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1. *SAMAHAN NG MANGGAGAWA SA HANJIN employers may form a workers' association.

It further
SHIPYARD REP. BY ITS PRESIDENT, ALFIE posited that one third (1/3) of the members of the
ALIPIO association had definite employers and the continued
VS. existence and registration of the association would
BUREAU OF LABOR RELATIONS, HANJIN prejudice the company's goodwill.
CO., LTD. (HHIC-PIDL.) On March 18, 2010, Hanjin filed a supplemental petition,8
G.R. No. 211145 adding the alternative ground that Samahan committed a
misrepresentation in connection with the list of members
The right to self-organization is not limited to unionism. and/or voters who took part in the ratification of their
Workers may also form or join an association for mutual constitution and by-laws in its application for registration.
aid and protection and for other legitimate purposes. Hanjin claimed that Samahan made it appear that its
members were all qualified to become members of the
This is a petition for review on certiorari seeking to workers' association.
reverse and set aside the July 4, 2013 Decision1 and the
January 28, 2014 Resolution2 of the Court of Appeals On March 26, 2010, DOLE-Pampanga called for a
(CA) in CA-G.R. SP No. 123397, which reversed the conference, wherein Samahan requested for a 10-day
November 28, 2011 Resolution3 of the Bureau of Labor period to file a responsive pleading. No pleading,
Relations (BLR) and reinstated the April 20, 2010 however, was submitted. Instead, Samahan filed a motion
Decision 4 of the Department of Labor and Employment to dismiss on April 14, 2010.9
(DOLE) Regional Director, cancelling the registration
of Samahan ng Manggagawa sa Hanjin The Ruling of the DOLE Regional Director
Shipyard (Samahan) as a worker's association under
On April 20, 2010, DOLE Regional Director Ernesto Bihis
Article 243 (now Article 249) of the Labor Code.
ruled in favor of Hanjin. He found that the preamble, as
The Facts stated in the Constitution and By-Laws of Samahan, was
an admission on its part that all of its members were
On February 16, 2010, Samahan, through its authorized employees of Hanjin, to wit:
representative, Alfie F. Alipio, filed an application for
registration 5 of its name "Samahan ng Mga KAMI, ang mga Manggagawa sa HANJIN Shipyard
Manggagawa sa Hanjin Shipyard" with the DOLE. (SAMAHAN) ay naglalayong na isulong ang pagpapabuti
Attached to the application were the list of names of the ng kondisyon sa paggawa at katiyakan sa hanapbuhay sa
association's officers and members, signatures of the pamamagitan ng patuloy na pagpapaunlad ng kasanayan
attendees of the February 7, 2010 meeting, copies of their ng para sa mga kasapi nito. Naniniwala na sa
Constitution and By-laws. The application stated that the pamamagitan ng aming mga angking lakas, kaalaman at
association had a total of 120 members. kasanayan ay aming maitataguyod at makapag-aambag
sa kaunlaran ng isang lipunan. Na mararating at
On February 26, 2010, the DOLE Regional Office No. 3, makakamit ang antas ng pagkilala, pagdakila at
City of San Fernando, Pampanga (DOLE-Pampanga), pagpapahalaga sa mga tulad naming mga manggagawa.
issued the corresponding certificate of registration6 in
favor of Samahan. XXX10

On March 15, 2010, respondent Hanjin Heavy Industries The same claim was made by Samahan in its motion to
and Construction Co., Ltd. Philippines (Hanjin), with dismiss, but it failed to adduce evidence that the
offices at Greenbeach 1, Renondo Peninsula, Sitio remaining 63 members were also employees of Hanjin.
Agustin, Barangay Cawag, Subic Bay Freeport Zone, filed Its admission bolstered Hanjin's claim that Samahan
a petition7 with DOLE-Pampanga praying for the committed misrepresentation in its application for
cancellation of registration of Samahan' s association on registration as it made an express representation that all
the ground that its members did not fall under any of the of its members were employees of the former. Having a
types of workers enumerated in the second sentence of definite employer, these 57 members should have formed
Article 243 (now 249). a labor union for collective bargaining. 11 The dispositive
portion of the decision of the Dole Regional Director,
Hanjin opined that only ambulant, intermittent, itinerant, reads:
rural workers, self-employed, and those without definite
WHEREFORE, premises considered, the petition is remedy was not to seek the cancellation of the
hereby GRANTED. Consequently, the Certificate of association's registration. At most, the use by Samahan
Registration as Legitimate Workers Association (LWA) of the name "Hanjin Shipyard" would only warrant a
issued to the SAMAHAN NG MGA MANGGAGAWA SA change in the name of the association.20 Thus, the
HANJIN SHIPYARD (SAMAHAN) with Registration dispositive portion of the BLR decision reads:
Numbers R0300-1002-WA-009 dated February 26, 2010
is hereby CANCELLED, and said association is dropped WHEREFORE, the appeal is hereby GRANTED. The
from the roster of labor organizations of this Office. Order of DOLE Region III Director Ernesto C. Bihis dated
20 April 2010 is REVERSED and SET ASIDE.
Accordingly, Samahan ng mga Manggagawa sa Hanjin
The Ruling of the Bureau of Labor Relations Shipyard shall remain in the roster of legitimate workers'
Aggrieved, Samahan filed an appeal13 before the BLR,
arguing that Hanjin had no right to petition for the On October 14, 2010, Hanjin filed its motion for
cancellation of its registration. Samahan pointed out that reconsideration.22
the words "Hanjin Shipyard," as used in its application for
registration, referred to a workplace and not as employer In its Resolution,23 dated November 28, 2011, the BLR
or company. It explained that when a shipyard was put up affirmed its September 6, 2010 Decision, but directed
in Subic, Zambales, it became known as Hanjin Shipyard. Samahan to remove the words "Hanjin Shipyard" from its
Further, the remaining 63 members signed the Sama- name. The BLR explained that the Labor Code had no
Samang Pagpapatunay which stated that they were either provision on the use of trade or business name in the
working or had worked at Hanjin. Thus, the alleged naming of a worker's association, such matters being
misrepresentation committed by Samahan had no leg to governed by the Corporation Code. According to the BLR,
stand on.14 the most equitable relief that would strike a balance
between the contending interests of Samahan and Hanjin
In its Comment to the Appeal,15 Hanjin averred that it was was to direct Samahan to drop the name "Hanjin
a party-ininterest. It reiterated that Samahan committed Shipyard" without delisting it from the roster of legitimate
misrepresentation in its application for registration before labor organizations. The fallo reads:
DOLE Pampanga. While Samahan insisted that the
remaining 63 members were either working, or had at WHEREFORE, premises considered, our Decision dated
least worked in Hanjin, only 10 attested to such fact, thus, 6 September 2010 is hereby AFFIRMED with a
leaving its 53 members without any workplace to claim. DIRECTIVE for SAMAHAN to remove "HANJIN
SHIPYARD" from its name.
On September 6, 2010, the BLR granted Samahan's
appeal and reversed the ruling of the Regional Director. It SO RESOLVED.24
stated that the law clearly afforded the right to self-
organization to all workers including those without definite Unsatisfied, Samahan filed a petition for certiorari25 under
employers.16 As an expression of the right to self- Rule 65 before the CA, docketed as CA-G.R. SP No.
organization, industrial, commercial and self-employed 123397.
workers could form a workers' association if they so
desired but subject to the limitation that it was only for In its March 21, 2012 Resolution,26 the CA dismissed the
mutual aid and protection.17 Nowhere could it be found petition because of Samahan's failure to file a motion for
that to form a workers' association was prohibited or that reconsideration of the assailed November 28, 2011
the exercise of a workers' right to self-organization was Resolution.
limited to collective bargaining.18
On April 17, 2012, Samahan filed its motion for
The BLR was of the opinion that there was no reconsideration27 and on July 18, 2012, Hanjin filed its
misrepresentation on the part of Samahan. The comment28 to oppose the same. On October 22, 2012, the
phrase, "KAMI, ang mga Manggagawa sa Hanjin CA issued a resolution granting Samahan's motion for
Shipyard," if translated, would be: "We, the workers at reconsideration and reinstating the petition. Hanjin was
Hanjin Shipyard." The use of the preposition "at" instead directed to file a comment five (5) days from receipt of
of "of' would indicate that "Hanjin Shipyard" was intended notice.29
to describe a place.19 Should Hanjin feel that the use of its
name had affected the goodwill of the company, the
On December 12, 2012, Hanjin filed its comment on the II. THE COURT OF APPEALS SERIOUSLY ERRED IN
petition,30 arguing that to require Samahan to change its ORDERING THE REMOVAL/DELETION OF THE WORD
name was not tantamount to interfering with the workers' "HANJIN" IN THE NAME OF THE UNION BY REASON
right to self-organization.31 Thus, it prayed, among others, OF THE COMPANY'S PROPERTY RIGHT OVER THE
for the dismissalof the petition for Samahan's failure to file COMP ANY NAME "HANJIN."38
the required motion for reconsideration.32
Samahan argues that the right to form a workers'
On January 17, 2013, Samahan filed its reply.33 association is not exclusive to intermittent, ambulant and
itinerant workers. While the Labor Code allows the
On March 22, 2013, Hanjin filed its memorandum.34 workers "to form, join or assist labor organizations of their
own choosing" for the purpose of collective bargaining, it
The Ruling of the Court of Appeals does not prohibit them from forming a labor organization
simply for purposes of mutual aid and protection. All
On July 4, 2013, the CA rendered its decision, holding that members of Samahan have one common place of work,
the registration of Samahan as a legitimate workers' Hanjin Shipyard. Thus, there is no reason why they
association was contrary to the provisions of Article 243 cannot use "Hanjin Shipyard" in their name.39
of the Labor Code.35 It stressed that only 57 out of the 120
members were actually working in Hanjin while the phrase Hanjin counters that Samahan failed to adduce sufficient
in the preamble of Samahan's Constitution and By-laws, basis that all its members were employees of Hanjin or its
"KAMI, ang mga Manggagawa sa Hanjin Shipyard," legitimate contractors, and that the use of the name
created an impression that all its members were "Hanjin Shipyard" would create an impression that all its
employees of HHIC. Such unqualified manifestation members were employess of HHIC.40
which was used in its application for registration, was a
clear proof of misrepresentation which warranted the Samahan reiterates its stand that workers with a definite
cancellation of Samahan' s registration. employer can organize any association for purposes of
mutual aid and protection. Inherent in the workers' right to
It also stated that the members of Samahan could not self-organization is its right to name its own organization.
register it as a legitimate worker's association because Samahan referred "Hanjin Shipyard" as their common
the place where Hanjin's industry was located was not a place of work. Therefore, they may adopt the same in their
rural area. Neither was there any evidence to show that association's name.41
the members of the association were ambulant,
intermittent or itinerant workers.36 The Court's Ruling

At any rate, the CA was of the view that dropping the The petition is partly meritorious.
words "Hanjin Shipyard" from the association name would
not prejudice or impair its rightto self-organization Right to self-organization includes
because it could adopt other appropriate names. The right to form a union, workers '
dispositive portion reads: association and labor management
WHEREFORE, the petition is DISMISSED and the BLR's
directive, ordering that the words "Hanjin Shipyard" be More often than not, the right to self-organization
removed from petitioner association's name, is connotes unionism. Workers, however, can also form and
AFFIRMED. The Decision dated April 20, 2010 of the join a workers' association as well as labor-management
DOLE Regional Director in Case No. Ro300-1003-CP- councils (LMC). Expressed in the highest law of the land
001, which ordered the cancellation of petitioner is the right of all workers to self-organization. Section 3,
association's registration is REINSTATED. Article XIII of the 1987 Constitution states:

ISSUES Section 3. The State shall afford full protection to labor,

local and overseas, organized and unorganized, and
promote full employment and equality of employment
opportunities for all. It shall guarantee the rights of all
workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including
the right to strike in accordance with law. xxx [Emphasis
And Section 8, Article III of the 1987 Constitution also work hours and other terms and conditions of
states: employment, even if the employees' group is not
registered with the DOLE.45
Section 8. The right of the people, including those
employed in the public and private sectors, to form unions, A union refers to any labor organization in the private
associations, or societies for purposes not contrary to law sector organized for collective bargaining and for other
shall not be abridged. legitimate purpose,46 while a workers' association is an
organization of workers formed for the mutual aid and
In relation thereto, Article 3 of the Labor Code provides: protection of its members or for any legitimate purpose
other than
Article 3. Declaration of basic policy. The State shall
afford protection to labor, promote full employment, collective bargaining.47
ensure equal work opportunities regardless of sex, race
or creed and regulate the relations between workers and Many associations or groups of employees, or even
employers. The State shall assure the rights of combinations of only several persons, may qualify as a
workers to self-organization, collective bargaining, labor organization yet fall short of constituting a labor
security of tenure, and just and humane conditions of union. While every labor union is a labor organization, not
work. every labor organization is a labor union. The difference
is one of organization, composition and operation.48
[Emphasis Supplied]
Collective bargaining is just one of the forms of employee
As Article 246 (now 252) of the Labor Code provides, the participation. Despite so much interest in and the
right to self-organization includes the right to form, join or promotion of collective bargaining, it is incorrect to say
assist labor organizations fer the purpose of collective that it is the device and no other, which secures industrial
bargaining through representatives of their own choosing democracy. It is equally misleading to say that collective
and to engage in lawful concerted activities for the same bargaining is the end-goal of employee representation.
purpose for their mutual aid and protection. This is in line Rather, the real aim is employee participation in
with the policy of the State to foster the free and voluntary whatever form it may appear, bargaining or no bargaining,
organization of a strong and united labor movement as union or no union.49 Any labor organization which may or
well as to make sure that workers participate in policy and may not be a union may deal with the employer. This
decision-making processes affecting their rights, duties explains why a workers' association or organization does
and welfare.42 not always have to be a labor union and why employer-
employee collective interactions are not always collective
The right to form a union or association or to self- bargaining.50
organization comprehends two notions, to wit: (a) the
liberty or freedom, that is, the absence of restraint which To further strengthen employee participation, Article 255
guarantees that the employee may act for himself without (now 261)51 of the Labor Code mandates that workers
being prevented by law; and (b) the power, by virtue of shall have the right to participate in policy and decision-
which an employee may, as he pleases, join or refrain making processes of the establishment where they are
from joining an association.43 employed insofar as said processes will directly affect
their rights, benefits and welfare. For this purpose,
In view of the revered right of every worker to self- workers and employers may form LMCs.
organization, the law expressly allows and even
encourages the formation of labor organizations. A labor A cursory reading of the law demonstrates that a common
organization is defined as "any union or association o[ element between unionism and the formation of LMCs is
employees which exists in whole or in part for the purpose the existence of an employer-employee relationship.
of collective bargaining or of dealing with employers Where neither party is an employer nor an employee of
concerning terms and conditions of employment."44 A the other, no duty to bargain collectively would exist.52 In
labor organization has two broad rights: (1) to bargain the same manner, expressed in Article 255 (now 261) is
collectively and (2) to deal with the employer concerning the requirement that such workers be employed in the
terms and conditions of employment. To bargain establishment before they can participate in policy and
collectively is a right given to a union once it registers itself decision making processes.
with the DOLE. Dealing with the employer, on the other
hand, is a generic description of interaction between In contrast, the existence of employer-employee
employer and employees concerning grievances, wages, relationship is not mandatory in the formation of workers'
association. What the law simply requires is that the collective bargaining. Ambulant, intermittent and itinerant
members of the workers' association, at the very least, workers, selfemployed people, rural workers and those
share the same interest. The very definition of a workers' without any definite employers may form labor
association speaks of "mutual aid and protection." organizations for their mutual aid and protection. (As
amended by Batas Pambansa Bilang 70, May 1, 1980)
Right to choose whether to form or
join a union or workers' association [Emphasis Supplied]
belongs to workers themselves
Further, Article 243 should be read together with Rule 2
In the case at bench, the Court cannot sanction the of Department Order (D. 0.) No. 40-03, Series of 2003,
opinion of the CA that Samahan should have formed a which provides:
union for purposes of collective bargaining instead of a
workers' association because the choice belonged to it. RULE II
The right to form or join a labor organization necessarily
includes the right to refuse or refrain from exercising the COVERAGE OF THE RIGHT TO SELF-
said right. It is self-evident that just as no one should be ORGANIZATION
denied the exercise of a right granted by law, so also, no
one should be compelled to exercise such a conferred Section 1. Policy. - It is the policy of the State to promote
right.53 Also inherent in the right to self-organization is the the free and responsible exercise of the right to self-
right to choose whether to form a union for purposes of organization through the establishment of a simplified
collective bargaining or a workers' association for mechanism for the speedy registration of labor unions and
purposes of providing mutual aid and protection. workers associations, determination of representation
status and resolution of inter/intra-union and other related
The right to self-organization, however, is subject to labor relations disputes. Only legitimate or registered
certain limitations as provided by law. For instance, the labor unions shall have the right to represent their
Labor Code specifically disallows managerial employees members for collective bargaining and other purposes.
from joining, assisting or forming any labor union. Workers' associations shall have the right to represent
Meanwhile, supervisory employees, while eligible for their members for purposes other than collective
membership in labor organizations, are proscribed from bargaining.
joining the collective bargaining unit of the rank and file
employees.54 Even government employees have the right Section 2. Who may join labor unions and workers'
to self-organization. It is not, however, regarded as associations. - All persons employed in commercial,
existing or available for purposes of collective bargaining, industrial and agricultural enterprises, including
but simply for the furtherance and protection of their employees of government owned or controlled
interests.55 corporations without original charters established under
the Corporation Code, as well as employees of religious,
Hanjin posits that the members of Samahan have definite charitable, medical or educational institutions whether
employers, hence, they should have formed a union operating for profit or not, shall have the right to self-
instead of a workers' association. The Court disagrees. organization and to form, join or assist labor unions for
There is no provision in the Labor Code that states that purposes of collective bargaining: provided, however, that
employees with definite employers may form, join or supervisory employees shall not be eligible for
assist unions only. membership in a labor union of the rank-and-file
employees but may form, join or assist separate labor
The Court cannot subscribe either to Hanjin's position that unions of their own. Managerial employees shall not be
Samahan's members cannot form the association eligible to form, join or assist any labor unions for
because they are not covered by the second sentence of purposes of collective bargaining. Alien employees with
Article 243 (now 249), to wit: valid working permits issued by the Department may
exercise the right to self-organization and join or assist
Article 243. Coverage and employees' right to labor unions for purposes of collective bargaining if they
selforganization. All persons employed in commercial, are nationals of a country which grants the same or similar
industrial and agricultural enterprises and in religious, rights to Filipino workers, as certified by the Department
charitable, medical, or educational institutions, whether of Foreign Affairs.
operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor For purposes of this section, any employee, whether
organizations of their own choosing for purposes of employed for a definite period or not, shall beginning on
the first day of his/her service, be eligible for membership another was merely a project employee, such facts were
in any labor organization. not considered misrepresentations in the absence of
showing that the respondent deliberately did so for the
All other workers, including ambulant, intermittent and purpose of increasing their union membership. The Court
other workers, the self-employed, rural workers and those ruled in favor of Salamat.
without any definite employers may form labor
organizations for their mutual aid and protection and other In S.S. Ventures International v. S.S. Ventures Labor
legitimate purposes except collective bargaining. Union,58 the petition for cancellation of certificate of
registration was denied. The Court wrote:
[Emphases Supplied]
If the union's application is infected by falsification
Clearly, there is nothing in the foregoing implementing and like serious irregularities, especially those
rules which provides that workers, with definite appearing on the face of the application and its
employers, cannot form or join a workers' association for attachments, a union should be denied recognition as
mutual aid and protection. Section 2 thereof even a legitimate labor organization. Prescinding from these
broadens the coverage of workers who can form or join a considerations, the issuance to the Union of Certificate of
workers' association. Thus, the Court agrees with Registration No. R0300-oo-02-UR-0003 necessarily
Samahan's argument that the right to form a workers' implies that its application for registration and the
association is not exclusive to ambulant, intermittent and supporting documents thereof are prima facie free from
itinerant workers. The option to form or join a union or a any vitiating irregularities. Another factor which militates
workers' association lies with the workers themselves, against the veracity of the allegations in the Sinumpaang
and whether they have definite employers or not. Petisyon is the lack of particularities on how, when and
where respondent union perpetrated the alleged
No misrepresentation on the part fraud on each member. Such details are crucial for in
of Samahan to warrant cancellation the proceedings for cancellation of union registration
of registration on the ground of fraud or misrepresentation, what
needs to be established is that the specific act or omission
In this case, Samahan's registration was cancelled not of the union deprived the complaining employees-
because its members were prohibited from forming a members of their right to choose.
workers' association but because they allegedly
committed misrepresentation for using the phrase, "KAMI, [Emphases Supplied]
ang mga Manggagawa sa HANJIN Shipyard."
Based on the foregoing, the Court concludes that
Misrepresentation, as a ground for the cancellation of misrepresentation, to be a ground for the cancellation of
registration of a labor organization, is committed "in the certificate of registration, must be done maliciously
connection with the adoption, or ratification of the and deliberately. Further, the mistakes appearing in the
constitution and by-laws or amendments thereto, the application or attachments must be grave or refer to
minutes of ratification, the list of members who took part significant matters. The details as to how the alleged fraud
in the ratification of the constitution and by-laws or was committed must also be indubitably shown.
amendments thereto, and those in connection with the
election of officers, minutes of the election of officers, and The records of this case reveal no deliberate or malicious
the list of voters, xxx."56 intent to commit misrepresentation on the part of
Samahan.1âwphi1 The use of such words "KAMI, ang
In Takata Corporation v. Bureau of Relations,57 the DOLE mga Manggagawa sa HANJIN Shipyard" in the preamble
Regional Director granted the petition for the cancellation of the constitution and by-laws did not constitute
of certificate of registration of Samahang Lakas misrepresentation so as to warrant the cancellation of
Manggagawa sa Takata (Salamat) after finding that the Samahan's certificate of registration. Hanjin failed to
employees who attended the organizational meeting fell indicate how this phrase constitutes a malicious and
short of the 20% union registration requirement. The BLR, deliberate misrepresentation. Neither was there any
however, reversed the ruling of the DOLE Regional showing that the alleged misrepresentation was serious
Director, stating that petitioner Takata Corporation in character. Misrepresentation is a devious charge that
(Takata) failed to prove deliberate and malicious cannot simply be entertained by mere surmises and
misrepresentation on the part of respondent Salamat. conjectures.
Although Takata claimed that in the list of members, there
was an employee whose name appeared twice and
Even granting arguendo that Samahan' s members For the same reason, it would be misleading for the
misrepresented themselves as employees or workers of members of Samahan to use "Hanjin Shipyard" in its
Hanjin, said misrepresentation does not relate to the name as it could give the wrong impression that all of its
adoption or ratification of its constitution and by-laws or to members are employed by Hanjin.
the election of its officers.
Further, Section 9, Rule IV of D.O. No. 40-03, Series of
Removal of the word "Hanjin Shipyard" 2003 explicitly states:
from the association 's name, however,
does not infringe on Samahan 's right to The change of name of a labor organization shall not
self-organization affect its legal personality. All the rights and obligations of
a labor organization under its old name shall continue to
Nevertheless, the Court agrees with the BLR that "Hanjin be exercised by the labor organization under its new
Shipyard" must be removed in the name of the name.
association. A legitimate workers' association refers to an
association of workers organized for mutual aid and Thus, in the directive of the BLR removing the words
protection of its members or for any legitimate purpose "Hanjin Shipyard," no abridgement of Samahan's right to
other than collective bargaining registered with the self-organization was committed.
DOLE.59Having been granted a certificate of registration,
Samahan's association is now recognized by law as a WHEREFORE, the petition is PARTIALLY GRANTED.
legitimate workers' association. The July 4, 2013 Decision and the January 28, 2014
Resolution of the Court of Appeals are
hereby REVERSED and SET ASIDE. The September 6,
According to Samahan, inherent in the workers' right to 2010 Resolution of the Bureau of Labor Relations, as
selforganization is its right to name its own organization. modified by its November 28, 2011 Resolution,
It seems to equate the dropping of words "Hanjin is REINSTATED. SO ORDERED.
Shipyard" from its name as a restraint in its exercise of the
right to self-organization. Hanjin, on the other hand, 2. *Dr. Carlos Sevilla and Lina O. Sevilla
invokes that "Hanjin Shipyard" is a registered trade name v. The Court of Appeals
and, thus, it is within their right to prohibit its use.
G.R. N o. L-41182-3 April 16, 1988
As there is no provision under our labor laws which speak
of the use of name by a workers' association, the Court
refers to the Corporation Code, which governs the names
On Oct. 19, 1960, Mrs. Noguera leased her property to
of juridical persons. Section 18 thereof provides:
Tourist World Service (TWS) represented by Eliseo
Canilao in Mabini
No corporate name may be allowed by the Securities and
Exchange Commission if the proposed name is identical
St., Manila with Lina Sevilla holding herself solidarily liable
or deceptively or confusingly similar to that of any
for the payment of the monthly rentals agreed on. A
existing corporation or to any other name already
branch was opened in said property by TWS, the same
protected by law or is patently deceptive, confusing or
was run by the herein appellant payable to Tourist World
contrary to existing laws. When a change in the corporate
Service Inc. by any airline for any fare brought in on the
name is approved, the Commission shall issue an
efforts of Mrs. Lina Sevilla, 4% was to go to Lina Sevilla
amended certificate of incorporation under the amended
and 3% was to be withheld by TWS.
However, on November 24, 1961, the board of TWS
The policy underlying the prohibition in Section 18 against
decided to abolish said branch on the ground that it was
the registration of a corporate name which is "identical or
losing and the alleged connection of Sevilla with a rival
deceptively or confusingly similar" to that of any existing
firm, Philippine Travel Bureau. The board also authorized
corporation or which is "patently deceptive" or "patently
the corporate secretary (Gabino Canilao) to receive the
confusing" or "contrary to existing laws," is the avoidance
properties of the Tourist World Service then located at the
of fraud upon the public which would have occasion to
said branch office. Later on, the corporate secretary went
deal with the entity concerned, the evasion of legal
to the branch and upon the finding that it was locked and
obligations and duties, and the reduction of difficulties of
being unable to contact Sevilla, he padlocked the
administration and supervision over corporations.60
premises of the branch. When neither the appellant Lina
Sevilla nor any of her employees could enter the locked
premises, a complaint was filed by the herein appellants in pursuing the business, obviously relied on her own gifts
against the appellees with a prayer for the issuance of and capabilities.
mandatory preliminary injunction (with claim for damages
invoking the provisions of the NCC on human relations). (3) Sevilla was not in the company's payroll. For her
Both appellees answered with counterclaims. For efforts, she retained 4% in commissions from airline
apparent lack of interest of the parties therein, the trial bookings, the remaining 3% going to Tourist World.
court ordered the dismissal of the case without prejudice.
However, on June 17,1963 both parties refiled their (4) Contrary to the claims of both parties, what exist
respective claims he court a quo ordered both cases to be between them seems to be that of a contract of agency
dismissed for lack of merit. On appeal, petitioners claim since Sevilla had conceded certain rights in favor of TWS
that there was no employer - employee relationship (TWS claims it was an employer-employee relationship
between her and TWS and what exists was that of one of while Sevilla claims that it was of a joint venture or
a joint business venture and that TWS had no right to partnership). A joint venture presupposes an equal
unilaterally evict Sevilla from the Mabini Office. standing between the joint partners, in which each party
has an equal proprietary interest in the capital or property
Issues contributed and where each party exercises equal rights
in the conduct of the business. Furthermore, both parties
WON Sevilla is an employee of Tourist World Services never held themselves as partners for the branch was
rendering the lower court without jurisdiction for such case embellished with the sign of TWS instead of a distinct
is within the ambit of the jurisdiction of the Bureau of Labor partner name. In a contract of agency, the essence of the
Relations. contract that the agent renders services "in representation
or on behalf of another” In the case at bar, Sevilla solicited
Decision airline fares, but she did so for and on behalf of her
principal, Tourist World Service, Inc. But unlike simple
Sevilla is not an employee of TWS. The court relied on the grants of a power of attorney, the agency that we hereby
Right of Control Test "where the person for whom the declare to be compatible with the intent of the parties,
services are cannot be revoked at will. The reason is that it is one
coupled with an interest, the agency having been created
performed reserves a right to control not only the end to for mutual interest, of the agent and the principal
be achieved but also the means to be used in reaching *remember that she had a solidary obligation for the
such end.” In addition to the standard of right-of control, payment of rentals.
the existing economic conditions prevailing between the
parties, like the inclusion of the employee in the payrolls, In this same vein the lower court must likewise be held to
in determining the existence of an employer-employee be in error with respect to the padlocking incident. For the
relationship. The records will show that the petitioner, Lina fact that
Sevilla, was not subject to control by the private
respondent Tourist World Service, Inc., either as to the Tourist World Service, Inc. was the lessee named in the
result of the enterprise or as to the means used in lease contract did not accord it any authority to terminate
connection therewith for the following reasons: that contract without notice to its actual occupant, and to
padlock the premises in such fashion. As this Court has
(1) She bound herself in solidumas (solidary) and for ruled, the petitioner, Lina Sevilla, had acquired a personal
rental payments of the Mabini property although the lower stake in the business itself, and necessarily, in the
court reduced such in to a mere guaranty this does not equipment pertaining thereto. Furthermore, Sevilla was
make her an employee of TWS. A true employee cannot not a stranger to that contract having been explicitly
be made to part with his own money in pursuance of his named therein as a third party in charge of rental
employer's business, or otherwise, assume any liability payments (solidarily with Tourist World, Inc.). She could
thereof. not be ousted from possession as summarily as one
would eject an interloper.
(2) As found by the Appellate Court, '[w]hen the branch
office was opened, the same was run by the herein Petition Granted, Respondents, with the exception of
appellant Lina O. Sevilla payable to Tourist World Noguera, were ordered to pay jointly and severally sum of
Service, Inc. by any airline for any fare brought in on the 25,00.00 as and for moral damages, the sum of
effort of Mrs. Lina Sevilla. Under these circumstances, it P10,000.00, as and for exemplary damages, and the sum
cannot be said that Sevilla was under the control of of P5,000.00, as and for nominal and/ or temperate
Tourist World Service, Inc. "as to the means used." Sevilla damages.
3. *GREGORIO V. TONGKO, vs. THE Manulife and Gregorio Tongko and ordered Manulife to
MANUFACTURERS LIFE INSURANCE CO. pay Tongko backwages and separation pay for illegal
(PHILS.), INC. and RENATO A. VERGEL DE dismissal. The Court ruled that Manulife had the power of
DIOS control over Tongko, sufficient to characterize him as an

Facts: Hence, the present Motion for Reconsideration.

The contractual relationship between Gregorio Tongko

and The Manufacturers Life Insurance Co. (Manulife) had Held:
two basic phases. The first or initial phase began on July
1, 1977, under a Career Agent's Agreement (Agreement) Agency vis-a-vis Employment relationship
which provided that the Agent is an independent
1. The factual antecedents were set in the insurance
industry so that the Insurance Code primarily governs.
The second phase started in 1983 when Tongko was Moreover, “agency” is a civil law matter governed by the
named Unit Manager in Manulife's Sales Agency Civil Code. At the very least, three sets of laws - namely,
Organization. In 1990, he became a Branch Manager. In the Insurance Code, the Labor Code and the Civil
1996, Tongko became a Regional Sales Manager. Code - have to be considered in looking at the present

Tongko's gross earnings consisted of commissions,

persistency income, and management overrides. Since 2. The main issue of whether an agency or an
the beginning, Tongko consistently declared himself employment relationship exists depends on the incidents
self-employed in his income tax returns. Manulife of the relationship. The Labor Code concept of
withheld the corresponding 10% tax on Tongko's "control" has to be compared and distinguished with
earnings. the "control" that must necessarily exist in a
principal-agent relationship. The principal cannot but
also have his or her say in directing the course of the
In a letter dated November 6, 2001, Renato Vergel de principal-agent relationship, especially in cases where the
Dios, in behalf of Manulife, wrote to Tongko on concerns company-representative relationship in the insurance
that were brought up during the October 18, 2001 Metro industry is an agency.
North Sales Managers Meeting, pointing to his region's
lackluster sales performance and his overall poor attitude.
3. The Civil Code defines an agent as a "person [who]
binds himself to render some service or to do something
Subsequently, de Dios wrote Tongko another letter, dated in representation or on behalf of another, with the consent
December 18, 2001, notifying Tongko of the “termination or authority of the latter." While this is a very broad
of your Agency Agreement” pursuant to the prerogative of definition that on its face may even encompass an
Manulife under Section 14 of the Agents Contract. employment relationship, the distinctions between agency
and employment are sufficiently established by law and
jurisprudence. Generally, the determinative element is
Tongko responded by filing an illegal dismissal complaint. the control exercised over the one rendering service.
The labor arbiter decreed that no employer-employee The employer controls the employee both in the results
relationship existed between the parties. However, the and in the means and manner of achieving this result. The
NLRC reversed the labor arbiter's decision. The Court of principal in an agency relationship, on the other hand, also
Appeals (CA) everted to the labor arbiter's decision. has the prerogative to exercise control over the agent in
undertaking the assigned task based on the parameters
outlined in the pertinent laws.
The case eventually reached the Supreme Court where,
in its Decision of November 7, 2008, the Court found that Insurance agency (element of control)
an employer-employee relationship existed between
Carpio Morales also cite Insular Life Assurance Co. vs.
4. Under the Insurance Code, the agent must, as a matter NLRC (second Insular case) to support the view that
of qualification, be licensed and must also act within the Tongko is Manulife's employee. On the other hand,
parameters of the authority granted under the license and Manulife cites the Carungcong case and AFP Mutual
under the contract with the principal. Other than the need Benefit Association, Inc. v. National Labor Relations
for a license, the agent is limited in the way he offers and Commission (AFPMBAI case) to support its allegation
negotiates for the sale of the company's insurance that Tongko was not its employee.
products, in his collection activities, and in the delivery of
the insurance contract or policy. Rules regarding the 8. The present case at first glance appears aligned with
desired results (e.g., the required volume to continue to the facts in the Carungcong, the Grepalife, and the
qualify as a company agent, rules to check on the second Insular Life cases. A critical difference, however,
parameters on the authority given to the agent, and rules exists as these cited cases dealt with the proper legal
to ensure that industry, legal and ethical rules are characterization of a subsequent management contract
followed) are built-in elements of control specific to an that superseded the original agency contract between
insurance agency and should not and cannot be read as the insurance company and its agent. In all these cited
elements of control that attend an employment cases, a determination of the presence of the Labor Code
relationship governed by the Labor Code. element of control was made on the basis of the
stipulations of the subsequent contracts.

5. Under the general law on agency as applied to

insurance, an agency must be express in light of the need 9. In contrast, the only contract submitted as evidence in
for a license and for the designation by the insurance the present case is the Career Agent's Agreement - a pure
company. In the present case, the Agreement fully serves agency agreement in the Civil Code context similar to the
as grant of authority to Tongko as Manulife's insurance original contract in the first Insular Life case and the
agent. This agreement is supplemented by the company's contract in the AFPMBAI case. And while Tongko was
agency practices and usages, duly accepted by the agent later on designated unit manager in 1983, Branch
in carrying out the agency. By authority of the Insurance Manager in 1990, and Regional Sales Manager in 1996,
Code, an insurance agency is for compensation, a matter no formal contract regarding these undertakings
the Civil Code Rules on Agency presumes in the absence appears in the records of the case. Any such contract
of proof to the contrary. Other than the compensation, the or agreement, had there been any, could have at the very
principal is bound to advance to, or to reimburse, the least provided the bases for properly ascertaining the
agent the agreed sums necessary for the execution of the juridical relationship established between the parties.
Intent of the governing Agreement between the
6. With particular relevance to the present case is the parties was to create an Agency relationship
provision that "In the execution of the agency, the agent
shall act in accordance with the instructions of the 10. The July 1, 1977 Career Agent's Agreement (the
principal." This provision is pertinent for purposes of the Agreement) governed and defined the parties' relations
necessary control that the principal exercises over the until the its termination in 2001. It assumes primacy
agent in undertaking the assigned task, and is an area because it directly dealt with the nature of the parties'
where the instructions can intrude into the labor law relationship up to the very end; moreover, both parties
concept of control so that minute consideration of the facts never disputed its authenticity or the accuracy of its terms.
is necessary. A related article is Article 1891 of the Civil
Code which binds the agent to render an account of his 11. By the Agreement's express terms, Tongko served as
transactions to the principal. an "insurance agent" for Manulife, not as an employee. To
be sure, the Agreement's legal characterization of the
The Cited Cases are not squarely applicable nature of the relationship cannot be conclusive and
binding on the courts. The characterization of the juridical
relationship the Agreement embodied is a matter of law
7. The November 7, 2008 Decision refers to the first that is for the courts to determine.
Insular and Grepalife cases to establish that the company
rules and regulations that an agent has to comply with are 12. At the same time, though, the parties' legal
indicative of an employer-employee relationship. The characterization of their intent, although not conclusive, is
Dissenting Opinions of Justice Velasco, Jr. and Justice critical in this case because this intent is not illegal or
outside the contemplation of law, particularly of the
Insurance and the Civil Codes. We can take judicial notice 15. Evidence indicates that Tongko consistently clung to
that as a matter of Insurance Code-based business the view that he was an independent agent selling
practice, an agency relationship prevails in the insurance Manulife insurance products since he invariably declared
industry for the purpose of selling insurance. The himself a business or self-employed person in his income
Agreement, by its express terms, is in accordance with tax returns. This consistency with, and action made
the Insurance Code model when it provided for a pursuant to the Agreement were pieces of evidence that
principal-agent relationship, and thus cannot lightly be set were never mentioned nor considered in our Decision of
aside nor simply be considered as an agreement that November 7, 2008. Had they been considered, they
does not reflect the parties' true intent. This intent, could, at the very least, serve as Tongko's admissions
incidentally, is reinforced by the system of compensation against his interest. Strictly speaking, Tongko's tax
the Agreement provides, which likewise is in accordance returns cannot but be legally significant because he
with the production-based sales commissions the certified under oath the amount he earned as gross
Insurance Code provides. business income, claimed business deductions, leading
to his net taxable income. This should be evidence of the
Tongko remained an independent agent of Manulife first order that cannot be brushed aside by a mere denial.
despite his increased managerial role
16. Hand in hand with the concept of admission against
13. Evidence shows that Tongko's role as an insurance interest in considering the tax returns, the concept of
agent never changed during his relationship with estoppel - a legal and equitable concept- necessarily
Manulife. If changes occurred at all, it was that Tongko must come into play. Tongko's previous admissions in
moved up in this role through Manulife's recognition that several years of tax returns as an independent agent, as
he could use other agents approved by Manulife, but against his belated claim that he was all along an
operating under his guidance and in whose employee, are too diametrically opposed to be simply
commissions he had a share. For want of a better term, dismissed or ignored.
Tongko perhaps could be labeled as a "lead agent" who
guided under his wing other Manulife agents similarly Lack of evidence showing that Manulife exercised
tasked with the selling of Manulife insurance. means-and-manner control

14. That Tongko assumed a leadership role but 17. There is lack of evidence on record showing that
nevertheless wholly remained an agent is the inevitable Manulife ever exercised means-and-manner control, even
conclusion that results from the reading of the Agreement to a limited extent, over Tongko during his ascent in
and his continuing role thereunder as sales agent. To the Manulife's sales ladder. The best evidence of control - the
dissent, Tongko's administrative functions as recruiter, agreement or directive relating to Tongko's duties and
trainer, or supervisor of other sales agents constituted a responsibilities - was never introduced as part of the
substantive alteration of Manulife's authority over Tongko records of the case. The alleged directives covered by de
and the performance of his end of the relationship with Dios' letter were policy directions and targeted results that
Manulife. We could not deny though that Tongko the company wanted Tongko and the other sales groups
remained, first and foremost, an insurance agent, and that to realign with in their own selling activities.
his additional role as Branch Manager did not lessen his
main and dominant role as insurance agent; this role 18. What, to Tongko, serve as evidence of labor law
continued to dominate the relations between Tongko and control are the codes of conduct that Manulife imposes on
Manulife even after Tongko assumed his leadership role its agents in the sale of insurance. The mere presentation
among agents. This conclusion cannot be denied of codes or of rules and regulations, however, is not per
because it proceeds from the undisputed fact that Tongko se indicative of labor law control as the law and
and Manulife never altered their July 1, 1977 jurisprudence teach us.
Agreement, a distinction the present case has with the
contractual changes made in the second Insular Life 19. The Insurance Code imposes obligations on both the
case. Tongko's results-based commissions, too, attest to insurance company and its agents in the performance of
the primacy he gave to his role as insurance sales agent. their respective obligations under the Code, particularly
on licenses and their renewals, on the representations to
Tongko's consistent declaration of being self- be made to potential customers, the collection of
employed in his income tax returns is an admission premiums, on the delivery of insurance policies, on the
against his interest matter of compensation, and on measures to ensure
ethical business practice in the industry. The general law business operations through the use of a bigger sales
on agency expressly allows the principal an element of force whose members are all on a principal-agent
control over the agent in a manner consistent with an relationship. An important point to note here is that
agency relationship. In this sense, these control Tongko was not supervising regular full-time
measures cannot be read as indicative of labor law employees of Manulife engaged in the running of the
control. Foremost among these are the directives that the insurance business; Tongko was effectively guiding
principal may impose on the agent to achieve the his corps of sales agents, who are bound to Manulife
assigned tasks, to the extent that they do not involve the through the same Agreement that he had with Manulife,
means and manner of undertaking these tasks. The law all the while sharing in these agents' commissions through
likewise obligates the agent to render an account; in this his overrides. The title of Branch Manager used by the
sense, the principal may impose on the agent specific parties is really a misnomer given that what is involved is
instructions on how an account shall be made, particularly not a specific regular branch of the company but a corps
on the matter of expenses and reimbursements. To these of non-employed agents. Still another point to consider is
extents, control can be imposed through rules and that Tongko was not even setting policies in the way a
regulations without intruding into the labor law regular company manager does; company aims and
concept of control for purposes of employment. objectives were simply relayed to him with suggestions on
how these objectives can be reached through the
20. An important lesson that the first Insular Life case expansion of a non-employee sales force.
teaches us is that a commitment to abide by the rules
and regulations of an insurance company does not Distinguished from other cases
ipso facto make the insurance agent an employee.
Neither do guidelines somehow restrictive of the 23. In Grepalife, the details of how to do the job are
insurance agent's conduct necessarily indicate "control" specified and pre-determined; in the present case, the
as this term is defined in jurisprudence. Guidelines operative words are the "sales target," the methodology
indicative of labor law "control," as the first Insular Life being left undefined except to the extent of being
case tells us, should not merely relate to the mutually "coordinative." To be sure, a "coordinative" standard for a
desirable result intended by the contractual relationship; manager cannot be indicative of control; the standard only
they must have the nature of dictating the means or essentially describes what a Branch Manager is - the
methods to be employed in attaining the result, or of fixing person in the lead who orchestrates activities within the
the methodology and of binding or restricting the party group. To "coordinate," and thereby to lead and to
hired to the use of these means. In fact, results-wise, the orchestrate, is not so much a matter of control by
principal can impose production quotas and can Manulife; it is simply a statement of a branch manager's
determine how many agents, with specific territories, role in relation with his agents from the point of view of
ought to be employed to achieve the company's Manulife whose business Tongko's sales group carries.
objectives. These are management policy decisions that
the labor law element of control cannot reach. 24. The present case must be distinguished from the
second Insular Life case that showed the hallmarks of an
21. Manulife's codes of conduct, all of which do not employer-employee relationship in the management
intrude into the insurance agents' means and manner of system established. These were: exclusivity of service,
conducting their sales and only control them as to the control of assignments and removal of agents under the
desired results and Insurance Code norms, cannot be private respondent's unit, and furnishing of company
used as basis for a finding that the labor law concept of facilities and materials as well as capital described as Unit
control existed between Manulife and Tongko. Development Fund. All these are obviously absent in the
present case. If there is a commonality in these cases, it
22. Even de Dios' letter is not determinative of control as is in the collection of premiums which is a basic authority
it indicates the least amount of intrusion into Tongko's that can be delegated to agents under the Insurance
exercise of his role as manager in guiding the sales Code.
agents. Strictly viewed, de Dios' directives are merely
operational guidelines on how Tongko could align his Article 4 of the Labor Code only applies when there is
operations with Manulife's re-directed goal of being a "big clearly an employment relationship
league player." The method is to expand coverage
through the use of more agents. This requirement for the 25. The dissent pointed out that any doubt in the
recruitment of more agents is not a means-and-method existence of an employer-employee relationship should
control as it relates,to Manulife's objective of expanded be resolved in favor of the existence of the relationship.
This observation, apparently drawn from Article 4 of the In the final analysis, petitioner has no way of compelling
Labor Code, is misplaced, as Article 4 applies only when the presence of the caddies as they are not required to
a doubt exists in the "implementation and application" of render a definite number of hours of work on a single day.
the Labor Code and its implementing rules; it does not Even the group rotation of caddies is not absolute
apply where no doubt exists as in a situation where the because a player is at liberty to choose a caddy of his
claimant clearly failed to substantiate his claim of preference regardless of the caddy’s order in the rotation.
employment relationship by the quantum of evidence the It can happen that a caddy who has rendered services to
Labor Code requires. a player on one day may still find sufficient time to work
elsewhere. Under such circumstances, he may then leave
4. MANILA GOLF & COUNTRY CLUB, INC. vs. the premises of petitioner and go to such other place of
INTERMEDIATE APPELLATE COURT and work that he wishes. Or a caddy who is on call for a
FERMIN LLAMAR particular day may deliberately absent himself if he has
G.R. No. 64948 September 27, 1994 more profitable caddying, or another, engagement in
some other place. These are things beyond petitioner’s
control and for which it imposes no direct sanctions on the
Respondent Fermin Llamar and his fellow caddies filed
with the Social Security Commission for coverage and
availment of benefits under the Social Security Act. Court drew basis for the reversal from this Court's ruling
Subsequently, all but 2 of the original 17 petitioners in Investment Planning Corporation of the Philippines
withdrew their claim for social security coverage. The vs. Social Security System, supra and declared that upon
case continued and was adjudicated by the SSC only as
the evidence, the questioned employer-employee
regards the 2 holdouts dismissing their petition and relationship between the Club and Fermin Llamar passed
stating that the caddies were never employees of the so-called "control test," establishment in the case
petitioner. An appeal was taken to the IAC but the other — i.e., "whether the employer controls or has reserved
caddy’s appeal was dismissed at his instance, leaving
the right to control the employee not only as to the result
respondent Llamar the lone appellant. The IAC found for
of the work to be done but also as to the means and
Llamar finding employer-employee relationship between methods by which the same is to be accomplished," —
him and petitioner. the Club's control over the caddies encompassing:

(a) the promulgation of no less than twenty-four (24) rules
and regulations just about every aspect of the conduct
Whether or not respondent Llamar is an employee of
that the caddy must observe, or avoid, when serving as
such, any violation of any which could subject him to
disciplinary action, which may include suspending or
cutting off his access to the club premises;
(b) the devising and enforcement of a group rotation
The various matters of conduct, dress, language, etc. system whereby a caddy is assigned a number which
covered by the petitioner’s regulations, does not, in the designates his turn to serve a player;
mind of the Court, so circumscribe the actions or judgment
(c) the club's "suggesting" the rate of fees payable to the
of the caddies concerned as to leave them little or no
freedom of choice whatsoever in the manner of carrying
out their services.
Deemed of title or no moment by the Appellate Court was
the fact that the caddies were paid by the players, not by
The Court agrees with petitioner that the group rotation
the Club, that they observed no definite working hours and
system so-called, is less a measure of employer control
earned no fixed income. It quoted with approval from an
than an assurance that the work is fairly distributed, a
American decision 10 to the effect that: "whether the club
caddy who is absent when his turn number is called
paid the caddies and afterward collected in the first
simply losing his turn to serve and being assigned instead
instance, the caddies were still employees of the club."
the last number for the day.
This, no matter that the case which produced this ruling
had a slightly different factual cast, apparently having
involved a claim for workmen's compensation made by a
caddy who, about to leave the premises of the club where very nature of that proceedings, is not such as to foreclose
he worked, was hit and injured by an automobile then all further dispute between the parties as to the existence,
negotiating the club's private driveway. or non-existence, of employer-employee relationship
between them.
That same issue of res adjudicata, ignored by the IAC
beyond bare mention thereof, as already pointed out, is It is well settled that for res adjudicata, or the principle of
now among the mainways of the private respondent's bar by prior judgment, to apply, the following essential
defenses to the petition for review. Considered in the requisites must concur: (1) there must be a final judgment
perspective of the incidents just recounted, it illustrates as or order; (2) said judgment or order must be on the merits;
well as anything can, why the practice of forum-shopping (3) the court rendering the same must have jurisdiction
justly merits censure and punitive sanction. Because the over the subject matter and the parties; and (4) there must
same question of employer-employee relationship has be between the two cases identity of parties, identity of
been dragged into three different fora, willy-nilly and in subject matter and identity of cause of action. 13
quick succession, it has birthed controversy as to which
of the resulting adjudications must now be recognized as Clearly implicit in these requisites is that the action or
decisive. On the one hand, there is the certification case proceedings in which is issued the "prior Judgment" that
[R4-LRDX-M-10-504-78), where the decision of the Med- would operate in bar of a subsequent action between the
Arbiter found for the existence of employer-employee same parties for the same cause, be adversarial, or
relationship between the parties, was affirmed by Director contentious, "one having opposing parties; (is) contested,
Carmelo S. Noriel, who ordered a certification election as distinguished from an ex parte hearing or proceeding.
held, a disposition never thereafter appealed according to . . . of which the party seeking relief has given legal notice
the private respondent; on the other, the compulsory to the other party and afforded the latter an opportunity to
arbitration case (NCR Case No. AB-4-1771-79), instituted contest it" 14 and a certification case is not such a
by or for the same respondent at about the same time, proceeding, as this Court already ruled:
which was dismissed for lack of merit by the Labor Arbiter,
which was afterwards affirmed by the NLRC itself on the A certification proceedings is not a
ground that there existed no such relationship between "litigation" in the sense in which the term
the Club and the private respondent. And, as if matters is commonly understood, but mere
were not already complicated enough, the same investigation of a non-adversary, fact-
respondent, with the support and assistance of the finding character, in which the
PTCCEA, saw fit, also contemporaneously, to initiate still investigating agency plays the part of a
a third proceeding for compulsory social security disinterested investigator seeking merely
coverage with the Social Security Commission (SSC to ascertain the desires of the employees
Case No. 5443), with the result already mentioned. as to the matter of their representation.
The court enjoys a wide discretion in
Before this Court, the petitioner Club now contends that determining the procedure necessary to
the decision of the Med-Arbiter in the certification case insure the fair and free choice of
had never become final, being in fact the subject of three bargaining representatives by the
pending and unresolved motions for reconsideration, as employees.15
well as of a later motion for early
resolution. 11 Unfortunately, none of these motions is Indeed, if any ruling or judgment can be said to operate
incorporated or reproduced in the record before the Court. as res adjudicata on the contested issue of employer-
And, for his part, the private respondent contends, not employee relationship between present petitioner and the
only that said decision had been appealed to and been private respondent, it would logically be that rendered in
affirmed by the Director of the BLR, but that a certification the compulsory arbitration case (NCR Case No. AB-4-
election had in fact been held, which resulted in the 771-79, supra), petitioner having asserted, without
PTCCEA being recognized as the sole bargaining agent dispute from the private respondent, that said issue was
of the caddies of the Manila Golf and Country Club with there squarely raised and litigated, resulting in a ruling of
respect to wages, hours of work, terms of employment, the Arbitration Branch (of the same Ministry of Labor) that
etc. 12 Whatever the truth about these opposing such relationship did not exist, and which ruling was
contentions, which the record before the Court does not thereafter affirmed by the National Labor Relations
adequately disclose, the more controlling consideration Commission in an appeal taken by said respondent. 16
would seem to be that, however, final it may become, the
decision in a certification case, by the In any case, this Court is not inclined to allow private
respondent the benefit of any doubt as to which of the
conflicting ruling just adverted to should be accorded simply losing his turn to serve and being assigned instead
primacy, given the fact that it was he who actively sought the last number for the day. 17
them simultaneously, as it were, from separate fora, and
even if the graver sanctions more lately imposed by the By and large, there appears nothing in the record to refute
Court for forum-shopping may not be applied to him the petitioner's claim that:
(Petitioner) has no means of compelling
Accordingly, the IAC is not to be faulted for ignoring the presence of a caddy. A caddy is not
private respondent's invocation of res adjudicata; on required to exercise his occupation in the
contrary, it acted correctly in doing so. premises of petitioner. He may work with
any other golf club or he may seek
Said Court’s holding that upon the facts, there exists (or employment a caddy or otherwise with
existed) a relationship of employer and employee any entity or individual without restriction
between petitioner and private respondent is, however, by petitioner. . . .
another matter. The Court does not agree that said facts
necessarily or logically point to such a relationship, and to . . . In the final analysis, petitioner has no
the exclusion of any form of arrangements, other than of was of compelling the presence of the
employment, that would make the respondent's services caddies as they are not required to
available to the members and guest of the petitioner. render a definite number of hours of work
on a single day. Even the group rotation
As long as it is, the list made in the appealed decision of caddies is not absolute because a
detailing the various matters of conduct, dress, language, player is at liberty to choose a caddy of
etc. covered by the petitioner's regulations, does not, in his preference regardless of the caddy's
the mind of the Court, so circumscribe the actions or order in the rotation.
judgment of the caddies concerned as to leave them little
or no freedom of choice whatsoever in the manner of It can happen that a caddy who has
carrying out their services. In the very nature of things, rendered services to a player on one day
caddies must submit to some supervision of their conduct may still find sufficient time to work
while enjoying the privilege of pursuing their occupation elsewhere. Under such circumstances,
within the premises and grounds of whatever club they do he may then leave the premises of
their work in. For all that is made to appear, they work for petitioner and go to such other place of
the club to which they attach themselves on sufference work that he wishes (sic). Or a caddy who
but, on the other hand, also without having to observe any is on call for a particular day may
working hours, free to leave anytime they please, to stay deliberately absent himself if he has
away for as long they like. It is not pretended that if found more profitable caddying, or another,
remiss in the observance of said rules, any discipline may engagement in some other place. These
be meted them beyond barring them from the premises are things beyond petitioner's control and
which, it may be supposed, the Club may do in any case for which it imposes no direct sanctions
even absent any breach of the rules, and without violating on the caddies. . . . 18
any right to work on their part. All these considerations
clash frontally with the concept of employment. G.R. No. 96189 July 14, 1992

The IAC would point to the fact that the Club suggests the 5. *UNIVERSITY OF THE PHILIPPINES
rate of fees payable by the players to the caddies as still HON. PURA FERRER-CALLEJA,
another indication of the latter's status as employees. It Director of the Bureau of Labor
seems to the Court, however, that the intendment of such Relations, Department of Labor and
fact is to the contrary, showing that the Club has not the Employment, and THE ALL U.P.
measure of control over the incidents of the caddies' work WORKERS' UNION, represented by
and compensation that an employer would possess.
its President, Rosario del Rosario
The Court agrees with petitioner that the group rotation
system so-called, is less a measure of employer control
In this special civil action of certiorari the University of the
than an assurance that the work is fairly distributed, a
Philippines seeks the nullification of the Order dated
caddy who is absent when his turn number is called
October 30, 1990 of Director Pura Ferrer-Calleja of the
Bureau of Labor Relations holding that "professors, Sec. 9. The appropriate organizational
associate professors and assistant professors (of the unit shall be the employer unit consisting
University of the Philippines) are . . rank-and-file of rank-and-file employees, unless
employees . . ;" consequently, they should, together with circumstances otherwise require.
the so-called non-academic, non-teaching, and all other
employees of the University, be represented by only one and Section 1, Rule IV of the Rules Implementing
labor organization. 1 The University is joined in this said EO 180 (as amended by SEC. 2, Resolution
undertaking by the Solicitor General who "has taken a of Public Sector Labor Management Council
position not contrary to that of petitioner and, in fact, has dated May 14, 1989, viz.:
manifested . . that he is not opposing the petition . . ." 2
xxx xxx xxx
The case was initiated in the Bureau of Labor Relations
by a petition filed on March 2, 1990 by a registered labor For purposes of registration, an
union, the "Organization of Non-Academic Personnel of appropriate organizational unit may refer
UP" (ONAPUP). 4 Claiming to have a membership of to:
3,236 members — comprising more than 33% of the
9,617 persons constituting the non-academic personnel xxx xxx xxx
of UP-Diliman, Los Baños, Manila, and Visayas, it sought
the holding of a certification election among all said non- d. State universities or colleges,
academic employees of the University of the Philippines. government-owned or controlled
At a conference thereafter held on March 22, 1990 in the corporations with original charters.
Bureau, the University stated that it had no objection to
She went on to say that the general intent of EO
the election.
180 was "not to fragmentize the employer unit, as
On April 18, 1990, another registered labor union, the "All "can be gleaned from the definition of the term
UP Workers' Union," 5 filed a comment, as intervenor in "accredited employees' organization," which
the certification election proceeding. Alleging that its refers to:
membership covers both academic and non-academic
. . a registered organization of the rank-
personnel, and that it aims to unite all UP rank-and-file
and-file employees as defined in these
employees in one union, it declared its assent to the
rules recognized to negotiate for the
holding of the election provided the appropriate
employees in an organizational unit
organizational unit was first clearly defined. It observed in
headed by an officer with sufficient
this connection that the Research, Extension and
authority to bind the agency, such as . . .
Professional Staff (REPS), who are academic non-
. . . state colleges and universities.
teaching personnel, should not be deemed part of the
organizational unit.
The Director thus commanded that a certification election
be "conducted among rank-and-file employees, teaching
For its part, the University, through its General
and non-teaching" in all four autonomous campuses of
Counsel, 6 made of record its view that there should be
the UP, and that management appear and bring copies of
two (2) unions: one for academic, the other for non-
the corresponding payrolls for January, June, and July,
academic or administrative, personnel considering the
1990 at the "usual pre-election conference . . ."
dichotomy of interests, conditions and rules governing
these employee groups.
At the pre-election conference held on March 22, 1990 at
the Labor Organizational Division of the DOLE, 8 the
Director Calleja ruled on the matter on August 7,
University sought further clarification of the coverage of
1990. 7 She declared that "the appropriate organizational
the term, "rank-and-file" personnel, asserting that not
unit . . should embrace all the regular rank-and-file
every employee could properly be embraced within both
employees, teaching and non-teaching, of the University
teaching and non-teaching categories since there are
of the Philippines, including all its branches" and that
those whose positions are in truth managerial and policy-
there was no sufficient evidence "to justify the grouping of
determining, and hence, excluded by law.
the non-academic or administrative personnel into an
organization unit apart and distinct from that of the
At a subsequent hearing (on October 4, 1990), the
academic or teaching personnel." Director Calleja
University filed a Manifestation seeking the exclusion from
adverted to Section 9 of Executive Order No. 180, viz.:
the organizational unit of those employees holding
supervisory positions among non-academic personnel, Implementing Guidelines of Executive Order No. 180,
and those in teaching staff with the rank of Assistant defining "high level employee" as follows:
Professor or higher, submitting the following as grounds
therefor: 1. High Level Employee — is one whose
functions are normally considered policy
1) Certain "high-level employees" with policy-making, determining, managerial or one whose
managerial, or confidential functions, are ineligible to join duties are highly confidential in nature. A
rank-and-file employee organizations under Section 3, managerial function refers to the exercise
EO 180: of powers such as:

Sec. 3. High-level employees whose 1. To effectively

functions are normally considered as recommend such
policy-making or managerial or whose managerial actions;
duties are of a highly confidential nature
shall not be eligible to join the 2. To formulate or
organization of rank-and file government execute management
employees; policies and decisions;
2) In the University hierarchy, not all teaching and non-
teaching personnel belong the rank-and file: just as there 3. To hire, transfer,
are those occupying managerial positions within the non- suspend, lay-off, recall,
teaching roster, there is also a dichotomy between dismiss, assign or
various levels of the teaching or academic staff; discipline employees.

3) Among the non-teaching employees composed of The Director adjudged that said teachers are rank-and-file
Administrative Staff and Research personnel, only those employees "qualified to join unions and vote in
holding positions below Grade 18 should be regarded as certification elections." According to her —
rank-and-file, considering that those holding higher grade
positions, like Chiefs of Sections, perform supervisory A careful perusal of the University Code .
functions including that of effectively recommending . shows that the policy-making powers of
termination of appointments or initiating appointments the Council are limited to academic
and promotions; and matters, namely, prescribing courses of
study and rules of discipline, fixing
4) Not all teaching personnel may be deemed included in student admission and graduation
the term, "rank-and-file;" only those holding appointments requirements, recommending to the
at the instructor level may be so considered, because Board of Regents the conferment of
those holding appointments from Assistant Professor to degrees, and disciplinary power over
Associate Professor to full Professor take part, as students. The policy-determining
members of the University Council, a policy-making body, functions contemplated in the definition
in the initiation of policies and rules with respect to faculty of a high-level employee pertain to
tenure and promotion. 9 managerial, executive, or organization
policies, such as hiring, firing, and
The ONAPUP quite categorically made of record its disciplining of employees, salaries,
position; that it was not opposing the University's teaching/working hours, other monetary
proferred classification of rank-and file employees. On the and non-monetary benefits, and other
other hand, the "All UP Workers' Union" opposed the terms and conditions of employment.
University's view, in a Position Paper presented by it They are the usual issues in collective
under date of October 18, 1990. bargaining negotiations so that whoever
wields these powers would be placed in
Director Calleja subsequently promulgated an Order a situation of conflicting interests if he
dated October 30, 1990, resolving the "sole issue" of were allowed to join the union of rank-
"whether or not professors, associate professors and and-file employees.
assistant professors are included in the definition of high-
level employee(s)" in light of Rule I, Section (1) of the The University seasonably moved for reconsideration,
seeking to make the following points, to wit:
1) UP professors do "wield the most potent managerial professors and assistant professors (hereafter simply
powers: the power to rule on tenure, on the creation of referred to as professors) cannot be considered as
new programs and new jobs, and conversely, the abolition exercising such managerial or highly confidential
of old programs and the attendant re-assignment of functions as would justify their being categorized as "high-
employees. level employees" of the institution.

2) To say that the Council is "limited to (acting on) The Academic Personnel Committees, through which the
academic matters" is error, since academic decisions "are professors supposedly exercise managerial functions,
the most important decisions made in a University . . were constituted "in order to foster greater involvement of
(being, as it were) the heart, the core of the University as the faculty and other academic personnel in
a workplace. appointments, promotions, and other personnel matters
that directly affect them." 14 Academic Personnel
3) Considering that the law regards as a "high level" Committees at the departmental and college levels were
employee, one who performs either policy-determining, organized "consistent with, and demonstrative of the very
managerial, or confidential functions, the Director erred in idea of consulting the faculty and other academic
applying only the "managerial functions" test, ignoring the personnel on matters directly affecting them" and to allow
"policy-determining functions" test. "flexibility in the determination of guidelines peculiar to a
particular department or college." 15
4) The Director's interpretation of the law would lead to
absurd results, e.g.: "an administrative officer of the Personnel actions affecting the faculty and other
College of Law is a high level employee, while a full academic personnel should, however, "be considered
Professor who has published several treatises and who under uniform guidelines and consistent with the
has distinguished himself in argument before the Resolution of the Board (of Regents) adopted during its
Supreme Court is a mere rank-and-file employee. A 789th Meeting (11-26-69) creating the University
dormitory manager is classified as a high level employee, Academic Personnel Board." 16 Thus, the Departmental
while a full Professor or Political Science with a Ph. D. and Academic Personnel Committee is given the function of
several Honorary doctorates is classified as rank-and- "assist(ing) in the review of the recommendations initiated
file." 10 by the Department Chairman with regard to recruitment,
selection, performance evaluation, tenure and staff
The motion for reconsideration was denied by Director development, in accordance with the general guidelines
Calleja, by Order dated November 20, 1990. formulated by the University Academic Personnel Board
and the implementing details laid down by the College
The University would now have this Court declare void the Academic Personnel Committee;" 17 while the College
Director's Order of October 30, 1990 as well as that of Academic Personnel Committee is entrusted with the
November 20, 1990. 11 A temporary restraining order was following functions: 18
issued by the Court, by Resolution dated December 5,
1990 conformably to the University's application therefor. 1. Assist the Dean in setting up the
details for the implementation of policies,
Two issues arise from these undisputed facts. One is rules, standards or general guidelines as
whether or not professors, associate professors and formulated by the University Academic
assistant professors are "high-level employees" "whose Personnel Board;
functions are normally considered policy determining,
managerial or . . highly confidential in nature." The other 2. Review the recommendation
is whether or not, they, and other employees performing submitted by the DAPCs with regard to
academic functions, 12 should comprise a collective recruitment, selection, performance
bargaining unit distinct and different from that consisting evaluation, tenure, staff development,
of the non-academic employees of the and promotion of the faculty and other
University, 13 considering the dichotomy of interests, academic personnel of the College;
conditions and rules existing between them.
3. Establish departmental priorities in the
As regards the first issue, the Court is satisfied that it has allocation of available funds for
been correctly resolved by the respondent Director of promotion;
Bureau Relations. In light of Executive Order No. 180 and
its implementing rules, as well as the University's charter 4. Act on cases of disagreement between
and relevant regulations, the professors, associate the Chairman and the members of the
DAPC particularly on personnel matters departmental and college academic personnel
covered by this Order; committees are not unlike the chiefs of divisions and
sections of the National Waterworks and Sewerage
5. Act on complaints and/or protests Authority whom this Court considered as rank-and-file
against personnel actions made by the employees in National Waterworks & Sewerage Authority
Department Chairman and/or the DAPC. vs. NWSA Consolidated Unions, 22because "given ready
policies to execute and standard practices to observe for
The University Academic Personnel Board, on the other their execution, . . . they have little freedom of action, as
hand, performs the following functions: 19 their main function is merely to carry out the company's
orders, plans and policies."
1. Assist the Chancellor in the review of
the recommendations of the CAPC'S. The power or prerogative pertaining to a high-level
employee "to effectively recommend such managerial
2. Act on cases of disagreement between actions, to formulate or execute management policies or
the Dean and the CAPC. decisions and/or to hire, transfer, suspend, lay-off, recall,
dismiss, assign or discipline employees" 23 is exercised to
3. Formulate policies, rules, and a certain degree by the university academic personnel
standards with respect to the selection, board/committees and ultimately by the Board of Regents
compensation, and promotion of in accordance with Section 6 of the University
members of the academic staff. Charter, 24 thus:

4. Assist the Chancellor in the review of (e) To appoint, on the recommendation of

recommendations on academic the President of the University,
promotions and on other matters professors, instructors, lecturers and
affecting faculty status and welfare. other employees of the University; to fix
their compensation, hours of service, and
From the foregoing, it is evident that it is the University
such other duties and conditions as it
Academic Personnel Committee, composed of deans, the
may deem proper; to grant them in its
assistant for academic affairs and the chief of personnel,
discretion leave of absence under such
which formulates the policies, rules and standards
regulations as it may promulgate, any
respecting selection, compensation and promotion of
other provision of law to the contrary
members of the academic staff. The departmental and
notwithstanding, and to remove them for
college academic personnel committees' functions are
cause after investigation and hearing
purely recommendatory in nature, subject to review and
shall have been had.
evaluation by the University Academic Personnel Board.
In Franklin Baker Company of the Philippines vs. Another factor that militates against petitioner's espousal
Trajano, 20 this Court reiterated the principle laid down
of managerial employment status for all its professors
in National Merchandising Corp. vs. Court of Industrial
through membership in the departmental and college
Relations, 21 that the power to recommend, in order to
academic personnel committees is that not all professors
qualify an employee as a supervisor or managerial are members thereof. Membership and the number of
employee "must not only be effective but the exercise of members in the committees are provided as follows: 25
such authority should not be merely of a routinary or
clerical nature but should require the use of independent Sec. 2. Membership in Committees. —
judgment." Where such recommendatory powers, as in Membership in committees may be made
the case at bar, are subject to evaluation, review and final either through appointment, election, or
action by the department heads and other higher by some other means as may be
executives of the company, the same, although present, determined by the faculty and other
are not effective and not an exercise of independent academic personnel of a particular
judgment as required by law. department or college.

Significantly, the personnel actions that may be Sec. 3. Number of Members. — In

recommended by the departmental and college academic addition to the Chairman, in the case of a
personnel committees must conform with the general department, and the Dean in the case of
guidelines drawn up by the university personnel academic a college, there shall be such number of
committee. This being the case, the members of the members representing the faculty and
academic personnel as will afford a fairly Even assuming arguendo that UP professors discharge
representative, deliberative and policy-determining functions through the University
manageable group that can handle Council, still such exercise would not qualify them as high-
evaluation of personnel actions. level employees within the context of E.O. 180. As
correctly observed by private respondent, "Executive
Neither can membership in the University Council elevate Order No. 180 is a law concerning public sector unionism.
the professors to the status of high-level employees. It must therefore be construed within that context. Within
Section 6 (f) and 9 of the UP Charter respectively that context, the University of the Philippines represents
provide: 26 the government as an employer. 'Policy-determining'
refers to policy-determination in university mattes that
Sec. 6. The Board of Regents shall have affect those same matters that may be the subject of
the following powers and duties . . . ; negotiation between public sector management and
labor. The reason why 'policy-determining' has been laid
xxx xxx xxx down as a test in segregating rank-and-file from
management is to ensure that those who lay down
(f) To approve the courses of study and policies in areas that are still negotiable in public sector
rules of discipline drawn up by the collective bargaining do not themselves become part of
University Council as hereinafter those employees who seek to change these policies for
provided; . . . their collective welfare." 27

Sec. 9. There shall be a University The policy-determining functions of the University Council
Council consisting of the President of the refer to academic matters, i.e. those governing the
University and of all instructors in the relationship between the University and its students, and
university holding the rank of professor, not the University as an employer and the professors as
associate professor, or assistant employees. It is thus evident that no conflict of interest
professor. The Council shall have the results in the professors being members of the University
power to prescribe the courses of study Council and being classified as rank-and-file employees.
and rules of discipline, subject to the
approval of the Board of Regents. It shall Be that as it may, does it follow, as public respondent
fix the requirements for admission to any would propose, that all rank-and-file employees of the
college of the university, as well as for university are to be organized into a single collective
graduation and the receiving of a degree. bargaining unit?
The Council alone shall have the power
to recommend students or others to be A "bargaining unit" has been defined as a group of
recipients of degrees. Through its employees of a given employer, comprised of all or less
president or committees, it shall have than all of the entire body of employees, which the
disciplinary power over the collective interest of all the employees, consistent with
students within the limits prescribed by equity to the employer, indicate to be the best suited to
the rules of discipline approved by the serve the reciprocal rights and duties of the parties under
Board of Regents. The powers and the collective bargaining provisions of the law. 28
duties of the President of the University,
in addition to those specifically provided Our labor laws do not however provide the criteria for
in this Act shall be those usually determining the proper collective bargaining unit. Section
pertaining to the office of president of a 12 of the old law, Republic Act No. 875 otherwise known
university. as the Industrial Peace Act, simply reads as follows: 29

It is readily apparent that the policy-determining functions Sec. 12. Exclusive Collective Bargaining
of the University Council are subject to review, evaluation Representation for Labor Organizations.
and final approval by the Board of Regents. The Council's — The labor organization designated or
power of discipline is likewise circumscribed by the limits selected for the purpose of collective
imposed by the Board of Regents. What has been said bargaining by the majority of the
about the recommendatory powers of the departmental employees in an appropriate collective
and college academic personnel committees applies with bargaining unit shall be the exclusive
equal force to the alleged policy-determining functions of representative of all the employees in
the University Council. such unit for the purpose of collective
bargaining in respect to rates of pay, (4) employment status, such as
wages, hours of employment, or other temporary, seasonal probationary
conditions of employment; Provided, employees. . . .
That any individual employee or group of
employees shall have the right at any An enlightening appraisal of the problem
time to present grievances to their of defining an appropriate bargaining unit
employer. is given in the 10th Annual Report of the
National Labor Relations Board wherein
Although said Section 12 of the Industrial Peace Act was it is emphasized that the factors which
subsequently incorporated into the Labor Code with minor said board may consider and weigh in
changes, no guidelines were included in said Code for fixing appropriate units are: the history,
determination of an appropriate bargaining unit in a given extent and type of organization of
case. 30 Thus, apart from the single descriptive word employees; the history of their collective
"appropriate," no specific guide for determining the proper bargaining; the history, extent and type of
collective bargaining unit can be found in the statutes. organization of employees in other plants
of the same employer, or other
Even Executive Order No. 180 already adverted to is not employers in the same industry; the skill,
much help. All it says, in its Section 9, is that "(t)he wages, work, and working conditions of
appropriate organizational unit shall be the employer unit the employees; the desires of the
consisting of rank-and-file employees, unless employees; the eligibility of the
circumstances otherwise require." Case law fortunately employees for membership in the union
furnishes some guidelines. or unions involved; and the relationship
between the unit or units proposed and
When first confronted with the task of determining the the employer's organization,
proper collective bargaining unit in a particular management, and operation. . . .
controversy, the Court had perforce to rely on American
jurisprudence. In Democratic Labor Association vs. Cebu . . In said report, it is likewise emphasized
Stevedoring Company, Inc., decided on February 28, that the basic test in determining the
1958, 31 the Court observed that "the issue of how to appropriate bargaining unit is that a unit,
determine the proper collective bargaining unit and what to be appropriate, must affect a grouping
unit would be appropriate to be the collective bargaining of employees who have substantial,
agency" . . . "is novel in this jurisdiction; however, mutual interests in wages, hours, working
American precedents on the matter abound . . (to which conditions and other subjects of
resort may be had) considering that our present Magna collective bargaining (citing Smith on
Carta has been patterned after the American law on the Labor Laws, 316-317; Francisco, Labor
subject." Said the Court: Laws, 162). . . .

. . . Under these precedents, there are The Court further explained that "(t)he test of the grouping
various factors which must be satisfied is community or mutuality of interests. And this is so
and considered in determining the proper because 'the basic test of an asserted bargaining unit's
constituency of a bargaining unit. No one acceptability is whether or not it is fundamentally the
particular factor is itself decisive of the combination which will best assure to all employees the
determination. The weight accorded to exercise of their collective bargaining rights' (Rothenberg
any particular factor varies in accordance on Labor Relations, 490)." Hence, in that case, the Court
with the particular question or questions upheld the trial court's conclusion that two separate
that may arise in a given case. What are bargaining units should be formed, one consisting of
these factors? Rothenberg mentions a regular and permanent employees and another consisting
good number, but the most pertinent to of casual laborers or stevedores.
our case are: (1) will of the employees
(Globe Doctrine); (2) affinity and unit of Since then, the "community or mutuality of interests"
employees' interest, such as substantial test has provided the standard in determining the proper
similarity of work and duties, or similarity constituency of a collective bargaining unit. In Alhambra
of compensation and working conditions; Cigar & Cigarette Manufacturing Company, et al. vs.
(3) prior collective bargaining history; and Alhambra Employees' Association (PAFLU), 107 Phil. 23,
the Court, noting that the employees in the administrative, academic employees as regards responsibilities and
sales and dispensary departments of a cigar and cigarette functions, working conditions, compensation rates, social
manufacturing firm perform work which have nothing to do life and interests, skills and intellectual pursuits, cultural
with production and maintenance, unlike those in the raw activities, etc. On the contrary, the dichotomy of interests,
lead (malalasi), cigar, cigarette, packing (precintera) and the dissimilarity in the nature of the work and duties as
engineering and garage departments, authorized the well as in the compensation and working conditions of the
formation of the former set of employees into a separate academic and non-academic personnel dictate the
collective bargaining unit. The ruling in the Democratic separation of these two categories of employees for
Labor Association case, supra, was reiterated purposes of collective bargaining. The formation of two
in Philippine Land-Air-Sea Labor Unit vs. Court of separate bargaining units, the first consisting of the rank-
Industrial Relations, 110 Phil. 176, where casual and-file non-academic personnel, and the second, of the
employees were barred from joining the union of the rank-and-file academic employees, is the set-up that will
permanent and regular employees. best assure to all the employees the exercise of their
collective bargaining rights. These special
Applying the same "community or mutuality of interests" circumstances, i.e., the dichotomy of interests and
test, but resulting in the formation of only one collective concerns as well as the dissimilarity in the nature and
bargaining units is the case of National Association of conditions of work, wages and compensation between the
Free Trade Unions vs. Mainit Lumber Development academic and non-academic personnel, bring the case at
Company Workers Union-United Lumber and General bar within the exception contemplated in Section 9 of
Workers of the Phils., G.R. No. 79526, December 21, Executive Order No. 180. It was grave abuse of discretion
1990, 192 SCRA 598. In said case, the Court ordered the on the part of the Labor Relations Director to have ruled
formation of a single bargaining unit consisting of the otherwise, ignoring plain and patent realities.
Sawmill Division in Butuan City and the Logging Division
in Zapanta Valley, Kitcharao, Agusan Norte of the Mainit WHEREFORE, the assailed Order of October 30, 1990 is
Lumber Development Company. The Court reasoned: hereby AFFIRMED in so far as it declares the professors,
associate professors and assistant professors of the
Certainly, there is a mutuality of interest University of the Philippines as rank-and-file employees.
among the employees of the Sawmill The Order of August 7, 1990 is MODIFIED in the sense
Division and the Logging Division. Their that the non-academic rank-and-file employees of the
functions mesh with one another. One University of the Philippines shall constitute a bargaining
group needs the other in the same way unit to the exclusion of the academic employees of the
that the company needs them both. institution — i.e., full professors, associate professors,
There may be difference as to the nature assistant professors, instructors, and the research,
of their individual assignments but the extension and professorial staff, who may, if so minded,
distinctions are not enough to warrant the organize themselves into a separate collective bargaining
formation of a separate bargaining unit. unit; and that, therefore, only said non-academic rank-
and-file personnel of the University of the Philippines in
In the case at bar, the University employees may, as Diliman, Manila, Los Baños and the Visayas are to
already suggested, quite easily be categorized into two participate in the certification election.
general classes: one, the group composed of employees
whose functions are non-academic, i.e., janitors, G.R. No. 109002 April 12, 2000
messengers, typists, clerks, receptionists, carpenters,
electricians, grounds-keepers, chauffeurs, mechanics, 6. *DELA SALLE UNIVERSITY
plumbers; 32 and two, the group made up of those vs.
performing academic functions, i.e., full professors, DELA SALLE UNIVERSITY EMPLOYEES
associate professors, assistant professors, instructors — ASSOCIATION (DLSUEA) and
who may be judges or government executives — and BUENAVENTURA MAGSALIN
research, extension and professorial staff. 33 Not much
reflection is needed to perceive that the community or Filed with this Court are two petitions for certiorari,1 the
mutuality of interests which justifies the formation of a first petition with preliminary injunction and/or temporary
single collective bargaining unit is wanting between the restraining order,2 assailing the decision of voluntary
academic and non-academic personnel of the university. arbitrator Buenaventura Magsalin, dated January 19,
It would seem obvious that teachers would find very little 1993, as having been rendered with grave abuse of
in common with the University clerks and other non- discretion amounting to lack or excess of jurisdiction.
These two petitions have been consolidated inasmuch as voluntary arbitrator ". . . believes that this type of
the factual antecedents, parties involved and issues employees belong (sic) to the rank-and-file on the basis
raised therein are interrelated.3 of the nature of their job." 15 With respect to the employees
of the College of St. Benilde, the voluntary arbitrator found
The facts are not disputed and, as summarized by the that the College of St. Benilde has a personality separate
voluntary arbitrator, are as follows. On December 1986, and distinct from the University and thus, held ". . . that
Dela Salle University (hereinafter referred to as the employees therein are outside the bargaining unit of
UNIVERSITY) and Dela Salle University Employees the University's rank-and-file employees." 16
Association — National Federation of Teachers and
Employees Union (DLSUEA-NAFTEU), which is On the second issue regarding the propriety of the
composed of regular non-academic rank and file inclusion of a union shop clause in the collective
employees,4 (hereinafter referred to as UNION) entered bargaining agreement, in addition to the existing
into a collective bargaining agreement with a life span of maintenance of membership clause, the voluntary
three (3) years, that is, from December 23, 1986 to arbitrator opined that a union shop clause ". . . is not a
December 22, 1989.5 During the freedom period, or 60 restriction on the employee's right of (sic) freedom of
days before the expiration of the said collective bargaining association but rather a valid form of union security while
agreement, the Union initiated negotiations with the the CBA is in force and in accordance with the
University for a new collective bargaining Constitutional policy to promote unionism and collective
agreement6 which, however, turned out to be bargaining and negotiations. The parties therefore should
unsuccessful, hence, the Union filed a Notice of Strike incorporate such union shop clause in their CBA." 17
with the National Conciliation and Mediation Board,
National Capital Region.7 After several conciliation- On the third issue with respect to the use of the "last-in-
mediation meetings, five (5) out of the eleven (11) issues first-out" method in case of retrenchment and transfer to
raised in the Notice of Strike were resolved by the parties. other schools or units, the voluntary arbitrator upheld the
A partial collective bargaining agreement was thereafter ". . . elementary right and prerogative of the management
executed by the parties.8 On March 18, 1991, the parties of the University to select and/or choose its employees, a
entered into a Submission Agreement, identifying the right equally recognized by the Constitution and the law.
remaining six (6) unresolved issues for arbitration, The employer, in the exercise of this right, can adopt valid
namely: "(1) scope of the bargaining unit, (2) union and equitable grounds as basis for lay-off or separation,
security clause, (3) security of tenure, (4) salary increases like performance, qualifications, competence, etc.
for the third and fourth years [this should properly read Similarly, the right to transfer or reassign an employee is
second and third years]9 of the collective bargaining an employer's exclusive right and prerogative." 18
agreement, (5) indefinite union leave, reduction of the
union president's workload, special leave, and finally, (6) Regarding the fourth issue concerning salary increases
duration of the agreement." 10 The parties appointed for the second and third years of the collective bargaining
Buenaventura Magsalin as voluntary arbitrator. 11 On agreement, the voluntary arbitrator opined that the ". .
January 19, 1993, the voluntary arbitrator rendered the .proposed budget of the University for SY 1992-93 could
assailed decision. 12 not sufficiently cope up with the demand for increases by
the Union. . . . . . . . With the present financial condition of
In the said decision, the voluntary arbitrator, on the first the University, it cannot now be required to grant another
issue involving the scope of the bargaining unit, ruled that round of increases through collective bargaining without
". . . the Computer Operators assigned at the CSC exhausting its coffers for other legitimate needs of the
[Computer Services Center], just like any other Computer University as an institution," 19 thus, he ruled that ". . . the
Operators in other units, [should be] included as members University can no longer be required to grant a second
of the bargaining unit," 13 after finding that "[e]vidently, the round of increase for the school years under
Computer Operators are presently doing clerical and consideration and charge the same to the incremental
routinary work and had nothing to do with [the] setting of proceeds." 20
management policies for the University, as [may be]
gleaned from the duties and responsibilities attached to On the fifth issue as to the Union's demand for a reduction
the position and embodied in the CSC [Computer of the workload of the union president, special leave
Services Center] brochure. They may have, as argued by benefits and indefinite union leave with pay, the voluntary
the University, access to vital information regarding the arbitrator rejected the same, ruling that unionism ". . . is
University's operations but they are not necessarily no valid reason for the reduction of the workload of its
confidential." 14 Regarding the discipline officers, the President," 21 and that there is ". . . no sufficient
justification to grant an indefinite leave." 22 Finding that the bargaining unit of the rank-and-file employees of the
Union and the Faculty Association are not similarly University. 33 The Solicitor General came to this
situated, technically and professionally, 23 and that conclusion after finding ". . . sufficient evidence to justify
"[w]hile professional growth is highly encouraged on the the Union's proposal to consider the University and the
part of the rank-and-file employees, this educational CSB [College of St. Benilde] as only one entity because
advancement would not serve in the same degree as the latter is but a mere integral part of the University," to
demanded of the faculty members," 24 the voluntary wit: 34
arbitrator denied the Union's demand for special leave
benefits. 1. One of the duties and responsibilities of the
CSB's Director of Academic Services is to
On the last issue regarding the duration of the collective coordinate with the University's Director of
bargaining agreement, the voluntary arbitrator ruled that Admissions regarding the admission of freshmen,
". . . when the parties forged their CBA and signed it on shiftees and transferees (Annex "3" of the
19 November 1990, where a provision on duration was University's Reply);
explicitly included, the same became a binding agreement
between them. Notwithstanding the Submission 2. Some of the duties and responsibilities of the
Agreement, thereby reopening this issue for resolution, CSB's Administrative Officer are as follows:
this Voluntary Arbitrator is constrained to respect the
original intention of the parties, the same being not A. xxx xxx xxx
contrary to law, morals or public policy." 25 As to the
economic aspect of the collective bargaining agreement, 4. Recommends and implements personnel
the voluntary arbitrator opined that the ". . . economic policies and guidelines (in accordance with the
provisions of the CBA shall be re-opened after the third Staff Manual) as well as pertinent existing general
year in compliance with the mandate of the Labor Code, policies of the university as a whole. . . . .
as amended." 26
12. Conducts and establishes liaison with all the
Subsequently, both parties filed their respective motions offices concerned at the Main Campus as well
for reconsideration which, however, were not entertained (sic) with other government agencies on all
by the voluntary arbitrator "pursuant to existing rules and administrative-related matters. . . .
jurisprudence governing voluntary arbitration cases." 27
B. xxx xxx xxx
On March 5, 1993, the University filed with the Second
Division of this Court, a petition for certiorari with 7. Handles processing, canvassing and direct
temporary restraining order and/or preliminary injunction purchasing of all requisitions worth more than
assailing the decision of the voluntary arbitrator, as having P10,000 or less. Coordinates and canvasses with
been rendered "in excess of jurisdiction and/or with grave the Main Campus all requisitions worth more than
abuse of discretion." 28 Subsequently, on May 24, 1993, P10,000. . . .
the Union also filed a petition for certiorari with the First
C. xxx xxx xxx
Division. 29 Without giving due course to the petition
pending before each division, the First and Second
7. Plans and coordinates with the Security and
Divisions separately resolved to require the respondents
Safety Committee at the Main Campus the
in each petition, including the Solicitor General on behalf
development of a security and safety program
of the voluntary arbitrator, to file their respective
during times of emergency or occurrence of fire
Comments. 30 Upon motion by the Solicitor General dated
or other natural calamities. . . . (Annex "4" of the
July 29, 1993, both petitions were consolidated and
University's Reply).
transferred to the Second Division. 31
3. The significant role which the University
In his consolidated Comment 32 filed on September 9,
assumes in the admission of students at the CSB
1993 on behalf of voluntary arbitrator Buenaventura C.
is revealed in the following provisions of the
Magsalin, the Solicitor General agreed with the voluntary
CSB's Bulletin for Arts and Business Studies
arbitrator's assailed decision on all points except that
Department for the schoolyear 1992-1993, thus:
involving the employees of the College of St. Benilde.
According to the Solicitor General, the employees of the Considered in the process of admission for a (sic)
College of St. Benilde should have been included in the high school graduate applicants are the following
criteria: results of DLSU College Entrance 6. The University officials themselves claimed
Examination . . . . during the 1990 University Athletic Association of
the Philippines (UAAP) meet that the CSB
Admission requirements for transferees are: . . . athletes represented the University since the
and an acceptable score in the DLSU admission latter and the CSB comprise only one entity.
test. . . .
On February 9, 1994, this Court resolved to give due
Shiftees from DLSU who are still eligible to enroll course to these consolidated petitions and to require the
may be admitted in accordance with the DLSU parties to submit their respective memoranda. 35
policy on shifting. Considering that there
sometimes exist exceptional cases where a very In its memorandum filed on April 28, 1994, 36 pursuant to
difficult but temporary situation renders a DLSU the above-stated Resolution, 37 the University raised the
student falling under this category a last chance following issues for the consideration of the Court: 38
to be re-admitted provided he meets the cut-off
scores required in the qualifying examination I.
administered by the university. . . .
He may not be remiss in his study obligations nor DISCRETION WAS COMMITTED BY THE
incur any violation whatsoever, as such will be VOLUNTARY ARBITRATOR WHEN HE
taken by the University to be an indication of his INCLUDED, WITHIN THE BARGAINING UNIT
loss of initiative to pursue further studies at DLSU. COMPRISING THE UNIVERSITY'S RANK-AND-
In sch (sic) a case, he renders himself ineligible FILE EMPLOYEES, THE COMPUTER
to continue studying at DLSU. DLSU thus OPERATORS ASSIGNED AT THE
reserves the right to the discontinuance of the UNIVERSITY'S COMPUTER SERVICES
studies of any enrolee whose presence is inimical CENTER AND THE UNIVERSITY'S DISCIPLINE
to the objectives of the CSB/DLSU. . . . OFFICERS, AND WHEN HE EXCLUDED THE
As a college within the university, the College of FROM THE SAID BARGAINING UNIT.
St. Benilde subscribes to the De La Salle
Mission." (Annexes "C-1," "C-2," and "C-3" of the II.
Union's Consolidated Reply and Rejoinder)
4. The academic programs offered at the CSB are DISCRETION WAS COMMITTED BY THE
likewise presented in the University's VOLUNTARY ARBITRATOR WHEN HE
Undergraduate Prospectus for schoolyear 1992- UPHELD THE UNION'S DEMAND FOR THE
1993 (Annex "D" of the Union's Consolidated INCLUSION OF A UNION SHOP CLAUSE IN
5. The Leave Form Request (Annex "F" of the
Union's Position Paper) at the CSB requires prior III.
permission from the University anent leaves of
The Union, on the other hand, raised the following issues, WHICH IS NOT EVEN A LEGITIMATE LABOR
in its memorandum, 39 filed pursuant to Supreme Court ORGANIZATION AND IN SPECULATING THAT
Resolution dated February 9, 1994, 40 to wit; that the THE PRESIDENT OF THE FACULTY
voluntary arbitrator committed grave abuse of discretion ASSOCIATION SUFFERS A
APPLICATION OF THE DOCTRINE; The question which now confronts us is whether or not the
voluntary arbitrator committed grave abuse of discretion
(2) DENYING THE PETITIONER'S PROPOSAL in rendering the assailed decision, particularly, in
FOR THE "LAST-IN FIRST-OUT" METHOD OF resolving the following issues: (1) whether the computer
LAY-OFF IN CASE OF RETRENCHMENT AND operators assigned at the University's Computer Services
IN UPHOLDING THE ALLEGED MANAGEMENT Center and the University's discipline officers may be
PREROGATIVE TO SELECT AND CHOOSE ITS considered as confidential employees and should
EMPLOYEES DISREGARDING THE BASIC therefore be excluded from the bargaining unit which is
TENETS OF SOCIAL JUSTICE AND EQUITY composed of rank and file employees of the University,
UPON WHICH THIS PROPOSAL WAS and whether the employees of the College of St. Benilde
FOUNDED; should also be included in the same bargaining unit; (2)
whether a union shop clause should be included in the
(3) FINDING THAT THE MULTISECTORAL parties' collective bargaining agreement, in addition to the
COMMITTEE IN THE RESPONDENT existing maintenance of membership clause; (3) whether
UNIVERSITY IS THE LEGITIMATE GROUP the denial of the Union's proposed "last-in-first-out"
WHICH DETERMINES AND SCRUTINIZES method of laying-off employees, is proper; (4) whether the
ANNUAL SALARY INCREASES AND FRINGE ruling that on the basis of the University's proposed
BENEFITS OF THE EMPLOYEES; budget, the University can no longer be required to grant
a second round of wage increases for the school years
1991-92 and 1992-93 and charge the same to the
incremental proceeds, is correct; (5) whether the denial of
the Union's proposals on the deloading of the union
president, improved leave benefits and indefinite union
leave with pay, is proper; (6) whether the finding that the
multi-sectoral committee in the University is the legitimate
group which determines and scrutinizes the annual salary Such demand is impermissible for it would involve
increases and fringe benefits of the employees of the this Court in determining what evidence is entitled
University, is correct; and (7) whether the ruling that the to belief and the weight to be assigned it. As we
70% share in the incremental tuition proceeds is the only have reiterated countless times, judicial review by
source of salary increases and fringe benefits of the this Court in labor cases does not go so far as to
employees, is proper. evaluate the sufficiency of the evidence upon
which the proper labor officer or office based his
Now, before proceeding to the discussion and resolution or its determination but is limited only to issues of
of the issues raised in the pending petitions, certain jurisdiction or grave abuse of discretion
preliminary matters call for disposition. As we reiterated in amounting to lack of jurisdiction. (emphasis
the case of Caltex Refinery Employees supplied).
Association (CREA) vs. Jose S. Brillantes, 42 the
following are the well-settled rules in a petition With the foregoing rules in mind, we shall now proceed to
for certiorari involving labor cases. "First, the factual discuss the merit of these consolidated petitions.
findings of quasi-judicial agencies (such as the
Department of Labor and Employment), when supported We affirm in part and modify in part.
by substantial evidence, are binding on this Court and
entitled to great respect, considering the expertise of On the first issue involving the classification of the
these agencies in their respective fields. It is well- computer operators assigned at the University's
established that findings of these administrative agencies Computer Services Center and discipline officers, the
are generally accorded not only respect but even University argues that they are confidential employees
finality. 43 and that the Union has already recognized the
confidential nature of their functions when the latter
Second, substantial evidence in labor cases is such agreed in the parties' 1986 collective bargaining
amount of relevant evidence which a reasonable mind will agreement to exclude the said employees from the
accept as adequate to justify a conclusion. 44 bargaining unit of rank-and-file employees. As far as the
said computer operators are concerned, the University
Third, in Flores vs. National Labor Relations contends that ". . . the parties have already previously
Commission, 45 we explained the role and function of Rule agreed to exclude all positions in the University's
65 as an extraordinary remedy: Computer Services Center (CSC), which include the
positions of computer operators, from the collective
It should be noted, in the first place, that the bargaining unit. . . . . . . . " 46 The University further
instant petition is a special civil action contends that ". . . the nature of the work done by these
for certiorari under Rule 65 of the Revised Rules Computer Operators is enough justification for their
of Court. An extraordinary remedy, its use is exclusion from the coverage of the bargaining unit of the
available only and restrictively in truly exceptional University's rank-and-file employees. . . . . . .
cases — those wherein the action of an inferior ." 47 According to the University, the Computer Services
court, board or officer performing judicial or quasi- Center, where these computer operators work, ". . .
judicial acts is challenged for being wholly void on processes data that are needed by management for
grounds of jurisdiction. The sole office of the writ strategic planning and evaluation of systems. It also
of certiorari is the correction of errors of houses the University's confidential records and
jurisdiction including the commission of grave information [e.g. student records, faculty records, faculty
abuse of discretion amounting to lack or excess and staff payroll data, and budget allocation and
of jurisdiction. It does not include correction of expenditure related data] which are contained in
public respondent NLRC's evaluation of the computer files and computer-generated reports. . . . . . . .
evidence and factual findings based thereon, Moreover, the Computer Operators are in fact the
which are generally accorded not only great repository of the University's confidential information and
respect but even finality. data, including those involving and/or pertinent to labor
relations. . . . . . . ." 48
No question of jurisdiction whatsoever is being
raised and/or pleaded in the case at bench. As to the discipline officers, the University maintains that
Instead, what is being sought is a judicial re- " . . . they are likewise excluded from the bargaining unit
evaluation of the adequacy or inadequacy of the of the rank-and-file employees under the parties' 1986
evidence on record, which is certainly beyond the CBA. The Discipline Officers are clearly alter egos of
province of the extraordinary writ of certiorari.
management as they perform tasks which are inherent in organization that every individual should be able to freely
management [e.g. enforce discipline, act as peace choose whether to become a member of the Union or not.
officers, secure peace and safety of the students inside The right to join a labor organization should carry with it
the campus, conduct investigations on violations of the corollary right not to join the same. This position of the
University regulations, or of existing criminal laws, University is but in due recognition of the individual's free
committed within the University or by University will and capability for judgment." 54 The University assails
employees] . . . . . . . " 49 The University also alleges that the Union's demand for a union shop clause as ". . .
"the Discipline Officers are privy to highly confidential definitely unjust and amounts to oppression. Moreover,
information ordinarily accessible only to management." 50 such a demand is repugnant to democratic principles and
the constitutionally guaranteed freedom of individuals to
With regard to the employees of the College of St. join or not to join an association as well as their right to
Benilde, the Union, supported by the Solicitor General at security of tenure, particularly, on the part of present
this point, asserts that the veil of corporate fiction should employees." 55
be pierced, thus, according to the Union, the University
and the College of St. Benilde should be considered as The Union, on the other hand, counters that the Labor
only one entity because the latter is but a mere integral Code, as amended, recognizes the validity of a union
part of the University. 51 shop agreement in Article 248 thereof which reads:

The University's arguments on the first issue fail to Art. 248. Unfair labor practices of employers. —
impress us. The Court agrees with the Solicitor General
that the express exclusion of the computer operators and xxx xxx xxx
discipline officers from the bargaining unit of rank-and-file
employees in the 1986 collective bargaining agreement (e) To discriminate in regard to hire or
does not bar any re-negotiation for the future inclusion of tenure of employment or any term or
the said employees in the bargaining unit. During the condition of employment in order to
freedom period, the parties may not only renew the encourage or discourage membership in
existing collective bargaining agreement but may also any labor organization. Nothing in this
propose and discuss modifications or amendments Code or in any other law shall prevent the
thereto. With regard to the alleged confidential nature of parties from requiring membership in a
the said employees' functions, after a careful recognized collective bargaining agent
consideration of the pleadings filed before this Court, we as a condition for employment, except of
rule that the said computer operators and discipline those employees who are already
officers are not confidential employees. As carefully members of another union at the time of
examined by the Solicitor General, the service record of a the signing of the collective bargaining
computer operator reveals that his duties are basically agreement. . . . . . . ." (emphasis supplied)
clerical and non-confidential in nature. 52 As to the
discipline officers, we agree with the voluntary arbitrator We affirm the ruling of the voluntary arbitrator for
that based on the nature of their duties, they are not the inclusion of a union shop provision in addition
confidential employees and should therefore be included to the existing maintenance of membership
in the bargaining unit of rank-and-file employees. clause in the collective bargaining agreement. As
the Solicitor General asserted in his consolidated
The Court also affirms the findings of the voluntary Comment, the University's reliance on the case
arbitrator that the employees of the College of St. Benilde of Victoriano vs. Elizalde Rope
should be excluded from the bargaining unit of the rank- Workers' Union 56 is clearly misplaced. In that
and-file employees of Dela Salle University, because the case, we ruled that ". . . the right to join a union
two educational institutions have their own separate includes the right to abstain from joining any
juridical personality and no sufficient evidence was shown union. . . . . . . . The right to refrain from joining
to justify the piercing of the veil of corporate fiction. 53 labor organizations recognized by Section 3 of
the Industrial Peace Act is, however, limited. The
On the second issue involving the inclusion of a union legal protection granted to such right to refrain
shop clause in addition to the existing maintenance of from joining is withdrawn by operation of law,
membership clause in the collective bargaining where a labor union and an employer have
agreement, the University avers that ". . . it is in the spirit agreed on a closed shop, by virtue of which the
of the exercise of the constitutional right to self- employer may employ only members of the
collective bargaining union, and the employees
must continue to be members of the union for the On the fourth issue involving the voluntary
duration of the contract in order to keep their jobs. arbitrator's ruling that on the basis of the
. . . . . . ." 57 University's proposed budget, the University can
no longer be required to grant a second round of
On the third issue regarding the Union's proposal wage increases for the school years 1991-92 and
for the use of the "last-in-first-out" method in case 1992-93 and charge the same to the incremental
of lay-off, termination due to retrenchment and proceeds, we find that the voluntary arbitrator
transfer of employees, the Union relies on social committed grave abuse of discretion amounting
justice and equity to support its proposition, and to lack or excess of jurisdiction. As we ruled in the
submits that the University's prerogative to select case of Caltex Refinery Employees Association
and/or choose the employees it will hire is limited, (CREA) vs. Jose S. Brillantes, 62 ". . . . . . . [w]e
either by law or agreement, especially where the believe that the standard proof of a company's
exercise of this prerogative might result in the loss financial standing is its financial statements duly
of employment. 58 The Union further insists that audited by independent and credible external
its proposal is ". . . in keeping with the avowed auditors." 63 Financial statements audited by
State policy '(q) To ensure the participation of independent external auditors constitute the
workers in decision and policy-making processes normal method of proof of profit and loss
affecting their rights, duties and welfare' (Art. 211, performance of a company. 64 The financial
Labor Code, as amended)." 59 capability of a company cannot be based on its
proposed budget because a proposed budget
On the other hand, the University asserts its does not reflect the true financial condition of a
management prerogative and counters that company, unlike audited financial statements,
"[w]hile it is recognized that this right of and more importantly, the use of a proposed
employees and workers to 'participate in policy budget as proof of a company's financial
and decision-making processes affecting their condition would be susceptible to abuse by
rights and benefits as may be provided by law' scheming employers who might be merely
has been enshrined in the Constitution (Article III, feigning dire financial condition in their business
[should be Article XIII], Section 3, par. 2), said ventures in order to avoid granting salary
participation, however, does not automatically increases and fringe benefits to their employees.
entitle the Union to dictate as to how an employer
should choose the employees to be affected by a On the fifth issue involving the Union's proposals
retrenchment program. The employer still retains on the deloading of the union president, improved
the prerogative to determine the reasonable basis leave benefits and indefinite union leave with pay,
for selecting such employees." 60 we agree with the voluntary arbitrator's rejection
of the said demands, there being no justifiable
We agree with the voluntary arbitrator that as an reason for the granting of the same.
exercise of management prerogative, the
University has the right to adopt valid and On the sixth issue regarding the finding that the
equitable grounds as basis for terminating or multi-sectoral committee in the University is the
transferring employees. As we ruled in the case legitimate group which determines and
of Autobus Workers' Union (AWU) and Ricardo scrutinizes the annual salary increases and fringe
Escanlar vs. National Labor Relations benefits of the employees of the University, the
Commission, "[a] valid exercise of Court finds that the voluntary arbitrator did not
management prerogative is one which, among gravely abuse his discretion on this matter. From
others, covers: work assignment, working our reading of the assailed decision, it appears
methods, time, supervision of workers, transfer of that during the parties' negotiations for a new
employees, work supervision, and the discipline, collective bargaining agreement, the Union
dismissal and recall of workers. Except as demanded for a 25% and 40% salary increase for
provided for, or limited by special laws, an the second and third years, respectively, of the
employer is free to regulate, according to his own collective bargaining agreement. 65 The
discretion and judgment, all aspects of University's counter-proposal was for a 10%
employment." (emphasis supplied) increase for the third year. 66 After the meeting of
the multi-sectoral committee on budget, which is
composed of students, parents, faculty,
administration and union, the University granted Facts:
across-the-board salary increases of 11.3% and
19% for the second and third years, Private respondent Judico entered into an agreement of
respectively. 67 While the voluntary arbitrator agency with petitioner Grepalife to become a debit agent
found that the said committee ". . . decided to attached to the industrial life agency in Cebu City.
grant the said increases based on the University's Sometime in September 1981, complainant was
viability which were exclusively sourced from the promoted to the position of Zone Supervisor and was
tuition fees. . . . . . . .," no finding was made as to given additional (supervisor's) allowance fixed at P110.00
the basis of the committee's decision. Be that as per week.
it may, assuming for the sake of argument that
the said committee is the group responsible for During the third week of November 1981, he was reverted
determining wage increases and fringe benefits, to his former position as debit agent but, for unknown
as ruled by the voluntary arbitrator, the reasons, not paid so called weekly sales reserve of at
committee's determination must still be based on least P200.00. Finally on June 28, 1982, complainant was
duly audited financial statements following our dismissed by way of termination of his agency contract.
ruling on the fourth issue.1âwphi1
Honorato Judico filed a complaint for illegal dismissal
On the seventh and last issue involving the ruling against Grepalife, a duly organized insurance firm,
that the 70% share in the incremental tuition beforethe NLRC Regional Arbitration Branch No. VII,
proceeds is the only source of salary increases Cebu City on August 27, 1982 NLRC ruled that there was
and fringe benefits of the employees, the Court no employer-employee
deems that any determination of this alleged error
is unnecessary and irrelevant, in view of our relationship but ordered Grepalife to pay the complainant
rulings on the fourth and preceding issues and with P1,000.00 by reason of Christian Charity.
there being no evidence presented before the
voluntary arbitrator that the University held
incremental tuition fee proceeds from which any
Was there an employer-employee relationship between
wage increase or fringe benefit may be satisfied.
Grepalife and Judico?
WHEREFORE, premises considered, the
petitions in these consolidated cases, G.R. No.
109002 and G.R. No. 110072 are partially
Yes. We can readily see that the element of control by the
GRANTED. The assailed decision dated January
petitioner on Judico was very much present. The record
19, 1993 of voluntary arbitrator Buenaventura
shows that
Magsalin is hereby AFFIRMED with the
modification that the issue on salary increases for petitioner Judico received a definite minimum amount per
the second and third years of the collective week as his wage known as "sales reserve" wherein the
bargaining agreement be REMANDED to the failure to maintain the same would bring him back to a
voluntary arbitrator for definite resolution within beginner's employment with a fixed weekly wage of
one month from the finality of this Decision, on the P200.00 for thirteen weeks regardless of production. He
basis of the externally audited financial was assigned a definite place in the office to work on
statements of the University already submitted by when he is not in the field; and in addition to his
the Union before the voluntary arbitrator and canvassing work he was burdened with the job of
forming part of the records.1â collection. In both cases he was required to make regular
report to the company regarding this duties, and for which
G.R. No. 73887 December 21, 1989
an anemic performance would mean a dismissal.
Conversely faithful and productive service earned him a
7. GREAT PACIFIC LIFE ASSURANCE promotion to Zone Supervisor with additional supervisor's
CORPORATION allowance, a definite amount of P110.00 aside from the
vs. regular P200.00 weekly "allowance". Furthermore, his
HONORATO JUDICO and NATIONAL contract of services with petitioner is not for a piece of
LABOR RELATIONS COMMISSION work nor for a definite period.

Petition denied.
8. THELMA DUMPIT-MURILLO v. THE COURT exist, does not necessary prevent regular employment
OF APPEALS status.

G.R. No. 164652, 8 June 2007, SECOND DIVISION Sonza case is not applicable in this case because
(Quisimbing, J.) element of control is present in this case. In Sonza, the
television station did not instruct Sonza how to perform
DOCTRINE OF THE CASE his job. How Sonza delivered his lines, appeared on
television, and sounded on radio were outside the
There are two kinds of regular employee: (1) television station’s control. Clearly the television station
those who are engaged in a performance which are did not exercise control over the means and methods of
usually necessary and desirable in the usual business or the performance of Sonza’s work. In this case, ABC had
trade of employer, and (2) those who have rendered at control over the performance of Thelma’s work.
least one year of service, whether continuous or broken, Noteworthy too, is the comparatively low P28,000 monthly
with respect to activity in which they are employed. Private pay of petitioner vis the P300,000 a month salary of Sonza
respondent’s practice of repeatedly extending petitioner’s that all the more bolsters the conclusion that petitioner
3-month contract for 4 years is a circumvention of the was not in the same situation as Sonza.
acquisition of regular status.
There are two kinds of regular employee: (1)
FACTS those who are engaged in a performance which are
usually necessary and desirable in the usual business or
ABC hired Thelma as a newscaster and a co- trade of employer, and (2) those who have rendered at
anchor for an early evening news program. It was agreed least one year of service, whether continuous or broken,
that her contract will last for 3 months. After 4 years of with respect to activity in which they are employed.
repeated renewals, petitioner’s talent contract expired.
Thelma wrote to Javier, Vice President for News and Private respondent’s practice of repeatedly
Public Affairs of ABC, informing him her desire to renew extending petitioner’s 3-month contract for 4 years is a
her contract subject to salary increase. A month later, circumvention of the acquisition of regular status. As a
petitioner send a demand letter requesting that (1) she be regular employee, petitioner is entitled to security of
reinstated to her former position, (2) payment of unpaid tenure and can be dismissed only for just cause and after
wages, and (3) payment of benefits. due compliance with procedural due process.

However, because of non-compliance, petitioner 9. FUJI TELEVISION NETWORK, INC. vs.

filed a case against ABC at NLRC-NCR for illegal ARLENE S. ESPIRITU
constructive dismissal. The Labor Arbiter dismissed the
complaint. However, the NLRC reversed the ruling of the G.R. Nos. 204944-45. December 3, 2014; LEONEN, J
LA, stating that there was an employee-employer
relationship involved. Thus, ordered Thelma to be Principle: It is the burden of the employer to prove that a
reinstated without loss to seniority rights. person whose services it pays for is an independent
contractor rather than a regular employee with or without
ABC elevated the case to the Court of Appeals a fixed term. That a person has a disease does not per se
under Rule 65. CA reversed the ruling of NLRC stating entitle the employer to terminate his or her services.
that petitioner is a fixed-term employee and not a regular Termination is the last resort. At the very least, a
employee because her job was only for a specified period competent public health authority must certify that the
of time. disease cannot be cured within six (6) months, even with
appropriate treatment.
Is Thelma an employee of ABC company?
1. In 2005, Arlene S. Espiritu ("Arlene") was
RULING engaged by Fuji Television Network, Inc. ("Fuji")
as a news correspondent/producer 4 "tasked to
YES. Thelma is an employee of ABC, and a report Philippine news to Fuji through its Manila
regular employee (not a fixed-term employee) under the Bureau field office." Arlene's employment
contemplation of law. The assertion that talent contract contract initially provided for a term of one (1)
year but was successively renewed on a yearly a. The Court of Appeals held that Arlene was a
basis with salary adjustment upon every renewal. regular employee because she was engaged to
2. Sometime in January 2009, Arlene was perform work that was necessary or desirable in
diagnosed with lung cancer. She informed Fuji the business of Fuji, and the successive renewals
about her condition. In turn, the Chief of News of her fixed-term contract resulted in regular
Agency of Fuji, Yoshiki Aoki, informed Arlene employment.
"that the company will have a problem renewing b. According to the Court of Appeals, Sonza does
her contract" since it would be difficult for her to not apply in order to establish that Arlene was an
perform her job. She "insisted that she was still fit independent contractor because she was not
to work as certified by her attending physician." contracted on account of any peculiar ability,
3. After several verbal and written communications, special talent, or skill. The fact that everything
Arlene and Fuji signed a nonrenewal contract on used by Arlene in her work was owned by Fuji
May 5, 2009 where it was stipulated that her negated the idea of job contracting.
contract would no longer be renewed after its c. The Court of Appeals also held that Arlene was
expiration on May 31, 2009. The contract also illegally dismissed because Fuji failed to comply
provided that the parties release each other from with the requirements of substantive and
liabilities and responsibilities under the procedural due process necessary for her
employment contract. dismissal since she was a regular employee.
4. In consideration of the non-renewal contract, d. The Court of Appeals found that Arlene did not
Arlene "acknowledged receipt of the total amount sign the non-renewal contract voluntarily and that
of US$18,050.00 representing her monthly salary the contract was a mere subterfuge by Fuji to
from March 2009 to May 2009, year-end bonus, secure its position that it was her choice not to
mid-year bonus, and separation pay." 13 renew her contract. She was left with no choice
However, Arlene affixed her signature on the non- since Fuji was decided on severing her
renewal contract with the initials "U.P." for "under employment.
5. On May 6, 2009, the day after Arlene signed the ISSUES:
non-renewal contract, she filed a complaint for
illegal dismissal and attorney's fees with the (1) Whether or not Espiritu is a regular employee or a
National Capital Region Arbitration Branch of the fixed-term contractual employee;
National Labor Relations Commission. She (2) Whether or not Espiritu was illegally dismissed; and
alleged that she was forced to sign the non-
renewal contract when Fuji came to know of her
illness and that Fuji withheld her salaries and PRELIMINARIES
other bene7ts for March and April 2009 when she
refused to sign ON BURDEN OF PROOF
6. Labor Arbiter: Dismissed
Corazon C. Borbolla dismissed Arlene's 1. In this case, there is no question that Arlene
complaint. Citing Sonza v. ABS-CBN and rendered services to Fuji. However, Fuji alleges
applying the four-fold test, the Labor that Arlene was an independent contractor, while
Arbiter held that Arlene was not Fuji's Arlene alleges that she was a regular employee.
employee but an independent contractor. To resolve this issue, we ascertain whether an
7. NLRC: Reversed employer-employee relationship existed between
The National Labor Relations Fuji and Arlene. This court has often used the
Commission reversed the Labor Arbiter's four-fold test to determine the existence of an
decision. It held that Arlene was a regular employer-employee relationship. Under the four-
employee with respect to the activities for fold test, the "control test" is the most important.
which she was employed since she 2. If the circumstances show that Arlene's work was
continuously rendered services that were necessary and desirable to Fuji, then she is
deemed necessary and desirable to presumed to be a regular employee. The burden
Fuji's business. of proving that she was an independent
8. Court of Appeals affirmed the National Labor contractor lies with Fuji.
Relations ( based on Dumpit-Murillo Case) 3. In labor cases, the quantum of proof required is
substantial evidence. "Substantial evidence" has
been defined as "such amount of relevant the parties without any force, duress, or
evidence which a reasonable mind might accept improper pressure being brought to bear
as adequate to justify a conclusion." upon the employee and absent any other
4. If Arlene was a regular employee, we then circumstances vitiating his consent; or
determine whether she was illegally dismissed. In b. It satisfactorily appears that the employer
complaints for illegal dismissal, the burden of and the employee dealt with each other
proof is on the employee to prove the fact of on more or less equal terms with no
dismissal. Once the employee establishes the moral dominance exercised by the
fact of dismissal, supported by substantial former or the latter.
evidence, the burden of proof shifts to the 3. Labayog v. M.Y. San Biscuits, Inc: Contracts of
employer to show that there was a just or employment for a fixed period are not unlawful.
authorized cause for the dismissal and that due What is objectionable is the practice of some
process was observed. scrupulous employers who try to circumvent the
law protecting workers from the capricious
ON REGULAR EMPLOYMENT termination of employment.

1. Art. 280. Regular and casual employment. — ON INDEPENDENT CONTRACTOR

The provisions of written agreement to the contrary
notwithstanding and regardless of the oral agreement 1. Independent contractor is defined as: . . . one who
of the parties, an employment shall be deemed to be carries on a distinct and independent business
regular where the employee has been engaged to and undertakes to perform the job, work, or
perform activities which are usually necessary or service on its own account and under one's own
desirable in the usual business or trade of the responsibility according to one's own manner and
employer, except where the employment has been method, free from the control and direction of the
fixed for a specific project or undertaking the principal in all matters connected with the
completion or termination of which has been performance of the work except as to the results
determined at the time of the engagement of the thereof
employee or where the work or services to be
performed is seasonal in nature and the employment 2. Art. 106. Contractor or subcontractor. —
is for the duration of the season. Whenever an employer enters into a contract with
2. This provision classifies employees into regular, another person for the performance of the
project, seasonal, and casual. It further classifies former's work, the employees of the contractor
regular employees into two kinds: (1) those "engaged and of the latter's subcontractor, if any, shall be
to perform activities which are usually necessary or paid in accordance with the provisions of this
desirable in the usual business or trade of the Code
employer"; and (2) casual employees who have
"rendered at least one year of service, whether such The Secretary of Labor and Employment may, by
service is continuous or broken." appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of
ON FIXED TERM CONTRACTUAL EMPLOYEE workers established under this Code. In so
prohibiting or restricting, he may make
1. GMA Network, Inc. v. Pabriga : Logically, the appropriate distinctions between labor-only
decisive determinant in the term employment contracting and job contracting as well as
should not be the activities that the employee is differentiations within these types of contracting
called upon to perform, but the day certain and determine who among the parties involved
agreed upon by the parties for the shall be considered the employer for purposes of
commencement and termination of their this Code, to prevent any violation or
employment relationship, a day certain being circumvention of any provision of this Code.
understood to be "that which must necessarily
come, although it may not be known when."
2. The validity of the fixed-term contract (Brent
Doctrine) There is "labor-only" contracting where the
a. The fixed period of employment was person supplying workers to an employer does
knowingly and voluntarily agreed upon by not have substantial capital or investment in the
form of tools, equipment, machineries, work
premises, among others, and the workers - Bernarte v. Philippine Basketball Association
recruited and placed by such person are involved a basketball referee. This court ruled
performing activities which are directly related to that "a referee is an independent contractor,
the principal business of such employer. In such whose special skills and independent judgment
cases, the person or intermediary shall be are required speci7cally for such position and
considered merely as an agent of the employer cannot possibly be controlled by the hiring party.
who shall be responsible to the workers in the
same manner and extent as if the latter were 6. In other words, there are different kinds of
directly employed by him independent contractors: those engaged in
legitimate job contracting and those who have
unique skills and talents that set them apart from
ordinary employees. Since no employer-
3. Department Order No. 18-A: Section 3. . . . (c) . . employee relationship exists between
. an arrangement whereby a principal agrees to independent contractors and their principals, their
put out or farm out with a contractor the contracts are governed by the Civil Code
performance or completion of a specific job, work provisions on contracts and other applicable
or service within a definite or predetermined laws.
period, regardless of whether such job, work or
service is to be performed or completed within or RULING:
outside the premises of the principal.
YES. Espiritu is a regular employee

1. Fuji's argument that Arlene was an independent

4. This department order also states that there is a contractor under a fixed-term contract is
trilateral relationship in legitimate job contracting contradictory. Employees under fixed-term
and subcontracting arrangements among the contracts cannot be independent contractors
principal, contractor, and employees of the because in fixed-term contracts, an employer-
contractor. There is no employer-employee employee relationship exists. The test in this kind
relationship between the contractor and principal of contract is not the necessity grid desirability of
who engages the contractor's services, but there the employee's activities, "but the day certain
is an employer-employee relationship between agreed upon by the parties for the
the contractor and workers hired to accomplish commencement and termination of the
the work for the principal. employment relationship." For regular
employees, the necessity and desirability of their
work in the usual course of the employer's
5. Cases: business are the determining factors. On the
- Orozco v. Court of Appeals, Wilhelmina Orozco other hand, independent contractors do not have
was a columnist for the Philippine Daily Inquirer. employer-employee relationships with their
This court ruled that she was an independent principals.
contractor because of her "talent, skill,
experience, and her unique viewpoint as a 2. Here, the Court of Appeals applied Sonza v. ABS-
feminist advocate." In addition, the Philippine CBN and Dumpit-Murillo v. Court of Appeals in
Daily Inquirer did not have the power of control determining whether Arlene was an independent
over Orozco, and she worked at her own contractor or a regular employee.
- Semblante v. Court of Appeals involved a 3. In deciding Sonza and Dumpit-Murillo, this court
masiador and a sentenciador. This court ruled used the four-fold test. Both cases involved
that "petitioners performed their functions as newscasters and anchors. However, Sonza was
masiador and sentenciador free from the held to be an independent contractor, while
direction and control of respondents" and that the Dumpit-Murillo was held to be a regular employee
masiador and sentenciador "relied mainly on their
'expertise that is characteristic of the cockfight SONZA and DUMPIT-MURILLO Case distinguished
gambling.'" Hence, no employer-employee
relationship existed.
1. Sonza was engaged by ABS-CBN in view of his - The Court of Appeals affirmed the finding of the
"unique skills, talent and celebrity status not National Labor Relations Commission that the
possessed by ordinary employees." His work was successive renewals of Arlene's contract
for radio and television programs. On the other indicated the necessity and desirability of her
hand, Dumpit-Murillo was hired by ABC as a work in the usual course of Fuji's business.
newscaster and co-anchor. Because of this, Arlene had become a regular
2. Sonza's talent fee amounted to P317,000.00 per employee with the right to security of tenure.
month, which this court found to be a substantial
amount that indicated he was an independent YES. Espiritu was illegally dismissed
contractor rather than a regular employee.
Meanwhile, Dumpit-Murillo's monthly salary was 1. As a regular employee, Arlene was entitled to
P28,000.00, a very low amount compared to what security of tenure and could be dismissed only for
Sonza received. just or authorized causes and after the
3. Sonza was unable to prove that ABS-CBN could observance of due process.
terminate his services apart from breach of 2. Art. 279. Security of tenure. — In cases of
contract. There was no indication that he could be regular employment, the employer shall not
terminated based on just or authorized causes terminate the services of an employee except for
under the Labor Code. In addition, ABS-CBN a just cause of when authorized by this Title. An
continued to pay his talent fee under their employee who is unjustly dismissed from work
agreement, even though his programs were no shall be entitled to reinstatement without loss of
longer broadcasted. Dumpit-Murillo was found to seniority rights and other privileges and to his full
have been illegally dismissed by her employer backwages, inclusive of allowances, and to his
when they did not renew her contract on her other benefits or their monetary equivalent
fourth year with ABC. computed from the time his compensation was
4. In Sonza, this court ruled that ABS-CBN did not withheld from him up to the time of his actual
control how Sonza delivered his lines, how he reinstatement
appeared on television, or how he sounded on 3. The expiration of Arlene's contract does not
radio. All that Sonza needed was his talent. negate the finding of illegal dismissal by Fuji. The
Further, "ABS-CBN could not terminate or manner by which Fuji informed Arlene that her
discipline SONZA even if the means and methods contract would no longer be renewed is
of performance of his work . . . did not meet ABS- tantamount to constructive dismissal. To make
CBN's approval." In Dumpit-Murillo, the duties matters worse, Arlene was asked to sign a letter
and responsibilities enumerated in her contract of resignation prepared by Fuji. The existence of
was a clear indication that ABC had control over a fixed-term contract should not mean that there
her work. can be no illegal dismissal. Due process must still
be observed in the pre-termination of fixed-term
The Control Test contracts of employment.

1. Her contract also indicated that Fuji had control 4. Disease as a ground for termination is recognized
over her work because she was required to work under Article 284
for eight (8) hours from Monday to Friday, 5. For dismissal under Article 284 to be valid, two
although on flexible time. requirements must be complied with:
2. Arlene alleged that Fuji gave her instructions on (1) The employee's disease cannot be cured
what to report. Even the mode of transportation in within six (6) months and his "continued
carrying out her functions was controlled by Fuji. employment is prohibited by law or prejudicial
Paragraph 6 of her contract states: During the to his health as well as to the health of his co-
travel to carry out work, if there is change of place employees"; and
or change of place of work, the train, bus, or (2) Certification issued by a competent public
public transport shall be used for the trip. If the health authority that even with proper medical
Employee uses the private car during the work treatment, the disease cannot be cured within
and there is an accident the Employer shall not six (6) months.
be responsible for the damage, which may be
caused to the Employee. 6. The burden of proving compliance with these
requisites is on the employer. Noncompliance
leads to the conclusion that the dismissal was The Labor Arbiter rendered his Decision dated 8 July
illegal 1997 dismissing the complaint for lack of jurisdiction.
7. There is no evidence showing that Arlene was SONZA contends that the Labor Arbiter has jurisdiction
accorded due process. After informing her over the case because he was an employee of ABS-CBN.
employer of her lung cancer, she was not given On the other hand, ABS-CBN insists that the Labor Arbiter
the chance to present medical certificates. Fuji has no jurisdiction because SONZA was an independent
immediately concluded that Arlene could no contractor.
longer perform her duties because of
chemotherapy. It did not ask her how her ISSUE:
condition would affect her work. Neither did it
suggest for her to take a leave, even though she Whether or not SONZA was an employee of ABSCBN
was entitled to sick leaves. Worse, it did not entitling him the benefits granted under the Labor Code.
present any certificate from a competent public
health authority. What Fuji did was to inform her HELD:
that her contract would no longer be renewed,
No. Sonza was not an employee of ABSCBN. He
and when she did not agree, her salary was
was an independent contractor.

Case law has consistently held that the elements of

10. Sonza vs. ABSCBN Broadcasting
an employer-employee relationship are: (a) the selection
and engagement of the employee; (b) the payment of
wages; (c) the power of dismissal; and (d) the employer’s
G.R. No. 138051 | June 10, 2014 | Carpio, J.:
power to control the employee on the means and methods
by which the work is accomplished. The last element, the
so-called “control test”, is the most important element.
In May 1994, respondent ABS-CBN Broadcasting
A. Selection and Engagement of Employee
Corporation (“ABS-CBN”) signed an Agreement
(“Agreement”) with the Mel and Jay Management and
Development Corporation (“MJMDC”). ABS-CBN was
ABS-CBN engaged SONZA’s services to co-host its
represented by its corporate officers while MJMDC was
television and radio programs because of SONZA’s
represented by SONZA, as President and General
peculiar skills, talent and celebrity status. Independent
Manager, and Carmela Tiangco (“TIANGCO”), as EVP
contractors often present themselves to possess unique
and Treasurer. Referred to in the Agreement as “AGENT,”
skills, expertise or talent to distinguish them from ordinary
MJMDC agreed to provide SONZA’s services exclusively
employees. The specific selection and hiring of SONZA,
to ABS-CBN as talent for radio and television.
because of his unique skills, talent and celebrity
status not possessed by ordinary employees, is a
ABS-CBN agreed to pay for SONZA’s services a
circumstance indicative, but not conclusive, of an
monthly talent fee of P310,000 for the first year and
independent contractual relationship. If SONZA did not
P317,000 for the second and third year of the Agreement.
possess such unique skills, talent and celebrity status,
ABS-CBN would pay the talent fees on the 10th and 25th
ABS-CBN would not have entered into the Agreement
days of the month.
with SONZA but would have hired him through its
On 30 April 1996, SONZA filed a complaint against personnel department just like any other employee. In any
ABS-CBN before the Department of Labor and event, the method of selecting and engaging SONZA
Employment, National Capital Region in Quezon City. does not conclusively determine his status. We must
SONZA complained that ABS-CBN did not pay his consider all the circumstances of the relationship, with the
salaries, separation pay, service incentive leave pay, 13th control test being the most important element.
month pay, signing bonus, travel allowance and amounts
B. Payment of Wages
due under the Employees Stock Option Plan (“ESOP”).
On 10 July 1996, ABS-CBN filed a Motion to Dismiss on
All the talent fees and benefits paid to SONZA were
the ground that no employer-employee relationship
the result of negotiations that led to the Agreement. If
existed between the parties. SONZA filed an Opposition
SONZA were ABS-CBN’s employee, there would be no
to the motion on 19 July 1996.
need for the parties to stipulate on benefits such as “SSS,
Medicare, x x x and 13th month pay” which the law
automatically incorporates into every employer-employee dictate the contents of SONZA’s script. However, the
contract. Whatever benefits SONZA enjoyed arose from Agreement prohibited SONZA from criticizing in his shows
contract and not because of an employer-employee ABS-CBN or its interests.[32] The clear implication is that
relationship. SONZA had a free hand on what to say or discuss in his
shows provided he did not attack ABS-CBN or its
B. Power of Dismissal interests.

We find that ABS-CBN was not involved in the actual

During the life of the Agreement, ABS-CBN agreed to performance that produced the finished product of
pay SONZA’s talent fees as long as “AGENT and Jay SONZA’s work.[33] ABS-CBN did not instruct SONZA how
Sonza shall faithfully and completely perform each to perform his job. ABS-CBN merely reserved the right to
condition of this Agreement.”[24] Even if it suffered severe modify the program format and airtime schedule “for more
business losses, ABS-CBN could not retrench SONZA effective programming.”[34] ABS-CBN’s sole concern was
because ABS-CBN remained obligated to pay SONZA’s the quality of the shows and their standing in the ratings.
talent fees during the life of the Agreement. This Clearly, ABS-CBN did not exercise control over the
circumstance indicates an independent contractual means and methods of performance of SONZA’s work.
relationship between SONZA and ABS-CBN.
In Vaughan, et al. v. Warner, et al., the United States
C. Power of Control Circuit Court of Appeals ruled that vaudeville performers
were independent contractors although the management
The United States Court of Appeals, First Circuit, reserved the right to delete objectionable features in their
recently held in Alberty-Vélez v. Corporación De Puerto shows. Since the management did not have control over
Rico Para La Difusión Pública (“WIPR”) that a the manner of performance of the skills of the artists, it
television program host is an independent contractor. could only control the result of the work by deleting
First, a television actress is a skilled position requiring objectionable features.
talent and training not available on-the-job. Second,
Alberty provided the “tools and instrumentalities” No doubt, ABS-CBN supplied the equipment, crew
necessary for her to perform. Third, WIPR could not and airtime needed to broadcast the “Mel & Jay”
assign Alberty work in addition to filming “Desde Mi programs. However, the equipment, crew and airtime are
Pueblo.” not the “tools and instrumentalities” SONZA needed to
perform his job. What SONZA principally needed were his
talent or skills and the costumes necessary for his
appearance. [38] Even though ABS-CBN provided SONZA
Applying the control test to the present case, we find with the place of work and the necessary equipment,
that SONZA is not an employee but an independent SONZA was still an independent contractor since ABS-
contractor. The control test is the most important test our CBN did not supervise and control his work. ABS-CBN’s
courts apply in distinguishing an employee from an sole concern was for SONZA to display his talent during
independent contractor.[29] This test is based on the extent the airing of the programs. A radio broadcast specialist
of control the hirer exercises over a worker. The greater who works under minimal supervision is an independent
the supervision and control the hirer exercises, the more contractor.[40] SONZA’s work as television and radio
likely the worker is deemed an employee. The converse program host required special skills and talent, which
holds true as well – the less control the hirer exercises, SONZA admittedly possesses. The records do not show
the more likely the worker is considered an independent that ABS-CBN exercised any supervision and control over
contractor how SONZA utilized his skills and talent in his shows.

Firstly, ABS-CBN engaged SONZA’s services Secondly, SONZA urges us to rule that he was ABS-
specifically to co-host the “Mel & Jay” programs. ABS- CBN’s employee because ABS-CBN subjected him to its
CBN did not assign any other work to SONZA. To perform rules and standards of performance. We find that these
his work, SONZA only needed his skills and talent. How general rules are merely guidelines towards the
SONZA delivered his lines, appeared on television, and achievement of the mutually desired result, which are top-
sounded on radio were outside ABS-CBN’s control. rating television and radio programs that comply with
SONZA did not have to render eight hours of work per standards of the industry. Logically, the line should be
day. The Agreement required SONZA to attend only drawn between rules that merely serve as guidelines
rehearsals and tapings of the shows, as well as pre- and towards the achievement of the mutually desired result
post-production staff meetings.[31] ABS-CBN could not
without dictating the means or methods to be employed in SONZA. The records do not show that MJMDC acted as
attaining it, and those that control or fix the methodology ABS-CBN’s agent. MJMDC, which stands for Mel and Jay
and bind or restrict the party hired to the use of such Management and Development Corporation, is a
means. The first, which aim only to promote the result, corporation organized and owned by SONZA and
create no employer-employee relationship unlike the TIANGCO. The President and General Manager of
second, which address both the result and the means MJMDC is SONZA himself. It is absurd to hold that
used to achieve it. The Vaughan case also held that one MJMDC, which is owned, controlled, headed and
could still be an independent contractor although the hirer managed by SONZA, acted as agent of ABS-CBN in
reserved certain supervision to insure the attainment of entering into the Agreement with SONZA, who himself is
the desired result. The hirer, however, must not deprive represented by MJMDC. That would make MJMDC the
the one hired from performing his services according to agent of both ABS-CBN and SONZA.
his own initiative.
As SONZA admits, MJMDC is a management
Lastly, SONZA insists that the “exclusivity clause” in company devoted exclusively to managing the careers
the Agreement is the most extreme form of control which of SONZA and his broadcast partner, TIANGCO. MJMDC
ABS-CBN exercised over him. This argument is futile. is not engaged in any other business, not even job
Being an exclusive talent does not by itself mean that contracting. MJMDC does not have any other function
SONZA is an employee of ABS-CBN. Even an apart from acting as agent of SONZA or TIANGCO to
independent contractor can validly provide his services promote their careers in the broadcast and television
exclusively to the hiring party. In the broadcast industry, industry.
exclusivity is not necessarily the same as control. The
hiring of exclusive talents is a widespread and accepted Nature of SONZA’s Claims
practice in the entertainment industry. This practice is not
designed to control the means and methods of work of the SONZA seeks the recovery of allegedly unpaid talent
talent, but simply to protect the investment of the fees, 13th month pay, separation pay, service incentive
broadcast station. The broadcast station normally spends leave, signing bonus, travel allowance, and amounts due
substantial amounts of money, time and effort “in building under the Employee Stock Option Plan. We agree with
up its talents as well as the programs they appear in and the findings of the Labor Arbiter and the Court of Appeals
thus expects that said talents remain exclusive with the that SONZA’s claims are all based on the May 1994
station for a commensurate period of time. Agreement and stock option plan, and not on the
Labor Code. Clearly, the present case does not call for
MJMDC as Agent of SONZA an application of the Labor Code provisions but an
interpretation and implementation of the May 1994
SONZA protests the Labor Arbiter’s finding that he is Agreement. In effect, SONZA’s cause of action is for
a talent of MJMDC, which contracted out his services to breach of contract which is intrinsically a civil dispute
ABS-CBN. The Labor Arbiter ruled that as a talent of cognizable by the regular courts.
MJMDC, SONZA is not an employee of ABS-CBN.
SONZA insists that MJMDC is a “labor-only” contractor
and ABS-CBN is his employer.
[G.R. No. 120969. January 22, 1998]
In a labor-only contract, there are three parties
involved: (1) the “labor-only” contractor; (2) the employee 11. ALEJANDRO MARAGUINOT, JR. and
who is ostensibly under the employ of the “labor-only” PAULINO ENERO, petitioners, vs. NATIONAL
contractor; and (3) the principal who is deemed the real LABOR RELATIONS COMMISSION (SECOND
employer. Under this scheme, the “labor-only” DIVISION) composed of Presiding
contractor is the agent of the principal. The law makes Commissioner RAUL T. AQUINO,
the principal responsible to the employees of the “labor- Commissioner ROGELIO I. RAYALA and
only contractor” as if the principal itself directly hired or Commissioner VICTORIANO R. CALAYCAY
employed the employees.[48] These circumstances are not (Ponente), VIC DEL ROSARIO and VIVA
present in this case. FILMS

There are essentially only two parties involved under Facts

the Agreement, namely, SONZA and ABS-CBN. MJMDC
merely acted as SONZA’s agent. The Agreement Petitioners Maraguinot and Enero maintains that they
expressly states that MJMDC acted as the “AGENT” of were employed as a members of the filming crew. Their
tasks consisted of loading, unloading and arranging account under his own responsibility according to his own
movie equipment in the shooting area as instructed by the manner and method free from the control and direction of
cameraman, returning the equipment to Viva Films’ his employer or principal in all matters connected with the
warehouse, assisting in the “fixing” of the lighting system, performance of the work except as to the results thereof
and performing other tasks that the cameraman and/ or and (2) The contractor has substantial capital or
director may assign. investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary
In May 1992, petitioners sought the assistance of their in the conduct of his business. In the case associate
supervisor, Mrs. Alejandria Cesario, to facilitate their producers do not have the equipment; in fact, it is VIVA
request that private respondents adjust their salary in itself who supplies the movie-making equipment. The
accordance with the minimum wage law. On June 1992, associate producers of VIVA cannot be considered labor-
Mrs. Cesario informed petitioners that Mr. Vic del Rosario only contractors as they did not supply, recruit nor hire the
would agree to increase their salary only if they signed a workers. It was Cesario, the Shooting Supervisor of VIVA,
blank employment contract. Both petitioners refused to who recruited crew members. Thus, the relationship
sign, respondents forced Enero to go on leave. However, between VIVA and its producers or associate producers
when here ported to work, respondent refused seems to be that of agency. The latter make movies on
behalf of VIVA, whose business is to “make” movies. As
to take him back. Maraguinot was dropped from the such, the employment relationship between petitioners
company payroll but when his name was again included and producers is actually one between petitioners and
in such, he was again asked to sign a blank employment VIVA, with the latter being the direct employer.
contract, and when he still refused, respondent’s
terminated his services. Petitioners thus sued for illegal The employer-employee relationship between petitioners
dismissal. and VIVA can further be established by the “control test.”
While four elements are usually considered in determining
Private respondents claim that Viva Films is primarily the existence of an employment relationship, namely: (a)
engaged in the distribution and exhibition of movies -- but the selection and engagement of the employee; (b) the
not in the business of making movies; in the same vein, payment of wages; (c) the power of dismissal; and (d) the
private respondent Vic Del Rosario is merely an executive employer’s power to control the employee’s conduct, the
producer, i.e., the financier who invests a certain sum of most important element is the employer’s control of the
money for the production of movies distributed and employee’s conduct, not only as to the result of the work
exhibited by VIVA. Private respondents assert that they to be done but also as to the means and methods to
contract persons called “producers” --also referred to as accomplish the same. All of which are present in the case.
“associate producers”-- to “produce” or make movies for The movie project must be finished within schedule
private respondents. Petitioners are project employees of without exceeding the budget, and additional expenses
the associate producers who, in turn, act as independent must be justified; certain scenes are subject to change to
contractors. As such, there is no employer-employee suit the taste of the company; and the Supervising
relationship. The labor arbiter ruled in favor of the Producer, the “eyes and ears” of VIVA and del Rosario,
petitioners. On appeal, the NLRC reversed the decision intervenes in the movie-making process by assisting the
hence, this appeal. associate producer in solving problems encountered in
making the film.
Regarding the Illegal Dismissal, petitioners although
WON there is an employer - employee relationship admitted that they were hired as project employees, they
between petitioners and private respondents had attained the status of regular employees in view of
VIVA’s conduct. A project employee or a member of a
work pool may acquire the status of a regular employee
when the following concur: (1) There is a continuous
Yes. Petitioners cannot be considered as project
rehiring of project employees even after cessation of a
employees of associate producers who, in turn, act as
project; and (2) The tasks performed by the alleged
independent contractors. It is settled that the contracting
“project employee” are vital, necessary and indispensable
out of labor is allowed only in case of job contracting.
to the usual business or trade of the employer.
According to Sec. 8 rule 8 book 3 of the Omnibus Rules
Implementing the Labor Code such is only permissible The evidence on record shows that petitioner Enero was
when (1) The contractor carries on an independent employed for a total of two (2) years and engaged in at
business and undertakes the contract work on his own
least eighteen (18) projects, while petitioner Maraguinot inclusion in the payroll and the opportunity to seek other
was employed for some three (3) years and worked on at employment denote project employment.
least twenty-three (23) projects. Moreover, as petitioners’
tasks involved, among other chores, the loading, 12. *BITOY JAVIER (DANILO P. JAVIER) v. FLY
unloading and arranging of movie equipment in the ACE CORPORATION/FLORDELYN CASTILLO
shooting area as instructed by the cameramen, returning
the equipment to the Viva Films’ warehouse, and G.R. No. 192558
assisting in the “fixing” of the lighting system, it may not
be gainsaid that these tasks were vital, necessary and This is a petition under Rule 45 of the Rules of
indispensable to the usual business or trade of the Civil Procedure assailing the March 18, 2010
employer. Decision[1] of the Court of Appeals (CA) and its June 7,
2010 Resolution,[2]in CA-G.R. SP No. 109975, which
As petitioners had already gained the status of regular reversed the May 28, 2009 Decision[3] of the National
employees, their dismissal was unwarranted, for the Labor Relations Commission (NLRC) in the case
cause invoked by private respondents for petitioners’ entitled Bitoy Javier v. Fly Ace/Flordelyn
dismissal, viz., completion of project, was not, as to them, Castillo,[4] holding that petitioner Bitoy Javier (Javier) was
a valid cause for dismissal under Article 282 of the Labor illegally dismissed from employment and ordering Fly Ace
Code. As such, petitioners are now entitled to back wages Corporation (Fly Ace) to pay backwages and separation
and reinstatement, without loss of seniority rights and pay in lieu of reinstatement.
other benefits that may have accrued.
Antecedent Facts
On May 23, 2008, Javier filed a complaint before the
NOTE: NLRC for underpayment of salaries and other labor
standard benefits. He alleged that he was an employee of
A work pool may exist although the workers in the pool do Fly Ace since September 2007, performing various tasks
not receive salaries and are free to seek other at the respondents warehouse such as cleaning and
employment during temporary breaks in the business, arranging the canned items before their delivery to certain
provided that the worker shall be available when called to locations, except in instances when he would be ordered
report for a project. to accompany the companys delivery vehicles,
as pahinante; that he reported for work from Monday to
Although primarily applicable to regular seasonal workers, Saturday from 7:00 oclock in the morning to 5:00 oclock
this set-up can likewise be applied to project workers in the afternoon; that during his employment, he was not
insofar as the effect of temporary cessation of work is issued an identification card and payslips by the
concerned. company; that on May 6, 2008, he reported for work but
he was no longer allowed to enter the company premises
This is beneficial to both the employer and employee for by the security guard upon the instruction of Ruben
it prevents the unjust situation of “coddling labor at the Ong (Mr. Ong), his superior;[5] that after several minutes
expense of capital” and at the same time enables the of begging to the guard to allow him to enter, he saw Ong
workers to attain the status of regular employees. whom he approached and asked why he was being
barred from entering the premises; that Ong replied by
Truly, the cessation of construction activities at the end of
saying, Tanungin mo anak mo; [6] that he then went home
every project is a foreseeable suspension of work. Of
and discussed the matter with his family; that he
course, no compensation can be demanded from the
discovered that Ong had been courting his daughter
employer because the stoppage of operations at the end
Annalyn after the two met at a fiesta celebration in
of a project and before the start of a new one is regular
Malabon City; that Annalyn tried to talk to Ong and
and expected by both parties to the labor relations. Similar
convince him to spare her father from trouble but he
to the case of regular seasonal employees, the
refused to accede; that thereafter, Javier was terminated
employment relation is not severed by merely being
from his employment without notice; and that he was
suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186
neither given the opportunity to refute the cause/s of his
(1963)] The employees are, strictly speaking, not
dismissal from work.
separated from services but merely on leave of absence
without pay until they are reemployed. Thus we cannot
affirm the argument that non-payment of salary or non-
To support his allegations, Javier presented an products, we give credence to
affidavit of one Bengie Valenzuela who alleged that Javier Respondents claim that complainant
was a stevedore or pahinante of Fly Ace from September was contracted on pakiao basis.
2007 to January 2008. The said affidavit was subscribed
before the Labor Arbiter (LA).[7] As to the claim for underpayment
of salaries, the payroll presented by the
Respondents showing salaries of
workers on pakiao basis has evidentiary
For its part, Fly Ace averred that it was engaged weight because although the signature
in the business of importation and sales of groceries. of the complainant appearing thereon
Sometime in December 2007, Javier was contracted by are not uniform, they appeared to be his
its employee, Mr. Ong, as extra helper on a pakyaw basis true signature.
at an agreed rate of ₱300.00 per trip, which was later
increased to ₱325.00 in January 2008. Mr. Ong xxxx
contracted Javier roughly 5 to 6 times only in a month
whenever the vehicle of its contracted hauler, Milmar Hence, as complainant received
Hauling Services, was not available. On April 30, 2008, the rightful salary as shown by the above
Fly Ace no longer needed the services of Javier. Denying described payrolls, Respondents are not
that he was their employee, Fly Ace insisted that there liable for salary differentials. [9]
was no illegal dismissal.[8] Fly Ace submitted a copy of its
agreement with Milmar Hauling Services and copies of Ruling of the NLRC
acknowledgment receipts evidencing payment to Javier
for his contracted services bearing the words, daily On appeal with the NLRC, Javier was favored. It ruled
manpower (pakyaw/piece rate pay) and the latters that the LA skirted the argument of Javier and immediately
signatures/initials. concluded that he was not a regular employee simply
because he failed to present proof. It was of the view that
a pakyaw-basis arrangement did not preclude the
existence of employer-employee relationship. Payment
Ruling of the Labor Arbiter by result x x x is a method of compensation and does not
define the essence of the relation. It is a mere method of
computing compensation, not a basis for determining the
existence or absence of an employer-employee
On November 28, 2008, the LA dismissed the relationship.[10] The NLRC further averred that it did not
complaint for lack of merit on the ground that Javier failed follow that a worker was a job contractor and not an
to present proof that he was a regular employee of Fly employee, just because the work he was doing was not
Ace. He wrote: directly related to the employers trade or business or the
work may be considered as extra helper as in this case;
Complainant has no employee and that the relationship of an employer and an employee
ID showing his employment with the was determined by law and the same would prevail
Respondent nor any document showing whatever the parties may call it. In this case, the NLRC
that he received the benefits accorded to held that substantial evidence was sufficient basis for
regular employees of the Respondents. judgment on the existence of the employer-employee
His contention that Respondent failed to relationship. Javier was a regular employee of Fly Ace
give him said ID and payslips implies because there was reasonable connection between the
that indeed he was not a regular particular activity performed by the employee (as a
employee of Fly Ace considering that pahinante) in relation to the usual business or trade of the
complainant was a helper and that employer (importation, sales and delivery of groceries).
Respondent company has contracted a He may not be considered as an independent contractor
regular trucking for the delivery of its because he could not exercise any judgment in the
products. delivery of company products. He was only engaged as a
Respondent Fly Ace is not
engaged in trucking business but in the Finding Javier to be a regular employee, the
importation and sales of groceries. Since NLRC ruled that he was entitled to a security of tenure.
there is a regular hauler to deliver its For failing to present proof of a valid cause for his
termination, Fly Ace was found to be liable for illegal xxx
dismissal of Javier who was likewise entitled to
backwages and separation pay in lieu of reinstatement.
The NLRC thus ordered:
In an illegal dismissal case
WHEREFORE, premises the onus probandi rests on the employer
considered, complainants appeal is to prove that its dismissal was for a valid
partially GRANTED. The assailed cause. However, before a case for illegal
Decision of the labor arbiter is dismissal can prosper, an employer-
VACATED and a new one is hereby employee relationship must first be
entered holding respondent FLY ACE established. x x x it is incumbent upon
CORPORATION guilty of illegal private respondent to prove the
dismissal and non-payment of employee-employer relationship by
13 month pay. Consequently, it is substantial evidence.
hereby ordered to pay complainant
DANILO Bitoy JAVIER the following:


1. Backwages -₱45,770.83

2. Separation pay, in lieu of It is incumbent upon private

reinstatement - 8,450.00 respondent to prove, by substantial
evidence, that he is an employee of
3. Unpaid 13th month pay petitioners, but he failed to discharge his
(proportionate) - 5,633.33 burden. The non-issuance of a
company-issued identification card to
TOTAL -₱59,854.16 private respondent supports petitioners
contention that private respondent was
not its employee.[12]

All other claims are dismissed for

lack of merit.
The CA likewise added that Javiers failure to present
salary vouchers, payslips, or other pieces of evidence to
bolster his contention, pointed to the inescapable
SO ORDERED.[11] conclusion that he was not an employee of Fly
Ace. Further, it found that Javiers work was not
necessary and desirable to the business or trade of the
company, as it was only when there were scheduled
deliveries, which a regular hauling service could not
deliver, that Fly Ace would contract the services of Javier
Ruling of the Court of Appeals
as an extra helper. Lastly, the CA declared that the facts
alleged by Javier did not pass the control test.

On March 18, 2010, the CA annulled the NLRC

findings that Javier was indeed a former employee of Fly
He contracted work outside the company premises; he
Ace and reinstated the dismissal of Javiers complaint as
was not required to observe definite hours of work; he
ordered by the LA. The CA exercised its authority to make
was not required to report daily; and he was free to
its own factual determination anent the issue of the
accept other work elsewhere as there was no exclusivity
existence of an employer-employee relationship between
of his contracted service to the company, the same being
the parties.According to the CA:
co-terminous with the trip only.[13] Since no substantial
evidence was presented to establish an employer-
employee relationship, the case for illegal dismissal could to compliance with company rules and regulations as
not prosper. regards working hours, delivery schedule and output, and
his other duties in the warehouse.[16]

The petitioners moved for reconsideration, but to

no avail. The petitioner chiefly relied on Chavez v.
NLRC,[17] where the Court ruled that payment to a worker
on a per trip basis is not significant because this is merely
a method of computing compensation and not a basis for
Hence, this appeal anchored on the following determining the existence of employer-employee
grounds: relationship. Javier likewise invokes the rule that, in
controversies between a laborer and his master, x x x
doubts reasonably arising from the evidence should be
resolved in the formers favour. The policy is reflected is
no less than the Constitution, Labor Code and Civil
REGULAR EMPLOYEE OF FLY ACE. Claiming to be an employee of Fly Ace, petitioner
asserts that he was illegally dismissed by the latters
failure to observe substantive and procedural due
process. Since his dismissal was not based on any of the
causes recognized by law, and was implemented without
notice, Javier is entitled to separation pay and

In its Comment,[19] Fly Ace insists that there was

no substantial evidence to prove employer-employee
The petitioner contends that other than its bare
relationship. Having a service contract with Milmar
allegations and self-serving affidavits of the other
Hauling Services for the purpose of transporting and
employees, Fly Ace has nothing to substantiate its claim
delivering company products to customers, Fly Ace
that Javier was engaged on a pakyaw basis. Assuming
contracted Javier as an extra helper or pahinante on a
that Javier was indeed hired on a pakyaw basis, it does
mere per trip basis. Javier, who was actually a loiterer in
not preclude his regular employment with the company.
the area, only accompanied and assisted the company
Even the acknowledgment receipts bearing his signature
driver when Milmar could not deliver or when the exigency
and the confirming receipt of his salaries will not show the
of extra deliveries arises for roughly five to six times a
true nature of his employment as they do not reflect the
month. Before making a delivery, Fly Ace would turn over
necessary details of the commissioned task. Besides,
to the driver and Javier the delivery vehicle with its loaded
Javiers tasks as pahinante are related, necessary and
company products. With the vehicle and products in their
desirable to the line of business by Fly Ace which is
custody, the driver and Javier would leave the company
engaged in the importation and sale of grocery items. On
premises using their own means, method, best judgment
days when there were no scheduled deliveries, he worked
and discretion on how to deliver, time to deliver, where
in petitioners warehouse, arranging and cleaning the
and [when] to start, and manner of delivering the
stored cans for delivery to clients.[15] More importantly,
Javier was subject to the control and supervision of the
company, as he was made to report to the office from
Monday to Saturday, from 7:00 oclock in the morning
until 5:00 oclock in the afternoon. The list of deliverable Fly Ace dismisses Javiers claims of employment
goods, together with the corresponding clients and their as baseless assertions. Aside from his bare allegations,
respective purchases and addresses, would necessarily he presented nothing to substantiate his status as an
have been prepared by Fly Ace. Clearly, he was subjected employee. It is a basic rule of evidence that each party
must prove his affirmative allegation. If he claims a right
granted by law, he must prove his claim by competent
evidence, relying on the strength of his own evidence and
not upon the weakness of his opponent.[21] Invoking the
case of Lopez v. Bodega City,[22] Fly Ace insists that in an Fly Ace likewise claims that Javiers function as
illegal dismissal case, the burden of proof is upon the a pahinante was not directly related or necessary to its
complainant who claims to be an employee. It is essential principal business of importation and sales of groceries.
that an employer-employee relationship be proved by Even without Javier, the business could operate its usual
substantial evidence. Thus, it cites: course as it did not involve the business of inland
transportation. Lastly, the acknowledgment receipts
bearing Javiers signature and words pakiao rate, referring
to his earned salaries on a per trip basis, have evidentiary
weight that the LA correctly considered in arriving at the
conclusion that Javier was not an employee of the

In an illegal dismissal case,

the onus probandi rests on the employer
to prove that its dismissal of an The Court affirms the assailed CA decision.
employee was for a valid cause.
However, before a case for illegal
dismissal can prosper, an employer-
employee relationship must first be It must be noted that the issue of Javiers alleged
established. illegal dismissal is anchored on the existence of an
employer-employee relationship between him and Fly
Fly Ace points out that Javier merely offers factual Ace. This is essentially a question of fact. Generally, the
assertions that he was an employee of Fly Ace, which are Court does not review errors that raise factual questions.
unfortunately not supported by proof, documentary or However, when there is conflict among the factual
otherwise.[23] Javier simply assumed that he was an findings of the antecedent deciding bodies like the LA, the
employee of Fly Ace, absent any competent or relevant NLRC and the CA, it is proper, in the exercise of Our
evidence to support it. He performed his contracted work equity jurisdiction, to review and re-evaluate the factual
outside the premises of the respondent; he was not even issues and to look into the records of the case and re-
required to report to work at regular hours; he was not examine the questioned findings.[26] In dealing with factual
made to register his time in and time out every time he was issues in labor cases, substantial evidence that amount of
contracted to work; he was not subjected to any relevant evidence which a reasonable mind might accept
disciplinary sanction imposed to other employees for as adequate to justify a conclusion is sufficient.[27]
company violations; he was not issued a company I.D.; he
was not accorded the same benefits given to other
employees; he was not registered with the Social Security
System (SSS) as petitioners employee; and, he was free As the records bear out, the LA and the CA found
to leave, accept and engage in other means of livelihood Javiers claim of employment with Fly Ace as wanting and
as there is no exclusivity of his contracted services with deficient. The Court is constrained to agree. Although
the petitioner, his services being co-terminus with the trip Section 10, Rule VII of the New Rules of Procedure of the
only. All these lead to the conclusion that petitioner is not NLRC[28] allows a relaxation of the rules of procedure and
an employee of the respondents.[24] evidence in labor cases, this rule of liberality does not
mean a complete dispensation of proof. Labor officials are
Moreover, Fly Ace claims that it had no right to enjoined to use reasonable means to ascertain the facts
control the result, means, manner and methods by which speedily and objectively with little regard to technicalities
Javier would perform his work or by which the same is to or formalities but nowhere in the rules are they provided a
be accomplished.[25] In other words, Javier and the license to completely discount evidence, or the lack of it.
company driver were given a free hand as to how they The quantum of proof required, however, must still be
would perform their contracted services and neither were satisfied. Hence, when confronted with conflicting
they subjected to definite hours or condition of work. versions on factual matters, it is for them in the exercise
of discretion to determine which party deserves credence
on the basis of evidence received, subject only to the
requirement that their decision must be supported by While Javier remains firm in his position that as
substantial evidence.[29] Accordingly, the petitioner needs an employed stevedore of Fly Ace, he was made to work
to show by substantial evidence that he was indeed an in the company premises during weekdays arranging and
employee of the company against which he claims illegal cleaning grocery items for delivery to clients, no other
dismissal. proof was submitted to fortify his claim. The lone affidavit
executed by one Bengie Valenzuela was unsuccessful in
strengthening Javiers cause. In said document, all
Valenzuela attested to was that he would frequently see
Expectedly, opposing parties would stand poles Javier at the workplace where the latter was also hired as
apart and proffer allegations as different as chalk and stevedore.[34]Certainly, in gauging the evidence presented
cheese. It is, therefore, incumbent upon the Court to by Javier, the Court cannot ignore the inescapable
determine whether the party on whom the burden to prove conclusion that his mere presence at the workplace falls
lies was able to hurdle the same. No particular form of short in proving employment therein. The supporting
evidence is required to prove the existence of such affidavit could have, to an extent, bolstered Javiers claim
employer-employee relationship. Any competent and of being tasked to clean grocery items when there were
relevant evidence to prove the relationship may be no scheduled delivery trips, but no information was
admitted. Hence, while no particular form of evidence is offered in this subject simply because the witness had no
required, a finding that such relationship exists must still personal knowledge of Javiers employment status in the
rest on some substantial evidence. Moreover, the company. Verily, the Court cannot accept Javiers
substantiality of the evidence depends on its quantitative statements, hook, line and sinker.
as well as its qualitative aspects.[30]Although substantial
evidence is not a function of quantity but rather of quality,
the x x x circumstances of the instant case demand that
something more should have been proffered. Had there The Court is of the considerable view that on
been other proofs of employment, such as x x x inclusion Javier lies the burden to pass the well-settled tests to
in petitioners payroll, or a clear exercise of control, the determine the existence of an employer-employee
Court would have affirmed the finding of employer- relationship, viz: (1) the selection and engagement of the
employee relationship.[31] employee; (2) the payment of wages; (3) the power of
dismissal; and (4) the power to control the employees
conduct. Of these elements, the most important criterion
is whether the employer controls or has reserved the right
to control the employee not only as to the result of the
work but also as to the means and methods by which the
In sum, the rule of thumb remains: the onus result is to be accomplished.[35]
probandi falls on petitioner to establish or substantiate
such claim by the requisite quantum of
evidence.[32] Whoever claims entitlement to the benefits
provided by law should establish his or her right thereto x In this case, Javier was not able to persuade the
x x.[33] Sadly, Javier failed to adduce substantial evidence Court that the above elements exist in his case. He could
as basis for the grant of relief. not submit competent proof that Fly Ace engaged his
services as a regular employee; that Fly Ace paid his
wages as an employee, or that Fly Ace could dictate what
his conduct should be while at work. In other words,
In this case, the LA and the CA both concluded Javiers allegations did not establish that his relationship
that Javier failed to establish his employment with Fly Ace. with Fly Ace had the attributes of an employer-employee
By way of evidence on this point, all that Javier presented relationship on the basis of the above-mentioned four-fold
were his self-serving statements purportedly showing his test. Worse, Javier was not able to refute Fly Aces
activities as an employee of Fly Ace. Clearly, Javier failed assertion that it had an agreement with a hauling
to pass the substantiality requirement to support his company to undertake the delivery of its goods. It was
claim. Hence, the Court sees no reason to depart from the also baffling to realize that Javier did not dispute Fly Aces
findings of the CA. denial of his services exclusivity to the company. In short,
all that Javier laid down were bare allegations without
corroborative proof.
favoritism, however, has not blinded the Court to the rule
that justice is in every case for the deserving, to be
Fly Ace does not dispute having contracted Javier dispensed in the light of the established facts and the
and paid him on a per trip rate as a stevedore, albeit on applicable law and doctrine.[39]
a pakyaw basis. The Court cannot fail to note that Fly Ace
presented documentary proof that Javier was indeed paid
on a pakyaw basis per the acknowledgment receipts
admitted as competent evidence by the LA. Unfortunately WHEREFORE, the petition is DENIED.
for Javier, his mere denial of the signatures affixed therein The March 18, 2010 Decision of the Court of Appeals and
cannot automatically sway us to ignore the documents its June 7, 2010 Resolution, in CA-G.R. SP No. 109975,
because forgery cannot be presumed and must be proved are hereby AFFIRMED.
by clear, positive and convincing evidence and the burden
of proof lies on the party alleging forgery. [36] SO ORDERED.

Considering the above findings, the Court does

not see the necessity to resolve the second issue

One final note. The Courts decision does not

contradict the settled rule that payment by the piece is just
a method of compensation and does not define the
essence of the relation.[37] Payment on a piece-rate basis
does not negate regular employment. The term wage is
broadly defined in Article 97 of the Labor Code as
remuneration or earnings, capable of being expressed in
terms of money whether fixed or ascertained on a time,
task, piece or commission basis. Payment by the piece is
just a method of compensation and does not define the
essence of the relations. Nor does the fact that the
petitioner is not covered by the SSS affect the employer-
employee relationship. However, in determining whether
the relationship is that of employer and employee or one
of an independent contractor, each case must be
determined on its own facts and all the features of the
relationship are to be considered.[38] Unfortunately for
Javier, the attendant facts and circumstances of the
instant case do not provide the Court with sufficient
reason to uphold his claimed status as employee of Fly

While the Constitution is committed to the policy

of social justice and the protection of the working class, it
should not be supposed that every labor dispute will be
automatically decided in favor of labor. Management also
has its rights which are entitled to respect and
enforcement in the interest of simple fair play. Out of its
concern for the less privileged in life, the Court has
inclined, more often than not, toward the worker and
upheld his cause in his conflicts with the employer. Such
13. *OSCAR VILLAMARIA, JR. V. COURT OF in case of failure to do so, any fine that may be imposed
APPEALS by government authorities would be charged against his
account. Bustamante further obliged himself to pay for the
G.R. No. 165881 cost of replacing any parts of the vehicle that would be
lost or damaged due to his negligence. In case the vehicle
Before us is a Petition for Review on Certiorari under Rule sustained serious damage, Bustamante was obliged to
65 of the Revised Rules of Court assailing the notify Villamaria Motors before commencing
Decision[1] and Resolution[2] of the Court of Appeals (CA) repairs. Bustamante was not allowed to wear slippers,
in CA-G.R. SP No. 78720 which set aside the short pants or undershirts while driving. He was required
Resolution[3] of the National Labor Relations Commission to be polite and respectful towards the passengers. He
(NLRC) in NCR-30-08-03247-00, which in turn affirmed was also obliged to notify Villamaria Motors in case the
the Decision[4] of the Labor Arbiter dismissing the vehicle was leased for two or more days and was required
complaint filed by respondent Jerry V. Bustamante. to attend any meetings which may be called from time to
time. Aside from the boundary-hulog, Bustamante was
Petitioner Oscar Villamaria, Jr. was the owner of also obliged to pay for the annual registration fees of the
Villamaria Motors, a sole proprietorship engaged in vehicle and the premium for the vehicles comprehensive
assembling passenger jeepneys with a public utility insurance. Bustamante promised to strictly comply with
franchise to operate along the Baclaran-Sucat route. By the rules and regulations imposed by Villamaria for the
1995, Villamaria stopped assembling jeepneys and upkeep and maintenance of the jeepney.
retained only nine, four of which he operated by
employing drivers on a boundary basis. One of those Bustamante continued driving the jeepney under the
drivers was respondent Bustamante who drove the supervision and control of Villamaria. As agreed upon, he
jeepney with Plate No. PVU-660. Bustamante made daily remittances of P550.00 in payment of the
remitted P450.00 a day to Villamaria as boundary and purchase price of the vehicle. Bustamante failed to pay for
kept the residue of his daily earnings as compensation for the annual registration fees of the vehicle, but Villamaria
driving the vehicle. In August 1997, Villamaria verbally allowed him to continue driving the jeepney.
agreed to sell the jeepney to Bustamante under the
boundary-hulog scheme, where Bustamante would remit In 1999, Bustamante and other drivers who also had the
to Villarama P550.00 a day for a period of four years; same arrangement with Villamaria Motors failed to pay
Bustamante would then become the owner of the vehicle their respective boundary-hulog. This prompted
and continue to drive the same under Villamarias Villamaria to serve a Paalala,[6] reminding them that under
franchise. It was also agreed that Bustamante would the Kasunduan, failure to pay the daily boundary-
make a downpayment of P10,000.00. hulog for one week, would mean their respective
jeepneys would be returned to him without any
On August 7, 1997, Villamaria executed a contract complaints. He warned the drivers that
entitled Kasunduan ng Bilihan ng Sasakyan sa the Kasunduan would henceforth be strictly enforced and
Pamamagitan ng Boundary-Hulog[5] over the passenger urged them to comply with their obligation to avoid
jeepney with Plate No. PVU-660, Chassis No. EVER95- litigation.
38168-C and Motor No. SL-26647. The parties agreed
that if Bustamante failed to pay the boundary-hulog for On July 24, 2000, Villamaria took back the jeepney
three days, Villamaria Motors would hold on to the vehicle driven by Bustamante and barred the latter from driving
until Bustamante paid his arrears, including a penalty the vehicle.
of P50.00 a day; in case Bustamante failed to remit the
daily boundary-hulog for a period of one week, On August 15, 2000, Bustamante filed a Complaint[7] for
the Kasunduan would cease to have legal effect and Illegal Dismissal against Villamaria and his wife
Bustamante would have to return the vehicle to Villamaria Teresita. In his Position Paper,[8] Bustamante alleged that
Motors. he was employed by Villamaria in July 1996 under the
boundary system, where he was required to
Under the Kasunduan, Bustamante was prohibited from remit P450.00 a day. After one year of continuously
driving the vehicle without prior authority from Villamaria working for them, the spouses Villamaria presented
Motors. Thus, Bustamante was authorized to operate the the Kasunduan for his signature, with the assurance that
vehicle to transport passengers only and not for other he (Bustamante) would own the jeepney by March 2001
purposes. He was also required to display an after paying P550.00 in daily installments and that he
identification card in front of the windshield of the vehicle; would thereafter continue driving the vehicle along the
same route under the same franchise. He further narrated alleged that Bustamante eventually failed to remit the
that in July 2000, he informed the Villamaria spouses that requisite boundary-hulog of P550.00 a day, which
the surplus engine of the jeepney needed to be replaced, prompted them to issue the Paalaala. Instead of
and was assured that it would be done. However, he was complying with his obligations, Bustamante stopped
later arrested and his drivers license was confiscated making his remittances despite his daily trips and even
because apparently, the replacement engine that was brought the jeepney to the province without
installed was taken from a stolen vehicle. Due to permission. Worse, the jeepney figured in an accident
negotiations with the apprehending authorities, the and its license plate was confiscated; Bustamante even
jeepney was not impounded. The Villamaria spouses took abandoned the vehicle in a gasoline station in
the jeepney from him on July 24, 2000, and he was no Sucat, Paraaque Cityfor two weeks. When the security
longer allowed to drive the vehicle since then unless he guard at the gasoline station requested that the vehicle
paid them P70,000.00. be retrieved and Teresita Villamaria asked Bustamante
for the keys, Bustamante told her: Di kunin ninyo. When
Bustamante prayed that judgment be rendered in his the vehicle was finally retrieved, the tires were worn, the
favor, thus alternator was gone, and the battery was no longer
WHEREFORE, in the light of the foregoing, it is most
respectfully prayed that judgment be rendered ordering Citing the cases of Cathedral School of Technology v.
the respondents, jointly and severally, the following: NLRC[11] and Canlubang Security Agency Corporation v.
NLRC,[12] the spouses Villamaria argued that Bustamante
1. Reinstate complainant to his former position was not illegally dismissed since
without loss of seniority rights and execute a the Kasunduan executed on August 7, 1997 transformed
Deed of Sale in favor of the complainant relative the employer-employee relationship into that of vendor-
to the PUJ with Plate No. PVU-660; vendee. Hence, the spouses concluded, there was no
legal basis to hold them liable for illegal dismissal. They
2. Ordering the respondents to pay backwages in prayed that the case be dismissed for lack of jurisdiction
the amount of P400.00 a day and other benefits and patent lack of merit.
computed from July 24, 2000 up to the time of his
actual reinstatement; In his Reply,[13] Bustamante claimed that Villamaria
exercised control and supervision over the conduct of his
3. Ordering respondents to return the amount employment. He maintained that the rulings of the Court
of P10,000.00 and P180,000.00 for the expenses in National Labor Union v. Dinglasan,[14] Magboo v.
incurred by the complainant in the repair and Bernardo,[15] and Citizen's League of Free Workers v.
maintenance of the subject jeep; Abbas[16] are germane to the issue as they define the
nature of the owner/operator-driver relationship under the
4. Ordering the respondents to refund the amount boundary system. He further reiterated that it was the
of One Hundred (P100.00) Pesos per day Villamaria spouses who presented the Kasunduan to him
counted from August 7, 1997 up to June 2000 or and that he conformed thereto only upon their
a total of P91,200.00; representation that he would own the vehicle after four
years. Moreover, it appeared that the Paalala was duly
5. To pay moral and exemplary damages of not
received by him, as he, together with other drivers, was
less than P200,000.00;
made to affix his signature on a blank piece of paper
purporting to be an attendance sheet.
6. Attorneys fee[s] of not less than 10% of the
monetary award.
On March 15, 2002, the Labor Arbiter rendered
judgment[17] in favor of the spouses Villamaria and
Other just and equitable reliefs under the
ordered the complaint dismissed on the following
premises are also being prayed for.[9]

In their Position Paper,[10] the spouses Villamaria

Respondents presented the
admitted the existence of the Kasunduan, but alleged that
contract of Boundary-Hulog, as well as
Bustamante failed to pay the P10,000.00 downpayment
the PAALALA, to prove their claim that
and the vehicles annual registration fees. They further
complainant violated the terms of their
contract and afterwards abandoned the IN DISMISSING PETITIONERS
vehicle assigned to him. As against the APPEAL FOR REASON NOT STATED
foregoing, [the] complaints (sic) mere IN THE LABOR ARBITERS DECISION,
allegations to the contrary cannot prevail. BUT MAINLY ON JURISDICTIONAL

Not having been illegally dismissed,

complainant is not entitled to damages II
and attorney's fees.[18]
Bustamante appealed the decision to the RELATIONSHIP WHICH WAS
NLRC,[19] insisting that the Kasunduan did not extinguish ESTABLISHED BETWEEN
the employer-employee relationship between him and PETITIONER AND THE PRIVATE
Villamaria.While he did not receive fixed wages, he kept RESPONDENT WAS DEFINITELY A
only the excess of the boundary-hulog which he was MATTER WHICH IS BEYOND THE
required to remit daily to Villamaria under the PROTECTIVE MANTLE OF OUR
agreement. Bustamante maintained that he remained an LABOR LAWS.[23]
employee because he was engaged to perform activities
which were necessary or desirable to Villamarias trade or
Bustamante insisted that despite the Kasunduan, the
The NLRC rendered judgment[20] dismissing the relationship between him and Villamaria continued to be
appeal for lack of merit, thus: that of employer-employee and as such, the Labor Arbiter
had jurisdiction over his complaint. He further alleged that
it is common knowledge that operators of passenger
jeepneys (including taxis) pay their drivers not on a
WHEREFORE, premises regular monthly basis but on commission or boundary
considered, complainant's appeal is basis, or even the boundary-hulog system. Bustamante
hereby DISMISSED for reasons not asserted that he was dismissed from employment without
stated in the Labor Arbiter's decision but any lawful or just cause and without due notice.
mainly on a jurisdictional issue, there
being none over the subject matter of the For his part, Villamaria averred that Bustamante
controversy.[21] failed to adduce proof of their employer-employee
relationship. He further pointed out that
the Dinglasan case pertains to the boundary system and
not the boundary-hulog system, hence inapplicable in the
The NLRC ruled that under the Kasunduan, the instant case. He argued that upon the execution of
juridical relationship between Bustamante and Villamaria the Kasunduan, the juridical tie between him and
was that of vendor and vendee, hence, the Labor Arbiter Bustamante was transformed into a vendor-vendee
had no jurisdiction over the complaint. Bustamante filed a relationship. Noting that he was engaged in the
Motion for Reconsideration, which the NLRC resolved to manufacture and sale of jeepneys and not in the business
deny on May 30, 2003.[22] of transporting passengers for consideration, Villamaria
contended that the daily fees which Bustmante paid were
actually periodic installments for the the vehicle and were
not the same fees as understood in the boundary
Bustamante elevated the matter to the CA via
system. He added that the boundary-hulog plan was
Petition for Certiorari, alleging that the NLRC erred
basically a scheme to help the driver-buyer earn money
and eventually pay for the unit in full, and for the owner to
profit not from the daily earnings of the driver-buyer but
I from the purchase price of the unit sold. Villamaria further
asserted that the apparently restrictive conditions in
the Kasunduan did not mean that the means and method
of driver-buyers conduct was controlled, but were mere the prevailing minimum
ways to preserve the vehicle for the benefit of both parties: wage at the time of his
Villamaria would be able to collect the agreed purchase dismissal.
price, while Bustamante would be assured that the vehicle
would still be in good running condition even after four
years. Moreover, the right of vendor to impose certain
conditions on the buyer should be respected until full Without Costs.
ownership of the property is vested on the latter.Villamaria
insisted that the parallel circumstances obtaining
in Singer Sewing Machine Company v. Drilon[24] has
analogous application to the instant issue. SO ORDERED.[26]

In its Decision[25] dated August 30, 2004, the CA The appellate court ruled that the Labor Arbiter
reversed and set aside the NLRC decision. The fallo of had jurisdiction over Bustamantes complaint. Under
the Kasunduan, the relationship between him and
the decision reads:
Villamaria was dual: that of vendor-vendee and employer-
employee. The CA ratiocinated that Villamarias exercise
of control over Bustamantes conduct in operating the
UPON THE VIEW WE TAKE IN jeepney is inconsistent with the formers claim that he was
THIS CASE, THUS, the impugned not engaged in the transportation business. There was no
resolutions of the NLRC must be, as they evidence that petitioner was allowed to let some other
are hereby are, REVERSED AND SET person drive the jeepney.
ASIDE, and judgment entered in favor of

The CA further held that, while the power to

dismiss was not mentioned in the Kasunduan, it did not
mean that Villamaria could not exercise it. It explained
that the existence of an employment relationship did not
depend on how the worker was paid but on the presence
1. Sentencing or absence of control over the means and method of the
private respondent employees work. In this case, Villamarias directives (to
Oscar Villamaria, Jr. to drive carefully, wear an identification card, don decent
pay petitioner Jerry attire, park the vehicle in his garage, and to inform him
Bustamante separation about provincial trips, etc.) was a means to control the
pay computed from the way in which Bustamante was to go about his work. In
time of his employment view of Villamarias supervision and control as employer,
up to the time of the fact that the boundary represented installment
termination based on the payments of the purchase price on the jeepney did not
prevailing minimum remove the parties employer-employee relationship.
wage at the time of
termination; and,

While the appellate court recognized that a weeks

default in paying the boundary-hulog constituted an
2. Condemning additional cause for terminating Bustamantes
private respondent employment, it held that the latter was illegally
Oscar Villamaria, Jr. to dismissed. According to the CA, assuming that
pay petitioner Jerry Bustamante failed to make the required payments as
Bustamante back wages claimed by Villamaria, the latter nevertheless failed to
computed from the time take steps to recover the unit and waited for Bustamante
of his dismissal up to to abandon it. It also pointed out that Villamaria neither
March 2001 based on submitted any police report to support his claim that the
vehicle figured in a mishap nor presented the affidavit of In his Reply, petitioner avers that the Rules of Procedure
the gas station guard to substantiate the claim that should be liberally construed in his favor; hence, it
Bustamante abandoned the unit. behooves the Court to resolve the merits of his petition.

Villamaria received a copy of the decision We agree with respondents contention that the remedy of
on September 8, 2004, and filed, on September 17, 2004, petitioner from the CA decision was to file a petition for
a motion for reconsideration thereof. The CA denied the review on certiorari under Rule 45 of the Rules of Court
motion in a Resolution[27] dated November 2, 2004, and and not the independent action of certiorari under Rule
Villamaria received a copy thereof on November 8, 2004. 65. Petitioner had 15 days from receipt of the CA
resolution denying his motion for the reconsideration
within which to file the petition under Rule 45.[28] But
instead of doing so, he filed a petition
Villamaria, now petitioner, seeks relief from this Court via for certiorari under Rule 65 on November 22, 2004,
petition for review on certiorari under Rule 65 of the Rules which did not, however, suspend the running of the 15-
of Court, alleging that the CA committed grave abuse of day reglementary period; consequently, the CA decision
its discretion amounting to excess or lack of jurisdiction in became final and executory upon the lapse of the
reversing the decision of the Labor Arbiter and the reglementary period for appeal. Thus, on this procedural
NLRC. He claims that the CA erred in ruling that the lapse, the instant petition stands to be dismissed.[29]
juridical relationship between him and respondent under
the Kasunduan was a combination of employer-employee
and vendor-vendee relationships. The terms and
conditions of the Kasunduan clearly state that he and It must be stressed that the recourse to a special civil
respondent Bustamante had entered into a conditional action under Rule 65 of the Rules of Court is proscribed
deed of sale over the jeepney; as such, their employer- by the remedy of appeal under Rule 45. As the Court
employee relationship had been transformed into that of elaborated in Tomas Claudio Memorial College, Inc. v.
vendor-vendee. Petitioner insists that he had the right to Court of Appeals:[30]
reserve his title on the jeepney until after the purchase
price thereof had been paid in full.

We agree that the remedy of the

aggrieved party from a decision or final
In his Comment on the petition, respondent avers that the resolution of the CA is to file a petition for
appropriate remedy of petitioner was an appeal via a review on certiorari under Rule 45 of the
petition for review on certiorari under Rule 45 of the Rules Rules of Court, as amended, on
of Court and not a special civil action of certiorari under questions of facts or issues of law within
Rule 65. He argues that petitioner failed to establish that fifteen days from notice of the said
the CA committed grave abuse of its discretion amounting resolution. Otherwise, the decision of the
to excess or lack of jurisdiction in its decision, as the said CA shall become final and executory.
ruling is in accord with law and the evidence on record. The remedy under Rule 45 of the Rules
of Court is a mode of appeal to this Court
from the decision of the CA. It is a
continuation of the appellate process
Respondent further asserts that over the original case. A review is not a
the Kasunduan presented to him by petitioner which matter of right but is a matter of judicial
provides for a boundary-hulog scheme was a devious discretion. The aggrieved party may,
circumvention of the Labor Code of however, assail the decision of the
the Philippines. Respondent insists that his juridical CA via a petition for certiorari under Rule
relationship with petitioner is that of employer-employee 65 of the Rules of Court within sixty days
because he was engaged to perform activities which were from notice of the decision of the CA or
necessary or desirable in the usual business of petitioner, its resolution denying the motion for
his employer. reconsideration of the same. This is
based on the premise that in issuing the
assailed decision and resolution, the CA
acted with grave abuse of discretion,
amounting to excess or lack of
jurisdiction and there is no plain, speedy The rule is that, the nature of an action and the
and adequate remedy in the ordinary subject matter thereof, as well as, which court or agency
course of law. A remedy is considered of the government has jurisdiction over the same, are
plain, speedy and adequate if it will determined by the material allegations of the complaint in
promptly relieve the petitioner from the relation to the law involved and the character of the reliefs
injurious effect of the judgment and the prayed for, whether or not the complainant/plaintiff is
acts of the lower court. entitled to any or all of such reliefs.[33] A prayer or demand
for relief is not part of the petition of the cause of action;
nor does it enlarge the cause of action stated or change
the legal effect of what is alleged.[34] In determining which
The aggrieved party is proscribed from body has jurisdiction over a case, the better policy is to
filing a petition for certiorari if appeal is consider not only the status or relationship of the parties
available, for the remedies of appeal but also the nature of the action that is the subject of their
and certiorari are mutually exclusive and controversy.[35]
not alternative or successive.The
aggrieved party is, likewise, barred from
filing a petition for certiorari if the remedy
of appeal is lost through his negligence. Article 217 of the Labor Code, as amended, vests
A petition for certiorari is an original on the Labor Arbiter exclusive original jurisdiction only
action and does not interrupt the course over the following:
of the principal case unless a temporary
restraining order or a writ of preliminary
injunction has been issued against the
public respondent from further x x x (a) Except as otherwise
proceeding. A petition for certiorari must provided under this Code, the Labor
be based on jurisdictional grounds Arbiters shall have original and exclusive
because, as long as the respondent court jurisdiction to hear and decide, within
acted within its jurisdiction, any error thirty (30) calendar days after the
committed by it will amount to nothing submission of the case by the parties for
more than an error of judgment which decision without extension, even in the
may be corrected or reviewed only by absence of stenographic notes, the
appeal.[31] following cases involving all workers,
whether agricultural or non-agricultural:

However, we have also ruled that a petition

for certiorari under Rule 65 may be considered as filed 1. Unfair labor
under Rule 45, conformably with the principle that rules of practice cases;
procedure are to be construed liberally, provided that the
petition is filed within the reglementary period under 2. Termination
Section 2, Rule 45 of the Rules of Court, and where valid disputes;
and compelling circumstances warrant that the petition be
3. If
resolved on its merits.[32] In this case, the petition was filed
accompanied with a
within the reglementary period and petitioner has raised
claim for
an issue of substance: whether the existence of a
reinstatement, those
boundary-hulog agreement negates the employer-
cases that workers
employee relationship between the vendor and vendee,
may file involving
and, as a corollary, whether the Labor Arbiter has
wage, rates of pay,
jurisdiction over a complaint for illegal dismissal in such
hours of work, and
other terms and
We resolve these issues in the affirmative. conditions of
4. Claims for Arbiter by referring the same to the
actual, moral, grievance machinery and voluntary
exemplary and other arbitration as may be provided in said
forms of damages agreements.
arising from the
In the foregoing cases, an employer-employee
5. Cases relationship is an indispensable jurisdictional
arising from violation of requisite.[36] The jurisdiction of Labor Arbiters and the
Article 264 of this NLRC under Article 217 of the Labor Code is limited to
Code, including disputes arising from an employer-employee relationship
questions involving the which can only be resolved by reference to the Labor
legality of strikes and Code, other labor statutes or their collective bargaining
lockouts; and agreement.[37] Not every dispute between an employer
and employee involves matters that only the Labor Arbiter
and the NLRC can resolve in the exercise of their
adjudicatory or quasi-judicial powers. Actions between
employers and employees where the employer-employee
relationship is merely incidental is within the exclusive
original jurisdiction of the regular courts.[38] When the
6. Except principal relief is to be granted under labor legislation or a
claims for Employees collective bargaining agreement, the case falls within the
Compensation, Social exclusive jurisdiction of the Labor Arbiter and the NLRC
Security, Medicare even though a claim for damages might be asserted as
and maternity benefits, an incident to such claim.[39]
all other claims, arising
from employer-
employee relationship,
including those of We agree with the ruling of the CA that, under the
persons in domestic or boundary-hulog scheme incorporated in
household service, the Kasunduan, a dual juridical relationship was created
involving an amount between petitioner and respondent: that of employer-
exceeding five employee and vendor-vendee. The Kasunduan did not
thousand pesos extinguish the employer-employee relationship of the
(P5,000.00) parties extant before the execution of said deed.
regardless of whether
accompanied with a As early as 1956, the Court ruled in National
claim for Labor Union v. Dinglasan[40] that the jeepney
reinstatement. owner/operator-driver relationship under the boundary
system is that of employer-employee and not lessor-
lessee. This doctrine was affirmed, under similar factual
settings, in Magboo v. Bernardo[41] and Lantaco, Sr. v.
(b) The Commission shall have Llamas,[42] and was analogously applied to govern the
exclusive appellate jurisdiction over all relationships between auto-calesa owner/operator and
cases decided by Labor Arbiters. driver,[43] bus owner/operator and conductor,[44] and taxi
owner/operator and driver.[45]

(c) Cases arising from the

interpretation or implementation of The boundary system is a scheme by an
collective bargaining agreements, and owner/operator engaged in transporting passengers as a
those arising from the interpretation or common carrier to primarily govern the compensation of
enforcement of company personnel the driver, that is, the latters daily earnings are remitted to
policies shall be disposed of by the Labor the owner/operator less the excess of the boundary which
represents the drivers compensation. Under this system, legal effect of a contract is to be determined from the
the owner/operator exercises control and supervision whole read together.[50]
over the driver. It is unlike in lease of chattels where the
lessor loses complete control over the chattel leased but
the lessee is still ultimately responsible for the
consequences of its use. The management of the Under the Kasunduan, petitioner retained
business is still in the hands of the owner/operator, who, supervision and control over the conduct of the
being the holder of the certificate of public convenience, respondent as driver of the jeepney, thus:
must see to it that the driver follows the route prescribed
by the franchising and regulatory authority, and the rules
promulgated with regard to the business operations. The
Ang mga patakaran, kaugnay
fact that the driver does not receive fixed wages but only
the excess of the boundary given to the owner/operator is ng bilihang ito sa pamamagitan ng
boundary hulog ay ang mga
not sufficient to change the relationship between
them. Indubitably, the driver performs activities which are
usually necessary or desirable in the usual business or
trade of the owner/operator.[46]

Under the Kasunduan, respondent was required

1. Pangangalagaan at pag-
to remit P550.00 daily to petitioner, an amount which
represented the boundary of petitioner as well as
PANIG ang sasakyan ipinagkatiwala sa
respondents partial payment (hulog) of the purchase price
of the jeepney.
Respondent was entitled to keep the excess of his daily
earnings as his daily wage. Thus, the daily remittances
also had a dual purpose: that of petitioners boundary and 2. Na ang sasakyan nabanggit
respondents partial payment (hulog) for the vehicle. This ay gagamitin lamang ng TAUHAN NG
dual purpose was expressly stated in IKALAWANG PANIG sa
the Kasunduan. The well-settled rule is that an obligation paghahanapbuhay bilang pampasada o
is not novated by an instrument that expressly recognizes pangangalakal sa malinis at maayos na
the old one, changes only the terms of payment, and adds pamamaraan.
other obligations not incompatible with the old provisions
or where the new contract merely supplements the
previous one. [47] The two obligations of the respondent to
remit to petitioner the boundary-hulog can stand together. 3. Na ang sasakyan nabanggit
ay hindi gagamitin ng TAUHAN NG
IKALAWANG PANIG sa mga bagay na
makapagdudulot ng kahihiyan, kasiraan
In resolving an issue based on contract, this Court o pananagutan sa TAUHAN NG
must first examine the contract itself, keeping in mind that UNANG PANIG.
when the terms of the agreement are clear and leave no
doubt as to the intention of the contracting parties, the
literal meaning of its stipulations shall prevail.[48] The
intention of the contracting parties should be ascertained 4. Na hindi ito mamanehohin ng
by looking at the words used to project their intention, that hindi awtorisado ng opisina ng UNANG
is, all the words, not just a particular word or two or more PANIG.
words standing alone. The various stipulations of a
contract shall be interpreted together, attributing to the
doubtful ones that sense which may result from all of them
taken jointly.[49] The parts and clauses must be interpreted 5. Na ang TAUHAN NG
in relation to one another to give effect to the whole. The IKALAWANG PANIG ay kinakailangang
maglagay ng ID Card sa harap ng
windshield upang sa pamamagitan nito 11. Na ang TAUHAN NG
ay madaliang malaman kung ang IKALAWANG PANIG o ang awtorisado
nagmamaneho ay awtorisado ng niyang driver ay magpapakita ng
VILLAMARIA MOTORS o hindi. magandang asal sa mga pasaheros at
hindi dapat magsasalita ng masama
kung sakali man may pasaherong
pilosopo upang maiwasan ang
6. Na sasagutin ng TAUHAN anumang kaguluhan na maaaring
NG IKALAWANG PANIG ang [halaga kasangkutan.
ng] multa kung sakaling mahuli ang
sasakyang ito na hindi nakakabit ang ID
card sa wastong lugar o anuman
kasalanan o kapabayaan. 12. Na kung sakaling hindi
makapagbigay ng BOUNDARY HULOG
PANIG sa loob ng tatlong (3) araw ay
7. Na sasagutin din ng ang opisina ng VILLAMARIA MOTORS
TAUHAN NG IKALAWANG PANIG ang ang may karapatang mangasiwa ng
materyales o piyesa na papalitan ng nasabing sasakyan hanggang
nasira o nawala ito dahil sa kanyang matugunan ang lahat ng
kapabayaan. responsibilidad. Ang halagang dapat
bayaran sa opisina ay may
karagdagang multa ng P50.00 sa araw-
araw na ito ay nasa pangangasiwa ng
MOTORS pa rin ang garahe habang
hinuhulugan pa rin ng TAUHAN NG
IKALAWANG PANIG ang nasabing
sasakyan. 13. Na kung ang TAUHAN NG
makapagbigay ng BOUNDARY HULOG
sa loob ng isang linggo ay
9. Na kung magkaroon ng nangangahulugan na ang kasunduang
mabigat na kasiraan ang sasakyang ito ay wala ng bisa at kusang ibabalik ng
PANIG, ang TAUHAN NG IKALAWANG nasabing sasakyan sa TAUHAN NG
PANIG ay obligadong itawag ito muna UNANG PANIG.
ipagawa sa alin mang Motor Shop na
awtorisado ng VILLAMARIA MOTORS.
14. Sasagutin ng TAUHAN NG
IKALAWANG PANIG ang bayad sa
rehistro, comprehensive insurance
10. Na hindi pahihintulutan ng taon-taon at kahit anong uri ng
TAUHAN NG IKALAWANG PANIG sa aksidente habang ito ay hinuhulugan pa
panahon ng pamamasada na ang sa TAUHAN NG UNANG PANIG.
nagmamaneho ay naka-tsinelas, naka
short pants at nakasando
lamang. Dapat ang nagmamaneho ay
laging nasa maayos ang kasuotan 15. Na ang TAUHAN NG
upang igalang ng mga pasahero. IKALAWANG PANIG ay obligadong
dumalo sa pangkalahatang
pagpupulong ng VILLAMARIA
MOTORS sa tuwing tatawag ang mga
tagapangasiwa nito upang maipaabot
ang anumang mungkahi sa ikasusulong mabuti man or masama ay iparating
ng samahan. agad ito sa kinauukulan at iwasan na
iparating ito kung [kani-kanino] lamang
upang maiwasan ang anumang usapin.
Magsadya agad sa opisina ng
IKALAWANG PANIG ay makikiisa sa
lahat ng mga patakaran na
magkakaroon ng pagbabago o
karagdagan sa mga darating na 22. Ang mga nasasaad sa
panahon at hindi magiging hadlang sa KASUNDUAN ito ay buong galang at
lahat ng mga balakin ng VILLAMARIA puso kong sinasang-ayunan at buong
MOTORS sa lalo pang ipagtatagumpay sikap na pangangalagaan ng TAUHAN
at ikakatibay ng Samahan. NG IKALAWANG PANIG ang nasabing
sasakyan at gagamitin lamang ito sa
paghahanapbuhay at wala nang iba
17. Na ang TAUHAN NG
IKALAWANG PANIG ay hindi magiging
buwaya sa pasahero upang hindi
kainisan ng kapwa driver at maiwasan The parties expressly agreed that petitioner, as
ang pagkakasangkot sa anumang gulo. vendor, and respondent, as vendee, entered into a
contract to sell the jeepney on a daily installment basis
of P550.00 payable in four years and that petitioner would
thereafter become its owner. A contract is one of
18. Ang nasabing sasakyan ay conditional sale, oftentimes referred to as contract to sell,
hindi kalilimutang siyasatin ang if the ownership or title over the
kalagayan lalo na sa umaga bago property sold is retained by the vendor, and is not passed
pumasada, at sa hapon o gabi naman to the vendee unless and until there is full payment of the
ay sisikapin mapanatili ang kalinisan purchase price and/or upon faithful compliance with the
nito. other terms and conditions that may lawfully be
stipulated.[52] Such payment or satisfaction of other
preconditions, as the case may be, is a positive
suspensive condition, the failure of which is not a breach
19. Na kung sakaling ang
of contract, casual or serious, but simply an event that
nasabing sasakyan ay maaarkila at
would prevent the obligation of the vendor to convey title
aabutin ng dalawa o higit pang araw sa from acquiring binding force.[53] Stated differently, the
lalawigan ay dapat lamang na ipagbigay
efficacy or obligatory force of the vendor's obligation to
alam muna ito sa VILLAMARIA
transfer title is subordinated to the happening of a future
MOTORS upang maiwasan ang mga
and uncertain event so that if the suspensive condition
anumang suliranin.
does not take place, the parties would stand as if the
conditional obligation had never existed.[54] The vendor
may extrajudicially terminate the operation of the contract,
refuse conveyance, and retain the sums or installments
20. Na ang TAUHAN NG
already received, where such rights are expressly
IKALAWANG PANIG ay iiwasan ang
provided for.[55]
pakikipag-unahan sa kaninumang
sasakyan upang maiwasan ang
Under the boundary-hulog scheme, petitioner
retained ownership of the jeepney although its material
possession was vested in respondent as its driver. In
21. Na kung ang TAUHAN NG
case respondent failed to make his P550.00 daily
installment payment for a week, the agreement would be
of no force and effect and respondent would have to
return the jeepney to petitioner; the employer-employee boundary here represented installment
relationship would likewise be terminated unless payment of the purchase price on the
petitioner would allow respondent to continue driving the jeepney did not withdraw the relationship
jeepney on a boundary basis of P550.00 daily despite the from that of employer-employee, in view
termination of their vendor-vendee relationship. of the overt presence of supervision and
control by the employer.[56]

The juridical relationship of employer-employee

between petitioner and respondent was not negated by Neither is such juridical relationship negated by
the foregoing stipulation in the Kasunduan, considering petitioners claim that the terms and conditions in
that petitioner retained control of respondents conduct as the Kasunduan relative to respondents behavior and
driver of the vehicle. As correctly ruled by the CA: deportment as driver was for his and respondents benefit:
to insure that respondent would be able to pay the
requisite daily installment of P550.00, and that the vehicle
would still be in good condition despite the lapse of four
The exercise of control by private years. What is primordial is that petitioner retained control
respondent over petitioners conduct in over the conduct of the respondent as driver of the
operating the jeepney he was driving is jeepney.
inconsistent with private respondents
claim that he is, or was, not engaged in
the transportation business; that, even if
petitioner was allowed to let some other Indeed, petitioner, as the owner of the vehicle and
person drive the unit, it was not shown the holder of the franchise, is entitled to exercise
that he did so; that the existence of an supervision and control over the respondent, by seeing to
employment relation is not dependent on it that the route provided in his franchise, and the rules
how the worker is paid but on the and regulations of the Land Transportation Regulatory
presence or absence of control over the Board are duly complied with. Moreover, in a business
means and method of the work; that the establishment, an identification card is usually provided
amount earned in excess of the not just as a security measure but to mainly identify the
boundary hulog is equivalent to wages; holder thereof as a bona fide employee of the firm who
and that the fact that the power of issues it.[57]
dismissal was not mentioned in
the Kasunduan did not mean that private
respondent never exercised such power,
or could not exercise such power. As respondents employer, it was the burden of
petitioner to prove that respondents termination from
employment was for a lawful or just cause, or, at the very
least, that respondent failed to make his daily remittances
Moreover, requiring petitioner to of P550.00 as boundary. However, petitioner failed to do
drive the unit for commercial use, or to so. As correctly ruled by the appellate court:
wear an identification card, or to don a
decent attire, or to park the vehicle in
Villamaria Motors garage, or to inform
Villamaria Motors about the fact that the It is basic of course that
unit would be going out to the province termination of employment must be
for two days of more, or to drive the unit effected in accordance with law. The just
carefully, etc. necessarily related to and authorized causes for termination of
control over the means by which the employment are enumerated under
petitioner was to go about his work; that Articles 282, 283 and 284 of the Labor
the ruling applicable here is not Singer Code.
Sewing Machine but National Labor
Union since the latter case involved
jeepney owners/operators and jeepney
drivers, and that the fact that the
Parenthetically, given the abandoned the vehicle at a gasoline
peculiarity of the situation of the parties station after figuring in an accident. But
here, the default in the remittance of the private respondent failed to substantiate
boundary hulog for one week or longer these allegations with solid, sufficient
may be considered an additional cause proof. Notably, private respondents
for termination of employment. The allegation viz, that he retrieved the
reason is because the Kasunduan would vehicle from the gas station, where
be of no force and effect in the event that petitioner abandoned it, contradicted his
the purchaser failed to remit the statement in the Paalala that he would
boundary hulog for one enforce the provision (in the Kasunduan)
week. The Kasunduan in this case to the effect that default in the remittance
pertinently stipulates: of the boundary hulog for one week
would result in the forfeiture of the
unit. The Paalala reads as follows:

13. Na kung ang

PANIG ay hindi makapagbigay Sa lahat ng mga kumukuha ng sasakyan
loob ng isang linggo ay Sa pamamagitan ng BOUNDARY
ang kasunduang ito ay wala ng
bisa at kusang ibabalik ng
PANIG ang nasabing Nais ko pong ipaalala sa inyo ang
sasakyan sa TAUHAN NG Kasunduan na inyong pinirmahan
UNANG PANIG na wala ng particular na ang paragrapo 13 na
paghahabol pa. nagsasaad na kung hindi kayo
makapagbigay ng Boundary Hulog sa
loob ng isang linggo ay kusa ninyong
ibabalik and nasabing sasakyan na
Moreover, well-settled is the rule that, the inyong hinuhulugan ng wala ng
employer has the burden of proving that paghahabol pa.
the dismissal of an employee is for a just
cause. The failure of the employer to
discharge this burden means that the
dismissal is not justified and that the Mula po sa araw ng inyong
employee is entitled to reinstatement and pagkatanggap ng Paalala na ito ay akin
back wages. na pong ipatutupad ang nasabing
Kasunduan kayat aking pinaaalala sa
inyong lahat na tuparin natin ang
nakalagay sa kasunduan upang
In the case at bench, private maiwasan natin ito.
respondent in his position paper before
the Labor Arbiter, alleged that petitioner
failed to pay the miscellaneous fee
of P10,000.00 and the yearly registration Hinihiling ko na sumunod kayo sa
of the unit; that petitioner also stopped hinihingi ng paalalang ito upang hindi na
remitting the boundary hulog, prompting tayo makaabot pa sa korte kung sakaling
him (private respondent) to issue hindi ninyo isasauli ang inyong sasakyan
a Paalala, which petitioner however na hinuhulugan na ang mga magagastos
ignored; that petitioner even brought the ay kayo pa ang magbabayad sapagkat
unit to his (petitioners) province without ang hindi ninyo pagtupad sa kasunduan
informing him (private respondent) about ang naging dahilan ng pagsampa ng
it; and that petitioner eventually kaso.

Attendance: 8/27/99

(The Signatures appearing herein

include (sic) that of petitioners) (Sgd.)


If it were true that petitioner did not remit

the boundary hulog for one week or
more, why did private respondent not
forthwith take steps to recover the unit,
and why did he have to wait for petitioner
to abandon it?

On another point, private respondent did

not submit any police report to support
his claim that petitioner really figured in a
vehicular mishap. Neither did he present
the affidavit of the guard from the gas
station to substantiate his claim that
petitioner abandoned the unit there.[58]

Petitioners claim that he opted not to terminate

the employment of respondent because of magnanimity
is negated by his (petitioners) own evidence that he took
the jeepney from the respondent only on July 24, 2000.


petition is DENIED. The decision of the Court of Appeals
in CA-G.R. SP No. 78720 is AFFIRMED. Costs against

G.R. No. L-80680 January 26, 1989 RULING

14. DANILO B. TABAS vs. NO. ART. 106. Contractor or subcontractor. - Whenever
CALIFORNIA MANUFACTURING COMPANY an employer enters into a contract with another person for
the performance of the former's work, the employees of
FACTS the contractor and of the latter's subcontractor, if any,
shall be paid in accordance with the provisions of this
Petitioners were employees of Livi, who assigned them to Code.
work as “promotional merchandisers” for California
pursuant to a manpower supply agreement. Among other In the event that the contractor or subcontractor fails to
things, the agreement provided that California “has no pay the wages of his employees in accordance with this
control or supervision whatsoever over Livi's workers with Code, the employer shall be jointly and severally liable
respect to how they accomplish their work or perform with his contractor or subcontractor to such employees.
California's obligation”; that Livi "is an independent The Secretary of Labor may, by appropriate regulations,
contractor and nothing herein contained shall be restrict or prohibit the contracting out of labor to protect
construed as creating between them… the relationship of the rights of workers.
principal-agent or employer-employee"; that "it is hereby
agreed that it is the sole responsibility of Livi to comply There is "labor-only" contracting where the person
with all existing as well as future laws, rules and supplying workers to an employer does not have
regulations pertinent to employment of labor"; and that substantial capital or investment and the workers
"California is free and harmless from any liability arising recruited and placed by such person are performing
from such labor laws or from any accident that may befall activities which are directly related to the principal
workers and employees of [Livi] while in the performance business of such employer. In such cases, the person or
of their duties for [California]." It was further expressly intermediary shall be considered merely as an agent of
stipulated that the assignment of workers to California the employer who shall be responsible to the workers in
shall be on a "seasonal and contractual basis.” the same manner and extent as if the latter were directly
employed by him.
The petitioners were then made to sign employment
contracts with durations of six months, upon the expiration In the case at bar, Livi is admittedly an "independent
of which they signed new agreements with the same contractor providing temporary services of manpower to
period, and so on. Unlike regular California employees, its clients."
who received not less than P2,823.00 a month in addition
to a host of fringe benefits and bonuses, they received When it thus provided California with manpower, it
P38.56 plus P15.00 in allowance daily. supplied California with personnel, as if such personnel
had been directly hired by California, charged with
The petitioners now allege that they had become regular "merchandising [sic] promotion or sale of the products of
California employees and demand, as a consequence [California] in the different sales outlets in Metro Manila
whereof, similar benefits. They likewise claim that including task and occasional price tagging," an activity
pending further proceedings below, they were notified by that is doubtless, an integral part of the manufacturing
California that they would not be rehired. As a result, they business. Relations of parties must be judged from case
filed an amended complaint charging California with to case and the decree of law, and not by declarations of
illegal dismissal. parties. Hence, Article 106 of the Code applies.

California admits having refused to accept Tabas et al., The fact that the petitioners have been hired on a
back to work but deny liability therefor for the reason that "temporary or seasonal" basis merely is no argument
it is not, to begin with, the petitioners' employer and that either. As we held in Philippine Bank of Communications
the "retrenchment" had been forced by business losses v. NLRC, a temporary or casual employee, under Article
as well as expiration of contracts. It appears that 281 of the Labor Code, becomes regular after service of
thereafter, Livi reabsorbed them into its labor pool on a one year, unless he has been contracted for a specific
"wait-in or standby" status. project. And we cannot say that merchandising is a
specific project for the obvious reason that it is an activity
ISSUE related to the day-to-day operations of California.
Accordingly, under Article 281 of the Code, they had
WON the contractual agreement was binding insofar as become regular employees of California and had acquired
California is free from any liability a secure tenure.
Hence, they cannot be separated without due process of 3. As soon as respondents learned of the filing of
law. It is not that by dismissing the terms and conditions the claims with DOLE, they were dismissed on
of the manpower supply agreement, we have, hence, various dates in January 2004. Their claims were
considered it illegal. Under the Labor Code, genuine job later settled by the respondent company, but the
contracts are permissible, provided they are genuine job settlement allegedly did not include the issues on
contracts. But, as we held in Philippine Bank of reinstatement and payment of CBA benefits.
Communications, supra, when such arrangements are Thus, on November 10, 2006, they filed their
resorted to "in anticipation of, and for the very purpose of complaint for illegal dismissal.
making possible, the secondment of the employees from 4. Respondent Coca-Cola denies employer-
the true employer, the Court will be justified in expressing employee relationship with the complainants
its concern. For then that would compromise the rights of pointing to respondent Interserve with whom it
the workers, especially their right to security of tenure. has a service agreement as the complainants'
employer. As alleged independent service
Petition granted. California is hereby ordered to reinstate contractor of respondent Coca-Cola, respondent
petitioners and to jointly and severally pay with Livi, the Interserve "is engaged in the business of
latter their money claims. rendering substitute or reliever delivery services
to its own clients and for CCBPI in particular, the
15. EMMANUEL D. QUINTANAR vs. COCA-COLA delivery of CCBPI's softdrinks and beverage
BOTTLERS, PHILIPPINES, INC. products." It is allegedly free from the control and
direction of CCBPI in all matters connected with
G.R. No. 210565. June 28, 2016; MENDOZA, J the performance of the work, except as to the
results thereof, pursuant to the service
Topic: LOC and LJC agreement.

FACTS ISSUE: Whether the petitioners were illegally dismissed

from their employment with Coca-Cola
1. Complainants allege that they are former
employees directly hired by respondent Coca- RULING:
Cola on different dates from 1984 up to 2000,
assigned as regular Route Helpers under the 1. The petitioners insist that ISI, Lipercon, PSI,
direct supervision of the Route Sales ROMAC, and Interserve are labor-only
Supervisors. Their duties consist of distributing contractors, making Coca-Cola still liable for their
bottled Coca-Cola products to the stores and claims. The latter, on the other hand, asserts that
customers in their assigned areas/routes, and the said agencies are independent job
they were paid salaries and commissions at the contractors and, thus, liable to the petitioners on
average of P3,000.00 per month. After working their own.
for quite sometime as directly-hired employees of 2. See Art. 280. Regular and Casual Employment –
Coca-Cola, complainants were allegedly 3. The standard, supplied by the law itself, is
transferred successively as agency workers to whether the work undertaken is necessary or
the following manpower agencies, namely, desirable in the usual business or trade of the
Lipercon Services, Inc., People's Services, Inc., employer, a fact that can be assessed by looking
ROMAC, and the latest being respondent into the nature of the services rendered and its
Interserve Management and Manpower relation to the general scheme under which the
Resources, Inc. business or trade is pursued in the usual
2. Further, complainants allege that the Department course… But, although the work to be performed
of Labor and Employment (DOLE) conducted an is only for a specific project or seasonal, where a
inspection of Coca-Cola to determine whether it person thus engaged has been performing the
is complying with the various mandated labor job for at least one year, even if the performance
standards, and relative thereto, they were is not continuous or is merely intermittent, the law
declared to be regular employees of Coca-Cola, deems the repeated and continuing need for its
which was held liable to pay complainants the performance as being sufficient to indicate the
underpayment of their 13th month pay, necessity or desirability of that activity to the
emergency cost of living allowance (ECOLA), and business or trade of the employer. The
other claims. employment of such person is also then deemed
to be regular with respect to such activity and agency. However, in the absence of proof that the
while such activity exists. employer itself committed the acts constitutive of illegal
dismissal or conspired with the security agency in the
performance of such acts, the employer shall not be liable
for back wages and/or separation pay arising as a
4. SC claimed that the route-helpers therein were consequence of such unlawful termination.
not simply employees of Lipercon, Peoples
Specialist Services, Inc. or ISI, which, as Coca- FACTS
Cola claimed were independent job contractors,
but rather, those of Coca-Cola itself All the complainants were employed by the
[security agency] as security guards: Napoleon Mamon
5. The Court found that the work of the respondent on October 7, 1989; Arsenio Gazzingan on September
salesmen therein, constituting distribution and 25, 1988; Rodolfo C. Velasco on January 5, 1987;
6. sale of Coca-Cola products, was clearly Armando Ballon on June 28, 1990; Victor Aldeza on
indispensable to the principal business of March 21, 1990; and Jose L. Cabrera [in] January 1988.
petitioner Coca-Cola.
[Short version of the story: The Security guards were
7. As to the supposed substantial capital and being paid less than minimum wage. When they
investment required of an independent job complained to the NLRC, Mamon, was offered to just sign
contractor, the Court stated that it "does not set a quit claim, and the failure to do so the agency would no
an absolute figure for what it considers longer give him assignments. Gazzingan on the other
substantial capital for an independent job hand, requested for a transfer to be better nearer to his
contractor, but it measures the same against the home, to lessen transportation expense, but was
type of work which the contractor is obligated to transferred elsewhere. When he applied for another
perform for the principal." The Court reiterated transfer he was not given another assignment, and was
that the contractor, not the employee, had the simply told to wait and come back another time. Ballon,
burden of proof that it has the substantial capital, on the other hand, filed for a sick leave, which was only
investment and tool to engage in job contracting. crumpled by the HRM, when he returned after 15 days,
he was told he was terminated. Cabrera got hospitalized
8. Thus, performing activities directly related to the because of a stab wound by his detachment commander.
principal business of the employer is only one of When he returned to the agency, after getting a fit for work
the two indicators that "labor-only" contracting declaration by the doctor, they told him to come back
exists; the other is lack of substantial capital or another day. He was not given another assignment.
investment. Aldeza filed a complaint for underpayment, but instead of
adjusting the wage, the agency left him floating. He was
9. Finally, the Court determined the existence of an told to just resign if he does not like how the agency treats
employer-employee relationship between the him]
parties therein considering that the contract of
service between Coca-Cola and Interserve Napoleon Mamon was assigned as office guard for three
showed that the former indeed exercised the (3) days without any pay nor allowance as it was allegedly
power of control over the complainants therein. an OJT so there was no pay. On October 10, 1989, he
was transferred to the residence of Mr. Benito Ong with
16. ROSEWOOD PROCESSING, INC. V. NLRC 12 hours duty a day receiving a salary very much less
than the minimum wage for eight (8) hours work until
[G.R. Nos. 116476-84. May 21, 1998.] (PANGANIBAN, February 3, 1990 when he received an order transferring
J) him to Rosewood Processing, Inc. effective that date. At
Rosewood Processing, Inc., he was required to render
also 12 hours duty every day with a salary of
P2,600.00/month. He was not given his pay for February
Doctrine of the Case 1 and 2 by the paymaster of [the security agency]
allegedly because the payroll could not be located so after
Under the Labor Code, an employer is solidarily 3 to 4 times of going back and forth to [the security
liable for legal wages due security guards for the period of agencys] office to get his salary[;] [after] xxx two (2) days
time they were assigned to it by its contracted security he gave up because he was already spending more than
what he could get thru transportation alone. On May 16, with a salary of only P148.00/day and after 24 days, he
1991, Rosewood Processing, Inc. asked for the relief of was floated for one month. He reported to [the security
Mamon and other guards at Rosewood because they agencys] office and was assigned to Purefoods Breeder
came to know that complainants filed a complaint for Farm in Canlubang rendering 8 hours work per day
underpayment on May 13, 1991 with the NLRC. On May receiving only P78.00/day. After 11 days, he asked to be
18 to 19, 1991, the security agency assigned him to their transferred to Manila[.] [B]ecause of the distance from his
main office. After that, complainant was floated until May home the transfer was approved but instead of being
29, 1991 when he was assigned to Mead Johnson transferred to Manila, he was assigned to Purefoods B-F-
Philippines Corporation. [A]t about a week later, [the 4 in Batangas rendering 12 hours duty/day and receiving
security agency] received summons on complainants only P148.00 per day until January 28, 1991[;] and again
complaint for underpayment and he was called to [the he requested for transfer which was also approved by the
security agencys] office. When he reported, he was told [security agencys] office[,] but since then he was told to
to sign a Quitclaim and Waiver by Lt. R. Rodriguez come back again and again. [U]p to the present he has
because according to the latter, he [could] only get a not been given any assignment. Because of the fact that
measly sum from his complaint with the NLRC and if he his family [was] in danger of going hungry, he sought relief
signed the quitclaim and waiver he would be retained at from the NLRC-NCR-Arbitration Branch.
his present assignment which was giving quite a good
salary and other benefits but if he did not sign the Rodolfo Velasco was assigned to PCI Bank Elcano,
quitclaim and waiver, he would be relieved from his post Tondo Branch, as probationary, and [for] working 8 hours
and would no longer be given any assignment. He was a day for 9 days he received only P400.00. On January
given up to the end of July 1991 to think it over. At the end 16, 1987, he was assigned to [the security agencys]
of July 1991, he was approached by the Security in headquarters up to January 31, 1987, working 12 hours a
Charge A. Azuela and asked him to sign the quitclaim and day[; he] received only P650.00 for the 16 days. On
waiver and when he refused to sign, he was told that the September 1, 1988, he was assigned to Imperial
following day August 1, 1991, he would have no more Synthetic Rubber Products rendering 12 hours duty per
assignment and should report to their office. Thinking that day until December 31, 1988 and was given a salary of
it was only a joke, he reported the following day to the P1,600.00/month. He was later transferred to various
detachment commander Mr. A. Yadao and he was told posts like Polypaper Products working 12 hours a day
that the main office relieved him because he did not sign given a salary of P1,800.00 a month; Paramount
the quitclaim and waiver. He reported to their office asking Electrical, Inc. working 12 hours a day given P1,100.00
for an assignment but he was told by R. Rodriguez that I for 15 days; Rosewood Processing, Inc., rendering 12
no longer can be given an assignment so I had better hours duty per day receiving P2,200.00/month until May
resign. He went back several times to the office of the 16, 1991[;] Alen Engineering rendering 12 hours duty/day
[security agency] but every time the answer was the same receiving P1,100/month; Purefoods Corporation on Delta
[:] that he better tender his resignation because he cannot II rendering 12 hours duty per day received P4,200.00 a
be given any assignment although respondent was month. He was relieved on August 24 and his salary for
recruiting new guards and posting them. the period August 20 to 23 has not been paid by [the
security agency.] He was suspended for no cause at all.
Arsenio Gazzingan was assigned to Purefoods Breeding
Farm at Calauan, Laguna and given a salary of P54.00 a Armando Ballon started as security guard with [the
day working eight (8) hours. After three (3) months, he security agency] July 1990 [Note: the introductory
was given an examination and passed the same. On paragraph stated June 28, 1990] and was assigned to
December 26, 1988, he was given an increase and was Purefoods Corporation in Marikina for five (5) months and
paid P64.00/day working eight (8) hours; [h]e remained at received a salary of P50.00 per day for 8 hours. He was
the same post for 8 months and transferred to Purefoods transferred to Rosewood Processing, Inc. on November
Feed Mill at Sta. Rosa, Laguna, with the same salary and 6, 1990 rendering 12 hours duty as [d]etachment
the same tour of duty, 8 hours[.] After four (4) months, he [c]ommander and a salary of P2,700.00/month including
was transferred to Purefoods Grand Perry at Sta. Rosa, P200.00 officers allowance until May 15, 1991. On May
Laguna, and after eleven (11) days on June 1989, he was 16, 1991, he applied for sick leave on orders of his doctor
transferred to Rosewood Processing, Inc. at for 15 days but the HRM, Miss M. Andres[,] got angry and
Meycauayan, Bulacan and required to work for 12 hours crumpled his application for sick leave, that [was] why he
at a salary of P94.00/day for one year. [In] June 1990, he was not able to forward it to the SSS. After 15 days, he
was assigned at Purefoods DELPAN [to] guard x x x a came back to the office of [the security agency] asking for
barge loaded with corn and rendered 12 hours work/day an assignment and he was told that he [was] already
terminated. Complainant found out that the reason why law[,] relieved him and left him floating[.] When he
Miss Andres crumpled his application for sick leave was complained of the treatment, he was told to resign
because of the complaint he previously filed and was because he could no longer be given any assignment.
dismissed for failure to appear. He then refiled this case Because of this, complainant was forced to file another
to seek redress from this Office. complaint for illegal dismissal.

Jose L. Cabrera was assigned to Alencor Residence On May 13, 1991, a complaint for illegal
rendering 12 hours duty per day and received a salary of dismissal; underpayment of wages; and for nonpayment
P2,400.00 a month for 3 months[.] [I]n May, 1988, he was of overtime pay, legal holiday pay, premium pay for
transferred to E & L Restaurant rendering 12 hours duty holiday and rest day, thirteenth month pay, cash bond
per day and receiv[ing] a salary of P1,500.00 per month deposit, unpaid wages and damages was filed against
for 6 months[.] [I]n January, 1989, he was transferred to Veterans Philippine Scout Security Agency and/or Sergio
Paramount rendering 12 hours duty per day receiving only Jamila IV. Thereafter, petitioner was impleaded as a
P1,800.00 per month for 6 months[.] [I]n July 1989, he third-party respondent by the security agency. The LA
was transferred to Benito Ong[s] residence rendering 12 ruled in favor of the complainant, holding Rosewood
hours duty per day and receiving a salary of P1,400.00 Processing and the Agency, jointly and severally liable for
per month for 4 months[.] [I]n December, 1989, he was the underpayment of wages.
transferred to Sea Trade International rendering xxx 12
hours duty per day and receiving a salary of P1,900 per Although the security agency could lawfully place the
month for 6 months[.] [I]n July, 1990, he was transferred complainants on floating status for a period not exceeding
to Holland Pacific & Paper Mills rendering 8 hours duty six months, the act was illegal because the former had
per day and receiving a salary of P2,400.00 per month issued a newspaper advertisement for new security
until September 1990[.] [In] October 1990, he was guards. Since the relation between the complainants and
transferred to RMG residence rendering 12 hours duty per the agency was already strained, the labor arbiter ordered
day receiving a salary of P2,200.00 per month for 3 the payment of separation pay in lieu of reinstatement.
months[.] [In] February 1991, he was transferred to
Purefoods Corporation at Mabini, Batangas rendering 12 On appeal, the petition was dismissed for failure
hours duty per day with a salary of P3,600.00 per month of the petitioner to file the required appeal bond within the
for only one month because he was hospitalized due to a reglementary period. It appears on record that [petitioner]
stab wound inflicted by his [d]etachment [c]ommander. received their copy of the [labor arbiters] decision on April
When he was discharged from the hospital and after he 2, 1993 and subsequently filed a Notice of Appeal with
was examined and declared fit to work by the doctor, he Memorandum of Appeal on April 26, 1993, in violation of
reported back to [the security agencys] office but was Rule VI, Section 1, 3, and 6 of the 1990 New Rules of
given the run-around [and was told to] come back Procedure of the NLRC. Clearly, the appeal filed by the
tomorrow[.] [H]e [could] see that [the agency was] posting [petitioners] on April 12, 1993 was not perfected within the
new recruits. He then complained to this Honorable Office reglementary period, and the decision dated March 26,
to seek redress, hiring the services of a counsel. 1993 became final and executory as of April 23, 1993.

Victor Aldeza was assigned to Meridian Condominium, In its motion for reconsideration, petitioner
rendering 12 hours work per day and receiving a salary of contended that it received a copy of the labor arbiters
P1,500.00 per month. Although he knew that the salary Decision only on April 6, 1993, and that it filed on April 16,
was below minimum yet he persevered because he had 1993 within the prescribed time, a Notice of Appeal with a
spent much to get this job and stayed on until October 15, Memorandum on Appeal, a Motion to Reduce Appeal
1990[.] On October 16, 1990, he was transferred to Bond and a surety bond issued by Prudential Guarantee
Rosewood Processing, Inc., rendering 12 hours duty per and Assurance, Inc. in the amount of P50,000.
day and receiving a salary of P2,600.00 per month up to
May 15, 1991[.] On the later part of May 1991, he was Section 14, Rule VII of the NLRC New Rules of Procedure
assigned to UPSSA (Sandoval Shipyard) rendering 12 allows [u]s to entertain a motion for reconsideration only
hours duty per day receiving a salary of P3,200.00 per on palpable or patent errors [w]e may have committed in
month. [Aldeza] complained to [the security agency] about [o]ur disputed April 28, 1994 resolution.Since, there was
the salary but [the agency] did not heed him; thus, he filed none, the MR was denied.
his complaint for underpayment[.] [The agency] upon
complainants complaint for underpayment xxx, instead of
adjusting his salary to meet the minimum prescribed by
1. Whether there was substantial compliance with project has been performed for petitioners benefit or on its
the appeal bond requirement. behalf, the liability accrues for such period even if, later
2. Whether Rosewood Processing is solitarily liable on, the employees are eventually transferred or
being an indirect employer. reassigned elsewhere. The solidary liability for payment
of back wages and separation pay is limited, under Article
RULING 106, to the extent of the work performed under the
contract; under Article 107, to the performance of any
Yes. In case of a judgment involving a monetary work, task, job or project; and under Article 109, to the
award, an appeal by the employer may be perfected only extent of their civil liability under this Chapter [on payment
upon the posting of a cash or surety bond issued by a of wages]. The liability arising from an illegal dismissal is
reputable bonding company duly accredited by the unlike an order to pay the statutory minimum wage,
Commission in the amount equivalent to the monetary because the workers right to such wage is derived from
award in the judgment appealed from. However, in a law. The proposition that payment of back wages and
number of cases, this Court has relaxed this requirement separation pay should be covered by Article 109, which
in order to bring about the immediate and appropriate holds an indirect employer solidarily responsible with his
resolution of controversies on the merits.[12] Some of contractor or subcontractor for any violation of any
these cases include: (a) counsels reliance on the footnote provision of this Code, would have been tenable if there
of the notice of the decision of the labor arbiter that the were proof -- there was none in this case -- that the
aggrieved party may appeal xxx within ten (10) working principal/employer had conspired with the contractor in
days; (b) fundamental consideration of substantial justice; the acts giving rise to the illegal dismissal.
(c) prevention of miscarriage of justice or of unjust
enrichment, as where the tardy appeal is from a decision Rosewood Processing is not liable, because the guards
granting separation pay which was already granted in an were not assigned to them anymore, as well as they did
earlier final decision; and (d) special circumstances of the not conspire for the illegal dismissal of said guards by the
case combined with its legal merits or the amount and the agency. They are only liable to the wage differential during
issue involved. We hold that petitioners’ motion to reduce the period that the complainants were actually under its
the bond is a substantial compliance with the Labor employ, and were exonerated from payment of
Code. This holding is consistent with the norm that letter- backwages and separation pay.
perfect rules must yield to the broader interest of
substantial justice.

No. The indirect employers liability to the

contractors employees extends only to the period during
which they were working for the petitioner, and the fact
that they were reassigned to another principal necessarily
ends such responsibility. The principal is made liable to
his indirect employees, because it can protect itself from
irresponsible contractors by withholding such sums and
paying them directly to the employees or by requiring a
bond from the contractor or subcontractor for this
purpose. Withal, fairness likewise dictates that the
petitioner should not, however, be held liable for wage
differentials incurred while the complainants were
assigned to other companies. Under these cited
provisions of the Labor Code, should the contractor fail to
pay the wages of its employees in accordance with law,
the indirect employer (the petitioner in this case), is jointly
and severally liable with the contractor, but such
responsibility should be understood to be limited to the
extent of the work performed under the contract, in the
same manner and extent that he is liable to the employees
directly employed by him. This liability of petitioner covers
the payment of the workers performance of any work,
task, job or project. So long as the work, task, job or
17. INTERNATIONAL SCHOOL ALLIANCE OF Discrimination, particularly in terms of wages, is frowned
EDUCATORS (ISAE) v. HON . LEON ARDO A. upon by the Labor Code. Article 135, for example,
QUISUMBIN G ET AL. prohibits and penalizes the payment of lesser
compensation to a female employee as against a male
G.R. N o. 128845, June 01, 2000, FIRST DIVISION employee for work of equal value. Article 248 declares it
(KAPUNAN , J.) an unfair labor practice for an employer to discriminate in
regard to wages in order to encourage or discourage
Facts: membership in any labor organization.

International School, Inc. (the School, for short), pursuant Notably, the International Covenant on Economic, Social,
to Presidential Decree 732, is a domestic educational and Cultural
institution established primarily for dependents of foreign
diplomatic personnel and other temporary residents. The Rights, supra, in Article 7 thereof, provides:
School hires both foreign and local teachers as members
of its faculty, classifying the same into two: (1) foreign- Remuneration which provides all workers, as a minimum,
hires and (2) local-hires. The School grants foreign-hires with:
certain benefits not accorded local-hires. These include
housing, transportation, shipping costs, taxes, and home Fair wages and equal remuneration for work of equal
leave travel allowance. Foreign-hires are also paid a value without distinction of any kind, in particular women
salary rate twenty-five percent (25%) more than local- being guaranteed conditions of work not inferior to those
hires. The School justifies the difference on two enjoyed by men, with equal pay for equal work;
"significant economic disadvantages" foreign-hires have
The foregoing provisions impregnably institutionalize in
to endure, namely: (a) the "dislocation factor" and (b)
this jurisdiction the long honored legal truism of "equal pay
limited tenure.
for equal work."
International School Alliance of Educators (ISAE), "a
Persons who work with substantially equal qualifications,
legitimate labor union and the collective bargaining
skill, effort and responsibility, under similar conditions,
representative of all faculty members" of the School,
should be paid similar salaries. This rule applies to the
contested the difference in salary rates between foreign
School, its "international character" notwithstanding.
and local-hires in a CBA negotiation. They failed to come
to an agreement and ISAE filed a notice of strike. DOLE
While we recognize the need of the School to attract
Acting Secretary ruled in favor of the school while DOLE
foreign hires, salaries should not be used as an
Secretary denied their MR. Hence, this petition.
enticement to the prejudice of local-hires. The local-hires
perform the same services as foreign-hires and they
ought to be paid the same salaries as the latter. For the
Is the point-of-hire classification employed by the School same reason, the "dislocation factor" and the foreign-
is discriminatory to Filipinos and that the grant of higher hires' limited tenure also cannot serve as valid bases for
salaries to foreign-hires constitutes racial discrimination? the distinction in salary rates. The dislocation factor and
limited tenure affecting foreign-hires are adequately
HELD: compensated by certain benefits accorded them which
are not enjoyed by local-hires, such as housing,
YES. transportation, shipping costs, taxes and home leave
travel allowances.
The Constitution also directs the State to promote
"equality of employment opportunities for all." Similarly, The Constitution enjoins the State to "protect the rights
the Labor Code provides that the State shall "ensure ofworkers and promote their welfare," "to afford labor full
equal work opportunities regardless of sex, race or protection." The State, therefore, has the right and duty to
creed." It would be an affront to both the spirit and letter regulate the relations between labor and capital. These
of these provisions if the State, in spite of its primordial relations are not merely contractual but are so impressed
obligation to promote and ensure equal employment with public interest that labor contracts, collective
opportunities, closes its eyes to unequal and bargaining agreements included, must yield to the
discriminatory terms and conditions of employment. common good. Should such contracts contain stipulations
that are contrary to public policy, courts will not hesitate to
strike down these stipulations. In this case, we find the
point-of-hire classification employed by respondent No. 1161, its employees are part of the civil service
School to justify the distinction in the salary rates of [NASECO v. NLRC, G.R. Nos. 69870 & 70295, November
foreign-hires and local hires to be an invalid classification. 24, 1988] and are covered by the Civil Service
There is no reasonable distinction between the services Commission's memorandum prohibiting strikes. This
rendered by foreign-hires and local hires. being the case, the strike staged by the employees of the
SSS was illegal. The statement of the Court in Alliance of
The practice of the School of according higher salaries to Government Workers v. Minister of Labor and
foreign hires contravenes public policy and, certainly, Employment [G.R. No. 60403, August 3, 1983, 124 SCRA
does not deserve the sympathy of this court. 1] is relevant as it furnishes the rationale for distinguishing
between workers in the private sector and government
18. SSS EMPLOYEES ASSOCIATION v. CA employees with regard to the right to strike: The general
rule in the past and up to the present is that "the terms
G.R. NO. 85279, JULY 28, 1989, THIRD DIVISION, and conditions of employment in the Government,
(CORTES, J.) including any political subdivision or instrumentality
thereof are governed by law" (Section 11, the Industrial
Peace Act, R.A. No. 875, as amended and Article 277, the
Labor Code, P.D. No. 442, as amended). Since the terms
Facts: and conditions of government employment are fixed by
law, government workers cannot use the same weapons
The officers and members of Social Security System employed by workers in the private sector to secure
Employees Association (SSSEA) staged a strike and concessions from their employers. The principle behind
barricaded the entrances to the SSS Building that labor unionism in private industry is that industrial peace
hampered the regular course of business. This was after cannot be secured through compulsion by law. Relations
the SSS failed to act on the union’s demands regarding between private employers and their employees rest on
salaries and benefits. The strike was reported to the an essentially voluntary basis. Subject to the minimum
Public Sector Labor-Management Council, which ordered requirements of wage laws and other labor and welfare
the strikers to return to work but the strikers refused to legislation, the terms and conditions of employment in the
return to work. SSS filed a complaint to the RTC for unionized private sector are settled through the process
complaint of damages with a prayer for a writ of of collective bargaining. In government employment,
preliminary injunction. The court issued a Temporary however, it is the legislature and, where properly given
restraining Order (TRO) and thereafter issued an delegated power, the administrative heads of government
injunction after finding that the strike was illegal. SSEA which fix the terms and conditions of employment. And
filed a motion for reconsideration but was denied. Hence, this is effected through statutes or administrative
they filed the petition on certiorari but the case was circulars, rules, and regulations, not through collective
referred to the CA. But during the pendency of the case in bargaining agreements. [At p. 13; underscoring supplied.]
CA, the moved to recall the decision but was denied. Government employees may, therefore, through their
Hence, the instant petition before the SC. unions or associations, either petition the Congress for
the betterment of the terms and conditions of employment
which are within the ambit of legislation or negotiate with
the appropriate government agencies for the
1) Do the employees of the SSS have the right to strike?
improvement of those which are not fixed by law. If there
be any unresolved grievances, the dispute may be
2) Does the RTC have jurisdiction to try the case?
referred to the Public Sector Labor-Management Council
HELD: for appropriate action. But employees in the civil service
may not resort to strikes, walkouts and other temporary
NO. Considering that under the 1987 Constitution "[t]he work stoppages, like workers in the private sector, to
civil service embraces all branches, subdivisions, pressure the Government to accede to their demands. As
instrumentalities, and agencies of the Government, now provided under Sec. 4, Rule III of the Rules and
including government-owned or controlled corporations Regulations to Govern the Exercise of the Right of
with original charters" [Art.IX(B), Sec. 2(1); see also Sec. Government-Employees to Self-Organization, which took
1 of E.O. No. 180 where the employees in the civil service effect after the instant dispute arose, "[t]he terms and
are denominated as "government employees"] and that conditions of employment in the government, including
the SSS is one such government-controlled corporation any political subdivision or instrumentality thereof and
with an original charter, having been created under R.A. government-owned and controlled corporations with
original charters are governed by law and employees
therein shall not strike for the purpose of securing
changes thereof." YES. The Labor Code itself provides
that terms and conditions of employment of government
employees shall be governed by the Civil Service Law,
rules and regulations [Art. 276.] More importantly, E.O.
No. 180 vests the Public Sector Labor-Management
Council with jurisdiction over unresolved labor disputes
involving government employees [Sec. 16.] Clearly, the
NLRC has no jurisdiction over the dispute. This being the
case, the Regional Trial Court was not precluded, in the
exercise of its general jurisdiction under B.P. Blg. 129, as
amended, from assuming jurisdiction over the SSS’s
complaint for damages and issuing the injunctive writ
prayed for therein. Unlike the NLRC, the Public Sector
Labor-Management Council has not been granted by law
authority to issue writs of injunction in labor disputes
within its jurisdiction. Thus, since it is the Council, and not
the NLRC, that has jurisdiction over the instant labor
dispute, resort to the general courts of law for the
issuance of a writ of injunction to enjoin the strike is
19. *SAN MIGUEL CORPORATION prayed for on September 3, 1991 and directed the
SUPERVISORS AND EXEMPT UNION conduct of separate certification elections among the
vs. HONARABLE BIENVENIDO E. supervisors ranked as supervisory levels 1 to 4 (S1 to S4)
LAGUESMA and the exempt employees in each of the three plants at
Cabuyao, San Fernando and Otis.

On September 21, 1991, respondent company, San

This is a Petition for Certiorari with Prayer for the Miguel Corporation filed a Motion for Reconsideration with
Issuance of Preliminary Injunction seeking to reverse and Motion to suspend proceedings.
set aside the Order of public respondent, Undersecretary
of the Department of Labor and Employment, Bienvenido On March 11, 1993, an Order was issued by the
E. Laguesma, dated March 11, 1993, in Case No. OS MA public respondent granting the Motion, citing the doctrine
A-2-70-91[1] entitled In Re: Petition for Certification enunciated in Philips Industrial Development, Inc. v.
Election Among the Supervisory and Exempt Employees NLRC[2] case. Said Order reads in part:
of the San Miguel Corporation Magnolia Poultry Plants of
Cabuyao, San Fernando and Otis, San Miguel x x x Confidential employees, like managerial employees,
Corporation Supervisors and Exempt Union, are not allowed to form, join or assist a labor union for
Petitioner. The Order excluded the employees under purposes of collective bargaining.
supervisory levels 3 and 4 and the so-called exempt
In this case, S3 and S4 and the so-called exempt
employees from the proposed bargaining unit and ruled
employees are admittedly confidential employees and
out their participation in the certification election.
therefore, they are not allowed to form, join or assist a
The antecedent facts are undisputed: labor union for purposes of collective bargaining following
the above courts ruling. Consequently, they are not
On October 5, 1990, petitioner union filed before the allowed to participate in the certification election.
Department of Labor and Employment (DOLE) a Petition
for District Certification or Certification Election among the WHEREFORE, the motion is hereby granted and the
supervisors and exempt employees of the SMC Magnolia Decision of this Office dated 03 September 1991 is hereby
Poultry Products Plants of Cabuyao, San Fernando and modified to the extent that employees under supervisory
Otis. levels 3 and 4 (S3 and S4) and the so-called exempt
employees are not allowed to join the proposed
On December 19, 1990, Med-Arbiter Danilo L. bargaining unit and are therefore excluded from those
Reynante issued an Order ordering the conduct of who could participate in the certification election.[3]
certification among the supervisors and exempt
employees of the SMC Magnolia Poultry Products Plants Hence this petition.
of Cabuyao, San Fernando and Otis as one bargaining
For resolution in this case are the following issues:
1. Whether Supervisory employees 3 and 4 and
On January 18, 1991, respondent San Miguel
the exempt employees of the company are
Corporation filed a Notice of Appeal with Memorandum on
considered confidential employees, hence
Appeal, pointing out, among others, the Med-Arbiters
ineligible from joining a union.
error in grouping together all three (3) separate plants,
Otis, Cabuyao and San Fernando, into one bargaining
2. If they are not confidential employees, do the
unit, and in including supervisory levels 3 and above
employees of the three plants constitute an
whose positions are confidential in nature.
appropriate single bargaining unit.
On July 23, 1991, the public respondent,
On the first issue, this Court rules that said
Undersecretary Laguesma, granted respondent
employees do not fall within the term confidential
companys Appeal and ordered the remand of the case to
employees who may be prohibited from joining a union.
the Med-Arbiter of origin for determination of the true
classification of each of the employees sought to be
There is no question that the said employees,
included in the appropriate bargaining unit.
supervisors and the exempt employees, are not vested
with the powers and prerogatives to lay down and execute
Upon petitioner-unions motion dated August 7, 1991,
management policies and/or to hire, transfer, suspend,
Undersecretary Laguesma granted the reconsideration
layoff, recall, discharge or dismiss employees. They are, the ineligibility of managerial employees to form, assist or
therefore, not qualified to be classified as managerial join a labor union was held equally applicable to them.[12]
employees who, under Article 245[4] of the Labor Code,
are not eligible to join, assist or form any labor An important element of the confidential employee
organization. In the very same provision, they are not rule is the employees need to use labor relations
allowed membership in a labor organization of the rank- information. Thus, in determining the confidentiality of
and-file employees but may join, assist or form separate certain employees, a key questions frequently considered
labor organizations of their own. The only question that is the employees necessary access to confidential labor
need be addressed is whether these employees are relations information.[13]
properly classified as confidential employees or not.
It is the contention of respondent corporation that
Confidential employees are those who (1) assist or Supervisory employees 3 and 4 and the exempt
act in a confidential capacity, (2) to persons who employees come within the meaning of the term
formulate, determine, and effectuate management confidential employees primarily because they answered
policies in the field of labor relations.[5] The two criteria are in the affirmative when asked Do you handle confidential
cumulative, and both must be met if an employee is to be data or documents? in the Position Questionnaires
considered a confidential employee that is, the submitted by the Union.[14] In the same questionnaire,
confidential relationship must exist between the however, it was also stated that the confidential
employees and his supervisor, and the supervisor must information handled by questioned employees relate to
handle the prescribed responsibilities relating to labor product formulation, product standards and product
relations.[6] specification which by no means relate to labor
The exclusion from bargaining units of employees
who, in the normal course of their duties, become aware Granting arguendo that an employee has access to
of management policies relating to labor relations is a confidential labor relations information but such is merely
principal objective sought to be accomplished by the incidental to his duties and knowledge thereof is not
confidential employee rule. The broad rationale behind necessary in the performance of such duties, said access
this rule is that employees should not be placed in a does not render the employee a confidential
position involving a potential conflict of employee.[16] If access to confidential labor relations
interests.[7] Management should not be required to handle information is to be a factor in the determination of an
labor relations matters through employees who are employees confidential status, such information must
represented by the union with the company is required to relate to the employers labor relations policies. Thus, an
deal and who in the normal performance of their duties employee of a labor union, or of a management
may obtain advance information of the companys position association, must have access to confidential labor
with regard to contract negotiations, the disposition of information with respect to his employer, the union, or the
grievances, or other labor relations matters.[8] association, to be regarded a confidential employee, and
knowledge of labor relations information pertaining to the
There have been ample precedents in this regard, companies with which the union deals, or which the
thus in Bulletin Publishing Company v. Hon. Augusto association represents, will not clause an employee to be
Sanchez,[9] the Court held that if these managerial excluded from the bargaining unit representing
employees would belong to or be affiliated with a Union, employees of the union or association.[17] Access to
the latter might not be assured of their loyalty to the Union information which is regarded by the employer to be
in view of evident conflict of interest. The Union can also confidential from the business standpoint, such as
become company-dominated with the presence of financial information[18] or technical trade secrets, will not
managerial employees in Union membership. The same render an employee a confidential employee.[19]
rationale was applied to confidential employees in Golden
Farms, Inc. v. Ferrer-Calleja[10] and in the more recent Herein listed are the functions of supervisors 3 and
case of Philips Industrial Development, Inc. v. higher:
NLRC[11] which held that confidential employees, by the
very nature of their functions, assist and act in a 1. To undertake decisions to
confidential capacity to, or have access to confidential discontinue/temporarily stop shift operations
matters of, persons who exercise managerial functions in when situations require.
the field of labor relations. Therefore, the rationale behind
2. To effectively oversee the quality control In this connection, the issue of whether the
function at the processing lines in the employees of San Miguel Corporation Magnolia Poultry
storage of chicken and other products. Products Plants of Cabuyao, San Fernando, and Otis
constitute a single bargaining unit needs to be threshed
3. To administer efficient system of evaluation out.
of products in the outlets.
It is the contention of the petitioner union that the
4. To be directly responsible for the recall, creation of three (3) separate bargaining units, one each
holding and rejection of direct manufacturing for Cabuyao Otis and San Fernando as ruled by the
materials. respondent Undersecretary, is contrary to the one-
company, one-union policy. It adds that Supervisors level
5. To recommend and initiate actions in the 1 to 4 and exempt employees of the three plants have a
maintenance of sanitation and hygiene similarity or a community of interests.
throughout the plant.[20]
This Court finds the contention of the petitioner
It is evident that whatever confidential data the meritorious.
questioned employees may handle will have to relate to
their functions. From the foregoing functions, it can be An appropriate bargaining unit may be defined as a
gleaned that the confidential information said employees group of employees of a given employer, comprised of all
have access to concern the employers internal business or less than all of the entire body of employees, which the
operations. As held in Westinghouse Electric collective interest of all the employees, consistent with
Corporation v. National Labor Relations Board,[21] an equity to the employer, indicate to be best suited to serve
employee may not be excluded from appropriate the reciprocal rights and duties of the parties under the
bargaining unit merely because he has access to collective bargaining provisions of the law.[24]
confidential information concerning employers internal
business operations and which is not related to the field A unit to be appropriate must effect a grouping of
of labor relations. employees who have substantial, mutual interests in
wages, hours, working conditions and other subjects of
It must be borne in mind that Section 3 of Article XIII collective bargaining.[25]
of the 1987 Constitution mandates the State to guarantee
to all workers the right to self-organization. Hence, It is readily seen that the employees in the instant
confidential employees who may be excluded from case have community or mutuality of interest, which is the
bargaining unit must be strictly defined so as not to standard in determining the proper constituency of a
needlessly deprive many employees of their right bargain collective bargaining unit.[26] It is undisputed that they all
collectively through representatives of their choosing.[22] belong to the Magnolia Poultry Division of San Miguel
Corporation. This means that, although they belong to
In the case at bar, supervisors 3 and above may not three different plants, they perform work of the same
be considered confidential employees merely because nature, receive the same wages and compensation, and
they handle confidential data as such must first be strictly most importantly, share a common stake in concerted
classified as pertaining to labor relations for them to fall activities.
under said restrictions. The information they handle are
properly classifiable as technical and internal business In light of these considerations, the Solicitor General
operations data which, to our mind, has no relevance to has opined that separate bargaining units in the three
negotiations and settlement of grievances wherein the different plants of the division will fragmentize the
interests of a union and the management are invariably employees of the said division, thus greatly diminishing
adversarial. Since the employees are not classifiable their bargaining leverage. Any concerted activity held
under the confidential type, this Court rules that they may against the private respondent for a labor grievance in one
appropriately form a bargaining unit for purposes of bargaining unit will, in all probability, not create much
collective bargaining. Furthermore, even assuming that impact on the operations of the private respondent. The
they are confidential employees, jurisprudence has two other plants still in operation can well step up their
established that there is no legal prohibition against production and make up for the slack caused by the
confidential employees who are not performing bargaining unit engaged in the concerted activity. This
managerial functions to form and join a union.[23] situation will clearly frustrate the provisions of the Labor
Code and the Mandate of the Constitution.[27]
The fact that the three plants are located in three
different places, namely, in Cabuyao, Laguna, in Otis,
Pandacan, Metro Manila, and in San Fernando,
Pampanga is immaterial.Geographical location can be
completely disregarded if the communal or mutual
interests of the employees are not sacrificed as
demonstrated in UP v. Calleja-Ferrer where all non-
academic rank and file employees of the University of the
Philippines inDiliman, Quezon City, Padre Faura, Manila,
Los Baos, Laguna and the Visayas were allowed to
participate in a certification election. We rule that the
distance among the three plants is not productive of
insurmountable difficulties in the administration of union
affairs. Neither are there regional differences that are
likely to impede the operations of a single bargaining

WHEREFORE, the assailed Order of March 11,

1993 is hereby SET ASIDE and the Order of the Med-
Arbiter on December 19, 1990 is REINSTATED under
which a certification election among the supervisors (level
1 to 4) and exempt employees of the San Miguel
Corporation Magnolia Poultry Products Plants of
Cabuyao, San Fernando, and Otis as one bargaining unit
is ordered conducted.

[G.R. No. 122226. March 25, 1998] In resolving these issues it would be useful to begin
by defining who are managerial employees and
20. *UNITED PEPSI-COLA SUPERVISORY UNION considering the types of managerial employees.
(UPSU), petitioner, vs. HON. BIENVENIDO E.
Types of Managerial Employees
PHILIPPINES, INC. respondents.
The term manager generally refers to anyone who is
Petitioner is a union of supervisory employees. It responsible for subordinates and other organization
appears that on March 20, 1995 the union filed a petition resources.[1] As a class, managers constitute three levels
for certification election on behalf of the route managers of a pyramid:
at Pepsi-Cola Products Philippines, Inc. However, its
petition was denied by the med-arbiter and, on appeal, by Top Management
the Secretary of Labor and Employment, on the ground
that the route managers are managerial employees and,
therefore, ineligible for union membership under the first
Middle Management
sentence of Art. 245 of the Labor Code, which provides:
Ineligibility of managerial employees to join any labor
organization; right of supervisory employees. Managerial
First Line
employees are not eligible to join, assist or form any labor
organization.Supervisory employees shall not be eligible Management
for membership in a labor organization of the rank-and-
file employees but may join, assist or form separate labor (also called Supervisor)
organizations of their own.
Petitioner brought this suit challenging the validity of
the order dated August 31, 1995, as reiterated in the order ____________________
dated September 22, 1995, of the Secretary of Labor and
Employment.Its petition was dismissed by the Third Operatives
Division for lack of showing that respondent committed
grave abuse of discretion. But petitioner filed a motion for Or Operating Employees
reconsideration, pressing for resolution its contention that
the first sentence of Art. 245 of the Labor Code, so far as FIRST-LINE MANAGERS The lowest level in an
it declares managerial employees to be ineligible to form, organization at which individuals are responsible for the
assist or join unions, contravenes Art. III 8 of the work of others is called first-line or first-level
Constitution which provides: management. First-line managers direct operating
employees only; they do not supervise other
The right of the people, including those employed in the managers. Example of first-line managers are the
public and private sectors, to form unions, associations, foreman or production supervisor in a manufacturing
or societies for the purposes not contrary to law shall not plant, the technical supervisor in a research department,
be abridged. and the clerical supervisor in a large office. First-level
managers are often called supervisors.
For this reason, the petition was referred to the Court en
banc. MIDDLE MANAGERS The term middle management can
refer to more than one level in an organization. Middle
The Issues in this Case
managers direct the activities of other managers and
sometimes also those of operating employees. Middle
Two question are presented by the petition: (1) managers principal responsibilities are to direct the
whether the route managers at Pepsi-Cola Products activities that implement their organizations policies and
Philippines, Inc. are managerial employees and (2) to balance the demands of their superiors with the
whether Art. 245, insofar as it prohibits managerial capacities of their subordinates. A plant manager in an
employees from forming, joining or assisting labor unions, electronics firm is an example of a middle manager.
violates Art. III, 8 of the Constitution.
TOP MANAGERS Composed of a comparatively small
group of executives, top management is responsible for
the overall management of the organization. It establishes paragraph (m), Article 212 of the Labor Code as
operating policies and guides the organizations amended. Designations or titles of positions are not
interactions with its environment. Typical titles of top controlling. In the instant case, nothing on record will
managers are chief executive officer, president, and support the claim that the quality control manager,
senior vice-president. Actual titles vary from one yard/transport manager and warehouse operations
organization to another and are not always a reliable manager are vested with said attributes. The warehouse
guide to membership in the highest management operations manager, for example, merely assists the plant
classification.[2] finance manager in planning, organizing, directing and
controlling all activities relative to development and
As can be seen from this description, a distinction implementation of an effective management control
exist between those who have the authority to devise, information system at the sale offices. The exercise of
implement and control strategic and operational policies authority of the quality control manager, on the other
(top and middle managers) and those whose task is hand, needs the concurrence of the manufacturing
simply to ensure that such polices are carried out by the manager
rank-and-file employees of an organization (first-level
managers/supervisors). What distinguishes them from As to the route managers and accounting manager, we
the rank-and file employees is that they act in the interest are convinced that they are managerial employees. Their
of the employer in supervising such rank-and-file job descriptions clearly reveal so.
On July 6, 1992, this finding was reiterated in Case
Managerial employees may therefore be said to fall No. OS-A-3-71-92, entitled In Re: Petition for Direct
into two distinct categories: the managers per se, who Certification and/or Certification Election-Route
compose the former group described above, and the Managers/Supervisory Employees of Pepsi-Cola
supervisors who form the latter group. Whether they Products Phils. Inc., as follows:
belong to the first or second category, managers, vis--vis
employers, are, likewise, employees.[3] The issue brought before us is not of first impression. At
one time, we had the occasion to rule upon the status of
The first question is whether route managers are route manager in the same company vis a vis the issue
managers are managerial employees or supervisors. as to whether or not it is supervisory employee or a
managerial employee. In the case of Workers Alliance
Previous Administrative Determinations of the Question Whether Route Managers
Trade Unions (NATU) vs. Pepsi Cola Products, Phils.,
are Managerial Employees
Inc. (OS-MA-A-10-318-91), 15 November 1991, we ruled
that a route manager is a managerial employee within the
It appears that this question was the subject of two context of the definition of the law, and hence, ineligible
previous determinations by the Secretary of Labor and to join, form or assist a union. We have once more passed
Employment, in accordance with which this case was upon the logic of our Decision aforecited in the light of the
decided by the med-arbiter. issues raised in the instant appeal, as well as the available
documentary evidence on hand, and have come to the
In Case No. OS-MA-10318-91, entitled Workerss view that there is no cogent reason to depart from our
Alliance Trade Union (WATU) v. Pepsi-Cola Products earlier holding. Route Managers are, by the very nature of
Philippines, Inc., decided on November 13, 1991, the their functions and the authority they wield over their
Secretary of Labor found: subordinates, managerial employees.The prescription
found in Art. 245 of the Labor Code, as amended
We examined carefully the pertinent job description of the therefore, clearly applies to them.[4]4
subject employees and other documentary evidence on
record vis--vis paragraph (m), Article 212 of the Labor Citing our ruling in Nasipit Lumber Co. v. National
Code, as amended, and we find that only those Labor Relations Commission,[5]5 however, petitioner
employees occupying the position of route manager and argues that these previous administrative determinations
accounting manager are managerial employees. The rest do not have the effect of res judicata in this case, because
i.e. quality control manager, yard/transport manager and "labor relations proceedings" are "non-litigious and
warehouse operations manager are supervisory summary in nature without regard to legal
employees. technicalities."[6] Nasipit Lumber Co. involved a clearance
to dismiss an employee issued by the Department of
To qualify as managerial employee, there must be a clear Labor. The question was whether in a subsequent
showing of the exercise of managerial attributes under
proceeding for illegal dismissal, the clearance was res lay off, recall, discharge, assign or discipline
judicata. In holding it was not, this Court made it clear that employees. Supervisory employees are those who, in the
it was referring to labor relations proceedings of a non- interest of the employer, effectively recommend such
adversary character, thus: managerial actions if the exercise of such authority is not
merely routinary or clerical in nature but requires the use
The requirement of a clearance to terminate employment of independent judgment. All employees not falling within
was a creation of the Department of labor to carry out the any of the above definitions are considered rank-and-file
Labor Code provisions on security of tenure and employees for purposes of this Book.
termination of employment. The proceeding subsequent
to the filing of an application for clearance to terminate At the very least, the principle of finality of administrative
employment was outlined in Book V, Rule XIV of the determination compels respect for the finding of the
Rules and Regulations Implementing the Labor Secretary of Labor that route managers are managerial
Code. The fact that said rule allowed a procedure for the employees as defined by law in the absence of anything
approval of the clearance with or without the opposition of to show that such determination is without substantial
the employee concerned (Secs. 7 & 8), demonstrates the evidence to support it. Nonetheless, the Court, concerned
non-litigious and summary nature of the proceeding. The that employees who are otherwise supervisors may
clearance requirement was therefore necessary only as wittingly or unwittingly be classified as managerial
an expeditious shield against arbitrary dismissal without personnel and thus denied the right of self- organization,
the knowledge and supervision of the Department of has decided to review the record of this case.
Labor. Hence, a duly approved clearance implied that the
DOLE's Finding that Route Managers are Managerial Employees Supported by
dismissal was legal or for cause (Sec. 2).[7]v. National
Substantial Evidence in the Record
Labor Relations Commission, 177 SCRA 93, 100 (1989).7

But the doctrine of res judicata certainly applies to The Court now finds that the job evaluation made by
adversary administrative proceedings. As early as 1956, the Secretary of Labor is indeed supported by substantial
in Brillantes v. Castro,[8]8 we sustained the dismissal of an evidence. The nature of the job of route managers is given
action by a trial court on the basis of a prior administrative in a four-page pamphlet, prepared by the company, called
determination of the same case by the Wage "Route Manager Position Description," the pertinent parts
Administration Service, applying the principle of res of which read:
judicata. Recently, in Abad v. NLRC[9]9 we applied the
related doctrine of stare decisis in holding that the prior A. BASIC PURPOSE
determination that certain jobs at the Atlantic Gulf and
Pacific Co. were project employments was binding in A Manager achieves objectives through others.
another case involving another group of employees of the
same company. Indeed, in Nasipit Lumber Co., this Court As a Route Manager, your purpose is to meet
clarified toward the end of its opinion that "the doctrine the sales plan; and you achieve this objective
of res judicata applies . . . to judicial or quasi judicial through the skillful MANAGEMENT OF YOUR
proceedings and not to the exercise of administrative JOB AND THE MANAGEMENT OF YOUR
powers."[10]v. National Labor Relations PEOPLE.
Commission, supra note 7.10 Now proceedings for
These then are your functions as Pepsi-Cola
certification election, such as those involved in Case No.
Route Manager. Within these functions -
OS-M-A-10-318-91 and Case No. OS-A-3-71-92, are
managing your job and managing your people
quasi judicial in nature and, therefore, decisions rendered
- you are accountable to your District Manager
in such proceedings can attain finality.[11]v. B.F. Goodrich
for the execution and completion of various
(Marikina Factory) Confidential and Salaries Employees
tasks and activities which will make it possible
Union-NATU, 49 SCRA 532 (1973).11
for you to achieve your sales objectives.
Thus, we have in this case an expert's view that the
employees concerned are managerial employees within
the purview of Art. 212 which provides:
(m) "managerial employee" is one who is vested with
The Route Manager is accountable for the following:
powers or prerogatives to lay down and execute
management policies and/or to hire, transfer, suspend, 1.1 SALES DEVELOPMENT
1.1.1 Achieve the sales plan. 2.0 MANAGING YOUR PEOPLE

1.1.2 Achieve all distribution and new The Route Manager is accountable for the following:
account objectives.
2.1 Route Sales Team Development
1.1.3 Develop new business opportunities
thru personal contacts with 2.1.1 Conduct route rides to train, evaluate
dealers. and develop all assigned route
salesmen and helpers at least 3
1.1.4 Inspect and ensure that all days a week, to be supported by
merchandizing [sic] objectives required route ride
are achieved in all outlets. documents/reports & back
check/spot check at least 2 days
1.1.5 maintain and improve productivity of a week to be supported by
all cooling equipment and kiosks. required documents/reports.

1.1.6 Execute and control all authorized 2.1.2 Conduct sales meetings and morning
promotions. huddles. Training should focus
on the enhancement of effective
1.1.7 Develop and maintain dealer sales and merchandizing [sic]
goodwill. techniques of the salesmen and
helpers. Conduct group training
1.1.8 Ensure all accounts comply with at least 1 hour each week on a
company suggested retail designated day and of specific
pricing. topic.

1.1.9 Study from time to time individual 2.2 Code of Conduct

route coverage and productivity
for possible adjustments to 2.2.1 Maintain the company's reputation
maximize utilization of through strict adherence to
resources. PCPPI's code of conduct and the
universal standards of
1.2 Administration unquestioned business
1.2.1 Ensure the proper loading of route
trucks before check-out and the Earlier in this opinion, reference was made to the
proper sorting of bottles before distinction between managers per se (top managers and
check-in. middle managers) and supervisors (first-line
managers). That distinction is evident in the work of the
1.2.2 Ensure the upkeep of all route sales route managers which sets them apart from supervisors
reports and all other related in general. Unlike supervisors who basically merely direct
reports and forms required on an operating employees in line with set tasks assigned to
accurate and timely basis. them, route managers are responsible for the success of
the company's main line of business through
1.2.3 Ensure proper implementation of the
management of their respective sales teams. Such
various company policies and
management necessarily involves the planning, direction,
procedures incl. but not limited to
operation and evaluation of their individual teams and
shakedown; route shortage;
areas which the work of supervisors does not entail.
progressive discipline; sorting;
spoilages; credit/collection; The route managers cannot thus possibly be
accident; attendance. classified as mere supervisors because their work does
not only involve, but goes far beyond, the simple direction
1.2.4 Ensure collection of receivables and
or supervision of operating employees to accomplish
delinquent accounts.
objectives set by those above them. They are not mere
functionaries with simple oversight functions but business
administrators in their own right. An idea of the role of fully revealed. Indeed, if any, the card indicates the great
route managers as managers per se can be gotten from latitude and discretion given to route managers - from
a memo sent by the director of metro sales operations of servicing and enhancing company goodwill to supervising
respondent company to one of the route managers. It and auditing accounts, from trade (new business)
reads:[13] development to the discipline, training and monitoring of
performance of their respective sales teams, and so forth,
03 April 1995 - if they are to fulfill the company's expectations in the "key
result areas."
Article 212(m) says that "supervisory employees are
From : REGGIE M. SANTOS those who, in the interest of the employer, effectively
recommend such managerial actions if the exercise of
Subj : SALARY INCREASE such authority is not merely routinary or clerical in nature
but requires the use of independent judgment." Thus,
Effective 01 April 1995, your basic monthly salary
their only power is to recommend. Certainly, the route
of P11,710 will be increased to P12,881 or an
managers in this case more than merely recommend
increase of 10%. This represents the added
effective management action. They perform operational,
managerial responsibilities you will assume due to human resource, financial and marketing functions for the
the recent restructuring and streamlining of Metro company, all of which involve the laying down of operating
Sales Operations brought about by the continuous policies for themselves and their teams. For example, with
losses for the last nine (9) months. respect to marketing, route managers, in accordance with
B.1.1.1 to B.1.1.9 of the Route Managers Job Description,
Let me remind you that for our operations to be
are charged, among other things, with expanding the
profitable, we have to sustain the intensity and
dealership base of their respective sales areas,
momentum that your group and yourself have shown
maintaining the goodwill of current dealers, and
last March. You just have to deliver the desired
distributing the company's various promotional items as
volume targets, better negotiated concessions,
they see fit. It is difficult to see how supervisors can be
rationalized sustaining deals, eliminate or
given such responsibility when this involves not just the
reduced overdues, improved collections, more
routine supervision of operating employees but the
cash accounts, controlled operating
protection and expansion of the company's business vis-
expenses, etc. Also, based on the agreed set
a-vis its competitors.
targets, your monthly performance will be closely
monitored. While route managers do not appear to have the
power to hire and fire people (the evidence shows that
You have proven in the past that your capable of
they only "recommended" or "endorsed" the taking of
achieving your targets thru better planning,
disciplinary action against certain employees), this is
managing your group as a fighting team, and
because this is a function of the Human Resources or
thru aggressive selling. I am looking forward to
Personnel Department of the company.[14]14 And neither
your success and I expect that you just have to
should it be presumed that just because they are given
exert your doubly best in turning around our
set benchmarks to observe, they are ipso
operations from a losing to a profitable one!
facto supervisors. Adequate control methods (as
embodied in such concepts as "Management by
Happy Selling!!
Objectives [MBO]" and "performance appraisals") which
(Sgd.) R.M. SANTOS require a delineation of the functions and responsibilities
of managers by means of ready reference cards as here,
The plasticized card given to route managers, have long been recognized in management as effective
quoted in the separate opinion of Justice Vitug, although tools for keeping businesses competitive.
entitled "RM's Job Description," is only a summary of
performance standards. It does not show whether route This brings us to the second question, whether the
managers are managers per se or supervisors. first sentence of Art. 245 of the Labor Code, prohibiting
Obviously, these performance standards have to be managerial employees from forming, assisting or joining
related to the specific tasks given to route managers in any labor organization, is constitutional in light of Art. III,
the four-page "Route Manager Position Description," and, 8 of the Constitution which provides:
when this is done, the managerial nature of their jobs is
The right of the people, including those employed in the employees, or responsibly to direct them, and to adjust
public and private sectors, to form unions, associations, their grievances, or effectively to recommend such acts,
or societies for purposes not contrary to law shall not be if, in connection with the foregoing, the exercise of such
abridged. authority is not of a merely routinary or clerical nature but
requires the use of independent judgment.[16]16
As already stated, whether they belong to the first
category (managers per se) or the second category The right of supervisors to form their own
(supervisors), managers are employees. Nonetheless, in organizations was affirmed:
the United States, as Justice Puno's separate opinion
notes, supervisors have no right to form unions. They are SEC. 3. Employees' Right to Self-Organization. --
excluded from the definition of the term "employee" in 2(3) Employees shall have the right to self-organization and to
of the Labor-Management Relations Act of 1947.[15]v. Bell form, join or assist labor organizations of their own
Aerospace Co., 416 U.S. 281, n 11, 40 L.Ed.2d 134, 147, choosing for the purpose of collective bargaining through
n. 11 (1974), thus: representatives of their own choosing and to engage in
concerted activities for the purpose of collective
Supervisors are management people. They have bargaining and other mutual aid and protection.
distinguished themselves in their work. They have Individuals employed as supervisors shall not be eligible
demonstrated their ability to take care of themselves for membership in a labor organization of employees
without depending upon the pressure of collective under their supervision but may form separate
action. No one forced them to become supervisors. They organizations of their own.[17]
abandoned the "collective security" of the rank and file
voluntarily, because they believed the opportunities thus For its part, the Supreme Court upheld in several of its
opened to them to be more valuable to them than such decisions the right of supervisors to organize for purposes
"security". It seems wrong, and it is wrong, to subject of labor relations.[18]v. Filoil Supervisory and Confidential
people of this kind, who have demonstrated their initiative, Employees Association, 6 SCRA 522 (1972); Kapisanan
their ambition and their ability to get ahead, to the leveling ng mga Manggagawa sa Manila Railroad Co. v. CIR, 106
processes of seniority, uniformity and standardization that Phil 607 (1959).18
the Supreme Court recognizes as being fundamental
principles of unionism. (J.I. Case Co. v. National Labor Although it had a definition of the term "supervisor,"
Relations Board, 321 U.S. 332, 88 L.Ed. 762, 64 S. Ct. the Industrial Peace Act did not define the term
576 (1994). It is wrong for the foremen, for it discourages "manager." But, using the commonly-understood concept
the things in them that made them foremen in the first of "manager," as above stated, it is apparent that the law
place. For the same reason, that it discourages those best used the term "supervisors" to refer to the sub-group of
qualified to get ahead, it is wrong for industry, and "managerial employees" known as front-line managers.
particularly for the future strength and productivity of our The other sub-group of "managerial employees," known
country.15 In the Philippines, the question whether as managers per se, was not covered.
managerial employees have a right of self-organization
has arisen with respect to first-level managers or However, in Caltex Filipino Managers and
supervisors, as shown by a review of the course of labor Supervisors Association v. Court of Industrial
legislation in this country. Relations,[19]J.)19 the right of all managerial employees to
self-organization was upheld as a general proposition,
Right of Self-Organization of Managerial Employees under Pre-Labor Code Laws thus:

Before the promulgation of the Labor Code in 1974, It would be going too far to dismiss summarily the point
the field of labor relations was governed by the Industrial raised by respondent Company - that of the alleged
Peace Act (R.A. No. 875). identity of interest between the managerial staff and the
employing firm. That should ordinarily be the case,
In accordance with the general definition above, this especially so where the dispute is between management
law defined "supervisor" as follows: and the rank and file. It does not necessarily follow though
that what binds the managerial staff to the corporation
SECTION 2. . . . forecloses the possibility of conflict between them. There
could be a real difference between what the welfare of
(k) "Supervisor" means any person having authority in the such group requires and the concessions the firm is willing
interest of an employer, to hire, transfer, suspend, lay-off, to grant. Their needs might not be attended to then in the
recall, discharge, assign, recommend, or discipline other absence of any organization of their own. Nor is this to
indulge in empty theorizing. The record of respondent Lab. Supvr. - Pandacan
Company, even the very case cited by it, is proof enough
of their uneasy and troubled relationship. Certainly the Jr. Sales Engineer B
impression is difficult to erase that an alien firm failed to
manifest sympathy for the claims of its Filipino Operations Assistant B
executives. To predicate under such circumstances that
agreement inevitably marks their relationship, ignoring Field Engineer
that discord would not be unusual, is to fly in the face of
reality. Sr. Opers. Supvr. - MIA A/S

. . . The basic question is whether the managerial Purchasing Assistant

personnel can organize. What respondent Company
Jr. Construction Engineer
failed to take into account is that the right to self-
organization is not merely a statutory creation. It is
St. Sales Supervisor
fortified by our Constitution. All are free to exercise such
right unless their purpose is contrary to law. Certainly it Deport Supervisor A
would be to attach unorthodoxy to, not to say an
emasculation of, the concept of law if managers as such Terminal Accountant B
were precluded from organizing. Having done so and
having been duly registered, as did occur in this case, Merchandiser
their union is entitled to all the rights under Republic Act
No. 875. Considering what is denominated as unfair labor Dist. Sales Prom. Supvr.
practice under Section 4 of such Act and the facts set forth
in our decision, there can be only one answer to the Instr. - Merchandising
objection raised that no unfair labor practice could be
committed by respondent Company insofar as managerial Asst. Dist. Accountant B
personnel is concerned. It is, as is quite obvious, in the
negative.[20]20 Sr. Opers. Supervisor

Actually, the case involved front-line managers or Jr. Sales Engineer A

supervisors only, as the plantilla of employees, quoted in
the main opinion,[21]J.) (emphasis added).21 clearly Asst. Bulk Ter. Supt.
Sr. Opers. Supvr.
CAFIMSA members holding the following
Credit Supervisor A
Supervisory Payroll Position Title are Recognized by
the Company
Asst. Stores Supvr. A
Payroll Position Title
Ref. Supervisory Draftsman
Assistant to Mgr. - National Acct. Sales
Refinery Shift Supvr. B
Jr. Sales Engineer
Asst. Supvr. A - Operations (Refinery)
Retail Development Asst.
Refinery Shift Supvr. B
Staff Asst. - 0 Marketing
Asst. Lab. Supvr. A (Refinery)
Sales Supervisor
St. Process Engineer B (Refinery)
Supervisory Assistant
Asst. Supvr. A - Maintenance (Refinery)
Jr. Supervisory Assistant
Asst. Supvr. B - Maintenance (Refinery)
Credit Assistant
Supervisory Accountant (Refinery)
Communications Supervisor (Refinery) Supervisory unions and unions of security guards to
cease operation. - All existing supervisory unions and
Finally, also deemed included are all other unions of security guards shall, upon the effectivity of the
employees excluded from the rank and file unions Code, cease to operate as such and their registration
but not classified as managerial or otherwise certificates shall be deemed automatically
excludable by law or applicable judicial precedents. cancelled. However, existing collective agreements with
such unions, the life of which extends beyond the date of
Right of Self-Organization of Managerial Employees under the Labor Code
effectivity of the Code, shall be respected until their expiry
date insofar as the economic benefits granted therein are
Thus, the dictum in the Caltex case which allowed at concerned.
least for the theoretical unionization of top and middle
managers by assimilating them with the supervisory Members of supervisory unions who do not fall within the
group under the broad phrase "managerial personnel," definition of managerial employees shall become eligible
provided the lynchpin for later laws denying the right of to join or assist the rank and file labor organization, and if
self-organization not only to top and middle management none exists, to form or assist in the forming of such rank
employees but to front line managers or supervisors as and file organization. The determination of who are
well. Following the Caltex case, the Labor Code, managerial employees and who are not shall be the
promulgated in 1974 under martial law, dropped the subject of negotiation between representatives of the
distinction between the first and second sub-groups of supervisory union and the employer. If no agreement is
managerial employees. Instead of treating the terms reached between the parties, either or both of them may
"supervisor" and "manager" separately, the law lumped bring the issue to the nearest Regional Office for
them together and called them "managerial employees," determination.
as follows:
The Department of Labor continued to use the term
ART. 212. Definitions . . . . "supervisory unions" despite the demise of the legal
definition of "supervisor" apparently because these were
(k) "Managerial Employee" is one who is vested with the unions of front line managers which were then allowed
powers or prerogatives to lay down and execute as a result of the statutory grant of the right of self-
management policies and/or to hire, transfer, suspend, organization under the Industrial Peace Act. Had the
lay off, recall, discharge, assign or discipline employees, Department of Labor seen fit to similarly ban unions of top
or to effectively recommend such managerial actions. All and middle managers which may have been formed
employees not falling within this definition are considered following the dictum in Caltex, it obviously would have
rank and file employees for purposes of this Book.[22]22 done so. Yet it did not, apparently because no such
unions of top and middle managers really then existed.
The definition shows that it is actually a combination of the
commonly understood definitions of both groups of Real Intent of the 1986 Constitutional Commission

managerial employees, grammatically joined by the

phrase "and/or." This was the law as it stood at the time the
Constitutional Commission considered the draft of Art. III,
This general definition was perhaps legally 8. Commissioner Lerum sought to amend the draft of
necessary at that time for two reasons. First, the 1974 what was later to become Art. III, 8 of the present
Code denied supervisors their right to self-organize as Constitution:
theretofore guaranteed to them by the Industrial Peace
Act. Second, it stood the dictum in the Caltex case on its MR. LERUM. My amendment is on Section 7, page 2, line
head by prohibiting all types of managers from forming 19, which is to insert between the words "people" and "to"
unions. The explicit general prohibition was contained in the following: WHETHER EMPLOYED BY THE STATE
the then Art. 246 of the Labor Code. OR PRIVATE ESTABLISHMENTS. In other words, the
section will now read as follows: "The right of the people
The practical effect of this synthesis of legal concepts WHETHER EMPLOYED BY THE STATE OR PRIVATE
was made apparent in the Omnibus Rules Implementing ESTABLISHMENTS to form associations, unions, or
the Labor Code which the Department of Labor societies for purposes not contrary to law shall not be
promulgated on January 19, 1975. Book V, Rule II, 11 of abridged."[23]23
the Rules provided:
Explaining his proposed amendment, he stated:
MR. LERUM. Under the 1935 Bill of Rights, the right to MR. LERUM. Yes, as long as it will carry the idea that the
form associations is granted to all persons whether or not right of the employees in the private sector is
they are employed in the government. Under that recognized.[24]
provision, we allow unions in the government, in
government-owned and controlled corporations and in Lerum thus anchored his proposal on the fact that (1)
other industries in the private sector, such as the government employees, supervisory employees, and
Philippine Government Employees' Association, unions in security guards, who had the right to organize under the
the GSIS, the SSS, the DBP and other government- Industrial Peace Act, had been denied this right by the
owned and controlled corporations. Also, we have unions Labor Code, and (2) there was a need to reinstate the
of supervisory employees and of security guards. But right of these employees. In consonance with his
what is tragic about this is that after the 1973 Constitution objective to reinstate the right of government, security,
was approved and in spite of an express recognition of and supervisory employees to organize, Lerum then
the right to organize in P.D. No. 442, known as the Labor made his proposal:
Code, the right of government workers, supervisory
employees and security guards to form unions was MR. LERUM. Mr. Presiding Officer, after a consultation
abolished. with several Members of this Commission, my
amendment will now read as follows: "The right of the
And we have been fighting against this abolition. In every people INCLUDING THOSE EMPLOYED IN THE
tripartite conference attended by the government, PUBLIC AND PRIVATE SECTORS to form associations,
management and workers, we have always been insisting unions, or societies for purposes not contrary to law shall
on the return of these rights. However, both the not be abridged. In proposing that amendment I ask to
government and employers opposed our proposal, so make of record that I want the following provisions of the
nothing came out of this until this week when we approved Labor Code to be automatically abolished, which read:
a provision which states:
ART. 245. Security guards and other personnel employed
Notwithstanding any provision of this article, the right to for the protection and security of the person, properties
self-organization shall not be denied to government and premises of the employers shall not be eligible for
employees. membership in a labor organization.

We are afraid that without any corresponding provision ART. 246. Managerial employees are not eligible to join,
covering the private sector, the security guards, the assist, and form any labor organization.
supervisory employees or majority employees [sic] will
still be excluded, and that is the purpose of this THE PRESIDING OFFICER (Mr. Bengzon). What does
amendment. the Committee say?

I will be very glad to accept any kind of wording as long FR. BERNAS. The Committee accepts.
as it will amount to absolute recognition of private sector
employees, without exception, to organize. THE PRESIDING OFFICER. (Mr. Bengzon) The
Committee has accepted the amendment, as amended.
THE PRESIDENT. What does the Committee say?
Is there any objection? (Silence) The Chair hears none;
FR. BERNAS. Certainly, the sense is very acceptable, but the amendment, as amended, is approved.[25]
the point raised by Commissioner Rodrigo is well-
taken. Perhaps, we can lengthen this a little bit more to The question is what Commissioner Lerum meant in
read: "The right of the people WHETHER UNEMPLOYED seeking to "automatically abolish" the then Art. 246 of the
OR EMPLOYED BY STATE OR PRIVATE Labor Code. Did he simply want "any kind of wording as
ESTABLISHMENTS." long as it will amount to absolute recognition of private
sector employees, without exception, to organize"?[26] Or,
I want to avoid also the possibility of having this did he instead intend to have his words taken in the
interpreted as applicable only to the employed. context of the cause which moved him to propose the
amendment in the first place, namely, the denial of the
MR. DE LOS REYES. Will the proponent accept an right of supervisory employees to organize, because he
amendment to the amendment, Madam President? said, "We are afraid that without any corresponding
provision covering the private sector, security guards,
supervisory employees or majority [of] employees will still
be excluded, and that is the purpose of this ART. 246. Managerial employees are not eligible to join,
amendment"?[27] assist, and form any labor organization.[28]28

Implications of the Lerum Proposal

It would seem that Commissioner Lerum simply
meant to restore the right of supervisory employees to
organize. For even though he spoke of the need to In sum, Lerum's proposal to amend Art. III, 8 of the
"abolish" Art. 246 of the Labor Code which, as already draft Constitution by including labor unions in the
stated, prohibited "managerial employees" in general guarantee of organizational right should be taken in the
from forming unions, the fact was that in explaining his context of statements that his aim was the removal of the
proposal, he repeatedly referred to "supervisory statutory ban against security guards and supervisory
employees" whose right under the Industrial Peace Act to employees joining labor organizations. The approval by
organize had been taken away by Art. 246. It is the Constitutional Commission of his proposal can only
noteworthy that Commissioner Lerum never referred to mean, therefore, that the Commission intended the
the then definition of "managerial employees" in Art. absolute right to organize of government workers,
212(m) of the Labor Code which put together, under the supervisory employees, and security guards to be
broad phrase "managerial employees," top and middle constitutionally guaranteed. By implication, no similar
managers and supervisors. Instead, his repeated use of absolute constitutional right to organize for labor purposes
the term "supervisory employees," when such term then should be deemed to have been granted to top-level and
was no longer in the statute books, suggests a frame of middle managers. As to them the right of self-organization
mind that remained grounded in the language of the may be regulated and even abridged conformably to Art.
Industrial Peace Act. III, 8.

Constitutionality of Art. 245

Nor did Lerum ever refer to the dictum in Caltex
recognizing the right of all managerial employees to
organize, despite the fact that the Industrial Peace Act did Finally, the question is whether the present ban
not expressly provide for the right of top and middle against managerial employees, as embodied in Art.
managers to organize. If Lerum was aware of the Caltex 245 (which superseded Art. 246) of the Labor Code, is
dictum, then his insistence on the use of the term valid. This provision reads:
"supervisory employees" could only mean that he was
excluding other managerial employees from his ART. 245. Ineligibility of managerial employees to join
proposal. If, on the other hand, he was not aware of the any labor organization; right of supervisory employees. -
Caltex statement sustaining the right to organize to top Managerial employees are not eligible to join, assist or
and middle managers, then the more should his repeated form any labor organization. Supervisory employees shall
use of the term "supervisory employees" be taken at face not be eligible for membership in a labor organization of
value, as it had been defined in the then Industrial Peace the rank-and-file employees but may join, assist or form
Act. separate labor organizations of their own.[29]29

At all events, that the rest of the Commissioners This provision is the result of the amendment of the
understood his proposal to refer solely to supervisors and Labor Code in 1989 by R.A. No. 6715, otherwise known
not to other managerial employees is clear from the as the Herrera-Veloso Law. Unlike the Industrial Peace
following account of Commissioner Joaquin G. Bernas, Act or the provisions of the Labor Code which it
who writes: superseded, R.A. No. 6715 provides separate definitions
of the terms "managerial" and "supervisory employees,"
In presenting the modification on the 1935 and 1973 texts, as follows:
Commissioner Eulogio R. Lerum explained that the
modification included three categories of workers: (1) ART. 212. Definitions. . . .
government employees, (2) supervisory employees, and
(3) security guards. Lerum made of record the explicit (m) "managerial employee" is one who is vested with
intent to repeal provisions of P.D. 442, the Labor Code. powers or prerogatives to lay down and execute
The provisions referred to were: management policies and/or to hire transfer, suspend, lay
off, recall, discharge, assign or discipline
ART. 245. Security guards and other personnel employed employees. Supervisory employees are those who, in the
for the protection and security of the person, properties interest of the employer, effectively recommend such
and premises of the employers shall not be eligible for managerial actions if the exercise of such authority is not
membership in a labor organization. merely routinary or clerical in nature but requires the use
of independent judgment. All employees not falling within the same reason for denying them the right to organize
any of the above definitions are considered rank-and-file justifies even more the ban on managerial employees
employees for purposes of this Book. from forming unions. After all, those who qualify as top or
middle managers are executives who receive from their
Although the definition of "supervisory employees" employers information that not only is confidential but also
seems to have been unduly restricted to the last phrase is not generally available to the public, or to their
of the definition in the Industrial Peace Act, the legal competitors, or to other employees. It is hardly necessary
significance given to the phrase "effectively recommends" to point out that to say that the first sentence of Art. 245 is
remains the same. In fact, the distinction between top and unconstitutional would be to contradict the decision in that
middle managers, who set management policy, and front- case.
line supervisors, who are merely responsible for ensuring
that such policies are carried out by the rank and file, is WHEREFORE, the petition is DISMISSED.
articulated in the present definition.[30]30 When read in
relation to this definition in Art. 212(m), it will be seen that
Art. 245 faithfully carries out the intent of the
Constitutional Commission in framing Art. III, 8 of the
fundamental law.

Nor is the guarantee of organizational right in Art. III,

8 infringed by a ban against managerial employees
forming a union. The right guaranteed in Art. III, 8 is
subject to the condition that its exercise should be for
purposes "not contrary to law." In the case of Art. 245,
there is a rational basis for prohibiting managerial
employees from forming or joining labor organizations. As
Justice Davide, Jr., himself a constitutional commissioner,
said in his ponencia in Philips Industrial Development,
Inc. v. NLRC:[31]31

In the first place, all these employees, with the exception

of the service engineers and the sales force personnel,
are confidential employees. Their classification as such is
not seriously disputed by PEO-FFW; the five (5) previous
CBAs between PIDI and PEO-FFW explicitly considered
them as confidential employees. By the very nature of
their functions, they assist and act in a confidential
capacity to, or have access to confidential matters of,
persons who exercise managerial functions in the field of
labor relations. As such, the rationale behind the
ineligibility of managerial employees to form, assist or
joint a labor union equally applies to them.

In Bulletin Publishing Co., Inc. v. Hon. Augusto Sanchez,

this Court elaborated on this rationale, thus:

". . . The rationale for this inhibition has been stated to be,
because if these managerial employees would belong to
or be affiliated with a Union, the latter might not be
assured of their loyalty to the Union in view of evident
conflict of interests. The Union can also become
company-dominated with the presence of managerial
employees in Union membership."[32]

To be sure, the Court in Philips Industrial was dealing

with the right of confidential employees to organize. But
[G.R. No. 141717. April 14, 2004] 2.8. Velayo recommended to the petitioner that the
respondents employment be terminated due to habitual
21. *PHILIPS SEMICONDUCTORS (PHILS.), absenteeism,[11] in accordance with the Company Rules
INC., petitioner, vs. ELOISA and Regulations.[12] Thus, the respondents contract of
FADRIQUELA, respondent. employment was no longer renewed.

Before us is a petition for review of the Decision[1] of the The Complaint of the Respondent
Court of Appeals (CA) in CA-G.R. SP No. 52149 and its
Resolution dated January 26, 2000 denying the motion The respondent filed a complaint before the National
for reconsideration therefrom. Capital Region Arbitration Branch of the National Labor
Relations Commission (NLRC) for illegal dismissal
The Case for the Petitioner against the petitioner, docketed as NLRC Case No. NCR-
07-04263-93. She alleged, inter alia, that she was illegally
The petitioner Philips Semiconductors (Phils.), Inc. is dismissed, as there was no valid cause for the termination
a domestic corporation engaged in the production and of her employment. She was not notified of any infractions
assembly of semiconductors such as power devices, RF she allegedly committed; neither was she accorded a
modules, CATV modules, RF and metal transistors and chance to be heard. According to the respondent, the
glass diods. It caters to domestic and foreign corporations petitioner did not conduct any formal investigation before
that manufacture computers, telecommunications her employment was terminated. Furthermore,
equipment and cars. considering that she had rendered more than six months
of service to the petitioner, she was already a regular
Aside from contractual employees, the petitioner employee and could not be terminated without any
employed 1,029 regular workers. The employees were justifiable cause. Moreover, her absences were covered
subjected to periodic performance appraisal based on by the proper authorizations.[13]
output, quality, attendance and work attitude.[2] One was
required to obtain a performance rating of at least 3.0 for On the other hand, the petitioner contended that the
the period covered by the performance appraisal to respondent had not been dismissed, but that her contract
maintain good standing as an employee. of employment for the period of April 4, 1993 to June 4,
1993 merely expired and was no longer renewed because
On May 8, 1992, respondent Eloisa Fadriquela of her low performance rating. Hence, there was no need
executed a Contract of Employment with the petitioner in for a notice or investigation. Furthermore, the respondent
which she was hired as a production operator with a daily had already accumulated five unauthorized absences
salary of P118. Her initial contract was for a period of which led to the deterioration of her performance, and
three months up to August 8, 1992,[3] but was extended ultimately caused the non-renewal of her contract.[14]
for two months when she garnered a performance rating
of 3.15.[4] Her contract was again renewed for two months The Ruling of the Labor Arbiter and the NLRC
or up to December 16, 1992,[5] when she received a
performance rating of 3.8.[6] After the expiration of her On June 26, 1997, the Labor Arbiter rendered a
third contract, it was extended anew, for three decision dismissing the complaint for lack of merit, thus:
months,[7]that is, from January 4, 1993 to April 4, 1993.
After garnering a performance rating of 3.4,[8]the is hereby dismissed for lack of merit. The respondent is,
respondents contract was extended for another three however, ordered to extend to the complainant a send off
months, that is, from April 5, 1993 to June 4, 1993.[9] She, award or financial assistance in the amount equivalent to
however, incurred five absences in the month of April, one-month salary on ground of equity.[15]
three absences in the month of May and four absences in
the month of June.[10] Line supervisor Shirley F. Velayo The Labor Arbiter declared that the respondent, who
asked the respondent why she incurred the said had rendered less than seventeen months of service to
absences, but the latter failed to explain her side. The the petitioner, cannot be said to have acquired regular
respondent was warned that if she offered no valid status. The petitioner and the Philips Semiconductor
justification for her absences, Velayo would have no other Phils., Inc., Workers Union had agreed in their Collective
recourse but to recommend the non-renewal of her Bargaining Agreement (CBA) that a contractual employee
contract. The respondent still failed to respond, as a would acquire a regular employment status only upon
consequence of which her performance rating declined to completion of seventeen months of service. This was also
reflected in the minutes of the meeting of April 6,
1993 between the petitioner and the union.Further, a Labor Arbiter and granting the respondents petition. The
contractual employee was required to receive a CA ratiocinated that the bases upon which the NLRC and
performance rating of at least 3.0, based on output, quality the Labor Arbiter founded their decisions were
of work, attendance and work attitude, to qualify for inappropriate because the CBA and the Minutes of the
contract renewal.In the respondents case, she had Meeting between the union and the management showed
worked for the petitioner for only twelve months. In the last that the CBA did not cover contractual employees like the
extension of her employment contract, she garnered only respondent. Thus, the seventeenth-month probationary
2.8 points, below the 3.0 required average, which period under the CBA did not apply to her. The CA ruled
disqualified her for contract renewal, and regularization of that under Article 280 of the Labor Code, regardless of the
employment. The Labor Arbiter also ruled that the written and oral agreements between an employee and
respondent cannot justifiably complain that she was her employer, an employee shall be deemed to have
deprived of her right to notice and hearing because her attained regular status when engaged to perform activities
line supervisor had asked her to explain her unauthorized which are necessary and desirable in the usual trade or
absences. Accordingly, these dialogues between the business of the employer. Even casual employees shall
respondent and her line supervisor can be deemed as be deemed regular employees if they had rendered at
substantial compliance of the required notice and least one year of service to the employer, whether broken
investigation. or continuous.

The Labor Arbiter declared, however, that the The CA noted that the respondent had been
respondent had rendered satisfactory service for a period performing activities that were usually necessary and
of one year, and since her infraction did not involve moral desirable to the petitioners business, and that she had
turpitude, she was entitled to one months salary. rendered thirteen months of service. It concluded that the
respondent had attained regular status and cannot, thus,
Aggrieved, the respondent appealed to the NLRC, be dismissed except for just cause and only after due
which, on September 16, 1998, issued a Resolution hearing. The appellate court further declared that the task
affirming the decision of the Labor Arbiter and dismissing of the respondent was hardly specific or seasonal. The
the appeal. The NLRC explained that the respondent was periods fixed in the contracts of employment executed by
a contractual employee whose period of employment was the respondent were designed by the petitioner to
fixed in the successive contracts of employment she had preclude the respondent from acquiring regular
executed with the petitioner. Thus, upon the expiration of employment status. The strict application of the contract
her contract, the respondents employment automatically of employment against the respondent placed her at the
ceased. The respondents employment was not mercy of the petitioner, whose employees crafted the said
terminated; neither was she dismissed. contract.

The NLRC further ruled that as a contractual According to the appellate court, the petitioners
employee, the respondent was bound by the stipulations contention that the respondents employment on as the
in her contract of employment which, among others, was need arises basis was illogical. If such stance were
to maintain a performance rating of at least 3.0 as a sustained, the court ruled, then no employee would attain
condition for her continued employment. Since she failed regular status even if employed by the petitioner for
to meet the said requirement, the petitioner was justified seventeen months or more. The CA held that the
in not renewing her contract. respondents sporadic absences upon which her dismissal
was premised did not constitute valid justifiable grounds
The respondent filed a motion for reconsideration of for the termination of her employment. The tribunal also
the resolution, but on January 12, 1999, the NLRC ruled that a less punitive penalty would suffice for
resolved to deny the same. missteps such as absenteeism, especially considering
that the respondent had performed satisfactorily for the
The Case Before the Court of Appeals past twelve months.

Dissatisfied, the respondent filed a petition The CA further held that, contrary to the ruling of the
for certiorari under Rule 65 before the Court of Appeals, Labor Arbiter, the dialogues between the respondent and
docketed as CA-G.R. SP No. 52149, for the reversal of the line supervisor cannot be considered substantial
the resolutions of the NLRC. compliance with the requirement of notice and
investigation. Thus, the respondent was not only
On October 11, 1999, the appellate court rendered a
decision reversing the decisions of the NLRC and the
dismissed without justifiable cause; she was also rule, that the parties to an employment contract may
deprived of her right to due process. agree otherwise, particularly when the same is
established by company policy or required by the nature
The petitioner filed a motion for reconsideration of of work to be performed. The employer has the
the decision but on January 26, 2000, the CA issued a prerogative to set reasonable standards to qualify for
resolution denying the same. regular employment, as well as to set a reasonable period
within which to determine such fitness for the job.
The Case Before the Court
According to the petitioner, the conclusion of the CA
The petitioner filed the instant petition and raised the that the policy adopted by it was intended to circumvent
following issues for the courts resolution: (a) whether or the respondents security of tenure is without basis. The
not the respondent was still a contractual employee of the petitioner merely exercised a right granted to it by law and,
petitioner as of June 4, 1993; (b) whether or not the in the absence of any evidence of a wrongful act or
petitioner dismissed the respondent from her omission, no wrongful intent may be attributed to
employment; (c) if so, whether or not she was accorded it. Neither may the petitioner be penalized for agreeing to
the requisite notice and investigation prior to her consider workers who have rendered more than
dismissal; and, (d) whether or not the respondent is seventeen months of service as regular employees,
entitled to reinstatement and full payment of backwages notwithstanding the fact that by the nature of its business,
as well as attorneys fees. the petitioner may enter into specific limited contracts only
for the duration of its clients peak demands. After all, the
On the first issue, the petitioner contends that the petitioner asserts, the union recognized the need to
policy of hiring workers for a specific and limited period on establish such training and probationary period for at least
an as needed basis, as adopted by the petitioner, is not six months for a worker to qualify as a regular
new; neither is it prohibited. In fact, according to the employee. Thus, under their CBA, the petitioner and the
petitioner, the hiring of workers for a specific and limited union agreed that contractual workers be hired as
period is a valid exercise of management prerogative. It of December 31, 1992.
does not necessarily follow that where the duties of the
employee consist of activities usually necessary or The petitioner stresses that the operation of its
desirable in the usual course of business of the employer, business as a semiconductor company requires the use
the parties are forbidden from agreeing on a period of time of highly technical equipment which, in turn, calls for
for the performance of such activities. Hence, there is certain special skills for their use. Consequently, the
nothing essentially contradictory between a definite petitioner, in the exercise of its best technical and
period of employment and the nature of the employees business judgment, has set a standard of performance for
duties. workers as well as the level of skill, efficiency,
competence and production which the workers must pass
According to the petitioner, it had to resort to hiring to qualify as a regular employee. In rating the
contractual employees for definite periods because it is a performance of the worker, the following appraisal factors
semiconductor company and its business is cyclical in are considered by the respondent company as essential:
nature. Its operation, production rate and manpower (1) output (40%), (2) quality (30%), (3) attendance (15%),
requirements are dictated by the volume of business from and (4) work attitude (15%). The rate of 3.0 was set as the
its clients and the availability of the basic materials. It passing grade. As testified to by the petitioners Head of
produces the products upon order of its clients and does Personnel Services, Ms. Cecilia C. Mallari:
not allow such products to be stockpiled. Peak loads due
to cyclical demands increase the need for additional A workers efficiency and productivity can be established
manpower for short duration. Thus, the petitioner often only after he has rendered service using Philips
experiences short-term surges in labor requirements. The equipment over a period of time. A worker has to undergo
hiring of workers for a definite period to supplement the training, during which time the worker is taught the
regular work force during the unpredictable peak loads manufacturing process and quality control. After
was the most efficient, just and practical solution to the instructions, the worker is subjected to written and oral
petitioners operating needs. examinations to determine his fitness to continue with the
training. The orientation and initial training lasts from
The petitioner contends that the CA misapplied the three to four weeks before the worker is assigned to a
law when it insisted that the respondent should be specific work station. Thereafter, the workers efficiency
deemed a regular employee for having been employed for and skill are monitored.
more than one year.The CA ignored the exception to this
Among the factors considered (before a contractual of private respondent, the provisions of their contract of
employee becomes a regular employee) are output, employment notwithstanding. The private respondents
quality, attendance, and work attitude, which includes prepared employment contracts placed petitioner at the
cooperation, discipline, housekeeping and inter-office mercy of those who crafted the said contract.[17]
employee relationship. These factors determine the
workers efficiency and productivity.[16] We agree with the appellate court.

The Courts Ruling Article 280 of the Labor Code of the Philippines was
emplaced in our statute books to prevent the
In ruling for the respondent, the appellate court circumvention by unscrupulous employers of the
applied Article 280 of the Labor Code of the Philippines, employees right to be secure in his tenure by
as amended, which reads: indiscriminately and completely ruling out all written and
oral agreements inconsistent with the concept of regular
Art. 280. Regular and Casual Employment. The employment defined therein. The language of the law
provisions of written agreement to the contrary manifests the intent to protect the tenurial interest of the
notwithstanding and regardless of the oral argument of worker who may be denied the rights and benefits due a
the parties, an employment shall be deemed to be regular regular employee because of lopsided agreements with
where the employee has been engaged to perform the economically powerful employer who can maneuver
activities which are usually necessary or desirable in the to keep an employee on a casual or temporary status for
usual business or trade of the employer, except where the as long as it is convenient to it.[18] In tandem with Article
employment has been fixed for a specific project or 281 of the Labor Code, Article 280 was designed to put
undertaking the completion or termination of which has an end to the pernicious practice of making permanent
been determined at the time of the engagement of the casuals of our lowly employees by the simple expedient
employee or where the work or services to be performed of extending to them temporary or probationary
is seasonal in nature and the employment is for the appointments, ad infinitum.[19]
duration of the season.
The two kinds of regular employees under the law
An employment shall be deemed to be casual if it is not are (1) those engaged to perform activities which are
covered by the preceding paragraph; Provided, That, any necessary or desirable in the usual business or trade of
employee who has rendered at least one year of service, the employer; and (2) those casual employees who have
whether such service is continuous or broken, shall be rendered at least one year of service, whether continuous
considered a regular employee with respect to the activity or broken, with respect to the activities in which they are
in which he is employed and his employment shall employed.[20] The primary standard to determine a regular
continue while such activity exists. employment is the reasonable connection between the
particular activity performed by the employee in relation to
The appellate court held that, in light of the factual the business or trade of the employer. The test is whether
milieu, the respondent was already a regular employee the former is usually necessary or desirable in the usual
on June 4, 1993. Thus: business or trade of the employer.[21] If the employee has
been performing the job for at least one year, even if the
It is apparent from the factual circumstances of this case performance is not continuous or merely intermittent, the
that the period of employment has been imposed to law deems the repeated and continuing need for its
preclude acquisition of tenurial security by petitioner. It performance as sufficient evidence of the necessity, if not
bears stressing that petitioners original contract of indispensability of that activity to the business of the
employment, dated May 8, 1992 to August 8, 1992, had employer. Hence, the employment is also considered
been extended through several contracts one from regular, but only with respect to such activity and while
October 13, 1992 to December 16, 1992, another from such activity exists.[22] The law does not provide the
January 7, 1993 to April 4, 1993, and, lastly, from April 5, qualification that the employee must first be issued a
1993 to June 4, 1993. regular appointment or must be declared as such before
he can acquire a regular employee status.[23]
The fact that the petitioner had rendered more than one
year of service at the time of his (sic) dismissal only shows In this case, the respondent was employed by the
that she is performing an activity which is usually petitioner on May 8, 1992 as production operator. She
necessary and desirable in private respondents business was assigned to wirebuilding at the transistor
or trade. The work of petitioner is hardly specific or division. There is no dispute that the work of the
seasonal. The petitioner is, therefore, a regular employee
respondent was necessary or desirable in the business or regular employees by simply hiring them on a temporary
trade of the petitioner.[24] She remained under the employ or casual basis, thereby violating the employees security
of the petitioner without any interruption since May 8, of tenure in their jobs.[27]
1992 to June 4, 1993 or for one (1) year and twenty-eight
(28) days. The original contract of employment had been Under Section 3, Article XVI of the Constitution, it is
extended or renewed for four times, to the same position, the policy of the State to assure the workers of security of
with the same chores. Such a continuing need for the tenure and free them from the bondage of uncertainty of
services of the respondent is sufficient evidence of the tenure woven by some employers into their contracts of
necessity and indispensability of her services to the employment. The guarantee is an act of social
petitioners business.[25] By operation of law, then, the justice. When a person has no property, his job may
respondent had attained the regular status of her possibly be his only possession or means of livelihood
employment with the petitioner, and is thus entitled to and those of his dependents. When a person loses his
security of tenure as provided for in Article 279 of the job, his dependents suffer as well. The worker should
Labor Code which reads: therefor be protected and insulated against any arbitrary
deprivation of his job.[28]
Art. 279. Security of Tenure. In cases of regular
employment, the employer shall not terminate the We reject the petitioners general and catch-all
services of an employee except for a just cause or when submission that its policy for a specific and limited period
authorized by this Title. An employee who is unjustly on an as the need arises basis is not prohibited by law or
dismissed from work shall be entitled to reinstatement abhorred by the Constitution; and that there is nothing
without loss of seniority rights and other privileges and to essentially contradictory between a definite period of
his full backwages, inclusive of allowances, and to his employment and the nature of the employees duties.
other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to The petitioners reliance on our ruling in Brent
the time of his actual reinstatement. School, Inc. v. Zamora[29] and reaffirmed in subsequent
rulings is misplaced, precisely in light of the factual milieu
The respondents re-employment under contracts of this case. In the Brent School, Inc. case, we ruled that
ranging from two to three months over a period of one the Labor Code does not outlaw employment contracts on
year and twenty-eight days, with an express statement fixed terms or for specific period. We also ruled that the
that she may be reassigned at the discretion of the decisive determinant in term employment should not be
petitioner and that her employment may be terminated at the activity that the employee is called upon to perform
any time upon notice, was but a catch-all excuse to but the day certain agreed upon by the parties for the
prevent her regularization. Such statement is contrary to commencement and termination of their employment
the letter and spirit of Articles 279 and 280 of the Labor relationship. However, we also emphasized in the same
Code. We reiterate our ruling in Romares v. NLRC:[26] case that where from the circumstances it is apparent that
the periods have been imposed to preclude acquisition of
Succinctly put, in rehiring petitioner, employment tenurial security by the employee, they should be struck
contracts ranging from two (2) to three (3) months with an down or disregarded as contrary to public policy and
express statement that his temporary job/service as morals. In the Romares v. NLRC case, we cited the
mason shall be terminated at the end of the said period or criteria under which term employment cannot be said to
upon completion of the project was obtrusively a be in circumvention of the law on security of tenure,
convenient subterfuge utilized to prevent his namely:
regularization. It was a clear circumvention of the
employees right to security of tenure and to other 1) The fixed period of employment was knowingly and
benefits. It, likewise, evidenced bad faith on the part of voluntarily agreed upon by the parties without any force,
PILMICO. duress, or improper pressure being brought to bear upon
the employee and absent any other circumstances
The limited period specified in petitioners employment vitiating his consent; or
contract having been imposed precisely to circumvent the
constitutional guarantee on security of tenure should, 2) It satisfactorily appears that the employer and the
therefore, be struck down or disregarded as contrary to employee dealt with each other on more or less equal
public policy or morals. To uphold the contractual terms with no moral dominance exercised by the former
arrangement between PILMICO and petitioner would, in or the latter.[30]
effect, permit the former to avoid hiring permanent or
None of these criteria has been met in this UNION RECOGNITION
case. Indeed, in Pure Foods Corporation v. NLRC,[31] we
sustained the private respondents averments therein, Section 1. Employees Covered: The Company hereby
thus: recognizes the Union as the exclusive bargaining
representative of the following regular employees in the
[I]t could not be supposed that private respondents and all Factory at Las Pias, Metro Manila: Janitors, Material
other so-called casual workers of [the petitioner] Handlers, Store helpers, Packers, Operators, QA
KNOWINGLY and VOLUNTARILY agreed to the 5-month Inspectors, Technicians, Storekeepers, Production
employment contract. Cannery workers are never on Controllers, Inventory Controllers, Draftsmen, Machinists,
equal terms with their employers. Almost always, they Sr. Technician, Sr. QA Inspectors, Controllers, Sr.
agree to any terms of an employment contract just to get Draftsmen, and Servicemen, except probationary and
employed considering that it is difficult to find work given Casual/Contractual Employees, all of whom do not belong
their ordinary qualifications. Their freedom to contract is to the bargaining unit.
empty and hollow because theirs is the freedom to starve
if they refuse to work as casual or contractual A copy of the CBA, dated May 16, 1993, was attached as
workers. Indeed, to the unemployed, security of tenure Annex 1 to Philips Position Paper, dated August 30, 1993.
has no value. It could not then be said that petitioner and
private respondents dealt with each other on more or less 6. Q: May a contractual employee become a regular
equal terms with no moral dominance whatever being employee of the Philips?
exercised by the former over the latter.[32]
A: Yes. Under the agreement, dated April 6, 1993,
We reject the petitioners submission that it resorted between the Union and Philips, contractual workers hired
to hiring employees for fixed terms to augment or before 12 December 1993, who have rendered seventeen
supplement its regular employment for the duration of months of satisfactory service, whether continuous or
peak loads during short-term surges to respond to cyclical broken, shall be given regular status. The service
demands; hence, it may hire and retire workers on fixed rendered by a contractual employee may be broken
terms, ad infinitum, depending upon the needs of its depending on production needs of Philips as explained
customers, domestic and international.Under the earlier.
petitioners submission, any worker hired by it for fixed
terms of months or years can never attain regular A copy of the Minutes of the Meeting (Minutes, for brevity),
employment status. However, the petitioner, through Ms. dated April 6, 1993, evidencing the agreement between
Cecilia C. Mallari, the Head of Personnel Services of the Philips and the Union has been submitted as Annex 2 of
petitioner, deposed that as agreed upon by the Philips Philips Position Paper.[33]
Semiconductor (Phils.), Inc. Workers Union and the
petitioner in their CBA, contractual employees hired In fine, under the CBA, the regularization of a
before December 12, 1993 shall acquire regular contractual or even a casual employee is based solely on
employment status after seventeen (17) months of a satisfactory service of the employee/worker for
satisfactory service, continuous or broken: seventeen (17) months and not on an as needed basis on
the fluctuation of the customers demands for its
5. Q: What was the response of Philips regular employees products. The illogic of the petitioners incongruent
to your hiring of contractual workers in the event of peak submissions was exposed by the appellate court in its
loads? assailed decision, thus:

A: Philips regular rank-and-file employees, through their The contention of private respondent that petitioner was
exclusive bargaining agent, the Philips Semiconductors employed on as needed basis because its operations and
(Phils.), Inc. Workers Union (Union), duly recognized the manpower requirements are dictated by the volume of
right of Philips, in its best business judgment, to hire business from its client and the availability of the basic
contractual workers, and excluded these workers from the materials, such that when the need ceases, private
bargaining unit of regular rank-and-file employees. respondent, at its option, may terminate the contract, is
certainly untenable. If such is the case, then we see no
Thus, it is provided under the Collective Bargaining reason for private respondent to allow the contractual
Agreement, dated May 16, 1993, between Philips and the employees to attain their regular status after they
Union that: rendered service for seventeen months. Indubitably, even
after the lapse of seventeen months, the operation of
ARTICLE I private respondent would still be dependent on the
volume of business from its client and the availability of on regularization. The law explicitly states that an
basic materials. The point is, the operation of every employee who had rendered at least one year of service,
business establishment naturally depends on the law of whether such service is continuous or broken, shall be
supply and demand. It cannot be invoked as a reason why considered a regular employee. The period set by law is
a person performing an activity, which is usually desirable one year. The seventeen months provided by the Minutes
and necessary in the usual business, should be placed in of Meeting is obviously much
a wobbly status. In reiteration, the relation between longer.The principle is well settled that the law forms part
capital and labor is not merely contractual. It is so of and is read into every contract without the need for th
impressed with public interest that labor contracts must e parties expressly making reference to it. [35]
yield to the common good.
On the second and third issues, we agree with the
While at the start, petitioner was just a mere contractual appellate court that the respondent was dismissed by the
employee, she became a regular employee as soon as petitioner without the requisite notice and without any
she had completed one year of service. It is not difficult to formal investigation.Given the factual milieu in this case,
see that to uphold the contractual arrangement between the respondents dismissal from employment for incurring
private respondent and petitioner would, in effect, be to five (5) absences in April 1993, three (3) absences in May
permit employers to avoid the necessity of hiring regular 1993 and four (4) absences in June 1993, even if true, is
or permanent employees. By hiring employees too harsh a penalty. We do agree that an employee may
indefinitely on a temporary or casual status, employers be dismissed for violation of reasonable regulations/rules
deny their right to security of tenure. This is not promulgated by the employer. However, we emphasized
sanctioned by law. [34] in PLDT v. NLRC[36] that:

Even then, the petitioners reliance on the CBA is Dismissal is the ultimate penalty that can be meted to an
misplaced. For, as ratiocinated by the appellate court in employee. Where a penalty less punitive would suffice,
its assailed decision: whatever missteps may have been committed by the
worker ought not to be visited with a consequence so
Obviously, it is the express mandate of the CBA not to severe such as dismissal from employment. For, the
include contractual employees within its coverage. Such Constitution guarantees the right of workers to security of
being the case, we see no reason why an agreement tenure. The misery and pain attendant to the loss of jobs
between the representative union and private respondent, then could be avoided if there be acceptance of the view
delaying the regularization of contractual employees, that under certain circumstances of the case the workers
should bind petitioner as well as other contractual should not be deprived of their means of livelihood.[37]
employees. Indeed, nothing could be more unjust than to
exclude contractual employees from the benefits of the Neither can the conferences purportedly held
CBA on the premise that the same contains an between the respondent and the line supervisor be
exclusionary clause while at the same time invoke a deemed substantial compliance with the requirements of
collateral agreement entered into between the parties to notice and investigation. We are in full accord with the
the CBA to prevent a contractual employee from attaining following ratiocinations of the appellate court in its
the status of a regular employee. assailed decision:

This cannot be allowed. As to the alleged absences, we are convinced that the
same do not constitute sufficient ground for
The CBA, during its lifetime, constitutes the law between dismissal. Dismissal is just too stern a penalty. No less
the parties. Such being the rule, the aforementioned CB than the Supreme Court mandates that where a penalty
A should be binding only upon private respondent and its less punitive would suffice, whatever missteps may be
regular employees who were duly represented by the committed by labor ought not to be visited with a
bargaining union. The agreement embodied in the consequence so severe. (Meracap v. International
Minutes of Meeting between the representative union and Ceramics Manufacturing Co., Inc., 92 SCRA 412
private respondent, providing that contractual employees [1979]). Besides, the fact that petitioner was repeatedly
shall become regular employees only after seventeen given a contract shows that she was an efficient worker
months of employment, cannot bind petitioner. Such a and, therefore, should be retained despite occasional
provision runs contrary to law not only because lapses in attendance. Perfection cannot, after all, be
contractual employees do not form part of the collective demanded. (Azucena, The Labor Code, Vol. II, 1996 ed.,
bargaining unit which entered into the CBA with private [p.] 680)
respondent but also because of the Labor Code provision
Finally, we are convinced that it is erroneous for the is AFFIRMED. The petition at bar is DENIED. Costs
Commission to uphold the following findings of the Labor against the petitioner.
Arbiter, thus:
Those dialogues of the complainant with the Line
Supervisor, substantially, stand for the notice and
investigation required to comply with due process. The
complainant did not avail of the opportunity to explain her
side to justify her shortcomings, especially, on
absences. She cannot now complain about deprivation of
due process.

Of course, the power to dismiss is a formal prerogative of

the employer. However, this is not without limitations. The
employer is bound to exercise caution in terminating the
services of his employees.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. (Liberty Cotton Mills
Workers Union v. Liberty Cotton Mills, Inc., 90 SCRA 391

To rule that the mere dialogue between private

respondent and petitioner sufficiently complied with the
demands of due process is to disregard the strict mandate
of the law. A conference is not a substitute for the actual
observance of notice and hearing. (Pepsi Cola Bottling
Co., Inc. v. National Labor Relations Commission, 210
SCRA 277 [1992]) The failure of private respondent to
give petitioner the benefit of a hearing before she was
dismissed constitutes an infringement on her
constitutional right to due process of law and not to be
denied the equal protection of the laws. The right of a
person to his labor is deemed to be his property within the
meaning of the constitutional guarantee. This is his
means of livelihood. He cannot be deprived of his labor or
work without due process of law. (Batangas Laguna
Tayabas Bus Co. v. Court of Appeals, 71 SCRA 470

All told, the court concludes that petitioners dismissal is

illegal because, first, she was dismissed in the absence of
a just cause, and second, she was not afforded
procedural due process. In pursuance of Article 279 of the
Labor Code, we deem it proper to order the reinstatement
of petitioner to her former job and the payment of her full
backwages. Also, having been compelled to come to
court to protect her rights, we grant petitioners prayer for
attorneys fees.[38]


decision of the appellate court in CA-G.R. SP No. 52149
[G.R. No. 108855. February 28, 1996] enforcement agencies to ensure compliance with
this provision as well as with such orders as he may
22. *METROLAB INDUSTRIES, INC. issue to enforce the same. . . . That Metrolabs
vs. HONORABLE MA. NIEVES ROLDAN- business is of national interest is not disputed.
CONFESOR Metrolab is one of the leading manufacturers and
suppliers of medical and pharmaceutical products to
2. LABOR AND SOCIAL LEGISLATION; the country. Metrolabs management prerogatives,
TERMINATION OF EMPLOYMENT; EXERCISE OF therefore, are not being unjustly curtailed but duly
MANAGEMENT PREROGATIVES; NOT balanced with and tempered by the limitations set by
ABSOLUTE; SUBJECT TO EXCEPTIONS law, taking into account its special character and the
IMPOSED BY LAW. - This Court recognizes the particular circumstances in the case at bench.
exercise of management prerogatives and often
declines to interfere with the legitimate business 4. ID.; LABOR RELATIONS; INELIGIBILITY OF
decisions of the employer. However, this privilege is MANAGERIAL EMPLOYEES TO JOIN, FORM
not absolute but subject to limitations imposed by AND ASSIST ANY LABOR ORGANIZATION;
issued this reminder: ... the exercise of management EMPLOYEES. - Although Article 245 of the Labor
prerogatives was never considered Code limits the ineligibility to join, form and assist any
boundless. Thus, in Cruz vs. Medina (177 labor organization to managerial employees,
SCRA 565 [1989]), it was held that managements jurisprudence has extended this prohibition to
prerogatives must be without abuse of discretion confidential employees or those who by reason of
...All this points to the conclusion that the exercise of their positions or nature of work are required to assist
managerial prerogatives is not unlimited. It is or act in a fiduciary manner to managerial employees
circumscribed by limi(ations found in law, a collective and hence, are likewise privy to sensitive and highly
bargaining agreement, or the general principles of confidential records.
fair play and justice (University of Sto. Tomas v.
- The case at bench constitutes one of the DISCRIMINATION. - Confidential employees cannot
exceptions. The Secretary of Labor is expressly be classified as rank and file. As previously
given the power under the Labor Code to assume discussed, the nature of employment of confidential
jurisdiction and resolve labor disputes involving employees is quite distinct from the rank and file,
industries indispensable to national interest. The thus, warranting a separate category. Excluding
disputed injunction is subsumed under this special confidential employees from the rank and file
grant of authority. Art. 263 (g) of the Labor Code bargaining unit, therefore, is not tantamount to
specifically provides that: x x x (g) When, in his discrimination.
opinion, there exists a labor dispute causing or likely
to cause a strike or lockout in an industry
indispensable to the national interest, the Secretary
of Labor and Employment may assume jurisdiction This is a petition for certiorari under Rule 65 of the
over the dispute and decide it or certify the same to Revised Rules of Court seeking the annulment of the
the Commission for compulsory arbitration. Such Resolution and Omnibus Resolution of the Secretary of
assumption or certification shall have the effect of Labor and Employment dated 14 April 1992 and 25
automatically enjoining the intended or impending January 1993, respectively, in OS-AJ-04491-11 (NCMB-
strike or lockout as specified in the assumption or NCR-NS-08-595-9 1; NCMB-NCR-NS-09-678-91) on
certification order. If one has already taken place at grounds that these were issued with grave abuse of
the time of assumption or certification, all striking or discretion and in excess of jurisdiction.
locked out employees shall immediately return to
Private respondent Metro Drug Corporation
work and the employer shall immediately resume
Employees Association-Federation of Free Workers
operations and readmit all workers under the same
(hereinafter referred to as the Union) is a labor
terms and conditions prevailing before the strike or
organization representing the rank and file employees of
lockout. The Secretary of Labor and Employment or
petitioner Metrolab Industries, Inc. (hereinafter referred to
the Commission may seek the assistance of law
as Metrolab/MII) and also of Metro Drug, Inc.
On 31 December 1990, the Collective Bargaining would suffer a yearly gross revenue loss of approximately
Agreement (CBA) between Metrolab and the Union sixty-six (66) million pesos due to the withdrawal of its
expired. The negotiations for a new CBA, however, ended principals in the Toll and Contract Manufacturing
in a deadlock. Department. Metrolab further asserted that with the
automation of the manufacture of its product Eskinol, the
Consequently, on 23 August 1991, the Union filed a number of workers required its production is significantly
notice of strike against Metrolab and Metro Drug Inc. The reduced.[3]
parties failed to settle their dispute despite the conciliation
efforts of the National Conciliation and Mediation Board. Thereafter, on various dates, Metrolab recalled some
of the laid off workers on a temporary basis due to
To contain the escalating dispute, the then Secretary availability of work in the production lines.
of Labor and Employment, Ruben D. Torres, issued an
assumption order dated 20 September 1991, the On 14 April 1992, Acting Labor Secretary Nieves
dispositive portion of which reads, thus: Confesor issued a resolution declaring the layoff of
Metrolabs 94 rank and file workers illegal and ordered
WHEREFORE, PREMISES CONSIDERED, and their reinstatement with full backwages. The dispositive
pursuant to Article 263 (g) of the Labor Code, as portion reads as follows:
amended, this Office hereby assumes jurisdiction over the
entire labor dispute at Metro Drug, Inc. - Metro Drug WHEREFORE, the Unions motion for reconsideration is
Distribution Division and Metrolab Industries Inc. granted in part, and our order of 28 December 1991 is
affirmed subject to the modifications in allowances and in
Accordingly, any strike or lockout is hereby strictly the close shop provision. The layoff of the 94 employees
enjoined. The Companies and the Metro Drug Corp. at MII is hereby declared illegal for the failure of the latter
Employees Association - FFW are likewise directed to to comply with our injunction against committing any act
cease and desist from committing any and all acts that which may exacerbate the dispute and with the 30-day
might exacerbate the situation. notice requirement. Accordingly, MII is hereby ordered to
reinstate the 94 employees, except those who have
Finally, the parties are directed to submit their position already been recalled, to their former positions or
papers and evidence on the aforequoted deadlocked substantially equivalent, positions with full backwages
issues to this office within twenty (20) days from receipt from the date they were illegally laid off on 27 January
hereof. 1992 until actually reinstated without loss of seniority
rights and other benefits. Issues relative to the CBA
SO ORDERED.[1] (Italics ours.) agreed upon by the parties and not embodied in our
earlier order are hereby ordered adopted for incorporation
On 27 December 1991, then Labor Secretary Torres in the CBA. Further, the dispositions and directives
issued an order resolving all the disputed items in the CBA contained in all previous orders and resolutions relative to
and ordered the parties involved to execute a new CBA. the instant dispute, insofar as not inconsistent herein, are
reiterated. Finally, the parties are enjoined to cease and
Thereafter, the Union filed a motion for
desist from committing any act which may tend to
circumvent this resolution.
On 27 January 1992, during the pendency of the
abovementioned motion for reconsideration, Metrolab laid
off 94 of its rank and file employees. On 6 March 1992, Metrolab filed a Partial Motion for
Reconsideration alleging that the layoff did not aggravate
On the same date, the Union filed a motion for a
the dispute since no untoward incident occurred as a
cease and desist order to enjoin Metrolab from
result thereof. It, likewise, filed a motion for clarification
implementing the mass layoff, alleging that such act
regarding the constitution of the bargaining unit covered
violated the prohibition against committing acts that would
by the CBA.
exacerbate the dispute as specifically directed in the
assumption order.[2] On 29 June 1992, after exhaustive negotiations, the
parties entered into a new CBA. The execution, however,
On the other hand, Metrolab contended that the
was without prejudice to the outcome of the issues raised
layoff was temporary and in the exercise of its
in the reconsideration and clarification motions submitted
management prerogative. It maintained that the company
for decision to the Secretary of Labor.[5]
Pending the resolution of the aforestated motions, on Omnibus Resolution dated 14 April 1992 and 25 January
2 October 1992, Metrolab laid off 73 of its employees on 1993, respectively.
grounds of redundancy due to lack of work which the
Union again promptly opposed on 5 October 1992. In its petition, Metrolab assigns the following errors:

On 15 October 1992, Labor Secretary Confesor A

again issued a cease and desist order. Metrolab moved
On 25 January 1993, Labor Secretary Confesor ABUSE OF DISCRETION AND EXCEEDED HER
issued the assailed Omnibus Resolution containing the JURISDICTION IN DECLARING THE TEMPORARY

1. MIIs motion for partial reconsideration of our 14 April B

1992 resolution specifically that portion thereof assailing
our ruling that the layoff of the 94 employees is illegal, is THE PUBLIC RESPONDENT HON. SECRETARY OF
hereby denied. MII is hereby ordered to pay such LABOR AND EMPLOYMENT GRAVELY ABUSED HER
employees their full backwages computed from the time DISCRETION IN INCLUDING EXECUTIVE
of actual layoff to the time of actual recall; SECRETARIES AS PART OF THE BARGAINING UNIT
2. For the parties to incorporate in their respective
collective bargaining agreements the clarifications herein Anent the first issue, we are asked to determine
contained; and whether or not public respondent Labor Secretary
committed grave abuse of discretion and exceeded her
3. MIIs motion for reconsideration with respect to the jurisdiction in declaring the subject layoffs instituted by
consequences of the second wave of layoff affecting 73 Metrolab illegal on grounds that these unilateral actions
employees, to the extent of assailing our ruling that such aggravated the conflict between Metrolab and the Union
layoff tended to exacerbate the dispute, is hereby who were, then, locked in a stalemate in CBA
denied. But inasmuch as the legality of the layoff was not negotiations.
submitted for our resolution and no evidence had been
adduced upon which a categorical finding thereon can be Metrolab argues that the Labor Secretarys order
based, the same is hereby referred to the NLRC for its enjoining the parties from committing any act that might
appropriate action. exacerbate the dispute is overly broad, sweeping and
vague and should not be used to curtail the employers
Finally, all prohibitory injunctions issued as a result of our right to manage his business and ensure its viability.
assumption of jurisdiction over this dispute are hereby
lifted. We cannot give credence to Metrolabs contention.

SO RESOLVED.[7] This Court recognizes the exercise of management

prerogatives and often declines to interfere with the
Labor Secretary Confesor also ruled that executive legitimate business decisions of the employer. However,
secretaries are excluded from the closed-shop provision this privilege is not absolute but subject to limitations
of the CBA, not from the bargaining unit. imposed by law.[9]

On 4 February 1993, the Union filed a motion for In PAL v. NLRC,[10] we issued this reminder:
execution. Metrolab opposed. Hence, the present petition
for certiorari with application for issuance of a Temporary xxx xxx xxx
Restraining Order.
. . .the exercise of management prerogatives was never
On 4 March 1993, we issued a Temporary considered boundless. Thus, in Cruz vs. Medina ( 177
Restraining Order enjoining the Secretary of Labor from SCRA 565 [1989]), it was held that managements
enforcing and implementing the assailed Resolution and prerogatives must be without abuse of discretion....
xxx xxx xxx As aptly declared by public respondent Secretary of
Labor in its assailed resolution:
All this points to the conclusion that the exercise of
managerial prerogatives is not unlimited. It is xxx xxx xxx.
circumscribed by limitations found in law, a collective
bargaining agreement, or the general principles of fair MII is right to the extent that as a rule, we may not interfere
play and justice (University of Sto. Tomas v. NLRC, 190 with the legitimate exercise of management prerogatives
SCRA 758 [1990]). . . . (Italics ours.) such as layoffs. But it may nevertheless be appropriate to
mention here that one of the substantive evils which
xxx xxx xxx. Article 263 (g) of the Labor Code seeks to curb is the
exacerbation of a labor dispute to the further detriment of
The case at bench constitutes one of the the national interest. When a labor dispute has in fact
exceptions. The Secretary of Labor is expressly given the occurred and a general injunction has been issued
power under the Labor Code to assume jurisdiction and restraining the commission of disruptive acts,
resolve labor disputes involving industries indispensable management prerogatives must always be exercised
to national interest. The disputed injunction is subsumed consistently with the statutory objective.[11]
under this special grant of authority. Art. 263 (g) of the
Labor Code specifically provides that: xxx xxx xxx.

xxx xxx xxx Metrolab insists that the subject layoffs did not
exacerbate their dispute with the Union since no untoward
(g) When, in his opinion, there exists a labor dispute incident occurred after the layoffs were
causing or likely to cause a strike or lockout in an industry implemented. There were no work disruptions or
indispensable to the national interest, the Secretary of stoppages and no mass actions were threatened or
Labor and Employment may assume jurisdiction over the undertaken. Instead, petitioner asserts, the affected
dispute and decide it or certify the same to the employees calmly accepted their fate as this was a matter
Commission for compulsory arbitration. Such assumption which they had been previously advised would be
or certification shall have the effect of automatically inevitable.[12]
enjoining the intended or impending strike or lockout as
specified in the assumption or certification order. If one After a judicious review of the record, we find no
has already taken place at the time of assumption or compelling reason to overturn the findings of the
certification, all striking or locked out employees shall Secretary of Labor.
immediately return to work and the employer shall
immediately resume operations and readmit all workers We reaffirm the doctrine that considering their
under the same terms and conditions prevailing before expertise in their respective fields, factual findings of
the strike or lockout. The Secretary of Labor and administrative agencies supported by substantial
Employment or the Commission may seek the assistance evidence are accorded great respect and binds this
of law enforcement agencies to ensure compliance with Court.[13]
this provision as well as with such orders as he may issue
to enforce the same. . . (Italics ours.) The Secretary of Labor ruled, thus:

xxx xxx xxx. xxx xxx xxx.

That Metrolabs business is of national interest is not Any act committed during the pendency of the dispute that
disputed. Metrolab is one of the leading manufacturers tends to give rise to further contentious issues or increase
and suppliers of medical and pharmaceutical products to the tensions between the parties should be considered an
the country. act of exacerbation. One must look at the act itself, not on
speculative reactions. A misplaced recourse is not
Metro labs management prerogatives, therefore, are needed to prove that a dispute has been exacerbated. For
not being unjustly curtailed but duly balanced with and instance, the Union could not be expected to file another
tempered by the limitations set by law, taking into account notice of strike. For this would depart from its theory of the
its special character and the particular circumstances in case that the layoff is subsumed under the instant dispute,
the case at bench. for which a notice of strike had already been filed. On the
other hand, to expect violent reactions, unruly behavior,
and any other chaotic or drastic action from the Union is
to expect it to commit acts disruptive of public order or kaya ng kumpanya ang magbayad ng suweldo kung ang
acts that may be illegal. Under a regime of laws, legal empleyado ay walang trabaho. Kung tayo ay patuloy na
remedies take the place of violent ones.[14] magbabayad ng suweldo, mas hihina ang ating
kumpanya at mas marami ang maaring maapektuhan.
xxx xxx xxx.
Sa pagpapatupad ng lay-off susundin natin ang LAST IN-
Protest against the subject layoffs need not be in the form FIRST OUT policy. Ang mga empleyadong may
of violent action or any other drastic measure. In the pinakamaikling serbisyo sa kumpanya ang unang
instant case the Union registered their dissent by swiftly maaapektuhan. Ito ay batay na rin sa nakasaad sa ating
filing a motion for a cease and desist order. Contrary to CBA na ang mga huling pumasok sa kumpanya ang
petitioners allegations, the Union strongly condemned the unang masasama sa lay-off kapag nagkaroon ng
layoffs and threatened mass action if the Secretary of ganitong mga kalagayan.
Labor fails to timely intervene:
Ang mga empleyado na kasama sa lay-off ay nakalista sa
xxx xxx xxx. sulat na ito. Ang umpisa ng lay-off ay sa Lunes, Enero 27.
Hindi na muna sila papasok sa kumpanya. Makukuha nila
3. This unilateral action of management is a blatant ang suweldo nila sa Enero 30, 1992.
violation of the injunction of this Office against committing
acts which would exacerbate the dispute. Unless such act Hindi po natin matitiyak kung gaano katagal ang lay-off
is enjoined the Union will be compelled to resort to its legal ngunit ang aming tingin ay matatagalan bago magkaroon
right to mass actions and concerted activities to protest ng dagdag na trabaho. Dahil dito, sinimulan na namin ang
and stop the said management action. This mass layoff is isang Redundancy Program sa mga
clearly one which would result in a very serious labor supervisors. Nabawasan ang mga puwesto para sa
dispute unless this Office swiftly intervenes.[15] kanila, kaya sila ay mawawalan ng trabaho at bibigyan na
ng redundancy pay.[16] (Italics ours.)
xxx xxx xxx.
xxx xxx xxx.
Metrolab and the Union were still in the process of
resolving their CBA deadlock when petitioner We agree with the ruling of the Secretary of Labor,
implemented the subject layoffs. As a result, motions and thus:
oppositions were filed diverting the parties attention,
delaying resolution of the bargaining deadlock and xxx xxx xxx.
postponing the signing of their new CBA, thereby
aggravating the whole conflict. . . .MII insists that the layoff in question is temporary not
permanent. It then cites International Hardware, Inc. vs.
We, likewise, find untenable Metrolabs contention NLRC, 176 SCRA 256, in which the Supreme Court held
that the layoff of the 94 rank-and-file employees was that the 30-day notice required under Article 283 of the
temporary, despite the recall of some of the laid off Labor Code need not be complied with if the employer has
workers. no intention to permanently severe (sic) the employment
If Metrolab intended the layoff of the 94 workers to
be temporary, it should have plainly stated so in the We are not convinced by this argument. International
notices it sent to the affected employees and the Hardware involves a case where there had been a
Department of Labor and Employment. Consider the reduction of workload. Precisely to avoid laying off the
tenor of the pertinent portions of the layoff notice to the employees, the employer therein opted to give them work
affected employees: on a rotating basis. Though on a limited scale, work was
available. This was the Supreme Courts basis for holding
xxx xxx xxx. that there was no intention to permanently severe (sic) the
employment relationship.
Dahil sa mga bagay na ito, napilitan ang ating kumpanya
na magsagawa ng lay-off ng mga empleyado sa Rank & Here, there is no circumstance at all from which we can
File dahil nabawasan ang trabaho at puwesto para sa infer an intention from MII not to sever the employment
kanila. Marami sa atin ang kasama sa lay-off dahil wala relationship permanently. If there was such an intention,
nang trabaho para sa kanila. Mahirap tanggapin ang mga MII could have made it very clear in the notices of layoff.
bagay na ito subalit kailangan nating gawin dahil hindi But as it were, the notices are couched in a language so
uncertain that the only conclusion possible is the Article I (b) of the 1988-1990 CBA provides:
permanent termination, not the continuation, of the
employment relationship. b)Close Shop. - All Qualified Employees must join the
Association immediately upon regularization as a
MII also seeks to excuse itself from compliance with the condition for continued employment. This provision shall
30-day notice with a tautology. While insisting that there not apply to: (i) managerial employees who are excluded
is really no best time to announce a bad news, (sic) it also from the scope of the bargaining unit; (ii) the auditors and
claims that it broke the bad news only on 27 January 1992 executive secretaries of senior executive officers, such
because had it complied with the 30-day notice, it could as, the President, Executive Vice-President, Vice-
have broken the bad news on 02 January 1992, the first President for Finance, Head of Legal, Vice-President for
working day of the year. If there is really no best time to Sales, who are excluded from membership in the
announce a bad news (sic), it wouldnt have mattered if Association; and (iii) those employees who are referred to
the same was announced at the first working day of the in Attachment I hereof, subject, however, to the
year. That way, MII could have at least complied with the application of the provision of Article II, par. (b) hereof.
requirement of the law.[17] Consequently, the above-specified employees are not
required to join the Association as a condition for their
The second issue raised by petitioner merits our continued employment.
On the other hand, Attachment I provides:
In the assailed Omnibus Resolution, Labor Secretary
Confesor clarified the CBA provisions on closed-shop and Exclusion from the Scope of the Close Shop
the scope of the bargaining unit in this wise: Provision

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

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

Exclusions. In our 14 April 1992 resolution, we ruled
on the issue of exclusion as follows: 2. Executive Secretary of the Personnel Manager, or
equivalent positions.
These aside, we reconsider our denial of the
modifications which the Union proposes to introduce on 3. Executive Secretary of the Director for Corporate
the close shop provision. While we note that the provision Planning, or equivalent positions.
as presently worded has served the relationship of the
parties well under previous CBAs, the shift in 4. Some personnel in the Personnel Department, EDP
constitutional policy toward expanding the right of all Staff at Head Office, Payroll Staff at Head Office,
workers to self-organization should now be formally Accounting Department at Head Office, and Budget Staff,
recognized by the parties, subject to the following who because of the nature of their duties and
exclusions only: responsibilities need not join the Association as a
condition for their employment.
1. Managerial employees; and
5. Newly-hired secretaries of Branch Managers and
2. The executive secretaries of the President, Executive Regional Managers.
Vice-President, Vice-President, Vice President for Sales,
Personnel Manager, and Director for Corporate Planning Both MDD and MII read the exclusion of managerial
who may have access to vital labor relations information employees and executive secretaries in our 14 April 1992
or who may otherwise act in a confidential capacity to resolution as exclusion from the bargaining unit. They
persons who determine or formulate management point out that managerial employees are lumped under
policies. one classification with executive secretaries, so that since
the former are excluded from the bargaining unit, so must
The provisions of Article I (b) and Attachment I of the the latter be likewise excluded.
1988-1990 CBA shall thus be modified consistently with
the foregoing.
This reading is obviously contrary to the intent of our Development Manager, Finance Director, Management
14 April 1992 resolution. By recognizing the expanded System Manager, Human Resources Manager, Marketing
scope of the right to self-organization, our intent was to Director, Engineering Manager, Materials Manager and
delimit the types of employees excluded from the close Production Manager, who are all members of the
shop provision, not from the bargaining unit, to executive companys Management Committee should not only be
secretaries only. Otherwise, the conversion of the exempted from the closed-shop provision but should be
exclusionary provision to one that refers to the bargaining excluded from membership in the bargaining unit of the
unit from one that merely refers to the close shop rank and file employees as well on grounds that their
provision would effectively curtail all the organizational executive secretaries are confidential employees, having
rights of executive secretaries. access to vital labor information.[19]

The exclusion of managerial employees, in We concur with Metrolab.

accordance with law, must therefore still carry the
qualifying phrase from the bargaining unit in Article I (b)(i) Although Article 245 of the Labor Code[20] limits the
of the 1988-1990 CBA. In the same manner, the exclusion ineligibility to join, form and assist any labor organization
of executive secretaries should be read together with the to managerial employees, jurisprudence has extended
qualifying phrase are excluded from membership in the this prohibition to confidential employees or those who by
Association of the same Article and with the heading of reason of their positions or nature of work are required to
Attachment I. The latter refers to Exclusions from Scope assist or act in a fiduciary manner to managerial
of Close Shop Provision and provides that [t]he following employees and hence, are likewise privy to sensitive and
positions in Bargaining Unit are not covered by the close highly confidential records.
shop provision of the CBA.
The rationale behind the exclusion of confidential
The issue of exclusion has different dimension in the employees from the bargaining unit of the rank and file
case of MII. In an earlier motion for clarification, MII points employees and their disqualification to join any labor
out that it has done away with the positions of Executive organization was succinctly discussed in Philips Industrial
Vice-President, Vice-President for Sales, and Director for Development v. NLRC:[21]
Corporate Planning. Thus, the foregoing group of
exclusions is no longer appropriate in its present xxx xxx xxx.
organizational structure. Nevertheless, there remain MII
officer positions for which there may be executive On the main issue raised before Us, it is quite obvious that
secretaries. These include the General Manager and respondent NLRC committed grave abuse of discretion in
members of the Management Committee, specifically i) reversing the decision of the Executive Labor Arbiter and
the Quality Assurance Manager; ii) the Product in decreeing that PIDIs Service Engineers, Sales Force,
Development Manager; iii) the Finance Director; iv) the division secretaries, all Staff of General Management,
Management System Manager; v) the Human Resources Personnel and Industrial Relations Department,
Manager; vi) the Marketing Director; vii) the Engineering Secretaries of Audit, EDP and Financial Systems are
Manager; viii) the Materials Manager; and ix) the included within the rank and file bargaining unit.
Production Manager.
In the first place, all these employees, with the exception
xxx xxx xxx of the service engineers and the sales force personnel,
are confidential employees. Their classification as such is
The basis for the questioned exclusions, it should be not seriously disputed by PEO-FFW; the five (5) previous
noted, is no other than the previous CBA between MII and CBAs between PIDI and PEO-FFW explicitly considered
the Union. If MII had undergone an organizational them as confidential employees. By the very nature of
restructuring since then, this is a fact to which we have their functions, they assist and act in a confidential
never been made privy. In any event, had this been capacity to, or have access to confidential matters of,
otherwise the result would have been the same. To persons who exercise managerial functions in the field of
repeat, we limited the exclusions to recognize the labor relations. As such, the rationale behind the
expanded scope of the right to self-organization as ineligibility of managerial employees to form, assist or join
embodied in the Constitution.[18] a labor union equally applies to them.

Metrolab, however, maintains that executive In Bulletin Publishing Co., Inc. vs. Hon. Augusto
secretaries of the General Manager and the executive Sanchez, this Court elaborated on this rationale, thus:
secretaries of the Quality Assurance Manager, Product
x x x The rationale for this inhibition has been stated to . . .(I)n the collective bargaining process, managerial
be, because if these managerial employees would belong employees are supposed to be on the side of the
to or be affiliated with a Union, the latter might not be employer, to act as its representatives, and to see to it that
assured of their loyalty to the Union in view of evident its interest are well protected. The employer is not
conflict of interests. The Union can also become assured of such protection if these employees themselves
company-dominated with the presence of managerial are union members. Collective bargaining in such a
employees in Union membership. situation can become one-sided. It is the same reason
that impelled this Court to consider the position of
In Golden Farms, Inc. vs. Ferrer-Calleja, this Court confidential employees as included in the disqualification
explicitly made this rationale applicable to confidential found in Art. 245 as if the disqualification of confidential
employees: employees were written in the provision. If confidential
employees could unionize in order to bargain for
This rationale holds true also for confidential employees advantages for themselves, then they could be governed
such as accounting personnel, radio and telegraph by their own motives rather than the interest of the
operators, who having access to confidential information, employers. Moreover, unionization of confidential
may become the source of undue advantage. Said employees for the purpose of collective bargaining would
employee(s) may act as a spy or spies of either party to a mean the extension of the law to persons or individuals
collective bargaining agreement. This is specially true in who are supposed to act in the interest of the
the present case where the petitioning Union is already employers. It is not farfetched that in the course of
the bargaining agent of the rank-and-file employees in the collective bargaining, they might jeopardize that interest
establishment. To allow the confidential employees to join which they are duty-bound to protect. . . .
the existing Union of the rank-and-file would be in violation
of the terms of the Collective Bargaining Agreement xxx xxx xxx.
wherein this kind of employees by the nature of their
functions/positions are expressly excluded. And in the latest case of Pier 8 Arrastre &
Stevedoring Services, Inc. vs. Roldan-Confesor,[23] we
xxx xxx xxx. ruled that:

Similarly, in National Association of Trade Union xxx xxx xxx.

- Republic Planters Bank Supervisors Chapter v.
Torres[22] we declared: Upon the other hand, legal secretaries are neither
managers nor supervisors. Their work is basically
xxx xxx xxx. routinary and clerical. However, they should be
differentiated from rank-and-file employees because they
. . . As regards the other claim of respondent Bank that are tasked with, among others, the typing of legal
Branch Managers/OICs, Cashiers and Controllers are documents, memoranda and correspondence, the
confidential employees, having control, custody and/ or keeping of records and files, the giving of and receiving
access to confidential matters, e.g., the branchs cash notices, and such other duties as required by the legal
position, statements of financial condition, vault personnel of the corporation. Legal secretaries therefore
combination, cash codes for telegraphic transfers, fall under the category of confidential employees. . . .
demand drafts and other negotiable instruments,
pursuant to Sec. 1166.4 of the Central Bank Manual xxx xxx xxx.
regarding joint custody, this claim is not even disputed by
petitioner. A confidential employee is one entrusted with We thus hold that public respondent acted with grave
confidence on delicate matters, or with the custody, abuse of discretion in not excluding the four foremen and
handling, or care and protection of the employers legal secretary from the bargaining unit composed of
property. While Art. 245 of the Labor Code singles out rank-and-file employees.
managerial employees as ineligible to join, assist or form
any labor organization, under the doctrine of necessary, xxx xxx xxx.
implication, confidential employees are similarly
disqualified. . . . In the case at bench, the Union does not disagree with
petitioner that the executive secretaries are confidential
xxx xxx xxx. employees. It however, makes the following contentions:

xxx xxx xxx.

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

Neither would there be a danger of espionage since the

confidential employees would not have any conflict of
interest, not being members of the Union. In any case,
there is always the danger that any employee would leak
management secrets to the Union out of sympathy for his
fellow rank and filer even if he were not a member of the
union nor the bargaining unit.

Confidential employees are rank and file employees and

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

xxx xxx xxx.

The Unions assurances fail to convince. The

dangers sought to be prevented, particularly the threat of
conflict of interest and espionage, are not eliminated by
non-membership of Metrolabs executive secretaries or
confidential employees in the Union. Forming part of the
bargaining unit, the executive secretaries stand to benefit
from any agreement executed between the Union and
Metrolab. Such a scenario, thus, gives rise to a potential
conflict between personal interests and their duty as
confidential employees to act for and in behalf of
Metrolab. They do not have to be union members to affect
or influence either side.

Finally, confidential employees cannot be classified

as rank and file. As previously discussed, the nature of
employment of confidential employees is quite distinct
from the rank and file, thus, warranting a separate
category. Excluding confidential employees from the rank
and file bargaining unit, therefore, is not tantamount to

WHEREFORE, premises considered, the petition is

partially GRANTED. The resolutions of public respondent
Secretary of Labor dated 14 April 1992 and 25 January
1993 are hereby MODIFIED to the extent that executive
secretaries of petitioner Metrolabs General Manager and
the executive secretaries of the members of its
Management Committee are excluded from the
bargaining unit of petitioners rank and file employees.

23. SanMIguel Case
G.R. No. L-25246 September 12, 1974 Union as a member. The management of the Company in
turn notified Appellee and his counsel that unless the
24. *BENJAMIN VICTORIANO vs. ELIZALDE Appellee could achieve a satisfactory arrangement with
ROPE WORKERS' UNION and ELIZALDE the Union, the Company would be constrained to dismiss
ROPE FACTORY, INC., defendants, him from the service. This prompted Appellee to file an
ELIZALDE ROPE WORKERS' UNION action for injunction, docketed as Civil Case No. 58894 in
the Court of First Instance of Manila to enjoin the
ZALDIVAR, J.:p Company and the Union from dismissing Appellee.1 In its
answer, the Union invoked the "union security clause" of
Appeal to this Court on purely questions of law from the the collective bargaining agreement; assailed the
decision of the Court of First Instance of Manila in its Civil constitutionality of Republic Act No. 3350; and contended
Case No. 58894. that the Court had no jurisdiction over the case, pursuant
to Republic Act No. 875, Sections 24 and 9 (d) and
The undisputed facts that spawned the instant case (e).2 Upon the facts agreed upon by the parties during the
follow: pre-trial conference, the Court a quo rendered its decision
on August 26, 1965, the dispositive portion of which
Benjamin Victoriano (hereinafter referred to as Appellee), reads:
a member of the religious sect known as the "Iglesia ni
Cristo", had been in the employ of the Elizalde Rope IN VIEW OF THE FOREGOING,
Factory, Inc. (hereinafter referred to as Company) since judgment is rendered enjoining the
1958. As such employee, he was a member of the defendant Elizalde Rope Factory, Inc.
Elizalde Rope Workers' Union (hereinafter referred to as from dismissing the plaintiff from his
Union) which had with the Company a collective present employment and sentencing the
bargaining agreement containing a closed shop provision defendant Elizalde Rope Workers' Union
which reads as follows: to pay the plaintiff P500 for attorney's
fees and the costs of this action.3
Membership in the Union shall be
required as a condition of employment for From this decision, the Union appealed directly to this
all permanent employees workers Court on purely questions of law, assigning the following
covered by this Agreement. errors:

The collective bargaining agreement expired on March 3, I. That the lower court erred when it did
1964 but was renewed the following day, March 4, 1964. not rule that Republic Act No. 3350 is
Under Section 4(a), paragraph 4, of Republic Act No. 875,
prior to its amendment by Republic Act No. 3350, the II. That the lower court erred when it
employer was not precluded "from making an agreement sentenced appellant herein to pay
with a labor organization to require as a condition of plaintiff the sum of P500 as attorney's
employment membership therein, if such labor fees and the cost thereof.
organization is the representative of the employees." On
June 18, 1961, however, Republic Act No. 3350 was In support of the alleged unconstitutionality of Republic
enacted, introducing an amendment to — paragraph (4) Act No. 3350, the Union contented, firstly, that the Act
subsection (a) of section 4 of Republic Act No. 875, as infringes on the fundamental right to form lawful
follows: ... "but such agreement shall not cover members associations; that "the very phraseology of said Republic
of any religious sects which prohibit affiliation of their Act 3350, that membership in a labor organization is
members in any such labor organization". banned to all those belonging to such religious sect
prohibiting affiliation with any labor organization" 4 ,
Being a member of a religious sect that prohibits the "prohibits all the members of a given religious sect from
affiliation of its members with any labor organization, joining any labor union if such sect prohibits affiliations of
Appellee presented his resignation to appellant Union in their members thereto"5 ; and, consequently, deprives
1962, and when no action was taken thereon, he said members of their constitutional right to form or join
reiterated his resignation on September 3, 1974. lawful associations or organizations guaranteed by the Bill
Thereupon, the Union wrote a formal letter to the of Rights, and thus becomes obnoxious to Article III,
Company asking the latter to separate Appellee from the Section 1 (6) of the 1935 Constitution. 6
service in view of the fact that he was resigning from the
Secondly, the Union contended that Republic Act No. Appellee, assailing appellant's arguments, contended that
3350 is unconstitutional for impairing the obligation of Republic Act No. 3350 does not violate the right to form
contracts in that, while the Union is obliged to comply with lawful associations, for the right to join associations
its collective bargaining agreement containing a "closed includes the right not to join or to resign from a labor
shop provision," the Act relieves the employer from its organization, if one's conscience does not allow his
reciprocal obligation of cooperating in the maintenance of membership therein, and the Act has given substance to
union membership as a condition of employment; and that such right by prohibiting the compulsion of workers to join
said Act, furthermore, impairs the Union's rights as it labor organizations; 14 that said Act does not impair the
deprives the union of dues from members who, under the obligation of contracts for said law formed part of, and was
Act, are relieved from the obligation to continue as such incorporated into, the terms of the closed shop
members.7 agreement; 15 that the Act does not violate the
establishment of religion clause or separation of Church
Thirdly, the Union contended that Republic Act No. 3350 and State, for Congress, in enacting said law, merely
discriminatorily favors those religious sects which ban accommodated the religious needs of those workers
their members from joining labor unions, in violation of whose religion prohibits its members from joining labor
Article Ill, Section 1 (7) of the 1935 Constitution; and while unions, and balanced the collective rights of organized
said Act unduly protects certain religious sects, it leaves labor with the constitutional right of an individual to freely
no rights or protection to labor organizations.8 exercise his chosen religion; that the constitutional right to
the free exercise of one's religion has primacy and
Fourthly, Republic Act No. 3350, asserted the Union, preference over union security measures which are
violates the constitutional provision that "no religious test merely contractual 16; that said Act does not violate the
shall be required for the exercise of a civil right," in that constitutional provision of equal protection, for the
the laborer's exercise of his civil right to join associations classification of workers under the Act depending on their
for purposes not contrary to law has to be determined religious tenets is based on substantial distinction, is
under the Act by his affiliation with a religious sect; that germane to the purpose of the law, and applies to all the
conversely, if a worker has to sever his religious members of a given class; 17 that said Act, finally, does
connection with a sect that prohibits membership in a not violate the social justice policy of the Constitution, for
labor organization in order to be able to join a labor said Act was enacted precisely to equalize employment
organization, said Act would violate religious freedom.9 opportunities for all citizens in the midst of the diversities
of their religious beliefs." 18
Fifthly, the Union contended that Republic Act No. 3350,
violates the "equal protection of laws" clause of the I. Before We proceed to the discussion of the first
Constitution, it being a discriminately legislation, assigned error, it is necessary to premise that there are
inasmuch as by exempting from the operation of closed some thoroughly established principles which must be
shop agreement the members of the "Iglesia ni Cristo", it followed in all cases where questions of constitutionality
has granted said members undue advantages over their as obtains in the instant case are involved. All
fellow workers, for while the Act exempts them from union presumptions are indulged in favor of constitutionality;
obligation and liability, it nevertheless entitles them at the one who attacks a statute, alleging unconstitutionality
same time to the enjoyment of all concessions, benefits must prove its invalidity beyond a reasonable doubt, that
and other emoluments that the union might secure from a law may work hardship does not render it
the employer. 10 unconstitutional; that if any reasonable basis may be
conceived which supports the statute, it will be upheld,
Sixthly, the Union contended that Republic Act No. 3350 and the challenger must negate all possible bases; that
violates the constitutional provision regarding the the courts are not concerned with the wisdom, justice,
promotion of social justice. 11 policy, or expediency of a statute; and that a liberal
interpretation of the constitution in favor of the
Appellant Union, furthermore, asserted that a "closed constitutionality of legislation should be adopted. 19
shop provision" in a collective bargaining agreement
cannot be considered violative of religious freedom, as to 1. Appellant Union's contention that Republic Act No.
call for the amendment introduced by Republic Act No. 3350 prohibits and bans the members of such religious
3350; 12and that unless Republic Act No. 3350 is declared sects that forbid affiliation of their members with labor
unconstitutional, trade unionism in this country would be unions from joining labor unions appears nowhere in the
wiped out as employers would prefer to hire or employ wording of Republic Act No. 3350; neither can the same
members of the Iglesia ni Cristo in order to do away with be deduced by necessary implication therefrom. It is not
labor organizations. 13
surprising, therefore, that appellant, having thus misread that although it would be an unfair labor practice for an
the Act, committed the error of contending that said Act is employer "to discriminate in regard to hire or tenure of
obnoxious to the constitutional provision on freedom of employment or any term or condition of employment to
association. encourage or discourage membership in any labor
organization" the employer is, however, not precluded
Both the Constitution and Republic Act No. 875 recognize "from making an agreement with a labor organization to
freedom of association. Section 1 (6) of Article III of the require as a condition of employment membership
Constitution of 1935, as well as Section 7 of Article IV of therein, if such labor organization is the representative of
the Constitution of 1973, provide that the right to form the employees". By virtue, therefore, of a closed shop
associations or societies for purposes not contrary to law agreement, before the enactment of Republic Act No.
shall not be abridged. Section 3 of Republic Act No. 875 3350, if any person, regardless of his religious beliefs,
provides that employees shall have the right to self- wishes to be employed or to keep his employment, he
organization and to form, join of assist labor organizations must become a member of the collective bargaining
of their own choosing for the purpose of collective union. Hence, the right of said employee not to join the
bargaining and to engage in concerted activities for the labor union is curtailed and withdrawn.
purpose of collective bargaining and other mutual aid or
protection. What the Constitution and the Industrial Peace To that all-embracing coverage of the closed shop
Act recognize and guarantee is the "right" to form or join arrangement, Republic Act No. 3350 introduced an
associations. Notwithstanding the different theories exception, when it added to Section 4 (a) (4) of the
propounded by the different schools of jurisprudence Industrial Peace Act the following proviso: "but such
regarding the nature and contents of a "right", it can be agreement shall not cover members of any religious sects
safely said that whatever theory one subscribes to, a right which prohibit affiliation of their members in any such
comprehends at least two broad notions, namely: first, labor organization". Republic Act No. 3350 merely
liberty or freedom, i.e., the absence of legal restraint, excludes ipso jure from the application and coverage of
whereby an employee may act for himself without being the closed shop agreement the employees belonging to
prevented by law; and second, power, whereby an any religious sects which prohibit affiliation of their
employee may, as he pleases, join or refrain from Joining members with any labor organization. What the exception
an association. It is, therefore, the employee who should provides, therefore, is that members of said religious
decide for himself whether he should join or not an sects cannot be compelled or coerced to join labor unions
association; and should he choose to join, he himself even when said unions have closed shop agreements
makes up his mind as to which association he would join; with the employers; that in spite of any closed shop
and even after he has joined, he still retains the liberty and agreement, members of said religious sects cannot be
the power to leave and cancel his membership with said refused employment or dismissed from their jobs on the
organization at any time. 20 It is clear, therefore, that the sole ground that they are not members of the collective
right to join a union includes the right to abstain from bargaining union. It is clear, therefore, that the assailed
joining any union. 21 Inasmuch as what both the Act, far from infringing the constitutional provision on
Constitution and the Industrial Peace Act have freedom of association, upholds and reinforces it. It does
recognized, and guaranteed to the employee, is the "right" not prohibit the members of said religious sects from
to join associations of his choice, it would be absurd to affiliating with labor unions. It still leaves to said members
say that the law also imposes, in the same breath, upon the liberty and the power to affiliate, or not to affiliate, with
the employee the duty to join associations. The law does labor unions. If, notwithstanding their religious beliefs, the
not enjoin an employee to sign up with any association. members of said religious sects prefer to sign up with the
labor union, they can do so. If in deference and fealty to
The right to refrain from joining labor organizations their religious faith, they refuse to sign up, they can do so;
recognized by Section 3 of the Industrial Peace Act is, the law does not coerce them to join; neither does the law
however, limited. The legal protection granted to such prohibit them from joining; and neither may the employer
right to refrain from joining is withdrawn by operation of or labor union compel them to join. Republic Act No. 3350,
law, where a labor union and an employer have agreed therefore, does not violate the constitutional provision on
on a closed shop, by virtue of which the employer may freedom of association.
employ only member of the collective bargaining union,
and the employees must continue to be members of the 2. Appellant Union also contends that the Act is
union for the duration of the contract in order to keep their unconstitutional for impairing the obligation of its contract,
jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, specifically, the "union security clause" embodied in its
before its amendment by Republic Act No. 3350, provides Collective Bargaining Agreement with the Company, by
virtue of which "membership in the union was required as government by virtue of which contractual relations are
a condition for employment for all permanent employees worthwhile a government which retains adequate
workers". This agreement was already in existence at the authority to secure the peace and good order of society.
time Republic Act No. 3350 was enacted on June 18, The contract clause of the Constitution must, therefore,
1961, and it cannot, therefore, be deemed to have been be not only in harmony with, but also in subordination to,
incorporated into the agreement. But by reason of this in appropriate instances, the reserved power of the state
amendment, Appellee, as well as others similarly situated, to safeguard the vital interests of the people. It follows that
could no longer be dismissed from his job even if he not all legislations, which have the effect of impairing a
should cease to be a member, or disaffiliate from the contract, are obnoxious to the constitutional prohibition as
Union, and the Company could continue employing him to impairment, and a statute passed in the legitimate
notwithstanding his disaffiliation from the Union. The Act, exercise of police power, although it incidentally destroys
therefore, introduced a change into the express terms of existing contract rights, must be upheld by the courts. This
the union security clause; the Company was partly has special application to contracts regulating relations
absolved by law from the contractual obligation it had with between capital and labor which are not merely
the Union of employing only Union members in contractual, and said labor contracts, for being impressed
permanent positions, It cannot be denied, therefore, that with public interest, must yield to the common good. 27
there was indeed an impairment of said union security
clause. In several occasions this Court declared that the
prohibition against impairing the obligations of contracts
According to Black, any statute which introduces a has no application to statutes relating to public subjects
change into the express terms of the contract, or its legal within the domain of the general legislative powers of the
construction, or its validity, or its discharge, or the remedy state involving public welfare. 28 Thus, this Court also held
for its enforcement, impairs the contract. The extent of the that the Blue Sunday Law was not an infringement of the
change is not material. It is not a question of degree or obligation of a contract that required the employer to
manner or cause, but of encroaching in any respect on its furnish work on Sundays to his employees, the law having
obligation or dispensing with any part of its force. There is been enacted to secure the well-being and happiness of
an impairment of the contract if either party is absolved by the laboring class, and being, furthermore, a legitimate
law from its performance. 22 Impairment has also been exercise of the police power. 29
predicated on laws which, without destroying contracts,
derogate from substantial contractual rights. 23 In order to determine whether legislation
unconstitutionally impairs contract obligations, no
It should not be overlooked, however, that the prohibition unchanging yardstick, applicable at all times and under all
to impair the obligation of contracts is not absolute and circumstances, by which the validity of each statute may
unqualified. The prohibition is general, affording a broad be measured or determined, has been fashioned, but
outline and requiring construction to fill in the details. The every case must be determined upon its own
prohibition is not to be read with literal exactness like a circumstances. Legislation impairing the obligation of
mathematical formula, for it prohibits unreasonable contracts can be sustained when it is enacted for the
impairment only. 24 In spite of the constitutional promotion of the general good of the people, and when
prohibition, the State continues to possess authority to the means adopted to secure that end are reasonable.
safeguard the vital interests of its people. Legislation Both the end sought and the means adopted must be
appropriate to safeguarding said interests may modify or legitimate, i.e., within the scope of the reserved power of
abrogate contracts already in effect. 25 For not only are the state construed in harmony with the constitutional
existing laws read into contracts in order to fix the limitation of that power. 30
obligations as between the parties, but the reservation of
essential attributes of sovereign power is also read into What then was the purpose sought to be achieved by
contracts as a postulate of the legal order. All contracts Republic Act No. 3350? Its purpose was to insure freedom
made with reference to any matter that is subject to of belief and religion, and to promote the general welfare
regulation under the police power must be understood as by preventing discrimination against those members of
made in reference to the possible exercise of that religious sects which prohibit their members from joining
power. 26 Otherwise, important and valuable reforms may labor unions, confirming thereby their natural, statutory
be precluded by the simple device of entering into and constitutional right to work, the fruits of which work
contracts for the purpose of doing that which otherwise are usually the only means whereby they can maintain
may be prohibited. The policy of protecting contracts their own life and the life of their dependents. It cannot be
against impairment presupposes the maintenance of a gainsaid that said purpose is legitimate.
The questioned Act also provides protection to members preferred position in the hierarchy of values. Contractual
of said religious sects against two aggregates of group rights, therefore, must yield to freedom of religion. It is
strength from which the individual needs protection. The only where unavoidably necessary to prevent an
individual employee, at various times in his working life, is immediate and grave danger to the security and welfare
confronted by two aggregates of power — collective labor, of the community that infringement of religious freedom
directed by a union, and collective capital, directed by may be justified, and only to the smallest extent necessary
management. The union, an institution developed to to avoid the danger.
organize labor into a collective force and thus protect the
individual employee from the power of collective capital, 3. In further support of its contention that Republic Act No.
is, paradoxically, both the champion of employee rights, 3350 is unconstitutional, appellant Union averred that said
and a new source of their frustration. Moreover, when the Act discriminates in favor of members of said religious
Union interacts with management, it produces yet a third sects in violation of Section 1 (7) of Article Ill of the 1935
aggregate of group strength from which the individual also Constitution, and which is now Section 8 of Article IV of
needs protection — the collective bargaining the 1973 Constitution, which provides:
relationship. 31
No law shall be made respecting an
The aforementioned purpose of the amendatory law is establishment of religion, or prohibiting
clearly seen in the Explanatory Note to House Bill No. the free exercise thereof, and the free
5859, which later became Republic Act No. 3350, as exercise and enjoyment of religious
follows: profession and worship, without
discrimination and preference, shall
It would be unthinkable indeed to refuse forever be allowed. No religious test shall
employing a person who, on account of be required for the exercise of civil or
his religious beliefs and convictions, political rights.
cannot accept membership in a labor
organization although he possesses all The constitutional provision into only prohibits legislation
the qualifications for the job. This is for the support of any religious tenets or the modes of
tantamount to punishing such person for worship of any sect, thus forestalling compulsion by law
believing in a doctrine he has a right of the acceptance of any creed or the practice of any form
under the law to believe in. The law would of worship, 35 but also assures the free exercise of one's
not allow discrimination to flourish to the chosen form of religion within limits of utmost amplitude.
detriment of those whose religion It has been said that the religion clauses of the
discards membership in any labor Constitution are all designed to protect the broadest
organization. Likewise, the law would not possible liberty of conscience, to allow each man to
commend the deprivation of their right to believe as his conscience directs, to profess his beliefs,
work and pursue a modest means of and to live as he believes he ought to live, consistent with
livelihood, without in any manner the liberty of others and with the common good. 36 Any
violating their religious faith and/or legislation whose effect or purpose is to impede the
belief. 32 observance of one or all religions, or to discriminate
invidiously between the religions, is invalid, even though
It cannot be denied, furthermore, that the means adopted the burden may be characterized as being only
by the Act to achieve that purpose — exempting the indirect. 37 But if the stage regulates conduct by enacting,
members of said religious sects from coverage of union within its power, a general law which has for its purpose
security agreements — is reasonable. and effect to advance the state's secular goals, the statute
is valid despite its indirect burden on religious
It may not be amiss to point out here that the free exercise observance, unless the state can accomplish its purpose
of religious profession or belief is superior to contract without imposing such burden. 38
rights. In case of conflict, the latter must, therefore, yield
to the former. The Supreme Court of the United States In Aglipay v. Ruiz 39 , this Court had occasion to state that
has also declared on several occasions that the rights in the government should not be precluded from pursuing
the First Amendment, which include freedom of religion, valid objectives secular in character even if the incidental
enjoy a preferred position in the constitutional result would be favorable to a religion or sect. It has
system. 33 Religious freedom, although not unlimited, is a likewise been held that the statute, in order to withstand
fundamental personal right and liberty, 34 and has a the strictures of constitutional prohibition, must have a
secular legislative purpose and a primary effect that is imposed by union security agreements. It was
neither advances nor inhibits religion. 40 Assessed by Congress itself that imposed that burden when it enacted
these criteria, Republic Act No. 3350 cannot be said to the Industrial Peace Act (Republic Act 875), and,
violate the constitutional inhibition of the "no- certainly, Congress, if it so deems advisable, could take
establishment" (of religion) clause of the Constitution. away the same burden. It is certain that not every
conscience can be accommodated by all the laws of the
The purpose of Republic Act No. 3350 is secular, worldly, land; but when general laws conflict with scrupples of
and temporal, not spiritual or religious or holy and eternal. conscience, exemptions ought to be granted unless some
It was intended to serve the secular purpose of advancing "compelling state interest" intervenes. 45 In the instant
the constitutional right to the free exercise of religion, by case, We see no such compelling state interest to
averting that certain persons be refused work, or be withhold exemption.
dismissed from work, or be dispossessed of their right to
work and of being impeded to pursue a modest means of Appellant bewails that while Republic Act No. 3350
livelihood, by reason of union security agreements. To protects members of certain religious sects, it leaves no
help its citizens to find gainful employment whereby they right to, and is silent as to the protection of, labor
can make a living to support themselves and their families organizations. The purpose of Republic Act No. 3350 was
is a valid objective of the state. In fact, the state is not to grant rights to labor unions. The rights of labor
enjoined, in the 1935 Constitution, to afford protection to unions are amply provided for in Republic Act No. 875 and
labor, and regulate the relations between labor and capital the new Labor Code. As to the lamented silence of the Act
and industry. 41 More so now in the 1973 Constitution regarding the rights and protection of labor unions, suffice
where it is mandated that "the State shall afford protection it to say, first, that the validity of a statute is determined by
to labor, promote full employment and equality in its provisions, not by its silence 46 ; and, second, the fact
employment, ensure equal work opportunities regardless that the law may work hardship does not render it
of sex, race or creed and regulate the relation between unconstitutional. 47
workers and employers. 42
It would not be amiss to state, regarding this matter, that
The primary effects of the exemption from closed shop to compel persons to join and remain members of a union
agreements in favor of members of religious sects that to keep their jobs in violation of their religious scrupples,
prohibit their members from affiliating with a labor would hurt, rather than help, labor unions, Congress has
organization, is the protection of said employees against seen it fit to exempt religious objectors lest their
the aggregate force of the collective bargaining resistance spread to other workers, for religious
agreement, and relieving certain citizens of a burden on objections have contagious potentialities more than
their religious beliefs; and by eliminating to a certain political and philosophic objections.
extent economic insecurity due to unemployment, which
is a serious menace to the health, morals, and welfare of Furthermore, let it be noted that coerced unity and loyalty
the people of the State, the Act also promotes the well- even to the country, and a fortiori to a labor — union
being of society. It is our view that the exemption from the assuming that such unity and loyalty can be attained
effects of closed shop agreement does not directly through coercion — is not a goal that is constitutionally
advance, or diminish, the interests of any particular obtainable at the expense of religious liberty. 48 A
religion. Although the exemption may benefit those who desirable end cannot be promoted by prohibited means.
are members of religious sects that prohibit their
members from joining labor unions, the benefit upon the 4. Appellants' fourth contention, that Republic Act No.
religious sects is merely incidental and indirect. The 3350 violates the constitutional prohibition against
"establishment clause" (of religion) does not ban requiring a religious test for the exercise of a civil right or
regulation on conduct whose reason or effect merely a political right, is not well taken. The Act does not require
happens to coincide or harmonize with the tenets of some as a qualification, or condition, for joining any lawful
or all religions. 43 The free exercise clause of the association membership in any particular religion or in any
Constitution has been interpreted to require that religious religious sect; neither does the Act require affiliation with
exercise be preferentially aided. 44 a religious sect that prohibits its members from joining a
labor union as a condition or qualification for withdrawing
We believe that in enacting Republic Act No. 3350, from a labor union. Joining or withdrawing from a labor
Congress acted consistently with the spirit of the union requires a positive act. Republic Act No. 3350 only
constitutional provision. It acted merely to relieve the exempts members with such religious affiliation from the
exercise of religion, by certain persons, of a burden that coverage of closed shop agreements. So, under this Act,
a religious objector is not required to do a positive act — that it must be germane to the purpose of the law; that it
to exercise the right to join or to resign from the union. He must not be limited to existing conditions only; and that it
is exempted ipso jure without need of any positive act on must apply equally to each member of the class. 54 This
his part. A conscientious religious objector need not Court has held that the standard is satisfied if the
perform a positive act or exercise the right of resigning classification or distinction is based on a reasonable
from the labor union — he is exempted from the coverage foundation or rational basis and is not palpably
of any closed shop agreement that a labor union may arbitrary. 55
have entered into. How then can there be a religious test
required for the exercise of a right when no right need be In the exercise of its power to make classifications for the
exercised? purpose of enacting laws over matters within its
jurisdiction, the state is recognized as enjoying a wide
We have said that it was within the police power of the range of discretion. 56 It is not necessary that the
State to enact Republic Act No. 3350, and that its purpose classification be based on scientific or marked differences
was legal and in consonance with the Constitution. It is of things or in their relation. 57 Neither is it necessary that
never an illegal evasion of a constitutional provision or the classification be made with mathematical
prohibition to accomplish a desired result, which is lawful nicety. 58 Hence legislative classification may in many
in itself, by discovering or following a legal way to do it. 49 cases properly rest on narrow distinctions, 59 for the equal
protection guaranty does not preclude the legislature from
5. Appellant avers as its fifth ground that Republic Act No. recognizing degrees of evil or harm, and legislation is
3350 is a discriminatory legislation, inasmuch as it grants addressed to evils as they may appear.
to the members of certain religious sects undue
advantages over other workers, thus violating Section 1 We believe that Republic Act No. 3350 satisfies the
of Article III of the 1935 Constitution which forbids the aforementioned requirements. The Act classifies
denial to any person of the equal protection of the laws. 50 employees and workers, as to the effect and coverage of
union shop security agreements, into those who by
The guaranty of equal protection of the laws is not a reason of their religious beliefs and convictions cannot
guaranty of equality in the application of the laws upon all sign up with a labor union, and those whose religion does
citizens of the state. It is not, therefore, a requirement, in not prohibit membership in labor unions. Tile classification
order to avoid the constitutional prohibition against rests on real or substantial, not merely imaginary or
inequality, that every man, woman and child should be whimsical, distinctions. There is such real distinction in
affected alike by a statute. Equality of operation of the beliefs, feelings and sentiments of employees.
statutes does not mean indiscriminate operation on Employees do not believe in the same religious faith and
persons merely as such, but on persons according to the different religions differ in their dogmas and cannons.
circumstances surrounding them. It guarantees equality, Religious beliefs, manifestations and practices, though
not identity of rights. The Constitution does not require they are found in all places, and in all times, take so many
that things which are different in fact be treated in law as varied forms as to be almost beyond imagination. There
though they were the same. The equal protection clause are many views that comprise the broad spectrum of
does not forbid discrimination as to things that are religious beliefs among the people. There are diverse
different. 51 It does not prohibit legislation which is limited manners in which beliefs, equally paramount in the lives
either in the object to which it is directed or by the territory of their possessors, may be articulated. Today the country
within which it is to operate. is far more heterogenous in religion than before,
differences in religion do exist, and these differences are
The equal protection of the laws clause of the Constitution important and should not be ignored.
allows classification. Classification in law, as in the other
departments of knowledge or practice, is the grouping of Even from the phychological point of view, the
things in speculation or practice because they agree with classification is based on real and important differences.
one another in certain particulars. A law is not invalid Religious beliefs are not mere beliefs, mere ideas existing
because of simple inequality. 52 The very idea of only in the mind, for they carry with them practical
classification is that of inequality, so that it goes without consequences and are the motives of certain rules. of
saying that the mere fact of inequality in no manner human conduct and the justification of certain
determines the matter of constitutionality. 53 All that is acts. 60 Religious sentiment makes a man view things and
required of a valid classification is that it be reasonable, events in their relation to his God. It gives to human life its
which means that the classification should be based on distinctive character, its tone, its happiness or
substantial distinctions which make for real differences; unhappiness its enjoyment or irksomeness. Usually, a
strong and passionate desire is involved in a religious regulation by law produces inequality in some degree, but
belief. To certain persons, no single factor of their the law is not thereby rendered invalid. A classification
experience is more important to them than their religion, otherwise reasonable does not offend the constitution
or their not having any religion. Because of differences in simply because in practice it results in some
religious belief and sentiments, a very poor person may inequality. 61 Anent this matter, it has been said that
consider himself better than the rich, and the man who whenever it is apparent from the scope of the law that its
even lacks the necessities of life may be more cheerful object is for the benefit of the public and the means by
than the one who has all possible luxuries. Due to their which the benefit is to be obtained are of public character,
religious beliefs people, like the martyrs, became the law will be upheld even though incidental advantage
resigned to the inevitable and accepted cheerfully even may occur to individuals beyond those enjoyed by the
the most painful and excruciating pains. Because of general public. 62
differences in religious beliefs, the world has witnessed
turmoil, civil strife, persecution, hatred, bloodshed and 6. Appellant's further contention that Republic Act No.
war, generated to a large extent by members of sects who 3350 violates the constitutional provision on social justice
were intolerant of other religious beliefs. The is also baseless. Social justice is intended to promote the
classification, introduced by Republic Act No. 3350, welfare of all the people. 63 Republic Act No. 3350
therefore, rests on substantial distinctions. promotes that welfare insofar as it looks after the welfare
of those who, because of their religious belief, cannot join
The classification introduced by said Act is also germane labor unions; the Act prevents their being deprived of work
to its purpose. The purpose of the law is precisely to avoid and of the means of livelihood. In determining whether
those who cannot, because of their religious belief, join any particular measure is for public advantage, it is not
labor unions, from being deprived of their right to work and necessary that the entire state be directly benefited — it
from being dismissed from their work because of union is sufficient that a portion of the state be benefited
shop security agreements. thereby.

Republic Act No. 3350, furthermore, is not limited in its Social justice also means the adoption by the
application to conditions existing at the time of its Government of measures calculated to insure economic
enactment. The law does not provide that it is to be stability of all component elements of society, through the
effective for a certain period of time only. It is intended to maintenance of a proper economic and social equilibrium
apply for all times as long as the conditions to which the in the inter-relations of the members of the
law is applicable exist. As long as there are closed shop community. 64 Republic Act No. 3350 insures economic
agreements between an employer and a labor union, and stability to the members of a religious sect, like the Iglesia
there are employees who are prohibited by their religion ni Cristo, who are also component elements of society, for
from affiliating with labor unions, their exemption from the it insures security in their employment, notwithstanding
coverage of said agreements continues. their failure to join a labor union having a closed shop
agreement with the employer. The Act also advances the
Finally, the Act applies equally to all members of said proper economic and social equilibrium between labor
religious sects; this is evident from its provision. The fact unions and employees who cannot join labor unions, for it
that the law grants a privilege to members of said religious exempts the latter from the compelling necessity of joining
sects cannot by itself render the Act unconstitutional, for labor unions that have closed shop agreements and
as We have adverted to, the Act only restores to them equalizes, in so far as opportunity to work is concerned,
their freedom of association which closed shop those whose religion prohibits membership in labor
agreements have taken away, and puts them in the same unions with those whose religion does not prohibit said
plane as the other workers who are not prohibited by their membership. Social justice does not imply social equality,
religion from joining labor unions. The circumstance, that because social inequality will always exist as long as
the other employees, because they are differently social relations depend on personal or subjective
situated, are not granted the same privilege, does not proclivities. Social justice does not require legal equality
render the law unconstitutional, for every classification because legal equality, being a relative term, is
allowed by the Constitution by its nature involves necessarily premised on differentiations based on
inequality. personal or natural conditions. 65 Social justice
guarantees equality of opportunity 66 , and this is precisely
The mere fact that the legislative classification may result what Republic Act No. 3350 proposes to accomplish — it
in actual inequality is not violative of the right to equal gives laborers, irrespective of their religious scrupples,
protection, for every classification of persons or things for equal opportunity for work.
7. As its last ground, appellant contends that the The second paragraph of Section 24 of Republic Act No.
amendment introduced by Republic Act No. 3350 is not 875 which is relied upon by appellant provides that:
called for — in other words, the Act is not proper,
necessary or desirable. Anent this matter, it has been held No suit, action or other proceedings shall
that a statute which is not necessary is not, for that be maintainable in any court against a
reason, unconstitutional; that in determining the labor organization or any officer or
constitutional validity of legislation, the courts are member thereof for any act done by or on
unconcerned with issues as to the necessity for the behalf of such organization in
enactment of the legislation in question. 67 Courts do furtherance of an industrial dispute to
inquire into the wisdom of laws. 68 Moreover, legislatures, which it is a party, on the ground only that
being chosen by the people, are presumed to understand such act induces some other person to
and correctly appreciate the needs of the people, and it break a contract of employment or that it
may change the laws accordingly. 69 The fear is is in restraint of trade or interferes with
entertained by appellant that unless the Act is declared the trade, business or employment of
unconstitutional, employers will prefer employing some other person or with the right of
members of religious sects that prohibit their members some other person to dispose of his
from joining labor unions, and thus be a fatal blow to capital or labor. (Emphasis supplied)
unionism. We do not agree. The threat to unionism will
depend on the number of employees who are members That there was a labor dispute in the instant case cannot
of the religious sects that control the demands of the labor be disputed for appellant sought the discharge of
market. But there is really no occasion now to go further respondent by virtue of the closed shop agreement and
and anticipate problems We cannot judge with the under Section 2 (j) of Republic Act No. 875 a question
material now before Us. At any rate, the validity of a involving tenure of employment is included in the term
statute is to be determined from its general purpose and "labor dispute". 74 The discharge or the act of seeking it is
its efficacy to accomplish the end desired, not from its the labor dispute itself. It being the labor dispute itself, that
effects on a particular case. 70 The essential basis for the very same act of the Union in asking the employer to
exercise of power, and not a mere incidental result arising dismiss Appellee cannot be "an act done ... in furtherance
from its exertion, is the criterion by which the validity of a of an industrial dispute". The mere fact that appellant is a
statute is to be measured. 71 labor union does not necessarily mean that all its acts are
in furtherance of an industrial dispute. 75 Appellant Union,
II. We now pass on the second assignment of error, in therefore, cannot invoke in its favor Section 24 of Republic
support of which the Union argued that the decision of the Act No. 875. This case is not intertwined with any unfair
trial court ordering the Union to pay P500 for attorney's labor practice case existing at the time when Appellee
fees directly contravenes Section 24 of Republic Act No. filed his complaint before the lower court.
875, for the instant action involves an industrial dispute
wherein the Union was a party, and said Union merely Neither does Article 2208 of the Civil Code, invoked by
acted in the exercise of its rights under the union shop the Union, serve as its shield. The article provides that
provision of its existing collective bargaining contract with attorney's fees and expenses of litigation may be awarded
the Company; that said order also contravenes Article "when the defendant's act or omission has compelled the
2208 of the Civil Code; that, furthermore, Appellee was plaintiff ... to incur expenses to protect his interest"; and
never actually dismissed by the defendant Company and "in any other case where the court deems it just and
did not therefore suffer any damage at all . 72 equitable that attorney's fees and expenses of litigation
should be recovered". In the instant case, it cannot be
In refuting appellant Union's arguments, Appellee claimed gainsaid that appellant Union's act in demanding
that in the instant case there was really no industrial Appellee's dismissal caused Appellee to incur expenses
dispute involved in the attempt to compel Appellee to to prevent his being dismissed from his job. Costs
maintain its membership in the union under pain of according to Section 1, Rule 142, of the Rules of Court,
dismissal, and that the Union, by its act, inflicted shall be allowed as a matter of course to the prevailing
intentional harm on Appellee; that since Appellee was party.
compelled to institute an action to protect his right to work,
appellant could legally be ordered to pay attorney's fees WHEREFORE, the instant appeal is dismissed, and the
under Articles 1704 and 2208 of the Civil Code. 73 decision, dated August 26, 1965, of the Court of First
Instance of Manila, in its Civil Case No. 58894, appealed
from is affirmed, with costs against appellant Union. It is
so ordered.
[G.R. No. 115077. April 18, 1997] 2) Voting was not conducted by secret ballot in
violation of Article 241, section (c) of the
BIENVENIDO LAGUESMA 3) The Constitution and by Laws submitted in
support of its petition were not properly
acknowledged and notarized.[3]

On July 9, 1993, Nagkakaisang Lakas ng On August 30, 1993, petitioner filed a

Manggagawa (NLM)-Katipunan (respondent Union) filed Petition[4] seeking the cancellation of the Union's
a petition for certification election with the Department of registration on the grounds of fraud and falsification,
Labor (National Capital Region) in behalf of the rank and docketed as BIR Case No. 8-21-83.[5]Motion was likewise
file employees of the Progressive Development filed by petitioner with the Med-Arbiter requesting
Corporation (Pizza Hut) docketed as NCR Case No. suspension of proceedings in the certification election
NCR-OD-M-9307-020.[1] case until after the prejudicial question of the Union's legal
personality is determined in the proceedings for
Petitioner filed on August 20, 1993, a verified Motion cancellation of registration.
to Dismiss the petition alleging fraud, falsification and
misrepresentation in the respondent Union's registration However, in an Order dated September 29,
making it void and invalid. The motion specifically alleged 1993,[6] Med-Arbiter Rasidali C. Abdullah directed the
that: a) respondent Union's registration was tainted with holding of a certification election among petitioner's rank
false, forged, double or multiple signatures of those who and file employees. The Order explained:
allegedly took part in the ratification of the respondent
Union's constitution and by-laws and in the election of its x x x Sumasaklaw sa Manggagawa ng Pizza Hut is a
officers that there were two sets of supposed attendees to legitimate labor organization in contemplation of law and
the alleged organizational meeting that was alleged to shall remain as such until its very charter certificate is
have taken place on June 26, 1993; that the alleged canceled or otherwise revoked by competent
chapter is claimed to have been supported by 318 authority. The alleged misrepresentation, fraud and false
members when in fact the persons who actually signed statement in connection with the issuance of the charter
their names were much less; and b) while the application certificate are collateral issues which could be properly
for registration of the charter was supposed to have been ventilated in the cancellation proceedings.[7]
approved in the organizational meeting held on June 27,
1993, the charter certification issued by the federation On appeal to the office of the Secretary of Labor,
KATIPUNAN was dated June 26, 1993 or one (1) day Labor Undersecretary Bienvenido E. Laguesma in a
prior to the formation of the chapter, thus, there were Resolution dated December 29, 1993[8] denied the same.
serious falsities in the dates of the issuance of the charter
A motion for reconsideration of the public
certification and the organization meeting of the alleged
respondent's resolution was denied in his Order [9] dated
January 27, 1994, hence, this special civil action for
Citing other instances of misrepresentation and certiorari under Rule 65 of the Revised Rules of Court
fraud, petitioner, on August 29, 1993, filed a Supplement where the principal issue raised is whether or not the
to its Motion to Dismiss,[2] claiming that: public respondent committed grave abuse of discretion in
affirming the Med-Arbiter's order to conduct a certification
1) Respondent Union alleged that the election election among petitioner's rank and file employees,
of its officers was held on June 27, 1993; considering that: (1) respondent Union's legal personality
however, it appears from the documents was squarely put in issue; (2) allegations of fraud and
submitted by respondent union to the BIR- falsification, supported by documentary evidence were
DOLE that the Union's constitution and by- made; and (3) a petition to cancel respondent Union's
laws were adopted only on July 7, 1993, registration is pending with the regional office of the
hence, there was no bases for the supposed Department of Labor and Employment.[10]
election of officers on June 27, 1993
because as of this date, there existed no We grant the petition.
positions to which the officers could be
In the public respondent's assailed Resolution dated
validly elected;
December 29, 1993, the suggestion is made that once a
labor organization has filed the necessary documents and (a) Fifty pesos (P50.00) registration fee;
papers and the same have been certified under oath and
attested to, said organization necessarily becomes (b) The names of its officers, their addresses,
clothed with the character of a legitimate labor the principal address of the labor
organization. The resolution declares: organization, the minutes of the
organizational meetings and the list of the
Records show that at the time of the filing of the subject workers who participated in such meetings;
petition on 9 July 1993 by the petitioner NLM-
KATIPUNAN, for and in behalf of its local affiliate (c) The names of all its members comprising at
Sumasaklaw sa Manggagawa ng Pizza Hut, the latter has least twenty percent (20%) of all the
been clothed with the status and/or character of a employees in the bargaining unit where it
legitimate labor organization. This is so, because on 8 seeks to operate;
July 1993, petitioner submitted to the Bureau of Labor
Relations (BLR), this Department, the following (d) If the applicant union has been in existence
documents: Charter Certificate, Minutes of the for one or more years, copies of its annual
Organizational Meeting, List of Officers, and their financial reports; and
respective addresses, financial statement, Constitution
and By-Laws (CBL, and the minutes of the ratification of (e) Four (4) copies of the constitution and by-
the CBL). Said documents (except the charter certificate) laws of the applicant union, minutes of its
are certified under oath and attested to by the local adoption or ratification, and the list of the
union's Secretary/Treasurer and President, respectively. members who participated in it.

As to the contention that the certification election A more than cursory reading of the aforecited
proceedings should be suspended in view of the pending provisions clearly indicates that the requirements
case for the cancellation of the petitioner's certificate of embodied therein are intended as preventive measures
registration, let it be stressed that the pendency of a against the commission of fraud.After a labor organization
cancellation case is not a ground for the dismissal or has filed the necessary papers and documents for
suspension of a representation proceedings considering registration, it becomes mandatory for the Bureau of
that a registered labor organization continues to be a Labor Relations to check if the requirements under Article
legitimate one entitled to all the rights appurtenant thereto 234 have been sedulously complied with. If its application
until a final valid order is issued canceling such for registration is vitiated by falsification and serious
registration.[11] irregularities, especially those appearing on the face of
the application and the supporting documents, a labor
In essence, therefore, the real controversy in this organization should be denied recognition as a legitimate
case centers on the question of whether or not, after the labor organization. And if a certificate of recognition has
necessary papers and documents have been filed by a been issued, the propriety of the labor organization's
labor organization, recognition by the Bureau of Labor registration could be assailed directly through cancellation
Relations merely becomes a ministerial function. of registration proceedings in accordance with Articles
238 and 239 of the Labor Code, or indirectly, by
We do not agree. challenging its petition for the issuance of an order for
certification election.
In the first place, the public respondent's views as
expressed in his December 29, 1993 Resolution miss the These measures are necessary - and may be
entire point behind the nature and purpose of proceedings undertaken simultaneously - if the spirit behind the Labor
leading to the recognition of unions as legitimate labor Code's requirements for registration are to be given flesh
organizations. Article 234 of the Labor Code provides: and blood. Registration requirements specifically afford a
measure of protection to unsuspecting employees who
Art. 234. Requirements of registration. - Any applicant may be lured into joining unscrupulous or fly-by-night
labor organization, association or group of unions or unions whose sole purpose is to control union funds or
workers shall acquire legal personality and shall be use the labor organization for illegitimate ends.[12] Such
entitled to the rights and privileges granted by law to requirements are a valid exercise of the police power,
legitimate labor organizations upon issuance of the because the activities in which labor organizations,
certificate of registration based on the following associations and unions of workers are engaged directly
requirements: affect the public interest and should be protected.[13]
Thus, in Progressive Development Corporation vs. and chapters to faithfully comply with the law and the rules
Secretary of Labor and Employment,[14] we held: instead of merely snapping union after union into their
folds in a furious bid with rival federations to get the most
The controversy in this case centers on the requirements number of members.
before a local or chapter of a federation may file a petition
for certification election and be certified as the sole and Furthermore, the Labor Code itself grants the Bureau
exclusive bargaining agent of the petitioner's employees. of Labor Relations a period of thirty (30) days within which
to review all applications for registration. Article 235
xxx provides:

But while Article 257 cited by the Solicitor General directs "Art. 235. Action on application. - The Bureau shall act on
the automatic conduct of a certification election in an all applications for registration within thirty (30) days from
unorganized establishment, it also requires that the filing.
petition for certification election must be filed by a
legitimate labor organization. xxx All requisite documents and papers shall be certified
under oath by the secretary or the treasurer of the
xxx organization, as the case may be, and attested to by its
xxx. The employer naturally needs assurance that the
union it is dealing with is a bona-fide organization, one The thirty-day period in the aforecited provision
which has not submitted false statements or ensures that any action taken by the Bureau of Labor
misrepresentations to the Bureau. The inclusion of the Relations is made in consonance with the mandate of the
certification and attestation requirements will in a marked Labor Code, which, it bears emphasis, specifically
degree allay these apprehensions of management. Not requires that the basis for the issuance of a certificate of
only is the issuance of any false statement and registration should be compliance with the requirements
misrepresentation or ground for cancellation of for recognition under Article 234. Since, obviously,
registration (see Article 239 (a), (c) and (d)); it is also a recognition of a labor union or labor organization is not
ground for a criminal charge of perjury. merely a ministerial function, the question now arises as
to whether or not the public respondent committed grave
The certification and attestation requirements are abuse of discretion in affirming the Med-Arbiter's order in
preventive measures against the commission of fraud. spite of the fact that the question of the Union's legitimacy
They likewise afford a measure of protection to was squarely put in issue and that the allegations of fraud
unsuspecting employees who may be lured into joining and falsification were adequately supported by
unscrupulous or fly-by-night unions whose sole purpose documentary evidence.
is to control union funds or to use the union for dubious
ends. The Labor Code requires that in organized and
unorganized[15] establishments, a petition for certification
xxx election must be filed by a legitimate labor
organization. The acquisition of rights by any union or
xxx. It is not this Court's function to augment the labor organization, particularly the right to file a petition for
requirements prescribed by law in order to make them certification election, first and foremost, depends on
wiser or to allow greater protection to the workers and whether or not the labor organization has attained the
even their employer. Our only recourse is, as earlier status of a legitimate labor organization.
discussed, to exact strict compliance with what the law
provides as requisites for local or chapter formation. In the case before us, the Med-Arbiter summarily
disregarded the petitioner's prayer that the former look
xxx into the legitimacy of the respondent Union by a sweeping
declaration that the union was in the possession of a
The Court's conclusion should not be misconstrued as charter certificate so that "for all intents and purposes,
impairing the local union's right to be certified as the Sumasaklaw sa Manggagawa sa Pizza Hut (was) a
employees' bargaining agent in the petitioner's legitimate labor organization."[16] Glossing over the
establishment. We are merely saying that the local union transcendental issue of fraud and misrepresentation
must first comply with the statutory requirements in order raised by herein petitioner, Med-Arbiter Rasidali Abdullah
to exercise this right. Big federations and national unions held that:
of workers should take the lead in requiring their locals
The alleged misrepresentation, fraud and false statement Once a labor organization attains the status of a
in connection with the issuance of the charter certificate legitimate labor organization it begins to possess all of the
are collateral issues which could be ventilated in the rights and privileges granted by law to such
cancellation proceedings.[17] organizations. As such rights and privileges ultimately
affect areas which are constitutionally protected, the
It cannot be denied that the grounds invoked by activities in which labor organizations, associations and
petitioner for the cancellation of respondent Union's unions are engaged directly affect the public interest and
registration fall under paragraph (a) and (c) of Article 239 should be zealously protected. A strict enforcement of the
of the Labor Code. to wit: Labor Code's requirements for the acquisition of the
status of a legitimate labor organization is in order.
(a) Misrepresentation, false statement or fraud in
connection with the adoption or ratification of the Inasmuch as the legal personality of respondent
constitution and by-laws or amendments thereto, the Union had been seriously challenged, it would have been
minutes of ratification, the list of members who took part more prudent for the Med-Arbiter and public respondent
in the ratification of the constitution and by-laws or to have granted petitioner's request for the suspension of
amendments thereto, the minutes of ratification, the list of proceedings in the certification election case, until the
members who took part in the ratification; issue of the legality of the Union's registration shall have
been resolved. Failure of the Med-Arbiter and public
xxx respondent to heed the request constituted a grave abuse
of discretion.
(c) Misrepresentation, false statements or fraud in
connection with the election of officers, minutes of the WHEREFORE, PREMISES CONSIDERED, the
election of officers, the list of voters, or failure to submit instant petition is GRANTED and the Resolution and
these documents together with the list of the newly Order of the public respondent dated December 29, 1993
elected-appointed officers and their postal addresses and January 24, 1994, respectively, are hereby SET
within thirty (30) days from election ASIDE.

xxx The case is REMANDED to the Med-Arbiter to

resolve with reasonable dispatch petitioner's petition for
The grounds ventilated in cancellation proceedings cancellation of respondent Union's registration
in accordance with Article 239 of the Labor Code
constitute a grave challenge to the right of respondent SO ORDERED.
Union to ask for certification election. The Med-Arbiter
should have looked into the merits of the petition for 26. INSULAR LIFE ASSURANCE CO.,
cancellation before issuing an order calling for certification
election. Registration based on false and fraudulent
G.R. N o. 119930, 12 March 1998, FIRST DIVISION ,
statements and documents confer no legitimacy upon a
(Bellosillo, J.)
labor organization irregularly recognized, which, at best,
holds on to a mere scrap of paper. Under such Facts
circumstances, the labor organization, not being a
legitimate labor organization, acquires no rights, On 1992, Insular Life entered into an agency contract,
particularly the right to ask for certification election in a which it prepared wholly, with Pantaleon de los Reyes
bargaining unit. authorizing him to

As we laid emphasis in Progressive Development solicit within the Philippines applications for life insurance
Corporation Labor,[18] "[t]he employer needs the and annuities for which he would be paid compensation
assurance that the union it is dealing with is a bona fide by commissions. It contained stipulation that no employer-
organization, one which has not submitted false employee relationship shall be created between the
statements or misrepresentations to the Bureau." Clearly, parties and that the agent shall be free to exercise his own
fraud, falsification and misrepresentation in obtaining judgment as to time, place and means of soliciting
recognition as a legitimate labor organization are contrary insurance. De los Reyes however was prohibited by
to the Med-Arbiter's conclusion not merely collateral Insular Life from working for any other life insurance
issues. The invalidity of respondent Union's registration company, and violation of which was sufficient ground for
would negate its legal personality to participate in termination. He was required to submit all completed
certification election. applications for insurance, deliver policies, receive and
collect initial premiums and balances of first year YES. Parenthetically, both Insular Life and NLRC treated
premiums, renewal premiums, deposits on applications, the agency contract and the management contract
and payments on policy loans. He was also bound to turn entered into between
over to the company immediately any and all sums of
money collected by him. Insular Life and De los Reyes as contracts of agency. We
however hold otherwise. Unquestionably there exist major
On 1993, Insular Life and De los Reyes entered into distinctions between the two agreements. While the first
another contract where De los Reyes was appointed as has the earmarks of an agency contract, the second is far
Acting Unit Manager in its Cebu office. His duties and removed from the concept of agency in that provided
responsibilities included the recruitment, training, therein are conditionalities that indicate an employer-
organization and development of a sufficient number of employee relationship. The N LRC was correct in finding
qualified, competent and trustworthy underwriters, and to that De los Reyes was an employee of Insular Life, but
supervise and coordinate the sales efforts of the this holds true only insofar as the management contract is
underwriters in the active solicitation of new business and concerned.
in the furtherance of the agency’s assigned goals.
It is axiomatic that the existence of an employer-employee
The contract stipulated that De los Reyes is considered relationship cannot be negated by expressly repudiating it
as an independent contractor. De los Reyes together with in the management contract and providing therein that the
his unit force was granted freedom to exercise judgment “employee” is an independent contractor when the terms
as to time, place and means of soliciting insurance. As of agreement clearly show otherwise. For, the
acting unit manager, he was given production bonus, employment status of a person is defined and prescribed
development allowance and “financial assistance” by law and not by what the parties say it should be. In
deemed as an advance against expected commissions determining the status of the management contract, the
only upon his fulfillment of certain quota requirements. He “fourfold test” on employment earlier mentioned has to be
was also expressly obliged to participate in the company’s applied.
conservation program, i.e., preservation and maintenance
of existing insurance policies, and to accept moneys duly The very designation of the appointment of De los Reyes
as “acting” unit manager obviously implies a temporary
receipted on agent’s receipts provided the same were employment status which may be made permanent only
turned over to the company. upon compliance with company standards under the
management contract.
He was notified on 1993 that his services were
terminated. Then he filed a complaint before the Labor It cannot be validly claimed that the financial assistance
Arbiter for illegal dismissal and non-payment of his consisting of the free portion of the UDF was purely
salaries and separation pay. The LA dismissed it saying dependent on the
that there was no employer-employee relationship for the
element of control was not established. The NLRC premium production of the agent. Be that as it may, it is
reversed the LA’s decision, saying there was employer- worth considering that the payment of compensation by
employee relationship, for Insular Life limited the work of way of commission does not militate against the
De los Reyes to selling of a certain insurance policy, conclusion that De los Reyes was an employee of Insular
assigned him to a particular place and table, paid him as Life. Under Art. 97 of the Labor Code, “wage” shall mean
Acting Unit Manager, and promised him of promotion “however designated, capable of being expressed in
upon meeting of certain terms of money, whether fixed or ascertained on a time,
task, price or commission basis”
requirements and quotas.
De los Reyes’ duty to collect the company’s premiums
ISSUE: using company receipts under the management contract
is further evidence of Insular Life’s control over De los
Is De los Reyes an employee of Insular Life even if the Reyes. De los Reyes was appointed Acting Unit Manager,
management contract stipulated him only as an not agency manager. There is no evidence that to
independent contractor? implement his obligations under the management
contract, De los Reyes had organized an office.
Insular Life in fact has admitted that it provided De los
Reyes a place and a table at its office where he reported
for and worked whenever he was not out in the field. and Hernando Clemente, a union director. The two union
Under the managership contract, De los Reyes was officers inquired about the stand of the company
obliged to work exclusively for Insular Life in life insurance regarding the duration of the CBA which was set to expire
solicitation and was imposed premium production quotas. in a few months. Salazar told the union officers that the
Of course, the acting unit manager could not underwrite matter could be best discussed during the formal
other lines of insurance because his Permanent negotiations which would start soon.
Certificate of Authority was for life insurance only and for
no other. He was proscribed from accepting a managerial In March 1993, Ocampo and Clemente again
or supervisory position in any other office including the approached Salazar. They inquired once more about the
government without the written consent of Insular Life. As CBA status and received the same reply from Salazar. In
Acting Unit Manager, De los Reyes performed functions April 1993, Ocampo requested for a meeting to discuss
beyond mere solicitation of insurance business for Insular the duration and effectivity of the CBA. Salazar acceded
Life. As found by the N LRC, he exercised administrative and a meeting was held on 15 April 1993 where the union
functions which were necessary and beneficial to the officers asked whether Salazar would be amenable to
business of INSULAR LIFE. make the new CBA effective for two (2) years, starting 01
August 1993. Salazar, however, declared that it would still
Exclusivity of service, control of assignments and removal be premature to discuss the matter and that the company
of agents under De los Reyes’s unit, collection of could not make a decision at the moment. The very next
premiums, furnishing of company facilities and materials day, or on 16 April 1993, all the rank-and-file employees
as well as capital described as Unit Development Fund of the company refused to follow their regular two-shift
are but hallmarks of the management system in which De work schedule of from 6:00 a.m. to 6:00 p.m., and from
los Reyes worked. This obtaining, there is no escaping 6:00 p.m. to 6:00 a.m. At 2:00 p.m. and 2:00 a.m.,
the conclusion that de los Reyes was an employee of respectively, the employees stopped working and left their
Insular Life. workplace without sealing the containers and
securing the raw materials they were working
[G.R. No. 142824. December 19, 2001] on. When Salazar inquired about the reason for their
refusal to follow their normal work schedule, the
27. *INTERPHIL LABORATORIES EMPLOYEES employees told him to "ask the union officers." To
UNION-FFW, ENRICO GONZALES and MA. minimize the damage the overtime boycott was causing
THERESA MONTEJO vs. INTERPHIL the company, Salazar immediately asked for a meeting
LABORATORIES, INC., AND HONORABLE with the union officers. In the meeting, Enrico Gonzales,
LEONARDO A. QUISUMBING, SECRETARY a union director, told Salazar that the employees would
OF LABOR AND EMPLOYMENT only return to their normal work schedule if the company
would agree to their demands as to the effectivity and
Assailed in this petition for review on certiorari are duration of the new CBA. Salazar again told the union
the decision, promulgated on 29 December 1999, and the officers that the matter could be better discussed during
resolution, promulgated on 05 April 2000, of the Court of the formal renegotiations of the CBA.Since the union was
Appeals in CA-G.R. SP No. 50978. apparently unsatisfied with the answer of the company,
the overtime boycott continued. In addition, the
Culled from the questioned decision, the facts of the employees started to engage in a work slowdown
case are as follows: campaign during the time they were working, thus
substantially delaying the production of the company.[2]
Interphil Laboratories Employees Union-FFW is the
sole and exclusive bargaining agent of the rank-and-file On 14 May 1993, petitioner union submitted with
employees of Interphil Laboratories, Inc., a company respondent company its CBA proposal, and the latter filed
engaged in the business of manufacturing and packaging its counter-proposal.
pharmaceutical products. They had a Collective
Bargaining Agreement (CBA) effective from 01 August On 03 September 1993, respondent company filed
1990 to 31 July 1993. with the National Labor Relations Commission (NLRC) a
petition to declare illegal petitioner unions overtime
Prior to the expiration of the CBA or sometime in boycott and work slowdown which, according to
February 1993, Allesandro G. Salazar,[1] Vice-President- respondent company, amounted to illegal strike. The
Human Resources Department of respondent company, case, docketed NLRC-NCR Case No. 00-09-05529-93,
was approached by Nestor Ocampo, the union president, was assigned to Labor Arbiter Manuel R. Caday.
On 22 October 1993, respondent company filed with and ADOPT the same as the decision in this case, and
the National Conciliation and Mediation Board (NCMB) an judgment is hereby rendered:
urgent request for preventive mediation aimed to help the
parties in their CBA negotiations.[3] The parties, however, (1) Declaring the overtime boycott and work slowdown as
failed to arrive at an agreement and on 15 November illegal strike;
1993, respondent company filed with Office of the
Secretary of Labor and Employment a petition for (2) Declaring the respondent union officers namely:
assumption of jurisdiction.
Nestor Ocampo - President
On 24 January 1994, petitioner union filed with the
NCMB a Notice of Strike citing unfair labor practice Carmelo Santos - Vice-President
allegedly committed by respondent company. On 12
February 1994, the union staged a strike. Marites Montejo - Treasurer/Board Member

On 14 February 1994, Secretary of Labor Nieves Rico Gonzales - Auditor

Confesor issued an assumption order[4] over the labor
Rod Abuan - Director
dispute. On 02 March 1994, Secretary Confesor issued
an order directing respondent company to immediately
Segundino Flores - Director
accept all striking workers, including the fifty-three (53)
terminated union officers, shop stewards and union Hernando Clemente - Director
members back to work under the same terms and
conditions prevailing prior to the strike, and to pay all the who spearheaded and led the overtime boycott and
unpaid accrued year end benefits of its employees in work slowdown, to have lost their employment
1993.[5] On the other hand, petitioner union was directed status; and
to strictly and immediately comply with the return to work
orders issued by (the) Office x x x.[6] The same order (3) Finding the respondents guilty of unfair labor
pronounced that (a)ll pending cases which are direct practice for violating the then existing
offshoots of the instant labor dispute are hereby CBA which prohibits the union or any
subsumed herewith.[7] employee during the existence of the
CBA from staging a strike or engaging in
In the interim, the case before Labor Arbiter Caday slowdown or interruption of work and
continued. On 16 March 1994, petitioner union filed an ordering them to cease and desist from
Urgent Manifestation and Motion to Consolidate the further committing the aforesaid illegal
Instant Case and to Suspend Proceedings seeking the acts.
consolidation of the case with the labor dispute pending
before the Secretary of Labor. Despite objection by Petitioner union moved for the reconsideration of the
respondent company, Labor Arbiter Caday held in order but its motion was denied. The union went to the
abeyance the proceedings before him. However, on 06 Court of Appeals via a petition for certiorari. In the now
June 1994, Acting Labor Secretary Jose S. Brillantes, questioned decision promulgated on 29 December 1999,
after finding that the issues raised would require a formal the appellate court dismissed the petition. The unions
hearing and the presentation of evidentiary matters, motion for reconsideration was likewise denied.
directed the Labor Arbiters Caday and M. Sol del Rosario
to proceed with the hearing of the cases before them and Hence, the present recourse where petitioner
to thereafter submit their report and recommendation to alleged:
his office.
On 05 September 1995, Labor Arbiter Caday OF APPEALS, LIKE THE HONORABLE PUBLIC
submitted his recommendation to the then Secretary of RESPONDENT IN THE PROCEEDINGS BELOW,
Labor Leonardo A. Quisumbing.[8] Then Secretary COMMITTED GRAVE ABUSE OF DISCRETION,
Quisumbing approved and adopted the report in his AMOUNTING TO LACK AND/OR EXCESS OF
Order, dated 13 August 1997, hence: JURISDICTION WHEN IT COMPLETELY
Manuel R. Caday to be supported by substantial PROFERRED BY THE PARTIES.
evidence, this Office hereby RESOLVES to APPROVE
THE HONORABLE FIFTH DIVISION OF THE COURT In the present case, the Secretary was explicitly granted
OF APPEALS COMMITTED GRAVE ABUSE OF by Article 263(g) of the Labor Code the authority to
DISCRETION, AMOUNTING TO LACK AND/OR assume jurisdiction over a labor dispute causing or likely
EXCESS OF JURISDICTION, WHEN IT DID NOT to cause a strike or lockout in an industry indispensable to
DECLARE PRIVATE RESPONDENTS ACT OF the national interest, and decide the same
EXTENDING SUBSTANTIAL SEPARATION PACKAGE accordingly. Necessarily, this authority to assume
TO ALMOST ALL INVOLVED OFFICERS OF jurisdiction over the said labor dispute must include and
PETITIONER UNION, DURING THE PENDENCY OF extend to all questions and controversies arising
THE CASE, AS TANTAMOUNT TO CONDONATION, IF therefrom, including cases over which the labor
INDEED, THERE WAS ANY MISDEED COMMITTED. arbiter has exclusive jurisdiction.

THE HONORABLE FIFTH DIVISION OF THE COURT Moreover, Article 217 of the Labor Code is not without,
OF APPEALS COMMITTED GRAVE ABUSE OF but contemplates, exceptions thereto. This is evident from
DISCRETION, AMOUNTING TO LACK AND/OR the opening proviso therein reading (e)xcept as otherwise
EXCESS OF JURISDICTION WHEN IT HELD THAT THE provided under this Code x x x.Plainly, Article 263(g) of
SECRETARY OF LABOR AND EMPLOYMENT HAS the Labor Code was meant to make both the Secretary
JURISDICTION OVER A CASE (A PETITION TO (or the various regional directors) and the labor arbiters
DECLARE STRIKE ILLEGAL) WHICH HAD LONG BEEN share jurisdiction, subject to certain
FILED AND PENDING BEFORE THE LABOR conditions. Otherwise, the Secretary would not be able to
ARBITER.[9] effectively and efficiently dispose of the primary
dispute. To hold the contrary may even lead to the absurd
We sustain the questioned decision. and undesirable result wherein the Secretary and the
labor arbiter concerned may have diametrically opposed
On the matter of the authority and jurisdiction of the rulings. As we have said, (i)t is fundamental that a statute
Secretary of Labor and Employment to rule on the illegal is to be read in a manner that would breathe life into it,
strike committed by petitioner union, it is undisputed that rather than defeat it.
the petition to declare the strike illegal before Labor
Arbiter Caday was filed long before the Secretary of Labor In fine, the issuance of the assailed orders is within the
and Employment issued the assumption order on 14 province of the Secretary as authorized by Article 263(g)
February 1994. However, it cannot be denied that the of the Labor Code and Article 217(a) and (5) of the same
issues of overtime boycott and work slowdown amounting Code, taken conjointly and rationally construed to
to illegal strike before Labor Arbiter Caday are intertwined subserve the objective of the jurisdiction vested in the
with the labor dispute before the Labor Secretary. In fact, Secretary.[11]
on 16 March 1994, petitioner union even asked Labor
Arbiter Caday to suspend the proceedings before him and Anent the alleged misappreciation of the evidence
consolidate the same with the case before the Secretary proffered by the parties, it is axiomatic that the factual
of Labor. When Acting Labor Secretary Brillantes ordered findings of the Labor Arbiter, when sufficiently supported
Labor Arbiter Caday to continue with the hearing of the by the evidence on record, must be accorded due respect
illegal strike case, the parties acceded and participated in by the Supreme Court.[12] Here, the report and
the proceedings, knowing fully well that there was also a recommendation of Labor Arbiter Caday was not only
directive for Labor Arbiter Caday to thereafter submit his adopted by then Secretary of Labor Quisumbing but it was
report and recommendation to the Secretary. As the likewise affirmed by the Court of Appeals. We see no
appellate court pointed out, the subsequent participation reason to depart from their findings.
of petitioner union in the continuation of the hearing was
in effect an affirmation of the jurisdiction of the Secretary Petitioner union maintained that the Labor Arbiter
of Labor. and the appellate court disregarded the parol evidence
rule[13] when they upheld the allegation of respondent
The appellate court also correctly held that the company that the work schedule of its employees was
question of the Secretary of Labor and Employments from 6:00 a.m. to 6:00 p.m. and from 6:00 p.m. to 6:00
jurisdiction over labor-related disputes was already a.m. According to petitioner union, the provisions of their
settled in International Pharmaceutical, Inc. vs. Hon. CBA on working hours clearly stated that the normal
Secretary of Labor and Associated Labor Union working hours were from 7:30 a.m. to 4:30
(ALU)[10] where the Court declared: p.m.[14] Petitioner union underscored that the regular work
hours for the company was only eight (8) hours. It further
contended that the Labor Arbiter as well as the Court of union for and in behalf of its members, wherein it is
Appeal should not have admitted any other evidence claimed that the company has not been computing
contrary to what was stated in the CBA. correctly the night premium and overtime pay for work
rendered between 2:00 A.M. and 6:00 A.M. of the 6:00
The reliance on the parol evidence rule is P.M. to 6:00 A.M. shift. (tsn pp. 9-10, testimony of
misplaced. In labor cases pending before the Alessandro G. Salazar during hearing on August 9,
Commission or the Labor Arbiter, the rules of evidence 1994). In fact, the union Vice-President Carmelo C.
prevailing in courts of law or equity are not Santos, demanded that the company make a
controlling.[15]Rules of procedure and evidence are not recomputation of the overtime records of the employees
applied in a very rigid and technical sense in labor from 1987 (Exh. "P"). Even their own witness, union
cases.[16] Hence, the Labor Arbiter is not precluded from Director Enrico C. Gonzales, testified that when in 1992
accepting and evaluating evidence other than, and even he was still a Quality Control Inspector at the Sucat Plant
contrary to, what is stated in, the CBA. of the company, his schedule was sometime at 6:00 A.M.
to 6:00 P.M., sometime at 6:00 A.M. to 2:00 P.M., at 2:00
In any event, the parties stipulated: P.M. to 10:00 P.M. and sometime at 6:00 P.M. to 6:00
A.M., and when on the 6 to 6 shifts, he received the
Section 1. Regular Working Hours - A normal workday commensurate pay (t.s.n. pp. 7-9, hearing of January 10,
shall consist of not more than eight (8) hours. The regular 1994). Likewise, while in the overtime permits, dated
working hours for the Company shall be from 7:30 A.M. to March 1, 6, 8, 9 to 12, 1993, which were passed around
4:30 P.M. The schedule of shift work shall be daily for the employees to sign, his name appeared but
maintained; however the company may change the without his signatures, he however had rendered
prevailing work time at its discretion, should such change overtime during those dates and was paid because unlike
be necessary in the operations of the Company. All in other departments, it has become a habit to them to
employees shall observe such rules as have been laid sign the overtime schedule weekly (t.s.n. pp. 26-31,
down by the company for the purpose of effecting control hearing of January 10, 1994). The awareness of the
over working hours.[17] respondent union, its officers and members about the
existence of the regular overtime schedule of 6:00 A.M. to
It is evident from the foregoing provision that the 6:00 P.M. and 6:00 P.M. to 6:00 A.M. of the following day
working hours may be changed, at the discretion of the
will be further shown in the discussion of the second
company, should such change be necessary for its
operations, and that the employees shall observe such
rules as have been laid down by the company. In the case As to the second issue of whether or not the respondents
before us, Labor Arbiter Caday found that respondent have engaged in "overtime boycott" and "work slowdown"
company had to adopt a continuous 24-hour work daily from April 16, 1993 up to March 7, 1994, both amounting
schedule by reason of the nature of its business and the to illegal strike, the evidence presented is equally crystal
demands of its clients. It was established that the clear that the "overtime boycott" and "work slowdown"
employees adhered to the said work schedule since committed by the respondents amounted to illegal strike.
1988. The employees are deemed to have waived the
eight-hour schedule since they followed, without any As undisputably testified to by Mr. Alessandro G. Salazar,
question or complaint, the two-shift schedule while their the company's Vice-President-Human Resources
CBA was still in force and even prior thereto. The two-shift Department, sometime in February, 1993, he was
schedule effectively changed the working hours stipulated approached by the union President NestorOcampo and
in the CBA. As the employees assented by practice to this Union Director Hernando Clemente who asked him as to
arrangement, they cannot now be heard to claim that the what was the stand of the company regarding the duration
overtime boycott is justified because they were not of the CBA between the company and which was set to
obliged to work beyond eight hours. expire on July 31, 1993. He answered that the matter
could be best discussed during the formal renegotiations
As Labor Arbiter Caday elucidated in his report: which anyway was to start soon. This query was followed
up sometime in March, 1993, and his answer was the
Respondents' attempt to deny the existence of such same. In early April, 1993, the union president requested
regular overtime schedule is belied by their own for a meeting to discuss the duration and effectivity of the
awareness of the existence of the regular overtime CBA. Acceding to the request, a meeting was held on
schedule of 6:00 A.M. to 6:00 P.M. and 6:00 P.M. to 6:00 April 15, 1993 wherein the union officers asked him if he
A.M. of the following day that has been going on since would agree to make the new CBA effective on August 1,
1988. Proof of this is the case undisputedly filed by the
1993 and the term thereof to be valid for only two (2) Sabado at Linggo' na siya namang araw ng "overtime" ko.
years. When he answered that it was still premature to xxx
discuss the matter, the very next day, April 16, 1993, all
the rank and file employees of the company refused to 3. Nakalipas ang dalawaang buwan at noong unang
follow their regular two-shift work schedule of 6:00 A.M. to bahagi ng Abril 1993, miniting kami ng Shop Stewards
6:00 P.M. and 6:00 P.M. to 6:00 A.M., when after the 8- namin na sina Ariel Abenoja, Dany Tansiongco at Vicky
hours work, they abruptly stopped working at 2:00 P.M. Baron. Sinabihan kami na huwag ng mag-ovetime pag
and 2:00 A.M., respectively, leaving their place of work nagbigay ng senyas ang Unyon ng "showtime."
without sealing the containers and securing the raw
materials they were working on.When he saw the workers 4. Noong umaga ng ika-15 ng Abril 1993, nagsabi na si
leaving before the end of their shift, he asked them why Danny Tansiongco ng "showtime". Dahil dito wala ng
and their reply was "asked (sic) the union empleyadong nag-overtime at sabay-sabay silang umalis,
officers." Alarmed by the overtime boycott and the maliban sa akin. Ako ay pumasok rin noong Abril 17 at 18,
damage it was causing the company, he requested for a 1993 na Sabado at Linggo.
meeting with the union officers. In the meeting, he asked
them why the regular work schedule was not being 5. Noong ika-19 ng Abril 1993, ako ay ipinatawag ni Ariel
followed by the employees, and union Director Enrico Abenoja Shop Steward, sa opisina ng Unyon. Nadatnan
Gonzales, with the support of the other union officers, told ko doon ang halos lahat ng opisyales ng Unyon na sina:
him that if management would agree to a two-year
duration for the new CBA and an effectivity date of August Nestor Ocampo ----- Presidente
1, 1993, all employees will return to the normal work
Carmelo Santos ----- Bise-Presidente
schedule of two 12-hour shifts. When answered that the
management could not decide on the matter at the
Nanding Clemente -- Director
moment and to have it discussed and agreed upon during
the formal renegotiations, the overtime boycott continued Tess Montejo------- Chief Steward
and the employees at the same time employed a work
slowdown campaign during working hours, causing Segundo Flores ------ Director
considerable delay in the production and complaints from
the clients/customers (Exh. "O", Affidavit of Alessandro G. Enrico Gonzales ----- Auditor
Salazar which formed part of his direct testimony). This
testimonial narrations of Salazar was, as earlier said, Boy Alcantara ------- Shop Steward
undisputed because the respondents' counsel waived his
cross examination (t.s.n. p. 15, hearing on August 9, Rod Abuan ----------- Director
at marami pang iba na hindi ko na maala-ala. Pagpasok
Aside from the foregoing undisputed testimonies of ko, ako'y pinaligiran ng mga opisyales ng
Salazar, the testimonies of other Department Managers Unyon. Tinanong ako ni Rod Aguan kung bakit ako "nag-
pointing to the union officers as the instigators of the ovetime" gayong "Binigyan ka na namin ng instruction na
overtime boycott and work slowdown, the testimony of huwag pumasok, pinilit mo pa ring
Epifanio Salumbides (Exh. "Y") a union member at the pumasok." "Management ka ba o Unyonista." Sinagot ko
time the concerted activities of the respondents took na ako ay Unyonista. Tinanong niya muli kung bakit ako
place, is quoted hereunder: pumasok. Sinabi ko na wala akong maibigay na dahilan
para lang hindi pumasok at "mag-overtime." Pagkatapos
2. Noon Pebrero 1993, ipinatawag ng Presidente ng nito, ako ay pinagmumura ng mga opisyales ng Unyon
Unyon na si Nestor Ocampo ang lahat ng taga- kaya't ako ay madaliang umalis.
maintenance ng bawat departamento upang dumalo sa
isang miting. Sa miting na iyon, sinabi ni Rod Abuan, na x x x"
isang Direktor ng Unyon, na mayroon ilalabas na memo
ang Unyon na nag-uutos sa mga empleyado ng Likewise, the respondents' denial of having a hand in the
Kompanya na mag-imbento ng sari-saring dahilan para work slowdown since there was no change in the
lang hindi sila makapagtrabaho ng"overtime". Sinabihan performance and work efficiency for the year 1993 as
rin ako ni Tessie Montejo na siya namang Treasurer ng compared to the previous year was even rebuffed by their
Unyon na 'Manny, huwag ka na lang pumasok sa witness M. Theresa Montejo, a Quality Control
Biyernes para hindi ka masabihan ng magtrabaho ng Analyst. For on cross-examination, she (Montejo)
admitted that she could not answer how she was able to operations of the COMPANY during the term of xxx (their
prepare the productivity reports from May 1993 to collective bargaining) agreement.
February 1994 because from April 1993 up to April 1994,
she was on union leave. As such, the productivity reports What has just been said makes unnecessary resolution of
she had earlier shown was not prepared by her since she SMCs argument that the workers concerted refusal to
had no personal knowledge of the reports (t.s.n. pp. 32- adhere to the work schedule in force for the last several
35, hearing of February 27, 1995). Aside from this years, is a slowdown, an inherently illegal activity
admission, the comparison made by the respondents was essentially illegal even in the absence of a no-strike
of no moment, because the higher production for the clause in a collective bargaining contract, or statute or
years previous to 1993 was reached when the employees rule. The Court is in substantial agreement with the
regularly rendered overtime work. But undeniably, petitioners concept of a slowdown as a strike on the
overtime boycott and work slowdown from April 16, 1993 installment plan; as a willful reduction in the rate of work
up to March 7, 1994 had resulted not only in financial by concerted action of workers for the purpose of
losses to the company but also damaged its business restricting the output of the employer, in relation to a labor
reputation. dispute; as an activity by which workers, without a
complete stoppage of work, retard production or their
Evidently, from all the foregoing, respondents' unjustified performance of duties and functions to compel
unilateral alteration of the 24-hour work schedule thru management to grant their demands. The Court also
their concerted activities of "overtime boycott" and "work agrees that such a slowdown is generally condemned as
slowdown" from April 16, 1993 up to March 7, 1994, to inherently illicit and unjustifiable, because while the
force the petitioner company to accede to their employees continue to work and remain at their positions
unreasonable demands, can be classified as a strike on and accept the wages paid to them, they at the same time
an installment basis, as correctly called by petitioner select what part of their allotted tasks they care to perform
company. xxx[19] of their own volition or refuse openly or secretly, to the
employers damage, to do other work; in other words, they
It is thus undisputed that members of the union by work on their own terms. x x x.[24]
their own volition decided not to render overtime services
in April 1993.[20] Petitioner union even admitted this in its Finally, the Court cannot agree with the proposition
Memorandum, dated 12 April 1999, filed with the Court of that respondent company, in extending substantial
Appeals, as well as in the petition before this Court, which separation package to some officers of petitioner union
both stated that "(s)sometime in April 1993, members of during the pendency of this case, in effect, condoned the
herein petitioner, on their own volition and in keeping with illegal acts they committed.
the regular working hours in the Company x x x decided
not to render overtime".[21] Such admission confirmed the Respondent company correctly postured that at the
allegation of respondent company that petitioner engaged time these union officers obtained their separation
in overtime boycott and work slowdown which, to use the benefits, they were still considered employees of the
words of Labor Arbiter Caday, was taken as a means to company. Hence, the company was merely complying
coerce respondent company to yield to its unreasonable with its legal obligations.[25] Respondent company could
demands. have withheld these benefits pending the final resolution
of this case. Yet, considering perhaps the financial
More importantly, the overtime boycott or work hardships experienced by its employees and the
slowdown by the employees constituted a violation of their economic situation prevailing, respondent company
CBA, which prohibits the union or employee, during the chose to let its employees avail of their separation
existence of the CBA, to stage a strike or engage in benefits. The Court views the gesture of respondent
slowdown or interruption of work.[22] In Ilaw at Buklod ng company as an act of generosity for which it should not
Manggagawa vs. NLRC,[23] this Court ruled: be punished.

x x x (T)he concerted activity in question would still be WHEREFORE, the petition is DENIED DUE
illicit because contrary to the workers explicit contractual COURSE and the 29 December 1999 decision of the
commitment that there shall be no strikes, walkouts, Court of Appeals is AFFIRMED.
stoppage or slowdown of work, boycotts, secondary
boycotts, refusal to handle any merchandise, picketing, SO ORDERED.
sit-down strikes of any kind, sympathetic or general
strikes, or any other interference with any of the
28. Nestle Case requisites majority, the Union submitted to the
Management of said corporations a set of demands for a
collective bargaining agreement (Exhibits A, A-1 and 3).
G.R. Nos. L-24267-8 May 31, 1966 This led to negotiations, held, sometimes, with the
intervention of the Conciliation Division of the Bureau of
29. *PERFECTO FERRER, OSCAR FLORES, Labor, and, sometimes, directly, between the
JULIAN AGUSTIN, FELICISIMO LICHUCA, representatives of the parties, without said intervention,
PIO SUMAGIT and INHELDER and lasting for several weeks. As an agreement was
LABORATORIES, INC. and SISTER reached on some points, the same were incorporated into
COMPANIES EMPLOYEES UNION vs. COURT a draft of agreement, which, in turn, became the basis for,
OF INDUSTRIAL RELATIONS, INHELDER or was followed by, further negotiations. As additional
LABORATORIES, INC., SAN ROQUE points of agreement were reached, another draft of
TRADING CORPORATION AND/OR HANS agreement was prepared.
MANAGER In a meeting held before said Conciliation Division, in the
morning of May 29, 1963, another such draft (Exhibit C-1)
These are two (2) unfair labor practice cases commenced was drawn, to which the Management refers as "final
in the Court of Industrial Relations. One (L-24268) was draft". However, petitioners' representatives pressed for
filed by the Management of Inhelder Laboratories, Inc. the inclusion, in the agreement, of a union clause, an
and its sister companies (Inhelder, Inc. and San Roque accumulated sick leave clause, and an accumulated
Trading Corporation) against the Labor Union of vacation leave clause, apart from the increase of the high
employees thereof and some officers and members of the cost of living monthly allowance from P20.00 to P30.00,
Union, and the other (L-24267) by the latter against the the creation of a grievance committee and a general
former. Being interrelated, the two cases were jointly salary increase. The negotiations continued in the
heard. In due course, the trial Judge, Hon. Ansberto P. afternoon of May 29, 1963, and were resumed in the
Paredes, rendered a decision dismissing the complaints morning of May 30 or 31, 1963, in the course of which,
in both cases. On motion for reconsideration filed by the respondents contend, the Management agreed to
Management, the Court of Industrial Relations en banc, in increase the high cost of living allowance to P25.00,
a resolution penned by Judge Emiliano C. Tabigne, and provided that the other demands were withdrawn, to
concurred "in the result" by Presiding Judge Arsenio I. which petitioners allegedly gave their conformity. Another
Martinez and Associate Judge Amando C. Bugayong, and draft of agreement (Exhibit D) — which the
with, in effect, the dissent of Judge Paredes, reconsidered representatives of Management, again, characterizes as
the latter's decision, insofar as it dismissed the complaint "final" — was, accordingly, prepared, and the
of the Management, and decreed that the officers and representatives of both parties initialed it, with the
members of the Union who had participated in a peaceful understanding, according to respondents, that the
strike staged by the latter from July 1 to July 15, 1963, "be agreement would be signed on June 1, 1963. In the
considered to have lost their status as employees of the afternoon of May 31, 1963, petitioners' representative
companies" aforementioned. Hence, this appeal called, however, that of Management and asked for the
by certiorari taken by the Union and its members inclusion in the agreement a union shop or union security
adversely affected by the said resolution. clause. This request not having been granted, the Union
later refused to sign the agreement.
The main issue in this appeal is whether said strike was
illegal or not. Respondents herein maintain that it was, The Court of Industrial Relations en banc was of the
because of petitioners' failure to give a 30-day notice of opinion that, inasmuch as the document last mentioned
their intention to strike and because the strike had (Exhibit D) was a "final draft" of the agreement between
allegedly been called in bad faith. Upon the other hand, the parties, and petitioners' representatives had initialed
petitioners contend that it was not, for the reason that the said draft, "the refusal ... of the union to sign the final or
strike was provoked by alleged unfair labor practices on clean form of the contract on June 1, 1963, its refusal to
the part of the respondents and because said petitioners honor Exhibit D as a perfected contract and its insistence
had acted in good faith in staging said strike. in negotiating the contract so recently after its perfection
are constitutive of bad faith"; that the strike staged by the
The records show that, immediately after an election held Union from July 1 to July 15, 1963, was not, therefore, one
on March 27, 1963, which Inhelder Laboratories Inc. and provoked by unfair labor practices on the part of the
Sister Companies Employees Union obtained the Management; and that, since thirty (30) days had not
elapsed since appellants had given, on June 13, 1963, the therewith a draft of the collective bargaining agreement
corresponding notice, the strike staged by them from July (Exhibit A-1) they would wish to have with the
1 to July 15, 1963, was illegal and those who took part in Management, as the basis for negotiations between both
it are deemed separated from the service. parties; that such negotiations lasted from late in March to
early in July, 1963, that, as they threshed out their points
Upon the other hand, His Honor, the trial Judge, held of difference, those that had been settled were
otherwise, upon the ground that the surrounding incorporated into another draft of agreement prepared by
circumstances were such that petitioners were the Management; that the latter was followed by further
reasonably justified in believing that the respondents' acts negotiations on other points; that, when an agreement
constituted unfair labor practices and that petitioners had was reached thereon, another draft incorporating said
to strike forthwith in order to arrest the evil effects of said additional points was made; that, when Exhibit D was
practices upon the Union and its members. prepared, several demands of the Union, contained in
Exhibit A-1, were still pending settlement; that among
Upon a review of the record, we are inclined to agree with these points were the matter of inclusion in the agreement
the latter view. That of the lower court en banc is mainly of a union shop or union security clause, a vacation leave
anchored on the fact that the draft of agreement made and clause, and a sick leave clause, in addition to the increase
amended in the morning of May 30 or 31, 1963 (Exhibit of the high cost of living monthly allowance from P20.00
D), had been initialed by representatives of both parties to P30.00, and the organization of a grievance committee;
and that the Management refers thereto as a "final draft". that, although in the afternoon of May 29, and the
We note, however, that the draft Exhibit C-1, prepared in following morning or that of May 31, 1963, the
the morning of May 29, 1963, is, likewise, called by the Management had agreed on the establishment of said
Management as a "final" draft. Yet, admittedly, committee and the increase of the high cost of living
negotiations between the parties continued after the monthly allowance to P25.00, this did not imply that
preparation of said "final" draft, thus indicating, not only petitioners had given up their demand for a union shop or
that the alleged finality thereof respected, at best, the union security clause; and that, in the return-to-work
unilateral opinion of the Management, but, also, that even agreements signed by both parties on July 15, 1963
the latter did not consider it as expressive of a complete, (Exhibits 1 and 2), said clause was, in fact, included.
definite and perfected agreement with the petitioners, for
otherwise, the Management would not have participated In other words, contrary to what is intimidated in the
in the negotiations that took place or continued after the resolution appealed from, it is not true that petitioners had
preparation of said Exhibit C-1. made new demands, either on May 29, or on May 30 or
31, 1963. Indeed, the demand for a union shop or union
These observations apply equally to the "draft" of security clause, which was the main bone of contention,
agreement Exhibit D, prepared and amended in the had been included in the draft of agreement Exhibit A-1
afternoon of May 29 and the morning of May 30 or 31, enclosed with petitioners' letter of March 29, 1963. What
1963. Moreover, the fact that both parties affixed their happened, merely, was that the demands incorporated in
initials to his "draft" Exhibit D does not necessarily prove said draft were discussed by both parties, one after the
that the same was more "final" than the "final draft" other; that an agreement on the former did not connote an
(Exhibit C-1) made in the morning of May 29, 1963. abandonment of the latter; and that, after the settlement
Indeed, if the parties had reached, said afternoon and in of one issue, it was understood that the others would be
the morning of May 30 or 31, 1963, a complete agreement taken up thereafter.
on the terms and conditions of their proposed collective
bargaining agreement, they could have and would have It would appear, also, that, after the meeting with the
signed Exhibit D that same morning, instead of agreeing representatives of Management, in the morning of May 30
that the document be formally signed on June 1, 1963. In or 31, 1963, petitioners' representatives reported to the
fact, the agreement to this effect suggests that the parties Union the contents of Exhibit D, and that, when the Union
understood that a contract had not, as yet, been members learned that said document did not include the
perfected. As His Honor, the trial Judge, had aptly put it, union shop or union security clause, they withdrew from
Exhibit D was no more than a draft of contract, not a their representatives the authority to sign, on their behalf,
contract in itself. the collective bargaining agreement with the
Management. Under these circumstances, said
At this juncture, it is well to remember that, on March 29, representatives could not validly sign said agreement,
1963, the petitioners had written to the Management the and their refusal to do so is not and cannot be an act of
letter Exhibit A (also marked as Exhibit 3) enclosing bad faith.
Neither may the Union members be held to have acted in Meanwhile, and thereafter — or from June 10 to June 22,
bad faith in so withdrawing said authority from their 1963 — the Management had transferred two (2)
representatives, unless the clause aforementioned were members of the Union, suspended a third one and
included in the agreement. That clause was part of their assigned still another to a work less dignified than that
original demands, as set forth in their draft of agreement which he did before.3 So, on June 24, 1963, petitioners
Exhibit A-1, and their representatives could not waive it filed an unfair labor practice charge against the
without their consent. Management, for the suspension or demotion of union
members due allegedly to union activities. On June 25,
As a matter of fact, there is reason to believe that when 1963, the Union gave another notice of strike upon the
petitioners' representatives did not sign on June 1, 1963 ground that the Management was engaged in unfair labor
and subsequently thereto the draft of agreement Exhibit practices, by suspending, demoting, intimidating and
D, as amended and initialed on May 30 or 31, upon the coercing union members, on account of their union
ground that they had no authority to do so without the activities. Thereafter and in accordance with a strike vote
union shop or union security clause, by specific mandate taken on June 26, 1963, the Union staged a strike from
of the members of the Union, the Management suspected July 1 to July 15, 1963, on which latter date the strike was
that this was a mere excuse put up by said called off in conformity with return-to-work agreements,
representatives of petitioners herein. Hence, on June 7, Exhibits 1 and 2, then signed by both parties.1äwphï1.ñët
1963, the Management sent a memorandum (Exhibits 13
and I) to all of its employees, purporting to inform them of Although the Management may have had the strict legal
the status of the negotiations with their representatives, right to take against union members the disciplinary and
and stating that the latter had refused to sign the draft of other administrative measures above referred to, there is
agreement Exhibit D — copies of which were made no denying the fact that the time chosen by the
available to all employees — and instead "came with a Management therefor, when considered in relation with
new1 demand — 'Union Shop' " — upon the ground that the attending circumstances, reasonably justified the
such was the desire of the Union members, who had belief of the Union that the real or main purpose of the
allegedly disauthorized the officers of the Union. Management was to discourage membership in the
Union, to discredit the officers thereof, to weaken the
Soon thereafter — or from June 10 to June 15, 1963 — Union and to induce or compel the same to sign the draft
several members of the Union resigned of agreement Exhibit D as amended, on May 29 and 30
therefrom irrevocably, effective on June 15, 1963, "in view or 31, 1963. As stated in the decision of His Honor, the
of the apparent failure of our Union officers to enter into a trial Judge, said belief was confirmed by the fact that
working agreement with our employer for the purpose of prosecutors of the Court of Industrial Relations found
improving our lot even in a small way".2 Considering that sufficient grounds to file and did file, against the
this is false, for the Management had already yielded to Management, a complaint for unfair labor practices.
the demand for an increase in the high cost of living
allowance and the creation of a grievance committee; that In other words, both parties had performed acts which
these resignations took place immediately after the understandably induced each to believe that the other
Management had dealt with the Union members directly, was guilty of such practices — although, as we now
through the aforementioned memorandum; and that said analyze the whole situation, without the excitement, the
resignations were conveyed in identically heat and the passion of the direct participants in the labor
worded communications (Exhibits 6, 7, 8, 9 and 10), some dispute, at the peak thereof, such belief may not turn out
of which were mimeographed, it was only natural for the to be borne out to the objective realities — and both were
petitioners to believe that said resignations had been reasonably justified in taking the counter measures
inspired, if not exacted, by the Management, and that the adopted by them. As a consequence, we hold that the
latter had resorted thereto in order to exert pressure upon strike in question had been called to offset what
the Union and compel the same to sign the draft of petitioners were warranted in believing in good faith to be
agreement (Exhibit 5) without the union shop or union unfair labor practices on the part of Management, that
security clause. Hence, on June 13, 1963, petitioners filed petitioners were not bound, therefore, to wait for the
a 30-day notice of strike (Exhibits 5 and E), upon the expiration of thirty (30) days from notice of strike before
ground that respondents had been "bargaining in bad staging the same, that said strike was not, accordingly,
faith". However, the Management, in turn, filed unfair illegal and that the strikers had not thereby lost their status
labor practice charges against the Union, for alleged as employees of respondents herein. Upon the other
refusal to bargain. hand, considering that the latter have been absolved from
the charge of unfair labor practice, the reinstatement of NLRC: modified the LA decision by setting aside the order
the strikers must be without backpay. of reinstatement as it ruled that there was no illegal
Wherefore, the resolution appealed from should be, as it
is hereby modified accordingly, without special
pronouncement as to costs. It is so ordered.
Unyon filed MR. Unyon also argued that since AER
30. Automotive Engine Rebuilders v. charged only 18 of the 32 employees with illegal strike,
Progresibong Unyon ng mga the employees who were not included in the said charge
Mangagawa sa AER should have been admitted back to work by AER

CA: Directed AER to reinstate the petitioners (the 14
AER filed an earlier complaint against the Unyon and 18 excluded from complaint) effective immediately but
members for illegal strike. AER likewise suspended 7 without backwages, except those who were tested
union members who tested positive for illegal drugs. On positive for illegal drugs and have failed to submit their
the other hand, 32 members of the Unyon filed a respective medical certificates
complaint against AER, praying that AER be declared
guilty of Unfair Labor Practices, Illegal Dismissal, Illegal
Suspension, and Run-away shop. In a previous decision,
CA Amended Decision: AER directed to reinstate all
the Court found out both parties were at fault or in pari
petitioners immediately without backwages.
delicto and must bear the consequences of their own
wrongdoing and ruled that the 14 employees (32 less 18)
must be reinstated without backwages. After the MR,
the Court ruled that the 14 employees should be Unyon argued that the CA erred in not awarding
reinstated with backwages but since only 9 out of the 14 backwages to the suspended employees who were
signed the Membership Resolution, the 5 employees who ordered reinstated. AER, on the other hand, argued that
did not sign cannot be granted the same relief. the CA erred in ordering the reinstatement

FACTS of the suspended employees.

This labor controversy started when both parties filed

charges against each other. AER filed an earlier
complaint against the Unyon and 18 members for illegal SC: petitions are DENIED. Employees should be
strike. AER likewise suspended 7 union members who reinstated without backwages. If reinstatement is no
tested positive for illegal drugs. longer feasible, the concerned employees should be
given separation pay up to the date set for their return in
On the other hand, 32 members of the Unyon filed a lieu of reinstatement. In arriving at said determination, the
complaint against AER, praying that AER be declared Court found out both parties were at fault or in pari
guilty of Unfair Labor Practices, Illegal Dismissal, Illegal delicto and must bear the consequences of their own
Suspension, and Run-away shop and that the that the wrongdoing
complainants be reinstated; and that they be paid "full
backwages and without loss of seniority rights and
privileges, payment of wages during suspension, plus
moral and exemplary damages and attorney's fees. Unyon argues that backwages should have been
awarded to the 14 employees who were excluded from
the complaint filed by AER and that the latter should have
reinstated them immediately because they did not have
LA: Ruled in favor of Unyon directing AER to reinstate the any case at all.
concerned employees but without backwages
W/N the 14 employees excluded from complaint -Due to the adverse effects of the Asian economic crisis
should be reinstated with backwages on the construction industry beginning 1997,petitioner
Jackbilt Industries, Inc. decided to temporarily stop its
RATIO business of producing concrete hollowblocks, compelling
most of its employees to go on leave for six
The Court holds that only nine (9) of the fourteen (14) months.- Respondent Jackbilt Employees Workers Unio
excluded employees deserve to be reinstated n-NAFLU-
immediately with backwages. KMU immediately protested the temporaryshutdown.
Because its collective bargaining agreement with
petitioner was expiring during the period
of the shutdown, respondent claimed that petitioner halte
Records disclose that thirty-two (32) employees filed a d production to avoid its duty to bargaincollectively.
complaint for illegal suspension and unfair labor The shutdown was allegedly motivated by anti-union
practice against AER. Out of these 32 workers, only sentiments.- Accordingly, on March 9, 1998, respondent
eighteen (18) of them were charged by AER with illegal went on strike. Its officers and members picketed
strike leaving fourteen (14) of them excluded from its petitioner’smain gates and deliberately prevented
complaint. persons and vehicles from going into and out of
the compound.

Technically, as no charges for illegal strike were filed
against these 14 employees, they cannot be among -Article 264(e) of the Labor Code prohibits any person
those found guilty of illegal strike. They cannot be engaged in picketing from obstructing the freeingress to
considered in pari delicto. They should be reinstated and egress from the employer’s premises. Since
and given their backwages. Out of these 14 employees, respondent was found in the July 17,
however, five (5) failed to write their names and affix 1998decision of the NLRC to have prevented the
their signatures in the Membership Resolution. free entry into and exit of vehicles from petitioner’scomp
ound, respondent’s officers and employees clearly
committed illegal acts in the course of the March9, 1998
strike. -The use of unlawful means in the course of a strike
Because of their failure to affix their names and
renders such strike illegal. Therefore, pursuant to
signatures in the Membership Resolution, the 5
theprinciple of conclusiveness of judgment, the March 9,
employees cannot be granted the relief that Unyon
1998 strike wasipso facto illegal.
wanted for them in its Motion for Partial
Reconsideration. Only the following nine (9) employees
The filing of apetition to declare the strike illegal was thus
who signed their names in the petition can be granted
the relief prayed for therein.
G.R. No. L-25003 October 23, 1981


These excluded nine (9) workers, who signed their
names in their petition before the CA, deserve to be
Affiliated with the NATIONAL ASSOCIATION
reinstated immediately and granted backwages. It is
basic in jurisprudence that illegally dismissed workers
are entitled to reinstatement with backwages plus
interest at the legal rate.

31. Jackbilt Industries, Inc. vs. Jackbilt

Employees Workers Union
This is an appeal from the decision of the Court of First
Instance of Manila declaring permanent the writ of
preliminary injunction issued in this case and condemning
the defendants (herein appellants) to pay plaintiff (herein As a consequence thereof, plaintiff rented another
appellee), the amount of P10,152.42 with interest thereon bodega during the time members of the defendant union
at the legal rate from the commencement of this action prevented its employees from entering its bodega in the
until fully paid, P1,000.00 as attorney's fees and costs. compound of Permanent Concrete Products, Inc. and
thus incurred expenses both in terms of bodega rentals
The case commenced when Liwayway Publications, Inc. and in transporting newsprint from the pier to the
brought an action in the CFI-Manila against Permanent temporary bodega.
Concrete Workers Union, et al. for the issuance of a writ
of preliminary injunction and for damages it incurred when On December 14, 1964, the lower court issued a writ of
its employees were prevented from getting their daily preliminary injunction enjoining the defendants from:
supply of newsprint from its bodega.
(a) threatening and intimidating plaintiff's executive
Plaintiff alleged that it is a second sublessee of a part of officers and their representatives, who are going to its
the premises of the Permanent Concrete Products, Inc. at bodega as well as its employees who are getting
1000 Cordeleria Street, Sta. Mesa, Manila from Don newsprint from it;
Ramon Roces, a first lessee from the aforesaid company.
The premises of the plaintiff is separated from the (b) ordering the defendants and their representatives not
compound of Permanent Concrete Products, Inc. by a to blockade and/or picket the compound and the gate of
concrete and barbed wire fence with its own entrance and the plaintiff;
road leading to the national road. This entrance is
separate and distinct from the entrance road of the (c) ordering the defendants not to stop, prohibit, molest
Permanent Concrete Products, Inc. 1 and interfere with the free passage of the plaintiff in going
in and out of the bodega.
Plaintiff further alleged that it has a bodega for its
newsprint in the sublet property which it uses for its Defendant union moved to dismiss the complaint on the
printing and publishing business. The daily supply of following grounds:
newsprint needed to feed its printing plant is taken from
this bodega. 1. That this case arose out of a labor dispute involving
unfair labor practices and, therefore, the Court of First
On September 10, 1964, the employees of the Permanent Instance where this action was brought has no jurisdiction
Concrete Products, Inc. who are representatives and to issue an injunction since this case fans within the
members of the defendant union declared a strike against exclusive jurisdiction of the Court of Industrial Relations;
their company.
2. That plaintiff is not the real party in interest in whose
On October 3, 1964 for unknown reasons and without name the present action may be prosecuted in
legal justification, Permanent Concrete Workers Union accordance with Section 2, Rule 3 of the Rules of Court.
and its members picketed, stopped and prohibited
plaintiff's truck from entering the compound to load On the first ground, defendants argued that the Court of
newsprint from its bodega. The union members Industrial Relations is vested with the exclusive power to
intimidated and threatened with bodily harm the issue injunctions in labor disputes involving unfair labor
employees who were in the truck. practices and that in the long line of decisions, the
Supreme Court hat, repeatedly held that ordinary do not
On October 6, 1964, union members stopped and have jurisdiction to issue an injunction in any labor dispute
prohibited the general manager, personnel manager, particularly when the Court of Industrial Relations has
bodega-in-charge and other employees of the plaintiff already acquired jurisdiction over it.
from getting newsprint in their bodega. 2
As to the second ground, defendants argue that the real
Plaintiff made repeated demands to the defendants not to party in interest in this case is the Permanent Concrete
intimidate and threaten its employees with bodily harm Products, Inc. against whom the defendants' strike and
and not to blockade, picket or prohibit plaintiff's truck from picket activities were directed and confined, and they
getting newsprint in their bodega. Defendants refused and point to cases between the real parties in interest, namely:
continued to refuse to give in to the demands of the Permanent Concrete products, Inc. on one hand and the
plaintiff. Permanent Concrete Workers Union on the other,
pending before the Court of Industrial Relations docketed
therein as CIR Case No. 156-Inj., Charge 212-ULP and the action until fully paid, Pl,000.00 as attorney's fees and
Charge No. 1414-M.C. the costs. Copy of this decision was received by
defendants on July 20, 1965 and forthwith, defendants
Plaintiff Liwayway Publications, Inc. opposed the motion, filed the notice of appeal on July 26, 1965.
alleging that:
On October 12,1965, Liwayway Publications, Inc. filed
1. There is no employer-employee relationship between with the Supreme Court a petition praying that a writ of
the plaintiff and the defendant; attachment be issued on any sum of money which is
owing from the company to the union and to other
2. There is no labor dispute between them; defendants to be used to satisfy the judgment in its favor
should the same be affirmed by the Supreme Court.
3. Plaintiff's compound is separate and distinct from the
compound of the company where the defendant's are Defendants filed an opposition to the petition for
employed. attachment alleging that even assuming that there is an
amount owing to the union from the company, such would
Defendants by way of reply to the abovementioned be in the concept of uncollected wages due the strikers
opposition argued that even if there was no employer- and, therefore, cannot be subject of attachment as
employee relationship, still the Court of First Instance provided by Art. 1708 of the New Civil Code that the
would have no jurisdiction to issue an injunction, citing laborer's wages shall not be subject to execution or
several cases holding that there could be a labor dispute attachment except for debts incurred for food, shelter,
regardless of whether or not the disputants stand in clothing and for medical attendance.
proximate relation of employer and employee and that
peaceful picketing is an extension of the freedom of The Supreme Court denied the above petition for
speech guaranteed by the Constitution, 3 a fundamental attachment but without prejudice to the movant seeking
right granted to labor which cannot be enjoined. remedy in the Court of First Instance.

Since plaintiff averred in its complaint that "it is a second The so