G.R. No.

125038 November 6, 1997

THE HONGKONG AND SHANGHAI BANKING CORPORATION EMPLOYEES UNION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND THE HONGKONG AND SHANGHAI
BANKING CORPORATION, LTD., respondents.

REGALADO, J.:

In an Order dated November 27, 1995, 1 respondent National Labor Relations Commission (NLRC)
reversed and set aside the order issued by Labor Arbiter Felipe T. Garduque II which dismissed and
remanded for further proceedings the case for unfair labor practice filed by private respondent Hongkong
and Shanghai Banking Corporation, Ltd. (the "Bank") against petitioner Hongkong and Shanghai Banking
Corporation Employees Union (the "Union"), the recognized bargaining representative of the Bank's
regular rank and file employees. The petition for certiorari impugns the aforesaid Order of respondent
commission.

The case at bar arose from the issuance of a non-executive job evaluation program (JEP) lowering
the starting salaries of future employees, resulting from the changes made in the job grades and
structures, which was unilaterally implemented by the Bank retroactive to January 1, 1993. The
program in question was announced by the Bank on January 18, 1993.

In a letter dated January 20, 1993, 2 the Union, through its President, Peter Paul Gamelo, reiterated its
previous verbal objections to the Bank's unilateral decision to devise and put into effect the said program
because it allegedly was in violation of the existing collective bargaining agreement (CBA) between the
parties and thus constituted unfair labor practice. The Union demanded the suspension of the
implementation of the JEP and proposed that the same be instead taken up or included in their upcoming
CBA negotiations.

The Bank replied in a letter dated January 25, 1993 3 that the JEP was issued in compliance with its
obligation under the CBA, apparently referring to Article III, Section 18 thereof which provides that:

Within the lifetime of this Agreement the BANK shall conduct a job evaluation of employee
positions. The implementation timetable of the said exercise shall be furnished the UNION by
the BANK within two (2) months from the signing of this Agreement.

This prompted the Union to undertake concerted activities to protest the implementation of the JEP,
such as whistle blowing during office hours starting on March 15, 1993 up to the 23rd day, and
writing to clients of the Bank allegedly to inform them of the real situation then obtaining and of an
imminent disastrous showdown between the Bank and the Union.

The Union engaged in said activities despite the fact that as early as February 11, 1993, 4 it had
already initiated the renegotiation of the non-representational provisions of the CBA by submitting their
proposal to the Bank, to which the latter submitted a reply. As a matter of fact, negotiations on the CBA
commenced on March 5, 1993 and continued through March 24, 1993 when the Bank was forced to
declare a "recess" to last for as long as the Union kept up with its concerted activities. The Union refused
to concede to the demand of the Bank unless the latter agreed to suspend the implementation of the JEP.

Instead of acquiescing thereto, the Bank filed on April 5, 1993 5 with the Arbitration Branch of the NLRC
a complaint for unfair labor practice against the Union allegedly for engaging in the contrived activities
against the ongoing CBA negotiations between the Bank and the Union in an attempt to unduly coerce
and pressure the Bank into agreeing to the Union's demand for the suspension of the implementation of
the JEP. It averred that such concerted activities, despite the ongoing CBA negotiations, constitute unfair
labor practice (ULP) and a violation of the Union's duty to bargain collectively under Articles 249 (c) and
252 of the Labor Code.

The Union filed a Motion to Dismiss 6 on the ground that the complaint states no cause of action. It
alleged that its united activities were actually being waged to protest the Bank's arbitrary imposition of a
job evaluation program and its unjustifiable refusal to suspend the implementation thereof. It further
claimed that the unilateral implementation of the JEP was in violation of Article I, Section 3 of the CBA
which prohibits a diminution of existing rights, privileges and benefits already granted and enjoyed by the
employees. To be sure, so the Union contended, the object of the Bank in downgrading existing CBA
salary scales, despite its sanctimonious claim that the reduced rates will apply only to future employees,
is to torpedo the salary structure built by the Union through three long decades of periodic hard
bargaining with the Bank and to thereafter replace the relatively higher-paid unionized employees with
cheap newly hired personnel. In light of these circumstances, the Union insists that the right to engage in
these concerted activities is protected under Article 246 of the Labor Code regarding non-abridgment of
the right to self-organization and, hence, is not actionable in law.

In its Opposition, 7 the Bank stated that the Union was actually challenging merely that portion of the JEP
providing for a lower rate of salaries for future employees. Contrary to the Union's allegations in its motion
to dismiss that the JEP had resulted in diminution of existing rights, privileges and benefits, the program
has actually granted salary increases to, and in fact is already being availed of by, the rank and file staff.
The Union's objections are premised on the erroneous belief that the salary rates for future employees is
a matter which must be subject of collective bargaining negotiation. The Bank believes that the
implementation of the JEP and the resultant lowering of the starting salaries of future employees, as
along as there is no diminution of existing benefits and privileges being accorded to existing rank and file
staff, is entirely a management prerogative.

In an Order dated July 29, 1993, 8 the labor arbiter dismissed the complaint with prejudice and ordered
the parties to continue with the collective bargaining negotiations, there having been no showing that the
Union acted with criminal intent in refusing to comply with its duty to bargain but was motivated by the
refusal of management to suspend the implementation of its job evaluation program, and that it is not
evident that the concerted activities caused damage to the Bank. It concluded that, at any rate, the Bank
is not left without recourse, in case more aggressive and serious acts be committed in the future by the
Union, since it could institute a petition to declare illegal such acts which may constitute a strike or
picketing.

On appeal, respondent NLRC declared that based on the facts obtaining in this case, it becomes
necessary to resolve whether or not the Union's objections to the implementation of the JEP are
valid hand, if it is without basis, whether or not the concerted activities conducted by the Union
constitute unfair labor practice. It held that the labor arbiter exceeded his authority when he ordered
the parties to return to the bargaining table and continue with CBA negotiations, considering that his
jurisdiction is limited only to labor disputes arising from those cases provided for under Article 217 of
the Labor Code, and that the labor arbiter's participation in this instance only begins when the
appropriate complaint for unfair labor practice due to a party's refusal to bargain collectively is filed.
Consequently, the case was ordered remanded to the arbitration branch of origin for further
proceedings in accordance with the guidelines provided for therein.

Hence, this petition.

The Union asserts that respondent NLRC committed grave abuse of discretion in failing to decide
that it is not guilty of unfair labor practice considering that the concerted activities were actually
directed against the implementation of the JEP and not at before the start of negotiations. Hence, it
cannot be deemed to have engaged in bad-faith bargaining. It claims that respondent NLRC gravely
erred in remanding the case for further proceedings to determine whether the objections raised by
the Union against the implementation of the JEP are valid or not, for the simple reason that such is
not the issue involved in the complaint for ULP filed by the Bank but rather whether the Union is
guilty of bargaining in bad faith in violation of the Labor Code. It is likewise averred that Labor Arbiter
Garduque cannot be considered to have exceeded his authority in ordering the parties to proceed
with the CBA negotiations because it was precisely a complaint for ULP which the Bank filed against
the Union.

We find no merit in the petition.

The main issue involved in the present case is whether or not the labor arbiter correctly ordered the
dismissal with prejudice of the complaint for unfair labor practice on the case merely of the
Complaint, the Motion to Dismiss as well as the Opposition thereto, filed by the parties. We agree
with respondent NLRC that there are several questions that need to be threshed out before there
can be an intelligent and complete determination of the propriety of the charges made by the Bank
against the Union.

A perusal of the allegations and arguments raised by the parties in the Motion to Dismiss and the
Opposition thereto will readily reveal that there are several issues that must preliminarily be resolved
and which will require the presentation of evidence other than the bare allegations in the pleadings
which have been filed, in order to ascertain the propriety or impropriety of the ULP charge against
the Union.

Foremost among the issues requiring resolution are:

1. Whether or not the unilateral implementation of the JEP constitutes a violation of the CBA
provisions requiring the Bank to furnish the Union with the job evaluation implementation timetable
within two months from the signing of the CBA on July 30, 1990, 9 and prohibiting the diminution of
existing rights, privileges and benefits already granted and enjoyed by the employees; 10

2. Whether or not the concerted acts committed by the Union were done with just cause and in good
faith in the lawful exercise of their alleged right under Article 246 of the Labor Code on non-
abridgment of the right to self-organization; and
3. Whether or not the fixing of salaries of future employees pursuant to a job evaluation program is
an exclusive management prerogative or should be subject of collective bargaining negotiation.

It does not fare petitioner any better that it had, wittingly or unwittingly, alleged in its Consolidated
Reply 11 that the concerted actions began on January 22, 1993 even before the commencement of CBA
negotiations which started in March, 1993. Apparently that was an attempt on the part of the Union to
rectify the incriminating pronouncement of the labor arbiter in his questioned order to the effect that the
challenged activities occurred from March 15 to 23, 1993 during the CBA negotiations. This seemingly
conflicting factual allegations are crucial in resolving the issue of whether or not the concerted activities
were committed in violation of the Union's duty to bargain collectively and would therefore constitute
unfair labor practice.

Likewise, the labor arbiter, in finding that the Union was not motivated by any criminal intent in
resorting to said concerted activities, merely gave a sweeping statement without bothering to explain
the factual and evidentiary bases therefor. The declaration that there was no damage caused to the
Bank by reason of such Union activities remains unsubstantiated. Nowhere is there any showing in
the labor arbiter's order of dismissal from which it can be fairly inferred that such a statement is
supported by even a preponderance of evidence. What purportedly is an adjudication on the merits
is in truth and in fact a short discourse devoid of evidentiary value but every liberal with generalities
and hasty conclusions.

The fact that there is an alternative remedy available to the Bank, as the labor arbiter would suggest,
will not justify an otherwise erroneous order. It bears emphasizing that by the very nature of an unfair
labor practice, it is not only a violation of the civil rights of both labor and management but is also a
criminal offense against the State which is subject to prosecution and punishment. 12 Essentially, a
complaint for unfair labor practice is no ordinary labor dispute and therefore requires a more thorough
analysis, evaluation and appreciation of the factual and legal issues involved.

One further point. The need for a more than cursory disposition on the unfair labor practice issue is
made doubly exigent in view of the Bank's allegation in its Comment 13 that a strike has been launched
by the Union specifically to protest the implementation of the JEP. Although the strike incident is not an
issue in this case, this supervening event bespeaks the worsening situation between the parties that calls
for a more circumspect assessment of the actual issues herein involved.

Necessarily, a determination of the validity of the Bank's unilateral implementation of the JEP or the
Union's act of engaging in concerted activities involves an appraisal of their motives. In cases of this
nature, motivations are seldom expressly avowed, and avowals are not always candid. There must
thus be a measure of reliance on the administrative agency. It was incumbent upon the labor arbiter,
in the first instance, to weigh such expressed motives in determining the effect of an otherwise
equivocal act. The Labor Code does not undertake the impossible task of specifying in precise and
unmistake language each incident which constitutes an unfair labor practice. Rather, it leaves to the
court the work of applying the law's general prohibitory language in light
of infinite combinations of events which may be charged as violative of its terms. 14

It has been held that the crucial question whether or not a party has met his statutory duty to bargain
in good faith typically turns on the facts of the individual case. There is no per se test of good faith in
bargaining. Good faith or bad faith is an inference to be drawn from the facts. To some degree, the
question of good faith may be a question of credibility. The effect of an employer's or a union's
actions individually is not the test of good-faith bargaining, but the impact of all such occasions or
actions, considered as a whole, and the inferences fairly drawn therefrom collectively may offer a
basis for the finding of the NLRC. 15

This, the court or the quasi-judicial agency concerned can do only after it has made a
comprehensive review of the allegations made in the pleadings filed and the evidence presented in
support thereof by the parties, but definitely not where, as in the present case, the accusation of
unfair labor practice was negated and subsequently discharged on a mere motion to dismiss.

It is a well-settled rule that labor laws do not authorize interference with the employer's judgment in
the conduct of his business. The Labor Code and its implementing rules do not vest in the labor
arbiters nor in the different divisions of the NLRC nor in the courts managerial authority. 16 The hiring,
firing, transfer, demotion, and promotion of employees has been traditionally identified as a management
prerogative subject to limitations found in the law, a collective bargaining agreement, or in general
principles of fair play and justice. This is a function associated with the employer's inherent right to control
and manage effectively its enterprise. Even as the law is solicitous of the welfare of 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. 17

Accordingly, this Court, in a number of cases, has recognized and affirmed the prerogative of
management to implement a job evaluation program or a reorganization for as long as it is not
contrary to law, morals or public policy.

Thus, in Batongbacal vs. Associated Bank, et al., 18 involving the dismissal of an assistant vice-
president for refusing to tender his courtesy resignation which the bank required in line with its
reorganization plan, the Court held, among others, that it is not prepared to preempt the employer's
prerogative to grant salary increases to its employees by virtue of the implementation of the
reorganization plan which thereby caused a distortion in salaries, notwithstanding that there is a
semblance of discrimination in this aspect of the bank's organizational setup.

In the case of National Sugar Refineries Corporation vs. National Labor Relations Commission, et
al., 19 the petitioner implemented a job evaluation program affecting all employees, from rank and file to
department heads. The JEP was designed to rationalize the duties and functions of all positions,
reestablish levels of responsibility, and reorganize both wage and operational structures. Jobs were
ranked according to effort, responsibility, training and working conditions and relative worth of the job. As
a result, all positions were re-evaluated, and all employees were granted salary adjustments and
increases in benefits commensurate to their actual duties and functions. With the JEP, the supervisory
employees, who were members of the respondent Union therein and were formerly treated in the same
manner as rank and file employees, were considered no longer entitled to overtime, rest day and holiday
pay but their basic salaries increased by 50%. The respondents therein sued for recovery of those
benefits.

In upholding management's prerogative to implement the JEP, the Court held therein that:

In the case at bar, private respondent union has miserably failed to convince this Court that
the petitioner acted in bad faith in implementing the JE Program. There is no showing that
 the JE Program was intended to circumvent the law and deprive the members of respondent
union of the benefits they used to receive.

. . . It is the prerogative of management to regulate, according to its discretion and judgment,

all aspects of employment. This flows from the established rule that labor laws does not
authorize the substitution of the judgment of the employer in the conduct of its business.
Such management prerogative may be availed of without fear of any liability so long as it is
exercised in good faith for the advancement of the employers' interest and not for the
purpose of defeating or circumventing the rights of employees under special laws or valid
agreement and are not exercised in a malicious, harsh, oppressive, vindictive or wanton
manner or out of malice or spite.

Just recently, this Court had the occasion to reiterate and uphold the established and unequivocal
right of an employer to implement a reorganization in the valid exercise of its management
prerogative, thus:

Being a regular employee, petitioner is of the view that she had already acquired a vested
right to the position of Executive Secretary, together with its corresponding grade, rank and
salary, which cannot be impaired by the 1991 reorganization of CENECO.

xxx xxx xxx

In Aurelio vs. National Labor Relations Commission, et al., we upheld the power of the board
of directors of a corporation to implement a reorganization, including the abolition of various
positions, as implied or incidental to its power to conduct the regular business affairs of the
corporation. In recognition of the right of management to conduct its own business affairs in
achieving its purpose, we declared that management is at liberty, absent any malice of its
part, to abolish positions which it deems no longer necessary.

This Court, absent any finding of bad faith on the part of management, will not deny it the
right to such initiative simply to protect the person holding that office. In other words, where
there is nothing that would indicate that an employee's position was abolished to ease him
out of employment, the deletion of that position should be accepted as a valid exercise of
management prerogative.

xxx xxx xxx

No ill will can be ascribed to private respondents as all the positions specified in the
old plantilla were abolished and all other employees were given new appointments. In short,
petitioner was not singled out. She was not the only employee affected by the reorganization.
The reorganization was fair to petitioner, if not to all of the employees of CENECO.

It should be remembered that petitioner's new appointment was made as a result of valid
organizational changes. A thorough review of both the indispensable and the unessential
positions was undertaken by a committee, specifically formed for this purpose, before the
Board of Directors abolished all the positions. Based on the qualifications and aptitude of
 petitioner, the committee and, subsequently, private respondents, deemed it best to appoint
petitioner as Secretary of the Engineering Department. We cannot meddle in such a decision
lest we interfere with the private respondents' right to independently control and manage
their operations absent any unfair or inequitable acts.

If the purpose of a reorganization is to be achieved, changes in positions and ranking of

employees should be expected. To insist on one's old position and ranking after a
reorganization would render such endeavor ineffectual. Here, to compel private respondents
to give petitioner her old ranking would deprive them of their right to adopt changes in the
cooperative's personnel structure as proposed by the Steering Committee.

xxx xxx xxx

. . . As we have held, security of tenure, while constitutionally guaranteed, cannot be used to

deprive an employer of its prerogatives under the law. Even if 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. 20

Notwithstanding the relevance of the foregoing disquisition, considering however the factual
antecedents in this case, or the lack of a complete presentation thereof, we are constrained to
refrain from ruling outright in favor of the Bank. While it would appear that remanding the case would
mean a further delay in its disposition, we are not inclined to sacrifice equity and justice for
procedural technicalities or expediency. The order dismissing the complaint for ULP with prejudice,
to say the least, leaves much to be desired.

Anent the question on whether or not the labor arbiter has jurisdiction to order the parties to return to
and continue with the collective bargaining negotiations, there is a commentary to the effect that, as
one of the reliefs which may be granted in ULP cases, the Court may, in addition to the usual cease
and desist orders, issue an affirmative order to the employer to "bargain" with the bargaining agent,
as the exclusive representative of its employees, with respect to the rate of pay, hours of work, and
other conditions of employment. 21 On this aspect, respondent NLRC stands to be reversed.
Nevertheless, its directive on this point is deemed vacated and ineffectual by our decision to remand the
case for further proceedings.

WHEREFORE, subject to the foregoing observation, the challenged disposition of respondent

National Labor Relations Commission is hereby AFFIRMED.

SO ORDERED.

G.R. No. 75704 July 19, 1989

RUBBERWORLD (PHILS.), INC. and ELPIDIO HIDALGO, petitioners,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and NESTOR
MALABANAN, respondents.
MEDIALDEA, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment of the
decision of the respondent National Labor Relations Commission dated June 17, 1986 (p. 23, Rollo)
in NLRC NCR Case No. 6-2158-84 entitled "Nestor Malabanan and Jonathan Transmil,
Complainants, versus Rubberworld (Phils.), Inc. and Elpidio Hidalgo, Respondents," reversing the
decision of the Labor Arbiter which dismissed the complaint for illegal dismissal for lack of merit.

The antecedent facts are as follows:

Respondent Malabanan was employed by petitioner Rubberworld (Phils.), Inc. on September

25,1978 as an ordinary clerk. In May, 1980, he was promoted to the position of production scheduler
with a corresponding salary increase. He was again transferred to the Inventory Control Section as
stock clerk on September 1, 1983.

On April 6,1984, Elpidio Hidalgo, the Plant I General Manager of petitioner company, received a
copy of the Financial Audit Report from the Internal Audit Department of the company showing a
significant material variance between the year-end actual inventory and that of the Cards (SC)/EDP
Control Records. As a result thereof, Noel Santiago, Section Head of the Inventory Control Section,
where respondent Malabanan was assigned, conducted an investigation of the reported
discrepancies in the stock cards upon the request of the Plant General Manager. Santiago then
submitted his report to the general manager recommending the dismissal of respondent Malabanan.

Consequently, Malabanan's case was endorsed to the Human Resources Division of petitioner
company, which conducted a reinvestigation on the matter and which affirmed the recommendation
of the Inventory Control Section Head for the termination of employment of respondent Malabanan.

On June 6, 1984, respondent Malabanan was dismissed by petitioner company.

On June 16, 1984, respondent Malabanan, along with another complainant named Jonathan
Transmit, filed a complaint for unfair labor practice and illegal dismissal against petitioner company
alleging that they (respondent Malabanan and complainant Transmil) were members of the monthly
salaried employees' union affiliated with TUPAS; that petitioner company forced them to disaffiliate
from the union; and that due to their refusal to resign from the union, they were ultimately dismissed
from employment by petitioner company.

Petitioner company on the other hand, denied complainants' allegations and averred that respondent
Malabanan's dismissal was due to gross and habitual neglect of his duty and not due to his union
affiliation.

During the hearing of the case, the other complainant, Jonathan Transmil withdrew from the case
since he already found another employment abroad.
On January 30, 1985, the Labor Arbiter rendered a decision (pp. 17- 22, Rollo), the dispositive
portion of which reads:

WHEREFORE, premises considered, this case should be, as it is hereby,

DISMISSED, for lack of merit.

SO ORDERED.

Respondent Malabanan appealed from the adverse decision to the respondent Commission. On
June 17, 1986, respondent Commission reversed the appealed decision of the Labor Arbiter and
stated, inter alia:

Confronted with this factual backgrounds, we find ourselves inclined to the view that
the appealed decision merits a reversal.

xxx

WHEREFORE, premises considered, the appealed decision should be, as it is

hereby REVERSED. Consequently, the respondents are directed to reinstate
complainant Nestor Malabanan to his former position as production scheduler, with
full backwages from the time he was illegally terminated up to actual reinstatement,
without loss of seniority rights and benefits appurtenant thereto.

SO ORDERED. (pp. 23-27, Rollo)

The petitioner company moved for a reconsideration on the ground that the respondent
Commission's decision is not in accordance with facts and evidence on record. On July 23, 1986, the
said motion for reconsideration was denied.

On September 3, 1986, petitioner filed the instant petition contending that the respondent
Commission committed grave abuse of discretion amounting to lack of jurisdiction in reversing the
Labor Arbiter's decision.

The two issues to be resolved in the instant case are: (1) whether or not the dismissal of respondent
Malabanan is tainted with unfair labor practice; and (2) whether or not a just and valid cause exists
for the dismissal of private respondent Malabanan.

Petitioner alleges that the National Labor Relations Commission gravely erred in concluding that the
demotion of Malabanan from production scheduler to a stock clerk at the Stock and Inventory
Section was intended to discourage Malabanan from union membership. It argued that the Labor
Arbiter was correct in finding that the private respondent had not shown ample proof to the effect
that he was a member of a labor organization prior to his transfer to another position.

We believe that the foregoing contentions are impressed with merit. Art. 248 of the Labor Code, PD
No. 442, as amended, provides:
 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;

xxx

The question of whether an employee was dismissed because of his union activities is essentially a
question of fact as to which the findings of the administrative agency concerned are conclusive and
binding if supported by substantial evidence. Substantial evidence has been defined as such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion. It means
such evidence which affords a substantial basis from which the fact in issue can be reasonably
inferred (Philippine Metal Foundries, Inc. v. Court of Industrial Relations, et. al., No. L- 34948-49,
May 15, 1979, 90 SCRA 135). The findings of the Labor Arbiter on the non-existence of unfair labor
practice on the part of the company are more in accord and supported by the evidence submitted by
the parties in the instant case, to wit:

Complainant had stated that he was a member of the monthly salaried employees
union affiliated with TUPAS. He, however, offered no proof to support his allegation.
In fact, no evidence was presented to prove the existence of such union. We (note]
from the records that, as the usual practice, in cases like this one, complainant is
usually supported by the union of which he is a member. And ordinarily, the union
itself is impleaded as a co- complainant. Such circumstances, surprisingly, [are] not
present in this case. In fact, complainant categorically alleged that he had solicited
the services of the PAFLU Labor Union in filing this case. It is, indeed, surprising that
complainant had to solicit the help of a labor union (PAFLU) of which he was not a
member instead of soliciting the aid of the labor union (TUPAS) of which he was
allegedly a member. These circumstances alone [destroy] the credibility of
complainant's allegations. (p. 21, Rollo).

Nowhere in the records can We find that the company actually performed positive acts to restrain the
union participation of private respondent. For one, it is doubtful whether Malabanan was really
engaged in the organization of a labor union affiliated with the federation TUPAS. The only evidence
presented by him to prove this contention is his affidavit and that of his father. It is therefore, not in
accordance with ordinary experience and common practice that the private respondent pursued his
battle alone, without the aid and support of his co-members in the union and his federation
especially in a case of serious nature as this one involving company intervention with union activity.

As a rule, it is the prerogative of the company to promote, transfer or even demote its employees to
other positions when the interests of the company reasonably demand it. Unless there are instances
which directly point to interference by the company with the employees' right to self-organization, the
transfer of private respondent should be considered as within the bounds allowed by law.
Furthermore, although private respondent was transferred to a lower position, his original rank and
salary remained undiminished, which fact was not refuted or questioned by private respondent.
In view of the foregoing conclusions of the Labor Arbiter, We are compelled to agree with the latter
that the petitioner company did not commit any unfair labor practice in transferring and thereafter
dismissing private respondent.

The remaining issue to be resolved on this point is whether the dismissal of respondent Malabanan
was for a just and lawful cause. Article 282 of the Labor Code, as amended, provides:

Article 282. Termination by employer. An employer may terminate an employment

for any of the following just causes:

xxx

b) Gross and habitual neglect by the employee of his duties;

x x x.

Petitioner contends that private respondent Malabanan was guilty of gross negligence when he
caused the posting of incorrect entries in the stock card without counter checking the actual
movement status of the items at the warehouse, thereby resulting into unmanageable inaccuracies
in the data posted in the stock cards. The respondent Commission correctly ruled:

Penultimately, even assuming for the sake of argument that herein complainant
'posted entries in the stock card without counter checking the actual movement
status of the items at the warehouse, thereby resulting in an inaccurate posting of
data on the stock cards," to our impression does not constitute as a just cause for
dismissal. Records show that he was only transferred to the Inventory Control
Section on September 1, 1983 and was not so familiar and experienced as a stock
clerk, and prior to his transfer, the record shows no derogatory records in terms of his
performance. His failure to carry out efficiently his duties as a stock clerk is not so
gross and habitual. In other words he was not notoriously negligent to warrant his
severance from the service. Considering that there is nothing on record that shows
that he wilfully defied instructions of his superior with regards to his duties and that
he gained personal benefit of the discrepancy, his dismissal is unwarranted. (p. 26,
Rollo).

It does not appear that private respondent Malabanan is an incorrigible offender or that what he did
inflicted serious damage to the company so much so that his continuance in the service would be
patently inimical to the employer's interest. Assuming, in gratia argumenti that the private respondent
had indeed committed the said mistakes in the posting of accurate data, this was only his first
infraction with regard to his duties. It would thus be cruel and unjust to mete out the drastic penalty
of dismissal, for it is not proportionate to the gravity of the misdeed.

In fact, the promotion of the private respondent from the position of ordinary clerk to production
scheduler establishes the presumption that his performance of his work is acceptable to the
company. The petitioner even admitted that it was due to heavy financial and business reverses that
the company assigned the private respondent to the position of Stock Clerk and not because of his
unsatisfactory performance as production scheduler (p. 6, Rollo). It has been held that there must be
fair and reasonable criteria to be used in selecting employees to be dismissed (Asiaworld Publishing
House, Inc. v. Ople, No. L-56398, July 23, 1987, 152 SCRA 219).

It is worthy to note that the prerogative of management to dismiss or lay-off an employee must be
done without abuse of discretion, for what is at stake is not only petitioner's position, but also his
means of livelihood. This is so because the preservation of the lives of the citizens is a basic duty of
the State, more vital than the peservation of corporate profits (Euro-Linea, Phils., Inc. v. NLRC, L-
75782, December 1, 1987,156 SCRA 79).

The law regards the worker with compassion. Our society is a compassionate one. Where a penalty
less punitive would suffice, whatever missteps may be committed by the worker should not be visited
by the supreme penalty of dismissal. This is not only because of the law's concern for the working
man. There is in addition, his family to consider. After all, labor determinations should not only be
secundum rationem but also secundum caritatem (Almira, et al., v. BF Goodrich Philippines, Inc., et
al., G.R. No. L-34974, July 25, 1974, 58 SCRA 120).

ACCORDINGLY, the petition is DISMISSED for lack of merit. However, the decision of the public
respondent is hereby MODIFIED to the effect that petitioner company is ordered to reinstate private
respondent Nestor Malabanan to the position of stock clerk or substantially equivalent position, with
the same rank and salary he is enjoying at the time of his termination, with three years backwages
and without loss of seniority rights and benefits appurtenant thereto.

Should the reinstatement of the private respondent as herein ordered be rendered impossible by the
supervention of circumstances which prevent the same, the petitioner is further ordered to pay
private respondent separation pay equivalent to one (1) month's salary for every year of service
rendered, computed at his last rate of salary.

SO ORDERED.

G.R. No. L-51382 December 29, 1986

RAFAEL ENRIQUEZ and VIRGILIO ECARMA, petitioners,

vs.
THE HONORABLE RONALDO B. ZAMORA, THE HONORABLE BLAS F. OPLE, NATIONAL
LABOR RELATIONS COMMISSION, ARBITER NESTOR LIM, PHILIPPINE AIR LINES, AIR LINES
PILOT ASSOCIATION OF THE PHILIPPINES and ORTIZ' GROUP, * respondents.

FERNAN, J.:

In this petition for certiorari and mandamus, pilots Rafael Enriquez and Virgilio Ecarma seek the
restoration of their seniority rights and other privileges which the Philippine Air Lines [PAL] declared
as forfeited by the pilots who joined the mass retirement/resignation of the members of the Air Lines
Pilot Association of the Philippines [ALPAP] to protest the dismissal of their president, Captain Felix
Gaston.

Enriquez and Ecarma were employed by PAL on October 2, 1961 and March 3, 1966, respectively.
Consequently, they became members of ALPAP. On October 3, 1970, Philippine Air Lines
Employees Association [PALEA] and ALPAP staged a strike against PAL to demand pay increases,
better working conditions on the Manila-Karachi and Rome-Amsterdam flights, and a better
retirement plan.

Pursuant to Section 10 of Republic Act No. 875, the President of the Philippines certified the strike to
the Court of Industrial Relations [CIR]. Said court, through Associate Judge Ansberto Paredes,
issued an order dated October 7, 1970 directing the officers and members of PALEA and ALPAP to
call off the strike, lift the picket lines in all places of operation of PAL, and return to work not later
than Friday, October 9, 1970. PAL management, on the other hand, was ordered to admit the striking
employees "back to work under the same terms and conditions of employment existing before the
strikes" and "not to suspend, dismiss or lay-off any employee as a result" of said strikes. The CIR
further stated that failure to comply with its order would constitute contempt of court and "the
employee failing or refusing to return to work by October 9, 1970, without justifiable cause, shall
immediately be replaced by PAL, and may not be reinstated without prior Court order and on
justifiable grounds" [Rollo, pp. 33-34].

The strikers moved for a reconsideration of the order but after it was denied by the court, they
returned to work on October 22, 1970. Five days later or on October 27, 1970, PAL dismissed strike
leader Captain Gaston.

On October 30, 1970, the board of directors of ALPAP adopted a resolution condemning PAL's
alleged "continued acts of harassment and other unfair labor practices" against the ALPAP such as
the attempted lockout of ten members, the actual lockout of three other members, the forced
retirement of Captain Regino Masias [Macias] and the dismissal of ALPAP leader Captain Gaston.
The board resolved to undertake the grounding of all PAL planes and the filing of applications for
"protest retirement" of members who had completed five years of continuous service, and "protest
resignation" for those who had rendered less than five years of service in the company [Rollo, pp.
36-37].

On November 9, 1970, the said board of directors adopted another resolution calling on all union
members to accomplish their respective "protest retirement" or "protest resignation" forms on or
before November 17, 1970. To implement said resolution, Captain Gaston issued on November 12,
1970, a circular setting the deadline for the submission of retirement/resignation papers on
November 17, 1970 at 2400H [Rollo, pp. 38-39].

Upon learning that many members of the ALPAP had signed their respective "protest
retirement/resignation" papers, and that ALPAP would submit them en masse to PAL at a time to
coincide with the then forthcoming Papal visit, PAL filed with the CIR an ex-parte urgent motion to
enjoin ALPAP officers and members from retiring or resigning en masse from PAL [Annex "B " to
Petition, Rollo, p. 35].
Acting on said motion, the Court of Industrial Relations issued an order on November 26, 1970
which states:

WHEREFORE, pending hearing of the subject motion, the petitioner, its members and
officers, and respondents and its officers are hereby ordered to maintain status quo; the
members and officers of said petitioner ALPAP, and ALPAP itself, are ordered not to strike or
in any way cause any stoppage in the operation and service of PAL, under pain of dismissal
and forfeiture of rights and privileges accruing to their respective employments should they
disregard this Order; and PAL is also ordered not to lockout any of such members and
officers of ALPAP under pain of contempt and cancellation of its franchise. [Rollo, p. 142]

Notwithstanding this order, some of the officers and majority of the members of ALPAP submitted
their respective retirement or resignation letters to PAL on December 12, 1970. The pilots tendered
their retirement or resignation individually. Their similarly worded retirement or resignation letters
read as follows:

Gentlemen:

In vigorous protest to your provocative harassments, unfair labor tactics, the contemptuous
lockout of our co-members and your vicious and vindictive attitude towards labor most
exemplified by the illegal termination of the services of our President, Capt. Felix C. Gaston,
we, the undersigned, are hereby retiring from our employment in accordance with Par. [b] of
Section 1 of Article VI of the Retirement Plan effective immediately upon receipt hereof.

We expect payment of the benefits due us within seventy-two [72] hours from receipt hereof

Very truly yours,

[SGD] (Rollo, pp. 235 367)

PAL acknowledged receipt of said letters through its own letter which reads in part:

We acknowledge receipt of your letter dated December 12, 1970, informing us that you 'are
hereby retiring from our employment ... effective immediately upon receipt' hereof. We have
accordingly dropped you from our payrolls as of 1:30 P.M. December 14, 1970, the time and
date we received the letter from ALPAP. However, since your 'retirement' was in pursuance
of a conspiracy and in violation of the Order dated November 26, 1970 promulgated by the
Court of Industrial Relations in CIR Case No. 101-IPA[B], you are not entitled to any of the
benefits claimed by you under the Retirement Plan nor to any of the other rights, benefits
and privileges to which you may otherwise be entitled by reason of your former employment
with PAL, you having committed acts resulting in the forfeiture of the same.

You are hereby requested to report immediately to the Industrial Relations Department in
order to secure the necessary clearances and to settle any account you may have with the
company. [Rollo, pp. 236, 367-368].
Among the pilots whose "protest resignation/retirement" was accepted by PAL were petitioners
Enriquez and Ecarma. However, on January 12, 1971, Ecarma returned to PAL after having been
away for thirty days. Enriquez, who had, not reported to work for thirty-six days, followed suit on
January 18, 1971.

Before their re-admission, PAL required them to accept two conditions, namely: that they sign
conformity to PAL's letter of acceptance of their retirement and/or resignation and that they submit
an application for employment as new employees without protest or reservation [Rollo, p. 6].

On March 17, 1971, PAL issued a new seniority list for pilots. Enriquez's and Ecarmas new seniority
dates were listed as January 18, 1971 and January 12, 1971, respectively. Thus, Enriquez and
Ecarma respectively lost their almost 10yeai and 5-year seniority, and started from zero seniority.

Aggrieved by this action of PAL, Enriquez and Ecarma, together with twenty-three other pilots, filed
before the CIR a petition to restore their seniority and other privileges [Rollo, p, 46]. They alleged
therein that they had not been apprised by the union of the legal consequences of their respective
retirement or resignation for they were merely told to obey, otherwise they would be expelled from
the union, and that, in fact, they were expelled by ALPAP on February 12, 1971.

PAL opposed the petition. It alleged that the mass retirement/resignation of the pilots constituted
contempt of court and that the returning pilots, who had filed applications for employment as new
pilots, "were accepted on probationary basis for a period of six months". PAL added that as the
pilots' retirement or resignation violated the November 26, 1970 order of the Court of Industrial
Relations, said pilots lost whatever privileges or benefits they had acquired as employees of PAL
[Rollo, pp. 52-55].

Some members of ALPAP under the leadership of Captain Ben Hur Gomez who chose not to retire
or resign, filed a manifestation stating that they would submit to any final ruling of the court on the
matter [Rollo, pp. 62-63].

Another group of pilots, headed by Captain Carlos Ortiz, who were hired by PAL as a result of
ALPAP's mass action, intervened in the case. They averred that they had earned their seniority on a
first-come-first-serve basis and would be prejudiced should the petition of Enriquez's group be
granted [Rollo, pp. 63-64].

During the pendency of the petition, the Court of industrial Relations was abolished, and the case
was turned over to the National Labor Relations Commission [NLRC] for adjudication. On March 31,
1975, Acting Labor Arbiter Nestor C. Lim issued an order denying the petition for restoration of
seniority and other privileges [Rollo, pp. 58-171]. Said order stated that the seniority ranking on
March 17, 1971 should be respected to avoid injustice and demoralization in the ranks of the pilots
and to forestall the disruption of the smooth operation of PAL. To eliminate sources of irritants
between PAL and its employees and "by way of mitigating the penalty" on the returning pilots, they
were allowed to receive "fifty percent [50%] or one-half of the retirement benefits which they would
have received under the PAL-ALPAP Retirement Plan, were it not for the fact that their
retirement/resignation was in violation of a court order" [Rollo, p. 167].
Both PAL and the Enriquez group appealed to the NLRC en banc. On August 15, 1975, at the
conference-hearing held before said commission, the parties entered into a compromise agreement
whereby the following were stipulated and agreed upon:

A] The parties shall recognize the termination of the employee-employer relationship

between PAL and the pilots who joined the mass retirement/resignation in December 1970
and the consequent loss by the said pilots of their seniority accuring to their old employment.

B] By way of compromise and to temper the penalty of forfeiture of all privileges decreed in
the Order of November 26, 1970 of the Court of Industrial Relations for those who joined the
aforesaid mass retirement/resignation, PAL shall pay to the aforesaid pilots who reapplied as
new pilots and who were already taken in as such by PAL, eighty-five [85%] per cent of their
retirement pay under the PAL-ALPAP Retirement Plan in effect in December 1970. With
respect to pilots not entitled to any retirement pay under the said plan, they shall be paid
eighty-five [85%] per cent of their separation pay under the Termination Pay Act in effect in
December 1970.

C] With the payment of the aforementioned 85% of their retirement/separation pay, the pilots
shall release PAL from any demand, claim or claims of whatever nature or kind, arising from
or connected with all the matters alleged in their 'Petition for Restoration of Seniority and
Other Privileges. ' [Rollo, pp. 187-188]

On September 16, 1975, said compromise agreement was approved by the NLRC en banc and the
case was dismissed "with prejudice". [Rollo, pp. 172-173]

Eight of the eleven petitioners approved the compromise agreement while one, N. Salgado, was
absent. Enriquez and Ecarma did not conform to the compromise agreement. They appealed to the
then Secretary of Labor on the ground that the resolution approving the compromise agreement was
"not in accordance with law and contrary to the constitutional guarantees of non-deprivation of
property without due process, as well as the labor and social justice protection in the constitution".
[Rollo, p. 184]

On August 3, 1976, then Secretary of Labor Blas F. Ople issued an order ruling that as far as
Enriquez, Ecarma and Salgado are concerned, the NLRC should not have dismissed the case but
decided it on the merits. However, finding the compromise agreement to be beneficial to appellants,
he affirmed the decision of Labor Arbiter Lim and directed Enriquez, Ecarma and Salgado to comply
with its terms. [Rollo, pp. 181-1851

Enriquez and Ecarma then filed with this Court a motion for an extension of time to file a petition for
review on certiorari. On September 16, 1976, they filed a manifestation stating that they would not
file said petition for they intended to exhaust administrative remedies. Accordingly, that case was
archived [G.R. No. L-44452, Capt. Rafael Enriquez and Capt. Virgilio Ecarma vs. Hon. Secretary of
Labor, National Labor Relations Commission and Philippine Air Lines, Inc.]

Enriquez and Ecarma elevated the case to the Office of the President. On October 10, 1977,
Presidential Assistant for Legal Affairs Ronaldo B. Zamora affirmed the order of the Secretary of
labor. He noted that by extending the benefits of the compromise agreement to Enriquez and
Ecarma, the Secretary of Labor was following the "constitutional mandate for the state to protect
labor" [Rollo, p. 214].

Enriquez and Ecarma were able to obtain a copy of the decision of the Office of the President on
August 24, 1979 or almost two years later. Whereupon, they filed the instant petition for mandamus
and certiorari.

Petitioners submit that the issues involved in this petition are: whether by their employment, they are
entitled to the restoration of their seniority rights and whether the mass strike" on December 12,
1970 was a concerted action protected by law [Memorandum, p. 26; Rollo, p. 425].

In their petition, Enriquez and Ecarma contend that it is beyond the coercive and punitive powers of
the Court of Industrial Relations [now the National Labor Relations Commission] to order the
forfeiture of their seniority rights and other privileges. They assert that seniority is a vested right
which they cannot be deprived of without due process of law. They believe that PAL's refusal to
reinstate them unless they give up their seniority rights, constitutes an unfair labor practice [Rollo, p.
24].

Petitioners' contentions are unmeritorious.

An employee has no inherent right to seniority. He has only such rights as may be based on a
contract, a statute, or an administrative regulation relative thereto [51 C.J.S. 586 citing Trailmobile
Co. vs. Whirls, 67 S. Ct. 982, 331 U.S. 40, 91 L.Ed. 1328 and other cases]. Seniority rights, which
are acquired by an employee through long-time employment, are contractual and not constitutional.
Hence, the discharge of such employee, thereby terminating such rights, would not violate the
Constitution [51 C.J.S. 587 citing Wicks vs. Southern Pacific Co., 121 F. Supp. 454].

When the pilots tendered their respective retirement or resignation and PAL immediately accepted
them, both parties mutually terminated the contractual employment relationship between them
thereby curtailing whatever seniority rights and privileges the pilots had earned through the years.
Hence, contrary to petitioners' contention, loss of seniority rights was not a penalty for their
precipitate retirement or resignation. Rather, it was the expected consequence of the acceptance of
their retirement or resignation.

The pilots' mass action was not a strike because employees who go on strike do not quit their
employment. Ordinarily, the relationship of employer and employee continues until one or the other
of the parties acts to sever the relationship or they mutually act to accomplish that purpose [Words
and Phrases, Vol. 40, 1964 ed., p. 465 quoting Kitchen vs. G.R. Herberger's Inc., 114 N.W. 2d 64,
67, 262 Minn. 135]. As they did not assume the status of strikers, their "protest
retirement/resignation" was not a concerted activity which was protected by law [First National Bank
of Omaha vs. N.L.R.B., 413 F. 2d 921]. Petitioners cannot, therefore, validly claim that PAL
committed an unfair labor practice because, having voluntarily terminated their employment
relationship with PAL, they were not dismissed.
Moreover, the issue of whether the retirement/resignation of ALPAP members on December 12,
1970 was a concerted activity protected by law was put to rest in Chavez vs. Martinez, L-35206
which was decided by this Court on April 15, 1977 together with Air Line Pilots Association of the
Philippines vs. Court of Industrial Relations, L-33705. We pronounced therein that:

Parenthetically, contrary to ALPAP [Gaston's] argument that the pilots' retirement/resignation

was a legitimate concerted activity, citing Section 2[l] of the Industrial Peace Act which
defines 'Strike' as 'any temporary stoppage of work by the concerted action of employees as
a result of an industrial dispute', it is worthwhile to observe that as the law defines it, a strike
means only a 'temporary stoppage of work'. What the mentioned pilots did, however, cannot
be considered in the opinion of this Court, as mere 'temporary stoppage of work'. What they
contemplated was evidently a permanent cut-off of employment relationship with their
erstwhile employer, the Philippine Air Lines. In any event, the dispute below having been
certified as existing in an industry indispensable to the national interest, the said pilots' rank
disregard for the compulsory orders of the industrial court and their daring and calculating
venture to disengage themselves from that court's jurisdiction, for the obvious purpose of
satisfying their narrow economic demands to the prejudice of the public interest, are evident
badges of bad faith.

A legitimate concerted activity is a matter that cannot be used to circumvent judicial orders or
be tossed around like a plaything. Definitely, neither employers nor employees should be
allowed to make of judicial authority a now-you've-got-it-now-you-don't affair. The courts
cannot hopefully effectuate and vindicate the sound policies of the Industrial Peace Act and
all our labor laws if employees, particularly those who on account of their highly advanced
technical background and relatively better life status are far above the general working class
spectrum, will be permitted to defy and invoke the jurisdiction of the courts whenever the
alternative chosen will serve to feather their pure and simple economic demands. [76 SCRA
274, 293]

Petitioners asseverate that their retirement or resignation was a "sham" for there was "no honest or
genuine desire to terminate the employee relationship with PAL" [Rollo, p. 533]. We perceive,
however, that the unorthodox manner by which the pilots aired their demands against PAL, even if it
was allegedly only a bluff calculated to bring favorable results, exposed them to the risk that PAL
would act accordingly and take their "sham" retirement or resignation seriously, as what happened in
this case.

Petitioners' insistence that they were not advised of the legal consequences of their "protest
retirement/resignation" cannot hold water considering that they are highly educated. Enriquez
obtained his Bachelor of Science degree from the Philippine Military Academy and took two years of
graduate studies in Business Administration at the University of the Philippines [Rollo, p. 77]. Expert
legal advice was available to him as his father is a retired justice of the Court of Appeals who also
appears as one of petitioners' counsel in this case. On the other hand, Ecarma took three years and
one semester of a commerce course and went through a two-year course in the Philippine Air Force
Flying School [Rollo, p. 92]. Verily, they are not the ordinary, illiterate laborers that they purport to be
in this case.
The employment relationship between petitioners and PAL having been terminated, Enriquez, who
worked as pilot for 9 years, 2 months and 12 days before his retirement, is entitled as a matter of
right, to the full benefits under the company's retirement plan. Ecarma, who was a pilot for 4 years, 9
months and 11 days and who apparently tendered his resignation in accordance with the October
30, 1970 resolution of the ALPAP, should also be granted the full separation pay under the
Termination Pay Act in force at the time of his resignation. Thus, as to petitioners, the compromise
agreement of August 15, 1975 which gave retiring or resigning pilots only 85% of their respective
retirement or separation benefits, should be considered inapplicable.

We take exception to the Labor arbiter's opinion that "to grant in full the reliefs prayed for by
petitioning pilots Enriquez, et. al. would amount to giving premium to wilful disobedience to a lawful
order issued by the CIR and would unjustifiably punish the other pilots in the employ of PAL who
elected to remain and obey the Court" [Rollo p. 164.] By granting to petitioners full retirement and
separation benefits, this Court is not in any way condoning the mass action undertaken by the pilots.
We are only granting to them what by law they are entitled to receive even if their course of action
was the result of their erroneous collective judgment.

The issue of whether forfeiture of seniority and other privileges is within the coercive and punitive
powers of the Court of Industrial Relations and, after its dissolution, of the labor arbiter and the
National Labor Relations Commission, is of no moment in this case considering that petitioners lost
their seniority rights not by virtue of the labor arbiter' order and its affirmance by the National Labor
Relations Commission, the Secretary of Labor and the Office of the President but by the operative
act of their retirement or resignation.

Enriquez and Ecarma were, therefore, new employees with entirely new seniority rankings when
they were readmitted by PAL on January 18, 1971 and January 12, 1971, respectively. Certainly,
PAL was merely exercising its prerogative as an employer when it imposed two conditions for the
reemployment of petitioners inasmuch as hiring or rehiring policies are matters for the company's
management to determine in the absence of an anti-union motivation [Metropolitan Life Ins. Co. vs.
N.L.R.B., 371 F. 2d 573].

WHEREFORE, the petition for certiorari and mandamus is hereby dismissed. The public
respondents' orders and decision are hereby affirmed subject to the modification that petitioners are
granted full retirement and separation benefits with legal interest from their accrual until petitioners
are fully paid. No costs.

SO ORDERED.

G.R. No. L-87672 October 13, 1989

WISE AND CO., INC., petitioner,

vs.
WISE & CO., INC. EMPLOYEES UNION-NATU AND HONORABLE BIENVENIDO G. LAGUESMA,
in his capacity as voluntary Arbitrator, respondents.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

GANCAYCO, J.:

The center of controversy in this petition is whether the grant by management of profit sharing
benefits to its non-union member employees is discriminatory against its workers who are union
members.

The facts are undisputed. On April 3,1987 the management issued a memorandum circular
introducing a profit sharing scheme for its managers and supervisors the initial distribution of which
was to take effect March 31, 1988.

On July 3,1987 the respondent union wrote petitioner through its president asking for participation in
this scheme. This was denied by petitioner on the ground that it had to adhere strictly to the
Collective Bargaining Agreement (CBA).

In the meantime, talks were underway for early negotiation by the parties of the CBA which was due
to expire on April 30, 1988. The negotiation thus begun earlier than the freedom period. On
November 11, 1987 petitioner wrote respondent union advising the latter that they were prepared to
consider including the employees covered by the CBA in the profit sharing scheme beginning the
year 1987 provided that the ongoing negotiations were concluded prior to December 1987. However,
the collective bargaining negotiations reached a deadlock on the issue of the scope of the bargaining
unit. Conciliation efforts to settle the dispute on 29 March 1988 were made but no settlement was
reached.

On March 30, 1988, petitioner distributed the profit sharing benefit not only to managers and
supervisors but also to all other rank and file employees not covered by the CBA. This caused the
respondent union to file a notice of strike alleging that petitioner was guilty of unfair labor practice
because the union members were discriminated against in the grant of the profit sharing benefits.
Consequently, management refused to proceed with the CBA negotiations unless the last notice of
strike was first resolved. The union agreed to postpone discussions on the profit sharing demand
until a new CBA was concluded. After a series of conciliation conferences, the parties agreed to
settle the dispute through voluntary arbitration. After the parties submitted their position papers, a
rejoinder and reply, on March 20,1989 the voluntary arbitrator issued an award ordering petitioner to
likewise extend the benefits of the 1987 profit sharing scheme to the members of respondent
union. 1 Hence, this petition wherein petitioner alleged the following grounds in support thereof

THE HONORABLE VOLUNTARY ARBITRATOR ACTED WITH GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN HE
ORDERED THE EXTENSION OF PROFIT SHARING BENEFITS TO THOSE
EMPLOYEES COVERED BY THE CBA DESPITE PATENT LACK OF FACTUAL
AND LEGAL BASIS THEREFOR IN THAT-
 1. DISCRIMINATION PER SE IS NOT UNLAWFUL ESPECIALLY
WHEN THE EMPLOYEES ARE NOT SIMILARLY SITUATED.

2. THE TERMS AND CONDITIONS STIPULATED IN THE CBA HAVE

THE FORCE AND EFFECT OF A LAW BETWEEN THE PARTIES.
PRIVATE RESPONDENT, THEREFORE CANNOT DEMAND, AS A
MATTER OF RIGHT, WHAT IS NOT STIPULATED IN THE CBA.

3. THE ACT OF THE UNION IN NEGOTIATING FOR THE

INCLUSION OF THE PROFIT SHARING BENEFIT IN THE
PRESENT CBA IS AN IMPLIED ADMISSION THAT THEY WERE
NOT ENTITLED TO IT IN 1987.

II

THE HONORABLE VOLUNTARY ARBITRATOR COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN HE
MADE THE CLEARLY BASELESS CONCLUSION THAT THE PETITIONER WAS
MOTIVATED BY ITS DESIRE TO DEFEAT OR OTHERWISE PREJUDICE THE
BASIC RIGHTS OF ITS EMPLOYEES. 2

The petition is impressed with merit.

Under the CBA between the parties that was in force and effect from May 1, 1985 to April 30,1988 it
was agreed that the "bargaining unit" covered by the CBA "consists of all regular or permanent
employees, below the rank of assistant supervisor, 3 Also expressly excluded from the term
"appropriate bargaining unit" are all regular rank and file employees in the office of the president, vice-
president, and the other offices of the company personnel office, security office, corporate affairs office,
accounting and treasurer department . 4

It is to this class of employees who were excluded in the "bargaining unit" and who do not derive
benefits from the CBA that the profit sharing privilege was extended by petitioner.

There can be no discrimination committed by petitioner thereby as the situation of the union
employees are different and distinct from the non-union employees. 5 Indeed, discrimination per se is
not unlawful. There can be no discrimination where the employees concerned are not similarly situated.

Respondent union can not claim that there is grave abuse of discretion by the petitioner in extending
the benefits of profit sharing to the non-union employees as they are two (2) groups not similarly
situated. These non-union employees are not covered by the CBA. They do not derive and enjoy the
benefits under the CBA.

The contention of the respondent union that the grant to the non-union employees of the profit
sharing benefits was made at a time when there was a deadlock in the CBA negotiation so that
apparently the motive thereby was to discourage such non-union employees from joining the union
is not borne by the record. Petitioner denies this accusation and instead points out that inspite of this
benefit extended to them, some non-union workers actually joined the respondent union thereafter.

Respondent union also decries that no less than the president of the petitioner agreed to include its
members in the coverage of the 1987 profit sharing benefit provided that they would agree to an
earlier negotiation for the renewal of the CBA which expired in 1988. Be this as it may, since there
was actually a deadlock in the negotiation and it was not resolved and consummated on the period
expected, private respondent can not now claim that petitioner has a duty to extend the profit sharing
benefit to the union members.

The Court holds that it is the prerogative of management to regulate, according to its discretion and
judgment, all aspects of employment. This flows from the established rule that labor law does not
authorize the of the employer in the conduct of its business. 6 such management prerogative may be
availed of without fear of any liability so long as it is exercised in good faith for the advancement of the
employers' interest and not for the purpose of defeating or circumventing the rights of employees under
special laws or valid agreement and are not exercised in a malicious, harsh, oppressive, vindictive or
wanton manner or out of malice or spite. 7

The grant by petitioner of profit sharing benefits to the employees outside the "bargaining unit" falls
under the ambit of its managerial prerogative. It appears to have been done in good faith and without
ulterior motive. More so when as in this case there is a clause in the CBA where the employees are
classified into those who are members of the union and those who are not. In the case of the union
members, they derive their benefits from the terms and conditions of the CBA contract which
constitute the law between the contracting parties. 8 Both the employer and the union members are
bound by such agreement.

However, the court serves notice that it will not hesitate to strike down any act of the employer that
tends to be discriminatory against union members. It is only because of the peculiar circumstances
of this case showing there is no such intention that this court ruled otherwise.

WHEREFORE, the petition is GRANTED and the award of respondent Voluntary Arbitrator dated
March 20,1989 is hereby REVERSED AND SET ASIDE being null and void, without pronouncement
as to costs.

SO ORDERED.

G.R. No. 80737 September 29, 1988

PHILIPPINE GRAPHIC ARTS INC., IGMIDIO R. SILVERIO AND CARLOS CABAL, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, ROSALINA M. PULPULAAN AND EMELITA
SALONGA, respondents.

George L. Howard for petitioners.

The Office of the Solicitor General for public respondent.

Raul E. Espinosa for private respondents.

GUTIERREZ, JR., J.:

In October, 1984, the petitioner corporation was forced by economic circumstances to require its
workers to go on mandatory vacation leave in batches of seven or nine for periods ranging from 15,
30, to 45 days. The workers were paid while on leave but the pay was charged against their
respective earned leaves.

As a result, the private respondents filed complaints for unfair labor practice and discrimination.

On April 9, 1986, the Labor Arbiter rendered a decision the dispositive portion of which reads:

Wherefore, for lack of merit, the complaint for unfair labor practice on grounds of
discrimination, forced leave and reduction of working days is hereby, DISMISSED.
Respondent is hereby ordered to restore and grant to all its employees the company
policy regarding groceries previously enjoyed by them. (p. 27, Rollo)

The private respondents filed a "partial appeal" with the National Labor Relations Commission
(NLRC) questioning the Labor Arbiter's dismissal of their complaint for unfair labor practice and the
resultant forced vacation leaves which were actually without pay.

On June 19,1986, the NLRC affirmed the arbiter's decision with modification as follows:

Be that as it may, since as intimated at the outset, the vacation leave forced upon the
complainants was visited with arbitrariness not amounting to unfair labor practice, a
refund of the amount equivalent to the earned leave of each of the complainants
treated as their pay during their vacation is believed in order.

WHEREFORE, modified as above indicated, the decision appealed from is hereby

AFFIRMED. (PARTIAL APPEAL TO THE NATIONAL LABOR RELATIONS
COMMISSION, p. 1) (p. 60, Rollo)

The petitioners raise two issues in their petition, namely:

A. PUBLIC RESPONDENT COMMITTED A GRAVE ABUSE OF DISCRETION IN

RENDERING A RESOLUTION ON AN ISSUE INVOLVING A MONEY CLAIM,
WHICH WAS NOT A SUBJECT OF AN APPEAL NOR ASSIGNED AS AN ERROR.

B. PUBLIC RESPONDENT COMMITTED A GRAVE ABUSE OF DISCRETION IN

RENDERING A RESOLUTION IN FAVOR OF THE UNION AND/OR 23 OTHER
EMPLOYEES WHO ARE NOT REAL PARTIES IN THE CASE, NOR IN THE
PARTIAL APPEAL. (pp. 17 & 22, Rollo)
After considering the petition and treating the comments of the private respondents and the Solicitor
General as Answers, the Court resolved to give due course to the petition and decide it on the basic
merits.

The principal issue now before the Court is the forced vacation leave without pay whether or not it is
unfair labor practice and if not an unfair labor practice, whether or not it was tainted with
arbitrariness.

The Court is convinced from the records now before it, that there was no unfair labor practice. As
found by the NLRC, the private respondents themselves never questioned the existence of an
economic crisis but, in fact, admitted its existence. There is basis for the petitioner's contentions that
the reduction of work schedule was temporary, that it was taken only after notice and consultations
with the workers and supervisors, that a consensus was reached on how to deal with deteriorating
economic conditions and reduced sales and that the temporary reduction of working days was a
more humane solution instead of a retrenchment and reduction of personnel. The petitioner further
points out that this is in consonance with the collective bargaining agreement between the employer
and its employees. The Court, therefore, agrees with the Solicitor General in his submission that:

There is also no showing that the imposition of forced leave was exercised for the
purpose of defeating or circumventing the rights of employees under special laws or
under valid agreements. As the records show, petitioners instituted the forced leave
due to economic crisis, which private respondents do not even question. (Position
Paper [Private Respondents'], dated July 1985, p. 2)

Likewise the forced leave was enforced neither in a malicious, harsh, oppressive,
vindictive nor wanton manner, or out of malice or spite. Apart from private
respondents concurrence that the forced leave was implemented due to economic
crisis, what only "hurts" (ibid.) them "is that said management's plan was not even
discussed in the grievance procedure so that the Union members thereof may well
be apprised of the reason therefor." (Ibid.)

However, to rule that petitioners' failure to bring the question of necessity in the
imposition of forced leave and the distribution of work availability before the
grievance machinery, as a prior requisite for the implementation of the forced leave
scheme, constitutes arbitrariness is erroneous. (Rollo, pp. 63-64)

The decision to resort to forced leaves was, under the circumstances, a management prerogative.
The workers' claim of non-resort. to the grievance machinery is negated by their failure to initiate
steps for its employment.

As stressed by the Solicitor General:

The statutory law on grievance procedure provides that:

ART. 261. Grievance machinery. Whenever a grievance arises from

the interpretation or implementation of a collective agreement,
 including disciplinary actions imposed on members of the bargaining
unit, the employer and the bargaining representative shall meet to
adjust the grievance. Where the grievance procedure as provided
herein does not apply, grievances shall be subject to negotiation,
conciliation or arbitration as provided elsewhere in this Code (Labor
Code (Emphasis supplied)

As the law stands, both employers and bargaining representative of the employees
are required to go through the grievance machinery in case a grievance arises. And
though the law does not provide who, as between labor and capital, should initiate
that said grievance be brought first to the, grievance machinery, it is only logical, just
and equitable that whoever is aggrieved should initiate settlement of the grievance
through the grievance machinery. To impose the compulsory procedure on
employers alone would be oppressive of capital, notwithstanding the fact that in most
cases the grievance is of the employees.

In the case at bar, when petitioners sent notice to complainants, no grievance

between petitioners and private respondents that need be threshed out before the
grievance machinery has yet materialized. But then, private respondents, who
received such notice and being aggrieved thereof, instituted a case before the Labor
Arbiter for unfair labor practices and discrimination, prior to any referral to the
grievance machinery, which they are equally mandated to go through and under the
circumstances they were better situated to initiate; likewise, petitioners even prayed
before the Labor Arbiter that the complaint be dismissed and/or referred to the
grievance machinery. (Position Paper (Petitioners'), dated 24 July 1985, p. 7) Thus,
petitioner should not be faulted if the grievance machinery was in any way by-
passed. (Rollo, pp. 64-66)

WHEREFORE, the petition is hereby GRANTED. The June 19, 1987 resolution of the National Labor
Relations Commission is set aside and the April 9, 1986 decision of the Labor Arbiter is
REINSTATED.

SO ORDERED.

G.R. No. L-15363 July 31, 1961

NATIONAL LABOR UNION, petitioner,

vs.
INSULAR-YEBANA TOBACCO CORPORATION, respondent.

Eulogio R. Lerun for petitioner.

Sycip, Salazar and Associates for respondent.

LABRADOR, J.:

The legal issue presented in this case has been stated correctly by the respondent and is as follows:
 In an unfair labor practice proceeding under Republic Act 875, charging an employer of
discriminatory dismissal of an employee because of union activity which results in the
dismissal of the case in view of a negative finding that the employer did not dismiss the
employee for union activity, may the Court of Industrial Relations order the reinstatement
with back pay of the dismissed employee pursuant to the provisions of Section 19 of
Commonwealth Act 103, as amended, on the ground that the dismissal was 'not justified'
(page 5, Respondent's memorandum in lieu of oral argument).

The facts that have brought the above issue before us may be briefly stated as follows: The
petitioner herein, the National Labor Union, filed charges against the respondent Insular-Yebana
Tobacco Corporation, in Court of Industrial Relations Case No. 798-ULP, alleging discriminatory
dismissal by the respondent of two employees, Juana Torres and Dominador Gonzales, and charges
for discriminatory dismissal of Honorato Gabriel in CIR Case No. 851-ULP. The cases were heard by
Judge Arsenio I. Martinez who made, in his decision of December 26, 1957, the following findings on
the above charges.

As to Juana Torres:

Under the facts of this case, it may be argued that the company was not completely justified
when it dismissed Juana Torres. Be that as it may, still the fact remains that in an unfair labor
practice case like the one at bar, the sufficiency or insufficiency of the cause of her dismissal
is not the issue but rather whether the dismissal of Juana Torres was due to her union
activity. As pointed out elsewhere, the evidence does not warrant a finding that Juana Torres
was dismissed because of her alleged union activity. It is therefore fully recommended that
the complaint in Case No. 798-ULP insofar as it alleges discriminatory dismissal of Juana
Torres be dismissed.

As to Dominador Gonzales:

After considering the evidence presented by both parties, the undersigned is fully convinced
that the immediate and fundamental cause of the dismissal of Gonzales was the quarrel that
took place between him and Dionisio Toh on August 2, 1955. This conclusion is supported by
the undisputed fact that Gonzales was barred from entering the company's compound the
next day, Aug. 3, 1935 and since that time was not allowed to work by respondent company.
While the union attempted to show that Gonzales was not at fault and therefore should not
be blamed for the quarrel still the preponderance of evidence shows that, it was the cause of
the dismissal. . . .. Under the circumstances the undersigned is led to conclude that
Gonzales invented the tale about his alleged union activity and the conversation between
him and the company's manager to make it appear that his dismissal was caused by an
unfair labor practice committed by the company.

In the case of Honorato Gabriel, the findings are as follows:

Considering the evidence presented by the parties, the undersigned is fully convinced that
Gabriel was not dismissed because of his union activities. He ceased working because the
machine he was operating broke down. Said machine has not been repaired up to now and
 the evidence also shows that it is already very old and worn out. As a matter of fact it was
salvaged from a fire and broke down very often. The union has not indicated any place
where an axle may be bought to replace the broken one. While the mechanic presented by
the union as witness claimed that the broken axle could have been welded together, his
superior, the chief mechanic, claimed otherwise. Considering that the chief mechanic's
experience in his line of work dates back to 1937, the undersigned is inclined to give due
weight and credit to his expert testimony.

As stated above, it was claimed by Gabriel that the company refused to repair the machine
because of his union activity. The undersigned, however, cannot see any harm or prejudice
caused to the company by reason of such activity. On the other hand, the non-operation of
the machine is patently disadvantageous to the company as it was deprived of the products
produced by that machine. The only logical and sensible conclusion that can be arrived at in
this case is that the company did not endeavor to repair the machine of Gabriel for legitimate
business reasons and not because, of his union activity.

It is therefore respectfully recommended that the complaint in Case No. 851-ULP alleging
discriminatory dismissal of Honorato Gabriel be dismissed.

A motion for reconsideration of the above decision of Judge Martinez having been submitted to
court in banc the majority sustained the decision of Judge Martinez.

Judge Bautista, with whom Judge Villanueva concurred, held that as the removal was not fully
justified, and since the offenses were so trivial and insignificant, Juana Torres and Dominador
Gonzales should be reinstated with back wages.

With the above-quoted portions of the decision and dissent, it is clear that the issue is as herein-
above quoted. It must be noted that the cases were instituted for unfair labor practice by the National
Labor Union against the Insular-Yebana Tobacco Corporation. In the case of Juana Torres, it was
charged that she was dismissed from her work because "she campaigned actively against the
president of the Union as alleged in the complaint." (Page 1, Decision of the Court of Industrial
Relations.) In the case of Dominador Gonzales, it is charged that he was dismissed "Because I
(Gonzales) am a rabid member of the Union and I was campaigning for membership to be able to
change our president." (Page 5, Ibid.) In the case of Honorato Gabriel no specification of unfair labor
practice is made because even the complaint Gabriel stated or admitted that the axle of the
machine, which he operated, broke and as the machine had not yet been repaired he was unable to
do any work.

The proceedings had in the Court of Industrial Relations are therefore, the proceedings described in
Section 5 of the Industrial Peace Act (Rep. Act No. 875). Pertinent provisions of said Act are as
follows:

Sec. 5 Unfair Labor Practice Cases.

(a) The Court shall have jurisdiction over the prevention of unfair labor practices and is
empowered to prevent any person engaging in any unfair labor practice. This power shall be
 exclusive and shall not be affected by any other means of adjustment or prevention that has
been or may be established by an agreement, code, law or otherwise.

(b) . . . Whenever it is charged by an offended party or his representative that any person
has engaged or is engaging in any such unfair labor practice, the Court or any agency or
agent designated by the Court must investigate such charge and shall have the power to
issue and cause to be served upon such person a complaint stating the charges in that
respect and containing a notice of bearing before the Court or a member thereof, or before a
designated Hearing Examiner at the time and place fixed therein not less than five nor more
than ten days after serving the said complaint . . ..

(c) . . . If, after investigation, the Court shall be of the opinion that any person named in the
complaint has engaged in or is engaging in any unfair labor practice, then the Court shall
state its findings of fact and shall issue and cause to be served on such person such unfair
labor practice and take such affirmative action as will effectuate the policies of this Act,
including (but not limited to) reinstatement of employees with or without back-pay and
including rights of the employees prior to dismissal including seniority. Such order may
further require such person to post the Court's order and findings in a place available to all
the employees and to make reports from time to time showing the extent to which the Court's
order has been complied with. If after investigation the Court shall be of the opinion that no
person named in the complaint has engaged in or is engaging in any such unfair labor
practice, then the Court shall state its findings of fact and shall issue an order dismissing the
said complaint. If the complaining party withdraws its complaint, the Court shall dismiss the
case.

The question now before us may be stated thus: In a proceeding for the trial of charges of unfair
labor practice, prosecuted in accordance with Section 5 of Republic Act No. 875, pertinent portions
of which are as quoted above, can the court grant a remedy such as reinstatement and back pay,
even if the complaint is to be dismissed because the unfair labor practice alleged to have been
committed has not been proved or found to exist?

A consideration of the entire law on the matter clearly discloses the intention of the lawmaker to
consider acts which are alleged to constitute unfair labor practices as violations of the law or
offenses, to be prosecuted in the same manner as a criminal offense. The reason for this provision is
that the commission of an unfair labor practice is an offense against a public right or interest and
should be prosecuted in the same manner as a public offense. It should also be noted that there is
no provision in Section 5 for the return or reinstatement of a dismissed employee, if the charge for
unfair labor has not been proved. On the contrary, the provision of the law is clear and express that if
the acts alleged to have been committed as constituting unfair labor practice have not been proved,
or if the complainant asks for the dismissal of the case, the charges for unfair labor practice shall be
dismissed.

But the dissenting opinion as well as petitioner herein ask: What is the remedy left to the employee
who has been dismissed if the dismissal is not entirely justified, when there is no proof of the
existence of unfair labor practice? We note that in the beginning of Section 5 of the his Industrial
Peace Act (Republic Act No. 875), this prohibition is contained:
 (b) The Court shall observe the following procedure without resort to mediation and
conciliation as provided in section four of Commonwealth Act Numbered One hundred and
three as amended or to any pre-trial procedure. (Sec. 5, R.A. 875)

This prohibition confirms the principle above indicated governing the proceeding in unfair labor
practice cases, i.e., that the proceeding is in the nature of a public prosecution for an offense defined
in the Industrial Peace Act. This prohibition against the court's exercising its power of conciliation
and mediation, is in complete consonance with the directive contained in the same section that if
unfair labor practice has not been proved or if the complainant withdraws his charges, the unfair
labor practice case shall be dismissed. The reason for the distinction between an unfair labor
practice case and a mere violation of an employer of its contractual obligation towards an employees
is, as we have stated above, thus: That unfair labor practice cases involve violations of a public right
or policy, to be prosecuted like criminal offenses whereas a breach of an obligation of the employer
to his employee is only a contractual breach to be redressed like an ordinary contract or obligation.
To this effect has been the express ruling in the United States in the case of National Labor
Relations vs. Newark Morning Co., 120 F (2d) 262, 265-266:

If during the life of such a contract an employee is discharged because of union membership
and activity in direct violation of the terms of the contract, the employer has violated a
contractual right of the employee which the latter is entitled to have enforced. But this is a
breach of a private right which may be redressed in the manner stipulated in the agreement
or by the recourse to the courts. The National Labor Relations Act contemplates no more
than the protection of the public rights which it creates and defines. National Licorice Co. v.
Labor Board, 309 U.S. 350, 366, 84 L. ed. 799. The breach of a covenant against discharge
may not be redressed by the Board because, while clearly a breach of contract, the
discharge is not an unfair labor practice within the meaning of the National Labor Relations
Act since it cannot possibly have the effect of interfering with, restraining, or coercing the
employees in exercising a right of collective bargaining which has already been fully and
successfully exercised by them. The Board is concerned only with those situations in which
an employer and his organized employees have not yet reached agreement; it is no part of
its duty to police relations between an employer and his employee under a collective
bargaining agreement. To construe the Act otherwise would be to impose upon the Board the
Herculean task of supervising the day to day relations of employers and employees in the
vast and ever growing segment of commerce and industry in which successful collective
bargaining has well nigh eliminated industrial strife. If Congress had intended that the Board
should assume enormous additional responsibility it would certainly have expressly so
provided. This, as we have seen, it did not do. (National Labor Relations Board v. Newark
Morning L. Co., 120 F. (2) 262, 265-266.

A similar or parallel case is that of the National Labor Relations Board vs. Union Pacific Stages, 99 F
(2d) pp. 153, 177-179, in which the following principles are laid down.

. . . Because the discharge drivers admittedly were guilty of infractions of the respondent's
rules and regulations the Board has sought to show that these breaches were trifles and that
the real reason for the discharges was the union activities of the drivers. It thus ignores and
minimizes the violations and bases its order on what is referred to as 'background,' which we
 have shown is not correctly presented or rightly interpreted and therefore not to be relied
upon. Not only is there no evidence which shows that respondent was seeking for an
opportunity to discharge these drivers, but there is affirmative evidence to establish the
contrary conclusion . . ..

. . . The National Labor Relations Act was not intended to empower the National Labor
Relations Board to substitute its judgment for that of the employer in the conduct of his
business, and did not deprive the employer of the right to select or dismiss his employees for
any cause except where the employee was actually discriminated against because of his
union activities or affiliation. It did not authorize the Board to absolve employees from
compliance with reasonable regulations for their government and guidance. The Act does not
vest in the Board managerial authority . . ..

We find that the evidence fails to sustain the finding of the Board 'that the respondent has
discriminated with respect to the hire and tenure of employment of Hebe Dobbs and Carroll
B. Kiesel for the purpose of discouraging membership in the Union,' and the order of the
Board requiring respondent to reinstate them in their former positions, or to remunerate them
for any losses of pay is set aside, and the complaint with respect to the discharges of said
Hebe Dobbs and Carroll B. Kiesel dismissed. (National Labor Relations Board v. Union
States, Inc., 99 F [2d] Pp. 153. 176-179).

The above considerations are believed sufficient to support the conclusion that we have reached, as
above in dedicated, on the question we proposed to answer at the beginning of this opinion. But it
may not be superfluous to invite attention to some provisions of the laws on labor relations to assure
ourselves that our conclusion is not contrary thereto.

Under Commonwealth Act No. 103, the power of arbitration and conciliation may be exercised only if
an industrial dispute is causing or likely to cause a strike or lockout and the number of employees or
laborers involved exceeds 30 (Sec. 4, Republic Act No. 103). Once the court acquires jurisdiction
and the case is pending before the court, the suspension, lay-off or dismissal of employees or
laborers may not be made without the court's approval (Sec. 19, Ibid). After trial, the court is granted
power to decide the nature and form of the remedy, or award that it may grant, which remedy, may
include reinstatement suspension or otherwise (Sec. 13, Ibid). The only other instance where the
court may order reinstatement of an employee is where the discharge of an employee is caused by
his testifying or intention to testify in an investigation before it (Sec. 21, Ibid). As none of the above
circumstances is present in the case at bar, the reinstatement in the court below suggested by the
dissenting opinion may not be granted.

Under the Industrial Peace Act, the power of the Court of Industrial Relations in cases not certified to
it by the President, seems to be limited to cases of unfair labor practice. The power and duty of
mediation and conciliation under the law is not granted to the Court of Industrial Relations. Such
power lies with the conciliation Service of the Department of Labor, thus:

It shall be the duty of the Service, in order to prevent or minimize labor disputes, to assist
parties to labor disputes in settling such disputes through conciliation and mediation.
 The Service may proffer its services in any labor dispute in any industry either upon its own
motion or upon the request of one or more of the parties to the dispute.

If the Service is not able to bring the parties to agreement by conciliation within a reasonable
time, it shall seek to induce the parties voluntarily to seek other means of settling the dispute
without resort to strike, lockout, or other coercion, including submission to the employees in
the bargaining unit employer's last offer to settlement for approval or rejection in a secret
ballot. (Sec. 18, R.A. 875).

The duty thus imposed upon the Department of Labor is reiterated in Section 20 of the Industrial
Peace Act which provides for the calling of labor management conferences, the purpose of which is
"to establish a positive philosophy in the governmental approach to the problem of industrial
relations" which "must rest, in keeping with the spirit of our democratic institutions, on an essentially
voluntary basis." (Sec. 20, Republic Act No. 875). Furthermore, the Secretary of Labor is entrusted
with the study of labor relations and the causes of industrial unrest in order to increase "the
usefulness and efficiency of collective bargaining for setting differences." (Sec. 22, Ibid).

We find that mediation and conciliation, except in cases of industries indispensable to the national
interest and certified to be such by the President to the Court of Industrial Relations, is entrusted to
the Department of labor, which shall have as its aim the settling of industrial differences between
labor and capital "on an essentially voluntary basis." So that in cases of conflict between an
employer and an employee in the absence of any unfair labor practice, attempt should be made to
settle the difference through the mediation of the Secretary of Labor or the Conciliation Service.
Upon failure of this remedy it seems that recourse may be made to the ordinary courts for the
enforcement of the respective rights of the parties in accordance with the terms of their labor
agreements or in accordance with the provisions of law.

Our attention has been invited to cases already decided by Us in which orders for the reinstatement
of dismissed employees were made even if apparently there was no that unfair labor practice was
committed. The cases in question are Confederated Sons of Labor vs. Anakan Lumber Co., et al.,
G.R. No. L-12503, April 29, 1960; Freeman Shirt manufacturing Co., Inc. et al. vs. Court of Industrial
Relations, et al., G.R. No. L-16561, January 28, 1961; and National Labor Union vs. Zip Venetian
Blind, et al., G.R. Nos. L-15827 and L-15828, May 31, 1961. In the third case Confederated Sons of
Labor vs. Anakan Lumber Co., we ordered the reinstatement of 45 laborers and employees who
were not members of the union with which respondent had a contract with a closed-shop agreement
clause. The case was started as one for unfair labor practice and we held that the employer had no
right to dismiss the old employees, who are not members of the union with which it had a labor
contract, notwithstanding the existence of a closed-shop agreement with another and later union
(United Workers' Union). We do not expressly state in this case that the return of the dismissed
employees was ordered because an unfair labor practice as committed by respondent company. But
that an unfair labor practice was committed is the import of the decision. The act of the company in
dismissing the old employees, already so at the time of its contract with the United Workers' Union,
constitutes an unfair labor practice within the meaning of Section 4, paragraph 4 of the Industrial
Peace Act, because the respondent company discriminated in regard to tenure of employment
against the members of the petitioner-union, Confederated Sons of Labor, to the benefit of the
United Workers' Union, helping destroy the tenure of employment that the members of the
Confederated Sons of Labor had already acquired at the time the closed-shop agreement was
entered into.

In the case of Freeman Shirt Manufacturing Co. vs. Court of Industrial Relations, the action was also
brought for unfair labor practice, it being charged that the company dominated the other union and
violated Sec. 4(a) Republic Act No. 875 for having dismissed ten laborers. The charge for unfair
labor practice was dismissed on a ground that the company, had a closed-shop agreement which
was made pursuant to law. But we held that the dismissed employees were entitled to reinstatement
because their dismissal "was illegal." We said:

Since a closed-shop clause in a collective bargaining agreement is inapplicable to

employees who were already in company's service at the time of its execution, the dismissal
of the employees herein concerned is unjustified. (Local 7, Press & Printing Free Workers
(FFW) et al. vs. Tabague, etc. et al., G.R. No. L-16093, November 29, 1960; I Francisco,
Labor Laws, 3rd ed. 374-375, citing Electric Vacuum Cleaner Co., NLRB No. 75, 1939, cited
in II Teller, Labor Disputes and Collective Bargaining, 867-868.)

Petitioners contend that the dismissal of the charges of unfair labor practices against the
company precludes any order for reinstatement. The contention is untenable, for the
dismissal here was made pursuant to a closed-shop agreement which is unauthorized by
law. In short, the dismissal was illegal. Ordinarily, the order for reinstatement should have
carried with it an award for back pay. Considering, however, that there is no local decision on
point, we are inclined to agree with the lower court and give the company the benefit of the
doubt regarding its claim that it acted in good faith and in the honest belief that, as the law
now stands, it could dismiss the employees who refused to join the winning or contracting
union. (Freeman Shirt Manufacturing Co., Inc., vs. Court of Industrial Relations. G.R. No. L-
16561, prom. January 28, 1961.)

An analysis of the facts of the case discloses that the act of the respondent company in
discriminating against members of the union with which it had contract, in favor of the union with
which it had recently entered into a closed-shop agreement, constitutes an unfair labor practice
under Section 4, par. 4 of the Industrial Peace Act.

The third case, National Labor Union vs. Zip Venetian Blind, et al., which follows the preceding case,
is to the same effect. We ordered the reinstatement of the employees saying that the employer had
dismissed the company employees in good faith believing that it had the right to dismiss them by
virtue of a closed-shop agreement. As in the two other preceding cases, the act of the company or
employer in dismissing old employees because they do not pertain or belong to the union with which
it had recently entered into a closed-shop agreement, is also an unfair labor practice within the
meaning of Section 4, paragraph 4 of the Industrial Peace Act, because the company discriminated
against the tenure of old employees, in favor of the members of a labor union with which it
subsequently entered into a closed-shop agreement.

Resuming what we have explained above, we hold that the above cases, although not expressly
declared by Us to be of unfair labor practice, are actually such cases because in each and every one
of them the employer had discriminated against the tenure of old employees in favor of new
employees belonging to a union with which it recently entered into a closed-shop agreement.

In conformity with the principles above expressed, we hold that the cases at bar having been
instituted expressly as unfair labor practice cases, pursuant to Section 5 of the Industrial Peace Act,
and no unfair labor practice having been proved to have committed, the Court of Industrial Relations
has no power to grant remedy under its general powers of mediation and conciliation, such as
reinstatement or back wages, but must limit itself to dismissing the charges of unfair labor practice.
Conformably thereto, we hold that the majority of the court below correctly dismissed the charges,
without considering the merits of the claim of the two employees, Juan Torres and Dominador
Gonzales, for reinstatement. No costs.

G.R. No. L-23495 September 30, 1970

LVN PICTURES EMPLOYEES AND WORKERS ASSOCIATION (NLU). petitioner,

vs.
LVN PICTURES, INC., respondent.

G.R. No. L-26432 September 30, 1970

LVN PICTURES CHECKERS UNION (NLU), petitioner,

vs.
LVN PICTURES, INC. and/or DALISAY PICTURES INC., and the COURT OF INDUSTRIAL
RELATIONS, respondents.

Eulogio R. Lerum for petitioners.

Teofilo Sison & Nicanor Sison for respondent LVN Pictures, Inc.

Zacarias V. Flores for respondent Dalisay Pictures, Inc.

CASTRO, J.:

These two appeals by certiorari taken by the respective complainants from the decision and the
resolution dated October 8, 1963 and August 29, 1964, respectively, of the Court of Industrial
Relations (CIR) in case 2879-ULP (LVN Pictures Employees and Workers Association [NLU] v. LVN
Pictures, Inc.), and from the decision and the resolution dated June 2, 1966 and July 18, 1966,
respectively, of the same court in case 3013-ULP (LVN Pictures Checkers Union [NLU] v. LVN
Pictures, Inc. and/or Dalisay Pictures, Inc.), are here considered together because all the
complainants in both cases were former employees of the LVN Pictures, Inc. and the two cases
involve similar, if no identical, factual situations and issues.

The LVN Pictures, Inc. (hereinafter referred to as the LVN) was a corporation engaged in the
business of producing Tagalog movies. Among its employees were the members of the LVN Pictures
Employees and Workers Association (NLU) (hereinafter referred to as the EWA) with which it
executed on April 23, 1959 a collective bargaining agreement to expire on December 31, 1960.
During their employment with LVN, the members of the EWA served in various capacities in the LVN,
such as cameramen and their assistants, soundmen and their assistants, sound technicians,
carpenters, electricians, drivers, laboratory personnel and laborers doing odd jobs.

Previous to the year 1957, the LVN was realizing profits from its business. However, from 1957 to
1961, it suffered heavy losses in its movie production due to causes beyond its control. As of May
31, 1961 its total losses amounted to P1,560,985.14, while its paid-up capital as of the said date was
only P1,204.000. Thus the losses exceeded the paid-up capital by P356,985.14. Also as of May 31,
1961, the company's total liabilities reached P1,189,946.19 while its total assets were only
P853,961.05, so that its liabilities exceeded its assets, by P335,985.14. In addition, outstanding
loans due from it amounted to P527,960.53. Of its overdraft line of P200,000 with the Philippine
National Bank which served as part of its operating capital, it had used and withdrawn the total sum
of P199,303.45, leaving the amount of only P696.55. LVN had likewise used and withdrawn
P199,167.95 of its overdraft line in the amount of P200,000 with the Commercial Bank & Trust
Company, leaving a balance of P832.05.

Not withstanding the foregoing adverse financial posture, the LVN continued to operate its movie
production with the expectation that it would recoup part of its losses and investments. And in order
to avoid immediate closure of business, as well as lay-off of employees, the management of the
LVN, by letter dated March 14, 1960, proposed to the EWA a change in the payment of salaries and
wages of the employees from salary or wage basis to the "pakiao" system per picture. This proposal
was however rejected in the union in its letter of March 31, 1960. On April 8, 1960 the LVN asked the
EWA to reconsider its decision on the "pakiao" system, to no avail. Again, on January 25, 1961, the
LVN proposed to reduce the monthly compensation of all its employees and laborers regardless of
whether or not they were union members, according to the following scale:

from P175.00 to P190.00 5%

from 200.00 to 350.00 10%
from 400.00 up 20%.

The salaries and/or wages of employees and workers below P175 as well as the daily wage earners
were not to be affected. This proposal was approved by the board of directors of the LVN as a
measure to stave off the mounting losses in the operation of its Tagalog movie production. But it was
also rejected by the EWA in its letter of February 15, 1961.

After the expiration of the term of the collective bargaining contract, the EWA proposed negotiations
for a contract on February 24, 1961. In a letter-reply dated March 2, 1961, the LVN informed the
EWA that on March 15, 1961 the LVN stockholders would hold a meeting at which one of the matters
to be discussed was whether because of the financial losses of the corporation, it would still continue
to make pictures. The LVN therefore advised the union that it would answer neither yes nor no to the
proposed negotiations but would await the outcome of the stockholders' meeting.

By letter dated March 20, 1961, the LVN informed the EWA that, because of huge losses incurred
and the many obligations of the former which could not be met, the stockholders had agreed not to
invest additional capital and to stop producing new moving pictures, and to finish only the pictures
that were then under production. Moreover, in view of the refusal of the EWA to consider the LVN's
proposals and because of the mounting losses, the LVN's board of directors decided to close its
movie production as of May 31, 1961.

As a necessary consequence of the stoppage of its movie production after May 31, 1961, the LVN
was compelled to dismiss all its personnel employed in the said movie production, among them the
84 employees and/or workers of the EWA The equipments and properties of the LVN were kept in
the studio premises under the care of a skeleton force selected for the purpose. Thereafter, in order
to secure rents to meet some of its obligations the LVN leased its equipments and properties for the
production of moving pictures to the Tagalog Ilang-Ilang Productions, Arriba Productions, Inc.,
Manuel M. Lagunsad Productions, Galaxy Productions, Inc., Dalisay Pictures, Inc., Magna East
Productions and other producers, at P13,000 per picture. In the production of moving pictures, the
several lessees employed their own personnel to handle the leased properties and equipments of
the LVN. There were some instances when these lessees employed former workers and employees
of the LVN.

On May 31, 1961 the Dalisay Pictures, Inc. (hereinafter referred to as the DPI) was incorporated,
capitalized at P100,000 which was wholly subscribed and fully paid by its incorporators, as follows:
Delfin Buencamino, 1,000 shares, P50,000; Encarnacion Luna, 400 shares, P20,000; Maria Sevilla,
200 shares, P10,000; Jose T. Beltran, 200 shares, P10,000; and Nicanor S. Sison, 200 shares,
P10,000.

On January 16, 1961, the LVN Pictures Checkers' Union (NLU) (hereinafter referred to as the LPCU)
was organized and was registered with the Department of Labor on February 21, 1961. On February
27, 1961 it sent a letter to the LVN containing collective bargaining proposals. The LVN informed the
LPCU that the former's stockholders would meet to decide whether or not it would continue
production of pictures. On March 24, 1961 all the members of LPCU received identical letters
informing them that the LVN would stop its movie production business effective May 31, 1961.
Thereafter, the LVN began reducing the work-load of the members of LPCU and, in November 1961,
dismissed them from employment.

On July 18, 1961 the EWA filed a complaint charging the LVN with violations of section 4(a) (1) and
(4) of Republic Act 875 (Industrial Peace Act), consisting of alleged union interference by the LVN
and/or discriminatory dismissal of 84 employees and workers because of the membership in the
EWA The LPCU likewise filed on October 20, 1961 a complaint against the LVN and the DPI for
alleged violations of sec. 4(a) (1), (4) and (6) in relation to sections 12 and 13 of the Industrial Peace
Act, consisting of alleged acts of discrimination, shortening of working hours and/or days, and forced
dismissals. In both cases the CIR decided in favor of the respondents, holding the latter not guilty of
unfair labor practices in dismissing the employees-members of the EWA and the LPCU, and, in the
latter case filed by the LPCU, declaring that the DPI is a business establishment and entity separate
and distinct from the LVN. The motions for reconsideration filed by the respective complainants were
denied by the CIR.

Hence, these appeals.

The numerous issues raised in both appeals can be capsulized into two main issues: (1) Is the LVN
guilty of unfair labor practice in dismissing its employees who are members of the EWA and the
LPCU? (2) Are the LVN and the DPI one and the same corporation or entity?

We resolve both issues in favor of the respondents LVN and DPI, and affirm the CIR decisions and
resolutions appealed from.

1. The evidence in both appealed cases is clear that the LVN incurred losses from 1957 to 1961,
reducing it to a state of practical bankruptcy. Thus, the respondent CIR found that as of December
31, 1957, the LVN suffered a net loss of P364,320.32; December 31, 1958, P210,857.01; December
31, 1959, P393,644.29; December 31, 1960, P399,085.85; and December 31, 1961, P333,714.60.
As of May 31, 1961, the total losses suffered by LVN amounted to P1,560,985.14, whereas its paid-
up capital was only P1,204,000.00 - the former exceeding the latter by P356,785.14. The liabilities of
the LVN as of May 31, 1961 totalled P1,189,946.19, while its total assets were only P853,961.05, the
total liabilities exceeding the total assets by P335,985.14. On top of these, the LVN as of May 31,
1961 had loans due from it in the amount of P527,960.53. It had an overdraft line of P200,000 with
the Philippine National Bank which served as paint of its operating capital, but of this amount it had
already withdrawn and used the total sum of P199,303.45 as of May 31, 1961, leaving a balance of
only P696.55. It had also as of the aforementioned date withdrawn and used P199,167.95 of its
P200,000 overdraft line with the Commercial Bank & Trust Company, leaving a balance of only
P832.05. Its yearly balance sheets, yearly profit and loss statements, and yearly income tax returns
unquestionably proved that the LVN became insolvent due to heavy financial losses suffered in good
faith and in the ordinary course of business operations from 1957 to May 31, 1961. Thus, it was
constrained to stole its movie production business. Since its operating capital of P400,000 consisting
of an overdraft line in the amount of P200,000 each with the Philippine National Bank and the
Commercial Bank & Trust Company, was nearly completely exhausted as of May 31, 1961, it is clear
that when the LVN completely stopped its movie production business on May 31, 1961, it was not
only insolvent but was also without any operating capital.

It is to the credit of the LVN, however, that it did not decide to stop producing movies immediately.
Notwithstanding its insolvency and before it finally closed its business on May 31, 1961, it had in
good faith attempted to avail of all possible arrangements with its employees to avoid the complete
closure of its business. It proposed various remedial measures, e.g., the payment of wages or
salaries on the pakiao system per picture, and the gradual reduction of the employees' salaries.
Unfortunately, these proposals were flatly rejected. To avoid total bankruptcy, the LVN had no
alternative but to close and stop its movie production business. The employees, by their refusal to
meet the LVN halfway, in effect "killed the goose that laid the golden eggs." It is not therefore correct
to say that when the LVN proposed the "pakiao" system and the reduction of wages for both union
and non-union members, it was committing an unfair labor practice. It was merely trying,
understandably and justifiably, to stave off eventual bankruptcy and the ultimate folding-up of its
movie production business. Neither can the LVN be accused of being anti-labor when it gradually
reduced the working hours of the checkers and finally laid them off. The members of the LPCU were
theater-checkers of the LVN. Their services were needed only in the exhibition of new pictures which
were shown on percentage basis, in order that the LVN might receive its lawful share in the gross
gate receipts. However, since the LVN stopped its movie production business on May 31, 1961, and
its second or old pictures were being exhibited on flat-rate rental basis, there was no longer any
need to employ checkers.

The argument is advanced that the LVN refused to bargain when it put off answering the proposals
of the EWA and the LPCU pending the stockholders' meeting. We do not agree. It was entirely
reasonable for the LVN to hold in abeyance its answers to the proposals because whether or not it
would still enter into a collective bargaining agreement with the EWA and the LPCU would depend
on the consensus that would be arrived at by the stockholders. There would be neither rhyme nor
reason for a collective bargaining agreement if the company would decide as it did decide to
stop producing moving pictures, because the resultant ultimate effect would be the dismissal or
separation of employees. In fact, subsequent events proved the prudence of the action taken by the
LVN. When the stockholders decided to stop movie production as of May 31, 1961, the LVN was
compelled to dismiss its employees because there was no more work for them. Had the LVN agreed
to enter into collective bargaining agreements with the two unions without awaiting the result of the
stockholders' meeting, the contracts would have become inutile anyway because it was closing
shop.

The petitioners in both cases also allege that non-union members were employed by the LVN even
after May 31, 1961. This is not correct. The truth is that although the LVN studio equipments and
movie apparatus were being used in the production of pictures, they were being used not to produce
LVN pictures but were leased to small independent producers. The several lessees employed former
workers of the LVN but the employment of these people depended solely upon the discretion of the
different lessees, without any participation of ongoing interference from the LVN.

The petitioners also contend that the LVN was not "really losing" because its assets, namely, all the
320 finished films, were undervalued at only P320, or at P1.00 book value per picture, when they
were actually earning thousands of pesos. We find no merit in this argument. In determining the
yearly profit or loss of a business enterprise, what is taken into account under section 28, Chapter IV
of the National Internal Revenue Code (Act No. 466, as amended), are the "gross income computed
under section twenty-nine, less the deductions allowed by section thirty" of the said Act. A perusal of
the said pertinent provisions of the Tax Code will clearly show that the book value or inventory value
of assets (such as the 320 finished films book-valued at P1.00 per picture) is immaterial and is not
considered in the preparation of the yearly profit and loss statement which is usually attached to the
yearly balance sheet. What are considered only are the incomes (not book value of assets) and the
expenses or deductions allowed in section 30 of the Tax Code. What is relevant and material,
therefore, for purposes of determining the yearly profit or loss of a corporation like the LVN is that all
such incomes are duly reported. And this has been done by the LVN.

Besides, this rate of depreciation has been observed and adhered to strictly by the LVN since 1946,
and sanctioned and allowed by the Bureau of Internal Revenue which, up to now has not found any
occasion to object to the said system of full depreciation after a period of 6 months from the date of
first exhibition. Indeed, under this procedure the LVN made and realized annual profits from 1946 to
1956, inclusive, as aforementioned. However, as hereinfore explained, it suffered losses in its movie
production business from 1957 to 1961.
The amount of P10,124,400.00 allegedly earned by these finished films from 1958 to 1961, included
both the earnings from the old pictures that were continued to be exhibited even after the period of
six months, and the incomes realized from the exhibition of all new pictures produced at an average
of 22 new pictures a year from 1956 to May 31, 1961. Therefore, the said amount of P10,124,400.00
represented practically the total gross income of the LVN in the period of five years as reflected in
the yearly operating account and yearly profit and loss statements attached to its yearly balance
sheets. Thus, the petitioners' allegation that the said amount of P10,124,400.00 represented only the
earnings of the 320 finished films book-valued at P1.00 each, is inaccurate and misleading.

This Court, in a number of cases, has recognized and affirmed the right of an employer to lay off or
dismiss employees because of losses in the operation of its
business, 1 lack of work, 2 and considerable reduction in the volume of his business. 3 We have held that
such acts of dismissal do not constitute unfair labor practice. 4 Indeed, "an employer may close his
business, provided the same is done in good faith and is due to causes beyond his control. To rule
otherwise would be oppressive and inhuman." 5

The respondent CIR found for a fact, and our own independent study of the evidence shows, that the
LVN suffered tremendous losses, completely depleting its capital which was needed to operate and
continue its business of producing moving pictures. In order to avoid immediate lay-off of employees
and the closure of its business, the LVN proposed to the EWA a change in the payment of salaries
and wages of the employees and workers from salary or wage basis to the "pakiao" system; and
when this was rejected by the union, it offered to reduce the monthly compensation of all the
employees (except those receiving less than P175 a month and the daily wage earners) regardless
of their union membership, and this too was rejected. In order to avoid further losses and in view of
the refusal of the union to cooperate in alleviating its mounting losses, the LVN was left with no
alternative but to close its movie production as of May 31, 1961 and to dismiss its employees. This
the LVN had the right to do, and it did so in good faith. We are not unmindful of the plight of the
employees in this case, but we consider it oppressive to compel the LVN to continue its business of
producing movies when to do so would only result in its incurring further losses.

Under the Termination Pay Law (R.A. 1052, sec. 1, as amended by R.A. 1787), one of the just
causes for terminating an employment without a definite period by the employer, is the closing or
cessation of operations of the establishment or enterprise, unless the closing is for the purpose of
defeating the intention of the said law. Since the LVN in good faith stopped its movie production
business on May 31, 1961, it could therefore legally dismiss its employees. But before doing so, it
gave them sufficient notice and an ample period within which to look for other employments.
Therefore, contrary to the petitioners' allegation, the Termination Pay Law applies.

2. Anent the second issue, the CIR found that the DPI is an entity separate and distinct from the
LVN. Thus, the CIR held in case 3013-ULP (LVN Pictures Checkers' Union [NLU] v. LVN Pictures, et
al.) that:

The Dalisay Pictures, Inc. is a separate and distinct entity from the LVN Pictures,
Inc., hence, it cannot be said that there was bad faith in the termination of the
employees mentioned in paragraph 5(a) of the complaint. The Articles of
Incorporation of the Dalisay Pictures, Inc. (Annex "2" RCA) duly registered with the
 Securities and Exchange Commission shows that the incorporators of the said
corporation are Encarnacion Luna, Maria Sevilla, Delfin Buencamino, Nicanor S.
Sison, Jose T. Beltran, who are entirely different from the owners of the LVN Pictures,
namely, the De Leon family, Villongco and the Navoa family. Hence, the two
corporations are distinct and separate from each other. The only point of contact
between the Dalisay Pictures, Inc. and the LVN Pictures, Inc. is when the former
leases its movie equipment with the latter.

To the same tenor is the CIR's holding in case 2879-ULP (LVN Pictures Employees & Workers
Association [NLU] v. LVN Pictures, Inc.) which states, inter alia:

The lessees Dalisay Pictures, Inc., Ilang-Ilang Productions, Arriba Productions, Inc.,
and Magna East Productions, are separate and distinct business establishments
and/or entities from the LVN Pictures, Inc. These are separate and distinct corporate
entities and independent from each other. They pursue their business enterprises
according to their respective incorporation papers. They produce movie pictures of
their own choice employing their own capital and separate personnel force without
the intervention and interference of the respondent LVN Pictures, Inc. These firms
leased the equipments and production properties of the latter (LVN Pictures, Inc.)
with rents properly paid by them.

The foregoing factual findings of the CIR are supported by substantial evidence on record and
therefore are conclusive. The rule is now firmly established that the CIR findings of fact are not to be
disturbed on appeal as long as they are supported by such material and relevant evidence as a
reasonable mind might accept as adequate to support a conclusion, 6 the appeal to the Supreme Court
being then confined to questions of law. 7 We cannot therefore disturb the CIR findings of fact on the
matter of the separate identities of the LVN and the DPI.

3. We have noted that in the second case at bar (LVN Pictures Checkers' Union [NLU], L-26432), the
CIR awarded one-month pay to each of the workers involved therein, in addition to holding that they
should be given the first preference in the event the LVN would operate anew.

The award of one-month pay to the members of the LPCU is not justified under the circumstances.
For it is now settled that when an employment is terminated for a just cause as defined in section 1
of Rep. Act 1052, as amended by Rep. Act 1787, because of the losses incurred by the business,
the employee whose services are terminated or dispensed with is not entitled to separation
pay. 8 However, because the LVN did not appeal from the said portion of the decision awarding a month's
pay to each of the members of the LPCU, nor discussed or called the attention of this Court to this error,
we are not authorized to consider this unassigned error. 9

ACCORDINGLY, the appealed decisions and resolutions of the Court of Industrial Relations in case
2879-ULP (LVN Pictures Employees and Workers Association [NLU] v. LVN Pictures, Inc.) and in
case 3013-ULP (LVN Pictures Checkers' Union [NLU] v. LVN Pictures, Inc., et al.) are affirmed. No
pronouncement as to costs.

COLLECTIVE BARGAINING
G.R. No. 106830 November 16, 1993

R. TRANSPORT CORPORATION, petitioner,

vs.
HON. BIENVIENIDO E. LAGUESMA. in his capacity as Undersecretary of the Department of
Labor and Employment, CHRISTIAN LABOR ORGANIZATION OF THE PHILIPPINES (CLOP),
NATIONAL FEDERATION OF LABOR UNIONS (NAFLU), and ASSOCIATED LABOR UNIONS
(ALU-TUCP), respondents.

Gaspar V. Tagalo for petitioner.

Jose Torregoza for Christian Labor Organization of the Philippines.

Joji Barrios for intervenor ALU-TUCP.

Villy Cadiz for National Federation of Labor Unions.

QUIASON, J.:

This is a petition for certiorari under Rule 65 of the Rules of Court which seeks to set aside the
Resolutions of the Undersecretary of the Department of Labor and Employment (DOLE) dated July
22, 1992, affirming the order of the Med-Arbiter calling for the conduct of the certification election,
and August 25, 1992, denying petitioner's motion for reconsideration.

On January 4, 1991, respondent Christian Labor Organization of the Philippines (CLOP), filed with
the Med-Arbitration Unit of the DOLE a petition for certification election among the rank and file
employees of the petitioner (NCR-OD-M-91-01-002).

On April 8, 1991, Med-Arbiter A. Dizon dismissed the petition on the ground that the bargaining unit
sought to be represented by respondent did not include all the eligible employees of petitioner but
only the drivers, conductors and conductresses to the exclusion of the inspectors, inspectresses,
dispatchers, mechanics and washerboys.

On May 10, 1991, respondent. CLOP rectified its mistake and filed a second petition for certification
election,which included all the rank and file employees of the company, who hold non-managerial.
and non-supervisorial positions.

Petitioner filed a motion to dismiss the second petition and contended that the dismissal of the first
petition constituted res judicata. Petitioner argued that respondent CLOP should have interposed an
appeal to the dismissal of the first petition and its failure to do so barred it from filing another petition
for certification election.
On July 3, 1991, Med-Arbiter R. Parungo rendered a decision, which ordered that a certification
election among the regular rank and file workers of petitioner company be conducted (Rollo, pp. 87-
91).

On October 16, 1991, the Associated Labor Unions (ALU-TUCP) filed a motion for intervention (NCR
OD-M-91-01-002) and alleged that it has members in the proposed bargaining unit. Subsequently,
the National Federation of Labor Unions (NAFLU) filed a separate petition for certification election
(NCR-OD-M-91-10-058) and a motion to consolidate related cases to avoid confusion.

Dissatisfied with the Decision dated July 3, 1991 rendered by Med-Arbiter R. Parungo, petitioner
appealed to the DOLE Secretary, who, through Undersecretary Bienvenido E. Laguesma, affirmed
the Med-Arbiter in its Resolution dated July 22, 1992 calling for the conduct of the certification
election (Rollo, pp. 25-28). The Resolution, in pertinent part, reads as follows:

xxx xxx xxx

The defense of res judicata is not obtaining in the present petition for certification
election. It is settled that for res judicata to apply there must be a final judgment on
the merits on matters put in issue. In the instant case, it could not be said that there
is a final judgment on the merits of the petition simply because the composition of
the present proposed bargaining unit is different from that in the first petition.
Moreover, there are now other parties involved, and therefore, it would not be correct
to say that the parties in the said two cases are identical.

xxx xxx xxx

With regard however, to the question on propriety of consolidation, there is merit in

the argument of respondent-appellant on the need to consolidate the separate
petitions for certification election because they involve the same bargaining unit.
Case No. NCR-OD-M-91-10-058 should be consolidated with that of Case No. NCR-
OD-M-91-05-062, where the petition of NAFLU should be treated as an intervention
and resolved by the Med-Arbiter together with the intervention of ALU-TUCP.

PREMISES CONSIDERED, the Order of the Med-Arbiter calling for the conduct of
the certification election is hereby affirmed subject to the resolution of the Med-
Arbiter of the motions for intervention aforementioned (Rollo, pp. 27-28; emphasis
supplied).

On July 31, 1992, petitioner filed a Motion for Reconsideration, again stressing the principle of res
judicata. Petitioner further argued that the second petition for a certification election by respondent
CLOP, NAFLU and ALU-TUCP were barred at least for a period of one year from the time the first
petition of CLOP was dismissed pursuant to Section Rule V, Book V of the Omnibus Rules
Implementing the Labor Code as amended.

On August 25, 1991, Undersecretary Laguesma denied the motion for reconsideration (Rollo, pp. 32-
34).
On September 3, 1992, petitioner filed a Motion to Suspend Proceedings based on Prejudicial
Questions as an Addendum to the Motion for Reconsideration filed on July 31, 1992. Petitioner
argued that the present case must be indefinitely suspended until the following cases are resolved
by the NLRC and the Supreme Court: a) NLRC-NCR Case No. 00-08-04708-91 entitled
"R". Transport Corporation v. Jose S. Torregaza, et. al., wherein Labor Arbiter de Castro declared the
strike staged by respondent CLOP illegal and ordered the strikers to pay petitioner the amount of
P10,000.00 as exemplary damages; b) NLRC-NCR Case No. 06-03415092 filed by respondent
CLOP and its members for illegal dismissal; and NLRC-NCR Case No. 00-08-04389-92 filed by
respondent CLOP in behalf of its affected members for illegal dismissal (Rollo, pp. 139-145).

On September 29, 1992, Undersecretary Laguesma in a resolution denied the motion to suspend
the conduct of the certification election. The pertinent portion of said resolution reads as follows:

The pendency of NLRC-NCR Cases Nos. 00-08- 04708-91, 06-03415092 and 00-08-
04389-92 before the NLRC is not a valid ground for the suspension of the already
stalled petition for certification election which must be resolved with dispatch.

This must be so, because the employees subject of the pending cases before the
NLRC legally remain as employees of respondent until the motion to declare them as
having lost their employment status by reason of the illegal strike or their complaint
for illegal dismissal is finally resolved. (Rollo, pp. 181-182; emphasis supplied)

On October 14, 1992, petitioner filed a motion for reconsideration of the Resolution dated September
29, 1992 which was subsequently denied by Undersecretary Laguesma on October 29, 1992 (Rollo,
pp. 29-31).

Petitioner filed a Comment and Objection to the Order dated October 29, 1992 with Urgent Motion to
Dismiss the Petition for Certification Election. Without waiting for the resolution of the motion to
dismiss, petitioner resorted to this Court by way of the instant special civil action.

This petition is without merit.

Before the principle of res judicata can be operative, the following requisites must be present: a) the
former judgment or order must be final; b) it must be a judgment ororder on the merits; c) it must
have been rendered by a court having jurisdiction over the subject-matter and the parties; and d)
there must be, between the first and second actions, identity of parties (Nabus v. Court of Appeals,
193 SCRA 732 [1991]).

In the case at bench, it cannot be said that the parties in the first and second actions were identical.
The first action was dismissed by the Med-Arbiter because it excluded parties essential to the
bargaining unit such as inspectors, inspectresses, dispatchers and washer boys. The second
petition included all the employees who were excluded in the first petition. Therefore, the Med-Arbiter
was correct when he gave due course to the second petition for certification election after
respondent CLOP corrected its mistake.
Likewise untenable is petitioner's contention that the second petition for certification election should
have been filed after one year from the dismissal of the first petition certification election under
Section 3, Rule V, Book V of the Omnibus Rules Implementing the Labor Code as amended. Said
section provides as follows:

When to file In the absence of collective bargaining agreement duly registered in

accordance with Article 231 of the Code, a petition for certification election may be
filed any time. However, no certification election may be held within one year from
the date of the issuance of a final certification election result (Emphasis supplied).

Apparently, petitioner misread the above-mentioned provision of law. The phrase "final certification
election result" means that there was an actual conduct of election i.e. ballots were cast and there
was a counting of votes. In this case, there was no certification election conducted precisely
because the first petition was dismissed, on the ground of a defective petition which did not include
all the employees who should be properly included in the collective bargaining unit.

Devoid of merit is petitioner's contention that the employment status of the members of respondent
CLOP who joined the strike must first be resolved before a certification election can be conducted.

As held in the case of Philippine Fruits and Vegetables Industries, Inc. v. Torres, 211 SCRA 95
(1992):

At any rate, it is now well-settled that employees who have been improperly laid-off
but who have a present, unabandoned right to or expectation of re-employment, are
eligible to vote in certification elections (Rothenberg on Labor Relations, p. 548).
Thus, and to repeat, if the dismissal is under question, as in the case now at bar
whereby a case of illegal dismissal and/or unfair labor practices was filed, the
employees concerned could still qualify to vote in the elections.

Therefore, the employees of petitioner who participated in the strike, legally remain as such, until
either the motion to declare their employment status legally terminated or their complaint for illegal
dismissal is resolved by the NLRC.

It should be noted that it is the petitioner, the employer, which has offered the most tenacious
resistance to the holding of a certification election. This must not be so for the choice of a collective
bargaining agent is the sole concern of the employees. The employer has no right to interfere in the
election and is merely regarded as a bystander (Divine Word University of Tacloban v. Secretary of
Labor and Employment, 213 SCRA 759 [1992]).

Finally, petitioner's Comment and Objection to the Order dated October 29, 1992 with Urgent Motion
to Dismiss the Petition for Certification Election is still pending with the Undersecretary of Labor. The
resort to judicial action by petitioner is premature. Hence, it is also guilty of forum-shopping in
pursuing the same cause of action involving the same issue, parties and subject matter before two
different fora.

WHEREFORE, the Court Resolved to DISMISS the petition.

SO ORDERED.

G.R. No. 118915 February 4, 1997

CAPITOL MEDICAL CENTER OF CONCERNED EMPLOYEES-UNIFIED FILIPINO SERVICE

WORKERS, (CMC-ACE-UFSW), petitioners,
vs.
HON. BIENVENIDO E. LAGUESMA, Undersecretary of the Department of Labor and
Employment; CAPITOL MEDICAL CENTER EMPLOYEES ASSOCIATION-ALLIANCE OF
FILIPINO WORKERS AND CAPITOL MEDICAL CENTER INCORPORATED AND DRA. THELMA
CLEMENTE, President, respondents.

HERMOSISIMA, JR., J.:

This petition for certiorari and prohibition seeks to reserves and set aside the Order dated November
18, 1994 of public respondent Bienvenido E. Laguesma, Undersecretary of the Department of Labor
and Employment in Case No. OS.-A-136-94 1 which dismissed the petition for certification election filed
by petitioner for lack of merit and further directed private respondent hospital to negotiate a collective
bargaining agreement with respondent union, Capitol Medical Center Employees Association-Alliance of
Filipino Workers.

The antecedent facts are undisputed.

On February 17, 1992, Med-Arbiter Rasidali C. Abdullah issued an Order which granted respondent
union's petition for certification election among the rank-and-file employees of the Capitol Medical
Center. 2 Respondent CMC appealed the Order to the Office of the Secretary by questioning the legal
status of respondent union's affiliation with the Alliance of Filipino Workers (AFW). To correct any
supposed infirmity in its legal status, respondent union registered itself independently and withdrew the
petition which had earlier been granted. Thereafter, it filed another petition for certification election.

On May 29, 1992, Med-Arbiter Manases T. Cruz issued an order granting the petition for certification
election. 3Respondent CMC again appealed to the Office of the Secretary which affirmed 4 the Order of
the Med-Arbiter granting the certification election.

On December 9, 1992, elections were finally held with respondent union garnering 204 votes, 168 in
favor of no union and 8 spoiled ballots out of a total of 380 votes cast. Thereafter, on January 4,
1993, Med-Arbiter Cruz issued an Order certifying respondent union as the sole and exclusive
bargaining representative of the rank and file employees at CMC. 5

Unsatisfied with the outcome of the elections, respondent CMC again appealed to the Office of the
Secretary of Labor which appeal was denied on February 26, 1993. 6 A subsequent motion for
reconsideration filed by respondent CMC was likewise denied on March 23, 1993. 7

Respondent CMC's basic contention was the supposed pendency of its petition for cancellation of
respondent union's certificate of registration in Case No. NCR-OD-M-92211-028. In the said case,
Med-Arbiter Paterno Adap issued an Order dated February 4, 1993 which declared respondent
union's certificate of registration as null and void. 8 However, this order was reversed on appeal by the
Officer-in-Charge of the Bureau of Labor Relations in her Order issued on April 13, 1993. The said Order
dismissed the motion for cancellation of the certificate of registration of respondent union and declared
that it was not only a bona fide affiliate or local of a federation (AFW), but a duly registered union as well.
Subsequently, this case reached this Court in Capitol Medical Center, Inc. v. Hon. Perlita Velasco, G.R.
No. 110718, where we issued a Resolution dated December 13, 1993, dismissing the petition of CMC for
failure to sufficiently show that public respondent committed grave abuse of discretion. 9 The motion for
reconsideration filed by CMC was likewise denied in our Resolution dated February 2, 1994. 10 Thereafter,
on March 23, 1994, we issued an entry of judgment certifying that the Resolution dated December 13,
1993 has become final and executory. 11

Respondent union, after being declared as the certified bargaining agent of the rank-and-file
employees of respondent CMC by Med-Arbiter Cruz, presented economic proposals for the
negotiation of a collective bargaining agreement (CBA). However, respondent CMC contended that
CBA negotiations should be suspended in view of the Order issued on February 4, 1993 by Med-
Arbiter Adap declaring the registration of respondent union as null and void. In spite of the refusal of
respondent CMC, respondent union still persisted in its demand for CBA negotiations, claiming that it
has already been declared as the sole and exclusive bargaining agent of the rank-and-file
employees of the hospital.

Due to respondent CMC's refusal to bargain collectively, respondent union filed a notice of strike on
March 1, 1993. After complying with the other legal requirements, respondent union staged a strike
on April 15, 1993. On April 16, 1993, the Secretary of Labor assumed jurisdiction over the case and
issued an order certifying the same to the National Labor Relations Commission for compulsory
arbitration where the said case is still pending. 12

It is at this juncture that petitioner union, on March 24, 1994, filed a petition for certification election
among the regular rank-and-file employees of the Capitol Medical Center Inc. It alleged in its petition
that: 1) three hundred thirty one (331) out of the four hundred (400) total rank-and-file employees of
respondent CMC signed a petition to conduct a certification election; and 2) that the said employees
are withdrawing their authorization for the said union to represent them as they have joined and
formed the union Capitol Medical Center Alliance of Concerned Employees (CMC-ACE). They also
alleged that a certification election can now be conducted as more that 12 months have lapsed since
the last certification election was held. Moreover, no certification election was conducted during the
twelve (12) months prior to the petition, and no collective bargaining agreement has as yet been
concluded between respondent union and respondent CMC despite the lapse of twelve months from
the time the said union was voted as the collective bargaining representative.

On April 12, 1994, respondent union opposed the petition and moved for its dismissal. It contended
that it is the certified bargaining agent of the rank-and-file employees of the Hospital, which was
confirmed by the Secretary of Labor and Employment and by this Court. It also alleged that it was
not remiss in asserting its right as the certified bargaining agent for it continuously demanded the
negotiation of a CBA with the hospital despite the latter's avoidance to bargain collectively.
Respondent union was even constrained to strike on April 15, 1993, where the Secretary of Labor
intervened and certified the dispute for compulsory arbitration. Furthermore, it alleged that majority
of the signatories who supported the petition were managerial and confidential employees and not
members of the rank-and-file, and that there was no valid disaffiliation of its members, contrary to
petitioner's allegations.

Petitioner, in its rejoinder, claimed that there is no legal impediment to the conduct of a certification
election as more than twelve (12) months had lapsed since respondent union was certified as the
exclusive bargaining agent and no CBA was as yet concluded. It also claimed that the other issues
raised could only be resolved by conducting another certification election.

In its surrejoinder, respondent union alleged that the petition to conduct a certification election was
improper, immoral and in manifest disregard of the decisions rendered by the Secretary of Labor and
by this Court. It claimed that CMC employed "legal obstructionism's" in order to let twelve months
pass without a CBA having been concluded between them so as to pave the way for the entry of
petitioner union.

On May 12, 1994, Med-Arbiter Brigida Fadrigon, issued an Order granting the petition for
certification election among the rank and file
employees. 13 It ruled that the issue was the majority status of respondent union. Since no certification
election was held within one year from the date of issuance of a final certification election result and there
was no bargaining deadlock between respondent union and the employees that had been submitted to
conciliation or had become the subject of a valid notice of strike or lock out, there is no bar to the holding
of a certification election. 14

Respondent union appeared from the said Order, alleging that the Med-Arbiter erred in granting the
petition for certification election and in holding that this case falls under Section 3, Rule V Book V of
the Rules Implementing the Labor Code. 15 It also prayed that the said provision must not be applied
strictly in view of the facts in this case.

Petitioner union did not file any opposition to the appeal.

On November 18, 1994, public respondent rendered a Resolution granting the appeal. 16 He
ratiocinated that while the petition was indeed filed after the lapse of one year form the time of declaration
of a final certification result, and that no bargaining deadlock had been submitted for conciliation or
arbitration, respondent union was not remiss on its right to enter into a CBA for it was the CMC which
refused to bargain collectively. 17

CMC and petitioner union separately filed motions for reconsideration of the said Order.

CMC contended that in certification election proceedings, the employer cannot be ordered to bargain
collectively with a union since the only issue involved is the determination of the bargaining agent of
the employees.

Petitioner union claimed that to completely disregard the will of the 331 rank-and-file employees for a
certification election would result in the denial of their substantial rights and interests. Moreover,it
contended that public respondent's "indictment" that petitioner "capitalize (sic) on the ensuing delay
which was caused by the Hospital, . . ." was unsupported by the facts and the records.
On January 11, 1995, public respondent issued a Resolution which denied the two motions for
reconsideration hence this petition. 18

The pivotal issue in this case is whether or not public respondent committed grave abuse of
discretion in dismissing the petition for certification election, and in directing the hospital to negotiate
a collective bargaining agreement with the said respondent union.

Petitioner alleges that public respondent Undersecretary Laguesma denied it due process when it
ruled against the holding of a certification election. It further claims that the denial of due process
can be gleaned from the manner by which the assailed resolution was written, i.e., instead of the
correct name of the mother federation UNIFIED, it was referred to as UNITED; and that the
respondent union's name CMCEA-AFW was referred to as CMCEA-AFLO. Petitioner maintains that
such errors indicate that the assailed resolution was prepared with "indecent haste."

We do not subscribe to petitioner's contention.

The errors pointed to by petitioner can be classified as mere typographical errors which cannot
materially alter the substance and merit of the assailed resolution.

Petitioner cannot merely anchor its position on the aforementioned erroneous' names just to attain a
reversal of the questioned resolution. As correctly observed by the Solicitor General, petitioner is
merely "nit-picking vainly trying to make a monumental issue out of a negligible error of the public
respondent." 19

Petitioner also assails public respondents' findings that the former "capitalize (sic) on the ensuing
delay which was caused by the hospital and which resulted in the non-conclusion of a CBA within
the certification year.'' 20 It further argues that the denial of its motion fro a fair hearing was clear case of
denial of its right to due process.

Such contention of petitioner deserves scant consideration.

A perusal of the record shows that petitioner failed to file its opposition to oppose the grounds for
respondent union's appeal.

It was given an opportunity to be heard but lost it when it refused to file an appellee's memorandum.

Petitioner insists that the circumstances prescribed in Section 3, Rule V, Book V Of the Rules
Implementing the Labor Code where a certification election should be conducted, viz: (1) that one
year had lapsed since the issuance of a final certification result; and (2) that there is no bargaining
deadlock to which the incumbent or certified bargaining agent is a party has been submitted to
conciliation or arbitration, or had become the subject of a valid notice of strike or lockout, are present
in this case. It further claims that since there is no evidence on record that there exists a CBA
deadlock, the law allowing the conduct of a certification election after twelve months must be given
effect in the interest of the right of the workers to freely choose their sole and exclusive bargaining
agent.
While it is true that, in the case at bench, one year had lapsed since the time of declaration of a final
certification result, and that there is no collective bargaining deadlock, public respondent did not
commit grave abuse of discretion when it ruled in respondent union's favor since the delay in the
forging of the CBA could not be attributed to the fault of the latter.

A scrutiny of the records will further reveal that after respondent union was certified as the
bargaining agent of CMC, it invited the employer hospital to the bargaining table by submitting its
economic proposal for a CBA. However, CMC refused to negotiate with respondent union and
instead challenged the latter's legal personality through a petition for cancellation of the certificate of
registration which eventually reached this Court. The decision affirming the legal status of
respondent union should have left CMC with no other recourse but to bargain collectively; but still it
did not. Respondent union was left with no other recourse but to file a notice of strike against CMC
for unfair labor practice with the National Conciliation and Mediation Board. This eventually led to a
strike on April 15, 1993.

Petitioner union on the other hand, after this Court issued an entry of judgment on March 23, 1994,
filed the subject petition for certification election on March 24, 1994, claiming that twelve months had
lapsed since the last certification election.

Was there a bargaining deadlock between CMC and respondent union, before the filing of petitioner
of a petition for certification election, which had been submitted to conciliation or had become the
subject of a valid notice of strike or lockout?

In the case of Divine Word University of Tacloban v. Secretary of Labor and Employment, 21 we had
the occasion to define what a deadlock is, viz:\

A "deadlock" is . . . the counteraction of things producing entire stoppage; . . . . There

is a deadlock when there is a complete blocking or stoppage resulting from the action
of equal and opposed forces . . . . The word is synonymous with the word impasse,
which . . "presupposes reasonable effort at good faith bargaining which, despite
noble intentions, does not conclude in agreement between the parties."

Although there is no "deadlock" in its strict sense as there is no "counteraction" of forces present in
this case nor "reasonable effort at good faith bargaining," such can be attributed to CMC's fault as
the bargaining proposals of respondent union were never answered by CMC. In fact, what happened
in this case is worse than a bargaining deadlock for CMC employed all legal means to block the
certification of respondent union as the bargaining agent of the rank-and-file; and use it as its
leverage for its failure to bargain with respondent union. Thus, we can only conclude that CMC was
unwilling to negotiate and reach an agreement with respondent union. CMC has not at any instance
shown willingness to discuss the economic proposals given by respondent union. 22

As correctly ratiocinated by public respondent, to wit:

For herein petitioner to capitalize on the ensuing delay which was caused by the
hospital and which resulted in the non-conclusion of a CBA within the certification
year, would be to negate and render a mockery of the proceedings undertaken
 before this Department and to put an unjustified premium on the failure of the
respondent hospital to perform its duty to bargain collectively as mandated in Article
252 of the Labor Code, as amended, which states".

"Article 252. Meaning of duty to bargain collectively the duty to

bargain collectively means the performance of a mutual obligation to
meet and convene promptly and expeditiously in good faith for the
purpose of negotiating an agreement with respect to wages, hours of
work and all other terms and conditions of employment including
proposals for adjusting any grievance or questions arising under such
agreement and executing a contract incorporating such agreements if
requested by either party but such duty does not compel any party to
agree to a proposal or to make any concession."

The duly certified bargaining agent, CMCEA-AFW, should not be made to further
bear the brunt flowing from the respondent hospital's reluctance and thinly disguised
refusal to bargain. 23

If the law proscribes the conduct of a certification election when there is a bargaining deadlock
submitted to conciliation or arbitration, with more reason should it not be conducted if, despite
attempts to bring an employer to the negotiation table by the "no reasonable effort in good faith" on
the employer certified bargaining agent, there was to bargain collectively.

In the case of Kaisahan ng Manggagawang Pilipino vs. Trajano 201 SCRA 453 (1991), penned by
Chief Justice Andres R. Narvasa, the factual milieu of which is similar to this case, this Court allowed
the holding of a certification election and ruled that the one year period known as the "certification
year" has long since expired. We also ruled, that:

. . . prior to the filing of the petition for election in this case, there was no such
"bargaining deadlock . . (which) had been submitted to conciliation or arbitration or
had become the subject of a valid notice of strike or lockout." To be sure, there are in
the record assertions by NAFLU that its attempts to bring VIRON to the negotiation
table had been unsuccessful because of the latter's recalcitrance, and unfulfilled
promises to bargain collectively; but there is no proof that it had taken tiny action to
legally coerce VIRON to comply with its statutory duty to bargain collectively. It could
have charged VIRON with unfair labor practice; but it did not. It could have gone on a
legitimate strike in protest against VIRON's refusal to bargain collectively and compel
it to do so; but it did not. There are assertions by NAFLU, too, that its attempts to
bargain collectively had been delayed by continuing challenges to the resolution
pronouncing it the sole bargaining representative in VIRON; but there is no adequate
substantiation thereof, or of how it did in fact prevent initiation of the bargaining
process between it and VIRON. 24

Although the statements pertinent to this case are merely obiter, still the fact remains that in
the Kaisahan case, NAFLU was counselled by this Court on the steps that it should have undertaken
to protect its interest, but which it failed to do so.
This is what is strikingly different between the Kaisahan case and the case at bench for in the latter
case, there was proof that the certified bargaining agent, respondent union, had taken an action to
legally coerce the employer to comply with its statutory duty to bargain collectively, i.e., charging the
employer with unfair labor practice and conducting a strike in protest against the employer's refusal
to bargain. 25 It is only just and equitable that the circumstances in this case should be considered as
similar in nature to a "bargaining deadlock" when no certification election could be held. This is also to
make sure that no floodgates will be opened for the circumvention of the law by unscrupulous employers
to prevent any certified bargaining agent from negotiating a CBA. Thus, Section 3, Rule V, Book V of the
Implement Rules should be interpreted liberally so as to include a circumstance, e.g. where a CBA could
not be concluded due to the failure of one party to willingly perform its duty to bargain collectively.

The order for the hospital to bargain is based on its failure to bargain collectively with respondent
union.

WHEREFORE, the Resolution dated November 18, 1994 of public respondent Laguesma is
AFFIRMED and the instant petition is hereby DISMISSED.

SO ORDERED

G.R. No. 107792 March 2, 1998

SAMAHANG MANGGAGAWA SA PERMEX (SMP-PIILU-TUCP), petitioners,

vs.
THE SECRETARY OF LABOR, NATIONAL FEDERATION OF LABOR, PERMEX PRODUCER
AND EXPORTER CORPORATION, respondents.

MENDOZA, J.:

This is a petition for review on certiorari of the decision, dated October 8, 1992 and order dated
November 12, 1992, of Undersecretary of Labor and Employment Bienvenido Laguesma, ordering a
certification election to be conducted among the employees of respondent company.

The facts of the case are as follows. On January 15, 1991, a certification election was conducted
among employees of respondent Permex Producer and Exporter Corporation (hereafter referred to
as Permex Producer). The results of the elections were as follows:

National Federation of Labor 235

(NFL)

No Union 466
Spoiled Ballots 18

Marked Ballots 9

Challenged Ballots 7

However, some employees of Permex Producer formed a labor organization known as the
Samahang Manggagawa sa Permex (SMP) which they registered with the Department of Labor and
Employment on March 11, 1991. The union later affiliated with the Philippine Integrated Industries
Labor Union (PIILU).

On August 16, 1991, Samahang Manggagawa sa Permex-Philippine Integrated Industries Labor

Union (SMP-PIILU), wrote the respondent company requesting recognition as the sole and exclusive
bargaining representative of employees at the Permex Producer. On October 19, 1991 Permex
Producer recognized SMP-PIILU and, on December 1, entered into a collective bargaining
agreement with it. The CBA was ratified between December 9 and 10, 1991 by the majority of the
rank and file employees of Permex Producer. On December 13, 1991, it was certified by the DOLE.

On February 25, 1992, respondent NFL filed a petition for certification election, but it was dismissed
by Med-Arbiter Edgar B. Gongalos in an order dated August 20, 1992. Respondent NFL then
appealed the order to the Secretary of Labor and Employment. On October 8, 1992, the Secretary of
Labor, through Undersecretary Bienvenido Laguesma, set aside the order of the Med-Arbiter and
ordered a certification election to be conducted among the rank and file employees at the Permex
Producer, with the following choices:

1. National Federation of Labor

2. Samahang Manggagawa sa Permex

3. No union

Petitioner moved for a reconsideration but its motion was denied in an order dated November 12,
1992. Hence, this petition.

Two arguments are put forth in support of the petition. First, it is contended that petitioner has been
recognized by the majority of the employees at Permex Producer as their sole collective bargaining
agent. Petitioner argues that when a group of employees constituting themselves into an
organization and claiming to represent a majority of the work force requests the employer to bargain
collectively, the employer may do one of two things. First, if the employer is satisfied with the
employees' claim the employer may voluntarily recognize the union by merely bargaining collectively
with it. The formal written confirmation is ordinarily stated in the collective bargaining agreement.
Second, if on the other hand, the employer refuses to recognize the union voluntarily, it may petition
the Bureau of Labor Relations to conduct a certification election. If the employer does not submit a
petition for certification election, the union claiming to represent the employees may submit the
petition so that it may be directly certified as the employees' representative or a certification election
may be held.

The case of Ilaw at Buklod ng Manggagawa v. Ferrer-Calleja, 1 cited by the Solicitor General in his
comment filed in behalf of the NLRC, is particularly apropos. There, the union also requested
voluntary recognition by the company. Instead of granting the request, the company petitioned for a
certification election. The union moved to dismiss on the ground that it did not ask the company to
bargain collectively with it. As its motion was denied, the union brought the matter to this Court. In
sustaining the company's stand, this Court ruled:

. . . Ordinarily, in an unorganized establishment like the Calasiao Beer Region, it is

the union that files a petition for a certification election if there is no certified
bargaining agent for the workers in the establishment. If a union asks the employer to
voluntarily recognize it as the bargaining agent of the employees, as the petitioner
did, it in effect asks the employer to certify it as the bargaining representative of the
employees A CERTIFICATION WHICH THE EMPLOYER HAS NO AUTHORITY
TO GIVE, for it is the employees' prerogative (not the employer's) to determine
whether they want a union to represent them, and, if so, which one it should be.
(emphasis supplied)

In accordance with this ruling, Permex Producer should not have given its voluntary recognition to
SMP-PIILU-TUCP when the latter asked for recognition as exclusive collective bargaining agent of
the employees of the company. The company did not have the power to declare the union the
exclusive representative of the workers for the purpose of collective bargaining,

Indeed, petitioner's contention runs counter to the trend towards the holding of certification election.
By virtue of Executive Order No. 111, which became effective on March 4, 1987, the direct
certification previously allowed under the Labor Code had been discontinued as a method of
selecting the exclusive bargaining agents of the workers. 2 Certification election is the most effective
and the most democratic way of determining which labor organization can truly represent the
working force in the appropriate bargaining unit of a company. 3

Petitioner argues that of the 763 qualified employees of Permex Producer, 479 supported its
application for registration with the DOLE and that when petitioner signed the CBA with the company,
the CBA was ratified by 542 employees. Petitioner contends that such support by the majority of the
employees justifies its finding that the CBA made by it is valid and binding.

But it is not enough that a union has the support of the majority of the employees. It is equally
important that everyone in the bargaining unit be given the opportunity to express himself. 4

This is especially so because, in this case, the recognition given to the union came barely ten (10)
months after the employees had voted "no union" in the certification election conducted in the
company. As pointed out by respondent Secretary of Labor in his decision, there can be no
determination of a bargaining representative within a year of the proclamation of the results of the
certification election. 5 Here the results, which showed that 61% of the employees voted for "no
union," were certified only on February 25, 1991 but on December 1, 1991 Permex Producer already
recognized the union and entered into a CBA with it.

There is something dubious about the fact that just ten (10) months after the employees had voted
that they did not want any union to represent them, they would be expressing support for petitioner.
The doubt is compounded by the fact that in sworn affidavits some employees claimed that they had
either been coerced or misled into signing a document which turned out to be in support of petitioner
as its collective bargaining agent. Although there were retractions, we agree with the Solicitor
General that retractions of statements by employees adverse to a company (or its favored union) are
oftentimes tainted with coercion and intimidation. For how could one explain the seeming flip-
flopping of position taken by the employees? The figures claimed by petitioner to have been given to
it in support cannot readily be accepted as true.

Second. Petitioner invokes the contract-bar rule. They contend that under Arts. 253, 253-A and 256
of the Labor Code and Book V, Rule 5, 3 of its Implementing Rules and Regulations, a petition for
certification election or motion for intervention may be entertained only within 60 days prior to the
date of expiration of an existing collective bargaining agreement. The purpose of the rule is to
ensure stability in the relationships of the workers and the management by preventing frequent
modifications of any collective bargaining agreement earlier entered into by them in good faith and
for the stipulated original period. Excepted from the contract-bar rule are certain types of contracts
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 not establish the kind of industrial peace contemplated by the law. 6 Such
situation obtains in this case. The petitioner entered into a CBA with Permex Producer when its
status as exclusive bargaining agent of the employees had not been established yet.

WHEREFORE, the challenged decision and order of the respondent Secretary of Labor are
AFFIRMED.

SO ORDERED.

G.R. No. 75037 April 30, 1987

TANDUAY DISTILLERY LABOR UNION, petitioner,

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

No. 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 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 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;

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:

(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 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 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.

G.R. No. L-24711 April 30, 1968

BENGUET CONSOLIDATED, INC., plaintiff-appellant,

vs.
BCI EMPLOYEES and WORKERS UNION-PAFLU, PHILIPPINE ASSOCIATION OF FREE LABOR
UNIONS, CIPRIANO CID and JUANITO GARCIA, defendants-appellees.

Ross, Selph, Del Rosario, Bito and Misa for plaintiff-appellant.

Cipriano Cid and Associates for defendants-appellees.

BENGZON, J.P., J.:

The contending parties in this case Benguet Consolidated, Inc., ("BENGUET") on the one hand,
and on the other, BCI Employees & Workers Union ("UNION") and the Philippine Association of Free
Labor Unions ("PAFLU") do not dispute the following factual settings established by the lower
court.

On June 23, 1959, the Benguet-Balatoc Workers Union ("BBWU"), for and in behalf of all BENGUET
employees in its mines and milling establishment located at Balatoc, Antamok and Acupan,
Municipality of Itogon, Mt. Province, entered into a Collective Bargaining Contract, Exh. "Z"
("CONTRACT") with BENGUET. Pursuant to its very terms, said CONTRACT became effective for a
period of four and a half (4-) years, or from June 23, 1959 to December 23, 1963. It likewise
embodied a No-Strike, No-Lockout clause. 1

About three years later, or on April 6, 1962, a certification election was conducted by the Department
of Labor among all the rank and file employees of BENGUET in the same collective bargaining units.
UNION obtained more than 50% of the total number of votes, defeating BBWU, and accordingly, the
Court of Industrial Relations, on August 18, 1962, certified UNION as the sole and exclusive
collective bargaining agent of all BENGUET employees as regards rates of pay, wages, hours of
work and such other terms and conditions of employment allowed them by law or contract.

Subsequently, separate meetings were conducted on November 22, 23 and 24, 1962 at Antamok,
Balatoc and Acupan Mines respectively by UNION. The result thereof was the approval by UNION
members of a resolution 2directing its president to file a notice of strike against BENGUET for:

1. [Refusal] to grant any amount as monthly living allowance for the workers;
 2. Violation of Agreements reached in conciliation meetings among which is the taking down
of investigation [sic] and statements of employees without the presence of union
representative;

3. Refusal to dismiss erring executive after affidavits had been presented, thereby company
showing [sic] bias and partiality to company personnel;

4. Discrimination against union members in the enforcement of disciplinary actions.

The Notice of Strike 3 was filed on December 28, 1962. Three months later, in the evening of March
2, 1963, UNION members who were BENGUET employees in the mining camps at Acupan,
Antamok and Balatoc, went on strike. Regarding the conduct of the strike, the trial court reports: 4

... Picket lines were formed at strategic points within the premises of the plaintiff. The
picketers, by means of threats and intimidation, and in some instances by the use of force
and violence, prevented passage thru the picket lines by personnel of the plaintiff who were
reporting for work. Human blocks were formed on points of entrance to working areas so that
even vehicles could not pass thru, while the officers of the plaintiff were not allowed for
sometime to leave the "staff" area.

The strikers forming picket lines bore placards with the letters BBWU-PAFLU written thereon.
As a general rule, the picketers were unruly, aggressive and uttered threatening remarks to
staff members and non-strikers who desire to pass thru the picket lines. On some occasions,
the picketers resorted to violence by pushing back the car wherein staff officers were riding
who would like to enter the mine working area. The picketers lifted one side of the vehicle
and were in the act of overturning it when they were prevented from doing so by the timely
intervention of PC soldiers, who threw tear gas bombs to make the crowd disperse. Many of
the picketers were apprehended by the PC soldiers and criminal charges for grave coercion
were filed against them before the Court of First Instance of Baguio. Two of the strike leaders
and twenty-two picketers, however, were found guilty of light coercion while nineteen other
accused were acquitted.

There was a complete stoppage of work during the strike in all the mines. After two weeks
elapsed, repair and maintenance of the water pump was allowed by the strikers and some of
the staff members were permitted to enter the mines, who inspected the premises in the
company of PC soldiers to ascertain the extent of the damage to the equipment and losses
of company property.

xxx xxx xxx

On May 2, 1963, the parties agreed to end the raging dispute. Accordingly, BENGUET and UNION
executed the AGREEMENT, Exh. 1. PAFLU placed its conformity thereto and said agreement was
attested to by the Director of the Bureau of Labor Relations. About a year later or on January 29,
1964, a collective bargaining contract was finally executed between UNION-PAFLU and BENGUET. 5
Meanwhile, as a result, allegedly, of the strike staged by UNION and its members, BENGUET had to
incur expenses for the rehabilitation of mine openings, repair of mechanical equipment, cost of
pumping water out of the mines, value of explosives, tools and supplies lost and/or destroyed, and
other miscellaneous expenses, all amounting to P1,911,363.83. So, BENGUET sued UNION,
PAFLU and their respective Presidents to recover said amount in the Court of First Instance of
Manila, on the sole premise that said defendants breached their undertaking in the existing
CONTRACT not to strike during the effectivity thereof .

In answer to BENGUET's complaint, defendants unions and their respective presidents put up the
following defenses: (1) they were not bound by the CONTRACT which BBWU, the defeated union,
had executed with BENGUET; (2) the strike was due, inter alia, to unfair labor practices of
BENGUET; and (3) the strike was lawful and in the exercise of the legitimate rights of UNION-PAFLU
under Republic Act 875.

Issues having been joined, trial commenced. On February 23, 1965, the trial court rendered
judgment dismissing the complaint on the ground that the CONTRACT, particularly the No-Strike
clause, did not bind defendants. The latters' counterclaim was likewise denied. Failing to get a
reconsideration of said decision, BENGUET interposed the present appeal.

The several errors assigned by BENGUET basically ask three questions:

(1) Did the Collective Bargaining Contract executed between BENGUET and BBWU on June
23, 1959 and effective until December 23, 1963 automatically bind UNION-PAFLU upon its
certification, on August 18, 1962, as sole bargaining representative of all BENGUET
employees?

(2) Are defendants labor unions and their respective presidents liable for the illegal acts
committed during the course of the strike and picketing by some union members?

(3) Are defendants liable to pay the damages claimed by BENGUET?

In support of an affirmative answer to the first question, BENGUET first invokes the so-called
"Doctrine of Substitution" referred to in General Maritime Stevedores' Union v. South Sea Shipping
Lines, L-14689, July 26, 1960. There it was remarked:

xxx xxx xxx

We also hold that where the bargaining contract is to run for more than two years, the
principle of substitution may well be adopted and enforced by the CIR to the effect that after
two years of the life of a bargaining agreement, a certification election may be allowed by the
CIR; that if a bargaining agent other than the union or organization that executed the
contract, is elected, said new agent would have to respect said contract, but that it may
bargain with the management for the shortening of the life of the contract if it considers it too
long, or refuse to renew the contract pursuant to an automatic renewal clause. (Emphasis
supplied)
 xxx xxx xxx

The submission utterly fails to persuade Us. The above-quoted pronouncement was obiter dictum.
The only issue in the General Maritime Stevedores' Union case was whether a collective bargaining
agreement which had practically run for 5 years constituted a bar to certification proceedings. We
held it did not and accordingly directed the court a quo to order certification elections. With that,
nothing more was necessary for the disposition of the case. Moreover, the pronouncement adverted
to was rather premature. The possible certification of a union different from that which signed the
bargaining contract was a mere contingency then since the elections were still to be held. Clearly,
the Court was not called upon to rule on possible effects of such proceedings on the bargaining
agreement. 6

But worse, BENGUET's reliance upon the Principle of Substitution is totally misplaced. This
principle, formulated by the NLRB 7 as its initial compromise solution to the problem facing it when
there occurs a shift in employees' union allegiance after the execution of a bargaining contract with
their employer, merely states that even during the effectivity of a collective bargaining agreement
executed between employer and employees thru their agent, the employees can change said
agent but the contract continues to bind them up to its expiration date. They may bargain however
for the shortening of said expiration date. 8

In formulating the "substitutionary" doctrine, the only consideration involved was the employees'
interest in the existing bargaining agreement. The agent's interest never entered the picture. In fact,
the justification 9 for said doctrine was:

... that the majority of the employees, as an entity under the statute, is the true party in
interest to the contract, holding rights through the agency of the union representative. Thus,
any exclusive interest claimed by the agent is defeasible at the will of the principal....
(Emphasis supplied)

Stated otherwise, the "substitutionary" doctrine only provides that the employees cannot revoke the
validly executed collective bargaining contract with their employer by the simple expedient of
changing their bargaining agent. And it is in the light of this that the phrase "said new agent would
have to respect said contract" must be understood. It only means that the employees, thru their new
bargaining agent, cannot renege on their collective bargaining contract, except of course to
negotiate with management for the shortening thereof.

The "substitutionary" doctrine, therefore, cannot be invoked to support the contention that a newly
certified collective bargaining agent automatically assumes all the personal undertakings like the
no-strike stipulation here in the collective bargaining agreement made by the deposed union.
When BBWU bound itself and its officers not to strike, it could not have validly bound also all the
other rival unions existing in the bargaining units in question. BBWU was the agent of the
employees, not of the other unions which possess distinct personalities. To consider UNION
contractually bound to the no-strike stipulation would therefore violate the legal maxim that res inter
alios nec prodest nec nocet. 10
Of course, UNION, as the newly certified bargaining agent, could always voluntarily assume all the
personal undertakings made by the displaced agent. But as the lower court found, there was no
showing at all that, prior to the strike, 11 UNION formally adopted the existing CONTRACT as its own
and assumed all the liability ties imposed by the same upon BBWU.

BENGUET also alleges that UNION is now in estoppel to claim that it is not contractually bound by
the CONTRACT for having filed on September 28, 1962, in Civil Case No. 1150 of the Court of First
Instance of Baguio, entitled "Bobok Lumber Jack Ass'n. vs. Benguet Consolidated, Inc. and BCI
Employees Workers Union-PAFLU" 12 a motion praying for the dissolution of the ex parte writ of
preliminary injunction issued therein, wherein the following appears:

In that case, the CIR transfered the contactual rights of the BBWU to the defendant union.
One of such rights transferred was the right to the modified union-shop checked off union
dues arrangement now under injunction.

The collective bargaining contract mentioned in the plaintiff's complaint did not expire by the
mere fact that the defendant union was certified as bargaining agent in place of the BBWU.
The Court of Industrial Relations in the case above mentioned made it clear that the
collective bargaining contract would be respected unless and until the parties act
otherwise. In effect, the defendant union by act of subrogation took the place of the BBWU
as the UNION referred to in the contract. (Emphasis supplied)

There is no estoppel. UNION did not assert the above statement against BENGUET to force it to rely
upon the same to effect the union check-off in its favor. UNION and BENGUET were together as co-
defendants in said Civil Case No. 1150. Rather, the statement was directed against Bobok Lumber
Jack Ass'n., plaintiff therein, to weaken its cause of action. Moreover, BENGUET did not rely upon
said statement. What prompted Bobok Lumber Jack Ass'n. to file the complaint for declaratory relief
was the fact that "... the defendants [UNION and BENGUET] are planning to agree to the
continuation of a modified union shop in the three camps mentioned above without giving the
employees concerned the opportunity to express their wishes on the matter ..." BENGUET even
went further in its answer filed on October 18, 1962, by asserting that "... defendants have already
agreed to the continuation of the modified union shop provision in the collective bargaining
agreement...." 13

Neither can we accept BENGUET's contention that the inclusion of said aforequoted motion in the
record on appeal filed in said Civil Case No. 1150, now on appeal before Us docketed as case No.
L-24729, refutes UNION's allegation that it has subsequently abandoned its stand against Bobok
Lumber Jack Ass'n., in said case. The mere appearance of such motion in the record on appeal is
but a compliance with the procedural requirement of Rule 41, Sec. 6, of the Rules of Court, that all
matters necessary for a proper understanding of the issues involved be included in the record on
appeal. This therefore cannot be taken as a rebuttal of the UNION's explanation.

There is nothing then, in law as well as in fact, to support plaintiff BENGUET's contention that
defendants are contractually bound by the CONTRACT. And the stand taken by the trial court all the
more becomes unassailable in the light of Art. 1704 of the Civil Code providing that:
 In the collective bargaining, the labor union or members of the board or committee signing
the contract shall be liable for non-fulfillment thereof. (Emphasis supplied)

There is no question, defendants were not signatories nor participants in the CONTRACT.

Lastly, BENGUET contends, citing Clause II in connection with Clause XVIII of the CONTRACT, that
since all the employees, as principals, continue being bound by the no-strike stipulation until the
CONTRACT's expiration, UNION, as their agent, must necessarily be bound also pursuant to the
Law on Agency. This is untenable. The way We understand it, everything binding on a duly
authorized agent, acting as such, is binding on the principal; not vice-versa, unless there is a mutual
agency, or unless the agent expressly binds himself to the party with whom he contracts. As the Civil
Code decrees it: 14

The agent who acts as such is not personally liable to the party with whom he contracts,
unless he expressly binds himself or exceeds the limits of his authority without giving such
party sufficient notice of his powers. (Emphasis supplied) 1wph1.t

Here, it was the previous agent who expressly bound itself to the other party, BENGUET. UNION, the
new agent, did not assume this undertaking of BBWU.

In view of all the foregoing, We see no further necessity of delving further into the other less
important points raised by BENGUET in connection with the first question.

On the second question, it suffices to consider, in answer thereto, that the rule of vicarious liability
has, since the passage of Republic Act 875, been expressly legislated out. 15 The standing rule now
is that for a labor union and/or its officials and members to be liable, there must be clear proof of
actual participation in, or authorization or ratification of the illegal acts. 16 While the lower court found
that some strikers and picketers resorted to intimidation and actual violence, it also found that
defendants presented uncontradicted evidence that before and during the strike, the strike leaders
had time and again warned the strikers not to resort to violence but to conduct peaceful picketing
only. 17 Assuming that the strikers did not heed these admonitions coming from their leaders, the
failure of the union officials to go against the erring union members pursuant to the UNION and
PAFLU constitutions and by-laws exposes, at the most, only a flaw or weakness in the defense
which, however, cannot be the basis for plaintiff BENGUET to recover.

Lastly, paragraph VI of the Answer 18 sufficiently traverses the material allegations in paragraph VI of
the Complaint, 19 thus precluding a fatal admission on defendants' part. The purpose behind the rule
requiring specific denial is obtained: defendants have set forth the matters relied upon in support of
their denial. Paragraph VI of the Answer may not be a model pleading, but it suffices for purposes of
the rule. Pleadings should, after all, be liberally construed. 20

Since defendants were not contractually bound by the no-strike clause in the CONTRACT, for the
simple reason that they were not parties thereto, they could not be liable for breach of contract to
plaintiff. The lower court therefore correctly absolved them from liability.
WHEREFORE, the judgment of the lower court appealed from is hereby affirmed. No costs. So
ordered. 1wph1.t

G.R. No. 85333 February 26, 1990

CARMELITO L. PALACOL, ET AL., petitioners,

vs.
PURA FERRER-CALLEJA, Director of the Bureau of Labor Relations, MANILA CCBPI SALES
FORCE UNION, and COCA-COLA BOTTLERS (PHILIPPINES), INC., respondents.

Wellington B. Lachica for petitioners.

Adolpho M. Guerzon for respondent Union.

GANCAYCO, J.:

Can a special assessment be validly deducted by a labor union from the lump-sum pay of its
members, granted under a collective bargaining agreement (CBA), notwithstanding a subsequent
disauthorization of the same by a majority of the union members? This is the main issue for
resolution in the instant petition for certiorari.

As gleaned from the records of the case, the pertinent facts are as follows:

On October 12, 1987, the respondent Manila CCBPI Sales Force Union (hereinafter referred to as
the Union), as the collective bargaining agent of all regular salesmen, regular helpers, and relief
helpers of the Manila Plant and Metro Manila Sales Office of the respondent Coca-Cola Bottlers
(Philippines), Inc. (hereinafter referred to as the Company) concluded a new collective bargaining
agreement with the latter. 1 Among the compensation benefits granted to the employees was a general
salary increase to be given in lump sum including recomputation of actual commissions earned based on
the new rates of increase.

On the same day, the president of the Union submitted to the Company the ratification by the union
members of the new CBA and authorization for the Company to deduct union dues equivalent to
P10.00 every payday or P20.00 every month and, in addition, 10% by way of special assessment,
from the CBA lump-sum pay granted to the union members. The last one among the aforementioned
is the subject of the instant petition.

As embodied in the Board Resolution of the Union dated September 29, 1987, the purpose of the
special assessment sought to be levied is "to put up a cooperative and credit union; purchase
vehicles and other items needed for the benefit of the officers and the general membership; and for
the payment for services rendered by union officers, consultants and others." 2 There was also an
additional proviso stating that the "matter of allocation ... shall be at the discretion of our incumbent Union
President."
This "Authorization and CBA Ratification" was obtained by the Union through a secret referendum
held in separate local membership meetings on various dates. 3 The total membership of the Union
was about 800. Of this number, 672 members originally authorized the 10% special assessment, while
173 opposed the same. 4

Subsequently however, one hundred seventy (170) members of the Union submitted documents to
the Company stating that although they have ratified the new CBA, they are withdrawing or
disauthorizing the deduction of any amount from their CBA lump sum. Later, 185 other union
members submitted similar documents expressing the same intent. These members, numbering 355
in all (170 + 185), added to the original oppositors of 173, turned the tide in favor of disauthorization
for the special assessment, with a total of 528 objectors and a remainder of 272 supporters. 5

On account of the above-mentioned disauthorization, the Company, being in a quandary as to whom

to remit the payment of the questioned amount, filed an action for interpleader with the Bureau of
Labor Relations in order to resolve the conflicting claims of the parties concerned. Petitioners, who
are regular rank-and-file employees of the Company and bona fide members of the Union, filed a
motion/complaint for intervention therein in two groups of 161 and 94, respectively. They claimed to
be among those union members who either did not sign any individual written authorization, or
having signed one, subsequently withdrew or retracted their signatures therefrom.

Petitioners assailed the 10% special assessment as a violation of Article 241(o) in relation to Article
222(b) of the Labor Code. Article 222(b) provides as follows:

ART. 222. Appearances and Fees.

xxx xxx xxx

(b) No attorney's fees, negotiation fees or similar charges of any kind

arising from any collective bargaining negotiations or conclusion of
the collective agreement shall be imposed on any individual member
of the contracting union; Provided, however, that attorney's fees may
be charged against union funds in an amount to be agreed upon by
the parties. Any contract, agreement or arrangement of any sort to
the contrary shall be null and void.

On the other hand, Article 241(o) mandates that:

ART. 241. Rights and conditions of membership in a labor organization.

xxx xxx xxx

(o) Other than for mandatory activities under the Code, no special
assessments, attorney's fees, negotiation fees or any other
extraordinary fees may be checked off from any amount due to an
employee without an individual written authorization duly signed by
 the employee. The authorization should specifically state the amount,
purpose and beneficiary of the deduction;

As authority for their contention, petitioners cited Galvadores v. Trajano, 6 wherein it was ruled that no
check-offs from any amount due employees may be effected without individual written authorizations duly
signed by the employees specifically stating the amount, purpose, and beneficiary of the deduction.

In its answer, the Union countered that the deductions not only have the popular indorsement and
approval of the general membership, but likewise complied with the legal requirements of Article 241
(n) and (o) of the Labor Code in that the board resolution of the Union imposing the questioned
special assessment had been duly approved in a general membership meeting and that the
collection of a special fund for labor education and research is mandated.

Article 241(n) of the Labor Code states that

ART. 241. Rights and conditions of membership in a labor organization.

xxx xxx xxx

(n) No special assessment or other extraordinary fees may be levied upon the
members of a labor organization unless authorized by a written resolution of a
majority of all the members at a general membership meeting duly called for the
purpose. The secretary of the organization shall record the minutes of the meeting
including the list of all members present, the votes cast, the purpose of the special
assessment or fees and the recipient of such assessments or fees. The record shall
be attested to by the president;

Med-Arbiter Manases T. Cruz ruled in favor of petitioners in an order dated February 15, 1988
whereby he directed the Company to remit the amount it had kept in trust directly to the rank-and-file
personnel without delay.

On appeal to the Bureau of Labor Relations, however, the order of the Med-Arbiter was reversed
and set aside by the respondent-Director in a resolution dated August 19, 1988 upholding the claim
of the Union that the special assessment is authorized under Article 241 (n) of the Labor Code, and
that the Union has complied with the requirements therein.

Hence, the instant petition.

Petitioners allege that the respondent-Director committed a grave abuse of discretion amounting to
lack or excess of jurisdiction when she held Article 241 (n) of the Labor Code to be the applicable
provision instead of Article 222(b) in relation to Article 241(o) of the same law.

According to petitioners, a cursory examination and comparison of the two provisions of Article 241
reveals that paragraph (n) cannot prevail over paragraph (o). The reason advanced is that a special
assessment is not a matter of major policy affecting the entire union membership but is one which
concerns the individual rights of union members.
Petitioners further assert that assuming arguendo that Article 241(n) should prevail over paragraph
(o), the Union has nevertheless failed to comply with the procedure to legitimize the questioned
special assessment by: (1) presenting mere minutes of local membership meetings instead of a
written resolution; (2) failing to call a general membership meeting; (3) having the minutes of three
(3) local membership meetings recorded by a union director, and not by the union secretary as
required; (4) failing to have the list of members present included in the minutes of the meetings; and
(5) failing to present a record of the votes cast. 7 Petitioners concluded their argument by
citing Galvadores.

After a careful review of the records of this case, We are convinced that the deduction of the 10%
special assessment by the Union was not made in accordance with the requirements provided by
law.

Petitioners are correct in citing the ruling of this Court in Galvadores which is applicable to the
instant case. The principle "that employees are protected by law from unwarranted practices that
diminish their compensation without their known edge and consent" 8 is in accord with the
constitutional principle of the State affording full protection to labor. 9

The respondent-Union brushed aside the defects pointed out by petitioners in the manner of
compliance with the legal requirements as "insignificant technicalities." On the contrary, the failure of
the Union to comply strictly with the requirements set out by the law invalidates the questioned
special assessment. Substantial compliance is not enough in view of the fact that the special
assessment will diminish the compensation of the union members. Their express consent is
required, and this consent must be obtained in accordance with the steps outlined by law, which
must be followed to the letter. No shortcuts are allowed.

The applicable provisions are clear. The Union itself admits that both paragraphs (n) and (o) of
Article 241 apply. Paragraph (n) refers to "levy" while paragraph (o) refers to "check-off" of a special
assessment. Both provisions must be complied with. Under paragraph (n), the Union must submit to
the Company a written resolution of a majority of all the members at a general membership meeting
duly called for the purpose. In addition, the secretary of the organization must record the minutes of
the meeting which, in turn, must include, among others, the list of all the members present as well as
the votes cast.

As earlier outlined by petitioners, the Union obviously failed to comply with the requirements of
paragraph (n). It held local membership meetings on separate occasions, on different dates and at
various venues, contrary to the express requirement that there must be a general membership
meeting. The contention of the Union that "the local membership meetings are precisely the very
general meetings required by law" 10 is untenable because the law would not have specified a general
membership meeting had the legislative intent been to allow local meetings in lieu of the latter.

It submitted only minutes of the local membership meetings when what is required is a written
resolution adopted at the general meeting. Worse still, the minutes of three of those local meetings
held were recorded by a union director and not by the union secretary. The minutes submitted to the
Company contained no list of the members present and no record of the votes cast. Since it is quite
evident that the Union did not comply with the law at every turn, the only conclusion that may be
made therefrom is that there was no valid levy of the special assessment pursuant to paragraph (n)
of Article 241 of the Labor Code.

Paragraph (o) on the other hand requires an individual written authorization duly signed by every
employee in order that a special assessment may be validly checked-off. Even assuming that the
special assessment was validly levied pursuant to paragraph (n), and granting that individual written
authorizations were obtained by the Union, nevertheless there can be no valid check-off considering
that the majority of the union members had already withdrawn their individual authorizations. A
withdrawal of individual authorizations is equivalent to no authorization at all. Hence, the ruling
in Galvadores that "no check-offs from any amounts due employees may be effected without an
individual written authorization signed by the employees ... " is applicable.

The Union points out, however, that said disauthorizations are not valid for being collective in form,
as they are "mere bunches of randomly procured signatures, under loose sheets of paper." 11 The
contention deserves no merit for the simple reason that the documents containing the disauthorizations
have the signatures of the union members. The Court finds these retractions to be valid. There is nothing
in the law which requires that the disauthorization must be in individual form.

Moreover, it is well-settled that "all doubts in the implementation and interpretation of the provisions
of the Labor Code ... shall be resolved in favor of labor." 12 And as previously stated, labor in this case
refers to the union members, as employees of the Company. Their mere desire to establish a separate
bargaining unit, albeit unproven, cannot be construed against them in relation to the legality of the
questioned special assessment. On the contrary, the same may even be taken to reflect their
dissatisfaction with their bargaining representative, the respondent-Union, as shown by the circumstances
of the instant petition, and with good reason.

The Med-Arbiter correctly ruled in his Order that:

The mandate of the majority rank and file have (sic) to be respected considering they
are the ones directly affected and the realities of the high standards of survival
nowadays. To ignore the mandate of the rank and file would enure to destabilizing
industrial peace and harmony within the rank and file and the employer's fold, which
we cannot countenance.

Moreover, it will be recalled that precisely union dues are collected from the union
members to be spent for the purposes alluded to by respondent. There is no reason
shown that the regular union dues being now implemented is not sufficient for the
alleged expenses. Furthermore, the rank and file have spoken in withdrawing their
consent to the special assessment, believing that their regular union dues are
adequate for the purposes stated by the respondent. Thus, the rank and file having
spoken and, as we have earlier mentioned, their sentiments should be respected.

Of the stated purposes of the special assessment, as embodied in the board resolution of the Union,
only the collection of a special fund for labor and education research is mandated, as correctly
pointed out by the Union. The two other purposes, namely, the purchase of vehicles and other items
for the benefit of the union officers and the general membership, and the payment of services
rendered by union officers, consultants and others, should be supported by the regular union dues,
there being no showing that the latter are not sufficient to cover the same.

The last stated purpose is contended by petitioners to fall under the coverage of Article 222 (b) of the
Labor Code. The contention is impressed with merit. Article 222 (b) prohibits attorney's fees,
negotiations fees and similar charges arising out of the conclusion of a collective bargaining
agreement from being imposed on any individual union member. The collection of the special
assessment partly for the payment for services rendered by union officers, consultants and others
may not be in the category of "attorney's fees or negotiations fees." But there is no question that it is
an exaction which falls within the category of a "similar charge," and, therefore, within the coverage
of the prohibition in the aforementioned article. There is an additional proviso giving the Union
President unlimited discretion to allocate the proceeds of the special assessment. Such a proviso
may open the door to abuse by the officers of the Union considering that the total amount of the
special assessment is quite considerable P1,027,694.33 collected from those union members
who originally authorized the deduction, and P1,267,863.39 from those who did not authorize the
same, or subsequently retracted their authorizations. 13 The former amount had already been remitted
to the Union, while the latter is being held in trust by the Company.

The Court, therefore, stakes down the questioned special assessment for being a violation of Article
241, paragraphs (n) and (o), and Article 222 (b) of the Labor Code.

WHEREFORE, the instant petition is hereby GRANTED. The Order of the Director of the Bureau of
Labor Relations dated August 19, 1988 is hereby REVERSED and SET ASIDE, while the order of
the Med-Arbiter dated February 17, 1988 is reinstated, and the respondent Coca-Cola Bottlers
(Philippines), Inc. is hereby ordered to immediately remit the amount of P1,267,863.39 to the
respective union members from whom the said amount was withheld. No pronouncement as to
costs. This decision is immediately executory.

SO ORDERED.

G.R. No. 167217 February 4, 2008

P.I. MANUFACTURING, INCORPORATED, petitioner,

vs.
P.I. MANUFACTURING SUPERVISORS AND FOREMAN ASSOCIATION and the NATIONAL
LABOR UNION, respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

The Court has always promoted the policy of encouraging employers to grant wage and allowance
increases to their employees higher than the minimum rates of increases prescribed by statute or
administrative regulation. Consistent with this, the Court also adopts the policy that
requires recognition and validation of wage increases given by employers either unilaterally or as
a result of collective bargaining negotiations in an effort to correct wage distortions.1
Before us is a motion for reconsideration of our Resolution dated April 18, 2005 denying the present
petition for review on certiorari for failure of the petitioner to show that a reversible error has been
committed by the Court of Appeals in its (a) Decision dated July 21, 2004 and (b) Resolution dated
February 18, 2005.

The facts are:

Petitioner P.I. Manufacturing, Incorporated is a domestic corporation engaged in the manufacture

and sale of household appliances. On the other hand, respondent P.I. Manufacturing Supervisors
and Foremen Association (PIMASUFA) is an organization of petitioners supervisors and foremen,
joined in this case by its federation, the National Labor Union (NLU).

On December 10, 1987, the President signed into law Republic Act (R.A.) No. 66402 providing,
among others, an increase in the statutory minimum wage and salary rates of employees and
workers in the private sector. Section 2 provides:

SEC. 2. The statutory minimum wage rates of workers and employees in the private sector,
whether agricultural or non-agricultural, shall be increased by ten pesos (P10.00) per day,
except non-agricultural workers and employees outside Metro Manila who shall receive an
increase of eleven pesos (P11.00) per day: Provided, That those already receiving above
the minimum wage up to one hundred pesos (P100.00) shall receive an increase of ten
pesos (P10.00) per day. Excepted from the provisions of this Act are domestic helpers and
persons employed in the personal service of another.

Thereafter, on December 18, 1987, petitioner and respondent PIMASUFA entered into a new
Collective Bargaining Agreement (1987 CBA) whereby the supervisors were granted an increase
of P625.00 per month and the foremen, P475.00 per month. The increases were made retroactive
to May 12, 1987, or prior to the passage of R.A. No. 6640, and every year thereafter until July 26,
1989. The pertinent portions of the 1987 CBA read:

ARTICLE IV

SALARIES AND OVERTIME

Section 1. The COMPANY shall grant to all regular supervisors and foremen within the
coverage of the unit represented by the ASSOCIATION, wage or salary increases in the
amount set forth as follows:

A. For FOREMEN

Effective May 12, 1987, an increase of P475,00 per month to all qualified regular foremen
who are in the service of the COMPANY as of said date and who are still in its employ on the
signing of this Agreement, subject to the conditions set forth in sub-paragraph (d) hereunder;

a) Effective July 26, 1988, an increase of P475.00 per month/employee to all covered
foremen;

b) Effective July 26, 1989, an increase of P475.00 per month/per employee to all covered
foremen;
 c) The salary increases from May 12, 1987 to November 30, 1987 shall be excluding and
without increment on fringe benefits and/or premium and shall solely be on basic salary.

B. For SUPERVISORS

a) Effective May 12, 1987, an increase of P625.00 per month/employee to all qualified
regular supervisors who are in the service of the COMPANY as of said date and who are still
in its employ on the signing of the Agreement, subject to the conditions set forth in
subparagraph (d) hereunder;

b) Effective July 26, 1988, an increase of P625.00 per month/employee to all covered
supervisors;

c) Effective July 26, 1989, an increase of P625.00 per month/employee to all covered
supervisors;

d) The salary increase from May 12, 1987 to November 30, 1987 shall be excluding and
without increment on fringe benefits and/or premiums and shall solely be on basic salary.

On January 26, 1989, respondents PIMASUFA and NLU filed a complaint with the Arbitration Branch
of the National Labor Relations Commission (NLRC), docketed as NLRC-NCR Case No. 00-01-
00584, charging petitioner with violation of R.A. No. 6640.3 Respondents attached to their complaint
a numerical illustration of wage distortion resulting from the implementation of R.A. No. 6640.

On March 19, 1990, the Labor Arbiter rendered his Decision in favor of respondents. Petitioner was
ordered to give the members of respondent PIMASUFA wage increases equivalent to 13.5% of their
basic pay they were receiving prior to December 14, 1987. The Labor Arbiter held:

As regards the issue of wage distortion brought about by the implementation of R.A. 6640
It is correctly pointed out by the union that employees cannot waive future benefits, much
less those mandated by law. That is against public policy as it would render meaningless the
law. Thus, the waiver in the CBA does not bar the union from claiming adjustments in pay as
a result of distortion of wages brought about by the implementation of R.A. 6640.

Just how much are the supervisors and foremen entitled to correct such distortion is now the
question. Pursuant to the said law, those who on December 14, 1987 were receiving less
than P100.00 are all entitled to an automatic across- the-board increase of P10.00 a
day. The percentage in increase given those who received benefits under R.A. 6640
should be the same percentage given to the supervisors and foremen.

The statutory minimum pay then was P54.00 a day. With the addition of P10.00 a day, the
said minimum pay raised to P64.00 a day. The increase of P10.00 a day is P13.5% of the
minimum wage prior to December 14, 1987. The same percentage of the pay of members of
petitioner prior to December 14, 1987 should be given them.

Finally, the claim of respondent that the filing of the present case, insofar as the provision of
R.A. 6640 is concerned, is premature does not deserve much consideration considering that
as of December 1988, complainant submitted in grievance the aforementioned issue but the
same was not settled.4
On appeal by petitioner, the NLRC, in its Resolution dated January 8, 1991, affirmed the Labor
Arbiters judgment.

Undaunted, petitioner filed a petition for certiorari with this Court. However, we referred the petition
to the Court of Appeals pursuant to our ruling in St. Martin Funeral Homes v. NLRC.5 It was docketed
therein as CA-G.R. SP No. 54379.

On July 21, 2004, the appellate court rendered its Decision affirming the Decision of the NLRC with
modification by raising the 13.5% wage increase to 18.5%. We quote the pertinent portions of the
Court of Appeals Decision, thus:

Anent the fourth issue, petitioner asseverates that the wage distortion issue is already barred
by Sec. 2 Article IV of the Contract denominated as "The Company and Supervisors and
Foremen Contract" dated December 18, 1987 declaring that it "absolves, quit claims and
releases the COMPANY for any monetary claim they have, if any there might be or
there might have been previous to the signing of this agreement." Petitioner interprets
this as absolving it from any wage distortion brought about by the implementation of the new
minimum wage law. Since the contract was signed on December 17, 1987, or after the
effectivity of Republic Act No. 6640, petitioner claims that private respondent is deemed to
have waived any benefit it may have under the new law.

We are not persuaded.

Contrary to petitioners stance, the increase resulting from any wage distortion caused by the
implementation of Republic Act 6640 is not waivable. As held in the case of Pure Foods
Corporation vs. National Labor Relations Commission, et al.:

"Generally, quitclaims by laborers are frowned upon as contrary to public policy and
are held to be ineffective to bar recovery for the full measure of the workers rights.
The reason for the rule is that the employer and the employee do not stand on the
same footing."

Moreover, Section 8 of the Rules Implementing RA 6640 states:

No wage increase shall be credited as compliance with the increase prescribed

herein unless expressly provided under valid individual written/collective agreements;
and provided further that such wage increase was granted in anticipation of the
legislated wage increase under the act. But such increases shall not include
anniversary wage increases provided in collective bargaining agreements.

Likewise, Article 1419 of the Civil Code mandates that:

When the law sets, or authorizes the setting of a minimum wage for laborers, and a
contract is agreed upon by which a laborer accepts a lower wage, he shall be entitled
to recover the deficiency.

Thus, notwithstanding the stipulation provided under Section 2 of the Company and
Supervisors and Foremen Contract, we find the members of private respondent union
entitled to the increase of their basic pay due to wage distortion by reason of the
implementation of RA 6640.
 On the last issue, the increase of 13.5% in the supervisors and foremens basic salary must
further be increased to 18.5% in order to correct the wage distortion brought about by the
implementation of RA 6640. It must be recalled that the statutory minimum pay before RA
6640 was P54.00 a day. The increase of P10.00 a day under RA 6640 on the prior minimum
pay of P54.00 is 18.5% and not 13.5%. Thus, petitioner should be made to pay the amount
equivalent to 18.5% of the basic pay of the members or private respondent union in
compliance with the provisions of Section 3 of RA 6640."

Petitioner filed a motion for reconsideration but it was denied by the appellate court in its Resolution
dated February 18, 2005.

Hence, the present recourse, petitioner alleging that the Court of Appeals erred:

1) In awarding wage increase to respondent supervisors and foremen to cure an alleged

wage distortion that resulted from the implementation of R.A. No. 6640.

2) In disregarding the wage increases granted under the 1987 CBA correcting whatever
wage distortion that may have been created by R.A. No. 6640.

3) In awarding wage increase equivalent to 18.5% of the basic pay of the members of
respondent PIMASUFA in violation of the clear provision of R.A. No. 6640 excluding from its
coverage employees receiving wages higher than P100.00.

4) In increasing the NLRCs award of wage increase from 13.5% to 18.5%, which increase is
very much higher than the P10.00 daily increase mandated by R.A. No. 6640.

Petitioner contends that the findings of the NLRC and the Court of Appeals as to the existence of a
wage distortion are not supported by evidence; that Section 2 of R.A. No. 6640 does not provide for
an increase in the wages of employees receiving more than P100.00; and that the 1987 CBA has
obliterated any possible wage distortion because the increase granted to the members of
respondent PIMASUFA in the amount of P625.00 and P475.00 per month substantially widened the
gap between the foremen and supervisors and as against the rank and file employees.

Respondents PIMASUFA and NLU, despite notice, failed to file their respective comments.

In a Minute Resolution dated April 18, 2005, we denied the petition for petitioners failure to show
that the Court of Appeals committed a reversible error.

Hence, this motion for reconsideration.

We grant the motion.

In the ultimate, the issue here is whether the implementation of R.A. No. 6640 resulted in a wage
distortion and whether such distortion was cured or remedied by the 1987 CBA.

R.A. No. 6727, otherwise known as the Wage Rationalization Act, explicitly defines "wage
distortion" as:

x x x a situation where an increase in prescribed wage rates results in the elimination or

severe contraction of intentional quantitative differences in wage or salary rates between and
among employee groups in an establishment as to effectively obliterate the distinctions
 embodied in such wage structure based on skills, length of service, or other logical bases of
differentiation.

Otherwise stated, wage distortion means the disappearance or virtual disappearance of pay
differentials between lower and higher positions in an enterprise because of compliance with a wage
order.6

In this case, the Court of Appeals correctly ruled that a wage distortion occurred due to the
implementation of R.A. No. 6640. The numerical illustration submitted by respondents 7 shows such
distortion, thus:

II WAGE DISTORTION REGARDING RA-6640 (P10.00 per day increase effective

December 31, 1987)

Illustration of Wage Distortion and corresponding wage adjustments as provided in RA-6640

NAME OF SUPERVISOR RATE RATE P109.01 P118.80 P128.08

(S) BEFORE AFTER OVER- OVER- OVER-
AND INCREASE INCREASE PASSED PASSED PASSED
FOREMAN (F) OF OF P108.80 P118.08 P123.76
RA-6640 RA-6640 RATE AFTER RATE AFTER RATE AFTER
P10.00 P10.00 ADJUSTMENT ADJUSTMENT ADJUSTMENT
P10.00 P10.00 P10.00

1. ALCANTARA, V (S) P 99.01 P 109.01

2. MORALES, A (F) 94.93 104.93

3. SALVO, R (F) 96.45 106.45

Note: No. 1 to 3 with increase of RA-6640

4.BUENCUCHILLO, C 102.38 102.38 P 112.38

(S)

5. MENDOZA, D (F) 107.14 107.14 117.14

6. DEL PRADO, M (S) 108.80 108.80 118.80

7. PALENSO, A (F) 109.71 109.71 P 119.71

8. OJERIO, E (S) 111.71 111.71 121.71

9. REYES, J (S) 114.98 114.98 124.98

10. PALOMIQUE, S (F) 116.79 116.79 126.79

11. PAGLINAWAN, A (S) 116.98 116.98 126.98

12. CAMITO, M (S) 117.04 117.04 127.04

13. TUMBOCON, P (S) 117.44 117.44 127.44

14. SISON JR., B (S) 118.08 118.08 128.08

15. BORJA, R (S) 119.80 119.80 P 129.80

16. GINON, D (S) 123.76 123.76 133.76

17. GINON, T (S) 151. 49 151.49

18. ANDRES, M (S) 255.72 255.72

Note: No. 4 to 18 no increase in R.A. No. 6640

Notably, the implementation of R.A. No. 6640 resulted in the increase of P10.00 in the wage rates
of Alcantara, supervisor, and Morales and Salvo, both foremen. They are petitioners lowest
paid supervisor and foremen. As a consequence, the increased wage rates of foremen
Morales and Salvo exceeded that of supervisor Buencuchillo. Also, the increased wage rate
of supervisor Alcantara exceeded those of supervisors Buencuchillo and Del Prado.
Consequently, the P9.79 gap or difference between the wage rate of supervisor Del Prado and that
of supervisor Alcantara was eliminated. Instead, the latter gained a P.21 lead over Del Prado. Like a
domino effect, these gaps or differences between and among the wage rates of all the above
employees have been substantially altered and reduced. It is therefore undeniable that the
increase in the wage rates by virtue of R.A. No. 6640 resulted in wage distortion or the elimination
of the intentional quantitative differences in the wage rates of the above employees.

However, while we find the presence of wage distortions, we are convinced that the same
were cured or remedied when respondent PIMASUFA entered into the 1987 CBA with petitioner
after the effectivity of R.A. No. 6640. The 1987 CBA increased the monthly salaries of the
supervisors by P625.00 and the foremen, by P475.00, effective May 12, 1987. These increases re-
established and broadened the gap, not only between the supervisors and the foremen, but also
between them and the rank-and-file employees. Significantly, the 1987 CBA wage increases
almost doubled that of the P10.00 increase under R.A. No. 6640.
The P625.00/month means P24.03 increase per day for the supervisors, while
the P475.00/month means P18.26 increase per day for the foremen. These increases were to be
observed every year, starting May 12, 1987 until July 26, 1989. Clearly, the gap between the wage
rates of the supervisors and those of the foremen was inevitably re-established. It continued to
broaden through the years.

Interestingly, such gap as re-established by virtue of the CBA is more than a substantial compliance
with R.A. No. 6640. We hold that the Court of Appeals erred in not taking into account the provisions
of the CBA viz-a-viz the wage increase under the said law. In National Federation of Labor v.
NLRC,8 we held:

We believe and so hold that the re-establishment of a significant gap or differential between
regular employees and casual employees by operation of the CBA was more than
substantial compliance with the requirements of the several Wage Orders (and of Article 124
of the Labor Code). That this re-establishment of a significant differential was the result
of collective bargaining negotiations, rather than of a special grievance procedure, is
not a legal basis for ignoring it. The NLRC En Banc was in serious error when it
disregarded the differential of P3.60 which had been restored by 1 July 1985 upon the
ground that such differential "represent[ed] negotiated wage increase[s] which should not be
considered covered and in compliance with the Wage Orders. x x x"

In Capitol Wireless, Inc. v. Bate,9 we also held:

x x x The wage orders did not grant across-the-board increases to all employees in the
National Capital Region but limited such increases only to those already receiving wage
rates not more than P125.00 per day under Wage Order Nos. NCR-01 and NCR-01-A and
P142.00 per day under Wage Order No. NCR-02. Since the wage orders specified who
among the employees are entitled to the statutory wage increases, then the increases
applied only to those mentioned therein. The provisions of the CBA should be read in
harmony with the wage orders, whose benefits should be given only to those
employees covered thereby.

It has not escaped our attention that requiring petitioner to pay all the members of respondent
PIMASUFA a wage increase of 18.5%, over and above the negotiated wage increases provided
under the 1987 CBA, is highly unfair and oppressive to the former. Obviously, it was not the
intention of R.A. No. 6640 to grant an across-the-board increase in pay to all the employees of
petitioner. Section 2 of R.A. No. 6640 mandates only the following increases in the private sector:
(1) P10.00 per day for the employees in the private sector, whether agricultural or non-agricultural,
who are receiving the statutory minimum wage rates; (2) P11.00 per day for non-agricultural workers
and employees outside Metro Manila; and (3) P10.00 per day for those already receiving the
minimum wage up to P100.00. To be sure, only those receiving wages P100.00 and below are
entitled to the P10.00 wage increase. The apparent intention of the law is only to upgrade the
salaries or wages of the employees specified therein.10 As the numerical illustration shows,
almost all of the members of respondent PIMASUFA have been receiving wage rates above P100.00
and, therefore, not entitled to the P10.00 increase. Only three (3) of them are receiving wage
rates below P100.00, thus, entitled to such increase. Now, to direct petitioner to grant an across-the-
board increase to all of them, regardless of the amount of wages they are already receiving, would
be harsh and unfair to the former. As we ruled in Metropolitan Bank and Trust Company Employees
Union ALU-TUCP v. NLRC:11

x x x To compel employers simply to add on legislative increases in salaries or

allowances without regard to what is already being paid, would be to penalize
employers who grant their workers more than the statutory prescribed minimum rates
of increases. Clearly, this would be counter-productive so far as securing the interests
of labor is concerned.

Corollarily, the Court of Appeals erred in citing Pure Foods Corporation v. National Labor Relations
Commission12as basis in disregarding the provisions of the 1987 CBA. The case involves, not wage
distortion, but illegal dismissal of employees from the service. The Release and Quitclaim executed
therein by the Pure Foods employees were intended to preclude them from questioning the
termination of their services, not their entitlement to wage increase on account of a wage distortion.

At this juncture, it must be stressed that a CBA constitutes the law between the
parties when freely and voluntarily entered into.13 Here, it has not been shown that respondent
PIMASUFA was coerced or forced by petitioner to sign the 1987 CBA. All of its thirteen (13) officers
signed the CBA with the assistance of respondent NLU. They signed it fully aware of the passage of
R.A. No. 6640. The duty to bargain requires that the parties deal with each other with open and fair
minds. A sincere endeavor to overcome obstacles and difficulties that may arise, so that employer-
employee relations may be stabilized and industrial strife eliminated, must be
apparent.14Respondents cannot invoke the beneficial provisions of the 1987 CBA but disregard the
concessions it voluntary extended to petitioner. The goal of collective bargaining is the making of
agreements that will stabilize business conditions and fix fair standards of working
conditions.15 Definitely, respondents posture contravenes this goal.

In fine, it must be emphasized that in the resolution of labor cases, this Court has always been
guided by the State policy enshrined in the Constitution that the rights of workers and the promotion
of their welfare shall be protected. However, consistent with such policy, the Court cannot favor one
party, be it labor or management, in arriving at a just solution to a controversy if the party concerned
has no valid support to its claim, like respondents here.

WHEREFORE, we GRANT petitioners motion for reconsideration and REINSTATE the petition we
likewise GRANT. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 54379
is REVERSED.

SO ORDERED.

G.R. No. L-54334 January 22, 1986

KIOK LOY, doing business under the name and style SWEDEN ICE CREAM PLANT, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and PAMBANSANG KILUSAN NG
PAGGAWA (KILUSAN), respondents.

Ablan and Associates for petitioner.

Abdulcadir T. Ibrahim for private respondent.

CUEVAS, J.:

Petition for certiorari to annul the decision 1 of the National Labor Relations Commission (NLRC) dated
July 20, 1979 which found petitioner Sweden Ice Cream guilty of unfair labor practice for unjustified
refusal to bargain, in violation of par. (g) of Article 249 2 of the New Labor Code, 3 and declared the draft
proposal of the Union for a collective bargaining agreement as the governing collective bargaining
agreement between the employees and the management.

The pertinent background facts are as follows:

In a certification election held on October 3, 1978, the Pambansang Kilusang Paggawa (Union for
short), a legitimate late labor federation, won and was subsequently certified in a resolution dated
November 29, 1978 by the Bureau of Labor Relations as the sole and exclusive bargaining agent of
the rank-and-file employees of Sweden Ice Cream Plant (Company for short). The Company's
motion for reconsideration of the said resolution was denied on January 25, 1978.

Thereafter, and more specifically on December 7, 1978, the Union furnished 4 the Company with two
copies of its proposed collective bargaining agreement. At the same time, it requested the Company for
its counter proposals. Eliciting no response to the aforesaid request, the Union again wrote the Company
reiterating its request for collective bargaining negotiations and for the Company to furnish them with its
counter proposals. Both requests were ignored and remained unacted upon by the Company.

Left with no other alternative in its attempt to bring the Company to the bargaining table, the Union,
on February 14, 1979, filed a "Notice of Strike", with the Bureau of Labor Relations (BLR) on ground
of unresolved economic issues in collective bargaining. 5

Conciliation proceedings then followed during the thirty-day statutory cooling-off period. But all
attempts towards an amicable settlement failed, prompting the Bureau of Labor Relations to certify
the case to the National Labor Relations Commission (NLRC) for compulsory arbitration pursuant to
Presidential Decree No. 823, as amended. The labor arbiter, Andres Fidelino, to whom the case was
assigned, set the initial hearing for April 29, 1979. For failure however, of the parties to submit their
respective position papers as required, the said hearing was cancelled and reset to another date.
Meanwhile, the Union submitted its position paper. The Company did not, and instead requested for
a resetting which was granted. The Company was directed anew to submit its financial statements
for the years 1976, 1977, and 1978.
The case was further reset to May 11, 1979 due to the withdrawal of the Company's counsel of
record, Atty. Rodolfo dela Cruz. On May 24, 1978, Atty. Fortunato Panganiban formally entered his
appearance as counsel for the Company only to request for another postponement allegedly for the
purpose of acquainting himself with the case. Meanwhile, the Company submitted its position paper
on May 28, 1979.

When the case was called for hearing on June 4, 1979 as scheduled, the Company's representative,
Mr. Ching, who was supposed to be examined, failed to appear. Atty. Panganiban then requested for
another postponement which the labor arbiter denied. He also ruled that the Company has waived
its right to present further evidence and, therefore, considered the case submitted for resolution.

On July 18, 1979, labor arbiter Andres Fidelino submitted its report to the National Labor Relations
Commission. On July 20, 1979, the National Labor Relations Commission rendered its decision, the
dispositive portion of which reads as follows:

WHEREFORE, the respondent Sweden Ice Cream is hereby declared guilty of

unjustified refusal to bargain, in violation of Section (g) Article 248 (now Article 249),
of P.D. 442, as amended. Further, the draft proposal for a collective bargaining
agreement (Exh. "E ") hereto attached and made an integral part of this decision,
sent by the Union (Private respondent) to the respondent (petitioner herein) and
which is hereby found to be reasonable under the premises, is hereby declared to be
the collective agreement which should govern the relationship between the parties
herein.

SO ORDERED. (Emphasis supplied)

Petitioner now comes before Us assailing the aforesaid decision contending that the National Labor
Relations Commission acted without or in excess of its jurisdiction or with grave abuse of discretion
amounting to lack of jurisdiction in rendering the challenged decision. On August 4, 1980, this Court
dismissed the petition for lack of merit. Upon motion of the petitioner, however, the Resolution of
dismissal was reconsidered and the petition was given due course in a Resolution dated April 1,
1981.

Petitioner Company now maintains that its right to procedural due process has been violated when it
was precluded from presenting further evidence in support of its stand and when its request for
further postponement was denied. Petitioner further contends that the National Labor Relations
Commission's finding of unfair labor practice for refusal to bargain is not supported by law and the
evidence considering that it was only on May 24, 1979 when the Union furnished them with a copy of
the proposed Collective Bargaining Agreement and it was only then that they came to know of the
Union's demands; and finally, that the Collective Bargaining Agreement approved and adopted by
the National Labor Relations Commission is unreasonable and lacks legal basis.

The petition lacks merit. Consequently, its dismissal is in order.

Collective bargaining which is defined as negotiations towards a collective agreement, 6 is one of the
democratic frameworks under the New Labor Code, designed to stabilize the relation between labor and
management and to create a climate of sound and stable industrial peace. It is a mutual responsibility of
the employer and the Union and is characterized as a legal obligation. So much so that Article 249, par.
(g) of the Labor Code makes it an unfair labor practice for an employer to refuse "to meet and convene
promptly and expeditiously in good faith for the purpose of negotiating an agreement with respect to
wages, hours of work, and all other terms and conditions of employment including proposals for adjusting
any grievance or question arising under such an agreement and executing a contract incorporating such
agreement, if requested by either party.

While it is a mutual obligation of the parties to bargain, the employer, however, is not under any legal
duty to initiate contract negotiation. 7 The mechanics of collective bargaining is set in motion only when
the following jurisdictional preconditions are present, namely, (1) possession of the status of majority
representation of the employees' representative in accordance with any of the means of selection or
designation provided for by the Labor Code; (2) proof of majority representation; and (3) a demand to
bargain under Article 251, par. (a) of the New Labor Code . ... all of which preconditions are undisputedly
present in the instant case.

From the over-all conduct of petitioner company in relation to the task of negotiation, there can be no
doubt that the Union has a valid cause to complain against its (Company's) attitude, the totality of
which is indicative of the latter's disregard of, and failure to live up to, what is enjoined by the Labor
Code to bargain in good faith.

We are in total conformity with respondent NLRC's pronouncement that petitioner Company is
GUILTY of unfair labor practice. It has been indubitably established that (1) respondent Union was a
duly certified bargaining agent; (2) it made a definite request to bargain, accompanied with a copy of
the proposed Collective Bargaining Agreement, to the Company not only once but twice which were
left unanswered and unacted upon; and (3) the Company made no counter proposal whatsoever all
of which conclusively indicate lack of a sincere desire to negotiate. 8 A Company's refusal to make
counter proposal if considered in relation to the entire bargaining process, may indicate bad faith and this
is specially true where the Union's request for a counter proposal is left unanswered. 9 Even during the
period of compulsory arbitration before the NLRC, petitioner Company's approach and attitude-stalling the
negotiation by a series of postponements, non-appearance at the hearing conducted, and undue delay in
submitting its financial statements, lead to no other conclusion except that it is unwilling to negotiate and
reach an agreement with the Union. Petitioner has not at any instance, evinced good faith or willingness
to discuss freely and fully the claims and demands set forth by the Union much less justify its opposition
thereto. 10

The case at bar is not a case of first impression, for in the Herald Delivery Carriers Union (PAFLU) vs.
Herald Publications 11 the rule had been laid down that "unfair labor practice is committed when it is
shown that the respondent employer, after having been served with a written bargaining proposal by the
petitioning Union, did not even bother to submit an answer or reply to the said proposal This doctrine was
reiterated anew in Bradman vs. Court of Industrial Relations 12 wherein it was further ruled that "while the
law does not compel the parties to reach an agreement, it does contemplate that both parties will
approach the negotiation with an open mind and make a reasonable effort to reach a common ground of
agreement

As a last-ditch attempt to effect a reversal of the decision sought to be reviewed, petitioner

capitalizes on the issue of due process claiming, that it was denied the right to be heard and present
its side when the Labor Arbiter denied the Company's motion for further postponement.
Petitioner's aforesaid submittal failed to impress Us. Considering the various postponements granted
in its behalf, the claimed denial of due process appeared totally bereft of any legal and factual
support. As herein earlier stated, petitioner had not even honored respondent Union with any reply to
the latter's successive letters, all geared towards bringing the Company to the bargaining table. It did
not even bother to furnish or serve the Union with its counter proposal despite persistent requests
made therefor. Certainly, the moves and overall behavior of petitioner-company were in total
derogation of the policy enshrined in the New Labor Code which is aimed towards expediting
settlement of economic disputes. Hence, this Court is not prepared to affix its imprimatur to such an
illegal scheme and dubious maneuvers.

Neither are WE persuaded by petitioner-company's stand that the Collective Bargaining Agreement
which was approved and adopted by the NLRC is a total nullity for it lacks the company's consent,
much less its argument that once the Collective Bargaining Agreement is implemented, the
Company will face the prospect of closing down because it has to pay a staggering amount of
economic benefits to the Union that will equal if not exceed its capital. Such a stand and the
evidence in support thereof should have been presented before the Labor Arbiter which is the proper
forum for the purpose.

We agree with the pronouncement that it is not obligatory upon either side of a labor controversy to
precipitately accept or agree to the proposals of the other. But an erring party should not be tolerated
and allowed with impunity to resort to schemes feigning negotiations by going through empty
gestures. 13 More so, as in the instant case, where the intervention of the National Labor Relations
Commission was properly sought for after conciliation efforts undertaken by the BLR failed. The instant
case being a certified one, it must be resolved by the NLRC pursuant to the mandate of P.D. 873, as
amended, which authorizes the said body to determine the reasonableness of the terms and conditions of
employment embodied in any Collective Bargaining Agreement. To that extent, utmost deference to its
findings of reasonableness of any Collective Bargaining Agreement as the governing agreement by the
employees and management must be accorded due respect by this Court.

WHEREFORE, the instant petition is DISMISSED. The temporary restraining order issued on August
27, 1980, is LIFTED and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.

G.R. No. 141471 September 18, 2000

COLEGIO DE SAN JUAN DE LETRAN, petitioner,

vs.
ASSOCIATION OF EMPLOYEES AND FACULTY OF LETRAN and ELEONOR
AMBAS, respondents.

DECISION

KAPUNAN, J.:
This is a petition for review on certiorari seeking the reversal of the Decision of the Court of Appeals,
promulgated on 9 August 1999, dismissing the petition filed by Colegio de San Juan de Letran
(hereinafter, "petitioner") and affirming the Order of the Secretary of Labor, dated December 2, 1996,
finding the petitioner guilty of unfair labor practice on two (2) counts.

The facts, as found by the Secretary of Labor and affirmed by the Court of Appeals, are as follows:

"On December 1992, Salvador Abtria, then President of respondent union, Association of Employees
and Faculty of Letran, initiated the renegotiation of its Collective Bargaining Agreement with
petitioner Colegio de San Juan de Letran for the last two (2) years of the CBA's five (5) year lifetime
from 1989-1994. On the same year, the union elected a new set of officers wherein private
respondent Eleanor Ambas emerged as the newly elected President (Secretary of Labor and
Employment's Order dated December 2, 1996, p. 12).

Ambas wanted to continue the renegotiation of the CBA but petitioner, through Fr. Edwin Lao,
claimed that the CBA was already prepared for signing by the parties. The parties submitted the
disputed CBA to a referendum by the union members, who eventually rejected the said CBA (Ibid, p.
2).

Petitioner accused the union officers of bargaining in bad faith before the National Labor Relations
Commission (NLRC). Labor Arbiter Edgardo M. Madriaga decided in favor of petitioner. However, the
Labor Arbiter's decision was reversed on appeal before the NLRC (Ibid, p. 2).

On January 1996, the union notified the National Conciliation and Mediation Board (NCMB) of its
intention to strike on the grounds (sic) of petitioner's: non-compliance with the NLRC (1) order to
delete the name of Atty. Federico Leynes as the union's legal counsel; and (2) refusal to bargain
(Ibid, p. 1).

On January 18, 1996, the parties agreed to disregard the unsigned CBA and to start negotiation on a
new five-year CBA starting 1994-1999. On February 7, 1996, the union submitted its proposals to
petitioner, which notified the union six days later or on February 13, 1996 that the same had been
submitted to its Board of Trustees. In the meantime, Ambas was informed through a letter dated
February 15, 1996 from her superior that her work schedule was being changed from Monday to
Friday to Tuesday to Saturday. Ambas protested and requested management to submit the issue to
a grievance machinery under the old CBA (Ibid, p. 2-3).

Due to petitioner's inaction, the union filed a notice of strike on March 13, 1996. The parties met on
March 27, 1996 before the NCMB to discuss the ground rules for the negotiation. On March 29,
1996, the union received petitioner's letter dismissing Ambas for alleged insubordination. Hence, the
union amended its notice of strike to include Ambas' dismissal. (Ibid, p. 2-3).

On April 20, 1996, both parties again discussed the ground rules for the CBA renegotiation.
However, petitioner stopped the negotiations after it purportedly received information that a new
group of employees had filed a petition for certification election (Ibid, p. 3).
On June 18, 1996, the union finally struck. On July 2, 1996, public respondent the Secretary of
Labor and Employment assumed jurisdiction and ordered all striking employees including the union
president to return to work and for petitioner to accept them back under the same terms and
conditions before the actual strike. Petitioner readmitted the striking members except Ambas. The
parties then submitted their pleadings including their position papers which were filed on July 17,
1996 ( Ibid, pp. 2-3).

On December 2, 1996, public respondent issued an order declaring petitioner guilty of unfair labor
practice on two counts and directing the reinstatement of private respondent Ambas with
backwages. Petitioner filed a motion for reconsideration which was denied in an Order dated May
29, 1997 (Petition, pp. 8-9)."1

Having been denied its motion for reconsideration, petitioner sought a review of the order of the
Secretary of Labor and Employment before the Court of Appeals. The appellate court dismissed the
petition and affirmed the findings of the Secretary of Labor and Employment. The dispositive portion
of the decision of the Court of Appeals sets forth:

WHEREFORE, foregoing premises considered, this Petition is DISMISSED, for being without merit
in fact and in law.

With cost to petitioner.

SO ORDERED.2

Hence, petitioner comes to this Court for redress.

Petitioner ascribes the following errors to the Court of Appeals:

THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF
DISCRETION IN AFFIRMING THE RULING OF THE SECRETARY OF LABOR AND
EMPLOYMENT WHICH DECLARES PETITIONER LETRAN GUILTY OF REFUSAL TO
BARGAIN (UNFAIR LABOR PRACTICE) FOR SUSPENDING THE COLLECTIVE
BARGAINING NEGOTIATIONS WITH RESPONDENT AEFL, DESPITE THE FACT THAT
THE SUSPENSION OF THE NEGOTIATIONS WAS BROUGHT ABOUT BY THE FILING OF
A PETITION FOR CERTIFICATION ELECTION BY A RIVAL UNION WHO CLAIMED TO
COMMAND THE MAJORITY OF THE EMPLOYEES WITHIN THE BARGAINING UNIT.

II

THE HONORABLE COURT OF APPEALS ERRED AND ACTED WITH GRAVE ABUSE OF
DISCRETION IN AFFIRMING THE RULING OF THE SECRETARY OF LABOR AND
EMPLOYMENT WHICH DECLARES PETITIONER LETRAN GUILTY OF UNFAIR LABOR
PRACTICE FOR DISMISSING RESPONDENT AMBAS, DESPITE THE FACT THAT HER
 DISMISSAL WAS CAUSED BY HER INSUBORDINATE ATTITUDE, SPECIFICALLY, HER
REFUSAL TO FOLLOW THE PRESCRIBED WORK SCHEDULE. 3

The twin questions of law before this Court are the following: (1) whether petitioner is guilty of unfair
labor practice by refusing to bargain with the union when it unilaterally suspended the ongoing
negotiations for a new Collective Bargaining Agreement (CBA) upon mere information that a petition
for certification has been filed by another legitimate labor organization? (2) whether the termination
of the union president amounts to an interference of the employees' right to self-organization?

The petition is without merit.

After a thorough review of the records of the case, this Court finds that petitioner has not shown any
compelling reason sufficient to overturn the ruling of the Court of Appeals affirming the findings of the
Secretary of Labor and Employment. It is axiomatic that the findings of fact of the Court of Appeals
are conclusive and binding on the Supreme Court and will not be reviewed or disturbed on appeal. In
this case, the petitioner failed to show any extraordinary circumstance justifying a departure from this
established doctrine.

As regards the first issue, Article 252 of the Labor Code defines the meaning of the phrase "duty to
bargain collectively," as follows:

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

Noteworthy in the above definition is the requirement on both parties of the performance of the
mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of
negotiating an agreement. Undoubtedly, respondent Association of Employees and Faculty of Letran
(AEFL) (hereinafter, "union") lived up to this requisite when it presented its proposals for the CBA to
petitioner on February 7, 1996. On the other hand, petitioner devised ways and means in order to
prevent the negotiation.

Petitioner's utter lack of interest in bargaining with the union is obvious in its failure to make a timely
reply to the proposals presented by the latter. More than a month after the proposals were submitted
by the union, petitioner still had not made any counter-proposals. This inaction on the part of
petitioner prompted the union to file its second notice of strike on March 13, 1996. Petitioner could
only offer a feeble explanation that the Board of Trustees had not yet convened to discuss the matter
as its excuse for failing to file its reply. This is a clear violation of Article 250 of the Labor Code
governing the procedure in collective bargaining, to wit:

Art. 250. Procedure in collective bargaining. - The following procedures shall be observed in
collective bargaining:
(a) When a party desires to negotiate an agreement, it shall serve a written notice upon the other
party with a statement of its proposals. The other party shall make a reply thereto not later than ten
(10) calendar days from receipt of such notice.4

xxx

As we have held in the case of Kiok Loy vs. NLRC,5 the company's refusal to make counter-proposal
to the union's proposed CBA is an indication of its bad faith. Where the employer did not even bother
to submit an answer to the bargaining proposals of the union, there is a clear evasion of the duty to
bargain collectively.6 In the case at bar, petitioner's actuation show a lack of sincere desire to
negotiate rendering it guilty of unfair labor practice.

Moreover, the series of events that transpired after the filing of the first notice of strike in January
1996 show petitioner's resort to delaying tactics to ensure that negotiation would not push through.
Thus, on February 15, 1996, or barely a few days after the union proposals for the new CBA were
submitted, the union president was informed by her superior that her work schedule was being
changed from Mondays to Fridays to Tuesdays to Saturdays. A request from the union president that
the issue be submitted to a grievance machinery was subsequently denied. Thereafter, the petitioner
and the union met on March 27, 1996 to discuss the ground rules for negotiation. However, just two
days later, or on March 29, 1996, petitioner dismissed the union president for alleged
insubordination. In its final attempt to thwart the bargaining process, petitioner suspended the
negotiation on the ground that it allegedly received information that a new group of employees called
the Association of Concerned Employees of Colegio (ACEC) had filed a petition for certification
election. Clearly, petitioner tried to evade its duty to bargain collectively.

Petitioner, however, argues that since it has already submitted the union's proposals to the Board of
Trustees and that a series of conferences had already been undertaken to discuss the ground rules
for negotiation such should already be considered as acts indicative of its intention to bargain. As
pointed out earlier, the evidence on record belie the assertions of petitioner.

Petitioner, likewise, claims that the suspension of negotiation was proper since by the filing of the
petition for certification election the issue on majority representation of the employees has arose.
According to petitioner, the authority of the union to negotiate on behalf of the employees was
challenged when a rival union filed a petition for certification election. Citing the case of Lakas Ng
Manggagawang Makabayan v. Marcelo Enterprises,7petitioner asserts that in view of the pendency
of the petition for certification election, it had no duty to bargain collectively with the union.

We disagree. In order to allow the employer to validly suspend the bargaining process there must be
a valid petition for certification election raising a legitimate representation issue. Hence, the mere
filing of a petition for certification election does not ipso facto justify the suspension of negotiation by
the employer. The petition must first comply with the provisions of the Labor Code and its
Implementing Rules. Foremost is that a petition for certification election must be filed during the
sixty-day freedom period. The "Contract Bar Rule" under Section 3, Rule XI, Book V, of the Omnibus
Rules Implementing the Labor Code, provides that: " . If 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 rule is based on Article 232,8 in relation to Articles 253, 253-A and 256 of the
Labor Code. No petition for certification election for any representation issue may be filed after the
lapse of the sixty-day freedom period. The old CBA is extended until a new one is signed. The rule is
that despite the lapse of the formal effectivity of the CBA the law still considers the same as
continuing in force and effect until a new CBA shall have been validly executed. 9 Hence, the contract
bar rule still applies.10 The purpose is to ensure stability in the relationship of the workers and the
company by preventing frequent modifications of any CBA earlier entered into by them in good faith
and for the stipulated original period.11

In the case at bar, the lifetime of the previous CBA was from 1989-1994. The petition for certification
1wphi1

election by ACEC, allegedly a legitimate labor organization, was filed with the Department of Labor
and Employment (DOLE) only on May 26, 1996. Clearly, the petition was filed outside the sixty-day
freedom period. Hence, the filing thereof was barred by the existence of a valid and existing
collective bargaining agreement. Consequently, there is no legitimate representation issue and, as
such, the filing of the petition for certification election did not constitute a bar to the ongoing
negotiation. Reliance, therefore, by petitioner of the ruling in Lakas Ng Manggagawang Makabayan
v. Marcelo Enterprises12 is misplaced since that case involved a legitimate representation issue
which is not present in the case at bar.

Significantly, the same petition for certification election was dismissed by the Secretary of Labor on
October 25, 1996. The dismissal was upheld by this Court in a Resolution, dated April 21, 1997. 13
1wphi1

In view of the above, there is no doubt that petitioner is guilty of unfair labor practice by its stern
refusal to bargain in good faith with respondent union.

Concerning the issue on the validity of the termination of the union president, we hold that the
dismissal was effected in violation of the employees' right to self-organization.

To justify the dismissal, petitioner asserts that the union president was terminated for cause,
allegedly for insubordination for her failure to comply with the new working schedule assigned to her,
and pursuant to its managerial prerogative to discipline and/or dismiss its employees. While we
recognize the right of the employer to terminate the services of an employee for a just or authorized
cause, nevertheless, the dismissal of employees must be made within the parameters of law and
pursuant to the tenets of equity and fair play.14 The employer's right to terminate the services of an
employee for just or authorized cause must be exercised in good faith. 15More importantly, it must not
amount to interfering with, restraining or coercing employees in the exercise of their right to self-
organization because it would amount to, as in this case, unlawful labor practice under Article 248 of
the Labor Code.

The factual backdrop of the termination of Ms. Ambas leads us to no other conclusion that she was
dismissed in order to strip the union of a leader who would fight for the right of her co-workers at the
bargaining table. Ms. Ambas, at the time of her dismissal, had been working for the petitioner for ten
(10) years already. In fact, she was a recipient of a loyalty award. Moreover, for the past ten (10)
years her working schedule was from Monday to Friday. However, things began to change when she
was elected as union president and when she started negotiating for a new CBA. Thus, it was when
she was the union president and during the period of tense and difficult negotiations when her work
schedule was altered from Mondays to Fridays to Tuesdays to Saturdays. When she did not budge,
although her schedule was changed, she was outrightly dismissed for alleged insubordination. 16 We
quote with approval the following findings of the Secretary of Labor on this matter, to wit:

"Assuming arguendo that Ms. Ambas was guilty, such disobedience was not, however, a valid
ground to teminate her employment. The disputed management action was directly connected with
Ms. Ambas' determination to change the complexion of the CBA. As a matter of fact, Ms. Ambas'
unflinching position in faithfully and truthfully carrying out her duties and responsibilities to her Union
and its members in getting a fair share of the fruits of their collective endeavors was the proximate
cause for her dismissal, the charge of insubordination being merely a ploy to give a color of legality
to the contemplated management action to dismiss her. Thus, the dismissal of Ms. Ambas was
heavily tainted with and evidently done in bad faith. Manifestly, it was designed to interfere with the
members' right to self-organization.

Admittedly, management has the prerogative to discipline its employees for insubordination. But
when the exercise of such management right tends to interfere with the employees' right to self-
organization, it amounts to union-busting and is therefore a prohibited act. The dismissal of Ms.
Ambas was clearly designed to frustrate the Union in its desire to forge a new CBA with the College
that is reflective of the true wishes and aspirations of the Union members. Her dismissal was merely
a subterfuge to get rid of her, which smacks of a pre-conceived plan to oust her from the premises of
the College. It has the effect of busting the Union, stripping it of its strong-willed leadership. When
management refused to treat the charge of insubordination as a grievance within the scope of the
Grievance Machinery, the action of the College in finally dismissing her from the service became
arbitrary, capricious and whimsical, and therefore violated Ms. Ambas' right to due process." 17

In this regard, we find no cogent reason to disturb the findings of the Court of Appeals affirming the
findings of the Secretary of Labor and Employment. The right to self-organization of employees must
not be interfered with by the employer on the pretext of exercising management prerogative of
disciplining its employees. In this case, the totality of conduct of the employer shows an evident
attempt to restrain the employees from fully exercising their rights under the law. This cannot be
done under the Labor Code.

WHEREFORE, premises considered, the petition is DENIED for lack of merit.

SO ORDERED.

G.R. No. 102672 October 4, 1995

PANAY ELECTRIC COMPANY, INC., petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION AND PANAY ELECTRIC
COMPANY EMPLOYEES AND WORKERS ASSOCIATION, respondents.

VITUG, J.:
In this petition for certiorari, petitioner Panay Electric Company, Inc., seeks to set aside the
questioned resolution of the National Labor Relations Commission ("NLRC") in granting separation
benefits to Enrique Huyan and Prescilla Napiar, in awarding moral and exemplary damages to
Enrique Huyan, and in merely sanctioning the suspension, instead of terminating the employment
status, of other officers and members of respondent labor union.

Here following is a factual backdrop of the case.

On 30 October 1990, petitioner Panay Electric Company, Inc., posted in its premises a notice
announcing the need for a "Report Clerk" who could assume the responsibility of gathering
accounting and computer data at its power plant. The position was open to any employee, "with Pay
Class V," of petitioner company. When nobody applied for the position, the EDP/Personnel Manager
recommended Enrique Huyan who was at the time an Administrative Personnel Assistant at the
head office. Huyan was then also a Vice President of respondent union. The recommendation was
approved by the company's President and General Manager.

In a letter, dated 09 November 1990, Enrique Huyan informed petitioner that he was not interested in
accepting the new position. He gave the following reasons:

a. The manner or procedure of implementing this notice of transfer is skeptical since

from Administrative Personnel Assistant to Report Clerk is apparently a demotion in
my part.

b. The position of Report Clerk is Pay Class III per our Organizational Chart.

c. Being the Vice-President of PECEWA, my transfer would certainly hinder my

function in settling labor matters and other problems with other PECEWA Officers.

d. Currently, the activation of geothermal power plant in Palimpinon, Negros had

gave rise to additional displaced workers in which my transfer would be another onus
to the Power Plant supervisor and my lack of technical knowhow, I presumed would
obstruct the flow of operation in the said department. 1

On 20 November 1990, the EDP/Personnel Manager required Huyan to explain within 48 hours why
no disciplinary action should be taken against him for gross insubordination and for failure to follow
the General Manager's approved directive. Eventually, on 03 December 1990, Huyan was given a
"notice of dismissal" for:

1. Failure to comply with the GM's general directive of 11/9/90 to a new assigned
task in the Power Plant;

2. Failure to comply with your direct superior's (AO) verbal directive to proceed to the
Power Plant 11/10/90 & 11/19/90;

3 Failure to comply with the undersigned's, as personnel manager, verbal directive to

proceed to the Power Plant last 11/16/90;
 4. Continued & unauthorized entry & use of the Personnel Section & property from
11/16/90 up to the present; (and)

5. Failure to report to your assigned task in the Power Plant for a period of more than
seven consecutive days from November 16, 1990 up to the present. 2

An administrative investigation was conducted; thereafter, Huyan was ordered dismissed

effective 10 December 1990.

Respondent union, on 20 December 1990, filed a notice of strike. On 02 January 1990, a strike vote
was taken where 113 out of 149 union members voted; the result showed 108 "yes" votes, 1 "no"
vote, and 4 abstentions. On 22 January 1991, the union went on strike. Forthwith, the company filed
a petition to declare the strike illegal. On 25 January 1991, upon receipt of an order from the
Secretary of Labor and Employment certifying the dispute to the NLRC, the union lifted its strike and,
on the day following, the striking employees, including Huyan, reported for work.

In its position paper and memorandum before the NLRC, the union averred that the real reason for
ordering the transfer of Huyan was to penalize him for his union activities, particularly for being the
suspected "Mao," author of the column "Red Corner," in the Union's New Digest which featured an
item on alleged wrongdoings by top company officials at the power plant; that in a letter, dated 10
October 1990, addressed by the Company's Operation Manager to the General Manager, it was
suggested that an investigation of "Mao's" real identity be conducted and, once ascertained, to have
him dismissed from the company; that the company had singled out Huyan for transfer to the power
plant; that the Personnel Manager's recommendation for such transfer was made without Huyan's
prior knowledge; that upon learning of his impending reassignment, Huyan requested for a
reconsideration but the Personnel Manager did not bother to reply, that the transfer of Huyan was a
demotion; and that, per the Company's Code Offenses, the "insubordination" charged was
punishable with dismissal only after a fourth commission of the offense.

Petitioner company, in turn, maintained that Huyan's inexplicable refusal to assume his new position
was an act of insubordination for which reason he was aptly dismissed; that the company's directive
was a valid exercise of management prerogative; that in declaring a strike, the Union, including its
officers and members, committed a serious breach of the "no strike, no lock out clause," of the
Collective Bargaining Agreement ("CBA"); and that during the strike, illegal acts were committed by
the union officers and members, e.g.,

a) . . . union director Rey Espinal blocked the service vehicle of PECO collectors
Domingo Tabobo and James Russel Balin, hurled invectives at them and challenged
them to fight.

b) . . . union (vice-president) Prescilla Napiar, together with union member Ma.

Teresa Cruz approached PECO messenger Douglas Legada . . . and snatched from
him the envelope containing . . . passbooks.

c) when PECO employees Carlos Miguel Borja and Joemar Paloma were on their
way to deliver bank passbook to PECO messengers riding in the car of Willy
 Hallares, union (vice-president) Prescilla Napiar blocked their way at the gate and
demanded that the car be inspected for PECO bills. An unidentified union member
placed a big stone against the right front tire. Union auditor, Allen Aquino insisted on
inspecting the glove compartment of the car. 3

The NLRC, in its resolution of 18 October 1991, concluded:

WHEREFORE, in view of all the foregoing, we resolve as follows:

1. We find the strike conducted by the Union from January 22 to 25, 1991 to be
illegal as the same was staged in violation of the no strike, no lock-out clause in the
Collective Bargaining Agreement existing between the parties and also because the
same disregarded the grievance procedure.

2. Enrique Huyan and Prescilla Napiar are deemed to have lost their employment
status but they shall be entitled to separation benefits under the CBA, or one (1)
month pay for every year of service, whichever is higher. Further, Enrique Huyan
shall be paid the wages withheld from him, moral damages in the sum of TWENTY
FIVE THOUSAND (P25,000.00) PESOS and exemplary damages in the amount of
TEN THOUSAND (P10,000.00) PESOS.

3. Rey Espinal and Allen Aquino are penalized by suspension for THREE (3) months.

4. The other officers of the Union, namely: Nieva Glenna Abeto, Noel Orquinaza, Alex
Atutubo, Federico Anatado, and Efren Lopez are penalized with suspension for ONE
(1) month.

No pronouncement as to costs.

SO ORDERED. 4

Petitioner assails NLRC's decision insofar as it has adjudged monetary awards to private
respondents Huyan and Napiar and in not sanctioning the dismissal of other union officers and
members.

We begin by restating the well-settled rule that the findings of fact of the NLRC, except when there is
a grave abuse of discretion committed by it, are practically conclusive on this Court. 5 It is only when
NLRC's findings are bereft of any substantial support from the records that the Court can step in and
proceed to make its own and independent evaluation of the facts.

In rejecting petitioner's theory, the NLRC, in a carefully considered assessment, said:

The company's contention that the decision to transfer Huyan was done in the
normal course of business cannot be sustained in the light of the attendant
circumstances.
We note that the request of the Company's Operations Manager which was used as
the basis for Huyan's transfer was made as early as June 18, 1990 but it was acted
only on October 15, 1990 as shown by the handwritten notations thereon changing
the designation of Computer Data Clerk to Report Clerk. Perhaps, it may only be a
pure coincidence that such action came a few days after the Operations Manager
made a strong recommendation to the General Manager to investigate and find out
who "MAO" is and to have him dismissed.

The company argues that, contrary to the Union's claim, Huyan was not being
singled out as shown by the fact that there was an announcement posted in all
bulletin boards of the Company inviting applications for the position of Report Clerk
at the power plant. On its face, this circumstance may indeed show bona fides on the
part of the Company. However, the announcement limited those who are qualified to
employees in the Pay Class V only and there were only 6 or 7 employees in the
entire work force that can qualify. Again, maybe it is purely coincidental that Enrique
Huyan was one of those in the Pay Class V. The point is, what is the logic and
rationale behind posting a general announcement when the Company fully knows
that only 6 or 7 out of over a hundred employees can qualify? To Our mind, the
posting of the announcement stands out as evidence of the Company's attempt to
camouflage its plan to target Huyan. Not only that, even the Company's
EDP/Personnel Manager admitted in his testimony that only Huyan had the best
qualifications among the Pay Class V employees, thus:

xxx xxx xxx

The conclusion is irresistible that even before the announcement was posted, the
Company, or at least the EDP/Personnel Manager, knew that it was Huyan who will
be transferred. After all, when the Company limited the choice to the Pay Class V
employees, it can be assumed that the Company had already reviewed their
qualifications.

That indeed the plan was directed against Huyan is made more evident by the fact
that the EDP/Personnel Manager did not even discuss the matter of the transfer with
Huyan before, and even after, making his recommendation. This circumstance does
not exactly speak well of the way the personnel policies of the company is being
managed. It simply shows that the concern for the well-being and welfare of its
employees is sorely lacking. It reduces the employees to mere pawns that can be
sacrificed whenever the Company or its managers feel like it. We cannot understand
why the Company will dispensed with this elementary courtesy on a very important
matter affecting the work and even the future of the employee. This, by itself, is more
than sufficient evidence to show the arbitrariness of the Company's decision to
transfer Huyan.

We cannot also blame Huyan if he felt, at that time, that he was being demoted. The
announcement did not state that the position of Report Clerk which was formerly Pay
Class III had already been upgraded to Pay Class V. Of course, it may be argued
that because only those employees with Pay Class V are qualified it follows that the
position of Report clerk must be at least Pay Class V. However, it is the Company's
fault that it did not clarify this matter in the announcement. Perhaps had the
EDP/Personnel Manager discussed the matter with Huyan before reassigning the
latter, the misunderstanding could have been avoided. In fact, from Huyan's letter to
the EDP/Personnel Manager, it can be deduced that he did not know about the
upgrading of the position. The least that the EDP/Personnel Manager could have
done was to clarify the matter upon receipt of Huyan's letter. However, it would
appear that the EDP/Personnel Manager was concerned of enforcing his
recommendation to transfer Huyan more than anything else.

As to the subsequent dismissal of Huyan, the grounds therefor arose out of the
disputed transfer. There was never any official written notice addressed to Huyan
concerning his reassignment. The Company's evidence consists simply of the
approved Memorandum from the EDP/Personnel Manager to the General Manager,
a copy of which was furnished to the Union and Huyan. Why no official notice was
ever given to Huyan baffles Us. Even granting for the sake of argument that such is a
mere formality, it betrays the insensitivity of the Company for its employee for it
expects him to rely on and act upon a piece of paper that is not even addressed to
him. Circumstances like this, no matter how trivial, indicate the propensity of the
Company to disregard the feelings of its employees. To top it all, the Company saw
no need to respond to Huyan's letter for reconsideration which was courteous and
respectful.

We grant that Huyan did not comply with the directives of the EDP/Personnel
Manager to transfer. However, We find that his refusal to do so was not without
reason or justification. As We see it, Huyan did not have it in his mind to be defiant,
otherwise he would not have written his superior seeking reconsideration. He had to
stand up for his rights and rightly so, considering the treatment he received. To Our
mind, therefore, in the context of the antecedent circumstances there was no serious
misconduct or willful disobedience committed by Huyan that would warrant his
dismissal. It is as if he was provoked into resisting by what he believed was an
affront to his dignity as a union officer and as a human being. Neither could there be
abandonment, as this concept is understood in termination disputes.

Be that as it may, we cannot sustain the charge of unfair labor practice against the
Company. As admitted by Huyan and the Union, the principal cause behind this
controversy is the Company's suspicion that Huyan was "MAO." That Huyan was the
Union vice-president was purely incidental. Put in another way, any employee who
was suspected of being "MAO" would have been the object of the Company's moves,
irrespective of whether that employee is a union officer or not. Huyan was not
pinpointed because he was a union officer or because the Company is anti-union but
rather because of the suspicion that he wrote the column that caught the ire of the
company's Operations Manager. No matter how detestable, the resultant moves of
the company cannot be considered unfair labor practice.
 On the basis of the foregoing, we rule that while the conduct of the company cannot
be strictly considered an unfair labor practice, still, the exercise of its management
prerogative cannot be sustained. The dismissal of Enrique Huyan, is illegal.
Ordinarily, when there is a finding of illegal dismissal, under Article 279 of the Labor
Code, the employee is entitled to reinstatement and the payment of his backwages.
However, in the case at bar, we are of the opinion that reinstatement cannot be
ordered not only because of the strained relationship between the parties herein but
also because Huyan's conduct as a union officer leaves much to be desired . . . .

xxx xxx xxx

Considering also the motivations and actuations of the company in orchestrating the
transfer and dismissal of Huyan, we shall award Moral Damages in the sum of
TWENTY FIVE THOUSAND (P25,000.00) PESOS, and Exemplary Damages in the
amount of TEN THOUSAND (P10,000.00) PESOS. After all Huyan's dismissal was
tainted with bad faith and the motive of the Company for dismissing Huyan was far
from noble as shown by the circumstances surrounding the dismissal. The Company
and its managers are admonished to change their attitude and manner in dealing
with their employees, especially in matters such as this.

xxx xxx xxx

. . . The absence of good faith or the honest belief that the company is committing
Unfair Labor Practice, therefore, is what inclines us to rule that the strike conducted
by the union from January 22 to 25, 1991 is illegal for being in violation of the "no
strike, no lock-out" proviso and the failure to bring the Union's grievance under the
grievance procedure in the CBA. 6

The State guarantees the right of all workers to self-organization, collective bargaining and
negotiations, as well as peaceful concerted activities, including the right to strike, in accordance with
law. 7 The right to strike, however, is not absolute. It has heretofore been held that a "no strike, no lock-
out" provision in the Collective Bargaining Agreement ("CBA") is a valid stipulation although the clause
may be invoked by an employer only when the strike is economic in nature or one which is conducted to
force wage or other concessions from the employer that are not mandated to be granted by the law
itself. 8 It would be inapplicable to prevent a strike which is grounded on unfair labor practice. In this
situation, it is not essential that the unfair labor practice act has, in fact, been committed; it suffices that
the striking workers are shown to have acted honestly on an impression that the company has committed
such unfair labor practice and the surrounding circumstances could warrant such a belief in good faith. 9

In the instant case, the NLRC found Enrique Huyan and Prescilla Napiar, the "principal leaders" of
the strike, not to have acted in good faith. The NLRC said:

It is bad enough that the Union struck despite the prohibition in the CBA. What is
worse is that its principal leaders, Napiar and Huyan, cannot honestly claim that they
were in good faith in their belief that the Company was committing unfair labor
practice. The absence of good faith or the honest belief that the Company is
committing Unfair Labor Practice, therefore, is what inclines us to rule that the strike
 conducted by the Union from January 22 to 25, 1991 is illegal for being in violation of
the "no strike, no lock-out" proviso and the failure to bring the union's grievances
under the grievance procedure in the CBA. It must be borne in mind that prior to the
dismissal of Huyan, there was sufficient time to have the matter of Huyan's transfer
subjected to the grievance procedure. That the Union considered the procedure an
exercise in futility is not reason enough to disregard the same given the
circumstances in this case. Whatever wrong the Union felt the Company committed
cannot be remedied by another wrong on the part of the Union. 10

Given its own above findings, the NLRC's grant of separation benefits and damages to
Huyan and Napiar would indeed appear to be unwarranted. Article 264, Title VIII, Book V, of
the Labor Code provides that "(a)ny union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly, participates in the commission of illegal
acts during a strike may be declared to have lost his employment status."

In the case of the other union officers, however, the NLRC, having found no sufficient proof to hold
them guilty of "bad faith" in taking part in the strike or of perpetrating "serious disorders" during the
concerted activity, merely decreed suspension. We see no grave abuse of discretion by the NLRC in
this regard and in not thus ordering the dismissal of said officers.

Finally, in the case of Huyan, we sustain the NLRC in holding that he, during the period of his
illegal suspension (from 09 November 1990 when he was effectively suspended until 25 January
1991 when he, along with the striking employees, were directed by the Secretary of Labor and
Employment to return to the work premises), should be entitled to back salaries and benefits plus
moral damages, but in the reduced amount of P10,000.00, in view of the findings of the NLRC, with
which we concur, that petitioner company acted arbitrarily in its decision to transfer Huyan.
Exemplary damages, upon the other hand, are awarded only when a person acts in a wanton,
fraudulent, reckless, oppressive or malevolent manner (Art. 2232, Civil Code). NLRC's findings fall
short of the underhandedness required so as to justify this award.

WHEREFORE, all considered, the questioned decision of public respondent NLRC, dated 18
October 1991, is hereby MODIFIED in that the award of separation benefits in favor of Enrique
Huyan and Prescilla Napiar is DELETED; the award to Huyan of moral damages is REDUCED to
P10,000.00; and the grant of exemplary damages is DELETED. The decision is AFFIRMED in all
other respects. No special pronouncement on costs.

SO ORDERED.

G.R. No. 113907 February 28, 2000

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (MSMG-UWP) vs.

HON. CRESENCIO J. RAMOS, NATIONAL LABOR RELATIONS COMMISSION, M. GREENFIELD
(B), INC., SAUL TAWIL, CARLOS T. JAVELOSA, RENATO C. PUANGCO, WINCEL LIGOT,
MARCIANO HALOG, GODOFREDO PACENO, SR., GERVACIO CASILLANO, LORENZO ITAOC,
ATTY. GODOFREDO PACENO, JR., MARGARITO CABRERA, GAUDENCIO RACHO, SANTIAGO
IBANEZ, AND RODRIGO AGUILING, respondents.
PURISIMA, J.:

At bar is a Petition for Certiorari under Rule 65 of the Revised Rules of Court to annul the decision of
the National Labor Relations Commission in an unfair labor practice case instituted by a local union
against its employer company and the officers of its national federation.

The petitioner, Malayang Samahan ng mga Manggagawa sa M. Greenfield, Inc., (B) (MSMG),
hereinafter referred to as the "local union", is an affiliate of the private respondent, United Lumber
and General Workers of the Philippines (ULGWP), referred to as the "federation". The collective
bargaining agreement between MSMG and M. Greenfield, Inc., names the parties as follows:

This agreement made and entered into by and between:

M. GREENFIELD, INC. (B) a corporation duly organized in accordance with the laws of the
Republic of the Philippines with office address at Km. 14, Merville Road, Paraaque, Metro
Manila, represented in this act by its General manager, Mr. Carlos T. Javelosa, hereinafter
referred to as the Company;

-and-

MALAYANG SAMAHAN NG MGA MANGGAGAWA SA M. GREENFIELD (B)

(MSMG)/UNITED LUMBER AND GENERAL WORKERS OF THE PHILIPPINES (ULGWP), a
legitimate labor organization with address at Suite 404, Trinity Building, T. M. Kalaw Street,
Manila, represented in this act by a Negotiating Committee headed by its National President,
Mr. Godofredo Paceno, Sr., referred to in this Agreement as the UNION.1

The CBA includes, among others, the following pertinent provisions:

Art. II-Union Security

Sec. 1. Coverage and Scope. All employees who are covered by this Agreement and
presently members of the UNION shall remain members of the UNION for the duration of this
Agreement as a condition precedent to continued employment with the COMPANY.

xxx xxx xxx

Sec. 4. Dismissal. Any such employee mentioned in Section 2 hereof, who fails to maintain
his membership in the UNION for non-payment of UNION dues, for resignation and for
violation of UNION's Constitution and By-Laws and any new employee as defined in Section
2 of this Article shall upon written notice of such failure to join or to maintain membership in
the UNION and upon written recommendation to the COMPANY by the UNION, be
dismissed from the employment by the COMPANY; provided, however, that the UNION shall
hold the COMPANY free and blameless from any and all liabilities that may arise should the
dismissed employee question, in any manner, his dismissal; provided, further that the matter
of the employee's dismissal under this Article may be submitted as a grievance under Article
XIII and, provided, finally, that no such written recommendation shall be made upon the
 COMPANY nor shall COMPANY be compelled to act upon any such recommendation within
the period of sixty (60) days prior to the expiry date of this Agreement conformably to law.

Art. IX

Sec. 4. Program Fund The Company shall provide the amount of P10,000.00 a month for
a continuing labor education program which shall be remitted to the Federation . . . 2

On September 12, 1986, a local union election was held under the auspices of the ULGWP wherein
the herein petitioner, Beda Magdalena Villanueva, and the other union officers were proclaimed as
winners. Minutes of the said election were duly filed with the Bureau of Labor Relations on
September 29, 1986.

On March 21, 1987, a Petition for Impeachment was filed with the national federation ULGWP by the
defeated candidates in the aforementioned election.

On June 16, 1987, the federation conducted an audit of the local union funds. The investigation did
not yield any unfavorable result and the local union officers were cleared of the charges of anomaly
in the custody, handling and disposition of the union funds. 1wphi1.nt

The 14 defeated candidates filed a Petition for Impeachment/Expulsion of the local union officers
with the DOLE NCR on November 5, 1987, docketed as NCR-OD-M-11-780-87. However, the same
was dismissed on March 2, 1988, by Med-Arbiter Renato Parungo for failure to substantiate the
charges and to present evidence in support of the allegations.

On April 17, 1988, the local union held a general membership meeting at the Caruncho Complex in
Pasig. Several union members failed to attend the meeting, prompting the Executive Board to create
a committee tasked to investigate the non-attendance of several union members in the said
assembly, pursuant to Sections 4 and 5, Article V of the Constitution and By-Laws of the union,
which read:

Seksyon 4. Ang mga kinukusang hindi pagdalo o hindi paglahok sa lahat ng hakbangin ng
unyon ng sinumang kasapi o pinuno ay maaaring maging sanhi ng pagtitiwalag o
pagpapataw ng multa ng hindi hihigit sa P50.00 sa bawat araw na nagkulang.

Seksyon 5. Ang sinumang dadalo na aalis ng hindi pa natatapos ang pulong ay ituturing na
pagliban at maparusahan itong alinsunod sa Article V, Seksyong 4 ng Saligang Batas na ito.
Sino mang kasapi o pisyales na mahuli and dating sa takdang oras ng di lalampas sa isang
oras ay magmumulta ng P25.00 at babawasin sa sahod sa pamamagitan ng salary
deduction at higit sa isang oras ng pagdating ng huli ay ituturing na pagliban. 3

On June 27, 1988, the local union wrote respondent company a letter requesting it to deduct the
union fines from the wages/salaries of those union members who failed to attend the general
membership meeting. A portion of the said letter stated:

xxx xxx xxx

 In connection with Section 4 Article II of our existing Collective Bargaining Agreement, please
deduct the amount of P50.00 from each of the union members named in said annexes on
the payroll of July 2-8, 1988 as fine for their failure to attend said general membership
meeting.4

In a Memorandum dated July 3, 1988, the Secretary General of the national federation, Godofredo
Paceo, Jr. disapproved the resolution of the local union imposing the P50.00 fine. The union
officers protested such action by the Federation in a Reply dated July 4, 1988.

On July 11, 1988, the Federation wrote respondent company a letter advising the latter not to deduct
the fifty-peso fine from the salaries of the union members requesting that:

. . . any and all future representations by MSMG affecting a number of members be first
cleared from the federation before corresponding action by the Company.5

The following day, respondent company sent a reply to petitioner union's request in a letter, stating
that it cannot deduct fines from the employees' salary without going against certain laws. The
company suggested that the union refer the matter to the proper government office for resolution in
order to avoid placing the company in the middle of the issue.

The imposition of P50.00 fine became the subject of bitter disagreement between the Federation
and the local union culminating in the latter's declaration of general autonomy from the former
through Resolution No. 10 passed by the local executive board and ratified by the general
membership on July 16, 1988.

In retaliation, the national federation asked respondent company to stop the remittance of the local
union's share in the education funds effective August 1988. This was objected to by the local union
which demanded that the education fund be remitted to it in full.

The company was thus constrained to file a Complaint for Interpleader with a Petition for Declaratory
Relief with the Med-Arbitration Branch of the Department of Labor and Employment, docketed as
Case No. OD-M-8-435-88. This was resolved on October 28, 1988, by Med-Arbiter Anastacio Bactin
in an Order, disposing thus:

WHEREFORE, premises considered, it is hereby ordered:

1. That the United Lumber and General Workers of the Philippines (ULGWP) through its
local union officers shall administer the collective bargaining agreement (CBA).

2. That petitioner company shall remit the P10,000.00 monthly labor education program fund
to the ULGWP subject to the condition that it shall use the said amount for its intended
purpose.

3. That the Treasurer of the MSMG shall be authorized to collect from the 356 union
members the amount of P50.00 as penalty for their failure to attend the general membership
assembly on April 17, 1988.
 However, if the MSMG Officers could present the individual written authorizations of the 356
union members, then the company is obliged to deduct from the salaries of the 356 union
members the P50.00 fine.6

On appeal, Director Pura-Ferrer Calleja issued a Resolution dated February 7, 1989, which modified
in part the earlier disposition, to wit:

WHEREFORE, premises considered, the appealed portion is hereby modified to the extent
that the company should remit the amount of five thousand pesos (P5,000.00) of the
P10,000.00 monthly labor education program fund to ULGWP and the other P5,000.00 to
MSMG, both unions to use the same for its intended purpose. 7

Meanwhile, on September 2, 1988, several local unions (Top Form, M. Greenfield, Grosby, Triumph
International, General Milling, and Vander Hons chapters) filed a Petition for Audit and Examination
of the federation and education funds of ULGWP which was granted by Med-Arbiter Rasidali
Abdullah on December 25, 1988 in an Order which directed the audit and examination of the books
of account of ULGWP.

On September 30, 1988, the officials of ULGWP called a Special National Executive Board Meeting
at Nasipit, Agusan del Norte where a Resolution was passed placing the MSMG under trusteeship
and appointing respondent Cesar Clarete as administrator.

On October 27, 1988, the said administrator wrote the respondent company informing the latter of its
designation of a certain Alfredo Kalingking as local union president and "disauthorizing" the
incumbent union officers from representing the employees. This action by the national federation
was protested by the petitioners in a letter to respondent company dated November 11, 1988.

On November 13, 1988, the petitioner union officers received identical letters from the administrator
requiring them to explain within 72 hours why they should not be removed from their office and
expelled from union membership.

On November 26, 1988, petitioners replied:

(a) Questioning the validity of the alleged National Executive Board Resolution placing their
union under trusteeship;

(b) Justifying the action of their union in declaring a general autonomy from ULGWP due to
the latter's inability to give proper educational, organizational and legal services to its
affiliates and the pendency of the audit of the federation funds;

(c) Advising that their union did not commit any act of disloyalty as it has remained an affiliate
of ULGWP;

(d) Giving ULGWP a period of five (5) days to cease and desist from further committing acts
of coercion, intimidation and harassment.8
However, as early as November 21, 1988, the officers were expelled from the ULGWP. The
termination letter read:

Effective today, November 21, 1988, you are hereby expelled from UNITED LUMBER AND
GENERAL WORKERS OF THE PHILIPPINES (ULGWP) for committing acts of disloyalty
and/or acts inimical to the interest and violative to the Constitution and by-laws of your
federation.

You failed and/or refused to offer an explanation inspite of the time granted to you.

Since you are no longer a member of good standing, ULGWP is constrained to recommend
for your termination from your employment, and provided in Article II Section 4, known as
UNION SECURITY, in the Collective Bargaining agreement. 9

On the same day, the federation advised respondent company of the expulsion of the 30 union
officers and demanded their separation from employment pursuant to the Union Security Clause in
their collective bargaining agreement. This demand was reiterated twice, through letters dated
February 21 and March 4, 1989, respectively, to respondent company.

Thereafter, the Federation filed a Notice of Strike with the National Conciliation and Mediation Board
to compel the company to effect the immediate termination of the expelled union officers.

On March 7, 1989, under the pressure of a threatened strike, respondent company terminated the
30 union officers from employment, serving them identical copies of the termination letter
reproduced below:

We received a demand letter dated 21 November 1988 from the United Lumber and General
Workers of the Philippines (ULGWP) demanding for your dismissal from employment
pursuant to the provisions of Article II, Section 4 of the existing Collective Bargaining
Agreement (CBA). In the said demand letter, ULGWP informed us that as of November 21,
1988, you were expelled from the said federation "for committing acts of disloyalty and/or
acts inimical to the interest of ULGWP and violative to its Constitution and By-laws
particularly Article V, Section 6, 9, and 12, Article XIII, Section 8.

In subsequent letters dated 21 February and 4 March 1989, the ULGWP reiterated its
demand for your dismissal, pointing out that notwithstanding your expulsion from the
federation, you have continued in your employment with the company in violation of Sec. 1
and 4 of Article II of our CBA, and of existing provisions of law.

In view thereof, we are left with no alternative but to comply with the provisions of the Union
Security Clause of our CBA. Accordingly, we hereby serve notice upon you that we are
dismissing you from your employment with M. Greenfield, Inc., pursuant to Sections 1 and 4,
Article II of the CBA effective immediately.10

On that same day, the expelled union officers assigned in the first shift were physically or bodily
brought out of the company premises by the company's security guards. Likewise, those assigned to
the second shift were not allowed to report for work. This provoked some of the members of the local
union to demonstrate their protest for the dismissal of the said union officers. Some union members
left their work posts and walked out of the company premises.

On the other hand, the Federation, having achieved its objective, withdrew the Notice of Strike filed
with the NCMB.

On March 8, 1989, the petitioners filed a Notice of Strike with the NCMB, DOLE, Manila, docketed as
Case No. NCMB-NCR-NS-03-216-89, alleging the following grounds for the strike:

(a) Discrimination

(b) Interference in union activities

(c) Mass dismissal of union officers and shop stewards

(d) Threats, coercion and intimidation

(e) Union busting

The following day, March 9, 1989, a strike vote referendum was conducted and out of 2, 103 union
members who cast their votes, 2,086 members voted to declare a strike.

On March 10, 1989, the thirty (30) dismissed union officers filed an urgent petition, docketed as
Case No. NCMB-NCR-NS-03-216-89, with the Office of the Secretary of the Department of Labor
and Employment praying for the suspension of the effects of their termination from employment.
However, the petition was dismissed by then Secretary Franklin Drilon on April 11, 1989, the
pertinent portion of which stated as follows:

At this point in time, it is clear that the dispute at M. Greenfield is purely an intra-union
matter. No mass lay-off is evident as the terminations have been limited to those allegedly
leading the secessionist group leaving MSMG-ULGWP to form a union under the KMU. . . .

xxx xxx xxx

WHEREFORE, finding no sufficient jurisdiction to warrant the exercise of our extraordinary

authority under Article 277 (b) of the Labor Code, as amended, the instant Petition is hereby
DISMISSED for lack of merit.

SO ORDERED.11

On March 13 and 14, 1989, a total of 78 union shop stewards were placed under preventive
suspension by respondent company. This prompted the union members to again stage a walk-out
and resulted in the official declaration of strike at around 3:30 in the afternoon of March 14, 1989.
The strike was attended with violence, force and intimidation on both sides resulting to physical
injuries to several employees, both striking and non-striking, and damage to company properties.
The employees who participated in the strike and allegedly figured in the violent incident were
placed under preventive suspension by respondent company. The company also sent return-to-work
notices to the home addresses of the striking employees thrice successively, on March 27, April 8
and April 31, 1989, respectively. However, respondent company admitted that only 261 employees
were eventually accepted back to work. Those who did not respond to the return-to-work notice were
sent termination letters dated May 17, 1989, reproduced below:

M. Greenfield Inc., (B)

Km. 14, Merville Rd., Paraaque, M.M.

May 17, 1989

xxx xxx xxx

On March 14, 1989, without justifiable cause and without due notice, you left your work
assignment at the prejudice of the Company's operations. On March 27, April 11, and April
21, 1989, we sent you notices to report to the Company. Inspite of your receipt of said
notices, we have not heard from you up to this date.

Accordingly, for your failure to report, it is construed that you have effectively abandoned
your employment and the Company is, therefore, constrained to dismiss you for said cause.

Very truly yours,

M. GREENFIELD, INC., (B)

By:

WENZEL STEPHEN LIGOT

Asst. HRD Manager12

On August 7, 1989, the petitioners filed a verified complaint with the Arbitration Branch, National
Capital Region, DOLE, Manila, docketed as Case No. NCR-00-09-04199-89, charging private
respondents of unfair labor practice which consists of union busting, illegal dismissal, illegal
suspension, interference in union activities, discrimination, threats, intimidation, coercion, violence,
and oppression.

After the filing of the complaint, the lease contracts on the respondent company's office and factory
at Merville Subdivision, Paraaque expired and were not renewed. Upon demand of the owners of
the premises, the company was compelled to vacate its office and factory.

Thereafter, the company transferred its administration and account/client servicing department at
AFP-RSBS Industrial Park in Taguig, Metro Manila. For failure to find a suitable place in Metro
Manila for relocation of its factory and manufacturing operations, the company was constrained to
move the said departments to Tacloban, Leyte. Hence, on April 16, 1990, respondent company
accordingly notified its employees of a temporary shutdown in operations. Employees who were
interested in relocating to Tacloban were advised to enlist on or before April 23, 1990.

The complaint for unfair labor practice was assigned to Labor Arbiter Manuel Asuncion but was
thereafter reassigned to Labor Arbiter Cresencio Ramos when respondents moved to inhibit him
from acting on the case.

On December 15, 1992, finding the termination to be valid in compliance with the union security
clause of the collective bargaining agreement, Labor Arbiter Cresencio Ramos dismissed the
complaint.

Petitioners then appealed to the NLRC. During its pendency, Commissioner Romeo Putong retired
from the service, leaving only two commissioners, Commissioner Vicente Veloso III and Hon.
Chairman Bartolome Carale in the First Division. When Commissioner Veloso inhibited himself from
the case, Commissioner Joaquin Tanodra of the Third Division was temporarily designated to sit in
the First Division for the proper disposition of the case.

The First Division affirmed the Labor Arbiter's disposition. With the denial of their motion for
reconsideration on January 28, 1994, petitioners elevated the case to this Court, attributing grave
abuse of discretion to public respondent NLRC in:

I. UPHOLDING THE DISMISSAL OF THE UNION OFFICERS BY RESPONDENT

COMPANY AS VALID;

II. HOLDING THAT THE STRIKE STAGED BY THE PETITIONERS AS ILLEGAL;

III. HOLDING THAT THE PETITIONER EMPLOYEES WERE DEEMED TO HAVE

ABANDONED THEIR WORK AND HENCE, VALIDLY DISMISSED BY RESPONDENT
COMPANY; AND

IV. NOT FINDING RESPONDENT COMPANY AND RESPONDENT FEDERATION

OFFICERS GUILTY OF ACTS OF UNFAIR LABOR PRACTICE.

Notwithstanding the several issues raised by the petitioners and respondents in the voluminous
pleadings presented before the NLRC and this Court, they revolve around and proceed from the
issue of whether or not respondent company was justified in dismissing petitioner employees merely
upon the labor federation's demand for the enforcement of the union security clause embodied in
their collective bargaining agreement.

Before delving into the main issue, the procedural flaw pointed out by the petitioners should first be
resolved.

Petitioners contend that the decision rendered by the First Division of the NLRC is not valid because
Commissioner Tanodra, who is from the Third Division, did not have any lawful authority to sit, much
less write the ponencia, on a case pending before the First Division. It is claimed that a
commissioner from one division of the NLRC cannot be assigned or temporarily designated to
another division because each division is assigned a particular territorial jurisdiction. Thus, the
decision rendered did not have any legal effect at all for being irregularly issued.

Petitioners' argument is misplaced. Article 213 of the Labor Code in enumerating the powers of the
Chairman of the National Labor Relations Commission provides that:

The concurrence of two (2) Commissioners of a division shall be necessary for the
pronouncement of a judgment or resolution. Whenever the required membership in a division
is not complete and the concurrence of two (2) commissioners to arrive at a judgment or
resolution cannot be obtained, the Chairman shall designate such number of additional
Commissioners from the other divisions as may be necessary.

It must be remembered that during the pendency of the case in the First Division of the NLRC, one
of the three commissioners, Commissioner Romeo Putong, retired, leaving Chairman Bartolome
Carale and Commissioner Vicente Veloso III. Subsequently, Commissioner Veloso inhibited himself
from the case because the counsel for the petitioners was his former classmate in law school. The
First Division was thus left with only one commissioner. Since the law requires the concurrence of
two commissioners to arrive at a judgment or resolution, the Commission was constrained to
temporarily designate a commissioner from another division to complete the First Division. There is
nothing irregular at all in such a temporary designation for the law empowers the Chairman to make
temporary assignments whenever the required concurrence is not met. The law does not say that a
commissioner from the first division cannot be temporarily assigned to the second or third division to
fill the gap or vice versa. The territorial divisions do not confer exclusive jurisdiction to each division
and are merely designed for administrative efficiency.

Going into the merits of the case, the court finds that the Complaint for unfair labor practice filed by
the petitioners against respondent company which charges union busting, illegal dismissal, illegal
suspension, interference in union activities, discrimination, threats, intimidation, coercion, violence,
and oppression actually proceeds from one main issue which is the termination of several
employees by respondent company upon the demand of the labor federation pursuant to the union
security clause embodied in their collective bargaining agreement.

Petitioners contend that their dismissal from work was effected in an arbitrary, hasty, capricious and
illegal manner because it was undertaken by the respondent company without any prior
administrative investigation; that, had respondent company conducted prior independent
investigation it would have found that their expulsion from the union was unlawful similarly for lack of
prior administrative investigation; that the federation cannot recommend the dismissal of the union
officers because it was not a principal party to the collective bargaining agreement between the
company and the union; that public respondents acted with grave abuse of discretion when they
declared petitioners' dismissals as valid and the union strike as illegal and in not declaring that
respondents were guilty of unfair labor practice.

Private respondents, on the other hand, maintain that the thirty dismissed employees who were
former officers of the federation have no cause of action against the company, the termination of
their employment having been made upon the demand of the federation pursuant to the union
security clause of the CBA; the expelled officers of the local union were accorded due process of law
prior to their expulsion from their federation; that the strike conducted by the petitioners was illegal
for noncompliance with the requirements; that the employees who participated in the illegal strike
and in the commission of violence thereof were validly terminated from work; that petitioners were
deemed to have abandoned their employment when they did not respond to the three return to work
notices sent to them; that petitioner labor union has no legal personality to file and prosecute the
case for and on behalf of the individual employees as the right to do so is personal to the latter; and
that, the officers of respondent company cannot be liable because as mere corporate officers, they
acted within the scope of their authority.

Public respondent, through the Labor Arbiter, ruled that the dismissed union officers were validly and
legally terminated because the dismissal was effected in compliance with the union security clause
of the CBA which is the law between the parties. And this was affirmed by the Commission on
appeal. Moreover, the Labor Arbiter declared that notwithstanding the lack of a prior administrative
investigation by respondent company, under the union security clause provision in the CBA, the
company cannot look into the legality or illegality of the recommendation to dismiss by the union nd
the obligation to dismiss is ministerial on the part of the company.13

This ruling of the NLRC is erroneous. Although this Court has ruled that union security clauses
embodied in the collective bargaining agreement may be validly enforced and that dismissals
pursuant thereto may likewise be valid, this does not erode the fundamental requirement of due
process. The reason behind the enforcement of union security clauses which is the sanctity and
inviolability of contracts14 cannot override one's right to due process.

In the case of Cario vs. National Labor Relations Commission,15 this Court pronounced that while
the company, under a maintenance of membership provision of the collective bargaining agreement,
is bound to dismiss any employee expelled by the union for disloyalty upon its written request, this
undertaking should not be done hastily and summarily. The company acts in bad faith in dismissing a
worker without giving him the benefit of a hearing.

The power to dismiss is a normal prerogative of the employer. However, this is not without
limitation. The employer is bound to exercise caution in terminating the services of his
employees especially so when it is made upon the request of a labor union pursuant to the
Collective Bargaining Agreement, . . . Dismissals must not be arbitrary and capricious. Due
process must be observed in dismissing an employee because it affects not only his position
but also his means of livelihood. Employers should respect and protect the rights of their
employees, which include the right to labor.

In the case under scrutiny, petitioner union officers were expelled by the federation for allegedly
committing acts of disloyalty and/or inimical to the interest of ULGWP and in violation of its
Constitution and By-laws. Upon demand of the federation, the company terminated the petitioners
without conducting a separate and independent investigation. Respondent company did not inquire
into the cause of the expulsion and whether or not the federation had sufficient grounds to effect the
same. Relying merely upon the federation's allegations, respondent company terminated petitioners
from employment when a separate inquiry could have revealed if the federation had acted arbitrarily
and capriciously in expelling the union officers. Respondent company's allegation that petitioners
were accorded due process is belied by the termination letters received by the petitioners which
state that the dismissal shall be immediately effective.

As held in the aforecited case of Cario, "the right of an employee to be informed of the charges
against him and to reasonable opportunity to present his side in a controversy with either the
company or his own union is not wiped away by a union security clause or a union shop clause in a
collective bargaining agreement. An employee is entitled to be protected not only from a company
which disregards his rights but also from his own union the leadership of which could yield to the
temptation of swift and arbitrary expulsion from membership and mere dismissal from his job.

While respondent company may validly dismiss the employees expelled by the union for disloyalty
under the union security clause of the collective bargaining agreement upon the recommendation by
the union, this dismissal should not be done hastily and summarily thereby eroding the employees'
right to due process, self-organization and security of tenure. The enforcement of union security
clauses is authorized by law provided such enforcement is not characterized by arbitrariness, and
always with due process.16 Even on the assumption that the federation had valid grounds to expel
the union officers, due process requires that these union officers be accorded a separate hearing by
respondent company.

In its decision, public respondent also declared that if complainants (herein petitioners) have any
recourse in law, their right of action is against the federation and not against the company or its
officers, relying on the findings of the Labor Secretary that the issue of expulsion of petitioner union
officers by the federation is a purely intra-union matter.

Again, such a contention is untenable. While it is true that the issue of expulsion of the local union
officers is originally between the local union and the federation, hence, intra-union in character, the
issue was later on converted into a termination dispute when the company dismissed the petitioners
from work without the benefit of a separate notice and hearing. As a matter of fact, the records
reveal that the termination was effective on the same day that the termination notice was served on
the petitioners.

In the case of Liberty Cotton Mills Workers Union vs. Liberty Cotton Mills, Inc.17, the Court held the
company liable for the payment of backwages for having acted in bad faith in effecting the dismissal
of the employees.

. . . Bad faith on the part of the respondent company may be gleaned from the fact that the
petitioner workers were dismissed hastily and summarily. At best, it was guilty of a tortious
act, for which it must assume solidary liability, since it apparently chose to summarily dismiss
the workers at the union's instance secure in the union's contractual undertaking that the
union would hold it "free from any liability" arising from such dismissal.

Thus, notwithstanding the fact that the dismissal was at the instance of the federation and that it
undertook to hold the company free from any liability resulting from such a dismissal, the company
may still be held liable if it was remiss in its duty to accord the would-be dismissed employees their
right to be heard on the matter.
Anent petitioners contention that the federation was not a principal party to the collective bargaining
agreement between the company and the union, suffice it to say that the matter was already ruled
upon in the Interpleader case filed by respondent company. Med-Arbiter Anastacio Bactin thus ruled:

After a careful examination of the facts and evidences presented by the parties, this Officer
hereby renders its decision as follows:

1.) It appears on record that in Collective Bargaining Agreement (CBA) which took effect on
July 1, 1986, the contracting parties are M. Greenfield, Inc. (B) and Malayang Samahan ng
Mga Manggagawa sa M. Greenfield, Inc. (B) (MSMG)/United Lumber and General Workers
of the Philippines (ULGWP). However, MSMG was not yet registered labor organization at
the time of the signing of the CBA. Hence, the union referred to in the CBA is the ULGWP.18

Likewise on appeal, Director Pura Ferrer-Calleja put the issue to rest as follows:

It is undisputed that ULGWP is the certified sole and exclusive collective bargaining agent of
all the regular rank-and-file workers of the company, M. Greenfield, Inc. (pages 31-32 of the
records).

It has been established also that the company and ULGWP signed a 3-year collective
bargaining agreement effective July 1, 1986 up to June 30, 1989.19

Although the issue of whether or not the federation had reasonable grounds to expel the petitioner
union officers is properly within the original and exclusive jurisdiction of the Bureau of Labor
Relations, being an intra-union conflict, this Court deems it justifiable that such issue be nonetheless
ruled upon, as the Labor Arbiter did, for to remand the same to the Bureau of Labor Relations would
be to intolerably delay the case.

The Labor Arbiter found that petitioner union officers were justifiably expelled from the federation for
committing acts of disloyalty when it "undertook to disaffiliate from the federation by charging
ULGWP with failure to provide any legal, educational or organizational support to the local. . . . and
declared autonomy, wherein they prohibit the federation from interfering in any internal and external
affairs of the local union."20

It is well-settled that findings of facts of the NLRC are entitled to great respect and are generally
binding on this Court, but it is equally well-settled that the Court will not uphold erroneous
conclusions of the NLRC as when the Court finds insufficient or insubstantial evidence on record to
support those factual findings. The same holds true when it is perceived that far too much is
concluded, inferred or deduced from the bare or incomplete facts appearing of record. 21

In its decision, the Labor Arbiter declared that the act of disaffiliation and declaration of autonomy by
the local union was part of its "plan to take over the respondent federation." This is purely conjecture
and speculation on the part of public respondent, totally unsupported by the evidence.

A local union has the right to disaffiliate from its mother union or declare its autonomy. A local union,
being a separate and voluntary association, is free to serve the interests of all its members including
the freedom to disaffiliate or declare its autonomy from the federation to which it belongs when
circumstances warrant, in accordance with the constitutional guarantee of freedom of association. 22

The purpose of affiliation by a local union with a mother union or a federation.

. . . is to increase by collective action the bargaining power in respect of the terms and
conditions of labor. Yet the locals remained the basic units of association, free to serve their
own and the common interest of all, subject to the restraints imposed by the Constitution and
By-Laws of the Association, and free also to renounce the affiliation for mutual welfare upon
the terms laid down in the agreement which brought it into existence. 23

Thus, a local union which has affiliated itself with a federation is free to sever such affiliation anytime
and such disaffiliation cannot be considered disloyalty. In the absence of specific provisions in the
federation's constitution prohibiting disaffiliation or the declaration of autonomy of a local union, a
local may dissociate with its parent union.24

The evidence on hand does not show that there is such a provision in ULGWP's constitution.
Respondents' reliance upon Article V, Section 6, of the federation's constitution is not right because
said section, in fact, bolsters the petitioner union's claim of its right to declare autonomy:

Sec. 6. The autonomy of a local union affiliated with ULGWP shall be respected insofar as it
pertains to its internal affairs, except as provided elsewhere in this Constitution.

There is no disloyalty to speak of, neither is there any violation of the federation's constitution
because there is nothing in the said constitution which specifically prohibits disaffiliation or
declaration of autonomy. Hence, there cannot be any valid dismissal because Article II, Section 4 of
the union security clause in the CBA limits the dismissal to only three (3) grounds, to wit: failure to
maintain membership in the union (1) for non-payment of union dues, (2) for resignation; and (3) for
violation of the union's Constitution and By-Laws.

To support the finding of disloyalty, the Labor Arbiter gave weight to the fact that on February 26,
1989, the petitioners declared as vacant all the responsible positions of ULGWP, filled these
vacancies through an election and filed a petition for the registration of UWP as a national
federation. It should be pointed out, however, that these occurred after the federation had already
expelled the union officers. The expulsion was effective November 21, 1988. Therefore, the act of
establishing a different federation, entirely separate from the federation which expelled them, is but a
normal retaliatory reaction to their expulsion.

With regard to the issue of the legality or illegality of the strike, the Labor Arbiter held that the strike
was illegal for the following reasons: (1) it was based on an intra-union dispute which cannot
properly be the subject of a strike, the right to strike being limited to cases of bargaining deadlocks
and unfair labor practice (2) it was made in violation of the "no strike, no lock-out" clause in the CBA,
and (3) it was attended with violence, force and intimidation upon the persons of the company
officials, other employees reporting for work and third persons having legitimate business with the
company, resulting to serious physical injuries to several employees and damage to company
property.
On the submission that the strike was illegal for being grounded on a non-strikeable issue, that is,
the intra-union conflict between the federation and the local union, it bears reiterating that when
respondent company dismissed the union officers, the issue was transformed into a termination
dispute and brought respondent company into the picture. Petitioners believed in good faith that in
dismissing them upon request by the federation, respondent company was guilty of unfair labor
practice in that it violated the petitioner's right to self-organization. The strike was staged to protest
respondent company's act of dismissing the union officers. Even if the allegations of unfair labor
practice are subsequently found out to be untrue, the presumption of legality of the strike prevails. 25

Another reason why the Labor Arbiter declared the strike illegal is due to the existence of a no strike
no lockout provision in the CBA. Again, such a ruling is erroneous. A no strike, no lock out provision
can only be invoked when the strike is economic in nature, i.e. to force wage or other concessions
from the employer which he is not required by law to grant. 26 Such a provision cannot be used to
assail the legality of a strike which is grounded on unfair labor practice, as was the honest belief of
herein petitioners. Again, whether or not there was indeed unfair labor practice does not affect the
strike.

On the allegation of violence committed in the course of the strike, it must be remembered that the
Labor Arbiter and the Commission found that "the parties are agreed that there were violent
incidents . . . resulting to injuries to both sides, the union and management." 27 The evidence on
record show that the violence cannot be attributed to the striking employees alone for the company
itself employed hired men to pacify the strikers. With violence committed on both sides, the
management and the employees, such violence cannot be a ground for declaring the strike as
illegal.

With respect to the dismissal of individual petitioners, the Labor Arbiter declared that their refusal to
heed respondent's recall to work notice is a clear indication that they were no longer interested in
continuing their employment and is deemed abandonment. It is admitted that three return to work
notices were sent by respondent company to the striking employees on March 27, April 11, and April
21, 1989 and that 261 employees who responded to the notice were admitted back to work.

However, jurisprudence holds that for abandonment of work to exist, it is essential (1) that the
employee must have failed to report for work or must have been absent without valid or justifiable
reason; and (2) that there must have been a clear intention to sever the employer-employee
relationship manifested by some overt acts.28Deliberate and unjustified refusal on the part of the
employee to go back to his work post amd resume his employment must be established. Absence
must be accompanied by overt acts unerringly pointing to the fact that the employee simply does not
want to work anymore.29 And the burden of proof to show that there was unjustified refusal to go
back to work rests on the employer.

In the present case, respondents failed to prove that there was a clear intention on the part of the
striking employees to sever their employer-employee relationship. Although admittedly the company
sent three return to work notices to them, it has not been substantially proven that these notices
were actually sent and received by the employees. As a matter of fact, some employees deny that
they ever received such notices. Others alleged that they were refused entry to the company
premises by the security guards and were advised to secure a clearance from ULGWP and to sign a
waiver. Some employees who responded to the notice were allegedly told to wait for further notice
from respondent company as there was lack of work.

Furthermore, this Court has ruled that an employee who took steps to protest his lay-off cannot be
said to have abandoned his work.30 The filing of a complaint for illegal dismissal is inconsistent with
the allegation of abandonment. In the case under consideration, the petitioners did, in fact, file a
complaint when they were refused reinstatement by respondent company.

Anent public respondent's finding that there was no unfair labor practice on the part of respondent
company and federation officers, the Court sustains the same. As earlier discussed, union security
clauses in collective bargaining agreements, if freely and voluntarily entered into, are valid and
binding. Corollary, dismissals pursuant to union security clauses are valid and legal subject only to
the requirement of due process, that is, notice and hearing prior to dismissal. Thus, the dismissal of
an employee by the company pursuant to a labor union's demand in accordance with a union
security agreement does not constitute unfair labor practice.31

However, the dismissal was invalidated in this case because of respondent company's failure to
accord petitioners with due process, that is, notice and hearing prior to their termination. Also, said
dismissal was invalidated because the reason relied upon by respondent Federation was not valid.
Nonetheless, the dismissal still does not constitute unfair labor practice.

Lastly, the Court is of the opinion, and so holds, that respondent company officials cannot be held
personally liable for damages on account of the employees' dismissal because the employer
corporation has a personality separate and distinct from its officers who merely acted as its agents.

It has come to the attention of this Court that the 30-day prior notice requirement for the dismissal of
employees has been repeatedly violated and the sanction imposed for such violation enunciated
in Wenphil Corporation vs. NLRC32 has become an ineffective deterrent. Thus, the Court recently
promulgated a decision to reinforce and make more effective the requirement of notice and hearing,
a procedure that must be observed before termination of employment can be legally effected.

In Ruben Serrano vs. NLRC and Isetann Department Store (G.R. No. 117040, January 27, 2000),
the Court ruled that an employee who is dismissed, whether or not for just or authorized cause but
without prior notice of his termination, is entitled to full backwages from the time he was terminated
until the decision in his case becomes final, when the dismissal was for cause; and in case the
dismissal was without just or valid cause, the backwages shall be computed from the time of his
dismissal until his actual reinstatement. In the case at bar, where the requirement of notice and
hearing was not complied with, the aforecited doctrine laid down in the Serrano case applies.

WHEREFORE, the Petition is GRANTED; the decision of the National Labor Relations Commission
in Case No. NCR-00-09-04199-89 is REVERSED and SET ASIDE; and the respondent company is
hereby ordered to immediately reinstate the petitioners to their respective positions. Should
reinstatement be not feasible, respondent company shall pay separation pay of one month salary for
every year of service. Since petitioners were terminated without the requisite written notice at least
30 days prior to their termination, following the recent ruling in the case of Ruben Serrano vs.
National Labor Relations Commission and Isetann Department Store, the respondent company is
hereby ordered to pay full backwages to petitioner-employees while the Federation is also ordered to
pay full backwages to petitioner-union officers who were dismissed upon its instigation. Since the
dismissal of petitioners was without cause, backwages shall be computed from the time the herein
petitioner employees and union officers were dismissed until their actual reinstatement. Should
reinstatement be not feasible, their backwages shall be computed from the time petitioners were
terminated until the finality of this decision. Costs against the respondent company.
1wphi1.nt

SO ORDERED.

G.R. No. 163942 November 11, 2008

NATIONAL UNION OF WORKERS IN THE HOTEL RESTAURANT AND

ALLIED INDUSTRIES (NUWHRAIN-APL-IUF) DUSIT HOTEL NIKKO
CHAPTER, petitioner,
vs.
THE HONORABLE COURT OF APPEALS (Former Eighth Division), THE
NATIONAL LABOR RELATIONS COMMISSION (NLRC), PHILIPPINE
HOTELIERS INC., owner and operator of DUSIT HOTEL NIKKO and/or
CHIYUKI FUJIMOTO, and ESPERANZA V. ALVEZ, respondents.

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

G.R. No. 166295 November 11, 2008

NUWHRAIN-DUSIT HOTEL NIKKO CHAPTER, petitioner,

vs.
SECRETARY OF LABOR AND EMPLOYMENT and PHILIPPINE
HOTELIERS, INC., respondents.

DECISION

VELASCO, JR., J.:

In G.R. No. 163942, the Petition for Review on Certiorari under Rule 45 of the
National Union of Workers in the Hotel Restaurant and Allied Industries Dusit
Hotel Nikko Chapter (Union) seeks to set aside the January 19, 2004
Decision1 and June 1, 2004 Resolution2 of the Court of Appeals (CA) in CA-
G.R. SP No. 76568 which affirmed the October 9, 2002 Decision3 of the
National Labor Relations Commission (NLRC) in NLRC NCR CC No. 000215-
02.

In G.R. No. 166295, the Petition for Certiorari under Rule 65 of the Union
seeks to nullify the May 6, 2004 Decision4 and November 25, 2004
Resolution5 of the CA in CA-G.R. SP No. 70778 which affirmed the January
31, 20026 and March 15, 20027 Orders of the Secretary of Labor and
Employment, Patricia A. Sto. Tomas (Secretary).

Evolution of the Present Petitions

The Union is the certified bargaining agent of the regular rank-and-file

employees of Dusit Hotel Nikko (Hotel), a five star service establishment
owned and operated by Philippine Hoteliers, Inc. located in Makati City.
Chiyuki Fuijimoto and Esperanza V. Alvez are impleaded in their official
capacities as the Hotel's General Manager and Director of Human Resources,
respectively.

On October 24, 2000, the Union submitted its Collective Bargaining

Agreement (CBA) negotiation proposals to the Hotel. As negotiations ensued,
the parties failed to arrive at mutually acceptable terms and conditions. Due to
the bargaining deadlock, the Union, on December 20, 2001, filed a Notice of
Strike on the ground of the bargaining deadlock with the National Conciliation
and Mediation Board (NCMB), which was docketed as NCMB-NCR-NS-12-
369-01. Thereafter, conciliation hearings were conducted which proved
unsuccessful. Consequently, a Strike Vote8 was conducted by the Union on
January 14, 2002 on which it was decided that the Union would wage a strike.

Soon thereafter, in the afternoon of January 17, 2002, the Union held a
general assembly at its office located in the Hotel's basement, where some
members sported closely cropped hair or cleanly shaven heads. The next day,
or on January 18, 2002, more male Union members came to work sporting the
same hair style. The Hotel prevented these workers from entering the
premises claiming that they violated the Hotel's Grooming Standards.

In view of the Hotel's action, the Union staged a picket outside the Hotel
premises. Later, other workers were also prevented from entering the Hotel
causing them to join the picket. For this reason the Hotel experienced a
severe lack of manpower which forced them to temporarily cease operations
in three restaurants.

Subsequently, on January 20, 2002, the Hotel issued notices to Union

members, preventively suspending them and charging them with the following
offenses: (1) violation of the duty to bargain in good faith; (2) illegal picket; (3)
unfair labor practice; (4) violation of the Hotel's Grooming Standards; (5)
illegal strike; and (6) commission of illegal acts during the illegal strike. The
next day, the Union filed with the NCMB a second Notice of Strike on the
ground of unfair labor practice and violation of Article 248(a) of the Labor
Code on illegal lockout, which was docketed as NCMB-NCR-NS-01-019-02. In
the meantime, the Union officers and members submitted their explanations to
the charges alleged by the Hotel, while they continued to stage a picket just
inside the Hotel's compound.

On January 26, 2002, the Hotel terminated the services of twenty-nine (29)
Union officers and sixty-one (61) members; and suspended eighty-one (81)
employees for 30 days, forty-eight (48) employees for 15 days, four (4)
employees for 10 days, and three (3) employees for five days. On the same
day, the Union declared a strike. Starting that day, the Union engaged in
picketing the premises of the Hotel. During the picket, the Union officials and
members unlawfully blocked the ingress and egress of the Hotel premises.

Consequently, on January 31, 2002, the Union filed its third Notice of Strike
with the NCMB which was docketed as NCMB-NCR-NS-01-050-02, this time
on the ground of unfair labor practice and union-busting.

On the same day, the Secretary, through her January 31, 2002 Order,
assumed jurisdiction over the labor dispute and certified the case to the NLRC
for compulsory arbitration, which was docketed as NLRC NCR CC No.
000215-02. The Secretary's Order partly reads:

WHEREFORE, in order to have a complete determination of the

bargaining deadlock and the other incidents of the dispute, this Office
hereby consolidates the two Notices of Strike - NCMB-NCR-NS-12-369-
01 and NCMB-NCR-NS-01-019-02 - and CERTIFIES the entire labor
 dispute covered by these Notices and the intervening events, to the
NATIONAL LABOR RELATIONS COMMISSION for compulsory
arbitration pursuant to Article 263 (g) of the Labor Code, as amended,
under the following terms:

xxxx

d. the Hotel is given the option, in lieu of actual reinstatement, to

merely reinstate the dismissed or suspended workers in the payroll in
light of the special circumstances attendant to their reinstatement;

xxxx

SO ORDERED. (Emphasis added.)

Pursuant to the Secretary's Order, the Hotel, on February 1, 2002, issued an

Inter-Office Memorandum,9 directing some of the employees to return to work,
while advising others not to do so, as they were placed under payroll
reinstatement.

Unhappy with the Secretary's January 31, 2002 Order, the Union moved for
reconsideration, but the same was denied per the Secretary's subsequent
March 15, 2002 Order. Affronted by the Secretary's January 31, 2002 and
March 15, 2002 Orders, the Union filed a Petition for Certiorari with the CA
which was docketed as CA-G.R. SP No. 70778.

Meanwhile, after due proceedings, the NLRC issued its October 9, 2002
Decision in NLRC NCR CC No. 000215-02, in which it ordered the Hotel and
the Union to execute a CBA within 30 days from the receipt of the decision.
The NLRC also held that the January 18, 2002 concerted action was an illegal
strike in which illegal acts were committed by the Union; and that the strike
violated the "No Strike, No Lockout" provision of the CBA, which thereby
caused the dismissal of 29 Union officers and 61 Union members. The NLRC
ordered the Hotel to grant the 61 dismissed Union members financial
assistance in the amount of month's pay for every year of service or their
retirement benefits under their retirement plan whichever was higher. The
NLRC explained that the strike which occurred on January 18, 2002 was
illegal because it failed to comply with the mandatory 30-day cooling-off
period10 and the seven-day strike ban,11 as the strike occurred only 29 days
after the submission of the notice of strike on December 20, 2001 and only
four days after the submission of the strike vote on January 14, 2002. The
NLRC also ruled that even if the Union had complied with the temporal
requirements mandated by law, the strike would nonetheless be declared
illegal because it was attended by illegal acts committed by the Union officers
and members.

The Union then filed a Motion for Reconsideration of the NLRC's Decision
which was denied in the February 7, 2003 NLRC Resolution. Unfazed, the
Union filed a Petition for Certiorari under Rule 65 with the CA, docketed as
CA-G.R. SP No. 76568, and assailed both the October 9, 2002 Decision and
the February 7, 2003 Resolution of the NLRC.

Soon thereafter, the CA promulgated its January 19, 2004 Decision in CA-
G.R. SP No. 76568 which dismissed the Union's petition and affirmed the
rulings of the NLRC. The CA ratiocinated that the Union failed to demonstrate
that the NLRC committed grave abuse of discretion and capriciously
exercised its judgment or exercised its power in an arbitrary and despotic
manner.

For this reason, the Union filed a Motion for Reconsideration which the CA, in
its June 1, 2004 Resolution, denied for lack of merit.

In the meantime, the CA promulgated its May 6, 2004 Decision in CA-G.R. SP

No. 70778 which denied due course to and consequently dismissed the
Union's petition. The Union moved to reconsider the Decision, but the CA was
unconvinced and denied the motion for reconsideration in its November 25,
2004 Resolution.

Thus, the Union filed the present petitions.

The Union raises several interwoven issues in G.R. No. 163942, most
eminent of which is whether the Union conducted an illegal strike. The issues
presented for resolution are:
 -A-

WHETHER OR NOT THE UNION, THE 29 UNION OFFICERS AND 61

MEMBERS MAY BE ADJUDGED GUILTY OF STAGING AN ILLEGAL
STRIKE ON JANUARY 18, 2002 DESPITE RESPONDENTS'
ADMISSION THAT THEY PREVENTED SAID OFFICERS AND
MEMBERS FROM REPORTING FOR WORK FOR ALLEGED
VIOLATION OF THE HOTEL'S GROOMING STANDARDS

-B-

WHETHER OR NOT THE 29 UNION OFFICERS AND 61 MEMBERS

MAY VALIDLY BE DISMISSED AND MORE THAN 200 MEMBERS BE
VALIDLY SUSPENDED ON THE BASIS OF FOUR (4) SELF-SERVING
AFFIDAVITS OF RESPONDENTS

-C-

WHETHER OR NOT RESPONDENTS IN PREVENTING UNION

OFFICERS AND MEMBERS FROM REPORTING FOR WORK
COMMITTED AN ILLEGAL LOCK-OUT12

In G.R. No. 166295, the Union solicits a riposte from this Court on whether the
Secretary has discretion to impose "payroll" reinstatement when he assumes
jurisdiction over labor disputes.

The Court's Ruling

The Court shall first dispose of G.R. No. 166295.

According to the Union, there is no legal basis for allowing payroll

reinstatement in lieu of actual or physical reinstatement. As argued, Art.
263(g) of the Labor Code is clear on this point.

The Hotel, on the other hand, claims that the issue is now moot and any
decision would be impossible to execute in view of the Decision of the NLRC
which upheld the dismissal of the Union officers and members.
The Union's position is untenable.

The Hotel correctly raises the argument that the issue was rendered moot
when the NLRC upheld the dismissal of the Union officers and members. In
order, however, to settle this relevant and novel issue involving the breadth of
the power and jurisdiction of the Secretary in assumption of jurisdiction cases,
we now decide the issue on the merits instead of relying on mere
technicalities.

We held in University of Immaculate Concepcion, Inc. v. Secretary of Labor:

With respect to the Secretary's Order allowing payroll reinstatement

instead of actual reinstatement for the individual respondents herein, an
amendment to the previous Orders issued by her office, the same is
usually not allowed. Article 263(g) of the Labor Code aforementioned
states that all workers must immediately return to work and all
employers must readmit all of them under the same terms and
conditions prevailing before the strike or lockout. The phrase "under the
same terms and conditions" makes it clear that the norm is actual
reinstatement. This is consistent with the idea that any work stoppage or
slowdown in that particular industry can be detrimental to the national
interest.13

Thus, it was settled that in assumption of jurisdiction cases, the Secretary

should impose actual reinstatement in accordance with the intent and spirit of
Art. 263(g) of the Labor Code. As with most rules, however, this one is subject
to exceptions. We held in Manila Diamond Hotel Employees' Union v. Court of
Appeals that payroll reinstatement is a departure from the rule, and special
circumstances which make actual reinstatement impracticable must be
shown.14 In one case, payroll reinstatement was allowed where the employees
previously occupied confidential positions, because their actual reinstatement,
the Court said, would be impracticable and would only serve to exacerbate the
situation.15 In another case, this Court held that the NLRC did not commit
grave abuse of discretion when it allowed payroll reinstatement as an option in
lieu of actual reinstatement for teachers who were to be reinstated in the
middle of the first term.16 We held that the NLRC was merely trying its best to
work out a satisfactory ad hoc solution to a festering and serious problem.17
The peculiar circumstances in the present case validate the Secretary's
decision to order payroll reinstatement instead of actual reinstatement. It is
obviously impracticable for the Hotel to actually reinstate the employees who
shaved their heads or cropped their hair because this was exactly the reason
they were prevented from working in the first place. Further, as with most
labor disputes which have resulted in strikes, there is mutual antagonism,
enmity, and animosity between the union and the management. Payroll
reinstatement, most especially in this case, would have been the only avenue
where further incidents and damages could be avoided. Public officials
entrusted with specific jurisdictions enjoy great confidence from this Court.
The Secretary surely meant only to ensure industrial peace as she assumed
jurisdiction over the labor dispute. In this case, we are not ready to substitute
our own findings in the absence of a clear showing of grave abuse of
discretion on her part.

The issues raised in G.R. No. 163942, being interrelated, shall be discussed
concurrently.

To be determined whether legal or not are the following acts of the Union:

(1) Reporting for work with their bald or cropped hair style on January
18, 2002; and

(2) The picketing of the Hotel premises on January 26, 2002.

The Union maintains that the mass picket conducted by its officers and
members did not constitute a strike and was merely an expression of their
grievance resulting from the lockout effected by the Hotel management. On
the other hand, the Hotel argues that the Union's deliberate defiance of the
company rules and regulations was a concerted effort to paralyze the
operations of the Hotel, as the Union officers and members knew pretty well
that they would not be allowed to work in their bald or cropped hair style. For
this reason, the Hotel argues that the Union committed an illegal strike on
January 18, 2002 and on January 26, 2002.

We rule for the Hotel.

Art. 212(o) of the Labor Code defines a strike as "any temporary stoppage of
work by the concerted action of employees as a result of an industrial or labor
dispute."

In Toyota Motor Phils. Corp. Workers Association (TMPCWA) v. National

Labor Relations Commission, we cited the various categories of an illegal
strike, to wit:

Noted authority on labor law, Ludwig Teller, lists six (6) categories of an
illegal strike, viz.:

(1) [when it] is contrary to a specific prohibition of law, such as strike by

employees performing governmental functions; or

(2) [when it] violates a specific requirement of law[, such as Article 263
of the Labor Code on the requisites of a valid strike]; or

(3) [when it] is declared for an unlawful purpose, such as inducing the
employer to commit an unfair labor practice against non-union
employees; or

(4) [when it] employs unlawful means in the pursuit of its objective, such
as a widespread terrorism of non-strikers [for example, prohibited acts
under Art. 264(e) of the Labor Code]; or

(5) [when it] is declared in violation of an existing injunction[, such as

injunction, prohibition, or order issued by the DOLE Secretary and the
NLRC under Art. 263 of the Labor Code]; or

(6) [when it] is contrary to an existing agreement, such as a no-strike

clause or conclusive arbitration clause.18

With the foregoing parameters as guide and the following grounds as basis,
we hold that the Union is liable for conducting an illegal strike for the following
reasons:

First, the Union's violation of the Hotel's Grooming Standards was clearly a
deliberate and concerted action to undermine the authority of and to
embarrass the Hotel and was, therefore, not a protected action. The
appearances of the Hotel employees directly reflect the character and well-
being of the Hotel, being a five-star hotel that provides service to top-notch
clients. Being bald or having cropped hair per se does not evoke negative or
unpleasant feelings. The reality that a substantial number of employees
assigned to the food and beverage outlets of the Hotel with full heads of hair
suddenly decided to come to work bald-headed or with cropped hair, however,
suggests that something is amiss and insinuates a sense that something out
of the ordinary is afoot. Obviously, the Hotel does not need to advertise its
labor problems with its clients. It can be gleaned from the records before us
that the Union officers and members deliberately and in apparent concert
shaved their heads or cropped their hair. This was shown by the fact that after
coming to work on January 18, 2002, some Union members even had their
heads shaved or their hair cropped at the Union office in the Hotel's
basement. Clearly, the decision to violate the company rule on grooming was
designed and calculated to place the Hotel management on its heels and to
force it to agree to the Union's proposals.

In view of the Union's collaborative effort to violate the Hotel's Grooming

Standards, it succeeded in forcing the Hotel to choose between allowing its
inappropriately hair styled employees to continue working, to the detriment of
its reputation, or to refuse them work, even if it had to cease operations in
affected departments or service units, which in either way would disrupt the
operations of the Hotel. This Court is of the opinion, therefore, that the act of
the Union was not merely an expression of their grievance or displeasure but,
indeed, a calibrated and calculated act designed to inflict serious damage to
the Hotel's finances or its reputation. Thus, we hold that the Union's concerted
violation of the Hotel's Grooming Standards which resulted in the temporary
cessation and disruption of the Hotel's operations is an unprotected act and
should be considered as an illegal strike.

Second, the Union's concerted action which disrupted the Hotel's operations
clearly violated the CBA's "No Strike, No Lockout" provision, which reads:

ARTICLE XXII - NO STRIKE/WORK STOPPAGE AND LOCKOUT

SECTION 1. No Strikes
 The Union agrees that there shall be no strikes, walkouts,
stoppage or slow-down of work, boycott, refusal to handle
accounts, picketing, sit-down strikes, sympathy strikes or any
other form of interference and/or interruptions with any of the
normal operations of the HOTEL during the life of this Agreement.

The facts are clear that the strike arose out of a bargaining deadlock in the
CBA negotiations with the Hotel. The concerted action is an economic strike
upon which the afore-quoted "no strike/work stoppage and lockout" prohibition
is squarely applicable and legally binding.19

Third, the Union officers and members' concerted action to shave their heads
and crop their hair not only violated the Hotel's Grooming Standards but also
violated the Union's duty and responsibility to bargain in good faith. By
shaving their heads and cropping their hair, the Union officers and members
violated then Section 6, Rule XIII of the Implementing Rules of Book V of the
Labor Code.20 This rule prohibits the commission of any act which will disrupt
or impede the early settlement of the labor disputes that are under
conciliation. Since the bargaining deadlock is being conciliated by the NCMB,
the Union's action to have their officers and members' heads shaved was
manifestly calculated to antagonize and embarrass the Hotel management
and in doing so effectively disrupted the operations of the Hotel and violated
their duty to bargain collectively in good faith.

Fourth, the Union failed to observe the mandatory 30-day cooling-off

period and the seven-day strike ban before it conducted the strike on
January 18, 2002. The NLRC correctly held that the Union failed to observe
the mandatory periods before conducting or holding a strike. Records reveal
that the Union filed its Notice of Strike on the ground of bargaining deadlock
on December 20, 2001. The 30-day cooling-off period should have been until
January 19, 2002. On top of that, the strike vote was held on January 14,
2002 and was submitted to the NCMB only on January 18, 2002; therefore,
the 7-day strike ban should have prevented them from holding a strike until
January 25, 2002. The concerted action committed by the Union on January
18, 2002 which resulted in the disruption of the Hotel's operations clearly
violated the above-stated mandatory periods.
Last, the Union committed illegal acts in the conduct of its strike. The NLRC
ruled that the strike was illegal since, as shown by the pictures21 presented by
the Hotel, the Union officers and members formed human barricades and
obstructed the driveway of the Hotel. There is no merit in the Union's
argument that it was not its members but the Hotel's security guards and the
police officers who blocked the driveway, as it can be seen that the guards
and/or police officers were just trying to secure the entrance to the Hotel. The
pictures clearly demonstrate the tense and highly explosive situation brought
about by the strikers' presence in the Hotel's driveway.

Furthermore, this Court, not being a trier of facts, finds no reason to alter or
disturb the NLRC findings on this matter, these findings being based on
substantial evidence and affirmed by the CA.22 Factual findings of labor
officials, who are deemed to have acquired expertise in matters within their
respective jurisdictions, are generally accorded not only respect but even
finality, and bind us when supported by substantial evidence.23 Likewise, we
are not duty-bound to delve into the accuracy of the factual findings of the
NLRC in the absence of clear showing that these were arrived at arbitrarily
and/or bereft of any rational basis.24

What then are the consequent liabilities of the Union officers and members for
their participation in the illegal strike?

Regarding the Union officers and members' liabilities for their participation in
the illegal picket and strike, Art. 264(a), paragraph 3 of the Labor Code
provides that "[a]ny union officer who knowingly participates in an illegal
strike and any worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to have lost
his employment status x x x." The law makes a distinction between union
officers and mere union members. Union officers may be validly terminated
from employment for their participation in an illegal strike, while union
members have to participate in and commit illegal acts for them to lose their
employment status.25 Thus, it is necessary for the company to adduce proof of
the participation of the striking employees in the commission of illegal acts
during the strikes.26
Clearly, the 29 Union officers may be dismissed pursuant to Art. 264(a), par. 3
of the Labor Code which imposes the penalty of dismissal on "any union
officer who knowingly participates in an illegal strike." We, however, are
of the opinion that there is room for leniency with respect to the Union
members. It is pertinent to note that the Hotel was able to prove before the
NLRC that the strikers blocked the ingress to and egress from the Hotel. But it
is quite apparent that the Hotel failed to specifically point out the participation
of each of the Union members in the commission of illegal acts during the
picket and the strike. For this lapse in judgment or diligence, we are
constrained to reinstate the 61 Union members.

Further, we held in one case that union members who participated in an illegal
strike but were not identified to have committed illegal acts are entitled to be
reinstated to their former positions but without backwages.27 We then held
in G & S Transport Corporation v. Infante:

With respect to backwages, the principle of a "fair day's wage for a fair
day's labor" remains as the basic factor in determining the award
thereof. If there is no work performed by the employee there can be no
wage or pay unless, of course, the laborer was able, willing and ready to
work but was illegally locked out, suspended or dismissed or otherwise
illegally prevented from working. While it was found that respondents
expressed their intention to report back to work, the latter exception
cannot apply in this case. In Philippine Marine Officer's Guild v.
Compaia Maritima, as affirmed in Philippine Diamond Hotel and Resort
v. Manila Diamond Hotel Employees Union, the Court stressed that for
this exception to apply, it is required that the strike be legal, a situation
that does not obtain in the case at bar.28

In this light, we stand by our recent rulings and reinstate the 61 Union
members without backwages.

WHEREFORE, premises considered, the CA's May 6, 2004 Decision in CA-

G.R. SP No. 70778 is hereby AFFIRMED.
The CA's January 19, 2004 Decision in CA-G.R. SP No. 76568 is hereby SET
ASIDE. The October 9, 2002 Decision of the NLRC in NLRC NCR CC No.
000215-02 is hereby AFFIRMED with MODIFICATIONS, as follows:

The 29 Union officials are hereby declared to have lost their employment
status, to wit:

1. LEO ANTONIO ATUTUBO

2. EDWIN E. BALLESTEROS
3. LORETTA DIVINA DE LUNA
4. INISUSAN DE VELEZ
5. DENNIS HABER
6. MARITES HERNANDEZ
7. BERNARD HUGO
8. NORZAMIA INTAL
9. LAURO JAVIER
10. SHANE LAUZ
11. MAY BELEN LEANO
12. EDGAR LINGHON
13. MILAGROS LOPEZ
14. JOSE MUZONES
15. RAY NERVA
16. JESUS NONAN
17. MARLYN OLLERO
18. CATHY ORDUNA
19. REYNALDO RASING
20. JUSTO TABUNDA
21. BARTOLOME TALISAYON
22. JUN TESORO
23. LYNDON TESORO
24. SALVADOR TIPONES
25. SONNY UY
26. WILFREDO VALLES, JR.
27. MEL VILLAHUCO
28. EMMA Q. DANAO
29. JORDAN ALEJANDRO
The 61 Union members are hereby REINSTATED to their former positions
without backwages:

1. DANILO AGUINALDO
2. CLARO ABRANTE
3. FELIX ARRIESGADO
4. DAN BAUTISTA
5. MA. THERESA BONIFACIO
6. JUAN BUSCANO
7. ELY CHUA
8. ALLAN DELAGON
9. FRUMENCIO DE LEON
10. ELLIE DEL MUNDO
11. EDWIN DELOS CIENTOS
12. SOLOMON DIZON
13. YLOTSKI DRAPER
14. ERLAND COLLANTES
15. JONAS COMPENIDO
16. RODELIO ESPINUEVA
17. ARMANDO ESTACIO
18. SHERWIN FALCES
19. JELA FRANZUELA
20. REY GEALOGO
21. ALONA GERNOMINO
22. VINCENT HEMBRADOR
23. ROSLYN IBARBIA
24. JAIME IDIOMA, JR.
25. OFELIA LLABAN
26. RENATON LUZONG
27. TEODULO MACALINO
28. JAKE MACASAET
29. HERNANIE PABILONIA
30. HONORIO PACIONE
31. ANDREA VILLAFUERTE
32. MARIO PACULAN
33. JULIO PAJINAG
 34. JOSELITO PASION
35. VICENTE PASIOLAN
36. HAZEL PENA
37. PEDRO POLLANTE
38. EDUARDO RAMOS
39. IMELDA RASIN
40. DELFIN RAZALAN
41. EVANGELINE REYES
42. RODOLFO REYES
43. BRIGILDO RUBIO
44. RIO SALCEDO
45. JUANITO SANCHEZ
46. MA. THERESA SANCHEZ
47. DONATO SAN AGUSTIN
48. RICARDO SOCORRO
49. VALERIO SOLIS
50. DOMINADOR SUAREZ
51. ORLANDO TABUGOCA
52. HELEN TALEON
53. ROBERT TANEGRA
54. LOURDES TAYAG
55. ROLANDO TOLENTINO
56. REYNALDO TRESNADO
57. RICHARD SABLADA
58. MAE YAP-DIANGCO
59. GILBERTO VEDASTO
60. DOMINGO VIDAROZAGA
61. DAN VILLANUEVA

In view of the possibility that the Hotel might have already hired regular
replacements for the afore-listed 61 employees, the Hotel may opt to
pay SEPARATION PAY computed at one (1) month's pay for every year of
service in lieu of REINSTATEMENT, a fraction of six (6) months being
considered one year of service.

SO ORDERED.
G.R. No. 114974 June 16, 2004

STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE), petitioner,

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

DECISION

CALLEJO, SR., J.:

This is a petition for certiorari under Rule 65 of the Rules of Court filed by the Standard Chartered
Bank Employees Union, seeking the nullification of the October 29, 1993 Order 1 of then Secretary of
Labor and Employment Nieves R. Confesor and her resolutions dated December 16, 1993 and
February 10, 1994.

The Antecedents

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

In August of 1990, the Bank and the Union signed a five-year collective bargaining agreement (CBA)
with a provision to renegotiate the terms thereof on the third year. Prior to the expiration of the three-
year period2 but within the sixty-day freedom period, the Union initiated the negotiations. On
February 18, 1993, the Union, through its President, Eddie L. Divinagracia, sent a letter 3 containing
its proposals4 covering political provisions5and thirty-four (34) economic provisions.6 Included therein
was a list of the names of the members of the Unions negotiating panel.7

In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H. Harris, took
note of the Unions proposals. The Bank attached its counter-proposal to the non-economic
provisions proposed by the Union.8 The Bank posited that it would be in a better position to present
its counter-proposals on the economic items after the Union had presented its justifications for the
economic proposals.9 The Bank, likewise, listed the members of its negotiating panel.10 The parties
agreed to set meetings to settle their differences on the proposed CBA.

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

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

On May 18, 1993, the negotiation for economic provisions commenced. A presentation of the basis
of the Unions economic proposals was made. The next meeting, the Bank made a similar
presentation. Towards the end of the Banks presentation, Umali requested the Bank to validate the
Unions "guestimates," especially the figures for the rank and file staff.15 In the succeeding meetings,
Umali chided the Bank for the insufficiency of its counter-proposal on the provisions on salary
increase, group hospitalization, death assistance and dental benefits. He reminded the Bank, how
the Union got what it wanted in 1987, and stated that if need be, the Union would go through the
same route to get what it wanted.16

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

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

Wage Increase:

1st Year Reduced from 45% to 40%

2nd Year - Retain at 20%

Total = 60%

Group Hospitalization Insurance:

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

Death Assistance:

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

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

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

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

Wage Increase : 1st Year from P1,000 to P1,050.00

2nd Year P800.00 no change

Group Hospitalization Insurance

 From: P35,000.00 per illness

To : P35,000.00 per illness per year

Death Assistance For employee

From: P20,000.00

To : P25,000.00

Dental Retainer Original offer remains the same21

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

Wage Increase: 1st Year - 40%

2nd Year - 19.5%

Group Hospitalization Insurance

From: P60,000.00 per year

To : P50,000.00 per year

Dental:

Temporary Filling/ P150.00

Tooth Extraction

Permanent Filling 200.00

Prophylaxis 250.00

Root Canal From P2,000 per tooth

To: 1,800.00 per tooth

Death Assistance:

For Employees: From P45,000.00 to P40,000.00

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

The Unions original proposals, aside from the above-quoted, remained the same.

Another set of counter-offer followed:

Management Union
 Wage Increase
1st Year P1,050.00 40%
2nd Year - 850.00 19.0%23

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

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

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

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

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

Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR Case No.
00-06-04191-93 is pending for his guidance and appropriate action. 29
The SOLE gave the following economic awards:

1. Wage Increase:

a) To be incorporated to present salary rates:

Fourth year : 7% of basic monthly salary

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

b) Additional fixed amount:

Fourth year : P600.00 per month

Fifth year : P400.00 per month

2. Group Insurance

a) Hospitalization : P45,000.00

b) Life : P130,000.00

c) Accident : P130,000.00

3. Medicine Allowance

Fourth year : P5,500.00

Fifth year : P6,000.00

4. Dental Benefits

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

5. Optical Allowance

Fourth year: P2,000.00

Fifth year : P2,500.00

6. Death Assistance

a) Employee : P30,000.00

b) Immediate Family Member : P5,000.00

7. Emergency Leave Five (5) days for each contingency

 8. Loans

a) Car Loan : P200,000.00

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

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

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

On March 22, 1994, the Bank and the Union signed the CBA.32 Immediately thereafter, the wage
increase was effected and the signing bonuses based on the increased wage were distributed to the
employees covered by the CBA.

The Present Petition

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

A. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE UNIONS
CHARGE OF UNFAIR LABOR PRACTICE IN VIEW OF THE CLEAR EVIDENCE OF
RECORD AND ADMISSIONS PROVING THE UNFAIR LABOR PRACTICES CHARGED. 33

B. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN FAILING TO RULE ON
OTHER UNFAIR LABOR PRACTICES CHARGED.34

C. RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE ABUSE OF

DISCRETION AMOUNTING TO LACK OF JURISDICTION IN DISMISSING THE CHARGES
OF UNFAIR LABOR PRACTICES ON THE GROUND THAT NO PROOF OF INJURY TO
THE PUBLIC INTEREST WAS PRESENTED.35

The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or excess
of jurisdiction when it found that the Bank did not commit unfair labor practice when it interfered with
the Unions choice of negotiator. It argued that, Dioknos suggestion that the negotiation be limited as
a "family affair" was tantamount to suggesting that Federation President Jose Umali, Jr. be excluded
from the Unions negotiating panel. It further argued that contrary to the ruling of the public
respondent, damage or injury to the public interest need not be present in order for unfair labor
practice to prosper.
The Union, likewise, pointed out that the public respondent failed to rule on the ULP charges arising
from the Banks surface bargaining. The Union contended that the Bank merely went through the
motions of collective bargaining without the intent to reach an agreement, and made bad faith
proposals when it announced that the parties should begin from a clean slate. It argued that the
Bank opened the political provisions "up for grabs," which had the effect of diminishing or obliterating
the gains that the Union had made.

The Union also accused the Bank of refusing to disclose material and necessary data, even after a
request was made by the Union to validate its "guestimates."

In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped,
considering that it signed the Collective Bargaining Agreement (CBA) on April 22, 1994. It asserted
that contrary to the Unions allegations, it was the Union that committed ULP when negotiator Jose
Umali, Jr. hurled invectives at the Banks head negotiator, Cielito Diokno, and demanded that she be
excluded from the Banks negotiating team. Moreover, the Union engaged in blue-sky
bargaining and isolated the no strike-no lockout clause of the existing CBA.

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

The Issues

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

The Courts Ruling

The petition is bereft of merit.

"Interference" under Article

248 (a) of the Labor Code

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

Citing the cases of U.S. Postal Service36 and Harley Davidson Motor Co., Inc., AMF,37 the Union
claims that interference in the choice of the Unions bargaining panel is tantamount to ULP.
In the aforecited cases, the alleged ULP was based on the employers violation of Section 8(a)(1)
and (5) of the National Labor Relations Act (NLRA), 38 which pertain to the interference, restraint or
coercion of the employer in the employees exercise of their rights to self-organization and to bargain
collectively through representatives of their own choosing; and the refusal of the employer to bargain
collectively with the employees representatives. In both cases, the National Labor Relations Board
held that upon the employers refusal to engage in negotiations with the Union for collective-
bargaining contract when the Union includes a person who is not an employee, or one who is a
member or an official of other labororganizations, such employer is engaged in unfair labor practice
under Section 8(a)(1) and (5) of the NLRA.

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

Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF ASSOCIATION
AND PROTECTION OF THE RIGHT TO ORGANIZE to which the Philippines is a signatory,
"workers and employers, without distinction whatsoever, shall have the right to establish and, subject
only to the rules of the organization concerned, to job organizations of their own choosing without
previous authorization."42

Workers and employers organizations shall have the right to draw up their constitutions and rules,
to elect their representatives in full freedom to organize their administration and activities and to
formulate their programs.43Article 2 of ILO Convention No. 98 pertaining to the Right to Organize and
Collective Bargaining, provides:

Article 2

1. Workers and employers organizations shall enjoy adequate protection against any acts or
interference by each other or each others agents or members in their establishment,
functioning or administration.

2. In particular, acts which are designed to promote the establishment of workers

organizations under the domination of employers or employers organizations or to support
workers organizations by financial or other means, with the object of placing such
organizations under the control of employers or employers organizations within the meaning
of this Article.

The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article 243 thereof,
which provides:

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

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

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

The said ILO Conventions were ratified on December 29, 1953. However, even as early as the 1935
Constitution,44 the State had already expressly bestowed protection to labor as part of the general
provisions. The 1973 Constitution,45 on the other hand, declared it as a policy of the state to afford
protection to labor, specifying that the workers rights to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work would be assured. For its part, the 1987
Constitution, aside from making it a policy to "protect the rights of workers and promote their
welfare,"46 devotes an entire section, emphasizing its mandate to afford protection to labor, and
highlights "the principle of shared responsibility" between workers and employers to promote
industrial peace.47

Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer interferes,
restrains or coerces employees in the exercise of their right to self-organization or the right to form
association. The right to self-organization necessarily includes the right to collective bargaining.

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

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

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

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

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

The Duty to Bargain

Collectively

If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the normal
relations and innocent communications, which are all part of the friendly relations between the Union
and Bank.

The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under Article
248(g) when it engaged in surface bargaining. It alleged that the Bank just went through the motions
of bargaining without any intent of reaching an agreement, as evident in the Banks counter-
proposals. It explained that of the 34 economic provisions it made, the Bank only made 6 economic
counterproposals. Further, as borne by the minutes of the meetings, the Bank, after indicating the
economic provisions it had rejected, accepted, retained or were open for discussion, refused to
make a list of items it agreed to include in the economic package.

Surface bargaining is defined as "going through the motions of negotiating" without any legal intent
to reach an agreement.50 The resolution of surface bargaining allegations never presents an easy
issue. The determination of whether a party has engaged in unlawful surface bargaining is usually a
difficult one because it involves, at bottom, a question of the intent of the party in question, and
usually such intent can only be inferred from the totality of the challenged partys conduct both at
and away from the bargaining table.51 It involves the question of whether an employers conduct
demonstrates an unwillingness to bargain in good faith or is merely hard bargaining. 52

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

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

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

In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank made bad-
faith provisions has no leg to stand on. The records show that the Banks counterproposals on the
non-economic provisions or political provisions did not put "up for grabs" the entire work of the Union
and its predecessors. As can be gleaned from the Banks counterproposal, there were many
provisions which it proposed to be retained. The revisions on the other provisions were made after
the parties had come to an agreement. Far from buttressing the Unions claim that the Bank made
bad-faith proposals on the non-economic provisions, all these, on the contrary, disprove such
allegations.
We, likewise, find that the Union failed to substantiate its claim that the Bank refused to furnish the
information it needed.

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

Article 242. Rights of Legitimate Labor Organization

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

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

No Grave Abuse of Discretion

On the Part of the Public Respondent

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

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

Estoppel not Applicable

In the Case at Bar

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

Article 1431 of the Civil Code provides:

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

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

In the case, however, the approval of the CBA and the release of signing bonus do not necessarily
mean that the Union waived its ULP claim against the Bank during the past negotiations. After all,
the conclusion of the CBA was included in the order of the SOLE, while the signing bonus was
included in the CBA itself. Moreover, the Union twice filed a motion for reconsideration respecting its
ULP charges against the Bank before the SOLE.

The Union Did Not Engage

In Blue-Sky Bargaining

We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky bargaining or
making exaggerated or unreasonable proposals.59 The Bank failed to show that the economic
demands made by the Union were exaggerated or unreasonable. The minutes of the meeting show
that the Union based its economic proposals on data of rank and file employees and the prevailing
economic benefits received by bank employees from other foreign banks doing business in the
Philippines and other branches of the Bank in the Asian region.

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

IN LIGHT OF THE FOREGOING, the October 29, 1993 Order and December 16, 1993 and
February 10, 1994 Resolutions of then Secretary of Labor Nieves R. Confesor are AFFIRMED. The
Petition is hereby DISMISSED.

SO ORDERED.