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Sosito

-------FIRST DIVISION
[G.R. No. L-48926. December 14, 1987.]
MANUEL SOSITO, Petitioner, v. AGUINALDO DEVELOPMENT CORPORATION, Respondent.

DECISION

CRUZ, J.:

We gave due course to this petition and required the parties to file simultaneous memoranda on the sole
question of whether or not the petitioner is entitled to separation pay under the retrenchment program of
the private Respondent.
The facts are as follows:

chanrob 1es vi rtua l 1aw lib rary

Petitioner Manuel Sosito was employed in 1964 by the private respondent, a logging company, and was in
charge of logging importation, with a monthly salary of P675.00, 1 when he went on indefinite leave with
the consent of the company on January 16, 1976. 2 On July 20, 1976, the private respondent, through its
president, announced a retrenchment program and offered separation pay to employees in the active
service as of June 30, 1976, who would tender their resignations not later than July 31, 1976. The petitioner
decided to accept this offer and so submitted his resignation on July 29, 1976, "to avail himself of the
gratuity benefits" promised. 3 However, his resignation was not acted upon and he was never given the
separation pay he expected. The petitioner complained to the Department of Labor, where he was sustained
by the labor arbiter. 4 The company was ordered to pay Sosito the sum of P4,387.50, representing his
salary for six and a half months. On appeal to the National Labor Relations Commission, this decision was
reversed and it was held that the petitioner was not covered by the retrenchment program. 5 The petitioner
then came to us.
For a better understanding of this case, the memorandum of the private respondent on its retrenchment
program is reproduced in full as follows:
jgc:cha nrob les.co m.ph

"July 20, 1976


"Memorandum To: ALL EMPLOYEES
"Re: RETRENCHMENT PROGRAM
"As you are all aware, the operations of wood-based industries in the Philippines for the last two (2) years
were adversely affected by the worldwide decline in the demand for and prices of logs and wood products.
Our company was no exception to this general decline in the market, and has suffered tremendous losses.
In 1975 alone, such losses amounted to nearly P20,000,000.00.
"The company has made a general review of its operations and has come to the unhappy decision of the
need to make adjustments in its manpower strength if it is to survive. This is indeed an unfortunate and
painful decision to make, but it leaves the company no alternative but to reduce its tremendous and
excessive overhead expense in order to prevent an ultimate closure.
"Although the law allows the Company, in a situation such as this, to drastically reduce it manpower
strength without any obligation to pay separation benefits, we recognize the need to provide our employees
some financial assistance while they are looking for other jobs.
"The Company therefore is adopting a retrenchment program whereby employees who are in the active

service as of June 30, 1976 will be paid separation benefits in an amount equivalent to the employees onehalf (1/2) months basic salary multiplied by his/her years of service with the Company. Employees
interested in availing of the separation benefits offered by the Company must manifest such intention by
submitting written letters of resignation to the Management not later than July 31, 1976. Those whose
resignations are accepted shall be informed accordingly and shall be paid their separation benefits.
"After July 31, 1976, this offer of payment of separation benefits will no longer be available. Thereafter, the
Company shall apply for a clearance to terminate the services of such number of employees as may be
necessary in order to reduce the manpower strength to such desired level as to prevent further losses.
"(SGD.) JOSE G. RICAFORT
President
"N.B.
"For additional information
and/or resignation forms,
please see Mr. Vic Maceda
or Atty. Ben Aritao." 6
It is clear from the memorandum that the offer of separation pay was extended only to those who were in
the active service of the company as of June 30, 1976. It is equally clear that the petitioner was not eligible
for the promised gratuity as he was not actually working with the company as of the said date. Being on
indefinite leave, he was not in the active service of the private respondent although, if one were to be
technical, he was still in its employ. Even so, during the period of indefinite leave, he was not entitled to
receive any salary or to enjoy any other benefits available to those in the active service.
It seems to us that the petitioner wants to enjoy the best of two worlds at the expense of the
privateRespondent. He has insulated himself from the insecurities of the floundering firm but at the same
time would demand the benefits it offers. Being on indefinite leave from the company, he could seek and try
other employment and remain there if he should find it acceptable; but if not, he could go back to his former
work and argue that he still had the right to return as he was only on leave.
There is no claim that the petitioner was temporarily laid off or forced to go on leave; on the contrary, the
record shows that he voluntarily sought the indefinite leave which the private respondent granted. It is
strange that the company should agree to such an open-ended arrangement, which is obviously one-sided.
The company would not be free to replace the petitioner but the petitioner would have a right to resume his
work as and when he saw fit.
chanrob les vi rtua l lawlib ra ry

We note that under the law then in force the private respondent could have validly reduced its work force
because of its financial reverses without the obligation to grant separation pay. This was permitted under
the original Article 272(a), of the Labor Code, 7 which was in force at the time. To its credit, however, the
company voluntarily offered gratuities to those who would agree to be phased out pursuant to the terms and
conditions of its retrenchment program, in recognition of their loyalty and to tide them over their own
financial difficulties. The Court feels that such compassionate measure deserves commendation and support
but at the same time rules that it should be available only to those who are qualified therefor. We hold that
the petitioner is not one of them.
While the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every labor dispute will be automatically decided in favor of labor. Management
also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair
play. Out of its concern for those with less privileges in life, this Court has inclined more often than not
toward the worker and upheld his cause in his conflicts with the employer. Such favoritism, however, has
not blinded us to the rule that justice is in every case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine.
WHEREFORE, the petition is DISMISSED and the challenged decision AFFIRMED, with costs against the
petitioner.

SO ORDERED.
Teehankee (C.J.), Narvasa, Paras and Gancayco, JJ., concur.
Endnotes:

1. Rollo, p. 13.
2. Ibid.
3. Id., p. 14.
4. Id., pp. 43-45.
5. Id., pp. 62-64.
6. Id., p. 19.
7. "Art. 272. Termination by employer. An employer may terminate an employment without a definite
period for any of the following just causes:
jgc:chanroble s.com. ph

"(a) the closing or cessation of operation of the establishment or enterprise, or where the employer has to
reduce his work force by more than one-half due to serious business reverses, unless the closing is for the
purpose of circumventing the provisions of this Chapter; . . ."

San Miguel
-------G.R. No. L-53515 February 8, 1989
SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,
vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.
Lorenzo F. Miravite for petitioner.
Isidro D. Amoroso for New San Miguel Corp. Sales Force Union.
Siguion Reyna, Montecillo & Ongsiako for private respondent.

GRIO-AQUINO, J.:

This is a petition for review of the Order dated February 28, 1980 of the Minister of Labor in Labor
Case No. AJML-069-79, approving the private respondent's marketing scheme, known as the
"Complementary Distribution System" (CDS) and dismissing the petitioner labor union's complaint
for unfair labor practice.
On April 17, 1978, a collective bargaining agreement (effective on May 1, 1978 until January 31,
1981) was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the
private respondent, San Miguel Corporation, Section 1, of Article IV of which provided as follows:
Art. IV, Section 1. Employees within the appropriate bargaining unit shall be entitled
to a basic monthly compensation plus commission based on their respective sales.
(p. 6, Annex A; p. 113, Rollo.)
In September 1979, the company introduced a marketing scheme known as the "Complementary
Distribution System" (CDS) whereby its beer products were offered for sale directly to wholesalers
through San Miguel's sales offices.
The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor,
with a notice of strike on the ground that the CDS was contrary to the existing marketing scheme
whereby the Route Salesmen were assigned specific territories within which to sell their stocks of
beer, and wholesalers had to buy beer products from them, not from the company. It was alleged
that the new marketing scheme violates Section 1, Article IV of the collective bargaining agreement
because the introduction of the CDS would reduce the take-home pay of the salesmen and their
truck helpers for the company would be unfairly competing with them.
The complaint filed by the petitioner against the respondent company raised two issues: (1) whether
the CDS violates the collective bargaining agreement, and (2) whether it is an indirect way of busting
the union.
In its order of February 28, 1980, the Minister of Labor found:
... We see nothing in the record as to suggest that the unilateral action of the
employer in inaugurating the new sales scheme was designed to discourage union
organization or diminish its influence, but rather it is undisputable that the
establishment of such scheme was part of its overall plan to improve efficiency and
economy and at the same time gain profit to the highest. While it may be admitted
that the introduction of new sales plan somewhat disturbed the present set-up, the
change however was too insignificant as to convince this Office to interpret that the
innovation interferred with the worker's right to self-organization.
Petitioner's conjecture that the new plan will sow dissatisfaction from its ranks is
already a prejudgment of the plan's viability and effectiveness. It is like saying that
the plan will not work out to the workers' [benefit] and therefore management must
adopt a new system of marketing. But what the petitioner failed to consider is the fact
that corollary to the adoption of the assailed marketing technique is the effort of the
company to compensate whatever loss the workers may suffer because of the new
plan over and above than what has been provided in the collective bargaining
agreement. To us, this is one indication that the action of the management is devoid
of any anti-union hues. (pp. 24-25, Rollo.)
The dispositive part of the Minister's Order reads:

WHEREFORE, premises considered, the notice of strike filed by the petitioner, San
Miguel Brewery Sales Force Union-PTGWO is hereby dismissed. Management
however is hereby ordered to pay an additional three (3) months back adjustment
commissions over and above the adjusted commission under the complementary
distribution system. (p. 26, Rollo.)
The petition has no merit.
Public respondent was correct in holding that the CDS is a valid exercise of management
prerogatives:
Except as limited by special laws, an employer is free to regulate, according to his
own discretion and judgment, all aspects of employment, including hiring, work
assignments, working methods, time, place and manner of work, tools to be
used, processes to be followed, supervision of workers, working regulations, transfer
of employees, work supervision, lay-off of workers and the discipline, dismissal and
recall of work. ... (NLU vs. Insular La Yebana Co., 2 SCRA 924; Republic Savings
Bank vs. CIR 21 SCRA 226, 235.) (Perfecto V. Hernandez, Labor Relations Law,
1985 Ed., p. 44.) (Emphasis ours.)
Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise
means designed towards that goal. In Abbott Laboratories vs. NLRC, 154 SCRA 713, We ruled:
... Even as the law is solicitous of the welfare of the employees, it must also protect
the right of an employer to exercise what are clearly management prerogatives. The
free will of management to conduct its own business affairs to achieve its purpose
cannot be denied.
So long as a company's management prerogatives are exercised in good faith for the advancement
of the employer's interest and not for the purpose of defeating or circumventing the rights of the
employees under special laws or under valid agreements, this Court will uphold them (LVN Pictures
Workers vs. LVN, 35 SCRA 147; Phil. American Embroideries vs. Embroidery and Garment
Workers, 26 SCRA 634; Phil. Refining Co. vs. Garcia, 18 SCRA 110). San Miguel Corporation's offer
to compensate the members of its sales force who will be adversely affected by the implementation
of the CDS by paying them a so-called "back adjustment commission" to make up for the
commissions they might lose as a result of the CDS proves the company's good faith and lack of
intention to bust their union.
WHEREFORE, the petition for certiorari is dismissed for lack of merit.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.

Metrolab
--------

FIRST DIVISION

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

METROLAB INDUSTRIES, INC., petitioner, vs. HONORABLE MA.


NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of
the Department of Labor and Employment and METRO DRUG
CORPORATION EMPLOYEES ASSOCIATION-FEDERATION OF
FREE WORKERS, respondents.
SYLLABUS
1.

REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF


ADMINISTRATIVE AGENCIES; RULE; CASE AT BAR. - We reaffirm the
doctrine that considering their expertise in their respective fields, factual
findings of administrative agencies supported by substantial evidence are
accorded great respect and binds this Court. The Secretary of Labor
ruled, thus: x x x Any act committed during the pendency of the dispute
that tends to give rise to further contentious issues or increase the
tensions between the parties should be considered an act of
exacerbation. One must look at the act itself, not on speculative
reactions. A misplaced recourse is not needed to prove that a dispute has
been exacerbated. For instance, the Union could not be expected to file
another notice of strike. For this would depart from its theory of the case
that the layoff is subsumed under the instant dispute, for which a notice of
strike had already been filed. On the other hand, to expect violent
reactions, unruly behavior, and any other chaotic or drastic action from the
Union is to expect it to commit acts disruptive of public order or acts that
may be illegal. Under a regime of laws, legal remedies take the place of
violent ones. x xx Protest against the subject layoffs need not be in the
form of violent action or any other drastic measure. In the instant case the
Union registered their dissent by swiftly filing a motion for a cease and
desist order. Contrary to petitioners allegations, the Union strongly
condemned the layoffs and threatened mass action if the Secretary of
Labor fails to timely intervene: x x x 3. This unilateral action of
management is a blatant violation of the injunction of this Office against

committing acts which would exacerbate the dispute. Unless such act is
enjoined the Union will be compelled to resort to its legal right to mass
actions and concerted activities to protest and stop the said management
action. This mass layoff is clearly one which would result in a very serious
dispute unless this Office swiftly intervenes. x x x Metrolab and the Union
were still in the process of resolving their CBA deadlock when petitioner
implemented the subject layoffs. As a result, motions and oppositions
were filed diverting the parties attention, delaying resolution of the
bargaining deadlock and postponing the signing of their new CBA, thereby
aggravating the whole conflict.
2.

LABOR
AND
SOCIAL
LEGISLATION;
TERMINATION
OF
EMPLOYMENT; EXERCISE OF MANAGEMENT PREROGATIVES; NOT
ABSOLUTE; SUBJECT TO EXCEPTIONS IMPOSED BY LAW. - This
Court recognizes the exercise of management prerogatives and often
declines to interfere with the legitimate business decisions of the
employer. However, this privilege is not absolute but subject to limitations
imposed by law. In PAL vs. NLRC, (225 SCRA 301 [1993]), we issued this
reminder: ... the exercise of management prerogatives was never
considered boundless. Thus, in Cruz vs. Medina (177 SCRA 565 [1989]),
it was held that managements prerogatives must be without abuse of
discretion ...All this points to the conclusion that the exercise of managerial
prerogatives is not unlimited. It is circumscribed by limi(ations found in
law, a collective bargaining agreement, or the general principles of fair
play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758
[1990]).

3.

ID.; ID.; ID.; ID.; ID.; CASE AT BAR AN EXCEPTION. - The case at
bench constitutes one of the exceptions. The Secretary of Labor is
expressly given the power under the Labor Code to assume jurisdiction
and resolve labor disputes involving industries indispensable to national
interest. The disputed injunction is subsumed under this special grant of
authority. Art. 263 (g) of the Labor Code specifically provides that: 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. . . . That Metrolabs business is of national interest is not disputed.
Metrolab is one of the leading manufacturers and suppliers of medical and
pharmaceutical products to the country. Metrolabs management
prerogatives, therefore, are not being unjustly curtailed but duly balanced
with and tempered by the limitations set by law, taking into account its
special character and the particular circumstances in the case at bench.
4.

ID.; LABOR RELATIONS; INELIGIBILITY OF MANAGERIAL


EMPLOYEES TO JOIN, FORM AND ASSIST ANY LABOR
ORGANIZATION; PROHIBITION EXTENDED TO CONFIDENTIAL
EMPLOYEES. - Although Article 245 of the Labor Code limits the
ineligibility to join, form and assist any labor organization to managerial
employees, jurisprudence has extended this prohibition to confidential
employees or those who by reason of their positions or nature of work are
required to assist or act in a fiduciary manner to managerial employees
and hence, are likewise privy to sensitive and highly confidential records.

5.

ID.; ID.; EXCLUSION OF CONFIDENTIAL EMPLOYEES FROM THE


RANK AND FILE BARGAINING UNIT; NOT TANTAMOUNT TO
DISCRIMINATION. - Confidential employees cannot be classified as rank
and file. As previously discussed, the nature of employment of
confidential employees is quite distinct from the rank and file, thus,
warranting a separate category. Excluding confidential employees from
the rank and file bargaining unit, therefore, is not tantamount to
discrimination.
APPEARANCES OF COUNSEL
Bautista Picazo Buyco Tan & Fider for petitioner.
The Solicitor General for public respondent.
Perfecto V. Fernandez, Jose P. Fernandez & Cristobal P. Fernandez for
Metro Drug Corporation.

DECISION
KAPUNAN, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court
seeking the annulment of the Resolution and Omnibus Resolution of the

Secretary of Labor and Employment dated 14 April 1992 and 25 January


1993, respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-9 1; NCMBNCR-NS-09-678-91) on grounds that these were issued with grave abuse of
discretion and in excess of jurisdiction.
Private respondent Metro Drug Corporation Employees AssociationFederation of Free Workers (hereinafter referred to as the Union) is a labor
organization representing the rank and file employees of petitioner Metrolab
Industries, Inc. (hereinafter referred to as Metrolab/MII) and also of Metro
Drug, Inc.
On 31 December 1990, the Collective Bargaining Agreement (CBA)
between Metrolab and the Union expired. The negotiations for a new CBA,
however, ended in a deadlock.
Consequently, on 23 August 1991, the Union filed a notice of strike
against Metrolab and Metro Drug Inc. The parties failed to settle their dispute
despite the conciliation efforts of the National Conciliation and Mediation
Board.
To contain the escalating dispute, the then Secretary of Labor and
Employment, Ruben D. Torres, issued an assumption order dated 20
September 1991, the dispositive portion of which reads, thus:
WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the
Labor Code, as amended, this Office hereby assumes jurisdiction over the entire labor
dispute at Metro Drug, Inc. - Metro Drug Distribution Division and Metrolab
Industries Inc.
Accordingly, any strike or lockout is hereby strictly enjoined. The Companies and the
Metro Drug Corp. Employees Association - FFW are likewise directed to cease and
desist from committing any and all acts that might exacerbate the situation.
Finally, the parties are directed to submit their position papers and evidence on the
aforequoted deadlocked issues to this office within twenty (20) days from receipt
hereof.
SO ORDERED. (Italics ours.)
[1]

On 27 December 1991, then Labor Secretary Torres issued an order


resolving all the disputed items in the CBA and ordered the parties involved to
execute a new CBA.
Thereafter, the Union filed a motion for reconsideration.

On 27 January 1992, during the pendency of the abovementioned motion


for reconsideration, Metrolab laid off 94 of its rank and file employees.
On the same date, the Union filed a motion for a cease and desist order to
enjoin Metrolab from implementing the mass layoff, alleging that such act
violated the prohibition against committing acts that would exacerbate the
dispute as specifically directed in the assumption order.
[2]

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

Thereafter, on various dates, Metrolab recalled some of the laid off


workers on a temporary basis due to availability of work in the production
lines.
On 14 April 1992, Acting Labor Secretary Nieves Confesor issued a
resolution declaring the layoff of Metrolabs 94 rank and file workers illegal
and ordered their reinstatement with full backwages. The dispositive portion
reads as follows:
WHEREFORE, the Unions motion for reconsideration is granted in part, and our
order of 28 December 1991 is affirmed subject to the modifications in allowances and
in the close shop provision. The layoff of the 94 employees at MII is hereby declared
illegal for the failure of the latter to comply with our injunction against committing
any act which may exacerbate the dispute and with the 30-day notice
requirement. Accordingly, MII is hereby ordered to reinstate the 94 employees,
except those who have already been recalled, to their former positions or substantially
equivalent, positions with full backwages from the date they were illegally laid off on
27 January 1992 until actually reinstated without loss of seniority rights and other
benefits. Issues relative to the CBA agreed upon by the parties and not embodied in
our earlier order are hereby ordered adopted for incorporation in the CBA. Further,
the dispositions and directives contained in all previous orders and resolutions relative
to the instant dispute, insofar as not inconsistent herein, are reiterated. Finally, the
parties are enjoined to cease and desist from committing any act which may tend to
circumvent this resolution.
SO RESOLVED.

[4]

On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration


alleging that the layoff did not aggravate the dispute since no untoward
incident occurred as a result thereof. It, likewise, filed a motion for clarification
regarding the constitution of the bargaining unit covered by the CBA.
On 29 June 1992, after exhaustive negotiations, the parties entered into a
new CBA. The execution, however, was without prejudice to the outcome of
the issues raised in the reconsideration and clarification motions submitted for
decision to the Secretary of Labor.
[5]

Pending the resolution of the aforestated motions, on 2 October 1992,


Metrolab laid off 73 of its employees on grounds of redundancy due to lack of
work which the Union again promptly opposed on 5 October 1992.
On 15 October 1992, Labor Secretary Confesor again issued a cease and
desist order. Metrolab moved for a reconsideration.
[6]

On 25 January 1993, Labor Secretary Confesor issued the assailed


Omnibus Resolution containing the following orders:
xxx

xxx

xxx.

1. MIIs motion for partial reconsideration of our 14 April 1992 resolution specifically
that portion thereof assailing our ruling that the layoff of the 94 employees is illegal,
is hereby denied. MII is hereby ordered to pay such employees their full backwages
computed from the time of actual layoff to the time of actual recall;
2. For the parties to incorporate in their respective collective bargaining agreements
the clarifications herein contained; and
3. MIIs motion for reconsideration with respect to the consequences of the second
wave of layoff affecting 73 employees, to the extent of assailing our ruling that such
layoff tended to exacerbate the dispute, is hereby denied. But inasmuch as the legality
of the layoff was not submitted for our resolution and no evidence had been adduced
upon which a categorical finding thereon can be based, the same is hereby referred to
the NLRC for its appropriate action.
Finally, all prohibitory injunctions issued as a result of our assumption of jurisdiction
over this dispute are hereby lifted.
SO RESOLVED.

[7]

Labor Secretary Confesor also ruled that executive secretaries are


excluded from the closed-shop provision of the CBA, not from the bargaining
unit.

On 4 February 1993, the Union filed a motion for execution. Metrolab


opposed. Hence, the present petition for certiorari with application for
issuance of a Temporary Restraining Order.
On 4 March 1993, we issued a Temporary Restraining Order enjoining the
Secretary of Labor from enforcing and implementing the assailed Resolution
and Omnibus Resolution dated 14 April 1992 and 25 January 1993,
respectively.
In its petition, Metrolab assigns the following errors:
A

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND


EMPLOYMENT COMMITTED GRAVE ABUSE OF DISCRETION AND
EXCEEDED HER JURISDICTION IN DECLARING THE TEMPORARY LAYOFF
ILLEGAL AND ORDERING THE REINSTATEMENT AND PAYMENT OF
BACKWAGES TO THE AFFECTED EMPLOYEES.
*

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND


EMPLOYMENT GRAVELY ABUSED HER DISCRETION IN INCLUDING
EXECUTIVE SECRETARIES AS PART OF THE BARGAINING UNIT OF RANK
AND FILE EMPLOYEES.
[8]

Anent the first issue, we are asked to determine whether or not public
respondent Labor Secretary committed grave abuse of discretion and
exceeded her jurisdiction in declaring the subject layoffs instituted by Metrolab
illegal on grounds that these unilateral actions aggravated the conflict
between Metrolab and the Union who were, then, locked in a stalemate in
CBA negotiations.
Metrolab argues that the Labor Secretarys order enjoining the parties
from committing any act that might exacerbate the dispute is overly broad,
sweeping and vague and should not be used to curtail the employers right to
manage his business and ensure its viability.
We cannot give credence to Metrolabs contention.
This Court recognizes the exercise of management prerogatives and often
declines to interfere with the legitimate business decisions of the
employer. However, this privilege is not absolute but subject to limitations
imposed by law.
[9]

In PAL v. NLRC, we issued this reminder:


[10]

xxx

xxx

xxx

. . .the exercise of management prerogatives was never considered boundless. Thus,


in Cruz vs. Medina ( 177 SCRA 565 [1989]), it was held that managements
prerogatives must be without abuse of discretion....
xxx

xxx

xxx

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

xxx

xxx.

The case at bench constitutes one of the exceptions. The Secretary of


Labor is expressly given the power under the Labor Code to assume
jurisdiction and resolve labor disputes involving industries indispensable to
national interest. The disputed injunction is subsumed under this special
grant of authority. Art. 263 (g) of the Labor Code specifically provides that:
xxx

xxx

xxx

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

xxx

xxx.

That Metrolabs business is of national interest is not disputed. Metrolab is


one of the leading manufacturers and suppliers of medical and
pharmaceutical products to the country.
Metro labs management prerogatives, therefore, are not being unjustly
curtailed but duly balanced with and tempered by the limitations set by law,

taking into account its special character and the particular circumstances in
the case at bench.
As aptly declared by public respondent Secretary of Labor in its assailed
resolution:
xxx

xxx

xxx.

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

xxx

xxx

xxx.

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

After a judicious review of the record, we find no compelling reason to


overturn the findings of the Secretary of Labor.
We reaffirm the doctrine that considering their expertise in their respective
fields, factual findings of administrative agencies supported by substantial
evidence are accorded great respect and binds this Court.
[13]

The Secretary of Labor ruled, thus:


xxx

xxx

xxx.

Any act committed during the pendency of the dispute that tends to give rise to further
contentious issues or increase the tensions between the parties should be considered
an act of exacerbation. One must look at the act itself, not on speculative
reactions. A misplaced recourse is not needed to prove that a dispute has been
exacerbated. For instance, the Union could not be expected to file another notice of
strike. For this would depart from its theory of the case that the layoff is subsumed
under the instant dispute, for which a notice of strike had already been filed. On the
other hand, to expect violent reactions, unruly behavior, and any other chaotic or

drastic action from the Union is to expect it to commit acts disruptive of public order
or acts that may be illegal. Under a regime of laws, legal remedies take the place of
violent ones.
[14]

xxx

xxx

xxx.

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

xxx

xxx.

3. This unilateral action of management is a blatant violation of the injunction of this


Office against committing acts which would exacerbate the dispute. Unless such act
is enjoined the Union will be compelled to resort to its legal right to mass actions and
concerted activities to protest and stop the said management action. This mass layoff
is clearly one which would result in a very serious labor dispute unless this Office
swiftly intervenes.
[15]

xxx

xxx

xxx.

Metrolab and the Union were still in the process of resolving their CBA
deadlock when petitioner implemented the subject layoffs. As a result,
motions and oppositions were filed diverting the parties attention, delaying
resolution of the bargaining deadlock and postponing the signing of their new
CBA, thereby aggravating the whole conflict.
We, likewise, find untenable Metrolabs contention that the layoff of the 94
rank-and-file employees was temporary, despite the recall of some of the laid
off workers.
If Metrolab intended the layoff of the 94 workers to be temporary, it should
have plainly stated so in the notices it sent to the affected employees and the
Department of Labor and Employment. Consider the tenor of the pertinent
portions of the layoff notice to the affected employees:
xxx

xxx

xxx.

Dahil sa mga bagay na ito, napilitan ang ating kumpanya na magsagawa ng lay-off
ng mga empleyado sa Rank & File dahil nabawasan ang trabaho at puwesto para sa
kanila. Marami sa atin ang kasama sa lay-off dahil wala nang trabaho para sa
kanila. Mahirap tanggapin ang mga bagay na ito subalit kailangan nating gawin dahil

hindi kaya ng kumpanya ang magbayad ng suweldo kung ang empleyado ay walang
trabaho. Kung tayo ay patuloy na magbabayad ng suweldo, mas hihina ang ating
kumpanya at mas marami ang maaring maapektuhan.
Sa pagpapatupad ng lay-off susundin natin ang LAST IN-FIRST OUT policy. Ang
mga empleyadong may pinakamaikling serbisyo sa kumpanya ang unang
maaapektuhan. Ito ay batay na rin sa nakasaad sa ating CBA na ang mga huling
pumasok sa kumpanya ang unang masasama sa lay-off kapag nagkaroon ng
ganitong mga kalagayan.
Ang mga empleyado na kasama sa lay-off ay nakalista sa sulat na ito. Ang umpisa
ng lay-off ay sa Lunes, Enero 27. Hindi na muna sila papasok sa kumpanya.
Makukuha nila ang suweldo nila sa Enero 30, 1992.
Hindi po natin matitiyak kung gaano katagal ang lay-off ngunit ang aming tingin
ay matatagalan bago magkaroon ng dagdag na trabaho. Dahil dito, sinimulan na
namin ang isang Redundancy Program sa mga supervisors. Nabawasan ang mga
puwesto para sa kanila, kaya sila ay mawawalan ng trabaho at bibigyan na ng
redundancy pay. (Italics ours.)
[16]

xxx

xxx

xxx.

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


xxx

xxx

xxx.

. . .MII insists that the layoff in question is temporary not permanent. It then
cites International Hardware, Inc. vs. NLRC, 176 SCRA 256, in which the Supreme
Court held that the 30-day notice required under Article 283 of the Labor Code need
not be complied with if the employer has no intention to permanently severe (sic) the
employment relationship.
We are not convinced by this argument. International Hardware involves a case
where there had been a reduction of workload. Precisely to avoid laying off the
employees, the employer therein opted to give them work on a rotating basis. Though
on a limited scale, work was available. This was the Supreme Courts basis for
holding that there was no intention to permanently severe (sic) the employment
relationship.
Here, there is no circumstance at all from which we can infer an intention from MII
not to sever the employment relationship permanently. If there was such an intention,
MII could have made it very clear in the notices of layoff. But as it were, the notices

are couched in a language so uncertain that the only conclusion possible is the
permanent termination, not the continuation, of the employment relationship.
MII also seeks to excuse itself from compliance with the 30-day notice with a
tautology. While insisting that there is really no best time to announce a bad news,
(sic) it also claims that it broke the bad news only on 27 January 1992 because had it
complied with the 30-day notice, it could have broken the bad news on 02 January
1992, the first working day of the year. If there is really no best time to announce a
bad news (sic), it wouldnt have mattered if the same was announced at the first
working day of the year. That way, MII could have at least complied with the
requirement of the law.
[17]

The second issue raised by petitioner merits our consideration.


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

xxx

xxx.

Appropriateness of the bargaining unit.


xxx

xxx

xxx.

Exclusions. In our 14 April 1992 resolution, we ruled on the issue of


exclusion as follows:
These aside, we reconsider our denial of the modifications which the Union proposes
to introduce on the close shop provision. While we note that the provision as
presently worded has served the relationship of the parties well under previous
CBAs, the shift in constitutional policy toward expanding the right of all workers to
self-organization should now be formally recognized by the parties, subject to the
following exclusions only:
1.

Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, VicePresident, Vice President for Sales, Personnel Manager, and Director for Corporate
Planning who may have access to vital labor relations information or who may
otherwise act in a confidential capacity to persons who determine or formulate
management policies.
The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall thus be
modified consistently with the foregoing.

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


b)Close Shop. - All Qualified Employees must join the Association immediately upon
regularization as a condition for continued employment. This provision shall not
apply to: (i) managerial employees who are excluded from the scope of the bargaining
unit; (ii) the auditors and executive secretaries of senior executive officers, such as,
the President, Executive Vice-President, Vice-President for Finance, Head of Legal,
Vice-President for Sales, who are excluded from membership in the Association; and
(iii) those employees who are referred to in Attachment I hereof, subject, however, to
the application of the provision of Article II, par. (b) hereof. Consequently, the abovespecified employees are not required to join the Association as a condition for their
continued employment.
On the other hand, Attachment I provides:
Exclusion from the Scope of the Close Shop Provision
The following positions in the Bargaining Unit are not covered by the Close
Shop provision of the CBA (Article I, par. b):
1. Executive Secretaries of Vice-Presidents, or equivalent positions.
2. Executive Secretary of the Personnel Manager, or equivalent positions.
3. Executive Secretary of the Director for Corporate Planning, or equivalent positions.
4. Some personnel in the Personnel Department, EDP Staff at Head Office, Payroll
Staff at Head Office, Accounting Department at Head Office, and Budget Staff, who
because of the nature of their duties and responsibilities need not join the Association
as a condition for their employment.
5. Newly-hired secretaries of Branch Managers and Regional Managers.
Both MDD and MII read the exclusion of managerial employees and
executive secretaries in our 14 April 1992 resolution as exclusion from the
bargaining unit. They point out that managerial employees are lumped under
one classification with executive secretaries, so that since the former are
excluded from the bargaining unit, so must the latter be likewise excluded.
This reading is obviously contrary to the intent of our 14 April 1992
resolution. By recognizing the expanded scope of the right to selforganization, our intent was to delimit the types of employees excluded from
the close shop provision, not from the bargaining unit, to executive secretaries
only. Otherwise, the conversion of the exclusionary provision to one that

refers to the bargaining unit from one that merely refers to the close shop
provision would effectively curtail all the organizational rights of executive
secretaries.
The exclusion of managerial employees, in accordance with law, must
therefore still carry the qualifying phrase from the bargaining unit in Article I
(b)(i) of the 1988-1990 CBA. In the same manner, the exclusion of executive
secretaries should be read together with the qualifying phrase are excluded
from membership in the Association of the same Article and with the heading
of Attachment I. The latter refers to Exclusions from Scope of Close Shop
Provision and provides that [t]he following positions in Bargaining Unit are
not covered by the close shop provision of the CBA.
The issue of exclusion has different dimension in the case of MII. In an
earlier motion for clarification, MII points out that it has done away with the
positions of Executive Vice-President, Vice-President for Sales, and Director
for Corporate Planning. Thus, the foregoing group of exclusions is no longer
appropriate in its present organizational structure. Nevertheless, there remain
MII officer positions for which there may be executive secretaries. These
include the General Manager and members of the Management Committee,
specifically i) the Quality Assurance Manager; ii) the Product Development
Manager; iii) the Finance Director; iv) the Management System Manager; v)
the Human Resources Manager; vi) the Marketing Director; vii) the
Engineering Manager; viii) the Materials Manager; and ix) the Production
Manager.
xxx

xxx

xxx

The basis for the questioned exclusions, it should be noted, is no other


than the previous CBA between MII and the Union. If MII had undergone an
organizational restructuring since then, this is a fact to which we have never
been made privy. In any event, had this been otherwise the result would have
been the same. To repeat, we limited the exclusions to recognize the
expanded scope of the right to self-organization as embodied in the
Constitution.
[18]

Metrolab, however, maintains that executive secretaries of the General


Manager and the executive secretaries of the Quality Assurance Manager,
Product Development Manager, Finance Director, Management System
Manager, Human Resources Manager, Marketing Director, Engineering
Manager, Materials Manager and Production Manager, who are all members
of the companys Management Committee should not only be exempted from
the closed-shop provision but should be excluded from membership in the
bargaining unit of the rank and file employees as well on grounds that their

executive secretaries are confidential employees, having access to vital labor


information.
[19]

We concur with Metrolab.


Although Article 245 of the Labor Code limits the ineligibility to join, form
and assist any labor organization to managerial employees, jurisprudence has
extended this prohibition to confidential employees or those who by reason of
their positions or nature of work are required to assist or act in a fiduciary
manner to managerial employees and hence, are likewise privy to sensitive
and highly confidential records.
[20]

The rationale behind the exclusion of confidential employees from the


bargaining unit of the rank and file employees and their disqualification to join
any labor organization was succinctly discussed in Philips Industrial
Development v. NLRC:
[21]

xxx

xxx

xxx.

On the main issue raised before Us, it is quite obvious that respondent NLRC
committed grave abuse of discretion in reversing the decision of the Executive Labor
Arbiter and in decreeing that PIDIs Service Engineers, Sales Force, division
secretaries, all Staff of General Management, Personnel and Industrial Relations
Department, Secretaries of Audit, EDP and Financial Systems are included within the
rank and file bargaining unit.
In the first place, all these employees, with the exception of the service engineers and
the sales force personnel, are confidential employees. Their classification as such is
not seriously disputed by PEO-FFW; the five (5) previous CBAs between PIDI and
PEO-FFW explicitly considered them as confidential employees. By the very nature
of their functions, they assist and act in a confidential capacity to, or have access to
confidential matters of, persons who exercise managerial functions in the field of
labor relations. As such, the rationale behind the ineligibility of managerial
employees to form, assist or join a labor union equally applies to them.
In Bulletin Publishing Co., Inc. vs. Hon. Augusto Sanchez, this Court
elaborated on this rationale, thus:
x x x The rationale for this inhibition has been stated to be, because if these
managerial employees would belong to or be affiliated with a Union, the latter might
not be assured of their loyalty to the Union in view of evident conflict of
interests. The Union can also become company-dominated with the presence of
managerial employees in Union membership.

In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this
rationale applicable to confidential employees:
This rationale holds true also for confidential employees such as accounting
personnel, radio and telegraph operators, who having access to confidential
information, may become the source of undue advantage. Said employee(s) may act
as a spy or spies of either party to a collective bargaining agreement. This is specially
true in the present case where the petitioning Union is already the bargaining agent of
the rank-and-file employees in the establishment. To allow the confidential
employees to join the existing Union of the rank-and-file would be in violation of the
terms of the Collective Bargaining Agreement wherein this kind of employees by the
nature of their functions/positions are expressly excluded.
xxx

xxx

xxx.

Similarly, in National Association of Trade Union - Republic Planters Bank


Supervisors Chapter v. Torres we declared:
[22]

xxx

xxx

xxx.

. . . As regards the other claim of respondent Bank that Branch Managers/OICs,


Cashiers and Controllers are confidential employees, having control, custody and/ or
access to confidential matters, e.g., the branchs cash position, statements of financial
condition, vault combination, cash codes for telegraphic transfers, demand drafts and
other negotiable instruments, pursuant to Sec. 1166.4 of the Central Bank Manual
regarding joint custody, this claim is not even disputed by petitioner. A confidential
employee is one entrusted with confidence on delicate matters, or with the custody,
handling, or care and protection of the employers property. While Art. 245 of the
Labor Code singles out managerial employees as ineligible to join, assist or form any
labor organization, under the doctrine of necessary, implication, confidential
employees are similarly disqualified. . . .
xxx

xxx

xxx.

. . .(I)n the collective bargaining process, managerial employees are supposed to be on


the side of the employer, to act as its representatives, and to see to it that its interest
are well protected. The employer is not assured of such protection if these employees
themselves are union members. Collective bargaining in such a situation can become
one-sided. It is the same reason that impelled this Court to consider the position of
confidential employees as included in the disqualification found in Art. 245 as if the
disqualification of confidential employees were written in the provision. If
confidential employees could unionize in order to bargain for advantages for
themselves, then they could be governed by their own motives rather than the interest

of the employers. Moreover, unionization of confidential employees for the purpose


of collective bargaining would mean the extension of the law to persons or individuals
who are supposed to act in the interest of the employers. It is not farfetched that in
the course of collective bargaining, they might jeopardize that interest which they are
duty-bound to protect. . . .
xxx

xxx

xxx.

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

xxx

xxx

xxx.

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

xxx

xxx.

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

xxx

xxx.

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

xxx

xxx.

There would be no danger of company domination of the Union since the confidential
employees would not be members of and would not participate in the decision making
processes of the Union.
Neither would there be a danger of espionage since the confidential employees would
not have any conflict of interest, not being members of the Union. In any case, there
is always the danger that any employee would leak management secrets to the Union
out of sympathy for his fellow rank and filer even if he were not a member of the
union nor the bargaining unit.

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

xxx

xxx

xxx.

The Unions assurances fail to convince. The dangers sought to be


prevented, particularly the threat of conflict of interest and espionage, are not
eliminated by non-membership of Metrolabs executive secretaries or
confidential employees in the Union. Forming part of the bargaining unit, the
executive secretaries stand to benefit from any agreement executed between
the Union and Metrolab. Such a scenario, thus, gives rise to a potential
conflict between personal interests and their duty as confidential employees to
act for and in behalf of Metrolab. They do not have to be union members to
affect or influence either side.
Finally, confidential employees cannot be classified as rank and file. As
previously discussed, the nature of employment of confidential employees is
quite distinct from the rank and file, thus, warranting a separate
category. Excluding confidential employees from the rank and file bargaining
unit, therefore, is not tantamount to discrimination.
WHEREFORE, premises considered, the petition is partially
GRANTED. The resolutions of public respondent Secretary of Labor dated 14
April 1992 and 25 January 1993 are hereby MODIFIED to the extent that
executive secretaries of petitioner Metrolabs General Manager and the
executive secretaries of the members of its Management Committee are
excluded from the bargaining unit of petitioners rank and file employees.
SO ORDERED.
Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

Master Iron Labor Union


-------G.R. No. 92009 February 17, 1993
MASTER IRON LABOR UNION (MILU), WILFREDO ABULENCIA, ROGELIO CABANA, LOPITO
SARANILLA, JESUS MOISES, BASILIO DELA CRUZ, EDGAR ARANES, ELY BORROMEO,
DANIEL BACOLON, MATIAS PAJIMULA, RESTITUTO PAYABYAB, MELCHOR BOSE, TEOFILO
ANTOLIN, ROBERT ASPURIA, JUSTINO BOTOR, ALFREDO FABROS, AGAPITO TABIOS,
BENARDO ALFON, BENIGNO BARCENA, BERNARDO NAVARRO, MOISES LABRADOR,
ERNESTO DELA CRUZ, EDUARDO ESPIRITU, IGNACIO PAGTAMA, BAYANI PEREZ,
SIMPLICIO PUASO, EDWIN VELARDE, BEATO ABOGADO, DANILO SAN ANTONIO, BERMESI
BORROMEO, and JOSE BORROMEO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and MASTER IRON WORKS AND
CONSTRUCTION CORPORATION, respondents.
Banzuela, Flores, Mirrales, Raeses, Sy, Taquio and Associates for petitioners.
Carlos L. Galarrita for private respondent.

MELO, J.:
The petition for certiorari before us seeks to annul and to set aside the decision of the National Labor
Relations Commission (Second Division) dated July 12, 1986 which affirmed that of Labor Arbiter
Fernando V. Cinco declaring illegal the strike staged by petitioners and terminating the employment
of the individual petitioners.
The Master Iron Works Construction Corporation (Corporation for brevity) is a duly organized
corporate entity engaged in steel fabrication and other related business activities. Sometime in
February 1987, the Master Iron Labor Union (MILU) entered into a collective barganing agreement
(CBA) with the Corporation for the three-year period between December 1, 1986 and November 30,
1989 (Rollo, p. 7). Pertinent provisions of the CBA state:
Sec. 1. That there shall be no strike and no lockout, stoppage or shutdown of work,
or any other interference with any of the operation of the COMPANY during the term
of this AGREEMENT, unless allowed and permitted by law.
Sec. 2. Service Allowance The COMPANY agrees to continue the granting of
service allowance of workers assigned to work outside the company plant, in addition
to his daily salary, as follows:
(a) For those assigned to work outside the plant within Metro Manila,
the service allowance shall be P12.00;
(b) For those assigned to work outside Metro Manila, the service
allowance shall be P25.00/day;

(c) The present practice of conveying to and from jobsites of workers


assigned to work outside of the company plant shall be maintained.
Right after the signing of the CBA, the Corporation subcontracted outside workers to do the usual
jobs done by its regular workers including those done outside of the company plant. As a result, the
regular workers were scheduled by the management to work on a rotation basis allegedly to prevent
financial losses thereby allowing the workers only ten (10) working days a month (Rollo, p. 8). Thus,
MILU requested implementation of the grievance procedure which had also been agreed upon in the
CBA, but the Corporation ignored the request.
Consequently, on April 8, 1987, MILU filed a notice of strike (Rollo,
p. 54) with the Department of Labor and Employment. Upon the intervention of the DOLE, through
one Atty. Bobot Hernandez, the Corporation and MILU reached an agreement whereby the
Corporation acceded to give back the usual work to its regular employees who are members of
MILU (Rollo, p. 55).
Notwithstanding said agreement, the Corporation continued the practice of hiring outside workers.
When the MILU president, Wilfredo Abulencia, insisted in doing his regular work of cutting steel bars
which was being done by casual workers, a supervisor reprimanded him, charged him with
insubordination and suspended him for three (3) days (Rollo, pp. 9 & 51-52). Upon the request of
MILU, Francisco Jose of the DOLE called for conciliation conferences. The Corporation, however,
insisted that the hiring of casual workers was a management prerogative. It later ignored subsequent
scheduled conciliation conferences (Rollo, pp. 51-52 & 57-58).
Hence, on July 9, 1987, MILU filed a notice of strike on the following grounds: (a) violation of CBA;
(b) discrimination; (c) unreasonable suspension of union officials; and (d) unreasonable refusal to
entertain grievance (Rollo,
p. 9). On July 24, 1987, MILU staged the strike, maintaining picket lines on the road leading to the
Corporation's plant entrance and premises.
At about 11 o'clock in the morning of July 28, 1987, CAPCOM soldiers, who had been summoned by
the Corporation's counsel, came and arrested the picketers. They were brought to Camp Karingal
and, the following day, to the Caloocan City jail. Charges for illegal possession of firearms and
deadly weapons were lodged against them. Later, however, those charges were dismissed for
failure of the arresting CAPCOM soldiers to appear at the investigation (Rollo, p. 10). The dispersal
of the picketlines by the CAPCOM also resulted in the temporary lifting of the strike.
On August 4, 1987, the Corporation filed with the NLRC National Capital Region arbitration branch a
petition to declare the strike illegal (Rollo,
p. 40). On September 7, 1987, MILU, with the assistance of the Alyansa ng Manggagawa sa
Valenzuela (AMVA), re-staged the strike. Consequently, the Corporation filed a petition for injunction
before the NLRC which, on September 24, 1987, issued an order directing the workers to remove
the barricades and other obstructions which prevented ingress to and egress from the company
premises. The workers obliged on October 1, 1987 (Rollo, p. 25). On October 22, 1987, through its
president, MILU offered to return to work in a letter which states:
22 Okt. 1987
Mr. Elieze Hao
Master Iron Works & Construction Corp.

790 Bagbagin, Caloocan City


Dear Sir:
Ang unyon, sa pamamagitan ng nakalagda sa ibaba, ay nagmumungkahi,
nagsusuhestiyon o nag-oofer sa inyong pangasiwaan ng aming kahilingan na
bumalik na sa trabaho dahilan din lang sa kalagayan na tuloy tuloy ang ating paguusap para sa ikatitiwasay ng ating relasyon. Gusto naming manatili ang ating
magandang pagtitinginan bilang magkasangga para sa ika-uunlad ng ating
kumpanya. Sana ay unawain niyo kami dahil kailangan namin ng trabaho.
Gumag
alang,
(Sgd.)
WILFREDO
ABULENCIA
Pangulo
(Rollo, p. 590)
On October 30, 1987, MILU filed a position paper with counter-complaint before the NLRC. In said
counter-complaint, the workers charged the Corporation with unfair labor practice for subcontracting
work that was normally done by its regular workers thereby causing the reduction of the latter's
workdays; illegal suspension of Abulencia without any investigation; discrimination for hiring casual
workers in violation of the CBA, and illegal dispersal of the picket lines by CAPCOM agents (Rollo,
pp. 26-27).
In due course, a decision dated March 16, 1988 was rendered by Labor Arbiter Fernando Cinco
declaring illegal the strike staged by MILU. The dispositive portion of the decision reads:
WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered,
as follows:
1. Declaring the strike by the respondents illegal and unlawful;
2. Ordering the cancellation of the registered permit of respondent union MILU for
having committed an illegal strike;
3. Ordering the termination of employment status of the individual respondents,
including the forfeiture of whatever benefits are due them under the law, for having
actively participated in an illegal strike, namely: Wilfredo Abulencia,
President; Rogelio Cabana, Vice-President; Lopito Saranilla, Secretary; Jesus
Moises, Treasurer; Basilio dela Cruz, Auditor; as Members of the Board:Edgar
Aranes, Melchor Bose, Restituto Payabyab, Matias Pajimula, Daniel Bacolon, and
Ely Borromeo, as Members of the Union: Teofilo Antolin, Robert Aspuria, Justino
Botor, Alfredo Fabros, Agapito Tabios, Bernardo Alfon, Benigno Barcena, Bernardo
Navaro, Moises Labrador, Ernesto dela Cruz, Eduardo Espiritu, Ignacio Pagtama,
Bayani Perez, Simplicio Puaso, Edwin Velarde, Beato Abogado, Danila San Antonio,
Bermes Borromeo and Jose Borromeo.

The respondents as appearing in Annex "A" of the Petition, but not included as
among those whose employment status were not terminated as above-mentioned,
are given priority of reinstatement, without backwages, in the event petitioner starts
its normal operations, or shall be paid their separation pay according to law.
4. Ordering the respondents to cease and desist from further committing the illegal
acts complained of;
5. Ordering Respondent Union to pay the amount of P10,000.00 to Petitioner's
Counsel as attorney's fees;
6. Ordering the dismissal of the claim for damages for lack of merit; and
7. Ordering the dismissal of the counter-complaint in view of the filing of a separate
complaint by the respondents.
SO ORDERED. (pp. 35-36, Rollo.)
On appeal to the NLRC, MILU and the individual officers and workers named in Labor Arbiter
Cinco's decision alleged that said labor arbiter gravely abused his discretion and exhibited bias in
favor of the Corporation in disallowing their request to cross-examine the Corporation's witnesses,
namely, Corporate Secretary Eleazar Hao, worker Daniel Ignacio and foreman Marcial Barcelon,
who all testified on the manner in which the strike was staged and on the coercion and intimidation
allegedly perpetrated by the strikers (Rollo,
p. 151).
The Second Division of the NLRC affirmed with modifications the decision of the labor arbiter. The
decision, which was promulgated on July 12, 1989 with Commissioners Domingo H. Zapanta and
Oscar N. Abella concurring and Commissioner Daniel M. Lucas, Jr. dissenting, disagreed with the
labor arbiter on the "summary execution of the life of Master Iron Labor Union (MILU)" on the
grounds that the Corporation did not specifically pray for the cancellation of MILU's registration and
that pursuant to Articles 239 and 240 of the Labor Code, only the Bureau of Labor Relations may
cancel MILU's license or certificate of registration. It also deleted the award of P10,000.00 as
attorney's fees for lack of sufficient basis but it affirmed the labor arbiter with regard to the
declaration of illegality of the strike and the termination of employment of certain employees and the
rest of the dispositive portion of the labor arbiter's decision (Rollo, pp. 48-49).
In his dissent, Commissioner Lucas stated that he is "for the setting aside of the decision appealed
from, and remanding of the case to the labor arbiter of origin, considering the respondent's
countercharge or complaint for unfair labor practice was not resolved on the merits" (Rollo, p. 49).
MILU filed a motion for the reconsideration but the same was denied by the NLRC for lack of merit in
its Resolution of August 9, 1989 (Rollo, p. 50). Hence, the instant petition. 1
Petitioners contend that notwithstanding the non-strike provision in the CBA, the strike they staged
was legal because the reasons therefor are non-economic in nature. They assert that the NLRC
abused its discretion in holding that there was "failure to exhaust the provision on grievance
procedure" in view of the fact that they themselves sought grievance meetings but the Corporation
ignored such requests. They charge the NLRC with bias in failing to give weight to the fact that the
criminal charges against the individual petitioners were dismissed for failure of the CAPCOM
soldiers to testify while the same individual strikers boldly faced the charges against them. Lastly,

they aver that the NLRC abused its discretion in holding that the workers' offer to return to work was
conditional.
In holding that the strike was illegal, the NLRC relied solely on the no-strike no-lockout provision of
the CBA aforequoted. As this Court has held in Philippine Metal Foundries, Inc. vs. CIR (90 SCRA
135 [1979]), a no-strike clause in a CBA is applicable only to economic strikes. Corollarily, if the
strike is founded on an unfair labor practice of the employer, a strike declared by the union cannot
be considered a violation of the no-strike clause.
An economic strike is defined as one which is to force wage or other concessions from the employer
which he is not required by law to grant (Consolidated Labor Association of the Philippines vs.
Marsman & Co., Inc., 11 SCRA 589 [1964]). In this case, petitioners enumerated in their notice of
strike the following grounds: violation of the CBA or the Corporation's practice of subcontracting
workers; discrimination; coercion of employees; unreasonable suspension of union officials, and
unreasonable refusal to entertain grievance.
Private respondent contends that petitioner's clamor for the implementation of Section 2, Article VIII
of the CBA on service allowances granted to workers who are assigned outside the company
premises is an economic issue (Rollo, p. 70). On the contrary, petitioners decry the violation of the
CBA, specifically the provision granting them service allowances. Petitioners are not, therefore,
already asking for an economic benefit not already agreed upon, but are merely asking for the
implementation of the same. They aver that the Corporation's practice of hiring subcontractors to do
jobs outside of the company premises was a way "to dodge paying service allowance to the workers"
(Rollo, pp. 61 & 70).
Much more than an economic issue, the said practice of the Corporation was a blatant violation of
the CBA and unfair labor practice on the part of the employer under Article 248(i) of the Labor
Code. Although the end result, should the Corporation be required to observe the CBA, may be
economic in nature because the workers would then be given their regular working hours and
therefore their just pay, not one of the said grounds is an economic demand within the meaning of
the law on labor strikes. Professor Perfecto Fernandez, in his
book Law on Strikes,Picketing and Lockouts (1981 edition, pp. 144-145), states that an economic
strike involves issues relating to demands for higher wages, higher pension or overtime rates,
pensions, profit sharing, shorter working hours, fewer work days for the same pay, elimination of
night work, lower retirement age, more healthful working conditions, better health services, better
sanitation and more safety appliances. The demands of the petitioners, being covered by the CBA,
are definitely within the power of the Corporation to grant and therefore the strike was not an
economic strike.
The other grounds, i.e., discrimination, unreasonable suspension of union officials and unreasonable
refusal to entertain grievance, had been ventilated before the Labor Arbiter. They are clearly unfair
labor practices as defined in Article 248 of the Labor Code. 2 The subsequent withdrawal of petitioners'
complaint for unfair labor practice (NLRC-NCR Case No. 00-11-04132-87) which was granted by Labor
Arbiter Ceferina Diosana who also considered the case closed and terminated (Rollo, pp. 97 & 109) may
not, therefore, be considered as having converted their other grievance into economic demands.

Moreover, petitioners staged the strike only after the Corporation had failed to abide by the
agreement forged between the parties upon the intervention of no less than the DOLE after the
union had complained of the Corporation's unabated subcontracting of workers who performed the
usual work of the regular workers. The Corporation's insistence that the hiring of casual employees
is a management prerogative betrays its attempt to coat with legality the illicit curtailment of its

employees' rights to work under the terms of the contract of employment and to a fair
implementation of the CBA.
While it is true that an employer's exercise of management prerogatives, with or without reason,
does not per seconstitute unjust discrimination, such exercise, if clearly shown to be in grave abuse
of discretion, may be looked into by the courts (National Federation of Labor Unions vs. NLRC, 202
SCRA 346 [1991]). Indeed, the hiring, firing, transfer, demotion, and promotion of employees are
traditionally identified as management prerogatives. However, they are not absolute prerogatives.
They are subject to limitations found in law, a collective bargaining agreement, or general principles
of fair play and justice (University of Sto. Tomas vs. NLRC, 190 SCRA 758 [1990] citing Abbott
Laboratories [Phil.], Inc. vs. NLRC, 154 SCRA 713 [1987]). The Corporation's assertion that it was
exercising a management prerogative in hiring outside workers being contrary to the contract of
employment which, of necessity, states the expected wages of the workers, as well as the CBA, is
therefore untenable.
Private respondent's failure to traverse petitioners' allegations that the NLRC abused its discretion in
holding that the provision on grievance procedure had not been exhausted clearly sustains such
allegation and upholds the petitioners' contention that the Corporation refused to undergo said
procedure. It should be remembered that a grievance procedure is part of the continuous process of
collective bargaining (Republic Savings Bank. vs. CIR, et al., 21 SCRA 226 [1967]). It is intended to
promote a friendly dialogue between labor and management as a means of maintaining industrial
peace. The Corporation's refusal to heed petitioners' request to undergo the grievance procedure
clearly demonstrated its lack of intent to abide by the terms of the CBA.
Anent the NLRC's finding that Abulencia's offer to return to work is conditional, even a cursory
reading of the letter aforequoted would reveal that no conditions had been set by petitioners. It is
incongruous to consider as a "condition" the statement therein that the parties would continue talks
for a peaceful working relationship ("tuloy tuloy ang ating pag-uusap sa ikatitiwasay ng ating
relasyon"). Conferences form part of the grievance procedure and their mere mention in Abulencia's
letter did not make the same "conditional".
In the same manner, the following findings of the Labor Arbiter showed the illegal breakup of the
picket lines by the CAPCOM:
d) On 28 July 1987, CAPCOM soldiers, on surveillance mission, arrived at the picket
line of respondents and searches were made on reported deadly weapons and
firearms in the possession of the strikers. Several bladed weapons and firearms in
the possession of the strikers were confiscated by the CAPCOM soldiers, as a result
of which, the apprehended strikers were brought to Camp Tomas Karingal in Quezon
City for proper investigation and filing of the appropriate criminal charges against
them. The strikers who were charged of illegal possession of deadly weapon and
firearms were: Edgar Aranes, Wilfredo Abulencia, Ernesto dela Cruz, Beato
Abogado, Lopito Saranilla, Restituto Payabyab, Jose Borromeo and Rogelio Cabana.
Criminal informations were filed by Inquest Fiscal, marked as Exhibits "E", "E-1 to E8". These strikers were jailed for sometime until they were ordered release after
putting up the required bail bond. Other strikers were also arrested and brought to
Camp Tomas Karingal, and after proper investigation as to their involvement in the
offense charged, they were released for lack of prima facie evidence. They were
Edwin Velarde, Bayani Perez, Daniel Bacolon, Jesus Moises, Robert Aspurias and
Benigno Barcena.

After the strikers who were arrested were brought to Camp Tomas Karingal on 28
July 1987, the rest of the strikers removed voluntarily their human and material
barricades which were placed and posted at the road leading to the premises of the
Company. (Rollo, p. 32)
The bringing in of CAPCOM soldiers to the peaceful picket lines without any reported outbreak of
violence, was clearly in violation of the following prohibited activity under Article 264 of the Labor
Code:
(d) No public official or employee, including officers and personnel of the New Armed
Forces of the Philippines or the Integrated National Police, or armed person, shall
bring in, introduce or escort in any manner any individual who seeks to replace
strikers in entering or leaving the premises of a strike area, or work in place of the
strikers. The police force shall keep out of the picket lines unless actual violence or
other criminal acts occur therein; Provided, That nothing herein shall be interpreted
to prevent any public officer from taking any measure necessary to maintain peace
and order, protect life and property, and/or enforce the law and legal order.
(Emphasis supplied.)
As the Labor Arbiter himself found, no pervasive or widespread coercion or violence were
perpetrated by the petitioners as to warrant the presence of the CAPCOM soldiers in the picket lines.
In this regard, worth quoting is the following excerpt of the decision in Shell Oil Workers' Union
vs. Shell Company of the Philippines, Ltd., 39 SCRA 276 [1971], which was decided by the Court
under the old Industrial Peace Act but which excerpt still holds true:
. . . What is clearly within the law is the concerted activity of cessation of work in
order that . . . employer cease and desist from an unfair labor practice. That the law
recognizes as a right. There is though a disapproval of the utilization of force to attain
such an objective. For implicit in the very concept of the legal order is the
maintenance of peaceful ways. A strike otherwise valid, if violent in character, may
be placed beyond the pale. Care is to be taken, however, especially where an unfair
labor practice is involved, to avoid stamping it with illegality just because it is tainted
with such acts. To avoid rendering illusory the recognition of the right to strike,
responsibility in such a case should be individual and not collective. A different
conclusion would be called for, of course, if the existence of force while the strike
lasts is pervasive and widespread, consistently and deliberately resorted to as a
matter of policy. It could be reasonably concluded then that even if justified as to
ends, it becomes illegal because of the means employed. (at p. 292.)
All told, the strike staged by the petitioners was a legal one even though it may have been called to
offset what the strikers believed in good faith to be unfair labor practices on the part of the employer
(Ferrer, et al. vs. Court of Industrial Relations, et al., 17 SCRA 352 [1966]). Verily, such presumption
of legality prevails even if the allegations of unfair labor practices are subsequently found out to be
untrue (People's Industrial and Commercial Employees and Workers Org. [FFW] vs. People's
Industrial and Commercial Corporation, 112 SCRA 440 [1982]). Consonant with these jurisprudential
pronouncements, is Article 263 of the Labor Code which clearly states "the policy of the State to
encourage free trade unionism and free collective bargaining". Paragraph (b) of the same article
guarantees the workers' "right to engage in concerted activities for purposes of collective bargaining
or for their mutual benefit and protection" and recognizes the "right of legitimate labor organizations
to strike and picket and of employers to lockout" so long as these actions are "consistent with the
national interest" and the grounds therefor do not involve inter-union and intra-union disputes.

The strike being legal, the NLRC gravely abused its discretion in terminating the employment of the
individual petitioners, who, by operation of law, are entitled to reinstatement with three years
backwages. Republic Act No. 6715 which amended Art. 279 of the Labor Code by giving "full
backwages inclusive of allowances" to reinstated employees, took effect fifteen days from the
publication of the law on March 21, 1989. The decision of the Labor Arbiter having been
promulgated on March 16, 1988, the law is not applicable in this case.
WHEREFORE, the questioned decision and resolution of the NLRC as well as the decision of the
Labor Arbiter are hereby SET ASIDE and the individual petitioners are reinstated to their positions,
with three years backwages and without loss of seniority rights and other privileges. Further,
respondent corporation is ordered to desist from subcontracting work usually performed by its
regular workers.
SO ORDERED.
Feliciano, Bidin, Davide, Jr. and Romero, JJ., concur.
Gutierrez, Jr., J., is on leave.