bidin and Cortes, JJ., concur.

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G.R. No. 111914 September 24, 1996

JORGE M. RANISES, petitioner,vs.NATIONAL LABOR RELATIONS COMMISSION, GRACE MARINE & SHIPPING CORPORATION, ET. AL., respondents.

FRANCISCO, J.:

Before us is a petition for certiorari under Rule 65 of the Rules of Court seeking to set aside the decision rendered by public respondent National Labor Relations Commission (NLRC) in NLRC NCR Case No. 002020-91 dated September 14, 1992 1 and the resolution dated August 20, 1993. 2 The assailed decision modified the judgment of the Philippine Overseas Employment Administration (POEA) in POEA Case No. (M) 90-09-1037 and declared that although petitioner's dismissal was carried out without due process, the same was however valid and based on a just cause. The resolution in turn denied petitioner's motion for reconsideration.

As succinctly summarized by petitioner, the antecedents that led to this suit are as follows:

The petitioner is a seaman and a holder of a Master's License and SCDB No. 130334. On January 18, 1990, he was hired by Orophil Shipping International Co. Inc., as Chief Mate to board a vessel M/V "Southern Laurel," an ocean goving vessel owned and operated by its foreign principal Sinkai Shipping Co. Ltd. Sometime on May, 1990, Sinkai Shipping Co. Ltd. changed its manning agent, Orophil Shipping International Co. Inc., and appointed Grace Marine and Shipping Corp. as its new manning agent, who has thereby responsibility for the above mentioned vessel.

On January 25, 1990 the Petitioner departed the Philippines to join the vessel based on his POEA approved employment contract for a twelve (12) month period and with a stipulated wage of US$1,571.00 per month and 3 days leave pay per month.

Contrary to the agreed wage of US$1,571.00 per month as per POEA Contract, petitioner since the time of his engagement on board the vessel has been receiving only the sum of US$1,387.00 PER MONTH as reflected in his pay slips, which prompted him to make enquiries (sic) and complaints on the under payment (sic) and/or unauthorized deductions by the private respondents. It appears further that prior to and at the time of his engagement, the vessel was under Collective Bargaining Agreement (ITF/JSU CBA) stipulating for US$1,571.00 per month for the position of Chief Officer, which is the same position that Petitioner occupies in the vessel.

On September 6, 1990, the Petitioner was repatriated to Manila, and feeling aggrieved, he brought lodged (sic) a Complaint at the POEA against the Private Respondents for illegal dismissal, salary differential, non-payment of overtime pay and leave pay. 3

Private respondent denied any liability to petitioner and alleged that although the latter's original employment contract provided for a basic monthly salary of US$1,571 for twelve (12) months, the same was subsequently revised upon the signing of a Special Agreement on February 26, 1990 between the International Transport Workers Federation (ITF)/and Japan Seaman's Union (JSU)/ Associated Marine Officer's and Seaman's Union of the Philippines (AMOSUP), of which petitioner is a member, and private respondent Sinkai Shipping Co. Ltd. and Orophil Shipping International Co. Inc. The Special Agreement amended their existing Collective Bargaining Agreement and reduced petitioner's salary to US$1,387.00 a month for a period of ten (10) months. It was expressly agreed upon that the Special Agreement shall be retroactive from January 11, 1990, thereby, including petitioner within its coverage. Petitioner refused to sign the new contract and instead requested that he be repatriated as the

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intended to apply for a higher paying contract. Moreover, private respondents alleged that petitioner failed to exhaust administrative remedies by not ventilating his complaint in accordance with the grievance procedures provided in the POEA approved ITF/JSU/AMOSUP CBA.

On July 2, 1991, judgment was rendered by the POEA in favor of petitioner finding private respondents guilty of illegal dismissal as petitioner's repatriation was an offshot of his demand that he paid the salary provided in his original contract, and ordered as follows:

WHEREFORE, premises considered, judgment is hereby rendered by ordering respondents to pay complainant, jointly and severally the following:

1. US$7,226.48 or its peso equivalent at the time of payment, representing the money equivalent of the unexpired portion of the contract;

2. US$957.63 or its peso equivalent at the time of payment representing salary differentials;

3. Five percent (5%) of the total amount as attorney's fee.

SO ORDERED. 4

Thereafter, private respondents filed an appeal with the NLRC, which in turn arrived at a different conclusion, modifying the ruling of the POEA, and rendered the assailed decision on September 14, 1992, the dispositive portion of which reads:

WHEREFORE, and in view thereof the appealed decision is hereby SET ASIDE and a new one entered ordering respondent GRACE MARINE to pay complainant the following amounts:

1). US$1,375.00 or its peso equivalent as penalty for violation of procedural rules;

2). US$957.00 or its peso equivalent representing his leave pay differential which was only computed based on three (3) days leave pay/month.

SO ORDERED. 5

Although it conceded that petitioner's dismissal was effected without due process, respondent NLRC nevertheless upheld petitioner's termination from employment and justified the same as a measure of self-protection on private respondent-employer's part. Respondent Commission ruled that there was just cause for petitioner's dismissal because he committed "acts which tended to breed discontent among crew members by advocating and inciting a labor dispute." 6

Taking exception to the foregoing decision of the NLRC, petitioner filed the instant petition for certiorari, assailing the NLRC for having committed grave abuse of discretion in reversing the judgment of the POEA. Petitioner argues that contrary to the conclusion of the NLRC, there was no valid ground to support his dismissal. This fact, coupled with the absence of due process in carrying out the same, therefore rendered his termination from employment illegal.

As a general rule, the factual findings and conclusions drawn by the NLRC are accorded great weight and respect upon appeal and even finality, as long as it is supported by substantial evidence. 7 However, where the findings of POEA and the NLRC are diametrically opposed, it behooves this Court to scrutinize the record of the case and the evidence presented to arrive at the correct conclusion. 8

The two-fold requirements for a valid dismissal are as follows: (1) dismissal must be for a cause provided for in the Labor Code, which is substantive; and (2) the observance of notice and hearing prior to the employee's dismissal, which is procedural. 9

In the instant case, there is no dispute that respondent employer failed to comply with the requirements of procedural due process in effecting petitioner's dismissal. Both the POEA and the NLRC confirmed this in their respective decisions. The focal point of inquiry therefore is whether or not there was indeed just cause for petitioner's dismissal.

It is a basic principle that in the dismissal of employees, the burden of proof rests upon the employer to show that the dismissal is for a just cause and failure to do so would necessarily mean that the dismissal is not justified. 10

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In reversing the POEA and upholding petitioner's dismissal, respondent NLRC held petitioner liable for breach of trust due to his "acts that tended to breed discontent among the crew members of the vessel by advocating and inciting a labor dispute." 11

However, a close scrutiny of the assailed decision revealed that other than this sweeping pronouncement, the finding of breach of rust is bereft of any factual basis. Respondent NLRC failed to even specify the alleged illegal acts committed by petitioner. In fact, respondent NLRC did not even advert to any evidence to support its conclusion that petitioner was indeed guilty of the charges levelled against him.

Apparently, the NLRC's conclusion was premised on the telex sent by Capt. T. Sonoda, Master of the vessel M/V Southern Laurel, recommending petitioner's repatriation on account of his alleged unsatisfactory behavior and character, to wit:

TO: SINKAI SHIPPING CO., LTD.

FOR: ATTENTION CAPT. M. WATANABE,

DIRECTOR

RE: C/M JORGE M. RANISES "I AM VERY MUCH REGRET TO INFORM YOU OF THE CAPTIONED CREW'S BEHAVIOR AND ALSO HIS CHARACTER AS FOLLOWS:

HE ALWAYS EXPRESSING HIS INTENTION AND DESIRE FOR EARLIER AND/OR SOONEST SIGNING OFF/REPATRIATION TO LOOK FOR HIGHER PAYING MANNING AGENCIES EVEN THOUGH SHOULDERING SUCH EXPENSES FOR HIS OWN ACCOUNTS.

HIS SUCH BEHAVIOR, NOT ONLY LACKING LEADERSHIP AND SEAMAN'S BASIC MORALE, GIVES VERY BAD INFLUENCE TO THE OTHER FILIPINO CREW MEMBERS AND FURTHERMORE HE IS ATTEMPTING TO INCITE OTHER CREW FOR MAKING SOME TROUBLES AND/OR LABOUR DISPUTE ON BOARD THE VESSEL OVER WHICH WE HE WOULD LIKE TO TAKE ADVANTAGE.

HIS BEHAVIOR AND CHARACTER BEING TOO DANGEROUS FOR THE VESSEL, I WOULD LIKE TO ADVISE YOU OF HIS SOONEST REPLACEMENT WHICH IS ALSO HIS REAL DESIRE IN ORDER TO ELIMINATE VERY POSSIBLE TROUBLES.

THANKS FOR YOUR SERIOUS ATTENTION AND YOUR SOONEST ACTIONS.

VERY TRULY YOURS,

CAPT. T. SONODA

MASTER OF THE M/V SOUTHERN LAUREL. 12

Unfortunately, the veracity of the allegations contained in the aforecited telex was never proven by respondent employer. Neither was it shown that respondent employer. Neither was it shown that respondent employer exerted any effort to ever verify the truthfulness of Capt. Sonoda's report and establish petitioner's culpability for his alleged illegal acts. Worse, no other evidence was submitted to corroborate the charges against petitioner.

In contrast, petitioner controverted the charges against him upon denying that he requested for an early repatriation and pointing to the absence of any entry in his Seaman's Book with regard to the cause of his discharge. Moreover, petitioner's demand that he be paid the salary stipulated in his original contract cannot be construed as baseless and unreasonable considering that the Special Agreement amending the existing CBA which reduced his salary was signed only on February 26, 1990, 13 after he was already deployed in the vessel. Undoubtedly, petitioner had a legitimate concern in questioning the reduction in his salary because this was contrary to his original contract and he was not informed thereof prior to his deployment in the vessel. It was therefore not far-fetched that, as found by the POEA, petitioner's persistence in demanding the payment of the salary in his original contract prompted respondent employer to cause his early repatriation and eventual dismissal. 14

Evidently, in the face of contrary evidence, respondent NLRC committed grave abuse of discretion in opting to rely exclusively on the bare allegations pertaining to petitioner's alleged illegal acts as contained in the aforementioned telex, and consequently finding petitioner liable for breach of trust.

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While it is true that loss of trust or breach of confidence is a valid ground for dismissing an employee, such loss or breach of trust must have somebasis. 15 Unsupported by sufficient proof, loss of confidence is without basis and may not be successfully invoked as a ground for dismissal. Loss of confidence as a ground for dismissal has never been intended to afford an occasion for abuse because of its subjected nature. 16 Thus, there must be an actual breach of duty committed by the employee and the same must be supported by substantial evidence. 17 Consequent therefore to respondent employer's failure to discharge the burden of substantiating its charges of breach of trust against petitioner, there is no just cause for the latter's dismissal. Hence, his termination from employment is illegal.

With respect however to petitioner's claim the he should be paid the salary provided in his original contract in the amount of US$1,571.00 per month, we agree with respondent NLRC in rejecting the same. As correctly observed by the Office of the Solicitor General and with which we are in complete accord:

It should, however, be noted that NLRC was correct in finding that under the new ITF/JSU/AMOSUP CBA with Sinkai Shipping Co. Ltd., as approved by POEA, which came into effect on January 11, 1990, petitioner's salary should be reduced to US$1,387.00, and his period of employment to 10 months, in accordance with Article XXXV, of said new CBA —

"Article XXXV CONFLICT WITH CONTRACT PROVISIONS

In case of conflict between the provisions of the individual employment contract of the seaman and that of the Collective Bargaining Agreement, the provisions of this Collective Bargaining Agreement shall be upheld and prevail over that of the individual employment contract."

Petitioner's employment contract was necessarily amended by said new CBA which was both signed by his union and private respondent Sinkai Shipping Co. Ltd. and later approved by NLRC. 18

Resultingly, petitioner, although herein adjudged as entitled to the award of his salary for the unexpired portion of his contract for having been illegally dismissed, the same must however be computed at the reduced rate of US$1,387.00 per month in accordance with the new CBA approved by the POEA between respondent employer and petitioner's union.

WHEREFORE, the petition is hereby GRANTED and the assailed decision of the NLRC dated September 14, 1992 as well as the resolution dated August 20, 1993 are hereby REVERSED and SET ASIDE and a new one is hereby entered ordering private respondents to pay petitioner his salary for the unexpired portion of his contract at the rate of US$1,387.00 per month and the sum of US$957.00 or its peso equivalent representing his leave pay differential of six (6) days for every month of service.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Panganiban, JJ., concur.

55


G.R. No. L-26197 August 30, 1968

ADELO C. RIVERA, plaintiff-appellant,vs.SAN MIGUEL BREWERY CORPORATION, defendant-appellee.

Francisco D. Alas for plaintiff-appellant.Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant-appellee.

R E S O L U T I O N

CASTRO, J.:

Subject of this Resolution is the appellant's motion dated August 12, 1968 for reconsideration of our decision promulgated on July 20, 1968. It raises several points which we shall discuss in seriatim.

1. The appellant initially argues that the entire amount of P1,261.75 corresponding to his retirement benefit, partakes of the nature of a regular compensation for his loyalty and efficiency, citing NWSA vs. NWSA Consolidated Unions, et al. (L-18938, Aug. 31, 1964.), and NDC vs. Unlicensed Crew Members of Three Doña Vessels (PMIU) and the CIR (L-25390, June 27, 1968).

Worthy of note is the fact that the cited cases involved the matter of gratuity or bonus, whereas the case at bar concerns a private benefit plan by virtue of which the employer (appellee) provides sickness, disability, death and old age benefits for its employees (including the appellant). But even assuming that the appellant's position is correct, that is, that his retirement benefit is in the nature of a compensation, still this will not preclude the appellee from effecting the corresponding deduction. It is not denied that the amount of P1,261.75 is the whole contribution of the appellee company for appellant's benefit to its private plan. In deducting from the said amount its (employer's) contribution to the Social Security System in behalf of the said employee, the appellee company was merely exercising the right granted to it by section 9 of the Social Security Act.

Equally off-tangent is PLDT Co. vs. Geturian, et al. (L-7756, July 30, 1955) because involved therein is the question of whether a company can disregard at will the pension plan which it has unilaterally set up. In the case at bar, the appellee company does not seek to disregard or discontinue its private plan. It merely asserts its right to deduct from the benefits accruing to the appellant under the said plan what the law says it may deduct — i.e., its contributions to the System in behalf of the said employee (appellant).

2. That appellant next argues that the appellee company's pension plan is a unilateral contract which bestowed on him a vested right to the entire amount of P1,261.75 as retirement benefit. This is not quite correct. Upon the happening of any contingency (sickness, disability, death or old age) provided for in the plan, what vests in an employee is merely the right to receive a retirement benefit, not in a specified sum, but in an amount computed in accord with the provisions and conditions to the whole contract.1 Precisely, article XV of the private plan provides that:

The benefits provided in these Rules shall be reduced by such amounts as would be sufficient to compensate the company for its (i.e., employer's) contribution for the account of each employee to the Social Security System. . . .

Thus, his retirement benefit was accordingly reduced by P331.40 which is the sum total of the appellee company's contributions for his account to the System.

Besides, granting that the private plan assumed the proportions of a unilateral contract, then it is elementary that the pertinent provisions of the law should be read into it. One such provision is section 9 of the Social Security Act which commands the integration of private plans — existing and in force at the time of compulsory coverage — with the plan of the System "in such a way that where the employer's contributions to his private plan is [sic] more than that required of him in this Act, he shall pay to the System only the contribution required of him and he shall continue his contributions to such private plan less his contribution to the System so that the employer's total contribution to his private benefit plan and to the Social Security System shall be the same as his contribution to his private plan before the compulsory coverage; . . ."2

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3. The appellant next contends that section 9 of the Social Security Act does not authorize the reduction of the retirement benefit upon retirement or at any time, but only and immediately upon the integration of the private plan with the System, because it mentions the word contribution no less than seven times.

A searching scrutiny of the aforementioned section fails to elicit any support for the appellant's contention. The section merely commands, inter alia, (1) the integration of private plans with the System's plan, and (2) in case the employer's contributions to his private plan are more than those required of him under the Social Security Act, the payment by him to the System of the contributions required of him, and the continuation of the payment of his contributions to the private plan less his contributions to the System. There is no express or implied mention of the need to make an immediate deduction of his contribution to the System from his contributions to the private plan. It would seem that this right to effect deduction, granted by law to the employer, can be exercised by the latter at his leisure but before payment to the employee of what is due to the latter under the private plan.

And this is as it should be — for to compel the employer to make the deduction every time he pays the required premiums to the System, would be to constrain him to adopt and maintain a cumbersome accounting procedure. Surely, our lawmakers did not intend nor envision this possible inconvenience to the employer. Indeed, where a right is granted, whatever is necessary for the proper and effective exercise of said right is presumed to have been granted likewise. Else, the right becomes inutile.

Nor can we consider as a waiver the appellee's omission to effect immediate deduction. Waivers are not presumed, but must clearly and convincingly be shown, either by express stipulation or by acts admitting no other reasonable interpretation.3

4. The appellant insists nevertheless that there was no need for the appellee company to adopt and incorporate article XV into its private plan because there was no reduction of the monthly contribution or amortization for the private benefit plan — considering that exhibit A which is the statement of account of the retirement benefits of the appellant duly rendered by the appellee, does not show any such reduction, whereas section 9 of the Social Security Act provides, inter alia.

. . . That any changes, adjustments, modifications, eliminations or improvements in the benefits to be available under the remaining private plan, which, may be necessary to adopt by reason of the reduced contribution thereto as a result of the integration, shall be subject to agreements between the employers and employees concerned. . . . (emphasis supplied).

If the appellant had taken a long look, he would have noted that exhibit A mentioned the following:

Less: Employer's Contribution to the Social Security System . . . . . . . . . . . . . . . . . . . . . . . . P331.40

The above amount of P331.40 is the sum total of the deductions effected by the appellee from its contributions to the private benefit plan. But the appellant tries to salvage his untenable position by saying that the reduction was made too late. We have shown the emptiness of this argument in our discussion in no. 3 above.

5. The appellant's argument that, not being a party to the collective bargaining agreement, he cannot be bound by article XV of the Health, Welfare and Retirement Plan, was sufficiently refuted in our decision of July 20, 1968.

6. The appellant differs with our view that he would be enriched at the expense of the appellee company if he were allowed "to enjoy the full amount of retirement pay under the private plan and all the benefits due to him under the Social Security Act without spending any single centavo," and, conversely, if we were "to prohibit the Company from making the corresponding deduction from such benefits of its contribution to the Social Security System in behalf of the appellant."

Does not the appellant stand to gain two benefits — his retirement benefit under the company plan and that accruing to him under the System? Did not the appellee company make possible his enjoyment of these two benefits — the first, by setting up unilaterally and maintaining singlehandedly its health, welfare and retirement Plan, and the second, by paying its employer's contributions to the System in behalf of the appellant?

The deduction of the amount of P331.40 in this case merely represents a writing-off of a superadded liability, inasmuch as payment of the System premiums would otherwise impose upon the appellee company a greater economic burden than that which it voluntarily assumed when it adopted the private plan. Otherwise stated, the Social Security Act grants the employer the right to deduct its contributions to the System in behalf of the employee in order to preclude the employer from shouldering a double burden.

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7. The appellant tries another approach, and cites the fact that the appellee has provided in article XV of the private plan that —1äwphï1.ñët

. . . However, beginning with the Company's contributions corresponding to the month of April, 1963 the Company's contribution to the Social Security System shall no longer be deducted from the benefits provided in these Rules.

in support of his argument that the appellee included this provision because it realized the unfairness of the situation.

We disagree. That the appellee introduced this proviso in article XV is no admission, much less proof, that the arrangement before April 1963 was unfair. The appellant here commits the fallacy of non sequitur.

Besides, the law (Social Security Act, section 9) grants to the appellee the right to make the corresponding deduction. Whether or not the appellee exercises said right is entirely up to it. That it decided to waive said right after April 1963 is a matter we cannot inquire into.

8. The appellant notes the "harsh discrimination where he now finds himself after all his years of loyalty, dedication and efficiency, to the very end of his good health." He has not, however, offered proof that no deduction of the employer's contributions has been made from the retirement benefits of other retirees similarly situated.

9. The appellant resorts to less than fair argument when he states that "Exhibit "A" also shows that the amount of P331.40 includes even the period of April 1, 1963 to September 15, 1963, and that deduction was still made on September 1, 1963, despite Article XV of the Health and Welfare Plan."

This statement is clearly false because the stipulation of facts entered into by the parties states —

. . . That the amount of P331.40 representing the Defendant's [appellee company] contribution to the Social Security System during the period from September 1957 to March 1963 was deducted from Plaintiff's [appellant] retirement benefits in accordance with Article 15 . . . of the Defendant's [appellee] Health, Welfare and Retirement Plan . . . (emphasis supplied).

Well-settled is the rule that where parties to an action submit a case upon stipulated facts, and, there is no other evidence introduced, they are bound by the facts so stipulated.4 The facts agreed upon cannot be contradicted, unless it is shown that the admission was made through a palpable mistake.5 Here, the appellant does not allege — much less prove — that a palpable mistake has led him into agreeing to the stipulation of facts. He may not therefore repudiate the stipulation of facts without the consent of the appellee or without leave of court on justifiable reasons.6

10. The appellant finally rehashes his argument that deduction of the amount of P331.40 from his retirement benefit is a violation of section 19 of the Social Security Act which provides, in part, that —

. . . Notwithstanding any contract to the contrary, an employer shall not deduct, directly or indirectly, from the compensation of his employees covered by the System or otherwise recover from them the employer's contribution with respect to such employees,

because — he maintains — the word "otherwise" in this particular section should be interpreted in its broadest sense. Meaning, stated elsewise, that any recovery from the employees of the employer's contribution to the System with respect to such employees, would be illegal.

The appellant's interpretation of the abovequoted provision of section 19 would create a conflict between said section and section 9 of the same Act, which states, inter alia, that

. . . [W]here the employer's contributions to his private plan is [sic] more than that required of him in this Act, he shall pay to the System only the contribution required of him and he shall continue his contributions to such private plan less his contribution to the System so that the employer's total contribution to his private benefit plan and to the Social Security System shall be the same as his contribution to his private plan before the compulsory coverage. . . . (emphasis supplied).

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For, whereas section 9 allows the employer to deduct his contributions to the System with respect to his employees from his contributions to his private plan, section 19 — according to the appellant's interpretation — prohibits this deduction because it would "otherwise" be a recovery from the employees of the employer's contributions to the System.

We cannot subscribe to appellant's interpretation because it will create — where there is clearly none — a conflict between section 19 and section 9. It is not the function of courts to impute conflicting intentions to the legislature, unless such conflicting intentions are shown by clear and positive contradictory language.7 Hence, where two constructions of a statute are possible, one of which harmonizes the provisions of the entire act, the other creating discord between different provisions, the former should be adopted.8

In fine, we still hold that section 19 prohibits any employer's scheme to make his employees shoulder his burden of paying to the System the employer's contributions required by the Social Security Act, but it does not prohibit the employer from effecting the proper deduction from his contributions to his private benefit plan.

ACCORDINGLY, the appellant's motion for reconsideration dated August 12, 1968 is hereby denied. 1äwphï1.ñët

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Sanchez, Angeles and Fernando, JJ., concur.

G.R. No. 75037 April 30, 198759


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

No. 75055 April 30, 1987

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

Jaime G. de Leon for petitioner in G.R. No. 75037.

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

GUTIERREZ, JR.:

These consolidated petitions for certiorari seek the review and setting aside of respondent National Labor Relations Commission's decision in NLRC Case No. AB-6-11685-81 dated May 26, 1986, affirming the October 12, 1984 decision of the Labor Arbiter, and of the NLRC resolution dated June 28, 1986, which denied the motion for reconsideration of the petitioners.

The facts of the case are as follows:

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

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

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

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

On November 7, 1980, KAMPIL filed a petition for certification election to determine union representation in TDI, which development compelled TDI to file a grievance with TDLU on November 7, 1980 pursuant to Article XV of the CBA.

Acting on the grievance of TDI, TDLU wrote the private respondents on December 23, 1980 requiring them to explain why TDLU should not take disciplinary action against them for, among other things —

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

TDLU created a committee to investigate its erring members in accordance with its by-laws which are not disputed by the private respondents. Except for Josefino Paguyo who, despite due notice, was absent during the investigation conducted on January 2, 1981, all the private respondents were present and given a chance to explain their side. Thereafter, in a resolution dated January 9, 1981, TDLU, through the Investigating Committee and approved by TDLU's Board of Directors, expelled the

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private respondents from TDLU for disloyalty to the Union effective January 16, 1981. By letter dated January 10, 1981, TDLU notified TDI that private respondents had been expelled from TDLU and demanded that TDI terminate the employment of private, respondents because they had lost their membership with TDLU.

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

Accordingly, TDI filed with the MOLE on January 14, 1981 its application for clearance to terminate the employment of private respondents. This application docketed as Case No. NCR-AC-1-435-81 specifically stated that the action applied for was preventive suspension which will result in termination of employment, ... due to (T)hreat to (P)roduction traceable to rival (U)nion activity. The private respondents then filed with the MOLE a complaint for illegal dismissal against TDI and Benjamin Agaloos, in his capacity as President of TDLU, which complaint was docketed as Case No. STF-1-333-91. The cases were jointly heard and tried by Labor Arbiter Teodorico Dogelio.

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

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

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

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

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

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

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

Using the foregoing as relevant and applicable to the consolidated cases for the clearance application for termination filed by TDI and the illegal dismissal case filed by the private respondents on October 12, 1984, Labor Arbiter Teodorico Dogelio rendered a decision denying TDI's application to terminate the private respondents and ordering TDI to reinstate the complainants with backwages. It should be noted that the Labor Arbiter rendered the decision even before the petitioner company could file its memorandum, formal offer of exhibits and its manifestation and motion to correct tentative markings of

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exhibits. This decision of the arbiter was upheld by the respondent NLRC in NLRC Case No. AB-6-11685-81 in its decision dated May 20,1986.

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

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

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

I

RESPONDENT COMMISSION ACTED IN EXCESS AND WITH GRAVE ABUSE OF ITS DISCRETION AND IN A MANNER CONTRARY TO LAW IN RENDERING ITS DECISION EN BANC OF MAY 20, 1986 AND IN DENYING PETITIONER'S MOTION FOR RECONSIDERATION THEREOF IN ITS RESOLUTION SOLUTION DATED JUNE 26, 1986 BECAUSE —

1. THE RESPONDENT COMMISSION HAS IGNORED THE FACT THAT THE PRIVATE RESPONDENTS WERE EXPELLED BY TDLU FROM ITS MEMBERSHIP ON JANUARY 16, 1981 AND, CONSEQUENTLY, TDLU HAD DEMANDED OF THE PETITIONER OF THE ENFORCEMENT OF THE UNION SECURITY CLAUSE OF THE CBA, THE SAID CBA WAS AN EXISTING AND A VALID CONTRACT BETWEEN THE PETITIONER AND TDLU, AND EFFECTIVE BETWEEN THE PARTIES;

2. IT IS FUNDAMENTAL THAT A UNION SECURITY CLAUSE PROVISION IN COLLECTIVE BARGAINING AGREEMENT IS BINDING BETWEEN THE PARTIES TO THE CBA UNDER THE LAWS;

3. THE EXPULSION OF THE PRIVATE RESPONDENTS FROM TDLU WAS THE UNION'S OWN DECISION. HENCE, WHEN TDLU DEMANDED OF THE PETITIONER THE ENFORCEMENT OF THE SECURITY CLAUSE PROVISION OF THE CBA BY SEPARATING PRIVATE RESPONDENTS FROM THEIR EMPLOYMENT, FOR HAVING LOST THEIR MEMBERSHIP IN THE UNION, THE PETITIONER WAS DUTY BOUND TO DO SO;

4. THE ALLUSION THAT THE CBA WAS NOT CERTIFIED BY THE BUREAU OF LABOR RELATIONS (BLR) HAS NOTHING TO DO WITH ITS EFFECTIVENESS AS A VALID CONTRACT BETWEEN ALL PARTIES THERETO.

II

RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AND IN EXCESS OF ITS JURISDICTION IN HOLDING THAT PRIVATE RESPONDENTS DID NOT COMMIT ACTS PREJUDICIAL TO THE PETITIONER'S PRODUCTION EFFORTS TO BE SUFFICIENT BASIS FOR THEIR PREVENTIVE SUSPENSION AND EVENTUAL REMOVAL.

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

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

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

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

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

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

The issues to be resolved are the following: (a) whether or not TDI was justified in terminating private respondents' employment in the company on the basis of TDLU's demand for the enforcement of the Union Security Clause of the CBA between TDI and TDLU; and (b) whether or not TDI is guilty of unfair labor practice in complying with TDLU's demand for the dismissal of private respondents.

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

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

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

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

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

xxx xxx xxx

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

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

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

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

No petition for certification election for intervention disaffiliation shall be entertained or given due course except within the 60 day freedom period immediately preceding the execution of the Collective Bargaining Agreement.

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

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

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

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

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

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

In an earlier case, this Court held:

Nor can it be said that the stipulation providing that the employer may dismiss an employee whenever the union recommends his expulsion either for disloyalty or for any violation of its by-laws and constitution is illegal or constitute of unfair labor practice, for such is one of the matters on which management and labor can agree in order to bring about harmonious relations

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between them and the union, and cohesion and integrity of their organization And as an act of loyalty a union may certainly require its members not to affiliate with any other labor union and to consider its infringement as a reasonable cause for separation. This is what was done by respondent union. And the respondent employer did nothing but to put in force their agreement when it separated the herein complainants upon the recommendation of said union. Such a stipulation is not only necessary to maintain loyalty and preserve the integrity of the union but is allowed by the Magna Charta of Labor when it provided that while it is recognized that an employee shall have the right to self-organization, it is at the same time postulated that such right shall not injure the right of the labor organization to prescribe its own rules with respect to the acquisition or retention of membership therein (Section 41(b) par. 1, Republic Act 875). This provision is significant. It is an indirect restriction on the right of an employee to self-organization. It is a solemn pronouncement of a policy that while an employee is given the right to join a labor organization, such right should only be asserted in a manner that will not spell the destruction of the same organization The law requires loyalty to the union on the part of its members in order to obtain to the full extent its cohesion and integrity. We therefore, see nothing improper in the disputed provisions of the collective bargaining agreement entered into between the parties. (Ang Malayang Manggagawa ng Ang Tibay Enterprises, et al. v. Ang Tibay, et al. 102 Phil. 669) (Emphasis supplied)

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

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

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

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

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

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

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

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

Inherent in every labor union, or any organization for that matter, is the right of self-preservation. When members of a labor union, therefore, sow the seeds of dissension and strife within the union; when they seek the disintegration and destruction of

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the very union to which they belong; they thereby forfeit their rights to remain as members of the union which they seek to destroy. Prudence and equity, as well as the dictates of law and justice, therefore, compelling mandate the adoption by the labor union of such corrective and remedial measures, in keeping with its laws and regulations, for its preservation and continued existence; lest by its folly and inaction, the labor union crumble and fall. (Idem., p. 458)

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

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

SO ORDERED.

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

Fernan (Chairman), J., took no part.

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