G.R. No. 161690. July 23, 2008.
* CA, these mostly undated written statements submitted by Ventures on March
S.S. VENTURES INTERNATIONAL, INC., petitioner, vs. S.S.
VENTURES LABOR UNION (SSVLU) and DIR. HANS LEO CACDAC, in
His capacity as Director of the Bureau of Labor Relations (BLR),
respondents.
Labor Law; Unions; Union Decertification; The right to form, join, or assist a
union is specifically protected by Art. XIII, Section 3 of the Constitution and such
right, according to Art. III, Sec. 8 of the Constitution and Art. 246 of the Labor
Code, shall not be abridged; To decertify a union, it is not enough to show that the
union includes ineligible employees in its membership—it must also be shown
that there was misrepresentation, false statement, or fraud in connection with the
application for registration and the supporting documents, such as the adoption
or ratification of the constitution and by-laws or amendments thereto and the
minutes of ratification of the constitution or by-laws, among other documents.—
The right to form, join, or assist a union is specifically protected by Art. XIII,
Section 3 of the Constitution and such right, according to Art. III, Sec. 8 of the
Constitution and Art. 246 of the Labor Code, shall not be abridged. Once
registered with the DOLE, a union is considered a legitimate labor organization
endowed with the right and privileges granted by law to such organization.
While a certificate of registration confers a union with legitimacy with the
concomitant right to participate in or ask for certification election in a bargaining
unit, the registration may be canceled or the union may be decertified as the
bargaining unit, in which case the union is divested of the status of a legitimate
labor organization. Among the grounds for cancellation is the commission of any
of the acts enumerated in Art. 239(a) of the Labor Code, such as fraud and
misrepresentation in connection with the adoption or ratification of the union’s
constitution and like documents. The Court, has in previous cases, said that to
decertify a union, it is not enough to show that the union includes ineligible
employees in its membership. It must also be shown that there was
misrepresentation, false statement, or fraud in connection with the application
for registration and the supporting documents, such as the adoption or
ratification of the constitution and by-laws or amendments thereto and the
minutes of ratification of the constitution or by-laws, among other documents.
Same; Same; Same; Presumptions; Employees’ withdrawal from a labor
union made before the filing of the petition for certification election is presumed
voluntary, while withdrawal after the filing of such petition is considered to be
involuntary and does not affect the same.—As aptly noted by both the BLR and
20, 2001, or seven months after it filed its petition for cancellation of
registration, partake of the nature of withdrawal of union membership executed
after the Union’s filing of a petition for certification election on March 21, 2000.
We have in precedent cases said that the employees’ withdrawal from a labor
union made before the filing of the petition for certification election is presumed
voluntary, while withdrawal after the filing of such petition is considered to be
involuntary and does not affect the same. Now then, if a withdrawal from union
membership done after a petition for certification election has been filed does not
vitiate such petition, is it not but logical to assume that such withdrawal cannot
work to nullify the registration of the union? Upon this light, the Court is
inclined to agree with the CA that the BLR did not abuse its discretion nor
gravely err when it concluded that the affidavits of retraction of the 82 members
had no evidentiary weight.
Same; Same; Same; Same; The issuance to a labor union of a Certificate of
Registration necessarily implies that its application for registration and the
supporting documents thereof are prima facie free from any vitiating
irregularities.—It cannot be over-emphasized that the registration or the
recognition of a labor union after it has submitted the corresponding papers is
not ministerial on the part of the BLR. Far from it. After a labor organization
has filed the necessary registration documents, it becomes mandatory for the
BLR to check if the requirements under Art. 234 of the Labor Code have been
sedulously complied with. If the union’s application is infected by falsification
and like serious irregularities, especially those appearing on the face of the
application and its attachments, a union should be denied recognition as a
legitimate labor organization. Prescinding from these considerations, the
issuance to the Union of Certificate of Registration No. RO300-00-02-UR-0003
necessarily implies that its application for registration and the supporting
documents thereof are prima facie free from any vitiating irregularities.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Legal Services Philippines for petitioner.
Ernesto R. Arellano for private respondent.
VELASCO, JR., J.:
Page 1 of 120
 Petitioner S.S. Ventures International, Inc. (Ventures), a PEZA-
registered export firm with principal place of business at Phase I-PEZA-
Bataan Export Zone, Mariveles, Bataan, is in the business of
manufacturing sports shoes. Respondent S.S. Ventures Labor Union
(Union), on the other hand, is a labor organization registered with the
Department of Labor and Employment (DOLE) under Certificate of
Registration No. RO300-00-02-UR-0003.
On March 21, 2000, the Union filed with DOLE-Region III a petition
for certification election in behalf of the rank-and-file employees of
Ventures. Five hundred forty two (542) signatures, 82 of which belong to
terminated Ventures employees, appeared on the basic documents
supporting the petition.438
438 SUPREME COURT REPORTS ANNOTATED
S.S. Ventures International, Inc. vs. S.S. Ventures Labor
Union
On August 21, 2000, Ventures filed a Petition1 to cancel the Union’s
certificate of registration invoking the grounds set forth in Article 239(a)
of the Labor Code.2 Docketed as Case No. RO300-0008-CP-002 of the same
DOLE regional office, the petition alleged the following:
(1) The Union deliberately and maliciously included the names of
more or less 82 former employees no longer connected with Ventures in its
list of members who attended the organizational meeting and in the
adoption/ratification of its constitution and by-laws held on January 9,
2000 in Mariveles, Bataan; and the Union forged the signatures of these
82 former employees to make it appear they took part in the
organizational meeting and adoption and ratification of the constitution;
(2) The Union maliciously twice entered the signatures of three
persons namely: Mara Santos, Raymond Balangbang, and Karen Agunos;
(3) No organizational meeting and ratification actually took place;
and
(4) The Union’s application for registration was not supported by at
least 20% of the rank-and-file employees of Ventures, or 418 of the total
2,197-employee complement. Since more or less 82 of the 5003 signatures
were forged or invalid, then the remaining valid signatures would only be
418, which is very much short of the 439 minimum (2197 total employees
x 20% = 439.4) required by the Labor Code.4
_______________
1 Rollo, pp. 68-77.
2 Art. 239. GROUNDS FOR CANCELLATION OF UNION REGISTRATION.—x x x (a)
Misrepresentation, false statement or fraud in connection with the adoption or ratification of
the constitution and by-laws or amendments thereto, the minutes of ratification, and the list
of members who took part in the ratification.
3 Per the Union, 542 union members signed the petition for certification election.
4 Rollo, p. 71.
439
VOL. 559, JULY 23, 2008 439
S.S. Ventures International, Inc. vs. S.S. Ventures Labor
Union
In its Answer with Motion to Dismiss,5 the Union denied committing
the imputed acts of fraud or forgery and alleged that: (1) the
organizational meeting actually took place on January 9, 2000 at the Shoe
City basketball court in Mariveles; (2) the 82 employees adverted to in
Ventures’ petition were qualified Union members for, although they have
been ordered dismissed, the one-year prescriptive period to question their
dismissal had not yet lapsed; (3) it had complied with the 20%-member
registration requirement since it had 542 members; and (4) the “double”
signatures were inadvertent human error.
In its supplemental reply memorandum6 filed on March 20, 2001, with
attachments, Ventures cited other instances of fraud and
misrepresentation, claiming that the “affidavits” executed by 82 alleged
Union members show that they were deceived into signing paper minutes
or were harassed to signing their attendance in the organizational
meeting. Ventures added that some employees signed the “affidavits”
denying having attended such meeting.
In a Decision dated April 6, 2001, Regional Director Ana C. Dione of
DOLE-Region III found for Ventures, the dispositive portion of which
reads:
“Viewed in the light of all the foregoing, this office hereby grants the petition.
WHEREFORE, this office resolved to CANCEL Certificate of Registration No.
Page 2 of 120
[RO300-00-02-UR-0003] dated 28 February 2000 of respondent S.S. Ventures EVIDENCE ADDUCED BY THE PETITIONER SHOWING THAT
Labor Union-Independent. RESPONDENT UNION
So Ordered.”7 _______________

Aggrieved, the Union interposed a motion for reconsideration, a 441

recourse which appeared to have been forwarded to the Bureau of Labor
Relations (BLR). Although it would later find VOL. 559, JULY 23, 2008 441
440 S.S. Ventures International, Inc. vs. S.S. Ventures Labor
440 SUPREME COURT REPORTS ANNOTATED Union
S.S. Ventures International, Inc. vs. S.S. Ventures Labor PERPETRATED FRAUD, FORGERY, MISREPRESENTATION AND
Union MISSTATEMENTS IN CONNECTION WITH THE ADOPTION AND
RATIFICATION OF ITS CONSTITUTION AND BY-LAWS, AND IN THE
this motion to have been belatedly filed, the BLR, over the objection of
PREPARATION OF THE LIST OF MEMBERS WHO TOOK PART IN THE
Ventures which filed a Motion to Expunge, gave it due course and treated ALLEGED ORGANIZATIONAL MEETING BY HOLDING THAT:
it as an appeal. A.
Despite Ventures’ motion to expunge the appeal,8 the BLR Director THE 87 AFFIDAVITS OF ALLEGED UNION MEMBERS HAVE NO
rendered on October 11, 2002 a decision9 in BLR-A-C-60-6-11-01, granting EVIDENTIARY WEIGHT.
the Union’s appeal and reversing the decision of Dione. The fallo of the B.
BLR’s decision reads: THE INCLUSION OF THE 82 EMPLOYEES IN THE LIST OF
“WHEREFORE, the appeal is hereby GRANTED. The Decision of Director ATTENDEES TO THE JANUARY 9, 2000 MEETING IS AN INTERNAL
Ana C. Dione dated 6 April 2001 is hereby REVERSED and SET ASIDE. S.S. MATTER WITHIN THE AMBIT OF THE WORKER’S RIGHT TO SELF-
Ventures Labor Union-Independent shall remain in the roster of legitimate labor ORGANIZATION AND OUTSIDE THE SPHERE OF INFLUENCE (OF)
organizations. THIS OFFICE (PUBLIC RESPONDENT IN THIS CASE) AND THE
SO ORDERED.”10 PETITIONER.
II.
Ventures sought reconsideration of the above decision but was denied PUBLIC RESPONDENT ACTED RECKLESSLY AND IMPRUDENTLY,
by the BLR. GRAVELY ABUSED ITS DISCRETION AND EXCEEDED ITS JURISDICTION
Ventures then went to the Court of Appeals (CA) on a petition for IN IGNORING AND DISREGARDING THE BLATANT PROCEDURAL
certiorari under Rule 65, the recourse docketed as CA-G.R. SP No. 74749. LAPSES OF THE RESPONDENT UNION IN THE FILING OF ITS MOTION
On October 20, 2003, the CA rendered a Decision,11 dismissing Ventures’ FOR RECONSIDERATION AND APPEAL.
petition. Ventures’ motion for reconsideration met a similar fate.12 A.
BY GIVING DUE COURSE TO THE MOTION FOR RECONSIDERATION
Hence, this petition for review under Rule 45, petitioner Ventures
FILED BY THE RESPONDENT UNION DESPITE THE FACT THAT IT
raising the following grounds:
WAS FILED BEYOND THE
I.
REGLEMENTARY PERIOD.
PUBLIC RESPONDENT ACTED RECKLESSLY AND IMPRUDENTLY,
B.
GRAVELY ABUSED ITS DISCRETION AND EXCEEDED ITS JURISDICTION
BY ADMITTING THE APPEAL FILED BY ATTY. ERNESTO R.
IN DISREGARDING THE SUBSTANTIAL AND OVERWHELMING
ARELLANO AND HOLDING THAT THE SAME DOES NOT

Page 3 of 120
 CONSTITUTE FORUM SHOPPING UNDER SUPREME COURT
CIRCULAR NO. 28-91.442
442 SUPREME COURT REPORTS ANNOTATED
S.S. Ventures International, Inc. vs. S.S. Ventures Labor
Union
III.
PUBLIC RESPONDENT ACTED RECKLESSLY AND IMPRUDENTLY,
GRAVELY ABUSED ITS DISCRETION AND EXCEEDED ITS JURISDICTION
IN INVOKING THE CONSTITUTIONAL RIGHT TO SELF-ORGANIZATION
AND ILO CONVENTION NO. 87 TO JUSTIFY THE MASSIVE FRAUD,
MISREPRESENTATION, MISSTATEMENTS AND FORGERY COMMITTED
BY THE RESPONDENT UNION.13
The petition lacks merit.
The right to form, join, or assist a union is specifically protected by Art.
XIII, Section 314 of the Constitution and such right, according to Art. III,
Sec. 8 of the Constitution and Art. 246 of the Labor Code, shall not be
abridged. Once registered with the DOLE, a union is considered a
legitimate labor organization endowed with the right and privileges
granted by law to such organization. While a certificate of registration
confers a union with legitimacy with the concomitant right to participate
in or ask for certification election in a bargaining unit, the registration
may be canceled or the union may be decertified as the bargaining unit, in
which case the union is divested of the status of a legitimate labor
organization.15 Among the grounds for cancellation is the commission of
any of the acts enumerated in Art. 239(a)16 of the Labor Code, such as
fraud and misrepresentation in connection with the adoption or
ratification of the union’s constitution and like documents. The Court, has
in previous cases, said that to decertify a union, it is not enough to show
that the union includes ineligible employees in its membership. It must
also be shown that there was misrepresentation, false statement, or fraud
in
_______________
13 Rollo, pp. 11-12
14 Sec. 3. The State shall afford full protection to labor x x x organized and unorganized
x x x. It shall guarantee the rights of all workers in self-organization, collective bargaining
and negotiation, and peaceful concerted activities x x x.
15 2 Azucena, The Labor Code 197-198 (6th ed., 2007).
16 Supra note 2.
443
VOL. 559, JULY 23, 2008 443
S.S. Ventures International, Inc. vs. S.S. Ventures Labor
Union
connection with the application for registration and the supporting
documents, such as the adoption or ratification of the constitution and by-
laws or amendments thereto and the minutes of ratification of the
constitution or by-laws, among other documents.17
Essentially, Ventures faults both the BLR and the CA in finding that
there was no fraud or misrepresentation on the part of the Union
sufficient to justify cancellation of its registration. In this regard,
Ventures makes much of, first, the separate hand-written statements of
82 employees who, in gist, alleged that they were unwilling or harassed
signatories to the attendance sheet of the organizational meeting.
We are not persuaded. As aptly noted by both the BLR and CA, these
mostly undated written statements submitted by Ventures on March 20,
2001, or seven months after it filed its petition for cancellation of
registration, partake of the nature of withdrawal of union membership
executed after the Union’s filing of a petition for certification election on
March 21, 2000. We have in precedent cases18 said that the employees’
withdrawal from a labor union made before the filing of the petition for
certification election is presumed voluntary, while withdrawal after the
filing of such petition is considered to be involuntary and does not affect
the same. Now then, if a withdrawal from union membership done after a
petition for certification election has been filed does not vitiate such
petition, is it not but logical to assume that such withdrawal cannot work
to nullify the registration of the union? Upon this light, the Court is
inclined to agree with the CA that the BLR did not abuse its discretion
nor gravely err when it concluded
_______________
Page 4 of 120
444
444 SUPREME COURT REPORTS ANNOTATED
S.S. Ventures International, Inc. vs. S.S. Ventures Labor
Union
that the affidavits of retraction of the 82 members had no evidentiary
weight.
It cannot be over-emphasized that the registration or the recognition of
a labor union after it has submitted the corresponding papers is not
ministerial on the part of the BLR. Far from it. After a labor organization
has filed the necessary registration documents, it becomes mandatory for
the BLR to check if the requirements under Art. 23419 of the Labor Code
have been sedulously complied with.20 If the union’s application is infected
by falsification and like serious irregularities, especially those appearing
on the face of the application and its attachments, a union should be
denied recognition as a legitimate labor organization. Prescinding from
these considerations, the issuance to the Union of Certificate of
Registration No. RO300-00-02-UR-0003 necessarily implies that its
application for registration and the supporting documents thereof
are prima facie free from any vitiating irregularities.
Second, Ventures draws attention to the inclusion of 82 individuals to
the list of participants in the January 9, 2000 organizational meeting.
Ventures submits that the 82, being no longer connected with the
company, should not have been
_______________
19 Art. 234. Requirements of registration.—Any applicant labor organization x x x shall
acquire legal personality and shall be entitled to the rights and privileges granted by law to
legitimate labor organizations upon issuance of the certificate of registration based on the
following requirements: (a) Fifty pesos (P50.00) registration fee; (b) The names of its officers,
x x x the minutes of the organizational meetings and the list of the workers who participated
in such meetings; (c) the names of all its members comprising at least twenty percent (20%) of
the employees in the bargaining unit where it seeks to operate; (d) x x x; and (e) Four (4)
copies of the constitution and by-laws of the applicant union, minutes of its adoption or
ratification, and the list of the members who participated in it.
445
counted as attendees in the meeting and the ratification proceedings
immediately afterwards.
The assailed inclusion of the said 82 individuals to the meeting and
proceedings adverted to is not really fatal to the Union’s cause for, as
determined by the BLR, the allegations of falsification of signatures or
misrepresentation with respect to these individuals are without
basis.21 The Court need not delve into the question of whether these 82
dismissed individuals were still Union members qualified to vote and affix
their signature on its application for registration and supporting
documents. Suffice it to say that, as aptly observed by the CA, the
procedure for acquiring or losing union membership and the
determination of who are qualified or disqualified to be members are
matters internal to the union and flow from its right to self-organization.
To our mind, the relevancy of the 82 individuals’ active participation in
the Union’s organizational meeting and the signing ceremonies thereafter
comes in only for purposes of determining whether or not the Union, even
without the 82, would still meet what Art. 234(c) of the Labor Code
requires to be submitted, to wit:
“Art. 234. Requirements of Registration.—Any applicant labor
organization x x x shall acquire legal personality and shall be entitled to the
rights and privileges granted by law to legitimate labor organizations upon
issuance of the certificate of registration based on the following requirements:
xxxx
(c) The names of all its members comprising at least twenty percent (20%) of
all the employees in the bargaining unit where it seeks to operate.”
The BLR, based on its official records, answered the poser in the
affirmative. Wrote the BLR:
“It is imperative to look into the records of respondent union with this
Bureau pursuant to our role as a central registry of union and CBA records
under Article 231 of the Labor Code and Rule XVII of the rules implementing
Book V of the Labor Code, as amended x x x.
In its union records on file with this Bureau, respondent union submitted the
names of [542] members x x x. This number easily complied with the 20%
requirement, be it 1,928 or 2,202 employees in the establishment. Even
subtracting the 82 employees from 542 leaves 460 union members, still
within 440 or 20% of the maximum total of 2,202 rank-and-file
employees.
Page 5 of 120
 Whatever misgivings the petitioner may have with regard to the 82 dismissed
employees is better addressed in the inclusion-exclusion proceedings during a
pre-election conference x x x. The issue surrounding the involvement of the
82 employees is a matter of membership or voter eligibility. It is not a
ground to cancel union registration.” (Emphasis added.)
The bare fact that three signatures twice appeared on the list of those
who participated in the organizational meeting would not, to our mind,
provide a valid reason to cancel Certificate of Registration No. RO300-00-
02-UR-0003. As the Union tenably explained without rebuttal from
Ventures, the double entries are no more than “normal human error,”
effected without malice. Even the labor arbiter who found for Ventures
sided with the Union in its explanation on the absence of malice.22
The cancellation of a union’s registration doubtless has an impairing
dimension on the right of labor to self-organization. Accordingly, we can
accord concurrence to the following apt observation of the BLR: “[F]or
fraud and misrepresentation [to be grounds for] cancellation of union
registration under Article 239 [of the Labor Code], the nature of the fraud
and misrepresentation must be grave and compelling enough to vitiate the
consent of a majority of union members.”23
447
VOL. 559, JULY 23, 2008 447
S.S. Ventures International, Inc. vs. S.S. Ventures Labor
Union
In its Comment, the Union points out that for almost seven (7) years
following the filing of its petition, no certification election has yet been
conducted among the rank-and-file employees. If this be the case, the
delay has gone far enough and can no longer be allowed to continue. The
CA is right when it said that Ventures should not interfere in the
certification election by actively and persistently opposing the certification
election of the Union. A certification election is exclusively the concern of
employees and the employer lacks the legal personality to challenge it.24 In
fact, jurisprudence frowns on the employer’s interference in a certification
election for such interference unduly creates the impression that it
intends to establish a company union.25
Ventures’ allegations on forum shopping and the procedural lapse
supposedly committed by the BLR in allowing a belatedly filed motion for
reconsideration need not detain us long. Suffice it to state that this Court
has consistently ruled that the application of technical rules of procedure
in labor cases may be relaxed to serve the demands of substantial
justice.26 So it must be in this case.
WHEREFORE, the petition is DENIED. The Decision and Resolution
dated October 20, 2003 and January 19, 2004, respectively, of the CA are
AFFIRMED. S.S. Ventures Labor Union shall remain in the roster of
legitimate labor organizations, unless it has in the meantime lost its
legitimacy for causes set forth in the Labor Code. Costs against petitioner.
SO ORDERED.
Notes.—Once a labor union attains the status of a legitimate labor
organization, it continues as such until its certificate of registration is
cancelled or revoked in an independent action for cancellation. When the
personality of the labor organization is questioned in the same manner
the veil of corporate fiction is pierced, the action partakes the nature of a
collateral attack. (Coastal Subic Bay Terminal, Inc. vs. Department of
Labor and Employment-Office of the Secretary, 507 SCRA 300 [2006])
A legitimate labor organization is defined as “any labor organization
duly registered with the Department of Labor and Employment, and
includes any branch or local thereof.” Legitimate labor organizations have
exclusive rights under the law which cannot be exercised by non-
legitimate unions, one of which is the right to be certified as the exclusive
representative of all the employees in an appropriate collective bargaining
unit for purposes of collective bargaining. (San Miguel Corporation
Employees Union-Philippine Transport and General Workers Organization
[SMCEU-PTGWO] vs. San Miguel Packaging Products Employees Union-
Pambansang Diwa ng Manggagawang Pilipino [SMPPEU-PDMP], 533
SCRA 125 [2007])
——o0o——
Page 6 of 120
 VOL. 318, NOVEMBER 16, 1999 185
UST Faculty Union vs. Bitonio, Jr.
G.R. No. 131235. November 16, 1999. * UST Faculty Union vs. Bitonio, Jr.
Labor Law; Actions; Certiorari; Pleadings and Practice; Hierarchy of
Courts; Challenges against rulings of the labor secretary and those acting on his
behalf, like the director of labor relations, shall be acted upon by the Court of
Appeals, which has concurrent jurisdiction with the Supreme Court over petitions
for certiorari.—At the outset, the Court stresses that National Federation of
Labor (NFL) v. Laguesma has held that challenges against rulings of the labor
secretary and those acting on his behalf, like the director of labor relations, shall
be acted upon by the Court of Appeals, which has concurrent jurisdiction with
this Court over petitions for certiorari. However, inasmuch as the memoranda in
the instant case have been filed prior to the promulgation and finality of our
Decision in NFL, we deem it proper to resolve the present controversy directly,
instead of remanding it to the Court of Appeals. Having disposed of the foregoing
procedural matter, we now tackle the issues in the present case seriatim.
Same; Right to Self-Organization; Unions; Employees have the right to form,
join or assist labor organizations for the purpose of collective bargaining or for
their mutual aid and protection.—Self-organization is a fundamental right
guaranteed by the Philippine Constitution and the Labor Code. Employees have
the right to form, join or assist labor organizations for the purpose of collective
bargaining or for their mutual aid and protection. Whether employed for a
definite period or not, any employee shall be considered as such, beginning on his
first day of service, for purposes of membership in a labor union.
Same; Same; Same; To become a union member, an employee must, as a rule,
not only signify the intent to become one, but also to take some positive steps to
realize that intent.—Corollary to this right is the prerogative not to join, affiliate
with or assist a labor union. Therefore, to become a union member, an employee
must, as a rule, not only signify the intent to become one, but also take some
positive steps to realize that intent. The procedure for union membership is
usually embodied in the union’s constitution and bylaws. An employee who
becomes a union member acquires the rights and the concomitant obligations
that go with this new status and becomes bound by the union’s rules and
regulations.
Same; Same; Same; Members’ frustration over the performance of the union
officers, as well as their fears of a “fraudulent” election to be held under the
latter’s supervision, could not justify the disregard
187
VOL. 318, NOVEMBER 16, 1999 1
87
of the union’s constitution and by-laws.—Petitioners claim that the
numerous anomalies allegedly committed by the private respondents during the
latter’s incumbency impelled the October 4, 1996 election of the new set of
USTFU officers. They assert that such exercise was pursuant to their right to
self-organization. Petitioners’ frustration over the performance of private
respondents, as well as their fears of a “fraudulent” election to be held under the
latter’s supervision, could not justify the method they chose to impose their will
on the union. Director Bitonio aptly elucidated: “The constitutional right to self-
organization is better understood in the context of ILO Convention No. 87
(Freedom of Association and Protection of Right to Organize), to which the
Philippines is signatory. Article 3 of the Convention provides that workers’
organizations shall have the right to draw up their constitution and rules and to
elect their representatives in full freedom, free from any interference from public
authorities. The freedom conferred by the provision is expansive; the
responsibility imposed on union members to respect the constitution and rules
they themselves draw up equally so. The point to be stressed is that the union’s
CBL is the fundamental law that governs the relationship between and among
the members of the union. It is where the rights, duties and obligations, powers,
functions and authority of the officers as well as the members are defined. It is
the organic law that determines the validity of acts done by any officer or
member of the union. Without respect for the CBL, a union as a democratic
institution degenerates into nothing more than a group of individuals governed
by mob rule.”
Same; Same; Same; Words and Phrases; “Union Election” and “Certification
Election,” Distinguished; An employee belonging to the appropriate bargaining
unit but who is not a member of the union cannot vote in the union election,
unless otherwise authorized by the constitution and by-laws of the union—union
affairs and elections cannot be decided in a non-union activity.—A union election
is held pursuant to the union’s constitution and by-laws, and the right to vote in
it is enjoyed only by union members. A union election should be distinguished
from a certification election, which is the process of determining, through secret
ballot, the sole and exclusive bargaining agent of the employees in the
appropriate bargaining unit, for purposes of collective bargaining. Specifically,
the purpose of a certification election is to ascertain whether or not a majority of
Page 7 of 120
the employees wish to be represented by a labor organization and, in the
affirmative case, by which particular labor organization. In a certifica-
188
1 SUPREME COURT REPORTS ANNOTATED
88
UST Faculty Union vs. Bitonio, Jr.
tion election, all employees belonging to the appropriate bargaining unit can
vote. Therefore, a union member who likewise belongs to the appropriate
bargaining unit is entitled to vote in said election. However, the reverse is not
always true; an employee belonging to the appropriate bargaining unit but who
is not a member of the union cannot vote in the union election, unless otherwise
authorized by the constitution and by-laws of the union. Verily, union affairs and
elections cannot be decided in a non-union activity.
Same; Same; Same; A union’s constitution and by-laws embody a covenant
between a union and its members and constitute the fundamental law governing
the members’ rights and obligations.—The importance of a union’s constitution
and by-laws cannot be overemphasized. They embody a covenant between a
union and its members and constitute the fundamental law governing the
members’ rights and obligations. As such, the union’s constitution and by-laws
should be upheld, as long as they are not contrary to law, good morals or public
policy.
Same; Same; Same; Collective Bargaining Agreements; Ratification of a new
Collective Bargaining Agreement executed between the new officers of the union
and management does not have the effect of validating a void union election—the
ratification refers only to the terms of the new Collective Bargaining Agreement,
not the issue of union leadership.—The ratification of the new CBA executed
between the petitioners and the University of Santo Tomas management did not
validate the void October 4, 1996 election. Ratified were the terms of the new
CBA, not the issue of union leadership—a matter that should be decided only by
union members in the proper forum at the proper time and after observance of
proper procedures.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Geronimo Q. Quadra and Pete Quirino-Quadra for petitioners.
Eduardo J. Marino, Jr. for private respondents.
189
VOL. 318, NOVEMBER 16, 1999 189
UST Faculty Union vs. Bitonio, Jr.
PANGANIBAN, J.:
There is a right way to do the right thing at the right time for the right
reasons, and in the present case, in the right forum by the right parties.
1
While grievances against union leaders constitute legitimate complaints
deserving appropriate redress, action thereon should be made in the
proper forum at the proper time and after observance of proper
procedures. Similarly, the election of union officers should be conducted in
accordance with the provisions of the union’s constitution and by-laws, as
well as the Philippine Constitution and the Labor Code. Specifically, while
all legitimate faculty members of the University of Santo Tomas (UST)
belonging to a collective bargaining unit may take part in a duly convened
certification election, only bona fide members of the UST Faculty Union
(USTFU) may participate and vote in a legally called election for union
officers. Mob hysteria, however wellintentioned, is not a substitute for the
rule of law.
The Case
The Petition for Certiorari before us assails the August 15, 1997
Resolution of Director Benedicto Ernesto R. Bitonio, Jr. of the Bureau of
2
Labor Relations (BLR) in BLR Case No. A-8-49-97, which affirmed the
February 11, 1997 Decision of MedArbiter Tomas F. Falconitin. The med-
arbiter’s Decision disposed as follows:
“WHEREFORE, premises considered, judgment is hereby rendered declaring the
election of USTFU officers conducted on October 4, 1996 and its election results
as null and void ab initio.
“Accordingly, respondents Gil Gamilla, et al. are hereby ordered to cease and
desist from acting and performing the duties and functions of the legitimate
officers of [the] University of Santo Tomas Faculty Union (USTFU) pursuant to
[the] union’s constitution and by-laws (CBL).
“The Temporary Restraining Order (TRO) issued by this Office on December
11, 1996 in connection with the instant petition, is hereby made and declared
permanent.” 3
Page 8 of 120
Likewise challenged is the October 30, 1997 Resolution of Director 4
Bitonio, which denied petitioners’ Motion for Reconsideration.
The Facts
The factual antecedents of the case are summarized in the assailed
Resolution as follows:
“Petitioners-appellees [herein Private Respondents] Marino, et al. (appellees) are
duly elected officers of the UST Faculty Union (USTFU). The union has a
subsisting five-year Collective Bargaining Agreement with its employer, the
University of Santo Tomas (UST). The CBA was registered with the Industrial
Relations Division, DOLE-NCR, on 20 February 1995. It is set to expire on 31
May 1998.
“On 21 September 1996, appellee Collantes, in her capacity as Secretary
General of USTFU, posted a notice addressed to all USTFU members
announcing a general assembly to be held on 05 October 1996. Among others, the
general assembly was called to elect USTFU’s next set of officers. Through the
notice, the members were also informed of the constitution of a Committee on
Elections (COMELEC) to oversee the elections. (Annex “B,” petition)
“On 01 October 1996, some of herein appellants filed a separate petition with
the Med-Arbiter, DOLE-NCR, directed against herein appellees and the
members of the COMELEC. Docketed as Case No. NCR-OD-M-9610-001, the
petition alleged that the COMELEC was not constituted in accordance with
USTFU’s constitution and by-laws (CBL) and that no rules had been issued to
govern the conduct of the 05 October 1996 election.
VOL. 318, NOVEMBER 16, 1999 191
UST Faculty Union vs. Bitonio, Jr.
“On 02 October 1996, the secretary general of UST, upon the request of the
various UST faculty club presidents (See paragraph VI, Respondents’ Comment
and Motion to Dismiss), issued notices allowing all faculty members to hold a
convocation on 04 October 1996 (See Annex ‘C’ Petition; Annexes ‘4’ to ‘10,’
Appeal). Denominated as [a] general faculty assembly, the convocation was
supposed to discuss the ‘state of the unratified UST-USTFU CBA’ and ‘status
and election of USTFU officers’ (Annex ‘11,’ Appeal)
“On 04 October 1996, the med-arbiter in Case No. NCR-OD-M-9610-001
issued a temporary restraining order against herein appellees enjoining them
from conducting the election scheduled on 05 October 1996.
“Also on 04 October 1996, and as earlier announced by the UST secretary
general, the general faculty assembly was held as scheduled. The general
assembly was attended by members of the USTFU and, as admitted by the
appellants, also by ‘non-USTFU members [who] are members in good standing of
the UST Academic Community Collective Bargaining Unit’ (See paragraph XI,
Respondents’ Comment and Motion to Dismiss). On this occasion, appellants
were elected as USTFU’s new set of officers by acclamation and clapping of
hands (See paragraphs 40 to 50, Annex ‘12,’ Appeal).
“The election of the appellants came about upon a motion of one Atty. Lopez,
admittedly not a member of USTFU, that the USTFU CBL and ‘the rules of the
election be suspended and that the election be held [on] that day’ (See paragraph
39, Idem.)
“On 11 October 1996, appellees filed the instant petition seeking injunctive
reliefs and the nullification of the results of the 04 October 1996 election.
Appellees alleged that the holding of the same violated the temporary
restraining order issued in Case No. NCR-OD-M-9610-001. Accusing appellants
of usurpation, appellees characterized the election as spurious for being violative
of USTFU’s CBL, specifically because the general assembly resulting in the
election of appellants was not called by the Board of Officers of the USTFU; there
was no compliance with the ten-day notice rule required by Section 1, Article
VIII of the CBL; the supposed elections were conducted without a COMELEC
being constituted by the Board of Officers in accordance with Section 1, Article
IX of the CBL; the elections were not by secret balloting as required by Section 1,
Article V and Section 6, Article IX of the CBL, and, the general assembly was
convened by faculty members some of whom were not members
192
192 SUPREME COURT REPORTS ANNOTATED
UST Faculty Union vs. Bitonio, Jr.
of USTFU, so much so that non-USTFU members were allowed to vote in
violation of Section 1, Article V of the CBL.
“On 24 October 1996, appellees filed another urgent ex-parte motion for a
temporary restraining order, this time alleging that appellants had served the
former a notice to vacate the union office. For their part, appellants moved to
dismiss the original petition and the subsequent motion on jurisdictional
grounds. Both the petition and the motion were captioned to be for “Prohibition,
Injunction with Prayer for Preliminary Injunction and Temporary Restraining
Order.” According to the appellants, the med-arbiter has no jurisdiction over
petitions for prohibition, ‘including the ancillary remedies of restraining order
Page 9 of 120
and/or preliminary injunction, which are merely incidental to the main petition
for PROHIBITION’ (Paragraph XVIII, Respondents’ Comment and Motion to
Dismiss). Appellants also averred that they now constituted the new set of union
officers having been elected in accordance with law after the term of office of
appellees had expired. They further maintained that appellees’ scheduling of the
5 October 1996 elections was illegal because no rules and regulations governing
the elections were promulgated as required by USTFU’s CBL and that one of the
members of the COMELEC was not a registered member of USTFU. Appellants
likewise noted that the elections called by the appellees should have been
postponed to allow the promulgation of rules and regulations and to ‘insure a
free, clean, honest and orderly elections and to afford at the same time the
greater majority of the general membership to participate’ (See paragraph V,
Idem.). Finally, appellants contended that the holding of the general faculty
assembly on 04 October 1996 was under the control of the Council of
College/Faculty Club Presidents in cooperation with the USTFU Reformist
Alliance and that they received the Temporary Restraining Order issued in Case
No. NCR-OD-M-9610-001 only on 07 October 1996 and were not aware of the
same on 04 October 1996.
“On 03 December 1996, appellants and UST allegedly entered into another
CBA covering the period from 01 June 1996 to 31 May 2001 (Annex 11,
appellants’ Rejoinder to the Reply and Opposition).
“Consequently, appellees again moved for the issuance of a temporary
restraining order to prevent appellants from making further representations
that [they] had entered into a new agreement with UST. Appellees also
reiterated their earlier stand that appellants were usurping the former’s duties
and functions and should be stopped from continuing such acts.
193
VOL. 318, NOVEMBER 16, 1999 193
UST Faculty Union vs. Bitonio, Jr.
“On 11 December 1996, over appellants’ insistence that the issue of
jurisdiction should first be resolved, the med-arbiter issued a temporary
restraining order directing the respondents to cease and desist from performing
any and all acts pertaining to the duties and functions of the officers and
directors of USTFU.
“In the meantime, appellants claimed that the new CBA was purportedly
ratified by an overwhelming majority of UST’s academic community on 12
December 1996 (Annexes 1 to 10, Idem.). For this reason, appellants moved for
the dismissal of what it denominated as appellees’ petition for prohibition on the
ground that this had become moot and academic.” 5
Petitioners appealed the med-arbiter’s Decision to the labor
secretary, who transmitted the records of the case to the Bureau of Labor
6
Relations which, under Department Order No. 9, was authorized to
resolve appeals of intra-union cases, consistent with the last paragraph of
Article 241 of the Labor Code. 7
The Assailed Ruling
Agreeing with the med-arbiter that the USTFU officers’ purported
election held on October 4, 1994 was void for having been conducted in
violation of the union’s Constitution and By-laws (CBL), Public
Respondent Bitonio rejected petitioners’ contention that it was a
legitimate exercise of their right to self-organization. He ruled that the
CBL, which constituted the covenant between the union and its members,
could not be suspended during the October 4, 1996 general assembly of all
faculty members, since that assembly had not been convened or
authorized by the USTFU.
Director Bitonio likewise held that the October 4, 1996 election could
not be legitimized by the recognition of the newly “elected” set of officers
by UST or by the alleged ratifi-
194
194 SUPREME COURT REPORTS ANNOTATED
UST Faculty Union vs. Bitonio, Jr.
cation of the new CBA by the general membership of the USTFU. Ruled
Respondent Bitonio:
“This submission is flawed. The issue at hand is not collective bargaining
representation but union leadership, a matter that should concern only the
members of USTFU. As pointed out by the appellees, the privilege of
determining who the union officers will be belongs exclusively to the members of
the union. Said privilege is exercised in an election proceeding in accordance
with the union’s CBL and applicable law.
“To accept appellants’ claim to legitimacy on the foregoing grounds is to invest
in appellants the position, duties, responsibilities, rights and privileges of
USTFU officers without the benefit of a lawful electoral exercise as defined in
USTFU’s CBL and Article 241(c) of the Labor Code. Not to mention the fact that
labor laws prohibit the employer from interfering with the employees in the
Page 10 of 120
latter’s exercise of their right to self-organization. To allow appellants to become
USTFU officers on the strength of management’s recognition of them is to
concede to the employer the power of determining who should be USTFU’s
leaders. This is a clear case of interference in the exercise by USTFU members of
their right to self-organization.”
8
Hence, this Petition.
9
The Issues
The main issue in this case is whether the public respondent committed
grave abuse of discretion in refusing to recognize the officers “elected”
during the October 4, 1996 general assembly. Specifically, petitioners in
their Memorandum urge the Court to resolve the following questions: 10
195
VOL. 318, NOVEMBER 16, 1999 195
UST Faculty Union vs. Bitonio, Jr.
1. “(1)Whether the Collective Bargaining Unit of all the faculty members in
that General Faculty Assembly had the right in that General Faculty
Assembly to suspend the provisions of the Constitution and By-Laws of
the USTFU regarding the elections of officers of the union[.]
2. “(2)Whether the suspension of the provisions of the Constitution and By-
Laws of the USTFU in that General Faculty Assembly is valid pursuant
to the constitutional right of the Collective Bargaining Unit to engage in
“peaceful concerted activities” for the purpose of ousting the corrupt
regime of the private respondents[.]
3. “(3)Whether the overwhelming ratification of the Collective Bargaining
Agreement executed by the petitioners in behalf of the USTFU with the
University of Santo Tomas has rendered moot and academic the issue as
to the validity of the suspension of the Constitution and By-Laws and
the elections of October 4, 1996 in the General Faculty Assembly[.]”
The Court’s Ruling
The petition is not meritorious. Petitioners fail to convince this Court that
Director Bitonio gravely abused his discretion in affirming the med-
arbiter and in refusing to recognize the binding effect of the October 4,
1996 general assembly called by the UST administration.
First Issue: Right to Self-Organization and Union Membership
At the outset, the Court stresses that National Federation of Labor (NFL)
v. Laguesma has held that challenges against rulings of the labor
11
secretary and those acting on his behalf, like the director of labor
relations, shall be acted upon by the Court of Appeals, which has
concurrent jurisdiction with this Court over petitions for certiorari.
However, inasmuch as the memoranda in the instant case have been filed
prior to the promulgation and finality of our Decision in NFL, we deem it
proper to resolve the present controversy directly, instead of
_______________
G.R. No. 123426, March 10, 1999, 304 SCRA 405.
11
196
196 SUPREME COURT REPORTS ANNOTATED
UST Faculty Union vs. Bitonio, Jr.
remanding it to the Court of Appeals. Having disposed of the foregoing
procedural matter, we now tackle the issues in the present case seriatim.
Self-organization is a fundamental right guaranteed by the Philippine
Constitution and the Labor Code. Employees have the right to form, join
or assist labor organizations for the purpose of collective bargaining or for
their mutual aid and protection. Whether employed for a definite period
12
or not, any employee shall be considered as such, beginning on his first
day of service, for purposes of membership in a labor union. 13
Corollary to this right is the prerogative not to join, affiliate with or
assist a labor union. Therefore, to become a union member, an employee
14
must, as a rule, not only signify the intent to become one, but also take
some positive steps to realize that intent. The procedure for union
membership is usually embodied in the union’s constitution and by-
laws. An15
_______________
12 See Article 244 of the Labor Code in conjunction with Executive Order No. 180, as well
as Article 245 of the same Code.
13 Art. 277 (c), Labor Code.
14 Reyes v. Trajano, 209 SCRA 484, June 2, 1992.
Page 11 of 120
 15For example, the following are pertinent provisions as regards membership in USTFU,
as set forth in its CBL:
“ARTICLE IV—MEMBERSHIP
Section 1. Every faculty member of the University of Santo Tomas, not otherwise disqualified by law and
without regard to sex, race, nationality, religious or political belief or affiliation, is eligible for
membership in the UNION.
Section 2. Qualified faculty members of the Company may become members of the UNION by
written application approved by the President upon recommendation of the Committee on Membership
and after payment in full of the required admission fee.
Section 3. The following shall not be eligible for membership nor to election or appointment to any
position in the UNION:
197
VOL. 318, NOVEMBER 16, 1999 197
UST Faculty Union vs. Bitonio, Jr.
employee who becomes a union member acquires the rights and the
concomitant obligations that go with this new status and becomes bound
by the union’s rules and regulations.
“When a man joins a labor union (or almost any other democratically controlled
group), necessarily a portion of his individual freedom is surrendered for the
benefit of all members. He accepts the will of the majority of the members in
order that he may derive the advantages to be gained from the concerted action
of all. Just as the enactments of the legislature bind all of us, to the constitution
and by-laws of the union (unless contrary to good morals or public policy, or
otherwise illegal), which are duly enacted through democratic processes, bind all
of the members. If a member of a union dislikes the provisions of the by-laws, he
may seek to have them amended or may withdraw from the union; otherwise, he
must abide by them. It is not the function of courts to decide the wisdom or
propriety of legitimate by-laws of a trade union.
“On joining a labor union, the constitution and by-laws become a part of the
member’s contract of membership under which he agrees to become bound by the
constitution and governing rules of the union so far as it is not inconsistent with
controlling principles of law. The constitution and by-laws of an unincorporated
trade union express the terms of a contract, which define the privileges and
rights secured to, and duties assumed by, those who have become members. The
agreement of a member on joining a union to abide by its laws and comply with
the will of the lawfully constituted majority does not require a member to submit
to the determination of the union any question involving his personal rights.”
Petitioners claim that the numerous anomalies allegedly committed by
the private respondents during the latter’s
_______________
1. a)Subversives or persons who profess subversive ideas;
2. b)Persons who have been convicted of a crime involving moral turpitude; and
3. c)Persons who are not faculty members of the Company.” (Rollo, p. 283)
16 Ang Malayang Manggagawa ng Ang Tibay Enterprises, et al. v. Ang Tibay, 102 Phil. 669,
December 23, 1957, per Bautista, Angelo, J.
198
198 SUPREME COURT REPORTS ANNOTATED
UST Faculty Union vs. Bitonio, Jr.
incumbency impelled the October 4, 1996 election of the new set of
USTFU officers. They assert that such exercise was pursuant to their
right to self-organization.
Petitioners’ frustration over the performance of private respondents, as
well as their fears of a “fraudulent” election to be held under the latter’s
supervision, could not justify the method they chose to impose their will
on the union. Director Bitonio aptly elucidated: 17
“The constitutional right to self-organization is better understood in the context
of ILO Convention No. 87 (Freedom of Association and Protection of Right to
Organize), to which the Philippines is signatory. Article 3 of the Convention
provides that workers’ organizations shall have the right to draw up their
constitution and rules and to elect their representatives in full freedom, free from
any interference from public authorities. The freedom conferred by the provision
is expansive; the responsibility imposed on union members to respect the
constitution and rules they themselves draw up equally so. The point to be
stressed is that the union’s CBL is the fundamental law that governs the
relationship between and among the members of the union. It is where the
rights, duties and obligations, powers, functions and authority of the officers as
well as the members are defined. It is the organic law that determines the
validity of acts done by any officer or member of the union. Without respect for
the CBL, a union as a democratic institution degenerates into nothing more than
a group of individuals governed by mob rule.”
16
Page 12 of 120
Union Election vs. Certification Election
A union election is held pursuant to the union’s constitution and by-laws,
and the right to vote in it is enjoyed only by union members. A union
election should be distinguished from a certification election, which is the
process of determining, through secret ballot, the sole and exclusive
bargaining agent of the employees in the appropriate bargaining unit, for
pur-
_______________
August 15, 1997 Resolution, pp. 9-10; rollo, pp. 82-83.
17
199
VOL. 318, NOVEMBER 16, 1999 199
UST Faculty Union vs. Bitonio, Jr.
poses of collective bargaining. Specifically, the purpose of a certification
18
election is to ascertain whether or not a majority of the employees wish to
be represented by a labor organization and, in the affirmative case,
by which particular labor organization. 19
In a certification election, all employees belonging to the appropriate
bargaining unit can vote. Therefore, a union member who likewise
20
belongs to the appropriate bargaining unit is entitled to vote in said
election. However, the reverse is not always true; an employee belonging
to the appropriate bargaining unit but who is not a member of the union
cannot vote in the union election, unless otherwise authorized by the
constitution and by-laws of the union. Verily, union affairs and elections
cannot be decided in a non-union activity.
In both elections, there are procedures to be followed. Thus, the
October 4, 1996 election cannot properly be called a union election,
because the procedure laid down in the USTFU’s CBL for the election of
officers was not followed. It could not have been a certification election
either, because representation was not the issue, and the proper
procedure for such election was not followed. The participation of non-
union members in the election aggravated its irregularity.
Second Issue: USTFU’s Constitution and By-Laws Violated
The importance of a union’s constitution and by-laws cannot be
overemphasized. They embody a covenant between a union and its
members and constitute the fundamental law governing the members’
rights and obligations. As such, the
21
_______________
18 §1 (x), Rule I, Book V, Rules and Regulations Implementing the Labor Code.
19 Reyes v. Trajano, supra.
20 Airtime Specialists v. Ferrer-Calleja, 180 SCRA 749, December 29, 1989.
21 Johnson and Johnson Labor Union-FFW v. Director of Labor Relations, 170 SCRA 469,
February 21, 1989.
200
200 SUPREME COURT REPORTS ANNOTATED
UST Faculty Union vs. Bitonio, Jr.
union’s constitution and by-laws should be upheld, as long as they are not
contrary to law, good morals or public policy.
We agree with the finding of Director Bitonio and MedArbiter
Falconitin that the October 4, 1996 election was tainted with
irregularities because of the following reasons.
First, the October 4, 1996 assembly was not called by the USTFU. It
was merely a convocation of faculty clubs, as indicated in the
memorandum sent to all faculty members by Fr. Rodel Aligan, OP, the
secretary general of the University of Santo Tomas. It was not convened
22
in accordance with the provision on general membership meetings as
found in the USTFU’s CBL, which reads:
“ARTICLE VIII—MEETINGS OF THE UNION
“Section 1. The Union shall hold regular general membership meetings at least
once every three (3) months. Notices of the meeting shall be sent out by the
Secretary-General at least ten (10) days prior to such meetings by posting in
conspicuous places, preferably inside Company premises, said notices. The date,
time and place for the meetings shall be determined by the Board of Officers.” 23
Unquestionably, the assembly was not a union meeting. It was in fact a
gathering that was called and participated in by management and non-
union members. By no legal fiat was such assembly transformed into a
union activity by the participation of some union members.
Second, there was no commission on elections to oversee the election,
as mandated by Sections 1 and 2 of Article IX of the USTFU’s CBL, which
provide:
Page 13 of 120
“ARTICLE IX—UNION ELECTION
Section 1. There shall be a Committee on Election (COMELEC) to be created by
the Board of Officers at least thirty
201
VOL. 318, NOVEMBER 16, 1999 201
UST Faculty Union vs. Bitonio, Jr.
(30) days before any regular or special election. The functions of the COMELEC
include the following:
1. a)Adopt and promulgate rules and regulations that will ensure a free,
clean, honest and orderly election, whether regular or special;
2. b)Pass upon qualifications of candidates;
3. c)Rule on any question or protest regarding the conduct of the election
subject to the procedure that may be promulgated by the Board of
Officers; and
4. d)Proclaim duly elected officers.
Section 2. The COMELEC shall be composed of a chairman and two members
all of whom shall be appointed by the Board of Officers.
“x x x xxx x x x”
24
Third, the purported election was not done by secret balloting, in violation
of Section 6, Article IX of the USTFU’s CBL, as well as Article 241 (c) of
the Labor Code.
The foregoing infirmities considered, we cannot attribute grave abuse
of discretion to Director Bitonio’s finding and conclusion. In Rodriguez v.
Director, Bureau of Labor Relations, we invalidated the local union
25
elections held at the wrong date without prior notice to members and
conducted without regard for duly prescribed ground rules. We held that
the proceedings were rendered void by the lack of due process—undue
haste, lack of adequate safeguards to ensure integrity of the voting, and
the absence of the notice of the dates of balloting.
Third Issue: Suspension of USTFU’s CBL
Petitioners contend that the October 4, 1996 assembly “suspended” the
union’s CBL. They aver that the suspension and the election that followed
were in accordance with their
_______________
.
202
202 SUPREME COURT REPORTS ANNOTATED
UST Faculty Union vs. Bitonio, Jr.
“constituent and residual powers as members of the collective bargaining
unit to choose their representatives for purposes of collective bargaining.”
Again they cite the numerous anomalies allegedly committed by the
private respondents as USTFU officers. This argument does not persuade.
First, as has been discussed, the general faculty assembly was not the
proper forum to conduct the election of USTFU officers. Not all who
attended the assembly were members of the union; some, apparently,
were even disqualified from becoming union members, since they
represented management. Thus, Director Bitonio correctly observed:
“Further, appellants cannot be heard to say that the CBL was effectively
suspended during the 04 October 1996 general assembly. A union CBL is a
covenant between the union and its members and among members (Johnson and
Johnson Labor Union-FFW, et al. v. Director of Labor Relations, 170 SCRA 469).
Where ILO Convention No. 87 speaks of a union’s full freedom to draw up its
constitution and rules, it includes freedom from interference by persons who are
not members of the union. The democratic principle that governance is a matter
for the governed to decide upon applies to the labor movement which, by law and
constitutional mandate, must be assiduously insulated against intrusions coming
from both the employer and complete strangers if the ‘protection to labor clause’
of the constitution is to be guaranteed. By appellant’s own evidence, the general
faculty assembly of 04 October 1996 was not a meeting of USTFU. It was
attended by members and non-members alike, and therefore was not a forum
appropriate for transacting union matters. The person who moved for the
suspension of USTFU’s CBL was not a member of USTFU. Allowing a non-union
member to initiate the suspension of a union’s CBL, and non-union members to
participate in a union election on the premise that the union’s CBL had been
suspended in the meantime, is incompatible with the freedom of association and
protection of the right to organize. “If there are members of the so-called
‘academic community collective bargaining unit’ who are not USTFU members
but who would nevertheless want to have a hand in USTFU’s affairs, the
appropriate procedure would have been for them to become members of USTFU
first. The procedure for membership is very clearly spelled out in Article IV of
Page 14 of 120
USTFU’s CBL. Having become members, they could then draw guidance
from Ang Malayang Manggagawa Ng
203
VOL. 318, NOVEMBER 16, 1999 203
UST Faculty Union vs. Bitonio, Jr.
Ang Tibay v. Ang Tibay, 103 Phil. 669. Therein the Supreme Court held that ‘if a
member of the union dislikes the provisions of the bylaws he may seek to have
them amended or may withdraw from the union; otherwise he must abide by
them.’ Under Article XVII of USTFU’s CBL, there is also a specific provision for
constitutional amendments. What is clear therefore is that USTFU’s CBL
provides for orderly procedures and remedies which appellants could have easily
availed [themselves] of instead of resorting to an exercise of their so-called
‘residual power.’ ” 26
Second, the grievances of the petitioners could have been brought up and
resolved in accordance with the procedure laid down by the union’s
CBL and by the Labor
27
_______________
26 Rollo, pp. 83-84.
27 The USTFU’s CBL as regards impeachment and recall reads as follows:
ARTICLE XV—IMPEACHMENT AND RECALL
Section 1. Any of the following shall be grounds for the impeachment or recall of UNION
officers:
1. a)Committing or causing the commission directly or indirectly of acts against the
interest and welfare of the UNION.
2. b)Malicious attack against the UNION, its officers, or against a fellow UNION officer.
3. c)Failure to comply with the obligation to turn over and return to the UNION
Treasurer within three (3) days any unexpended sum or sums of money received
from the UNION funds to answer for an authorized UNION purpose.
4. d)Gross misconduct unbecoming a UNION officer.
5. e)Misappropriation of UNION funds and property. This is without prejudice to the
filing of an appropriate criminal or civil action against the responsible officer or
officers by any interested party.
6. f)Willful violation of any provision of this Constitution and By-Laws or rules,
regulations, measures, resolutions or decisions of the UNION.
Section 2. The following procedure shall govern impeachment and recall proceedings:
1. a)Impeachment or recall proceedings shall be initiated by a formal petition or
resolution signed by at least thirty (30) per-
204
204 SUPREME COURT REPORTS ANNOTATED
UST Faculty Union vs. Bitonio, Jr.
Code. They contend that their sense of desperation and helplessness led
28
to the October 4, 1996 election. However, we cannot agree with the
method they used to rectify years of inaction on their part and thereby
ease bottled-up frustrations, as such method was in total disregard of the
USTFU’s CBL and of due process. The end never justifies the means.
We agree with the solicitor general’s observation that “the act of
suspending the constitution when the questioned election was held is an
implied admission that the election held on that date [October 4, 1996]
could not be considered valid under the existing USTFU constitution x x
x.”29
The ratification of the new CBA executed between the petitioners and
the University of Santo Tomas management did not validate the void
October 4, 1996 election. Ratified were the terms of the new
CBA, not the issue of union leadership—a matter that should be decided
only by union members in the proper forum at the proper time and after
observance of proper procedures.
_______________
cent of all bonafide members of the UNION and addressed to theChairman of the Board of
Officers.
1. b)The Board Chairman shall then convene a general membership meeting to consider
the impeachment or recall of an officer or a group of officers, whether elective or
appointive.
2. c)UNION officers against whom impeachment or recall charges have been filed shall
be given ample opportunity to defend themselves before any impeachment or recall
vote is finally taken.
3. d)A majority of all the members of the UNION shall be required to impeach or recall
UNION officers.
4. e)The UNION officers impeached shall ipso facto be considered resigned or ousted
from office and shall no longer be elected or appointed to any position in the
UNION.
Page 15 of 120
 5. f)The decision of the general membership on the impeachment or recall charge shall
be final and executory.
Art. 241.
28
Public respondent’s Memorandum, p. 13; rollo, p. 533.
29
205
VOL. 318, NOVEMBER 16, 1999 205
UST Faculty Union vs. Bitonio, Jr.
Epilogue
In dismissing this Petition, we are not passing upon the merits of the
mismanagement allegations imputed by the petitioners to the private
respondents; these are not at issue in the present case. Petitioners can
bring their grievances and resolve their differences with private
respondents in timely and appropriate proceedings. Courts will not
tolerate the unfair treatment of union members by their own leaders.
When the latter abuse and violate the rights of the former, they shall be
dealt with accordingly in the proper forum after the observance of due
process.
WHEREFORE, the Petition is hereby DISMISSED and the assailed
Resolutions AFFIRMED. Costs against petitioners.
SO ORDERED.
Notes.—The right to self-organization and collective bargaining is an
integral part of the protection to labor provision embodied in the
Constitution. (Barbizon Philippines, Inc. vs. Nagkakaisang Supervisor ng
Barbizon Philippines, Inc.-NAFLU, 261 SCRA 738 [1996])
A unit to be appropriate must effect a grouping of employees who have
substantial, mutual interests in wages, hours, working conditions and
other subjects of collective bargaining. (Dunlop Slazenger [Phils.], Inc. vs.
Secretary of Labor and Employment, 300 SCRA 120 [1998])
——o0o——
308 SUPREME COURT REPORTS ANNOTATED
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
G.R. No. 114974. June 16, 2004. *
STANDARD CHARTERED BANK EMPLOYEES UNION (NUBE),
petitioner, vs. The Honorable MA. NIEVES R. CONFESOR, in her
capacity as SECRETARY OF LABOR AND EMPLOYMENT; and the
STANDARD CHARTERED BANK, respondents.
Labor Law; Labor Code; Labor Union; Interference, restraints or coercion of
employees by the employer in the exercise of their right to self-organization or the
right to form association considered unfair labor practice; In order to show that
the employer committed ULP under the Labor Code, substantial evidence is
required to support such claim.—Article 248(a) of the Labor Code, considers it an
unfair labor practice when an employer interferes, restrains or coerces employees
in the exercise of their right to self-organization or the right to form association.
The right to self-organization necessarily includes the right to collective
bargaining. Parenthetically, if an employer interferes in the selection of its
negotiators or coerces the Union to exclude from its panel of negotiators a
representative of the Union, and if it can be inferred that the employer adopted
the said act to yield adverse effects on the free exercise to right to self-
organization or on the right to collective bargaining of the employees, ULP under
Article 248(a) in connection with Article 243 of the Labor Code is committed. In
order to show that the employer committed ULP under the Labor Code,
substantial evidence is required to support the claim. Substantial evidence has
been defined as such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion. In the case at bar, the Union bases its claim of
interference on the alleged suggestions of Diokno to exclude Umali from the
Union’s negotiating panel.
Same; Same; Same; Collective Bargaining Agreement; Words and
Phrases; Surface Bargaining Defined.—Surface bargaining is defined as “going
through the motions of negotiating” without any legal intent to reach an
agreement. The resolution of surface bargaining allegations never presents an
easy issue. The determination of whether a party has engaged in unlawful
surface bargaining is usually a difficult one because it involves, at bottom, a
question of the intent of the party in question, and usually such intent can only
be inferred from the totality of the challenged party’s conduct both at and away
from the bargaining table. It involves the question of whether an employer’s
conduct demonstrates an unwillingness to bargain in good faith or is merely hard
bargaining.
_______________
Page 16 of 120
 *SECOND DIVISION.
309
VOL. 432, JUNE 16, 2004 30
9
Standard Chartered Bank Employees Union (NUBE)
vs. Confesor
Same; Same; Same; Same; The duty to bargain “does not compel either party
to agree to a proposal or require the making of a concession.”—The Union has not
been able to show that the Bank had done acts, both at and away from the
bargaining table, which tend to show that it did not want to reach an agreement
with the Union or to settle the differences between it and the Union. Admittedly,
the parties were not able to agree and reached a deadlock. However, it is herein
emphasized that the duty to bargain “does not compel either party to agree to a
proposal or require the making of a concession.” Hence, the parties’ failure to
agree did not amount to ULP under Article 248(g) for violation of the duty to
bargain.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
Perfecto Fernandez for petitioner.
Sycip, Salazar, Hernandez and Gatmaitan for private respondent.
CALLEJO, SR., J.:
This is a petition for certiorari under Rule 65 of the Rules of Court filed by
the Standard Chartered Bank Employees Union, seeking the nullification
of the October 29, 1993 Order of then Secretary of Labor and Employment
1 benefits, i.e., maternity, vacation, sick, emergency and union leave; introduction of paternity
Nieves R. Confesor and her resolutions dated December 16, 1993 and
February 10, 1994.
The Antecedents
Standard Chartered Bank (the Bank, for brevity) is a foreign banking
corporation doing business in the Philippines. The exclusive bargaining
agent of the rank and file employees of the Bank is the Standard
Chartered Bank Employees Union (the Union, for brevity).
In August of 1990, the Bank and the Union signed a five-year collective
bargaining agreement (CBA) with a provision to renegotiate the terms
thereof on the third year. Prior to the expiration of the three-year
period but within the sixty-day freedom period, the Union initiated the
2
negotiations. On February 18, 1993, the Union,
_______________
1Rollo, pp. 451-464.
2The expiration of the CBA is on March 31, 1993.
310
310 SUPREME COURT REPORTS ANNOTATED
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
through its President, Eddie L. Divinagracia, sent a letter containing its 3
proposals covering political provisions and thirty-four (34) economic
4 5
provisions. Included therein was a list of the names of the members of the
6
Union’s negotiating panel. 7
In a Letter dated February 24, 1993, the Bank, through its Country
Manager Peter H. Harris, took note of the Union’s proposals. The Bank
attached its counter-proposal to the non-economic provisions proposed by
the Union. The Bank posited that it would be in a better position to
8
present its counter-proposals on the economic items after the Union had
presented its justifications for the economic proposals. The Bank, 9
likewise, listed the members of its
5 Sometimes referred to as non-economic provisions.
6 Uniforms, signing bonus, wages, group insurance, medicine allowance, dental benefits,
optical allowance, death assistance, additional 1/2 month in midyear allowance, additional
2.5% in the teller’s guarantee fund; profit-sharing provision, improvements in leave
leave, marriage leave, birthday leave and loyalty leave; extension of the enjoyment of salary
increments from 35 to 40 years of service; provision for meal and shift allowances; increase in
overtime, weekend, holiday and shift allowances; increase emergency premiums, increase in
availments of housing corresponding lowering of interest rates and eligibility requirements,
and deletion of the current rules on availment; improvement of gratuities to a maximum of
175% and increase of medical benefits (Rollo, p. 142).
7 Eddie L. Divinagracia, Rogelio Fernando, Nancy G. Sagum, Rebecca Gabay, Ray Michael
Quimpo, Reyel G. Vargas, Cipriano Garcia, Alberto Diaz, Ed De Mesa and Jose P. Umali, Jr.
8 The Bank’s counter-proposal centered on union recognition and scope (appropriate
bargaining agreement), union security and check-off (maintenance of membership), new
employees, collection of union dues, job security, hiring of next of kin, temporary personnel,
redundancies, closure and relocation, management prerogative, uniforms and grievance
Page 17 of 120
procedures. With respect to the counter-proposals on all economic provisions, the Bank said 13 The negotiations for the non-economic provisions were made on March 12, 16, 23, and
that it is open for discussion. (Rollo, p. 144). 30, 1993; April 6, 13, 20, 23 and 28, 1993 and May 4, 1993.
9 Rollo, p. 142. 14 The Union defined “DEADLOCKED” as exhaustion of the three readings; Rollo, p. 269.

311 15 Minutes of the Meeting of June 1, 1993; Rollo, p. 277.

VOL. 432, JUNE 16, 2004 311 312

Standard Chartered Bank Employees Union (NUBE) vs. 312 SUPREME COURT REPORTS ANNOTATED
Confesor Standard Chartered Bank Employees Union (NUBE) vs.
negotiating panel. The parties agreed to set meetings to settle their
10
Confesor
differences on the proposed CBA. on the provisions on salary increase, group hospitalization, death
Before the commencement of the negotiation, the Union, through assistance and dental benefits. He reminded the Bank, how the Union got
Divinagracia, suggested to the Bank’s Human Resource Manager and what it wanted in 1987, and stated that if need be, the Union would go
head of the negotiating panel, Cielito Diokno, that the bank lawyers through the same route to get what it wanted. 16

should be excluded from the negotiating team. The Bank Upon the Bank’s insistence, the parties agreed to tackle the economic
acceded. Meanwhile, Diokno suggested to Divinagracia that Jose P.
11 package item by item. Upon the Union’s suggestion, the Bank indicated
Umali, Jr., the President of the National Union of Bank Employees which provisions it would accept, reject, retain and agree to discuss. The 17

(NUBE), the federation to which the Union was affiliated, be excluded Bank suggested that the Union prioritize its economic proposals,
from the Union’s negotiating panel. However, Umali was retained as a
12 considering that many of such economic provisions remained unresolved.
member thereof. The Union, however, demanded that the Bank make a revised itemized
On March 12, 1993, the parties met and set the ground rules for the proposal.
negotiation. Diokno suggested that the negotiation be kept a “family In the succeeding meetings, the Union made the following proposals:
affair.” The proposed non-economic provisions of the CBA were discussed Wage Increase:
first. Even during the final reading of the noneconomic provisions on May
13
1st Year—Reduced from 45% to 40%
2nd Year—Retain at 20%
4, 1993, there were still provisions on which the Union and the Bank
Total = 60%
could not agree. Temporarily, the notation “DEFERRED” was placed Group Hospitalization Insurance:
therein. Towards the end of the meeting, the Union manifested that the Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness
same should be changed to “DEADLOCKED” to indicate that such items annually
remained unresolved. Both parties agreed to place the notation Death Assistance:
“DEFERRED/DEADLOCKED.” 14
For the employee—Reduced from P50,000.00 to P45,000.00
On May 18, 1993, the negotiation for economic provisions commenced. For Immediate Family Member—Reduced from P30,000.00 to P25,000.00
A presentation of the basis of the Union’s economic proposals was made. Dental and all others—No change from the original demand. 18

The next meeting, the Bank made a similar presentation. Towards the In the morning of the June 15, 1993 meeting, the Union suggested that if
end of the Bank’s presentation, Umali requested the Bank to validate the the Bank would not make the necessary revisions on its counter-proposal,
Union’s “guestimates,” especially the figures for the rank and file staff. In 15 it would be best to seek a third party assistance. After the break, the
19

the succeeding meetings, Umali chided the Bank for the insufficiency of Bank presented its revised counter-proposal as follows:
20

its counter-proposal Wage Increase: 1st Year—from P1,000 to P1,050.00

2nd Year—P800.00—no change
Page 18 of 120
 The Union’s original proposals, aside from the above-quoted, remained the
same.
VOL. 432, JUNE 16, 2004 313 Another set of counter-offer followed:
Standard Chartered Bank Employees Union (NUBE) vs. Management Union
Confesor Wage Increase
Group Hospitalization Insurance 1st Year—P1,050.00 40%
From: P35,000.00 per illness 2nd Year—850.00 19.0% 23

To : P35,000.00 per illness per year 314

314 SUPREME COURT REPORTS ANNOTATED
Death Assistance—For employee Standard Chartered Bank Employees Union (NUBE) vs.
From: P20,000.00 Confesor
To : P25,000.00 Diokno stated that, in order for the Bank to make a better offer, the Union
should clearly identify what it wanted to be included in the total economic
Dental Retainer—Original offer remains the package. Umali replied that it was impossible to do so because the Bank’s
same21
counter-proposal was unacceptable. He furthered asserted that it would
The Union, for its part, made the following counter-proposal: have been easier to bargain if the atmosphere was the same as before,
Wage Increase: 1st Year—40% where both panels trusted each other. Diokno requested the Union panel to
2nd Year—19.5% refrain from involving personalities and to instead focus on the
Group Hospitalization Insurance negotiations. He suggested that in order to break the impasse, the Union
24

From: P60,000.00 per year should prioritize the items it wanted to iron out. Divinagracia stated that
To: P50,000.00 per year the Bank should make the first move and make a list of items it wanted to
be included in the economic package. Except for the provisions on signing
Dental: bonus and uniforms, the Union and the Bank failed to agree on the
Temporary Filling—P150.00 remaining economic provisions of the CBA. The Union declared a
Tooth Extraction deadlock and filed a Notice of Strike before the National Conciliation and
25

Permanent Filling—200.00 Mediation Board (NCMB) on June 21, 1993, docketed as NCMB-NCR-NS-
Prophylaxis—250.00 06-380-93. 26

Root Canal—From P2,000 per tooth
To: 1,800.00 per tooth
Death Assistance:
For Employees: From P45,000.00 to P40,000.00
For Immediate Family Member: From P25,000.00 to
On the other hand, the Bank filed a complaint for Unfair Labor
Practice (ULP) and Damages before the Arbitration Branch of the
National Labor Relations Commission (NLRC) in Manila, docketed as
NLRC Case No. 00-06-04191-93 against the Union on June 28, 1993. The
Bank alleged that the Union violated its duty to bargain, as it did not
bargain in good faith. It contended that the Union demanded “sky high
economic demands,” indicative of blue-sky bargaining. Further, the Union
27

P20,000.00.22
violated its no strike-no lockout clause by filing a notice of strike before
Page 19 of 120
the NCMB. Considering that the filing of notice of strike was an illegal The SOLE gave the following economic awards:
act, the Union officers should be dismissed. Finally, the Bank alleged that 1. Wage Increase:
as a consequence of the illegal act, the Bank suffered nominal and actual a) To be incorporated to present salary rates:
damages and was forced to litigate and hire the services of the lawyer. 28
Fourth year: 7% of basic monthly salary
27 Blue-Sky Bargaining is defined as “unrealistic and unreasonable demands in Fifth year: 5% of basic monthly salary based on the 4th
negotiations by either or both labor and management, where neither concedes anything and year adjusted salary
demands the impossible.” It actually is not collective bargaining at all. (Harold S. Additional fixed amount:
Roberts, Robert’s Dictionary of Industrial Relations (Revised Edition, 1971, p. 51); Rollo, p.
671. 2. Group Insurance
315 a) Hospitalization: P45,000.00
VOL. 432, JUNE 16, 2004 315 b) Life: P130,000.00
Standard Chartered Bank Employees Union (NUBE) vs.
_______________
Confesor
On July 21, 1993, then Secretary of Labor and Employment (SOLE) Id., at pp. 463-464.
29

Nieves R. Confesor, pursuant to Article 263(g) of the Labor Code, issued 316
an Order assuming jurisdiction over the labor dispute at the Bank. The 316 SUPREME COURT REPORTS ANNOTATED
complaint for ULP filed by the Bank before the NLRC was consolidated Standard Chartered Bank Employees Union (NUBE) vs.
with the complaint over which the SOLE assumed jurisdiction. After the Confesor
parties submitted their respective position papers, the SOLE issued an c) Accident: P130,000.00
Order on October 29, 1993, the dispositive portion of which is herein 3. Medicine Allowance
quoted: Fourth year: P5,500.00
“WHEREFORE, the Standard Chartered Bank and the Standard Chartered Fifth year: P6,000.00
Bank Employees Union—NUBE are hereby ordered to execute a collective 4. Dental Benefits
bargaining agreement incorporating the dispositions contained herein. The CBA
shall be retroactive to 01 April 1993 and shall remain effective for two years
Provision of dental retainer as proposed by the Bank,
thereafter, or until such time as a new CBA has superseded it. All provisions in but without diminishing existing benefits
the expired CBA not expressly modified or not passed upon herein are deemed 5. Optical Allowance
retained while all new provisions which are being demanded by either party are Fourth year: P2,000.00
deemed denied, but without prejudice to such agreements as the parties may Fifth year: P2,500.00
have arrived at in the meantime. 6. Death Assistance
“The Bank’s charge for unfair labor practice which it originally filed with the a) Employee: P30,000.00
NLRC as NLRC-NCR Case No. 00-06-04191-93 but which is deemed consolidated
b) Immediate Family Member: P5,000.00
herein, is dismissed for lack of merit. On the other hand, the Union’s charge for
unfair labor practice is similarly dismissed. 7. Emergency Leave—Five (5) days for each
“Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC- contingency
NCR Case No. 00-06-04191-93 is pending for his guidance and appropriate 8. Loans
action.”29 a) Car Loan: P200,000.00
Page 20 of 120
 b) Housing Loan: It cannot be denied that the costs
attendant to having one’s own home have
tremendously gone up. The need, therefore, to
improve on this benefit cannot be overemphasized.
Thus, the management is urged to increase the
existing and allowable housing loan that the Bank
extends to its employees to an amount that will give
meaning and substance to this CBA benefit. 30
The SOLE dimissed the chargesof ULP of both the Unoion and the Bank,
explaining that both parties failed to substantiate their claims.
Citing National Labor Union v. Insular-Yebana Tobacco Corporation, the
31
SOLE stated that ULP charges would prosper only if shown to have
directly prejudiced the public interest.
Dissatisfied, the Union filed a motion for reconsideration with
clarification, while the Bank filed a motion for reconsideration. On
December 16, 1993, the SOLE issued a Resolution denying the motions.
The Union filed a second motion for reconsideration, which was, likewise,
denied on February 10, 1994.
On March 22, 1994, the Bank and the Union signed the
CBA. Immediately thereafter, the wage increase was effected and the
32
VOL. 432, JUNE 16, 2004 317
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
signing bonuses based on the increased wage were distributed to the
employees covered by the CBA.
The Present Petition
On April 28, 1994, the Union filed this petition for certiorari under Rule
65 of the Rules of Procedure alleging as follows:
1. A.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DISMISSING THE UNION’S CHARGE OF
UNFAIR LABOR PRACTICE IN VIEW OF THE CLEAR EVIDENCE
OF RECORD AND ADMISSIONS PROVING THE UNFAIR LABOR
PRACTICES CHARGED. 33
2. B.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN FAILING TO RULE ON OTHER UNFAIR LABOR
PRACTICES CHARGED. 34
3. C.RESPONDENT HONORABLE SECRETARY COMMITTED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURISDICTION IN DISMISSING THE CHARGES OF UNFAIR
LABOR PRACTICES ON THE GROUND THAT NO PROOF OF
INJURY TO THE PUBLIC INTEREST WAS PRESENTED. 35
The Union alleges that the SOLE acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it found that the Bank
did not commit unfair labor practice when it interfered with the Union’s
choice of negotiator. It argued that, Diokno’s suggestion that the
negotiation be limited as a “family affair” was tantamount to suggesting
that Federation President Jose Umali, Jr. be excluded from the Union’s
negotiating panel. It further argued that contrary to the ruling of the
public respondent, damage or injury to the public interest need not be
present in order for unfair labor practice to prosper.
The Union, likewise, pointed out that the public respondent failed to
rule on the ULP charges arising from the Bank’s surface bargaining. The
Union contended that the Bank merely went through the motions of
collective bargaining without the intent to
318 SUPREME COURT REPORTS ANNOTATED
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
reach an agreement, and made bad faith proposals when it announced
that the parties should begin from a clean slate. It argued that the Bank
opened the political provisions “up for grabs,” which had the effect of
diminishing or obliterating the gains that the Union had made.
The Union also accused the Bank of refusing to disclose material and
necessary data, even after a request was made by the Union to validate its
“guestimates.”
Page 21 of 120
 In its Comment, the Bank prayed that the petition be dismissed as the
Union was estopped, considering that it signed the Collective Bargaining
Agreement (CBA) on April 22, 1994. It asserted that contrary to the
Union’s allegations, it was the Union that committed ULP when
negotiator Jose Umali, Jr. hurled invectives at the Bank’s head
negotiator, Cielito Diokno, and demanded that she be excluded from the
Bank’s negotiating team. Moreover, the Union engaged in blue-sky
bargaining and isolated the no strike-no lockout clause of the existing
CBA.
The Office of the Solicitor General, in representation of the public
respondent, prayed that the petition be dismissed. It asserted that the
Union failed to prove its ULP charges and that the public respondent did
not commit any grave abuse of discretion in issuing the assailed order and
resolutions.
The Issues
The issues presented for resolution are the following: (a) whether or not
the Union was able to substantiate its claim of unfair labor practice
against the Bank arising from the latter’s alleged “interference” with its
choice of negotiator; surface bargaining; making bad faith non-economic
proposals; and refusal to furnish the Union with copies of the relevant
data; (b) whether or not the public respondent acted with grave abuse of
discretion amounting to lack or excess of jurisdiction when she issued the
assailed order and resolutions; and, (c) whether or not the petitioner is
estopped from filing the instant action.
The Court’s Ruling
The petition is bereft of merit.
319
VOL. 432, JUNE 16, 2004 319
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
“Interference” under Article
248 (a) of the Labor Code
The petitioner asserts that the private respondent committed ULP, i.e.,
interference in the selection of the Union’s negotiating panel, when Cielito
Diokno, the Bank’s Human Resource Manager, suggested to the Union’s
President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the
NUBE, be excluded from the Union’s negotiating panel. In support of its
claim, Divinagracia executed an affidavit, stating that prior to the
commencement of the negotiation, Diokno approached him and suggested
the exclusion of Umali from the Union’s negotiating panel, and that
during the first meeting, Diokno stated that the negotiation be kept a
“family affair.”
Citing the cases of U.S. Postal Service and Harley Davidson Motor Co.,
36
Inc., AMF, the Union claims that interference in the choice of the Union’s
37
bargaining panel is tantamount to ULP.
In the aforecited cases, the alleged ULP was based on the employer’s
violation of Section 8(a)(1) and (5) of the National Labor Relations Act
(NLRA), which pertain to the interference, restraint or coercion of the
38
employer in the employees’ exercise of their rights to self-organization and
to bargain collectively through representatives of their own choosing; and
the refusal of the employer to bargain collectively with the employees’
representatives. In both
38 Section 8.a. It shall be unfair labor practice for an employer—
(1) To interfere with, restrain or coerce employees in the exercise of their rights guaranteed under
Section 7;
...
(5) To refuse to bargain collectively with the representatives of his employees, subject to the
provisions of Section 9. (National Labor Management Act)
Section 7. Employees shall have the right to self-organization, to form, join or assist labor
organizations, to bargain collectively through representatives of their own choosing; and to engage in
other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and
shall also have the right to refrain from any or all of such activities except to the extent that such right
may be affected by an agreement requiring membership in a labor organization as a condition of
employment as authorized in Section 8(a)(3).
320
320 SUPREME COURT REPORTS ANNOTATED
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
cases, the National Labor Relations Board held that upon the employer’s
refusal to engage in negotiations with the Union for collective-bargaining
contract when the Union includes a person who is not an employee, or one
who is a member or an official of other labor organizations, such employer
Page 22 of 120
is engaged in unfair labor practice under Section 8(a)(1) and (5) of the
NLRA.
The Union further cited the case of Insular Life Assurance Co., Ltd.
Employees Association—NATU vs. Insular Life Assurance Co.,
Ltd., wherein this Court said that the test of whether an employer has
39
interfered with and coerced employees in the exercise of their right to self-
organization within the meaning of subsection (a)(1) is whether the
employer has engaged in conduct which it may reasonably be said, tends
to interfere with the free exercise of employees’ rights under Section 3 of
the Act. Further, it is not necessary that there be direct evidence that
40
any employee was in fact intimidated or coerced by statements of threats
of the employer if there is a reasonable inference that anti-union conduct
of the employer does have an adverse effect on self-organization and
collective bargaining. 41
Under the International Labor Organization Convention (ILO) No. 87
FREEDOM OF ASSOCIATION AND PROTECTION OF THE RIGHT TO
ORGANIZE to which the Philippines is a signatory, “workers and
employers, without distinction whatsoever,
_______________
Section 3. Employees’ Right to Self-Organization.—Employees shall have the right to
40
self-organization and to form, join or assist labor organizations of their own choosing for the
purpose of collective bargaining through representatives of their own choosing and to engage
in concerted activities for the purpose of collective bargaining and other mutual aid or
protection. Individuals employed as supervisors shall not be eligible for membership in a
labor organization of employees under their supervision but may form separate organizations
of their own.
...
Section 4. Unfair Labor Practices.—
(a) It shall be unfair labor practice for an employer:
(1) To interfere with, restrain or coerce employees in the exercise of their rights guaranteed in
Section three; (Republic Act No. 875)
Referring to Sections 3 and 4(a)(1) of the Industrial Peace Act, Republic Act No. 875.
41
321
VOL. 432, JUNE 16, 2004 321
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
shall have the right to establish and, subject only to the rules of the
organization concerned, to job organizations of their own choosing without
previous authorization.” Workers’ and employers’ organizations shall
42
have the right to draw up their constitutions and rules, to elect their
representatives in full freedom to organize their administration and
activities and to formulate their programs. Article 2 of ILO Convention
43
No. 98 pertaining to the Right to Organize and Collective Bargaining,
provides:
Article 2
1. 1.Workers’ and employers’ organizations shall enjoy adequate protection
against any acts or interference by each other or each other’s agents or
members in their establishment, functioning or administration.
2. 2.In particular, acts which are designed to promote the establishment of
workers’ organizations under the domination of employers or employers’
organizations or to support workers’ organizations by financial or other
means, with the object of placing such organizations under the control of
employers or employers’ organizations within the meaning of this
Article.
The aforcited ILO Conventions are incorporated in our Labor Code,
particularly in Article 243 thereof, which provides:
ART. 243. COVERAGE AND EMPLOYEES’ RIGHT TO SELF-
ORGANIZATION.—All persons employed in commercial, industrial and
agricultural enterprises and in religious, charitable, medical or educational
institutions whether operating for profit or not, shall have the right to self-
organization and to form, join, or assist labor organizations of their own choosing
for purposes of collective bargaining. Ambulant, intermittent and itinerant
workers, self-employed people, rural workers and those without any definite
employers may form labor organizations for their mutual aid and protection.
and Articles 248 and 249 respecting ULP of employers and labor
organizations.
The said ILO Conventions were ratified on December 29, 1953.
However, even as early as the 1935 Constitution, the State had
44
_______________
Page 23 of 120
 322
322 SUPREME COURT REPORTS ANNOTATED
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
already expressly bestowed protection to labor as part of the general
provisions. The 1973 Constitution, on the other hand, declared it as a
45
policy of the state to afford protection to labor, specifying that the workers’
rights to self-organization, collective bargaining, security of tenure, and
just and humane conditions of work would be assured. For its part, the
1987 Constitution, aside from making it a policy to “protect the rights of
workers and promote their welfare,” devotes an entire section,
46
emphasizing its mandate to afford protection to labor, and highlights “the
principle of shared responsibility” between workers and employers to
promote industrial peace. 47
_______________
Sec. 6. The State shall afford protection to labor, especially to working women and minors, and shall
regulate the relations between landowner and tenant, and between labor and capital in industry and in
agriculture. The State may provide for compulsory arbitration.
45 Section 9, Article II of the 1973 Constitution provides:
Sec. 9. The State shall afford protection to labor, promote full employment and equality in employment,
ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between
workers and employers. The State shall assure the rights of workers to self-organization, collective
bargaining, security of tenure, and just and humane conditions of work. The State may provide for
compulsory arbitration.
46 Section 18, Article II of the 1987 Constitution provides: Sec. 18. The State affirms labor
as a primary social economic force. It shall protect the rights of workers and promote their
welfare.
47 Section 3, Article XIII on Social Justice and Human Rights reads as follows:
LABOR
Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized 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. They
shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
323
VOL. 432, JUNE 16, 2004 323
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
Article 248(a) of the Labor Code, considers it an unfair labor practice
when an employer interferes, restrains or coerces employees in the
exercise of their right to self-organization or the right to form association.
The right to self-organization necessarily includes the right to collective
bargaining.
Parenthetically, if an employer interferes in the selection of its
negotiators or coerces the Union to exclude from its panel of negotiators a
representative of the Union, and if it can be inferred that the employer
adopted the said act to yield adverse effects on the free exercise to right to
self-organization or on the right to collective bargaining of the employees,
ULP under Article 248(a) in connection with Article 243 of the Labor Code
is committed.
In order to show that the employer committed ULP under the Labor
Code, substantial evidence is required to support the claim. Substantial
evidence has been defined as such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion. In the case at bar, the
48
Union bases its claim of interference on the alleged suggestions of Diokno
to exclude Umali from the Union’s negotiating panel.
The circumstances that occurred during the negotiation do not show
that the suggestion made by Diokno to Divinagracia is an anti-union
conduct from which it can be inferred that the Bank consciously adopted
such act to yield adverse effects on the free exercise of the right to self-
organization and collective bargaining of the employees, especially
considering that such was undertaken previous to the commencement of
the negotiation and simultaneously with Divinagracia’s suggestion that
the bank lawyers be excluded from its negotiating panel.
_______________
The State shall promote the principle of shared responsibility between workers and employers and the
preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce their
mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of labor
to its just share in the fruits of production and the right of enterprises to reasonable return on
investments, and to expansion and growth.
Page 24 of 120
324 SUPREME COURT REPORTS ANNOTATED
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
The records show that after the initiation of the collective bargaining
process, with the inclusion of Umali in the Union’s negotiating panel, the
negotiations pushed through. The complaint was made only on August 16,
1993 after a deadlock was declared by the Union on June 15, 1993.
It is clear that such ULP charge was merely an afterthought. The
accusation occurred after the arguments and differences over the
economic provisions became heated and the parties had become
frustrated. It happened after the parties started to involve personalities.
As the public respondent noted, passions may rise, and as a result,
suggestions given under less adversarial situations may be colored with
unintended meanings. Such is what appears to have happened in this
49
case.
The Duty to Bargain
Collectively
If at all, the suggestion made by Diokno to Divinagracia should be
construed as part of the normal relations and innocent communications,
which are all part of the friendly relations between the Union and Bank.
The Union alleges that the Bank violated its duty to bargain; hence,
committed ULP under Article 248(g) when it engaged in surface
bargaining. It alleged that the Bank just went through the motions of
bargaining without any intent of reaching an agreement, as evident in the
Bank’s counter-proposals. It explained that of the 34 economic provisions
it made, the Bank only made 6 economic counterproposals. Further, as
borne by the minutes of the meetings, the Bank, after indicating the
economic provisions it had rejected, accepted, retained or were open for
discussion, refused to make a list of items it agreed to include in the
economic package.
Surface bargaining is defined as “going through the motions of
negotiating” without any legal intent to reach an agreement. The 50
resolution of surface bargaining allegations never presents an easy issue.
The determination of whether a party has engaged in unlawful surface
bargaining is usually a difficult one because it involves, at bottom, a
question of the intent of the party in question, and
325
VOL. 432, JUNE 16, 2004 325
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
usually such intent can only be inferred from the totality of the challenged
party’s conduct both at and away from the bargaining table. It involves
51
the question of whether an employer’s conduct demonstrates an
unwillingness to bargain in good faith or is merely hard bargaining. 52
The minutes of meetings from March 12, 1993 to June 15, 1993 do not
show that the Bank had any intention of violating its duty to bargain with
the Union. Records show that after the Union sent its proposal to the
Bank on February 17, 1993, the latter replied with a list of its counter-
proposals on February 24, 1993. Thereafter, meetings were set for the
settlement of their differences. The minutes of the meetings show that
both the Bank and the Union exchanged economic and non-economic
proposals and counter-proposals.
The Union has not been able to show that the Bank had done acts, both
at and away from the bargaining table, which tend to show that it did not
want to reach an agreement with the Union or to settle the differences
between it and the Union. Admittedly, the parties were not able to agree
and reached a deadlock. However, it is herein emphasized that the duty to
bargain “does not compel either party to agree to a proposal or require the
making of a concession.” Hence, the parties’ failure to agree did not
53
amount to ULP under Article 248(g) for violation of the duty to bargain.
We can hardly dispute this finding, for it finds support in the evidence. The
inference that respondents did not refuse to bargain collectively with the
complaining union because they accepted some of the demands while they
refused the others even leaving open other demands for future discussion is
correct, especially so when those demands were discussed at a meeting called by
respondents themselves precisely in view of the letter sent by the union on April
29, 1960. . .
54
Page 25 of 120
In view of the finding of lack of ULP based on Article 248(g), the
accusation that the Bank made bad faith provisions has no leg to
326 SUPREME COURT REPORTS ANNOTATED
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
stand on. The records show that the Bank’s counter-proposals on the non-
economic provisions or political provisions did not put “up for grabs” the
entire work of the Union and its predecessors. As can be gleaned from the
Bank’s counter-proposal, there were many provisions which it proposed to
be retained. The revisions on the other provisions were made after the
parties had come to an agreement. Far from buttressing the Union’s claim
that the Bank made bad-faith proposals on the non-economic provisions,
all these, on the contrary, disprove such allegations.
We, likewise, find that the Union failed to substantiate its claim that
the Bank refused to furnish the information it needed.
While the refusal to furnish requested information is in itself an unfair
labor practice, and also supports the inference of surface bargaining, in 55
the case at bar, Umali, in a meeting dated May 18, 1993, requested the
Bank to validate its guestimates on the data of the rank and file. However,
Umali failed to put his request in writing as provided for in Article 242(c)
of the Labor Code:
Article 242. Rights of Legitimate Labor Organization . . .
(c) To be furnished by the employer, upon written request, with the annual
audited financial statements, including the balance sheet and the profit and loss
statement, within thirty (30) calendar days from the date of receipt of the
request, after the union has been duly recognized by the employer or certified as
the sole and exclusive bargaining representatives of the employees in the
bargaining unit, or within sixty (60) calendar days before the expiration of the
existing collective bargaining agreement, or during the collective negotiation;
The Union, did not, as the Labor Code requires, send a written request for
the issuance of a copy of the data about the Bank’s rank and file
employees. Moreover, as alleged by the Union, the fact that the Bank
made use of the aforesaid guestimates, amounts to a validation of the data
it had used in its presentation.
No Grave Abuse of Discretion
On the Part of the Public Respondent
The special civil action for certiorari may be availed of when the tribunal,
board, or officer exercising judicial or quasi-judicial func-
327
VOL. 432, JUNE 16, 2004 327
Standard Chartered Bank Employees Union (NUBE) vs.
Confesor
tions has acted without or in excess of jurisdiction and there is no appeal
or any plain, speedy, and adequate remedy in the ordinary course of law
for the purpose of annulling the proceeding. Grave abuse of discretion
56
implies such capricious and whimsical exercise of judgment as is
equivalent to lack of jurisdiction, or where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal hostility
which must be so patent and gross as to amount to an invasion of positive
duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. Mere abuse of discretion is not enough. 57
While it is true that a showing of prejudice to public interest is not a
requisite for ULP charges to prosper, it cannot be said that the public
respondent acted in capricious and whimsical exercise of judgment,
equivalent to lack of jurisdiction or excess thereof. Neither was it shown
that the public respondent exercised its power in an arbitrary and
despotic manner by reason of passion or personal hostility.
Estoppel not Applicable
In the Case at Bar
The respondent Bank argues that the petitioner is estopped from raising
the issue of ULP when it signed the new CBA.
Article 1431 of the Civil Code provides:
Through estoppel an admission or representation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person
relying thereon.
A person, who by his deed or conduct has induced another to act in a
particular manner, is barred from adopting an inconsistent position,
attitude or course of conduct that thereby causes loss or injury to
another.58
Page 26 of 120
 In the case, however, the approval of the CBA and the release of Note.—Until a new Collective Bargaining Agreement has been
signing bonus do not necessarily mean that the Union waived its ULP executed by and between the parties, they are duty-bound to keep
claim against the Bank during the past negotiations. After the status quo and to continue in full force and effect the terms and
conditions of the existing agreement. (New Pacific Timber and Supply
328 SUPREME COURT REPORTS ANNOTATED Company, Inc. vs. National Labor Relations Commission, 328 SCRA
Standard Chartered Bank Employees Union (NUBE) vs. 404 [2000])
Confesor
all, the conclusion of the CBA was included in the order of the SOLE, ——o0o——
while the signing bonus was included in the CBA itself. Moreover, the
512 SUPREME COURT REPORTS ANNOTATED
Union twice filed a motion for reconsideration respecting its ULP charges
Liberty Cotton Mills Workers Union vs. Liberty Cotton
against the Bank before the SOLE.
The Union Did Not Engage
Mills, Inc.
In Blue-Sky Bargaining No. L-33987. September 4, 1975. *

We, likewise, do not agree that the Union is guilty of ULP for engaging in
blue-sky bargaining or making exaggerated or unreasonable
proposals. The Bank failed to show that the economic demands made by
59
the Union were exaggerated or unreasonable. The minutes of the meeting
show that the Union based its economic proposals on data of rank and file
employees and the prevailing economic benefits received by bank
employees from other foreign banks doing business in the Philippines and
other branches of the Bank in the Asian region.
In sum, we find that the public respondent did not act with grave abuse
of discretion amounting to lack or excess of jurisdiction when it issued the
questioned order and resolutions. While the approval of the CBA and the
release of the signing bonus did not estop the Union from pursuing its
claims of ULP against the Bank, we find that the latter did not engage in
ULP. We, likewise, hold that the Union is not guilty of ULP.
In light of the foregoing, the October 29, 1993 Order and December 16,
1993 and February 10, 1994 Resolutions of then Secretary of Labor Nieves
R. Confesor are AFFIRMED. The Petition is hereby DISMISSED.
SO ORDERED.
Puno (Chairman), Quisumbing, Austria-Martinez and Tinga,
JJ., concur.
Assailed order and resolutions affirmed.
LIBERTY COTTON MILLS WORKERS UNION, RAFAEL
NEPOMUCENO, MARIANO CASTILLO, NELLY ACEVEDO, RIZALINO
CASTILLO and RAFAEL COMBALICER petitioners, vs. LIBERTY
COTTON MILLS, INC., PHILIPPINE
_______________
*FIRST DIVISION.
513
VOL. 66, SEPTEMBER 4, 1975 513
Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.
ASSOCIATION OF FREE LABOR UNION (PAFLU) and the COURT OF
INDUSTRIAL RELATIONS, respondents.
Labor relations; Labor unions; Status of national union in relation to local
union affiliated with it; Case at bar.—In the Collective Bargaining Agreements,
it appears that PAFLU has been recognized as the sole bargaining agent for all
the employees of the Company other than its supervisors and security guards.
The PAFLU, acting for and in behalf of its affiliate, had the status of an agent
while the local union remained the basic unit of the association free to serve the
common interest of all its members including the freedom to disaffiliate when the
circumstances warrant. This is clearly provided in its Constitution and By-Laws,
specifically Article X on Union Affiliation.

Page 27 of 120
 Same; Same; Validity of disaffiliation by local union from national union CIR, of fixing an amount of net backwages and doing away with the protracted
where disaffiliation in accordance with union’s Constitution and By-Laws; Case process of determining the complainants-workers’ earnings elsewhere during the
at bar.—Under the union’s Constitution and By-Laws, the local union shall be period of their illegal dismissal, the Court fixes the amount of backwages to be
affiliated with the PAFLU, and shall remain an affiliate as long as ten or more of paid under this decision to the complainants-workers at three (3) years
its members evidence their desire to continue the said local unions affiliation. backwages without deduction or qualification.
The record shows that only four out of its members remained for 32 out of the 36
members of the Union signed the resolution of disaffiliation. The disaffiliation PETITION for certiorari to review the decision of the Court of Industrial
was, therefore, valid under the local’s Constitution and By-Laws which, taken Relations.
together with the Collective Bargaining Agreement, is controlling. The
disaffiliation, coming as it did from the greater majority of its members, is more The facts are stated in the opinion of the Court.
than enough to show the collective desire of the members of the local union to
sever their relations from the mother federation. The right of disaffiliation is ESGUERRA, J.:
inherent in the compact and such act should not have been branded as an act of
disloyalty, especially considering the cause which impelled the union to take Petition for Certiorari to review the decision dated March 30, 1971 of the
such a step. Court of Industrial Relations in Case No. 4216, dismissing petitioners’
Same; Same; Dismissal of employees who signed resolution of disaffiliation; complaint for unfair labor practice.
Where dismissal at the instance of the national union, liability of company The factual background of this case is as follows:
limited only to reinstatement of employees dismissed; Case at bar.—Acting on the
The Liberty Cotton Mills Workers Union, hereinafter referred to as the
request of the mother federation the Company sent notices of termination to the
Union, adopted its Constitution and By-laws on January 1, 1959. Among 1
officers of the local union, heavily relying on the Collective Bargaining
Agreement. The stipulation in the Collective Bargaining Agreement does not other things, the said Constitution provided:
bind the courts much less released the Company from liability should a finding
ARTICLE I—NAME AND DOMICILE
for unfair labor practice be positive. `However, considering that the dispute
revolved around the mother federation and its local, “with the company
“Section 1. The name of organization shall be Liberty Cotton Mills Workers
dismissing the workers at
Union-PAFLU.
514
“Section 2. This Union shall have its office at 1233 Tecson, Tindalo, Tondo,
5 SUPREME COURT REPORTS ANNOTATED
Manila.
14
Liberty Cotton Mills Workers Union vs. Liberty _______________
Cotton Mills, Inc.
1Constitution and By-Laws p. 23 Record.
the instance of the mother federation, the Company’s liability should be
515
limited to the immediate reinstatement of the workers.
VOL. 66, SEPTEMBER 4, 1975 515
Same; Same; Same; Liability of national union to pay backwages of
dismissed employees; Payment of backwages equivalent to three years’ wages Liberty Cotton Mills Workers Union vs. Liberty Cotton
without deduction or qualification.—Considering that the dismissal of the Mills, Inc.
employees was effected without previous hearing, and at the instance of PAFLU,
this mother federation should be held liable to the dismissed Employees for the xxxx
payment of their back wages. Following the precedent of Mercury Drug Co. vs.
Page 28 of 120
 ARTICLE X—UNION AFFILIATION
“Section 1. The Liberty Cotton Mills Workers Union-Paflu shall be affiliated with
the Philippine Association of Free Labor Unions, otherwise known as PAFLU,
and shall remain an affiliate as long as ten or more of its members evidence their
desire to continue the said local union’s affiliation, in accordance with the Paflu
Constitution, Article XI-Paragraph 11:15 thereof;
ARTICLE XIII—CHARGES, TRIALS, AND IMPEACHMENT OF OFFICERS
AND MEMBERS: APPEALS
“Section 1. Any member or officer of the Liberty Cotton Mills Workers Union-
Paflu may be charged, tried or impeached if an officer, in accordance with this
and the PAFLU CONSTITUTION.
On October 1, 1959, a Collective Bargaining Agreement was entered into
2
by and between the Company and the Union represented by PAFLU. Said
Agreement contained these clear and unequivocal provisions:
“This Agreement, made and entered into this 1st day of October, 1959, in the
City of Manila, by and between
The LIBERTY COTTON MILLS INC., a corporation duly organized and existing under
the laws of the Philippines, with principal office at 549 San Francisco Street, Karuhatan,
Polo, Bulacan, hereinafter referred to as the COMPANY, represented in this Act by its
President, Mr. RAFAEL GOSINGCO: AND
THE PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS, a legitimate labor
organization existing and operating under the laws of the Philippines, with postal
address at 1233 Tecson, Tindalo, Tondo, Manila, hereinafter referred to as the UNION,
represented in this Act by its National Treasurer and duly authorized representative,
Mr. CATALINO G. LUZANO, herein acting for and in behalf of its affiliate the LIBERTY
COTTON MILLS WORKERS UNION-PAFLU, and the employees of the Company in the
appropriate bargaining unit hereinafter defined:
WITNESSETH:
I. UNION RECOGNITION
The COMPANY recognizes the UNION as the sole bargaining agent for all of
its employees, other than supervisors x x x
_______________
2 Collective Bargaining Agreement p. 29 Record.
516
516 SUPREME COURT REPORTS ANNOTATED
Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.
consonant with the certification of the said UNION by the Court of Industrial
Relations in Case No. 627-MC, entitled “In re Petition for Certification Election,
Liberty Cotton Mills, Inc., petitioner.”
III. UNION SECURITY
All employees who, at the time of the signing of this Agreement, are members
of the UNION, or who, at any time during the effectivity of this Agreement, may
join the UNION, shall, as a condition for continued employment, remain
members of the UNION while this agreement remains in force; any such
employee, who, at any time during the life of this agreement, shall resign from
the UNION or be expelled therefrom in accordance with its Constitution and By-
Laws for non-payment of union dues or other duly approved union assessments,
or for disloyalty to the UNION shall be dismissed from employment by the
COMPANY upon request in writing by the UNION, which shall hold the
COMPANY free from any liability arising from or caused by such dismissal.
XI. TERM
This Agreement shall be effective from October 1, 1959 to September 30,
1961, during which time it shall be binding upon the parties hereto and all the
employees of COMPANY comprised within the appropriate bargaining unit
defined above, and may not be modified by court action, by concerted activities or
by any other means. x x x Should either party fail to give written notice to the
other of its desire to amend or discontinue this Agreement at least thirty (30)
days from the expiry date set forth above, this Agreement shall be continued in
force for one (1) year, and thereafter for yearly terms; unless written notice is
given at least thirty (30) days from the expiration of the contract.
The above Collective Bargaining Agreement was amended on February
28, 1964, thus: 3
“Article III. UNION SECURITY
Page 29 of 120
 Additional Clause
The Company agrees to encourage casual workers and non-union members to
join the Union which is the sole and exclusive agent for all the employees covered
by this Agreement.
_______________
3Amendment to Collective Bargaining Agreement p. 34 Record.
517
VOL. 66, SEPTEMBER 4, 1975 517
Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.
“Article XI. DURATION
The Duration of this Agreement shall be for two (2) years, that is from November
2, 1963 up to November, 1965.”
The Agreements aforementioned bore the signatures of representatives of
both the Company and the PAFLU, and the incumbent President of the
local union.
On March 13, 1964, while the Collective Bargaining Agreement was in
full force, Marciano Castillo and Rafael Nepomuceno, President and Vice-
President, respectively, of the local union, wrote PAFLU, its mother
federation, complaining about the legal counsel assigned by the PAFLU to
assist them in a ULP case (Case No. 4001) they filed against the
Company. In said letter, the local union expressed its dissatisfaction and
loss of confidence in the PAFLU lawyers, claiming that PAFLU never
lifted a finger regarding this particular complaint.
On May 17, 1964 thirty two (32) out of the 36 members of the local
union disaffiliated themselves from respondent PAFLU pursuant to their
local union’s Constitution and By-Laws, specifically Article X thereof,
supra (p. 12 Record). A copy of the signed resolution of disaffiliation was
furnished the Company as well as the Bureau of Labor Relations. The
following day, the local union wrote the Company and required the turn-
over of the checked-off dues directly to its Treasurer.
On May 27, 1964, PAFLU, thru its National Secretary wrote the
Company this letter:
“This is to inform your good office that sometime last May 25, 1964, our
federation was in receipt of a letter signed by 32 persons and informing us of
their desire to disaffiliate the local union from the mother federation-PAFLU.
The members and officers who made the letter have no right to do the same
under our existing contract and under the PAFLU’s Constitution and By-Laws.
“We wish to make it clear with the management that the contractural union
in our contract which was signed a few months ago is the Philippine Association
of Free Labor Union (PAFLU). The actuation made by the supposed union
members is inconsistent with the present contract we have and under the
provisions of “Maintenance of Union Membership” they can all be dismissed.
Under the PAFLU’s Constitution that is null and void. And in view of the
disloyalty shown by those members, the mother federation will take over the
administration of the Union in dealing with the management especially.
518
518 SUPREME COURT REPORTS ANNOTATED
Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.
“We inform your goodself that the mother federation is not honoring the said
letter and we request you do the same under the circumstances.
“Hence, all the communications pertaining to union business and other
relative matters be coursed to the mother federation for prompt action.”
And on May 29, 1964, PAFLU wrote the Company again, this time
quoting en toto Article III of the Collective Bargaining Agreement on
“Union Security” and requesting the termination of the employment of
Rafael Nepomuceno, Marciano Castillo, Nelly Acevedo, Enrique Managan,
Rizalino Castillo and Rafael Combalicer, all petitioners herein. PAFLU at
the same time expelled the aforementioned workers from their union
membership in the mother federation for allegedly “instigating union
disaffiliation.”
On May 30, 1964, the Company terminated the employment of the
members expelled by the PAFLU (Exhs. “D”, “D-1” to “D-3” pp. 14-17
Record). On the last day of May, 1964, counsel for the ousted workers
wrote the Company requesting their reinstatement. This was denied by
Page 30 of 120
the Company; hence the complaint for unfair labor practice filed with the
Court of Industrial Relations.
After due hearing, the Court rendered its decision dismissing the
complaint, but with a strong recommendation for the reinstatement of
complainant workers in respondent Company. The workers (petitioners
herein) being unsatisfied with the decision, appealed to this Court and
raised the following questions:
1. 1.Under the Collective Bargaining Agreement, who between the PAFLU
and the local union is the sole bargaining agent of the workers of the
Company?
2. 2.Was the disaffiliation of the local union from the PAFLU valid and
justified under the Constitution and By-laws of the Union?
3. 3.Was the disaffiliation of the Union from the PAFLU an act of disloyalty
of the petitioners (workers) which could be a valid ground for their
expulsion from their own union and their dismissal from the Company?
4. 4.Does the PAFLU as the mother federation of the union possess the
power to expel the officers and members of the union under the
Constitution and By-Laws? And assuming it has such powers, were the
petitioner workers validly expelled from the Union in accordance with
the Constitution and By-Laws?
519
VOL. 66, SEPTEMBER 4, 1975 519
Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.
1. 5.May the workers be summarily dismissed by the Company under the
Collective Bargaining Agreement even without valid proof of their valid
expulsion from their own union?
2. 6.Did not the dismissal of only the five (5) petitioner workers constitute
discrimination, considering that the disaffiliation was signed by more
than the majority of the union members?
All these questions boil down to the single issue of whether or not the
dismissal of the complaining employees, petitioners herein, was justified
or not. The resolution of this question hinges on a precise and careful
analysis of the Collective Bargaining Agreements. (Exhs. “H” and “I”) In
these contracts it appears that PAFLU has been recognized as the sole
bargaining agent for all the employees of the Company other than its
supervisors and security guards. Moreover it likewise appears that
“PAFLU, represented in this Act by its National Treasurer, and duly
authorized representative, x x x (was) acting for and in behalf of its
affiliate, the Liberty Cotton Mills Workers Union and the employees of the
Company, etc.” In other words, the PAFLU, acting for and in behalf of its
affiliate, had the status of an agent while the local union remained the
basic unit of the association free to serve the common interest of all its
members including the freedom to disaffiliate when the circumstances
warrant. This is clearly provided in its Constitution and By-Laws,
specifically Article X on Union Affiliation, supra. At this point, relevant is
the ruling in an American case: 4
“The locals are separate and distinct units primarily designed to secure and
maintain an equality of bargaining power between the employer and their
employee-members in the economic struggle for the fruits of the joint productive
effort of labor and capital; and the association of the locals into the national
union (as PAFLU) was in furtherance of the same end. These associations are
consensual entities capable of entering into such legal relations with their
members. The essential purpose was the affiliation of the local unions into a
common enterprise to increase by collective action the common bargaining power
in respect of the terms and conditions of labor. Yet the locals remained the basic
units of association, free to serve their own and the common interest of all, subject
to the restraints imposed by the Constitution and By-Laws of the Association, and
free also to renounce the affiliation for mutual welfare upon the terms laid down
in the agreement which brought it into existence. “(Italics supplied)
520
520 SUPREME COURT REPORTS ANNOTATED
Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.
This brings Us to the question of disaffiliation which was the root cause of
the dismissal. It is claimed by PAFLU that the local union could not have
validly disaffiliated from it as the Union Security Clause so provided. We
have meticulously read the provision of the supposed union security
clause and We cannot agree with both the stand of PAFLU and the
Page 31 of 120
respondent court. For while it is correct to say that a union security clause
did exist, this clause was limited by the provision in the Unions’
Constitution and By-Laws, which states:
“That the Liberty Cotton Mills Workers Union-PAFLU shall be affiliated with
the PAFLU, and shall remain an affiliate as long as ten (10) or more of its
members evidence their desire to continue the said local unions affiliation.”
Record shows that only four (4) out of its members remained for 32 out of
the 36 members of the Union signed the resolution of disaffiliation on May
17, 1964, triggered by the alleged negligence of PAFLU in attending to the
needs of its local union, particularly its failure to assign a conscientious
lawyer to the local to attend to the ULP case they filed against the
Company. The disaffiliation was, therefore, valid under the local’s
Constitution and By-Laws which, taken together with the Collective
Bargaining Agreement, is controlling. The Court of Industrial Relations
likewise held in its decision that the act of disaffiliation did not have any
effect as the workers retracted from such act. As stated by the respondent
court—
“x x x it is believed that the effect of their retraction obliterates their
participation in the resolution. Hence, under Article X of the said Constitution
and By-Laws, complainant union remained affiliated with respondent union at
the time termination of the services of complainant workers was requested and
when they were dismissed by the Company on May 30, 1964.”
Although the fact of retraction is true, We find that the respondent court
failed to notice the fact that not all signatories to the resolution of
disaffiliation dated May 17, 1964, took part in the retraction. Only a
number of employees, 16 to be exact, retracted. Also, and this is a
significant factor, the retraction is dated June 3, 1964, or four days after
the petitioners herein had been dismissed. There is no use in saying that
the retraction obliterated the act of disaffiliation when they were already
out of the service when it was done. The disaffiliation, coming as it
521
VOL. 66, SEPTEMBER 4, 1975 521
Liberty Cotton Mills Workers Union vs. Liberty Cotton
Mills, Inc.
did from the greater majority of its members, is more than enough to show
the collective desire of the members of the Liberty Cotton Mills Workers
Union to sever their relations from the mother federation. The right of
disaffiliation is inherent in the compact and such act should not have been
branded as an act of disloyalty, especially considering the cause which
impelled the union to take such a step.
Lastly, We will take up the process by which the workers were
dismissed. We find that it was hastily and summarily done. The PAFLU
received the resolution to disaffiliate on or about May 25, 1964, after
which it wrote the Company about its stand, first on the 27th of May
followed by its letter of the 29th requesting for the termination of
petitioners herein for ‘disloyalty in having instigated disaffiliation’. The
Company then acting on the request of the mother federation sent notices
of termination to the officers of the local union immediately on the day
following, or on May 30, 1964, heavily relying on the Collective
Bargaining Agreement, viz:
“x x x for disloyalty to the union shall be dismissed from employment by the
Company upon request in writing by the Union, which shall hold the COMPANY
free from any liability arising from or caused by such dismissal.”
While the above-quoted provision may have been the basis for the
Company’s actuation, as in fact it was alleged by the Company in its Brief,
We are of the opinion that such a stipulation does not bind the courts
much less released the Company from liability should a finding for unfair
labor practice be positive. In the case at bar, however, considering that the
dispute revolved around the mother federation and its local, with the
company dismissing the workers at the instance of the mother federation,
We believe that the Company’s liability should be limited to the
immediate reinstatement of the workers.
Considering, however, that their dismissal was effected without
previous hearing, and at the instance of PAFLU, this mother federation
should be, as it is hereby, held liable to the petitioners for the payment of
their back wages. Following the precedent of Mercury Drug Co. vs. CIR, of 5
fixing an amount of net backwages and doing away with the protracted
process of determining the complainants-workers’ earnings elsewhere
during the period of their illegal dismissal, the Court fixes the amount of
backwages to be paid under this decision to the complainants-workers at
three (3) years backwages without deduction or qualification.
Page 32 of 120
 WHEREFORE, the decision appealed from is reversed and set aside
and the company is hereby ordered to immediately reinstate complainant
workers, within thirty (30) days from notice of this decision and failure to
so reinstate the workers without valid and just cause shall make
respondent company liable to the workers for the payment of their wages
from and after the expiration of such thirty-day period. The mother
federation respondent PAFLU is sentenced to pay complainants-workers
the equivalent of three (3) years backwages without deduction or
qualification.
In view of the length of time that this dispute has been pending, this
decision shall be immediately executory upon promulgation and notice to
the parties. Without pronouncement as to costs.
Castro (Chairman), Teehankee, Makasiar, Muñoz
Palma and Martin, JJ., concur.
Decision reversed and set aside.
Notes.—a) Effects of collective bargaining agreement.—The terms and
conditions of a collective bargaining contract constitute the law between
the parties. Those who are entitled to its benefits can invoke its
provisions. In the event that an obligation therein imposed is not fulfilled,
the aggrieved party has the right to go to court for redress. Nor does it
suffice as a defense that the claim is made on behalf of non-members, for
it is a well-settled doctrine that the benefits of a collective bargaining
agreement extend to the laborers and employees in the collective
bargaining unit, including those who do not belong to the chosen
bargaining labor organization. Any other view would be a discrimination
on which the law frowns. (Mactum Workers Union vs. Aboitiz, L-30241,
June 30, 1972).
523
——o0o——
G.R. No. 164301. August 10, 2010.*
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. BPI
EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS
IN BPI UNIBANK, respondent.
Labor Law; Labor Unions; Union Security Clauses; Words and Phrases;
“Union Security,” “Closed Shop,” “Union Shop,” and “Maintenance of
Membership,” Explained.—“Union security” is a generic term which is applied to
and comprehends “closed shop,” “union shop,” “maintenance of membership” or
any other form of agreement which imposes upon employees the obligation to
acquire or retain union membership as a condition affecting employment. There
is union shop when all new regular employees are required to join the union
within a certain period for their continued employment. There is maintenance of
membership shop when employees, who are union members as of the effective
date of the agreement, or who thereafter become members, must maintain union
membership as a condition for continued employment until they are promoted or
transferred out of the bargaining unit or the agreement is terminated. A closed-
shop, on the other hand, may be defined as an enterprise in which, by agreement
between the employer and his employees or their representatives, no person may
be employed in any or certain agreed departments of the enterprise unless he or
she is, becomes, and, for the duration of the agreement, remains a member in
good standing of a union entirely comprised of or of which the employees in
interest are a part.
Same; Same; Same; It is the policy of the State to promote unionism to enable
the workers to negotiate with management on the same level and with more
persuasiveness than if they were to individually and independently bargain for
the improvement of their respective conditions—the purpose of a union shop or
other union security arrangement is to guarantee the continued existence of the
union through enforced membership for the benefit of the workers.—In the case
of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc., 180 SCRA 668
(1989), we ruled that: It is the policy of the State to promote unionism to
enable the workers to negotiate
_______________
* EN BANC.
591
VOL. 627, AUGUST 10, 2010 591
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
with management on the same level and with more persuasiveness
than if they were to individually and independently bargain for the
improvement of their respective conditions. To this end, the Constitution
Page 33 of 120
guarantees to them the rights “to self-organization, collective bargaining and
negotiations and peaceful concerted actions including the right to strike in
accordance with law.” There is no question that these purposes could be
thwarted if every worker were to choose to go his own separate way instead of
joining his co-employees in planning collective action and presenting a united
front when they sit down to bargain with their employers. It is for this reason
that the law has sanctioned stipulations for the union shop and the closed shop
as a means of encouraging the workers to join and support the labor union of
their own choice as their representative in the negotiation of their demands and
the protection of their interest vis-à-vis the employer. (Emphasis ours.) In other
words, the purpose of a union shop or other union security arrangement is to
guarantee the continued existence of the union through enforced membership for
the benefit of the workers.
Same; Same; Same; All employees in the bargaining unit covered by a Union
Shop Clause in their Collective Bargaining Agreement (CBA) with management
are subject to its terms; Exceptions.—All employees in the bargaining unit
covered by a Union Shop Clause in their CBA with management are subject to
its terms. However, under law and jurisprudence, the following kinds of
employees are exempted from its coverage, namely, employees who at the
time the union shop agreement takes effect are bona fide members of a religious
organization which prohibits its members from joining labor unions on religious
grounds; employees already in the service and already members of a
union other than the majority at the time the union shop agreement
took effect; confidential employees who are excluded from the rank and file
bargaining unit; and employees excluded from the union shop by express
terms of the agreement.
Same; Same; Same; Right of Association; When certain employees are obliged
to join a particular union as a requisite for continued employment, as in the case
of Union Security Clauses, this condition is a valid restriction of the freedom or
right not to join any labor organization because it is in favor of unionism.—When
certain employees are obliged to join a particular union as a requisite for con-
592
592 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
tinued employment, as in the case of Union Security Clauses, this condition
is a valid restriction of the freedom or right not to join any labor organization
because it is in favor of unionism. This Court, on occasion, has even held that a
union security clause in a CBA is not a restriction of the right of freedom of
association guaranteed by the Constitution. Moreover, a closed shop agreement
is an agreement whereby an employer binds himself to hire only members of the
contracting union who must continue to remain members in good standing to
keep their jobs. It is “the most prized achievement of unionism.” It adds
membership and compulsory dues. By holding out to loyal members a promise of
employment in the closed shop, it wields group solidarity.
Same; Corporation Law; Corporate Mergers; Words and Phrases; In legal
parlance, human beings are never embraced in the term “assets and liabilities”;
The Corporation Code does not mandate the absorption of the employees of the
non-surviving corporation by the surviving corporation in the case of a merger.—
In legal parlance, however, human beings are never embraced in the term
“assets and liabilities.” Moreover, BPI’s absorption of former FEBTC employees
was neither by operation of law nor by legal consequence of contract. There was
no government regulation or law that compelled the merger of the two banks or
the absorption of the employees of the dissolved corporation by the surviving
corporation. Had there been such law or regulation, the absorption of employees
of the non-surviving entities of the merger would have been mandatory on the
surviving corporation. In the present case, the merger was voluntarily entered
into by both banks presumably for some mutually acceptable consideration. In
fact, the Corporation Code does not also mandate the absorption of the
employees of the non-surviving corporation by the surviving
corporation in the case of a merger.
Same; Same; Same; The rule is that unless expressly assumed, labor
contracts such as employment contracts and collective bargaining agreements are
not enforceable against a transferee of an enterprise, labor contracts being in
personam, thus binding only between the parties.—The Articles of Merger and
Plan of Merger dated April 7, 2000 did not contain any specific stipulation with
respect to the employment contracts of existing personnel of the non-surviving
entity which is FEBTC. Unlike the Voluntary Arbitrator, this Court
593
VOL. 627, AUGUST 10, 2010 593
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
cannot uphold the reasoning that the general stipulation regarding transfer
of FEBTC assets and liabilities to BPI as set forth in the Articles of Merger
necessarily includes the transfer of all FEBTC employees into the employ of BPI
and neither BPI nor the FEBTC employees allegedly could do anything about
Page 34 of 120
it. Even if it is so, it does not follow that the absorbed employees should
not be subject to the terms and conditions of employment obtaining in
the surviving corporation. The rule is that unless expressly assumed, labor
contracts such as employment contracts and collective bargaining agreements
are not enforceable against a transferee of an enterprise, labor contracts being in
personam, thus binding only between the parties. A labor contract merely creates
an action in personam and does not create any real right which should be
respected by third parties. This conclusion draws its force from the right of an
employer to select his employees and to decide when to engage them as protected
under our Constitution, and the same can only be restricted by law through the
exercise of the police power.
Same; Same; Same; Involuntary Servitude; The Court believes that it is
contrary to public policy to declare the former employees of the absorbed bank as
forming part of the assets or liabilities that were transferred and absorbed by the
other bank in the Articles of Merger—assets and liabilities, in this instance,
should be deemed to refer only to property rights and obligations of the absorbed
bank and do not include the employment contracts of its personnel; The employees
of the absorbed bank retained the prerogative to allow themselves to be absorbed
or not, otherwise, that would be tantamount to involuntary servitude.—This
Court believes that it is contrary to public policy to declare the former FEBTC
employees as forming part of the assets or liabilities of FEBTC that were
transferred and absorbed by BPI in the Articles of Merger. Assets and liabilities,
in this instance, should be deemed to refer only to property rights and obligations
of FEBTC and do not include the employment contracts of its personnel. A
corporation cannot unilaterally transfer its employees to another employer like
chattel. Certainly, if BPI as an employer had the right to choose who to retain
among FEBTC’s employees, FEBTC employees had the concomitant right to
choose not to be absorbed by BPI. Even though FEBTC employees had no choice
or control over the merger of their employer with BPI, they had a choice whether
or not they would allow themselves to be absorbed by BPI. Certainly nothing
prevented the FEBTC’s employees from resigning or retiring
594
594 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
and seeking employment elsewhere instead of going along with the proposed
absorption. Employment is a personal consensual contract and absorption by BPI
of a former FEBTC employee without the consent of the employee is in violation
of an individual’s freedom to contract. It would have been a different matter if
there was an express provision in the articles of merger that as a condition for
the merger, BPI was being required to assume all the employment contracts of
all existing FEBTC employees with the conformity of the employees. In the
absence of such a provision in the articles of merger, then BPI clearly had the
business management decision as to whether or not employ FEBTC’s employees.
FEBTC employees likewise retained the prerogative to allow themselves to be
absorbed or not; otherwise, that would be tantamount to involuntary servitude.
Same; Same; Same; From the tenor of local and foreign authorities, in
voluntary mergers, absorption of the dissolved corporation’s employees or the
recognition of the absorbed employees’ service with their previous employer may be
demanded from the surviving corporation if required by provision of law or
contract.—From the tenor of local and foreign authorities, in voluntary mergers,
absorption of the dissolved corporation’s employees or the recognition of the
absorbed employees’ service with their previous employer may be demanded
from the surviving corporation if required by provision of law or contract. The
dissent of Justice Arturo D. Brion tries to make a distinction as to the terms and
conditions of employment of the absorbed employees in the case of a corporate
merger or consolidation which will, in effect, take away from corporate
management the prerogative to make purely business decisions on the hiring of
employees or will give it an excuse not to apply the CBA in force to the prejudice
of its own employees and their recognized collective bargaining agent. In this
regard, we disagree with Justice Brion.
Same; Same; Same; Although in a merger it is as if there is no change in the
personality of the employer, there is in reality a change in the situation of the
employee—once an employee is absorbed, there are presumably changes in his
condition of employment even if his previous tenure and salary rate is recognized
by the absorbing company.—That BPI is the same entity as FEBTC after the
merger is but a legal fiction intended as a tool to adjudicate rights and
obligations between and among the merged corporations and the persons
595
VOL. 627, AUGUST 10, 2010 595
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
that deal with them. Although in a merger it is as if there is no change in
the personality of the employer, there is in reality a change in the situation of
the employee. Once an FEBTC employee is absorbed, there are presumably
changes in his condition of employment even if his previous tenure and salary
Page 35 of 120
rate is recognized by BPI. It is reasonable to assume that BPI would have
different rules and regulations and company practices than FEBTC and it is
incumbent upon the former FEBTC employees to obey these new rules and adapt
to their new environment. Not the least of the changes in employment condition
that the absorbed FEBTC employees must face is the fact that prior to the
merger they were employees of an unorganized establishment and after the
merger they became employees of a unionized company that had an existing
collective bargaining agreement with the certified union. This presupposes that
the union who is party to the collective bargaining agreement is the certified
union that has, in the appropriate certification election, been shown to represent
a majority of the members of the bargaining unit.
Same; Same; Same; Labor Unions; Union Security Clauses; Words and
Phrases; The Court should not uphold an interpretation of the term “new
employee” based on the general and extraneous provisions of the Corporation Code
on merger that would defeat, rather than fulfill, the purpose of the union shop
clause—the provision of the Article 248(e) of the Labor Code in point mandates
that nothing in the said Code or any other law should stop the parties from
requiring membership in a recognized collective bargaining agent as a condition
of employment.—Justice Brion himself points out that there is no clear,
categorical definition of “new employee” in the CBA. In other words, the term
“new employee” as used in the union shop clause is used broadly without any
qualification or distinction. However, the Court should not uphold an
interpretation of the term “new employee” based on the general and extraneous
provisions of the Corporation Code on merger that would defeat, rather than
fulfill, the purpose of the union shop clause. To reiterate, the provision of the
Article 248(e) of the Labor Code in point mandates that nothing in the
said Code or any other law should stop the parties from requiring
membership in a recognized collective bargaining agent as a condition
of employment.
596
596 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Same; Same; Same; Same; By law and jurisprudence, a merger only becomes
effective upon approval by the Securities and Exchange Commission (SEC) of the
articles of merger.—By law and jurisprudence, a merger only becomes effective
upon approval by the Securities and Exchange Commission (SEC) of the articles
of merger. In Associated Bank v. Court of Appeals, 291 SCRA 511 (1998), we
held: The procedure to be followed is prescribed under the Corporation Code.
Section 79 of said Code requires the approval by the Securities and Exchange
Commission (SEC) of the articles of merger which, in turn, must have been duly
approved by a majority of the respective stockholders of the constituent
corporations. The same provision further states that the merger shall be effective
only upon the issuance by the SEC of a certificate of merger. The effectivity
date of the merger is crucial for determining when the merged or
absorbed corporation ceases to exist; and when its rights, privileges,
properties as well as liabilities pass on to the surviving corporation.
Same; Same; Same; Same; Union Shop Clause; Words and Phrases; In law
or even under the express terms of the Collective Bargaining Agreement (CBA),
there is no special class of employees called “absorbed employees”—in order for the
Court to apply or not apply the Union Shop Clause, it can only classify the
employees of the absorbed bank as either “old” or “new.”—Petitioner limited itself
to the argument that its absorbed employees do not fall within the term “new
employees” contemplated under the Union Shop Clause with the apparent
objective of excluding all, and not just some, of the former FEBTC employees
from the application of the Union Shop Clause. However, in law or even under
the express terms of the CBA, there is no special class of employees called
“absorbed employees.” In order for the Court to apply or not apply the Union
Shop Clause, we can only classify the former FEBTC employees as either “old” or
“new.” If they are not “old” employees, they are necessarily “new” employees. If
they are new employees, the Union Shop Clause did not distinguish between new
employees who are non-regular at their hiring but who subsequently become
regular and new employees who are “absorbed” as regular and permanent from
the beginning of their employment. The Union Shop Clause did not so
distinguish, and so neither must we.
597
VOL. 627, AUGUST 10, 2010 597
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Same; Same; Same; Same; Same; The effect or consequence of BPI’s so-called
“absorption” of former Far East Bank and Trust Company (FEBTC) employees
should be limited to what they actually agreed to, i.e. recognition of the FEBTC
employees’ years of service, salary rate and other benefits with their previous
employer—the effect should not be stretched so far as to exempt former FEBTC
Page 36 of 120
employees from the existing Collective Bargaining Agreement (CBA) terms,
company policies and rules which apply to employees similarly situated.—We
agree with the Court of Appeals that there are no substantial differences
between a newly hired non-regular employee who was regularized weeks or
months after his hiring and a new employee who was absorbed from another
bank as a regular employee pursuant to a merger, for purposes of applying the
Union Shop Clause. Both employees were hired/employed only after the CBA
was signed. At the time they are being required to join the Union, they are both
already regular rank and file employees of BPI. They belong to the same
bargaining unit being represented by the Union. They both enjoy benefits that
the Union was able to secure for them under the CBA. When they both entered
the employ of BPI, the CBA and the Union Shop Clause therein were already in
effect and neither of them had the opportunity to express their preference for
unionism or not. We see no cogent reason why the Union Shop Clause should not
be applied equally to these two types of new employees, for they are undeniably
similarly situated. The effect or consequence of BPI’s so-called “absorption” of
former FEBTC employees should be limited to what they actually agreed
to, i.e. recognition of the FEBTC employees’ years of service, salary rate and
other benefits with their previous employer. The effect should not be stretched so
far as to exempt former FEBTC employees from the existing CBA terms,
company policies and rules which apply to employees similarly situated. If the
Union Shop Clause is valid as to other new regular BPI employees, there is no
reason why the same clause would be a violation of the “absorbed” employees’
freedom of association.
Same; Same; Same; Same; Same; It is but fair that similarly situated
employees who enjoy the same privileges of a Collective Bargaining Agreement
(CBA) should be likewise subject to the same obligations the CBA imposes upon
them—a contrary interpretation of the Union Shop Clause will be inimical to
industrial peace and workers’ solidarity.—It is but fair that similarly situated
employees who
598
598 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
enjoy the same privileges of a CBA should be likewise subject to the same
obligations the CBA imposes upon them. A contrary interpretation of the Union
Shop Clause will be inimical to industrial peace and workers’ solidarity. This
unfavorable situation will not be sufficiently addressed by asking the former
FEBTC employees to simply pay agency fees to the Union in lieu of union
membership, as the dissent of Justice Carpio suggests. The fact remains that
other new regular employees, to whom the “absorbed employees” should be
compared, do not have the option to simply pay the agency fees and they must
join the Union or face termination.
Same; Same; Same; Same; Same; A certified union whose membership falls
below twenty percent (20%) of the total members of the collective bargaining unit
may lose its status as a legitimate labor organization altogether, even in a
situation where there is no competing union, in which case, an interested party
may file for the cancellation of the union’s certificate of registration with the
Bureau of Labor Relations.—Without the union shop clause or with the
restrictive interpretation thereof as proposed in the dissenting opinions, the
company can jeopardize the majority status of the certified union by excluding
from union membership all new regular employees whom the Company will
“absorb” in future mergers and all new regular employees whom the Company
hires as regular from the beginning of their employment without undergoing a
probationary period. In this manner, the Company can increase the number of
members of the collective bargaining unit and if this increase is not accompanied
by a corresponding increase in union membership, the certified union may lose
its majority status and render it vulnerable to attack by another union who
wishes to represent the same bargaining unit. Or worse, a certified union whose
membership falls below twenty percent (20%) of the total members of the
collective bargaining unit may lose its status as a legitimate labor organization
altogether, even in a situation where there is no competing union. In such a case,
an interested party may file for the cancellation of the union’s certificate of
registration with the Bureau of Labor Relations. Plainly, the restrictive
interpretation of the union shop clause would place the certified union’s very
existence at the mercy and control of the employer. Relevantly, only BPI, the
employer appears to be interested in pursuing this case. The former
FEBTC employees have not joined BPI in this appeal.
599
VOL. 627, AUGUST 10, 2010 599
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Same; Labor Unions; Union Security Clauses; Social Justice; The
constitutional guarantee given the right to form unions and the State policy to
promote unionism have social justice considerations.—It is unsurprising that
Page 37 of 120
significant provisions on labor protection of the 1987 Constitution are found in
Article XIII on Social Justice. The constitutional guarantee given the right to
form unions and the State policy to promote unionism have social justice
considerations. In People’s Industrial and Commercial Employees and Workers
Organization v. People’s Industrial and Commercial Corporation, 112 SCRA 440
(1982), we recognized that “[l]abor, being the weaker in economic power and
resources than capital, deserve protection that is actually substantial and
material.”
Same; Same; Same; Right of Association; The rationale for upholding the
validity of union shop clauses in a Collective Bargaining Agreement (CBA), even
if they impinge upon the individual employee’s right or freedom of association, is
not to protect the union for the union’s sake—a strong and effective union
presumably benefits all employees in the bargaining unit since such a union
would be in a better position to demand improved benefits and conditions of work
from the employer.—The rationale for upholding the validity of union shop
clauses in a CBA, even if they impinge upon the individual employee’s right or
freedom of association, is not to protect the union for the union’s sake. Laws and
jurisprudence promote unionism and afford certain protections to the certified
bargaining agent in a unionized company because a strong and effective union
presumably benefits all employees in the bargaining unit since such a union
would be in a better position to demand improved benefits and conditions of work
from the employer. This is the rationale behind the State policy to promote
unionism declared in the Constitution, which was elucidated in the above-cited
case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc., 180 SCRA 668
(1989).
Same; Same; Same; Same; Hierarchy of Rights; In the hierarchy of
constitutional values, this Court has repeatedly held that the right to abstain
from joining a labor organization is subordinate to the policy of encouraging
unionism as an instrument of social justice.—In the case at bar, since the former
FEBTC employees are deemed covered by the Union Shop Clause, they are
required to join the certified bargaining agent, which supposedly has gathered
the support of the majority of workers within the bargaining unit in the
600
600 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
appropriate certification proceeding. Their joining the certified union would,
in fact, be in the best interests of the former FEBTC employees for it unites their
interests with the majority of employees in the bargaining unit. It encourages
employee solidarity and affords sufficient protection to the majority status of the
union during the life of the CBA which are the precisely the objectives of union
security clauses, such as the Union Shop Clause involved herein. We are indeed
not being called to balance the interests of individual employees as against the
State policy of promoting unionism, since the employees, who were parties in the
court below, no longer contested the adverse Court of Appeals’ decision.
Nonetheless, settled jurisprudence has already swung the balance in favor of
unionism, in recognition that ultimately the individual employee will be
benefited by that policy. In the hierarchy of constitutional values, this Court has
repeatedly held that the right to abstain from joining a labor organization is
subordinate to the policy of encouraging unionism as an instrument of social
justice.
CARPIO, J., Dissenting Opinion:
Labor Law; Labor Unions; Right of Association; This Court cannot adopt as
part of its jurisprudence a practice that clearly violates a fundamental
constitutional right just because the aggrieved employees gave up the fight to
protect such right.—BPI, independently of the absorbed FEBTC employees, has
the right to challenge the constitutionality of the union shop clause as applied to
the absorbed FEBTC employees because BPI is being compelled, against its best
interests, to terminate their employment if they do not join the Union. Besides,
this Court cannot adopt as part of its jurisprudence a practice that clearly
violates a fundamental constitutional right just because the aggrieved employees
gave up the fight to protect such right. The Constitution guarantees the
fundamental right of all workers to “self-organization.” The right to “self-organi-
zation” is a species of the broader constitutional right of the people “to form
unions, associations, or societies for purposes not contrary to law,” which right
“shall not be abridged.”
Same; Same; Same; Words and Phrases; “Self-organization” means
voluntary association without compulsion, threat of punishment, or threat of loss
of livelihood—compulsory membership is anathema to “self-organization.”—The
right of workers to self-
601
VOL. 627, AUGUST 10, 2010 601
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Page 38 of 120
 organization means that workers themselves voluntarily organize, without
compulsion from outside forces. “Self-organization” means voluntary association
without compulsion, threat of punishment, or threat of loss of livelihood.
Workers who “self-organize” are workers who on their own volition freely and
voluntarily form or join a union. Compulsory membership is anathema to
“self-organization.” The right to self-organize includes the right not to
exercise such right. Freedom to associate necessarily includes the
freedom not to associate. Thus, freedom to join unions necessarily
includes the freedom not to join unions.
Same; Same; Same; Union Security Clauses; Words and Phrases; In a “union
shop,” employees who are not union members at the time of signing of the contract
need not join the union, but all workers hired thereafter must join—non-members
may be hired, but to retain employment must become union members after a
certain period; In a “closed shop,” only union members can be hired by the
company and they must remain union members to retain employment in the
company; A closed shop is so harsh that it must be strictly construed and that
doubts must be resolved against it.—To further strengthen the powers of a union,
the State has allowed the inclusion of union security clauses, including a “union
shop” (the type of union security clause involved in this case), in collective
bargaining agreements (CBA). In a “union shop,” employees who are not union
members at the time of signing of the contract need not join the union, but all
workers hired thereafter must join. Non-members may be hired, but to retain
employment must become union members after a certain period.
The ponencia points out the validity in this jurisdiction of the more stringent
union security of “closed shop” and its applicability to old employees who are
non-union members at the time of effectivity of the CBA. In a “closed shop,” only
union members can be hired by the company and they must remain union
members to retain employment in the company. As explained in Guijarno, it was
to “further increase the effectiveness of [unions] that a closed shop has been
allowed.” However, this undertaking did not come without detrimental effects on
the workers themselves, such that in Confederated Sons of Labor v. Anakan
Lumber Co., 107 Phil. 915 (1960), we declared that a closed shop is “so harsh
that it must be strictly construed” and that “doubts must be resolved against
[it].” We also ruled in Anakan that “In order that an employer may be deemed
bound, under a collective bargaining agree-
602
602 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
ment, to dismiss employees for non-union membership, the stipulation to
this effect must be so clear and unequivocal as to leave no room for doubt
thereon.”
Same; Same; Same; Same; In the United States, closed shops, which require
compulsory union membership for all employees, have been declared unlawful
since 1947, while union shops, which allow old employees to remain non-union
members but require new employees to become members after a certain period, are
generally allowed.—In the United States, closed shops, which require compulsory
union membership for all employees, have been declared unlawful since 1947,
while union shops, which allow old employees to remain non-union members but
require new employees to become members after a certain period, are generally
allowed. Previously, closed shops, union shops and agency shops were all
permitted under Section 8(3) of the National Labor Relations Act of 1935
(NLRA), also known as the Wagner Act. But in 1947, the US Congress “reacted
to widespread abuses of closed-shop agreements by banning such arrangements”
through the enactment of the Labor Management Relations Act (LMRA), or the
Taft-Hartley Act, which amended the NLRA by adding Section 8(a)(3).
In National Labor Relations Board v. General Motors Corporation, the US
Supreme Court explained that the Taft-Hartley Act amendments were intended
to accomplish twin purposes, one of which is to abolish closed shop to eliminate
serious abuses of compulsory unionism.
Same; Same; Same; Same; Although United States laws and jurisprudence
on closed shops and union shops, as they now stand, are different from our own
laws, it may be worthwhile to treat them with careful regard since our Labor Code
and its precursor, the Industrial Peace Act, are patterned after US labor laws;
Union security agreements were adopted in our jurisdiction primarily to
safeguard the rights of the working man—where utilized to achieve a contrary
purpose, these union devices should be curtailed and carefully maneuvered to
remain within the periphery of labor protection.—Although United States laws
and jurisprudence on closed shops and union shops, as they now stand, are
different from our own laws, it may be worthwhile to treat them with careful
regard since our Labor Code and its precursor, the Industrial Peace Act, are
patterned after US labor laws. We have previously ruled that when a statute has
been adopted from another state or country and such statute has
603
VOL. 627, AUGUST 10, 2010 603
Bank of the Philippine Island vs. BPI Employees Union-
Page 39 of 120
 Davao Chapter-Federation of Union in BPI UniBank
previously been construed by the courts of such state or country, the statute
is deemed to have been adopted with the construction given to it. Where our
labor statutes are based on statutes in foreign jurisdiction, the decisions of the
high courts in those jurisdictions construing and interpreting the Act are given
persuasive effects in the application of Philippine law. Union security
agreements were adopted in our jurisdiction primarily to safeguard the rights of
the working man. Where utilized to achieve a contrary purpose, these union
devices should be curtailed and carefully maneuvered to remain within the
periphery of labor protection.
Same; Same; Same; Corporation Law; Corporate Mergers; The merger of two
corporations does not authorize the surviving corporation to terminate the
employees of the absorbed corporation in the absence of just or authorized causes
as provided in Articles 282 and 283 of the Labor Code.—The merger of two
corporations does not authorize the surviving corporation to terminate the
employees of the absorbed corporation in the absence of just or authorized causes
as provided in Articles 282 and 283 of the Labor Code. Merger of two
corporations is not one of the just or authorized causes for termination of
employment. Not even a union shop agreement is just or authorized cause to
terminate a permanent employee. A union shop clause is only a ground to
terminate a probationary employee who refuses to join the union as a condition
for continued employment. Once an employee becomes permanent, he is
protected by the security of tenure clause in the Constitution, and he can be
terminated only for just or authorized causes as provided by law. The right to
security of tenure of regular employees is enshrined in the Constitution. This
right cannot be eroded, let alone be forfeited except upon a clear and convincing
showing of a just and lawful cause. In this case, there is no showing that legal
ground exists to warrant a termination of the FEBTC employees. Therefore, BPI
is obligated to continue FEBTC employees’ regular employment in deference to
their constitutional right to security of tenure.
Same; Same; Same; Same; Same; A merger is a legitimate management
prerogative which cannot be opposed or rejected by the employees of the merging
entities.—The FEBTC employees had no choice but to accept the absorption
by way of merger. A merger is a legitimate management prerogative which
cannot be opposed or rejected by the employees of the merging entities. Hence,
604
604 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
the absorption by BPI of the FEBTC employees was not within the FEBTC
employees’ control, and the latter had no choice but to be absorbed by BPI, unless
they opted to give up their means of livelihood.
Same; Same; Same; Same; Same; To compel the absorbed employees to join
the Union at the risk of losing their jobs is violative of their constitutional freedom
to associate.—To require these absorbed employees to join the Union at the risk
of losing their jobs is akin to forcing an existing non-union BPI employee to join
the Union on pain of termination. In the same way that an existing non-union
BPI employee is given the constitutional right to choose whether or not to join a
union, an absorbed employee should be equally given the same right. And this
right must be conferred to the absorbed employee upon the effectivity of the
merger between FEBTC and BPI. Indisputably, the right to join or not to join a
Union is part of the fundamental constitutional right to form associations.
In Sta. Clara Homeowners’ Association v. Gaston, 374 SCRA 396 (2002), we held
that, “The constitutionally guaranteed freedom of association includes the
freedom not to associate. The right to choose with whom one will associate
oneself is the very foundation and essence of that partnership. It should
be noted that the provision guarantees the right to form an association.
It does not include the right to compel others to form or join one.” Thus,
to compel the absorbed FEBTC employees to join the Union at the risk of losing
their jobs is violative of their constitutional freedom to associate.
Same; Same; Same; Agency Fees; Unjust Enrichment; The legal basis of the
union’s right to agency fees is neither contractual nor statutory, but quasi-
contractual, deriving from the established principle that non-union employees
may not unjustly enrich themselves by benefiting from employment conditions
negotiated by the bargaining union.—We held in Holy Cross of Davao College,
Inc. v. Joaquin, 263 SCRA 358 (1996), that the collection of agency fees in an
amount equivalent to union dues and fees, from employees who are not union
members, is recognized by Article 248 (e) of the Labor Code. The employee’s
acceptance of benefits resulting from a CBA justifies the deduction of agency fees
from his pay and the union’s entitlement thereto. In this aspect, the legal basis of
the union’s right to agency fees is neither contractual nor statutory, but quasi-
contractual,
605
VOL. 627, AUGUST 10, 2010 605
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Page 40 of 120
 deriving from the established principle that non-union employees may not
unjustly enrich themselves by benefiting from employment conditions negotiated
by the bargaining union.
Same; Same; Same; We cannot exalt union rights over and above the freedom
and right of employees to join or not to join a union.—In the present case, since
the absorbed FEBTC employees will pay all union dues and fees, there is no
reason to force them to join the Union except to humiliate them by trampling
upon their fundamental constitutional right to join or not to join a union. This
the Court should not allow. It is this Court’s solemn duty to implement the State
policy of promoting unionism. However, this duty cannot be done at the expense
of a fundamental constitutional right of a worker. We cannot exalt union rights
over and above the freedom and right of employees to join or not to join a union.
BRION, J., Dissenting Opinion:
Labor Law; Labor Unions; Right to Association; Collective Bargaining
Agreements; Parties; In interpreting a Collective Bargaining Agreement (CBA)
provision, the real parties in interest are the bargaining parties—the company
and the union—the agreement is between them, hence, it matters not that the
affected employees, mere necessary parties, are not direct parties in the present
petition for review on certiorari.—The non-involvement of affected employees at
this level of the litigation (a new point the modified ponencia raised) is not a
stumbling block to the present petition as the ponencia now posits. In
interpreting a CBA provision, the real parties in interest are the bargaining
parties—the company and the union—the agreement is between them. Hence, it
matters not that the affected employees, mere necessary parties, are not direct
parties in the present petition for review on certiorari. For ease of appreciation, I
submit the following discussions topically presented, not necessarily in the order
of the ponencia’s presentation of positions as shown above.
Corporation Law; Corporate Mergers; Unlike the old Corporation Code that
did not contain express provisions on mergers and consolidations, the present law
now authorizes, under Section 76, two or more corporations to merge under one of
the participating constituent corporations, or to consolidate into a new single
corporation called the consolidated corporation.—A basic point of disagreement
with the ponencia relates to the approach in resolving the issues
606
606 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
raised. The ponencia appears to consider only the purely labor law aspect of
the case in determining the relationships among BPI, FEBTC and the absorbed
employees. More than anything else, however, the issues before us are rooted in
the corporate merger that took place; thus, the first priority in resolving the
issues before us should be to consider and analyze the nature and consequences
of the BPI-FEBTC merger—essentially a matter under the Corporation Code. On
the basis of this analysis, the application of labor law can follow. Unlike the old
Corporation Code that did not contain express provisions on mergers and
consolidations, the present law now authorizes, under Section 76, two or more
corporations to merge under one of the participating constituent corporations, or
to consolidate into a new single corporation called the consolidated corporation.
In either case, no liquidation of the assets of the dissolved corporations takes
place, and the surviving or consolidated corporation assumes ipso jure the
liabilities of the dissolved corporations, regardless of whether the creditors
consented to the merger or consolidation.
Same; Same; Words and Phrases; The levels of transfers of corporate assets
and liabilities are: (1) the assets-only level; (2) the business enterprise level; and
(3) the equity level; Each has its own impact on the participating corporations and
the immediately affected parties, among them, the employees; Beyond and
encompassing all these levels of transfers is total corporate merger or
consolidation; In a total merger, the merged corporation transfers everything—
figuratively speaking, its “body and soul”—to the surviving corporation.—An
overview of the whole range or levels of transfers of corporate assets and
liabilities, as established by jurisprudence, is helpful and instructive for the full
appreciation of the nature of the BPI-FEBTC merger. These levels of transfers
are: (1) the assets-only level; (2) the business enterprise level; and (3)
the equity level. Each has its own impact on the participating corporations and
the immediately affected parties, among them, the employees. Beyond and
encompassing all these levels of transfers is total corporate merger or
consolidation. The asset-only transfer affects only the corporate seller’s raw
assets and properties; the purchaser is not interested in the seller’s corporate
personality—its goodwill, or in other factors affecting the business itself. In this
transaction, no complications arise affecting the employer-employee relationship,
except perhaps the redundancy of employees whose presence in the selling
company is affected by the sale of the chosen assets and
607
VOL. 627, AUGUST 10, 2010 607
Page 41 of 120
 Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
properties, but this is a development completely internal to the selling
corporation. In the business enterprise level transaction, the purchaser’s
interest goes beyond the assets and properties and extends into the seller
corporation’s whole business and “earning capability,” short of the seller’s
juridical personality. Thus, a whole business is sold and purchased but the
parties retain their respective juridical personalities. In this type of transaction,
employer-employee and employer liability complications arise, as can be seen
from a survey of the cases on corporate transfers that this Court has already
passed upon. A transaction at the equity level does not disturb the
participating corporations’ separate juridical personality as both corporations
continue to remain in existence; the purchaser corporation simply buys the
underlying equity of the selling corporation which thus retains its separate
corporate personality. The selling corporation continues to run its business, but
control of the business is transferred to the purchaser corporation whose control
of the selling corporation’s equity enables it to elect the members of the selling
corporation’s board of directors. As pointed out above, a total merger or
consolidation goes way beyond all three levels of dealings in corporate business,
assets and property. In a total merger, the merged corporation transfers
everything—figuratively speaking, its “body and soul”—to the surviving
corporation. This was what happened in the BPI-FEBTC merger.
Same; Same; Labor Law; Due consideration of Section 80 of the Corporation
Code, the constitutionally declared policies on work, labor and employment, and
the specific Far East Bank and Trust Company-Bank of the Philippine Islands
(FEBTC-BPI) situation should point this Court to a declaration that in a
complete merger situation where there is total takeover by one corporation over
another and there is silence in the merger agreement on what the fate of the
human resource complement shall be, the latter should not be left in legal limbo
and should be properly provided for, by compelling the surviving entity to absorb
these employees.—In a corporate merger situation—where one corporation totally
surrenders itself, giving up to another corporation even the human resources
that enable its business to operate—the terms of the Constitution bar us from
looking at the corporate transaction purely as a contract that should be analyzed
purely on the basis of the law on contracts, in the way the ponencia suggested.
Nor can we accept as valid the ponencia’s pronouncement, apparently in line
with its purely contractual analysis,
608
608 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
that the transfer of all assets and liabilities in a merger situation, as in this
case, refers only to FEBTC’s property rights and obligations and does not include
the employment contracts of its personnel. To my mind, due consideration of
Section 80 of the Corporation Code, the constitutionally declared policies on
work, labor and employment, and the specific FEBTC-BPI situation—i.e., a
merger with complete “body and soul” transfer of all that FEBTC embodied and
possessed and where both participating banks were willing (albeit by deed, not
by their written agreement) to provide for the affected human resources by
recognizing continuity of employment—should point this Court to a declaration
that in a complete merger situation where there is total takeover by one
corporation over another and there is silence in the merger agreement on what the
fate of the human resource complement shall be, the latter should not be left in
legal limbo and should be properly provided for, by compelling the surviving
entity to absorb these employees. This is what Section 80 of the Corporation
Code commands, as the surviving corporation has the legal obligation to assume
all the obligations and liabilities of the merged constituent corporation.
Same; Same; Same; Union Security Clauses; An intrinsic distinction exists
between the absorbed employees and those who are hired as immediate regulars,
which distinction cannot simply be disregarded—those who are immediately
hired as regulars acquire their status through the voluntary act of hiring done
within the effective term or period of the Collective Bargaining Agreement (CBA),
while the absorbed employees merely continued the employment they started with
the absorbed corporation; Absorbed employees are neither “new” employees nor
employees who became regular only during the term of the Collective Bargaining
Agreement (CBA) in the way that newly regularized employees become so.—An
intrinsic distinction exists between the absorbed employees and those who are
hired as immediate regulars, which distinction cannot simply be disregarded
because it establishes how the absorbed employees came to work for BPI. Those
who are immediately hired as regulars acquire their status through the
voluntary act of hiring done within the effective term or period of the CBA. The
absorbed employees, on the other hand, merely continued the employment they
started with FEBTC; they came to be BPI employees by reason of a corporate
merger that changed the personality of their employer but did not at all give
them any new employment. Thus, they are neither “new” employees
609
Page 42 of 120
 VOL. 627, AUGUST 10, 2010 609
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
nor employees who became regular only during the term of the CBA in the
way that newly regularized employees become so. They were regular employees
under their present employment long before BPI succeeded to FEBTC’s role as
employer.
Same; Same; Same; Ultimately, the absorbed employees are best recognized
for what they really are—a sui generis group of employees whose classification
will not be duplicated until Bank of the Philippine Islands (BPI) has another
merger where it would be the surviving corporation and no provision would be
made to define the situation of the employees of the merged constituent
corporation.—It may well be asked: what then is the classification under the
CBA of the absorbed employees whose positions fall within the bargaining unit?
As discussed above, they cannot be new employees. In fact, they are more similar
to the “old” employees, if their continuity of service will be considered. This
characterization, nevertheless, is clearly inapt since they cannot also be treated
in exactly the same way as the pre-merger BPI employees. Besides, being “old”
employees will not compel them to join the union under the maintenance of
membership provision as they never had any union membership to
maintain. Ultimately, the absorbed employees are best recognized for what they
really are—a sui generis group of employees whose classification will not be
duplicated until BPI has another merger where it would be the surviving
corporation and no provision would be made to define the situation of the
employees of the merged constituent corporation. Significantly, this
classification—obviously, not within the contemplation of the CBA parties
when they executed their CBA—is not contrary to, nor governed by, any of the
agreed terms of the existing CBA on union security, and thus occupies a gap that
BPI, in the exercise of its management prerogative, can fill.
PETITION for review on certiorari of the decision and resolution of the
Court of Appeals.
The facts are stated in the opinion of the Court.
Sycip, Salazar, Hernandez & Gatmaitan and Hildegardo F. Iñigo for
petitioner.
Gregorio A. Pizzaro for respondent.
610
610 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
LEONARDO-DE CASTRO, J.:
May a corporation invoke its merger with another corporation as a
valid ground to exempt its “absorbed employees” from the coverage of a
union shop clause contained in its existing Collective Bargaining
Agreement (CBA) with its own certified labor union? That is the question
we shall endeavor to answer in this petition for review filed by an
employer after the Court of Appeals decided in favor of respondent union,
which is the employees’ recognized collective bargaining representative.
At the outset, we should call to mind the spirit and the letter of the
Labor Code provisions on union security clauses, specifically Article 248
(e), which states, “x x x Nothing in this Code or in any other
law shall stop the parties from requiring membership in a
recognized collective bargaining agent as a condition for
employment, except those employees who are already members of
another union at the time of the signing of the collective bargaining
agreement.”1 This case which involves the application of a collective
bargaining agreement with a union shop clause should be resolved
principally from the standpoint of the clear provisions of our labor laws,
and the express terms of the CBA in question, and not by inference from
the general consequence of the merger of corporations under the
Corporation Code, which obviously does not deal with and, therefore, is
silent on the terms and conditions of employment in corporations or
juridical entities.
This issue must be resolved NOW, instead of postponing it to a future
time when the CBA is renegotiated as suggested by the Honorable Justice
Arturo D. Brion because the same issue may still be resurrected in the
renegotiation if the absorbed employees insist on their privileged status of
being exempt from any union shop clause or any variant thereof.
_______________
Page 43 of 120
 1 Presidential Decree No. 442, as amended. Emphasis added.
611
VOL. 627, AUGUST 10, 2010 611
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
We find it significant to note that it is only the employer, Bank of the
Philippine Islands (BPI), that brought the case up to this Court via the
instant petition for review; while the employees actually involved in the
case did not pursue the same relief, but had instead chosen in effect to
acquiesce to the decision of the Court of Appeals which effectively required
them to comply with the union shop clause under the existing CBA at the
time of the merger of BPI with Far East Bank and Trust Company
(FEBTC), which decision had already become final and executory
as to the aforesaid employees. By not appealing the decision of the
Court of Appeals, the aforesaid employees are bound by the said Court of
Appeals’ decision to join BPI’s duly certified labor union. In view of the
apparent acquiescence of the affected FEBTC employees in the Court of
Appeals’ decision, BPI should not have pursued this petition for review.
However, even assuming that BPI may do so, the same still cannot
prosper.
What is before us now is a petition for review under Rule 45 of the
Rules of Court of the Decision2 dated September 30, 2003 of the Court of
Appeals, as reiterated in its Resolution3 of June 9, 2004, reversing and
setting aside the Decision4 dated November 23, 2001 of Voluntary
Arbitrator Rosalina Letrondo-Montejo, in CA-G.R. SP No. 70445,
entitled BPI Employees Union-Davao Chapter-Federation of Unions in
BPI Unibank v. Bank of the Philippine Islands, et al.
The antecedent facts are as follows:
On March 23, 2000, the Bangko Sentral ng Pilipinas approved the
Articles of Merger executed on January 20, 2000 by and between BPI,
herein petitioner, and FEBTC.5 This
_______________
612 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Article and Plan of Merger was approved by the Securities and Exchange
Commission on April 7, 2000.6
Pursuant to the Article and Plan of Merger, all the assets and liabilities
of FEBTC were transferred to and absorbed by BPI as the surviving
corporation. FEBTC employees, including those in its different branches
across the country, were hired by petitioner as its own employees, with
their status and tenure recognized and salaries and benefits maintained.
Respondent BPI Employees Union-Davao Chapter – Federation of
Unions in BPI Unibank (hereinafter the “Union,” for brevity) is the
exclusive bargaining agent of BPI’s rank and file employees in Davao City.
The former FEBTC rank-and-file employees in Davao City did not belong
to any labor union at the time of the merger. Prior to the effectivity of the
merger, or on March 31, 2000, respondent Union invited said FEBTC
employees to a meeting regarding the Union Shop Clause (Article II,
Section 2) of the existing CBA between petitioner BPI and respondent
Union.7
The parties both advert to certain provisions of the existing CBA,
which are quoted below:
ARTICLE I
Section 1. Recognition and Bargaining Unit.—The BANK recognizes the
UNION as the sole and exclusive collective bargaining representative of all the
regular rank and file employees of the Bank offices in Davao City.
Section 2. Exclusions
Section 3. Additional Exclusions
Section 4. Copy of Contract
613
VOL. 627, AUGUST 10, 2010 613
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
ARTICLE II
Section 1. Maintenance of Membership.—All employees within the bargaining
unit who are members of the Union on the date of the effectivity of this
Agreement as well as employees within the bargaining unit who subsequently
join or become members of the Union during the lifetime of this Agreement shall
Page 44 of 120
as a condition of their continued employment with the Bank, maintain their
membership in the Union in good standing.
Section 2. Union Shop.—New employees falling within the bargaining unit
as defined in Article I of this Agreement, who may hereafter be regularly
employed by the Bank shall, within thirty (30) days after they become regular
employees, join the Union as a condition of their continued employment. It is
understood that membership in good standing in the Union is a condition of their
continued employment with the Bank.8 (Emphases supplied.)
After the meeting called by the Union, some of the former FEBTC
employees joined the Union, while others refused. Later, however, some of
those who initially joined retracted their membership.9
Respondent Union then sent notices to the former FEBTC employees
who refused to join, as well as those who retracted their membership, and
called them to a hearing regarding the matter. When these former FEBTC
employees refused to attend the hearing, the president of the Union
requested BPI to implement the Union Shop Clause of the CBA and to
terminate their employment pursuant thereto.10
After two months of management inaction on the request, respondent
Union informed petitioner BPI of its decision to refer the issue of the
implementation of the Union Shop Clause of the CBA to the Grievance
Committee. However, the
614 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
issue remained unresolved at this level and so it was subsequently
submitted for voluntary arbitration by the parties.11
Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision12 dated
November 23, 2001, ruled in favor of petitioner BPI’s interpretation that
the former FEBTC employees were not covered by the Union Security
Clause of the CBA between the Union and the Bank on the ground that
the said employees were not new employees who were hired and
subsequently regularized, but were absorbed employees “by operation of
law” because the “former employees of FEBTC can be considered assets
and liabilities of the absorbed corporation.” The Voluntary
Arbitrator concluded that the former FEBTC employees could not be
compelled to join the Union, as it was their constitutional right to join or
not to join any organization.
Respondent Union filed a Motion for Reconsideration, but the
Voluntary Arbitrator denied the same in an Order dated March 25, 2002.13
Dissatisfied, respondent then appealed the Voluntary Arbitrator’s
decision to the Court of Appeals. In the herein assailed Decision dated
September 30, 2003, the Court of Appeals reversed and set aside the
Decision of the Voluntary Arbitrator.14 Likewise, the Court of Appeals
denied herein petitioner’s Motion for Reconsideration in a Resolution
dated June 9, 2004.
The Court of Appeals pertinently ruled in its Decision:
“A union-shop clause has been defined as a form of union security provision
wherein non-members may be hired, but to retain employment must become
union members after a certain period.
VOL. 627, AUGUST 10, 2010 615
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
There is no question as to the existence of the union-shop clause in the CBA
between the petitioner-union and the company. The controversy lies in its
application to the “absorbed” employees.
This Court agrees with the voluntary arbitrator that the ABSORBED
employees are distinct and different from NEW employees BUT only in so far as
their employment service is concerned. The distinction ends there. In the case at
bar, the absorbed employees’ length of service from its former employer is tacked
with their employment with BPI. Otherwise stated, the absorbed employees
service is continuous and there is no gap in their service record.
This Court is persuaded that the similarities of “new” and “absorbed”
employees far outweighs the distinction between them. The similarities lies on
the following, to wit: (a) they have a new employer; (b) new working conditions;
(c) new terms of employment and; (d) new company policy to follow. As such, they
should be considered as “new” employees for purposes of applying the provisions
of the CBA regarding the “union-shop” clause.
To rule otherwise would definitely result to a very awkward and unfair
situation wherein the “absorbed” employees shall be in a different if not, better
situation than the existing BPI employees. The existing BPI employees by virtue
Page 45 of 120
of the “union-shop” clause are required to pay the monthly union dues, remain as WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
members in good standing of the union otherwise, they shall be terminated from RULING THAT THE FORMER FEBTC EMPLOYEES SHOULD BE
the company, and other union-related obligations. On the other hand, the CONSIDERED ‘NEW’ EMPLOYEES OF BPI FOR PURPOSES OF
“absorbed” employees shall enjoy the “fruits of labor” of the petitioner-union and APPLYING THE UNION SHOP CLAUSE OF THE CBA
its members for nothing in exchange. Certainly, this would disturb industrial
peace in the company which is the paramount reason for the existence of the
II
CBA and the union.
The voluntary arbitrator’s interpretation of the provisions of the CBA WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
concerning the coverage of the “union-shop” clause is at war with the spirit and FINDING THAT THE VOLUNTARY ARBITRATOR’S
the rationale why the Labor Code itself allows the existence of such provision. INTERPRETATION OF THE COVERAGE OF THE UNION SHOP
The Supreme Court in the case of Manila Mandarin Employees Union vs. CLAUSE IS “AT WAR WITH THE SPIRIT AND THE RATIONALE WHY
NLRC (G.R. No. 76989, September 29, 1987) rule, to quote: THE LABOR CODE ITSELF ALLOWS THE EXISTENCE OF SUCH
“This Court has held that a valid form of union security, and such a PROVISION”16
provision in a collective bargaining agreement is not a restriction of the
right of freedom of association guaranteed by the Constitution. In essence, the sole issue in this case is whether or not the former
616
FEBTC employees that were absorbed by petitioner upon the merger
616 SUPREME COURT REPORTS ANNOTATED
between FEBTC and BPI should be covered
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank _______________
A closed-shop agreement is an agreement whereby an employer binds
himself to hire only members of the contracting union who must continue 617
to remain members in good standing to keep their jobs. It is “THE MOST VOL. 627, AUGUST 10, 2010 617
PRIZED ACHIEVEMENT OF UNIONISM.” IT ADDS MEMBERSHIP Bank of the Philippine Island vs. BPI Employees Union-
AND COMPULSORY DUES. By holding out to loyal members a promise Davao Chapter-Federation of Union in BPI UniBank
of employment in the closed-shop, it wields group solidarity.” by the Union Shop Clause found in the existing CBA between petitioner
(Emphasis supplied) and respondent Union.
Petitioner is of the position that the former FEBTC employees are not
Hence, the voluntary arbitrator erred in construing the CBA literally at new employees of BPI for purposes of applying the Union Shop Clause of
the expense of industrial peace in the company. the CBA, on this note, petitioner points to Section 2, Article II of the CBA,
With the foregoing ruling from this Court, necessarily, the alternative which provides:
prayer of the petitioner to require the individual respondents to become “New employees falling within the bargaining unit as defined in Article
members or if they refuse, for this Court to direct respondent BPI to I of this Agreement, who may hereafter be regularly employed by the
dismiss them, follows.”15 Bank shall, within thirty (30) days after they become
Hence, petitioner’s present recourse, raising the following issues: regular employees, join the Union as a condition of their continued
employment. It is understood that membership in good standing in the Union is
I a condition of their continued employment with the Bank.”17 (Emphases
supplied.)

Page 46 of 120

Petitioner argues that the term “new employees” in the Union Shop
Clause of the CBA is qualified by the phrases “who may hereafter be
regularly employed” and “after they become regular employees” which led
petitioner to conclude that the “new employees” referred to in, and
contemplated by, the Union Shop Clause of the CBA were only those
employees who were “new” to BPI, on account of having been hired
initially on a temporary or probationary status for possible regular
employment at some future date. BPI argues that the FEBTC employees
absorbed by BPI cannot be considered as “new employees” of BPI for
purposes of applying the Union Shop Clause of the CBA.18
According to petitioner, the contrary interpretation made by the Court
of Appeals of this particular CBA provision ignores, or even defies, what
petitioner assumes as its clear meaning and scope which allegedly
contradicts the Court’s strict and restrictive enforcement of union security
agreements.
We do not agree.
_______________
618
618 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Section 2, Article II of the CBA is silent as to how one becomes a
“regular employee” of the BPI for the first time. There is nothing in the
said provision which requires that a “new” regular employee first
undergo a temporary or probationary status before being deemed
as such under the union shop clause of the CBA.
“Union security” is a generic term which is applied to and comprehends
“closed shop,” “union shop,” “maintenance of membership” or any other
form of agreement which imposes upon employees the obligation to
acquire or retain union membership as a condition affecting employment.
There is union shop when all new regular employees are required to join
the union within a certain period for their continued employment. There
is maintenance of membership shop when employees, who are union
members as of the effective date of the agreement, or who thereafter
become members, must maintain union membership as a condition for
continued employment until they are promoted or transferred out of the
bargaining unit or the agreement is terminated. A closed-shop, on the
other hand, may be defined as an enterprise in which, by agreement
between the employer and his employees or their representatives, no
person may be employed in any or certain agreed departments of the
enterprise unless he or she is, becomes, and, for the duration of the
agreement, remains a member in good standing of a union entirely
comprised of or of which the employees in interest are a part.19
In the case of Liberty Flour Mills Employees v. Liberty Flour Mills,
Inc.,20 we ruled that:
“It is the policy of the State to promote unionism to enable the
workers to negotiate with management on the same level and with more
persuasiveness than if they were to individually and independently
bargain for the improvement of|
_______________
619
VOL. 627, AUGUST 10, 2010 619
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
their respective conditions. To this end, the Constitution guarantees to them
the rights “to self-organization, collective bargaining and negotiations and
peaceful concerted actions including the right to strike in accordance with law.”
There is no question that these purposes could be thwarted if every worker were
to choose to go his own separate way instead of joining his co-employees in
planning collective action and presenting a united front when they sit down to
bargain with their employers. It is for this reason that the law has sanctioned
stipulations for the union shop and the closed shop as a means of encouraging
the workers to join and support the labor union of their own choice as their
representative in the negotiation of their demands and the protection of their
interest vis-à-vis the employer.” (Emphasis ours.)
Page 47 of 120
 In other words, the purpose of a union shop or other union security
arrangement is to guarantee the continued existence of the union through
enforced membership for the benefit of the workers.
All employees in the bargaining unit covered by a Union Shop Clause
in their CBA with management are subject to its terms. However, under
law and jurisprudence, the following kinds of employees are
exempted from its coverage, namely, employees who at the time the
union shop agreement takes effect are bona fide members of a religious
organization which prohibits its members from joining labor unions on
religious grounds;21 employees already in the service and already
members of a union other than the majority at the time the union
shop agreement took effect;22 confidential employees who are excluded
from the
20
620 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
rank and file bargaining unit;23 and employees excluded from the
union shop by express terms of the agreement.
When certain employees are obliged to join a particular union as a
requisite for continued employment, as in the case of Union Security
Clauses, this condition is a valid restriction of the freedom or right not to
join any labor organization because it is in favor of unionism. This Court,
on occasion, has even held that a union security clause in a CBA is not a
restriction of the right of freedom of association guaranteed by the
Constitution.24
Moreover, a closed shop agreement is an agreement whereby an
employer binds himself to hire only members of the contracting union who
must continue to remain members in good standing to keep their jobs. It is
“the most prized achievement of unionism.” It adds membership and
compulsory dues. By holding out to loyal members a promise of
employment in the closed shop, it wields group solidarity.25
Indeed, the situation of the former FEBTC employees in this case
clearly does not fall within the first three exceptions to the application of
the Union Shop Clause discussed earlier. No allegation or evidence of
religious exemption or prior membership in another union or engagement
as a confidential employee was presented by both parties. The sole
category therefore in which petitioner may prove its claim is the fourth
recognized exception or whether the former FEBTC employ-
_______________
VOL. 627, AUGUST 10, 2010 621
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
ees are excluded by the express terms of the existing CBA between
petitioner and respondent.
To reiterate, petitioner insists that the term “new employees,” as the
same is used in the Union Shop Clause of the CBA at issue, refers only to
employees hired by BPI as non-regular employees who later qualify for
regular employment and become regular employees, and not those who, as
a legal consequence of a merger, are allegedly automatically deemed
regular employees of BPI. However, the CBA does not make a distinction
as to how a regular employee attains such a status. Moreover, there is
nothing in the Corporation Law and the merger agreement mandating the
automatic employment as regular employees by the surviving corporation
in the merger.
It is apparent that petitioner hinges its argument that the former
FEBTC employees were absorbed by BPI merely as a legal consequence of
a merger based on the characterization by the Voluntary Arbiter of these
absorbed employees as included in the “assets and liabilities” of the
dissolved corporation—assets because they help the Bank in its operation
and liabilities because redundant employees may be terminated and
company benefits will be paid to them, thus reducing the Bank’s financial
status. Based on this ratiocination, she ruled that the same are not new
employees of BPI as contemplated by the CBA at issue, noting that the
Certificate of Filing of the Articles of Merger and Plan of Merger between
FEBTC and BPI stated that “x x x the entire assets and liabilities of FAR
EASTERN BANK & TRUST COMPANY will be transferred to
Page 48 of 120
and absorbed by the BANK OF THE PHILIPPINE ISLANDS x x x
(underlining supplied).”26 In sum, the Voluntary Arbiter upheld the
reasoning of petitioner that the FEBTC employees became BPI employees
by “operation of law” because they are included in the term “assets and
liabilities.”
622 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Absorbed FEBTC Employees are
Neither Assets nor Liabilities
In legal parlance, however, human beings are never embraced in the
term “assets and liabilities.” Moreover, BPI’s absorption of former FEBTC
employees was neither by operation of law nor by legal consequence of
contract. There was no government regulation or law that compelled the
merger of the two banks or the absorption of the employees of the
dissolved corporation by the surviving corporation. Had there been such
law or regulation, the absorption of employees of the non-surviving
entities of the merger would have been mandatory on the surviving
corporation.27 In the present case, the merger was voluntarily entered into
by both banks presumably for some mutually acceptable consideration. In
fact, the Corporation Code does not also mandate the absorption
of the employees of the non-surviving corporation by the
surviving corporation in the case of a merger. Section 80 of the
Corporation Code provides:
“SEC. 80. Effects of merger or consolidation.—The merger or consolidation,
as provided in the preceding sections shall have the following effects:
1. The constituent corporations shall become a single corporation which, in
case of merger, shall be the surviving corporation designated in the plan of
merger; and, in case of consolidation, shall be the consolidated corporation
designated in the plan of consolidation;
2. The separate existence of the constituent corporations shall cease, except
that of the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under this Code;
_______________
VOL. 627, AUGUST 10, 2010 623
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
4. The surviving or the consolidated corporation shall thereupon and
thereafter possess all the rights, privileges, immunities and franchises of each of
the constituent corporations; and all property, real or personal, and all
receivables due on whatever account, including subscriptions to shares and other
choses in action, and all and every other interest of, or belonging to, or due to
each constituent corporation, shall be taken and deemed to be transferred to and
vested in such surviving or consolidated corporation without further act or deed;
and
5. The surviving or the consolidated corporation shall be responsible and
liable for all the liabilities and obligations of each of the constituent corporations
in the same manner as if such surviving or consolidated corporation had itself
incurred such liabilities or obligations; and any claim, action or proceeding
pending by or against any of such constituent corporations may be prosecuted by
or against the surviving or consolidated corporation, as the case may be. Neither
the rights of creditors nor any lien upon the property of any of such constituent
corporations shall be impaired by such merger or consolidated.”
Significantly, too, the Articles of Merger and Plan of Merger dated
April 7, 2000 did not contain any specific stipulation with respect to the
employment contracts of existing personnel of the non-surviving entity
which is FEBTC. Unlike the Voluntary Arbitrator, this Court cannot
uphold the reasoning that the general stipulation regarding transfer of
FEBTC assets and liabilities to BPI as set forth in the Articles of Merger
necessarily includes the transfer of all FEBTC employees into the employ
of BPI and neither BPI nor the FEBTC employees allegedly could do
anything about it. Even if it is so, it does not follow that the
absorbed employees should not be subject to the terms and
conditions of employment obtaining in the surviving corporation.
Page 49 of 120
 “The rule is that unless expressly assumed, labor contracts such as
employment contracts and collective bargaining agreements are not enforceable
against a transferee of an enterprise, labor contracts being in personam, thus
binding only between the parties. A labor contract merely creates an action in
personam and does not
624
624 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
create any real right which should be respected by third parties. This conclusion
draws its force from the right of an employer to select his employees and to
decide when to engage them as protected under our Constitution, and the same
can only be restricted by law through the exercise of the police power.”28
Furthermore, this Court believes that it is contrary to public policy to
declare the former FEBTC employees as forming part of the assets or
liabilities of FEBTC that were transferred and absorbed by BPI in the
Articles of Merger. Assets and liabilities, in this instance, should be
deemed to refer only to property rights and obligations of FEBTC and do
not include the employment contracts of its personnel. A corporation
cannot unilaterally transfer its employees to another employer like
chattel. Certainly, if BPI as an employer had the right to choose who to
retain among FEBTC’s employees, FEBTC employees had the
concomitant right to choose not to be absorbed by BPI. Even though
FEBTC employees had no choice or control over the merger of their
employer with BPI, they had a choice whether or not they would allow
themselves to be absorbed by BPI. Certainly nothing prevented the
FEBTC’s employees from resigning or retiring and seeking employment
elsewhere instead of going along with the proposed absorption.
Employment is a personal consensual contract and absorption by BPI
of a former FEBTC employee without the consent of the employee is in
violation of an individual’s freedom to contract. It would have been a
different matter if there was an express provision in the articles of merger
that as a condition for the merger, BPI was being required to assume all
the employment contracts of all existing FEBTC employees with the
conformity of the employees. In the absence of such a provision in the
articles of merger, then BPI clearly had the business management
decision as to whether or not employ
625
VOL. 627, AUGUST 10, 2010 625
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
FEBTC’s employees. FEBTC employees likewise retained the prerogative
to allow themselves to be absorbed or not; otherwise, that would be
tantamount to involuntary servitude.
There appears to be no dispute that with respect to FEBTC employees
that BPI chose not to employ or FEBTC employees who chose to retire or
be separated from employment instead of “being absorbed,” BPI’s
assumed liability to these employees pursuant to the merger is FEBTC’s
liability to them in terms of separation pay,29 retirement pay30 or other
benefits that may be due them depending on the circumstances.
_______________
29 Art. 283 of the Labor Code provides:
CLOSURE OF ESTABLISHMENT AND REDUCTION OF PERSONNEL.—The employer
may also terminate the employment of any employee due to the installation of labor saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the worker and Ministry of Labor an
Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1)
whole year.
30 Art. 287 of the Labor Code states:
RETIREMENT.—Any employees may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contact.
In case of retirement, the employee shall be entitled to receive such retirement benefits as
he may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employee’s retirement benefits under
626
Page 50 of 120
626 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Legal Consequences of Mergers
Although not binding on this Court, American jurisprudence on the
consequences of voluntary mergers on the right to employment and
seniority rights is persuasive and illuminating. We quote the following
pertinent discussion from the American Law Reports:
“Several cases have involved the situation where as a result of mergers,
consolidations, or shutdowns, one group of employees, who had accumulated
seniority at one plant or for one employer, finds
_______________
any collective bargaining and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (6) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment may retire and shall be
entitled to retirement pay equivalent to at least one half (1/2) month salary for every year of
service, a fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term “one-half (1/2) month salary”
shall mean fifteen (15) days plus one twelfth (1/12) of the 13th-month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
An underground mining employee upon reaching the age of fifty (50) years or more, but
not beyond sixty (60) years which is hereby declared the compulsory retirement age for
underground mine workers, who has served at least five (5) years as underground mine
workers, may retire and shall be entitled to all the retirement benefits provided for in this
Article. (R.A. No.8558, approved on February 26, 1998.)
Retail, service and agricultural establishments or operations employing not more than ten
(10) employees or workers are exempted from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the final provisions
provided under Article 288 of this Code.
627
VOL. 627, AUGUST 10, 2010 627
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
that their jobs have been discontinued except to the extent that they are offered
employment at the place or by the employer where the work is to be carried on in
the future. Such cases have involved the question whether such transferring
employees should be entitled to carry with them their accumulated seniority or
whether they are to be compelled to start over at the bottom of the seniority list in
the “new” job. It has been recognized in some cases that the accumulated seniority
does not survive and cannot be transferred to the “new” job.
In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of
three formerly separate railroad corporations, which had previously operated
separate facilities, was consolidated in the shops of one of the roads. Displaced
employees of the other two roads were given preference for the new jobs created
in the shops of the railroad which took over the work. A controversy arose
between the employees as to whether the displaced employees were entitled to
carry with them to the new jobs the seniority rights they had accumulated with
their prior employers, that is, whether the rosters of the three corporations, for
seniority purposes, should be “dovetailed” or whether the transferring employees
should go to the bottom of the roster of their new employer. Labor
representatives of the various systems involved attempted to work out an
agreement which, in effect, preserved the seniority status obtained in the prior
employment on other roads, and the action was for specific performance of this
agreement against a demurring group of the original employees of the railroad
which was operating the consolidated shops. The relief sought was denied, the
court saying that, absent some specific contract provision otherwise, seniority
rights were ordinarily limited to the employment in which they were earned, and
concluding that the contract for which specific performance was sought was not
such a completed and binding agreement as would support such equitable relief,
since the railroad, whose concurrence in the arrangements made was essential to
their effectuation, was not a party to the agreement.
Where the provisions of a labor contract provided that in the event that a
trucker absorbed the business of another private contractor or common carrier,
or was a party to a merger of lines, the seniority of the employees absorbed or
affected thereby should be determined by mutual agreement between the trucker
and the unions involved, it was held in Moore v International Brotherhood
of Teamsters, etc. (1962, Ky) 356 SW2d 241, that the trucker was
628
628 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
not required to absorb the affected employees as well as the business, the court
saying that they could find no such meaning in the above clause, stating that it
Page 51 of 120
dealt only with seniority, and not with initial employment. Unless and until the However, there are instances where an employer can validly
absorbing company agreed to take the employees of the company whose business discontinue or terminate the employment of an employee without
was being absorbed, no seniority problem was created, said the court, hence the violating his right to security of tenure. Among others, in case of
provision of the contract could have no application. Furthermore, said the court, redundancy, for example, superfluous employees may be terminated and
it did not require that the absorbing company take these employees, but only
such termination would be authorized under Article 283 of the Labor
that if it did take them the question of seniority between the old
Code.32
and new employees would be worked out by agreement or else be submitted to
the grievance procedure.”31 (Emphasis ours.) Moreover, assuming for the sake of argument that there is an
obligation to hire or absorb all employees of the non-surviving corporation,
Indeed, from the tenor of local and foreign authorities, in voluntary there is still no basis to conclude that the terms and conditions of
mergers, absorption of the dissolved corporation’s employees or the employment under a valid collective bargaining agreement in force in the
recognition of the absorbed employees’ service with their previous surviving corporation should not be made to apply to the absorbed
employer may be demanded from the surviving corporation if required by employees.
provision of law or contract. The dissent of Justice Arturo D. Brion tries to
make a distinction as to the terms and conditions of employment of the The Corporation Code and the Subject
absorbed employees in the case of a corporate merger or consolidation Merger Agreement are Silent on Efficacy,
which will, in effect, take away from corporate management the Terms and Conditions of Employment
prerogative to make purely business decisions on the hiring of employees Contracts
or will give it an excuse not to apply the CBA in force to the prejudice of
its own employees and their recognized collective bargaining agent. In this The lack of a provision in the plan of merger regarding the transfer of
regard, we disagree with Justice Brion. employment contracts to the surviving corporation
Justice Brion takes the position that because the surviving corporation _______________
continues the personality of the dissolved corporation and acquires all the
latter’s rights and obligations, it is duty-bound to absorb the dissolved 32 Art. 283. Closure of establishment and reduction of personnel.—The employer
corporation’s employees, even in the absence of a stipulation in the plan of may also terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of
merger. He proposes that this interpretation would provide the necessary the establishment or undertaking unless the closing is for the purpose of circumventing the
protection to labor as it spares workers from being “left in legal limbo.” provisions of this Title, by serving a written notice on the workers and the Ministry of Labor
and Employment at least one (1) month before the intended date thereof. In case of
_______________ termination due to the installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to
31 90 ALR 2D 975, 983-984. at least one (1) month pay for every year of service, whichever is higher. In case of
629 retrenchment to prevent losses and in cases of closures or cessation of operations of
VOL. 627, AUGUST 10, 2010 629 establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay
Bank of the Philippine Island vs. BPI Employees Union- for every year of service, whichever is higher. A fraction of at least six (6) months shall be
Davao Chapter-Federation of Union in BPI UniBank considered one (1) whole year.
630
630 SUPREME COURT REPORTS ANNOTATED
Page 52 of 120
 Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
could have very well been deliberate on the part of the parties to the
merger, in order to grant the surviving corporation the freedom to choose
who among the dissolved corporation’s employees to retain, in accordance
with the surviving corporation’s business needs. If terminations, for
instance due to redundancy or labor-saving devices or to prevent losses,
are done in good faith, they would be valid. The surviving corporation too
is duty-bound to protect the rights of its own employees who may be
affected by the merger in terms of seniority and other conditions of their
employment due to the merger. Thus, we are not convinced that in the
absence of a stipulation in the merger plan the surviving corporation was
compelled, or may be judicially compelled, to absorb all employees under
the same terms and conditions obtaining in the dissolved corporation as
the surviving corporation should also take into consideration the state of
its business and its obligations to its own employees, and to their certified
collective bargaining agent or labor union.
Even assuming we accept Justice Brion’s theory that in a merger
situation the surviving corporation should be compelled to absorb the
dissolved corporation’s employees as a legal consequence of the merger
and as a social justice consideration, it bears to emphasize his dissent also
recognizes that the employee may choose to end his employment at any
time by voluntarily resigning. For the employee to be “absorbed” by BPI, it
requires the employees’ implied or express consent. It is because of this
human element in employment contracts and the personal, consensual
nature thereof that we cannot agree that, in a merger situation,
employment contracts are automatically transferable from one entity to
another in the same manner that a contract pertaining to purely
proprietary rights—such as a promissory note or a deed of sale of
property—is perfectly and automatically transferable to the surviving
corporation.
That BPI is the same entity as FEBTC after the merger is but a legal
fiction intended as a tool to adjudicate rights and obligations between and
among the merged corporations and
631
VOL. 627, AUGUST 10, 2010 631
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
the persons that deal with them. Although in a merger it is as if there is
no change in the personality of the employer, there is in reality a change
in the situation of the employee. Once an FEBTC employee is absorbed,
there are presumably changes in his condition of employment even if his
previous tenure and salary rate is recognized by BPI. It is reasonable to
assume that BPI would have different rules and regulations and company
practices than FEBTC and it is incumbent upon the former FEBTC
employees to obey these new rules and adapt to their new environment.
Not the least of the changes in employment condition that the absorbed
FEBTC employees must face is the fact that prior to the merger they were
employees of an unorganized establishment and after the merger they
became employees of a unionized company that had an existing collective
bargaining agreement with the certified union. This presupposes that the
union who is party to the collective bargaining agreement is the certified
union that has, in the appropriate certification election, been shown to
represent a majority of the members of the bargaining unit.
Likewise, with respect to FEBTC employees that BPI chose to employ
and who also chose to be absorbed, then due to BPI’s blanket assumption
of liabilities and obligations under the articles of merger, BPI was bound
to respect the years of service of these FEBTC employees and to pay the
same, or commensurate salaries and other benefits that these employees
previously enjoyed with FEBTC.
As the Union likewise pointed out in its pleadings, there were
benefits under the CBA that the former FEBTC employees did not
enjoy with their previous employer. As BPI employees, they will
enjoy all these CBA benefits upon their “absorption.” Thus, although in a
sense BPI is continuing FEBTC’s employment of these absorbed
employees, BPI’s employment of these absorbed employees was not under
exactly the same terms and conditions as stated in the latter’s
employment contracts with FEBTC. This further strengthens the view
that BPI and the former FEBTC employees voluntar-
632
Page 53 of 120
632 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
ily contracted with each other for their employment in the surviving
corporation.
Proper Appreciation of the Term
“New Employees” Under the CBA
In any event, it is of no moment that the former FEBTC employees
retained the regular status that they possessed while working for their
former employer upon their absorption by petitioner. This fact would not
remove them from the scope of the phrase “new employees” as
contemplated in the Union Shop Clause of the CBA, contrary to
petitioner’s insistence that the term “new employees” only refers to those
who are initially hired as non-regular employees for possible regular
employment.
The Union Shop Clause in the CBA simply states that “new employees”
who during the effectivity of the CBA “may be regularly employed” by the
Bank must join the union within thirty (30) days from their
regularization. There is nothing in the said clause that limits its
application to only new employees who possess non-regular status,
meaning probationary status, at the start of their employment. Petitioner
likewise failed to point to any provision in the CBA expressly excluding
from the Union Shop Clause new employees who are “absorbed” as regular
employees from the beginning of their employment. What is indubitable
from the Union Shop Clause is that upon the effectivity of the CBA,
petitioner’s new regular employees (regardless of the manner by
which they became employees of BPI) are required to join the Union
as a condition of their continued employment.
The dissenting opinion of Justice Brion dovetails with Justice Carpio’s
view only in their restrictive interpretation of who are “new employees”
under the CBA. To our dissenting colleagues, the phrase “new employees”
(who are covered by the union shop clause) should only include new
employees who were hired as probationary during the life of the CBA and
were later granted regular status. They propose that the
633
VOL. 627, AUGUST 10, 2010 633
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
former FEBTC employees who were deemed regular employees from the
beginning of their employment with BPI should be treated as a special
class of employees and be excluded from the union shop clause.
Justice Brion himself points out that there is no clear, categorical
definition of “new employee” in the CBA. In other words, the term “new
employee” as used in the union shop clause is used broadly without any
qualification or distinction. However, the Court should not uphold an
interpretation of the term “new employee” based on the general and
extraneous provisions of the Corporation Code on merger that would
defeat, rather than fulfill, the purpose of the union shop clause. To
reiterate, the provision of the Article 248(e) of the Labor Code in
point mandates that nothing in the said Code or any other law
should stop the parties from requiring membership in a
recognized collective bargaining agent as a condition of
employment.
Significantly, petitioner BPI never stretches its arguments so far as to
state that the absorbed employees should be deemed “old employees” who
are not covered by the Union Shop Clause. This is not surprising.
By law and jurisprudence, a merger only becomes effective upon
approval by the Securities and Exchange Commission (SEC) of the articles
of merger. In Associated Bank v. Court of Appeals,33 we held:
“The procedure to be followed is prescribed under the Corporation Code. Section
79 of said Code requires the approval by the Securities and Exchange
Commission (SEC) of the articles of merger which, in turn, must have been duly
approved by a majority of the respective stockholders of the constituent
corporations. The same provision further states that the merger shall be effective
only upon the issuance by the SEC of a certificate of merger. The effectivity
date of the merger is crucial for determining when the merged or
absorbed corporation ceases to exist; and when its rights,
634
Page 54 of 120
634 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
privileges, properties as well as liabilities pass on to the surviving
corporation.” (Emphasis ours.)
In other words, even though BPI steps into the shoes of FEBTC as the
surviving corporation, BPI does so at a particular point in time, i.e., the
effectivity of the merger upon the SEC’s issuance of a certificate of
merger. In fact, the articles of merger themselves provided that both BPI
and FEBTC will continue their respective business operations until the
SEC issues the certificate of merger and in the event SEC does not issue
such a certificate, they agree to hold each other blameless for the non-
consummation of the merger.
Considering the foregoing principle, BPI could have only become the
employer of the FEBTC employees it absorbed after the approval by the
SEC of the merger. If the SEC did not approve the merger, BPI would not
be in the position to absorb the employees of FEBTC at all. Indeed, there
is evidence on record that BPI made the assignments of its absorbed
employees in BPI effective April 10, 2000, or after the SEC’s approval of
the merger.34 In other words, BPI became the employer of the absorbed
employees only at some point after the effectivity of the merger,
notwithstanding the fact that the absorbed employees’ years of service
with FEBTC were voluntarily recognized by BPI.
Even assuming for the sake of argument that we consider the absorbed
FEBTC employees as “old employees” of BPI who are not members of any
union (i.e., it is their date of hiring by FEBTC and not the date of
their absorption that is considered), this does not necessarily exclude
them from the union security clause in the CBA. The CBA subject of this
case was effective from April 1, 1996 until March 31, 2001. Based on the
allegations of the former FEBTC employees themselves, there were former
FEBTC employees who were hired by FEBTC after April 1, 1996 and if
their date of hiring by FEBTC is considered as their date of hiring by
_______________
VOL. 627, AUGUST 10, 2010 635
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
BPI, they would undeniably be considered “new employees” of BPI within
the contemplation of the Union Shop Clause of the said CBA. Otherwise,
it would lead to the absurd situation that we would discriminate not only
between new BPI employees (hired during the life of the CBA) and former
FEBTC employees (absorbed during the life of the CBA) but also among
the former FEBTC employees themselves. In other words, we would be
treating employees who are exactly similarly situated (i.e., the group of
absorbed FEBTC employees) differently. This hardly satisfies the
demands of equality and justice.
Petitioner limited itself to the argument that its absorbed employees do
not fall within the term “new employees” contemplated under the Union
Shop Clause with the apparent objective of excluding all, and not just
some, of the former FEBTC employees from the application of the Union
Shop Clause.
However, in law or even under the express terms of the CBA, there is
no special class of employees called “absorbed employees.” In order for the
Court to apply or not apply the Union Shop Clause, we can only classify
the former FEBTC employees as either “old” or “new.” If they are not “old”
employees, they are necessarily “new” employees. If they are new
employees, the Union Shop Clause did not distinguish between new
employees who are non-regular at their hiring but who subsequently
become regular and new employees who are “absorbed” as regular and
permanent from the beginning of their employment. The Union Shop
Clause did not so distinguish, and so neither must we.
No Substantial Distinction Under the
CBA Between Regular Employees Hired
After Probationary Status and Regular
Employees Hired After the Merger
Verily, we agree with the Court of Appeals that there are no
substantial differences between a newly hired non-regular
Page 55 of 120
636
636 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
employee who was regularized weeks or months after his hiring and a new
employee who was absorbed from another bank as a regular employee
pursuant to a merger, for purposes of applying the Union Shop Clause.
Both employees were hired/employed only after the CBA was signed. At
the time they are being required to join the Union, they are both already
regular rank and file employees of BPI. They belong to the same
bargaining unit being represented by the Union. They both enjoy benefits
that the Union was able to secure for them under the CBA. When they
both entered the employ of BPI, the CBA and the Union Shop Clause
therein were already in effect and neither of them had the opportunity to
express their preference for unionism or not. We see no cogent reason why
the Union Shop Clause should not be applied equally to these two types of
new employees, for they are undeniably similarly situated.
The effect or consequence of BPI’s so-called “absorption” of former
FEBTC employees should be limited to what they actually agreed
to, i.e. recognition of the FEBTC employees’ years of service, salary rate
and other benefits with their previous employer. The effect should not be
stretched so far as to exempt former FEBTC employees from the existing
CBA terms, company policies and rules which apply to employees
similarly situated. If the Union Shop Clause is valid as to other new
regular BPI employees, there is no reason why the same clause would be a
violation of the “absorbed” employees’ freedom of association.
Non-Application of Union Shop Clause
Contrary to the Policy of the Labor
Code and Inimical to Industrial Peace
It is but fair that similarly situated employees who enjoy the same
privileges of a CBA should be likewise subject to the same obligations the
CBA imposes upon them. A contrary interpretation of the Union Shop
Clause will be inimical to industrial peace and workers’ solidarity. This
unfavorable
637
VOL. 627, AUGUST 10, 2010 637
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
situation will not be sufficiently addressed by asking the former FEBTC
employees to simply pay agency fees to the Union in lieu of union
membership, as the dissent of Justice Carpio suggests. The fact remains
that other new regular employees, to whom the “absorbed employees”
should be compared, do not have the option to simply pay the agency fees
and they must join the Union or face termination.
Petitioner’s restrictive reading of the Union Shop Clause could also
inadvertently open an avenue, which an employer could readily use, in
order to dilute the membership base of the certified union in the collective
bargaining unit (CBU). By entering into a voluntary merger with a non-
unionized company that employs more workers, an employer could get rid
of its existing union by the simple expedient of arguing that the “absorbed
employees” are not new employees, as are commonly understood to be
covered by a CBA’s union security clause. This could then lead to a new
majority within the CBU that could potentially threaten the majority
status of the existing union and, ultimately, spell its demise as the CBU’s
bargaining representative. Such a dreaded but not entirely far-fetched
scenario is no different from the ingenious and creative “union-busting”
schemes that corporations have fomented throughout the years, which
this Court has foiled time and again in order to preserve and protect the
valued place of labor in this jurisdiction consistent with the Constitution’s
mandate of insuring social justice.
There is nothing in the Labor Code and other applicable laws or the
CBA provision at issue that requires that a new employee has to be of
probationary or non-regular status at the beginning of the employment
relationship. An employer may confer upon a new employee the status of
regular employment even at the onset of his engagement. Moreover, no
law prohibits an employer from voluntarily recognizing the length of
service of a new employee with a previous employer in relation to
Page 56 of 120
computation of benefits or seniority but it should not unduly be
interpreted to exclude them from the
638
638 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
coverage of the CBA which is a binding contractual obligation of the
employer and employees.
Indeed, a union security clause in a CBA should be interpreted to give
meaning and effect to its purpose, which is to afford protection to the
certified bargaining agent and ensure that the employer is dealing with a
union that represents the interests of the legally mandated percentage of
the members of the bargaining unit.
The union shop clause offers protection to the certified bargaining
agent by ensuring that future regular employees who (a) enter the employ
of the company during the life of the CBA; (b) are deemed part of the
collective bargaining unit; and (c) whose number will affect the number of
members of the collective bargaining unit will be compelled to join the
union. Such compulsion has legal effect, precisely because the employer by
voluntarily entering in to a union shop clause in a CBA with the certified
bargaining agent takes on the responsibility of dismissing the new regular
employee who does not join the union.
Without the union shop clause or with the restrictive interpretation
thereof as proposed in the dissenting opinions, the company can
jeopardize the majority status of the certified union by excluding from
union membership all new regular employees whom the Company will
“absorb” in future mergers and all new regular employees whom the
Company hires as regular from the beginning of their employment
without undergoing a probationary period. In this manner, the Company
can increase the number of members of the collective bargaining unit and
if this increase is not accompanied by a corresponding increase in union
membership, the certified union may lose its majority status and render it
vulnerable to attack by another union who wishes to represent the same
bargaining unit.35
_______________
35 Article 256 of the Labor Code provides:
639
VOL. 627, AUGUST 10, 2010 639
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Or worse, a certified union whose membership falls below twenty
percent (20%) of the total members of the collective bargaining unit may
lose its status as a legitimate labor organization altogether, even in a
situation where there is no competing union.36 In such a case, an
interested party may file
_______________
Art. 256. Representation issue in organized establishments.—In organized
establishments, when a verified petition questioning the majority status of the
incumbent bargaining agent is filed before the Department of Labor and Employment
within the sixty-day period before the expiration of the collective bargaining agreement, the
Med-Arbiter shall automatically order an election by secret ballot when the verified petition
is supported by the written consent of at least twenty-five percent (25%) of all the
employees in the bargaining unit to ascertain the will of the employees in the appropriate
bargaining unit. To have a valid election, at least a majority of all eligible voters in the unit
must have cast their votes. The labor union receiving the majority of the valid votes cast shall
be certified as the exclusive bargaining agent of all the workers in the unit. When an election
which provides for three or more choices results in no choice receiving a majority of the valid
votes cast, a run-off election shall be conducted between the labor unions receiving the two
highest number of votes: Provided, that the total number of votes for all contending unions is
at least fifty percent (50%) of the number of votes cast.
At the expiration of the freedom period, the employer shall continue to recognize the
majority status of the incumbent bargaining agent where no petition for certification election
is filed. (Emphases supplied.)
36 Article 234 of the Labor Code provides:
Art. 234. Requirements of registration.—Any applicant labor organization,
association or group of unions or workers shall acquire legal personality and shall be entitled
to the rights and privileges granted by law to legitimate labor organizations upon issuance of
the certificate of registration based on the following requirements. x x x
xxxx
640
640 SUPREME COURT REPORTS ANNOTATED
Page 57 of 120
 Bank of the Philippine Island vs. BPI Employees Union- Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank Davao Chapter-Federation of Union in BPI UniBank
for the cancellation of the union’s certificate of registration with the clause, the chances of the said bank ever agreeing to the inclusion of such
Bureau of Labor Relations.37 employees in a future CBA is next to nil – more so, if BPI’s narrow
Plainly, the restrictive interpretation of the union shop clause would interpretation of the union shop clause is sustained by this Court.
place the certified union’s very existence at the mercy and control of the
employer. Relevantly, only BPI, the employer appears to be Right of an Employee not to Join a
interested in pursuing this case. The former FEBTC employees have Union is not Absolute and Must Give
not joined BPI in this appeal. Way to the Collective Good of All
For the foregoing reasons, Justice Carpio’s proposal to simply require Members of the Bargaining Unit
the former FEBTC to pay agency fees is wholly inadequate to compensate
the certified union for the loss of additional membership supposedly The dissenting opinions place a premium on the fact that even if the
guaranteed by compliance with the union shop clause. This is apart from former FEBTC employees are not old employees, they nonetheless were
the fact that treating these “absorbed employees” as a special class of new employed as regular and permanent employees without a gap in their
employees does not encourage worker solidarity in the company since service. However, an employee’s permanent and regular employment
another class of new employees (i.e. those whose were hired as status in itself does not necessarily exempt him from the coverage of a
probationary and later regularized during the life of the CBA) would not union shop clause.
have the option of substituting union membership with payment of agency In the past this Court has upheld even the more stringent type of union
fees. security clause, i.e., the closed shop provision, and held that it can be
Justice Brion, on the other hand, appears to recognize the inherent made applicable to old employees who are already regular and permanent
unfairness of perpetually excluding the “absorbed” employees from the but have chosen not to join a union. In the early case of Juat v. Court of
ambit of the union shop clause. He proposes that this matter be left to Industrial Relations,38 the Court held that an old employee who had no
negotiation by the parties in the next CBA. To our mind, however, this union may be compelled to join the union even if the collective bargaining
proposal does not sufficiently address the issue. With BPI already taking agreement (CBA) imposing the closed shop provision was only entered
the position that employees “absorbed” pursuant to its voluntary mergers into seven years after of the hiring of the said employee. To quote from
with other banks are exempt from the union shop that decision:
“A closed-shop agreement has been considered as one form of union security
_______________ whereby only union members can be hired and workers must remain union
members as a condition of continued employment. The requirement for
c. The names of all its members comprising at least twenty percent (20%) of all the
employees or workers to become members of a union as a condition for
employees in the bargaining unit where it seeks to operate;
37 Article 238 of the Labor Code provides “[t]he certificate of registration of any legitimate employment redounds to the benefit and advantage of said
labor organization, whether national or local, shall be cancelled by the Bureau if it has reason employees because by holding out to loyal members a promise of employment in
to believe, after due hearing, that the said labor organization no longer meets one or more of the closed-shop the
the requirements herein prescribed.”
641 _______________
VOL. 627, AUGUST 10, 2010 641
Page 58 of 120

642 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
union wields group solidarity. In fact, it is said that “the closed-shop contract
is the most prized achievement of unionism.”
xxxx
This Court had categorically held in the case of Freeman Shirt Manufacturing
Co., Inc., et al. vs. Court of Industrial Relations, et al., G.R. No. L-16561, Jan. 28,
1961, that the closed-shop proviso of a collective bargaining agreement
entered into between an employer and a duly authorized labor union
is applicable not only to the employees or laborers that are employed
after the collective bargaining agreement had been entered into but
also to old employees who are not members of any labor union at the
time the said collective bargaining agreement was entered into. In other
words, if an employee or laborer is already a member of a labor union different
from the union that entered into a collective bargaining agreement with the
employer providing for a closed-shop, said employee or worker cannot be obliged
to become a member of that union which had entered into a collective bargaining
agreement with the employer as a condition for his continued employment.”
(Emphasis and underscoring supplied.)
Although the present case does not involve a closed shop provision that
included even old employees, the Juat example is but one of the cases that
laid down the doctrine that the right not to join a union is not absolute.
Theoretically, there is nothing in law or jurisprudence to prevent an
employer and a union from stipulating that existing employees (who
already attained regular and permanent status but who are not members
of any union) are to be included in the coverage of a union security clause.
Even Article 248(e) of the Labor Code only expressly exempts old
employees who already have a union from inclusion in a union
security clause.39
_______________
39 Article 248. Unfair Labor Practices of Employers.—It shall be unlawful for an
employer to commit any of the following unfair labor practice: x x x
(e) To discriminate in regard to wages, hours of work, and other terms and conditions of
employment in order to encourage or discourage membership in any labor
organization. Nothing in this
643
VOL. 627, AUGUST 10, 2010 643
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Contrary to the assertion in the dissent of Justice Carpio, Juat has not
been overturned by Victoriano v. Elizalde Rope Workers’ Union40 nor
by Reyes v. Trajano.41 The factual milieus of these three cases are vastly
different.
In Victoriano, the issue that confronted the Court was whether or not
employees who were members of the Iglesia ni Kristo (INK) sect could be
compelled to join the union under a closed shop provision, despite the fact
that their religious beliefs prohibited them from joining a union. In that
case, the Court was asked to balance the constitutional right to religious
freedom against a host of other constitutional provisions including the
freedom of association, the non-establishment clause, the non-impairment
of contracts clause, the equal protection clause, and the social justice
provision. In the end, the Court held that “religious freedom, although not
unlimited, is a fundamental personal right and liberty, and has a
preferred position in the hierarchy of values.”42
However, Victoriano is consistent with Juat since they both affirm that
the right to refrain from joining a union is not absolute. The relevant
portion of Victoriano is quoted below:
_______________
Code or in any other law shall stop the parties from requiring membership in a
recognized collective bargaining agent as a condition for employment, except those
employees who are already members of another union at the time of the signing of
the collective bargaining agreement.
Employees of an appropriate collective bargaining agent may be assessed a reasonable fee
equivalent to the dues and other fees paid by members of the recognized bargaining agent, if
such non-union members accept the benefits under the collective agreement: Provided, that
the individual authorization required under Article 242, paragraph (o) of this Code shall not
Page 59 of 120
apply to the non-members of the recognized collective bargaining agent. x x x. (Emphasis
supplied.)
644 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
“The right to refrain from joining labor organizations recognized by
Section 3 of the Industrial Peace Act is, however, limited. The legal
protection granted to such right to refrain from joining is withdrawn by
operation of law, where a labor union and an employer have agreed on
a closed shop, by virtue of which the employer may employ only
member of the collective bargaining union, and the employees must
continue to be members of the union for the duration of the contract in
order to keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act,
before its amendment by Republic Act No. 3350, provides that although it
would be an unfair labor practice for an employer “to discriminate in
regard to hire or tenure of employment or any term or condition of
employment to encourage or discourage membership in any labor
organization” the employer is, however, not precluded “from making an
agreement with a labor organization to require as a condition of
employment membership therein, if such labor organization is the
representative of the employees.” By virtue, therefore, of a closed shop
agreement, before the enactment of Republic Act No. 3350, if any person,
regardless of his religious beliefs, wishes to be employed or to keep his
employment, he must become a member of the collective bargaining
union. Hence, the right of said employee not to join the labor union is
curtailed and withdrawn.”43 (Emphases supplied.)
If Juat exemplified an exception to the rule that a person has the right
not to join a union, Victoriano merely created an exception to the
exception on the ground of religious freedom.
Reyes, on the other hand, did not involve the interpretation of any
union security clause. In that case, there was no certified bargaining
agent yet since the controversy arose during a certification election.
In Reyes, the Court highlighted the idea that the freedom of association
included the right not to associate or join a union in resolving the issue
whether or not the votes of members of the INK sect who were part of the
bargaining unit could be excluded in the results of a certification election,
simply because they were not members of the two
VOL. 627, AUGUST 10, 2010 645
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
contesting unions and were expected to have voted for “NO UNION” in
view of their religious affiliation. The Court upheld the inclusion of the
votes of the INK members since in the previous case of Victoriano we held
that INK members may not be compelled to join a union on the ground of
religious freedom and even without Victoriano every employee has the
right to vote “no union” in a certification election as part of his freedom of
association. However, Reyes is not authority for Justice Carpio’s
proposition that an employee who is not a member of any union may claim
an exemption from an existing union security clause because he already
has regular and permanent status but simply prefers not to join a union.
The other cases cited in Justice Carpio’s dissent on this point are
likewise inapplicable. Basa v. Federacion Obrera de la Industria
Tabaquera y Otros Trabajadores de Filipinas,44 Anucension v. National
Labor Union,45 and Gonzales v. Central Azucarera de Tarlac Labor
Union46 all involved members of the INK. In line with Victoriano, these
cases upheld the INK members’ claimed exemption from the union
security clause on religious grounds. In the present case, the former
FEBTC employees never claimed any religious grounds for their
exemption from the Union Shop Clause. As for Philips Industrial
Development, Inc. v. National Labor Relations Corporation47 and Knitjoy
Manufacturing, Inc. v. Ferrer-Calleja,48 the employees who were exempted
from joining the respondent union or who were excluded from
participating in the certification election were found to be not members
of the bargaining unit represented by respondent union and were
free to form/join their own union. In the case at bar,
646
646 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Page 60 of 120
it is undisputed that the former FEBTC employees were part of the
bargaining unit that the Union represented. Thus, the rulings
in Philips and Knitjoy have no relevance to the issues at hand.
Time and again, this Court has ruled that the individual employee’s
right not to join a union may be validly restricted by a union security
clause in a CBA49 and such union security clause is not a violation of the
employee’s constitutional right to freedom of association.50
It is unsurprising that significant provisions on labor protection of the
1987 Constitution are found in Article XIII on Social Justice. The
constitutional guarantee given the right to form unions51 and the State
policy to promote unionism52 have
51 Article III, Section 8 of the 1987 Constitution states: “The right of the people,
including those employed in the public and private sectors, to form unions,
associations, or societies for purposes not contrary to law shall not be abridged.”
52 Article XIII, Section 3 of the 1987 Constitution provides:
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.
They shall be entitled to security of tenure, humane conditions of work, and a
living wage. They shall also participate in policy and decision-making processes
affecting their rights and benefits as may be provided by law.
The State shall promote the principle of shared responsibility between workers
and employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to
foster industrial peace.
647
VOL. 627, AUGUST 10, 2010 647
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
social justice considerations. In People’s Industrial and Commercial
Employees and Workers Organization v. People’s Industrial and
Commercial Corporation,53 we recognized that “[l]abor, being the weaker
in economic power and resources than capital, deserve protection that is
actually substantial and material.”
The rationale for upholding the validity of union shop clauses in a CBA,
even if they impinge upon the individual employee’s right or freedom of
association, is not to protect the union for the union’s sake. Laws and
jurisprudence promote unionism and afford certain protections to the
certified bargaining agent in a unionized company because a strong and
effective union presumably benefits all employees in the bargaining
unit since such a union would be in a better position to demand improved
benefits and conditions of work from the employer. This is the rationale
behind the State policy to promote unionism declared in the Constitution,
which was elucidated in the above-cited case of Liberty Flour Mills
Employees v. Liberty Flour Mills, Inc.54
In the case at bar, since the former FEBTC employees are deemed
covered by the Union Shop Clause, they are required to join the certified
bargaining agent, which supposedly has gathered the support of the
majority of workers within the bargaining unit in the appropriate
certification proceeding. Their joining the certified union would, in fact, be
in the best interests of the former FEBTC employees for it unites their
interests with the majority of employees in the bargaining unit. It
encourages employee solidarity and affords sufficient protection to the
majority status of the union during the life of
_______________
The State shall regulate the relations between workers and employers,
recognizing the right of labor to its just share in the fruits of production and the
right of enterprises to reasonable returns to investments, and to expansion and
growth.
648
648 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
the CBA which are the precisely the objectives of union security clauses,
such as the Union Shop Clause involved herein. We are indeed not being
called to balance the interests of individual employees as against the
State policy of promoting unionism, since the employees, who were parties
in the court below, no longer contested the adverse Court of Appeals’
Page 61 of 120
decision. Nonetheless, settled jurisprudence has already swung the
balance in favor of unionism, in recognition that ultimately the individual
employee will be benefited by that policy. In the hierarchy of
constitutional values, this Court has repeatedly held that the right to
abstain from joining a labor organization is subordinate to the policy of
encouraging unionism as an instrument of social justice.
Also in the dissenting opinion of Justice Carpio, he maintains that one
of the dire consequences to the former FEBTC employees who refuse to
join the union is the forfeiture of their retirement benefits. This is clearly
not the case precisely because BPI expressly recognized under the merger
the length of service of the absorbed employees with FEBTC. Should some
refuse to become members of the union, they may still opt to retire if they
are qualified under the law, the applicable retirement plan, or the CBA,
based on their combined length of service with FEBTC and BPI.
Certainly, there is nothing in the union shop clause that should be read as
to curtail an employee’s eligibility to apply for retirement if qualified
under the law, the existing retirement plan, or the CBA as the case may
be.
In sum, this Court finds it reasonable and just to conclude that the
Union Shop Clause of the CBA covers the former FEBTC employees who
were hired/employed by BPI during the effectivity of the CBA in a manner
which petitioner describes as “absorption.” A contrary appreciation of the
facts of this case would, undoubtedly, lead to an inequitable and very
volatile labor situation which this Court has consistently ruled against.
649
VOL. 627, AUGUST 10, 2010 649
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
In the case of former FEBTC employees who initially joined the union
but later withdrew their membership, there is even greater reason for the
union to request their dismissal from the employer since the CBA also
contained a Maintenance of Membership Clause.
A final point in relation to procedural due process, the Court is not
unmindful that the former FEBTC employees’ refusal to join the union
and BPI’s refusal to enforce the Union Shop Clause in this instance may
have been based on the honest belief that the former FEBTC employees
were not covered by said clause. In the interest of fairness, we believe the
former FEBTC employees should be given a fresh thirty (30) days from
notice of finality of this decision to join the union before the union
demands BPI to terminate their employment under the Union Shop
Clause, assuming said clause has been carried over in the present CBA
and there has been no material change in the situation of the parties.
WHEREFORE, the petition is hereby DENIED, and the Decision dated
September 30, 2003 of the Court of Appeals is AFFIRMED, subject to the
thirty (30) day notice requirement imposed herein. Former FEBTC
employees who opt not to become union members but who qualify for
retirement shall receive their retirement benefits in accordance with law,
the applicable retirement plan, or the CBA, as the case may be.
SO ORDERED.
Corona (C.J.), Peralta, Del Castillo, Abad, Villarama, Jr. and Perez,
JJ., concur.
Carpio, J., See Dissenting Opinion.
Carpio-Morales, J., I join the dissents of JJ. Carpio & Brion.
Velasco, Jr., J., On Leave.
Nachura, J., I join J. Brion’s dissent.
Brion, J., I dissent. Please see Dissenting Opinion.
650
650 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Bersamin and Mendoza, JJ., Join the dissent of J. Brion.
DISSENTING OPINION
CARPIO, J.:
Page 62 of 120

I dissent.
The petition calls upon this Court to review the Court of Appeals
decision which reversed the decision of the Voluntary Arbitrator. The
Voluntary Arbitrator ruled that the FEBTC employees absorbed by BPI
are not covered by the union shop clause in the CBA between BPI and BPI
Employees Union (Union) because said absorbed employees are not “new
employees” and they “cannot be compelled to join the Union as it is
their constitutional right to join or not to join any
organization.”1In its Memorandum, petitioner BPI reiterated that “the
State policy of promoting unionism should not be blindly and
indiscriminately implemented at the expense of other rights as
enshrined in the Constitution and the laws.”2 Petitioner discussed
the protection of the rights of workers as provided in the Constitution and
the Labor Code. We quote the pertinent portion of petitioner’s
Memorandum, to wit:3
“Article II, [S]ection 18 of the 1987 Constitution x x x provides:
The State affirms labor as a primary social economic force. It shall protect the
rights of workers and promote their welfare.
_______________
1 Voluntary Arbitrator’s Decision dated 23 November 2001, Annex “C” to Petitioner’s
Memorandum dated 10 June 2005, Rollo, p. 86; emphasis supplied.
2 Petitioner’s Memorandum dated 10 June 2005, Rollo, p. 73; emphasis supplied.
3 Id., at pp. 73-74; emphasis in the original and underscoring omitted.
651
VOL. 627, AUGUST 10, 2010 651
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
One of the rights sought to be protected is the right of workers to
self-organization and to form, join, or assist labor organizations of their
own choosing. (Articles 3 and 243, Labor Code) In this regard, the Labor Code
also declares as a policy of the State the fostering of a free and voluntary
organization of a strong and united labor movement. (Article 211(A)(c), Labor
Code)
Consequently, the Labor Code declares that it shall be unlawful for any
person to restrain, coerce, discriminate against or unduly interfere with
employees and workers in their exercise of the right to self-organization, which
includes the right to form, join, or assist labor organizations for the purpose of
collective bargaining through representatives of their own choosing and to
engage in lawful concerted activities for the same purpose or for their mutual aid
and protection. (Article 246, Labor Code)
In Victoriano v. Elizalde Rope Workers’ Association, et al. (G.R. No. L-25246,
September 12, 1974), the Supreme Court declared that the right to join a union
includes the right to abstain from joining any union, for a right comprehends at
least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal
restraint, whereby an employee may act for himself without being prevented by
law; and second, power, whereby an employee may, as he pleases, join or refrain
from joining an association. In as much as what both the Constitution and
the Labor Code have recognized and guaranteed to the employee is the
“right” to join associations of his choice, it would be absurd to say that
the law also imposes, in the same breath, upon the employee the duty to
join associations.
Indeed, the right to abstain from joining labor organizations may be
curtailed or restricted by union security agreements, such as the Union
Shop Clause. However, being, in a sense, a derogation of the freedom or
right NOT to join any labor organization, this Honorable Court’s strict
and restrictive enforcement of union security agreements is clearly
warranted and justified.” (Emphasis supplied)
Respondent Union requested petitioner BPI to implement the union
shop clause of the CBA against absorbed FEBTC
652
652 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
employees who refused to join the Union, and to terminate their
employment pursuant to the union shop clause.4
BPI, independently of the absorbed FEBTC employees, has the right to
challenge the constitutionality of the union shop clause as applied to the
absorbed FEBTC employees because BPI is being compelled, against its
best interests, to terminate their employment if they do not join the
Page 63 of 120
Union. Besides, this Court cannot adopt as part of its jurisprudence a
practice that clearly violates a fundamental constitutional right just
because the aggrieved employees gave up the fight to protect such right.
The Constitution guarantees the fundamental right of all workers to
“self-organization.”5 The right to “self-organization” is a species of the
broader constitutional right of the people “to form unions, associations, or
societies for purposes not contrary to law,” which right “shall not be
abridged.”6
The right of workers to self-organization is protected under the Labor
Code which provides that workers “shall have the right to self-
organization and to form, join, or assist labor organizations of their own
choosing for purpose of collective bargaining.”7 The Code proscribes the
abridgment of this right, stating that: “It shall be unlawful for any person
to
_______________
4 Ponencia, p. 4; citing the Court of Appeals Decision, Rollo, p. 18.
5 Article XIII, Section 3 of the 1987 Philippine Constitution states:
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. x x x (Emphasis supplied)
6 Article III, Section 8 of the 1987 Philippine Constitution.
7 Article 243 (Coverage and Employees’ Right to Self-Organization), The Labor Code of
the Philippines, as amended.
653
VOL. 627, AUGUST 10, 2010 653
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
restrain, coerce, discriminate against or unduly interfere with employees
and workers in their exercise of the right to self-organization. Such right
shall include the right to form, join, or assist labor organizations for the
purpose of collective bargaining through representatives of their own
choosing x x x.”8
The right of workers to self-organization means that workers
themselves voluntarily organize, without compulsion from outside forces.
“Self-organization” means voluntary association without compulsion,
threat of punishment, or threat of loss of livelihood. Workers who “self-
organize” are workers who on their own volition freely and voluntarily
form or join a union. Compulsory membership is anathema to “self-
organization.”
The right to self-organize includes the right not to exercise
such right. Freedom to associate necessarily includes the freedom
not to associate. Thus, freedom to join unions necessarily includes
the freedom not to join unions. Reyes v. Trajano9 cannot be any clearer
on this point:
“Logically, the right NOT to join, affiliate with, or assist any union, and to
disaffiliate or resign from a labor organization, is subsumed in the right to join,
affiliate with, or assist any union, and to maintain membership therein. The
right to form or join a labor organization necessarily includes the right
to refuse or refrain from exercising said right. It is self-evident that just as
no one should be denied the exercise of a right granted by law, so also, no one
should be compelled to exercise such a conferred right.” (Emphasis supplied)
Reyes was decided on 2 June 1992 under the 1987 Constitution. Even
prior to Reyes, this Court already declared in
_______________
8 Id., Article 246.
9 G.R. No. 84433, 2 June 1992, 209 SCRA 484, 489.
654
654 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Victoriano v. Elizalde Rope Workers’ Union,10 decided on 12 September
1974 under the 1973 Constitution, that:
“What the Constitution and Industrial Peace Act recognize and guarantee is
the ‘right’ to form or join associations. Notwithstanding the different theories
propounded by the different schools of jurisprudence regarding the nature and
contents of a ‘right,’ it can be safely said that whatever theory one subscribes to,
Page 64 of 120
a right comprehends at least two broad notions, namely: first, liberty or
freedom, i.e., the absence of legal restraint, whereby an employee may act for
himself without being prevented by law; second, power, whereby an employee
may, as he pleases, join or refrain from joining an association. It is therefore
the employee who should decide for himself whether he should join or
not an association; and should he choose to join, he himself makes up
his mind as to which association he would join; and even after he has
joined, he still retains the liberty and the power to leave and cancel his
membership with said organization at any time x x x. It is clear,
therefore, that the right to join a union includes the right to abstain
from joining any union. (Citations omitted) Inasmuch as what both the
Constitution and the Industrial Peace Act have recognized, and
guaranteed to the employee, is the ‘right’ to join associations of his
choice, it would be absurd to say that the law also imposes, in the same
breath, upon the employee the duty to join associations. The law does
not enjoin an employee to sign up with any association.” (Emphasis
supplied)
The ruling in Victoriano has been reiterated in a plethora of cases,
including Basa v. Federacion Obrera de la Industria Tabaquera y Otros
Trabajadores de Filipinas (1974),11 Anucension v. National Labor Union
(1977),12 Gonzales v. Central Azucarera de Tarlac Labor Union
(1985),13 and Knitjoy Manufacturing, Inc. v. Ferrer-Calleja (1992).14 In the
case
655
VOL. 627, AUGUST 10, 2010 655
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
of Philips Industrial Development, Inc. v. NLRC,15 decided on 25 June
1992, this Court held:
“x x x in holding that they are included in the bargaining unit for the rank
and file employees of PIDI, the NLRC practically forced them to become
members of PEO-FFW or to be subject to its sphere of influence, it being the
certified bargaining agent for the subject bargaining unit. This violates,
obstructs, impairs and impedes the service engineers’ and the sales
representatives’ constitutional right to form unions or associations and
to self-organization.” (Emphasis supplied)
Thus, it is the worker who should personally decide whether or
not to join a labor union. The union, the management, the courts, and
even the State cannot decide this for the worker, more so against his will.
The State encourages union membership to protect an individual
employee from the power of the employer. A union is an instrumentality
utilized to achieve the objective of protecting the rights of workers.
In Guijarno v. Court of Industrial Relations,16 we clarified the purpose of a
union:
“x x x The State shall assure the rights of workers to self-organization,
collective bargaining, security of tenure, and just and humane conditions of
work.” (Art. II, Sec. 9 of the Revised Constitution) Where does that leave a
labor union, it may be asked. Correctly understood, it is nothing but the
means of assuring that such fundamental objectives would be
achieved. It is the instrumentality through which an individual laborer
who is helpless as against a powerful employer may, through concerted
effort and activity, achieve the goal of economic well-being. That is the
philosophy underlying the Industrial Peace Act. (Republic Act No. 875 (1953))
For, rightly has it been said that workers unorganized are weak; workers
organized are strong. Necessarily then, they join labor unions.” (Emphasis
supplied)
656
656 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
To further strengthen the powers of a union, the State has allowed the
inclusion of union security clauses, including a “union shop” (the type of
union security clause involved in this case), in collective bargaining
agreements (CBA). In a “union shop,” employees who are not union
members at the time of signing of the contract need not join the union, but
all workers hired thereafter must join.17 Non-members may be hired, but
to retain employment must become union members after a certain
period.18 The ponencia points out the validity in this jurisdiction of the
more stringent union security of “closed shop” and its applicability to old
employees who are non-union members at the time of effectivity of the
Page 65 of 120
CBA. In a “closed shop,” only union members can be hired by the company
and they must remain union members to retain employment in the
company.19
As explained in Guijarno, it was to “further increase the effectiveness
of [unions] that a closed shop has been allowed.”20 However, this
undertaking did not come without detrimental effects on the workers
themselves, such that in Confederated Sons of Labor v. Anakan Lumber
Co.,21 we declared that a closed shop is “so harsh that it must be strictly
construed” and that “doubts must be resolved against [it].” We also ruled
in Anakan that “In order that an employer may be deemed bound, under a
collective bargaining agreement, to dismiss employees for non-union
membership, the stipulation to this effect must be so clear and
unequivocal as to leave no room for doubt thereon.”22
Guijarno elucidated the downside of a closed shop and its compulsory
membership, thus:
_______________
17 Azucena, The Labor Code with Comments and Cases, vol. II, p. 242 (2004).
VOL. 627, AUGUST 10, 2010 657
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
“x x x To further increase the effectiveness of such organizations, a closed
shop has been allowed. It could happen, though, that such a stipulation which
assures further weight to a labor union at the bargaining table could be utilized
against minority groups or individual members thereof. x x x Respondent Court,
it would appear, was not sufficiently alert to such a danger. What is worse, it
paid no heed to the controlling doctrine which is merely a recognition of a basic
fact in life, namely, that power in a collectivity could be the means of crushing
opposition and stifling the voices of those who are in dissent. The right to join
others of like persuasion is indeed valuable. An individual by himself may feel
inadequate to meet the exigencies of life or even to express his personality
without the right to association being vitalized. It could happen though that
whatever group may be in control of the organization may simply ignore his
most-cherished desires and treat him as if he counts for naught. The antagonism
between him and the group becomes marked. Dissatisfaction if given expression
may be labeled disloyalty. In the labor field, the union under such circumstances
may no longer be a haven of refuge, but indeed as much of a potential foe as
management itself. Precisely with the Anakan doctrine, such an undesirable
eventuality has been sought to be minimized, if not entirely avoided.
x x x.”23 (Emphasis supplied)
Justice Fernando, in his concurring opinion in Victoriano,24 highlighted
the importance of freedom of association, while referring to closed shop
and its coercive nature with manifest disapproval, viz.:
“x x x Thought must be given to the freedom of association, likewise
an aspect of intellectual liberty. For the late Professor Howe a
constitutionalist and in his lifetime the biographer of the great Holmes, it even
partakes of the political theory of pluralistic sovereignty. So great is the
respect for the autonomy accorded voluntary societies. Such a right
implies at the very least that one can determine for himself whether or
not he should join or refrain from joining a labor organization, an
institutional device for promoting the welfare of the working
658 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
man. A closed shop, on the other hand, is inherently coercive. That is
why, as is unmistakably reflected in our decisions, the latest of which
is Guijarno v. Court of Industrial Relations, it is far from being a
favorite of the law. For a statutory provision then to further curtail its
operation, is precisely to follow the dictates of sound public policy.”
(Emphasis supplied, citations omitted)
In the United States, closed shops, which require compulsory union
membership for all employees, have been declared unlawful since 1947,
while union shops, which allow old employees to remain non-union
members but require new employees to become members after a certain
period, are generally allowed. Previously, closed shops, union shops and
agency shops25 were all permitted under Section 8(3) of the National Labor
Relations Act of 1935 (NLRA), also known as the Wagner Act.26 But in
1947, the US Congress “reacted to widespread abuses of closed-shop
Page 66 of 120
agreements by banning such arrangements” through the enactment of the
Labor Management Relations Act (LMRA), or the Taft-Hartley Act, which
amended the NLRA by adding Section 8(a)(3).27 In National Labor
Relations Board v. General Motors Corporation,28 the US Supreme Court
explained that the Taft-Hartley Act amendments were intended to
accomplish twin purposes, one of which is to abolish closed shop to
eliminate serious abuses of compulsory unionism.
“These additions were intended to accomplish twin purposes. On the one
hand, the most serious abuses of compulsory unionism were eliminated by
abolishing the closed shop. On the other hand,
_______________
25 An agreement whereby employees must either join the union or pay to the union as
exclusive bargaining agent a sum equal to that paid by the members.
VOL. 627, AUGUST 10, 2010 659
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Congress recognized that in the absence of a union-security provision ‘many
employees sharing the benefits of what unions are able to accomplish by
collective bargaining will refuse to pay their share *741 of the cost.’
S.Rep.No.105, 80th Cong., 1st Sess., p. 6, 1 Leg.Hist.L.M.R.A. 412. Consequently,
under the new law ‘employers would still be permitted to enter into agreements
requiring all the employees in a given bargaining unit to become members 30
days after being hired,’ but ‘expulsion from a union cannot be a ground of
compulsory discharge if the worker is not delinquent in paying his initiation fee
or dues.’ S.Rep.No.105, p. 7, 1 Leg.Hist.L.M.R.A. 413. The amendments were
intended only to ‘remedy the most serious abuses of compulsory union
membership and yet give employers and unions who feel that such agreements
promoted stability by eliminating ‘free riders’ the right to continue such
arrangements.’ Ibid. As far as the federal law was concerned, all employees could
be required to pay their way. The bill ‘abolishes the closed shop but permits
voluntary agreements for requiring such forms of compulsory membership as the
union shop or maintenance of membership ***.’ S.Rep.No.105, p. 3, 1
Leg.Hist.L.M.R.A. 409.”
Union shops and agency shops are still permitted under Section 8(a)(3)
of the NLRA as amended; however, Section 14(b) authorizes States to
exempt themselves from Section 8(a)(3) and to enact “right-to-work” laws
prohibiting union or agency shops.29 Where union shop agreements are
allowed, workers may be required to belong to labor unions as a condition
of their employment, so long as such workers are required to render
nothing other than financial support to the union and so long as the
unions themselves do not attempt to use union shop agreements as
vehicles for imposing ideological conformity.30 Thus, “membership” in
unions as a condition of employment is whittled down to its financial
core.31
Although United States laws and jurisprudence on closed shops and
union shops, as they now stand, are different from our own laws, it may be
worthwhile to treat them with careful
660
660 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
regard since our Labor Code and its precursor, the Industrial Peace Act,
are patterned after US labor laws.32 We have previously ruled that when a
statute has been adopted from another state or country and such statute
has previously been construed by the courts of such state or country, the
statute is deemed to have been adopted with the construction given to
it.33 Where our labor statutes are based on statutes in foreign jurisdiction,
the decisions of the high courts in those jurisdictions construing and
interpreting the Act are given persuasive effects in the application of
Philippine law.34
Union security agreements were adopted in our jurisdiction primarily
to safeguard the rights of the working man. Where utilized to achieve a
contrary purpose, these union devices should be curtailed and carefully
maneuvered to remain within the periphery of labor protection.
In this case, the CBA between BPI and the BPI Employees Union
contains a union shop clause requiring that “new employees” of BPI join
the Union within 30 days after they become regularized, as a condition for
their continued employment.
Page 67 of 120
 The ponencia points out that the absorption of FEBTC employees was
purely voluntary on the part of BPI, and was not mandated by law or by a
contract between the merging entities. The ponencia holds that in the
absence of a stipulation in the plan of merger regarding the absorption of
FEBTC’s employees by BPI, the latter has no obligation to absorb or
continue the employment of said FEBTC employees.
_______________
661
VOL. 627, AUGUST 10, 2010 661
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
I do not agree.
Upon merger, BPI, as the surviving entity, absorbs FEBTC and
continues the combined business of the two banks. BPI assumes the legal
personality of FEBTC, and automatically acquires FEBTC’s rights,
privileges and powers, as well as its liabilities and obligations. Section 80
of Batas Pambansa Blg. 68, otherwise known as “The Corporation Code of
the Philippines” enumerates the effects of merger, to wit:
“1. The constituent corporations shall become a single corporation which, in
case of merger, shall be the surviving corporation designated in the plan of
merger; x x x
2. The separate existence of the constituent corporations shall cease, except
that of the surviving x x x corporation;
3. The surviving x x x corporation shall possess all the rights, privileges,
immunities and powers and shall be subject to all the duties and liabilities of a
corporation organized under this Code;
4. The surviving x x x corporation shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises of each of
the constituent corporations; and all property, real or personal, and all
receivables due on whatever account, including subscriptions to shares and other
choses in action, and all and every other interest of, or belonging to, or due to
each constituent corporation, shall be deemed transferred to and vested in such
surviving x x x corporation without further act or deed; and
5. The surviving x x x corporation shall be responsible and liable for
all the liabilities and obligations of each of the constituent
corporations in the same manner as if such surviving x x x corporation had
itself incurred such liabilities or obligations; and any pending claim, action or
proceeding brought by or against any of such constituent corporations may be
prosecuted by or against the surviving or consolidated corporation. The rights of
creditors or liens upon the property of any of such constituent corporations shall
not be impaired by such merger.” (Emphasis supplied)
Among the obligations and liabilities of FEBTC is to continue the
employment of FEBTC employees. These employees have already
acquired certain employment status, tenure,
662
662 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
salary and benefits. They are regular employees of FEBTC. Since after the
merger, BPI has continued the business of FEBTC, FEBTC’s obligation to
these employees is assumed by BPI, and BPI becomes duty-bound to
continue the employment of these FEBTC employees.
Under Article 279 of the Labor Code, regular employees acquire
security of tenure, and hence, may not be terminated by the employer
except upon legal grounds. These grounds are the “just causes”
enumerated under Article 282 of the Code, which include serious
misconduct or willful disobedience by the employee, gross habitual neglect
of duties, fraud or willful breach of employer’s trust, and commission of a
crime; or “authorized causes” under Article 283, which include installation
of labor saving devices, redundancy, retrenchment to prevent losses, and
closing or cessation of business operations. Without any of these legal
grounds, the employer cannot validly terminate the employment of
regular employees; otherwise, the employees’ right to security of tenure
would be violated.
The merger of two corporations does not authorize the surviving
corporation to terminate the employees of the absorbed corporation in the
absence of just or authorized causes as provided in Articles 282 and 283 of
the Labor Code. Merger of two corporations is not one of the just or
Page 68 of 120
authorized causes for termination of employment. Not even a union shop
agreement is just or authorized cause to terminate a permanent employee.
A union shop clause is only a ground to terminate a probationary
employee who refuses to join the union as a condition for continued
employment. Once an employee becomes permanent, he is protected by
the security of tenure clause in the Constitution, and he can be
terminated only for just or authorized causes as provided by law.
663
VOL. 627, AUGUST 10, 2010 663
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
The right to security of tenure of regular employees is enshrined in the
Constitution.35 This right cannot be eroded, let alone be forfeited except
upon a clear and convincing showing of a just and lawful cause.36 In this
case, there is no showing that legal ground exists to warrant a
termination of the FEBTC employees. Therefore, BPI is obligated to
continue FEBTC employees’ regular employment in deference to their
constitutional right to security of tenure.
Meanwhile, the FEBTC employees had no choice but to accept the
absorption by way of merger. A merger is a legitimate management
prerogative37 which cannot be opposed or rejected by the employees of the
merging entities. Hence, the absorption by BPI of the FEBTC employees
was not within the FEBTC employees’ control, and the latter had no
choice but to be absorbed by BPI, unless they opted to give up their means
of livelihood.
_______________
35 Article XIII, Section 3 of the 1987 Philippine Constitution states:
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. They shall be entitled to security of tenure, humane conditions of work, and a
living wage. x x x (Emphasis supplied)
36 BPI Credit Corporation v. National Labor Relations Commission, G.R. No. 106027, 25
July 1994, 234 SCRA 441, 454.
37 In Central Azucarera del Danao v. Court of Appeals, 221 Phil. 647, 657; 137 SCRA 295,
304 (1985), this Court held that, “x x x [I]t is within the employer’s legitimate sphere of
management control of the business to adopt economic policies or make some changes or
adjustments in their organization or operations that would ensure profit to itself or protect
the investment of its stockholders. As in the exercise of such management prerogative, the
employer may merge or consolidate its business with another, or sell or dispose all or
substantially all of its assets and properties x x x.”
664
664 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Upon the effectivity of the CBA in this case, BPI employees who were
members of the Union were required to maintain their membership as a
condition for continued employment. On the other hand, the then non-
union employees of BPI were not compelled to join the Union—
they were given a choice whether or not to join the Union at no
risk to their continued employment. In other words, non-union BPI
employees could opt not to join the Union and still retain their
employment with BPI. Meanwhile, “new employees” or those who were
hired by BPI after the effectivity and during the life of the CBA were
automatically required to join the Union within 30 days after they were
regularized.
Existing BPI employees who were non-union members were not
compelled to join the Union as a condition for their continued
employment, as this would violate their fundamental constitutional right
not to join a union. This freedom of choice exercised by non-union BPI
employees was in recognition of their fundamental constitutional right to
join or not to join a union which is part of their broader constitutional
right to form associations. To force these employees to join a labor union
at the risk of losing their means of livelihood would violate the
Constitution.
Thus, under the CBA, the BPI employees required to acquire or
maintain union membership as a condition for their continued
employment are (1) the union members at the time of the effectivity of the
Page 69 of 120
CBA and (2) the “new employees” who were hired during the effectivity of
the CBA. Non-union BPI employees at the time of the effectivity of the
CBA were not, and are still not, required to join the Union.
In the case of “new employees” hired by BPI during the life of the CBA,
there is no violation of their constitutional right not to join a union. At the
time of their application for employment with BPI, or at the latest, at the
time they were hired by BPI, these employees knew that they were
required to join the Union within 30 days upon regularization as a
condition for continued employment with BPI. In short, the
665
VOL. 627, AUGUST 10, 2010 665
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
employees knew beforehand that they had to join the Union to be
employed with BPI. Thus, these employees had a clear choice
whether or not to be employed with BPI, which requires that they
must join the Union upon regularization.
The ponencia holds that the absorbed FEBTC employees should be
considered as “new employees” of BPI, and therefore, required to join
the Union pursuant to the union shop clause of the CBA.
The ponencia deprives the absorbed employees of their fundamental
constitutional right to choose whether or not to join the Union.
I cannot subscribe to this view.
The former FEBTC employees should not be considered as “new
employees” of BPI. The former FEBTC employees were absorbed by BPI
immediately upon merger, leaving no gap in their employment. The
employees retained their previous employment status, tenure, salary and
benefits. This clearly indicates the intention of BPI to assume and
continue the employer-employee relations of FEBTC and its employees.
The FEBTC employees’ employment remained continuous and unchanged,
except that their employer, FEBTC, merged with BPI which, as the
surviving entity, continued the combined business of the two banks.
Thus, the former FEBTC employees are immediately regularized and
made permanent employees of BPI. They are not subject to any
probationary period as in the case of “new employees” of BPI. The 30-day
period within which regularized “new employees” of BPI must join the
Union does not apply to former FEBTC employees who are not
probationary employees but are immediately regularized as permanent
employees of BPI. In short, the former FEBTC employees are
immediately given the same permanent status as old employees of
BPI.
The absorbed FEBTC employees are not “new employees” who are
seeking jobs for the first time. These absorbed em-
666
666 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
ployees are employees who have been working with FEBTC for years, or
even decades, and were only absorbed by BPI because of the merger.
Without the merger, these employees would have remained FEBTC
employees without being required to join a union to retain their
employment. These absorbed employees are recognized by BPI and
even by the Union as permanent employees immediately upon
their absorption by BPI because these employees do not have to
go through a probationary period. These absorbed employees are
different from the newly-hired employees of BPI, as these absorbed
employees already had existing employment tenure, and were earning a
livelihood when they were told that they had to join the Union at the risk
of losing their livelihood.
To require these absorbed employees to join the Union at the risk of
losing their jobs is akin to forcing an existing non-union BPI employee to
join the Union on pain of termination. In the same way that an existing
non-union BPI employee is given the constitutional right to choose
whether or not to join a union, an absorbed employee should be equally
given the same right. And this right must be conferred to the absorbed
employee upon the effectivity of the merger between FEBTC and BPI.
Indisputably, the right to join or not to join a Union is part of the
fundamental constitutional right to form associations. In Sta. Clara
Homeowners’ Association v. Gaston,38 we held that, “The constitutionally
guaranteed freedom of association includes the freedom not to
Page 70 of 120
associate.39 The right to choose with whom one will associate
oneself is the very foundation and essence of that partnership.40 It
should be noted that the provision guarantees the right to form
an association. It does not include the right to compel
_______________
667
VOL. 627, AUGUST 10, 2010 667
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
others to form or join one.”41 Thus, to compel the absorbed FEBTC
employees to join the Union at the risk of losing their jobs is violative of
their constitutional freedom to associate.
To consider the former FEBTC employees not “new employees” of BPI
for the purpose of the union shop clause of the CBA does not necessarily
mean that the FEBTC employees are considered “old employees” of BPI,
hired by BPI on the date that the employees were hired by FEBTC. The
former FEBTC employees are not old BPI employees. They are former
FEBTC employees absorbed by BPI upon effectivity of the merger.
Nevertheless, as absorbed employees, these former FEBTC employees
cannot be relegated to being “new employees” of BPI within the
contemplation of the union shop clause of the CBA.
If the absorbed employees are treated as “new employees,” and they
refuse to join the Union, the Union can ask BPI to terminate their
employment. And BPI can validly terminate their employment pursuant
to the union shop clause. It is well-settled that termination of employment
by virtue of a union security clause embodied in a CBA is recognized in
our jurisdiction,42 and an employer who merely complies in good faith with
the union’s request for the dismissal of an employee pursuant to the CBA
cannot be considered guilty of unfair labor practice.43
_______________
41 Citing Bernas, The Constitution of the Republic of the Philippines: A Commentary, p.
340 (1996).
42 Alabang Country Club, Inc. v. National Labor Relations Commission, G.R. No. 170287,
14 February 2008, 545 SCRA 351, 361.
43 Olvido v. Court of Appeals, G.R. Nos. 141166-67, 15 October 2007, 536 SCRA 73, 79,
citing Soriano v. Atienza, G.R. No. 68619, 16 March 1989, 171 SCRA 284, 289-290
and National Labor Union v. Zip Venetian Blinds, Nos. L-15827 and L-15828, 31 May 1961, 2
SCRA 509, 514-515.
668
668 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Upon such termination, the absorbed employees are not entitled to
separation pay under the law.44 Grant of separation pay to employees
dismissed pursuant to a union shop clause of a CBA is not a statutory
requirement. Worse, assuming that the absorbed employees have already
reached the age of 60 years or above, as “new employees” of BPI, they will
not be entitled to retirement benefits under the law. For instance, an
absorbed employee who is 60 years old or above, but less than 65 years
which is the compulsory retirement age, cannot avail
of optional retirement benefits since the law requires that the employee
“has served at least five (5) years in the said establishment.”45 Considering
that the absorbed employees are
_______________
44 Under the present law and jurisprudence, separation pay is given only in the following
instances: (1) as the employer’s statutory obligation in cases of legal termination due to
authorized causes under Articles 283 and 284 of the Labor Code (i.e., installation of labor
saving devices, redundancy, retrenchment to prevent losses, the closing or cessation of
operation of the establishment or undertaking, and in cases where an employee is found to be
suffering from any disease and his continued employment is prohibited by law or is
prejudicial to his health as well as to that of his co-employees); (2) as financial assistance, as
an act of social justice, even in cases of legal dismissal under Article 282 of the Labor Code; (3)
separation pay given in lieu of reinstatement in illegal dismissal cases where reinstatement is
not feasible; and (4) separation pay as an employee benefit granted in a CBA or company
policy. (C.A. Azucena, The Labor Code with Comments and Cases, Vol. 2 [2004], p. 694)
45 Art. 287 of the Labor Code, as amended by Republic Act No. 7641, provides:
Art. 287. Retirement.—Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract.
Page 71 of 120
 In case of retirement, the employee shall be entitled to receive such retirement benefits as
he may have earned under existing laws and any collective bargaining agreement and other
agreements: Provided, however, That an employee’s retirement benefits under any collective
bargaining and other agreements shall not be less than those provided herein.
669
VOL. 627, AUGUST 10, 2010 669
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
required to join the Union within 30 days from regularization, and the law
requires that probationary employment shall not exceed six months from
the date the employee started working,46 after which the employee shall be
considered a regular employee, it may be assumed that the absorbed
employees had not yet served BPI for at least five years when required to
join the Union. If, on the other hand, the absorbed employee has already
reached the compulsory retirement age of 65 years, then neither can the
employee avail of any retirement benefit since the law provides that a
compulsory retiree shall be entitled to “at least one-half (½) month
salary for every year of service, a fraction of at least six (6) months being
con-
_______________
In the absence of a retirement plan or agreement providing for retirement benefits of
employees in the establishment, an employee upon reaching the age of sixty (60) years or more,
but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in the said establishment, may retire and shall be entitled
to retirement pay equivalent to at least one-half (½) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.
Unless the parties provide for broader inclusions, the term ‘one-half (1/2) month salary’
shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash
equivalent of not more than five (5) days of service incentive leaves.
xxx
46 With the exception of employment covered by an apprenticeship agreement stipulating
a longer period. Art. 281 of the Labor Code provides:
Art. 281. Probationary employment.—Probationary employment shall not exceed six (6)
months from the date the employee started working, unless it is covered by an apprenticeship
agreement stipulating a longer period. The services of an employee who has been engaged on
a probationary basis may be terminated for a just cause or when he fails to qualify as a
regular employee in accordance with reasonable standards made known by the employer to
the employee at the time of his engagement. An employee who is allowed to work after a
probationary period shall be considered a regular employee.
670
670 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
sidered as one whole year.”47 Assuming that the absorbed employee has
not yet rendered service in BPI for at least six months when said
employee reached the compulsory retirement age of 65 years, then the
employee will not be entitled to receive any retirement benefit. Thus, to
consider the absorbed FEBTC employees as “new employees” of BPI can
have dire consequences on the absorbed employees who refuse to join the
Union, not the least of which is the forfeiture of benefits which should be
properly accorded these employees after years, or probably even decades,
of loyal service to FEBTC.
The ponencia points to Article 248 (e) of the Labor Code which states,
thus: “x x x Nothing in this Code or in any other law shall stop the parties
from requiring membership in a recognized collective bargaining agent as
a condition for employment, except those employees who are already
members of another union at the time of the signing of the collective
bargaining agreement. x x x”
The above provision presupposes that the parties agreed on “requiring
membership in a recognized collective bargaining agent as a condition for
employment,” with the stated exception. In this case, BPI and the Union
agreed on a union shop clause concerning “new employees” only. We
quote:
“Section 2. Union Shop—New employees falling within the bargaining unit
as defined in Article I of the Agreement, who may hereafter be regularly
employed by the Bank shall, within thirty (30) days after they become regular
employees, join the Union as a condition of their continued employment.
x x x.”48 (Emphasis in the original)
As previously discussed, the absorbed FEBTC employees are NOT and
cannot be considered as “new employees” within the contemplation of the
union shop clause.
_______________
Page 72 of 120
671
VOL. 627, AUGUST 10, 2010 671
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Verily, BPI and the Union never agreed on requiring the former
FEBTC employees to join the Union as a condition for their employment
by BPI. On the contrary, BPI is questioning the applicability of the union
shop clause to said employees.
The ponencia states, “When certain employees are obliged to join a
particular union as a requisite for continued employment, as in the case of
a Union Shop Clause, a form of discrimination or a derogation of the
freedom or right not to join any labor organization occurs but these are
valid restrictions because they are in favor of unionism.” In this case, a
derogation of the employees’ fundamental constitutional right not to join a
union is being done without a determination of whether the employees are
in favor of unionism. Certainly, the union shop clause in a CBA cannot
prevail over the fundamental constitutional right of a worker to join or not
to join a union.
Finally, the ponencia agrees with the Court of Appeals that sustaining
petitioner’s position will result in an awkward and unfair situation
wherein the absorbed employees will be in a better position than the
existing BPI employees, since the latter will be required to pay monthly
union dues, while the absorbed employees will “enjoy the fruits of labor of
the [union] and its members for nothing in exchange.” This is not correct.
Section 248(e) of the Labor Code provides that, “Employees of an
appropriate collective bargaining unit who are not members of the
recognized collective bargaining agent may be assessed a reasonable fee
equivalent to the dues and other fees paid by members of the recognized
collective bargaining agent, if such non-union members accept the benefits
under the collective bargaining agreement x x x.” The absorbed FEBTC
employees who refuse to join the Union will not be free riders.
We held in Holy Cross of Davao College, Inc. v. Joaquin49 that the
collection of agency fees in an amount equivalent to
672 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
union dues and fees, from employees who are not union members, is
recognized by Article 248 (e) of the Labor Code. The employee’s acceptance
of benefits resulting from a CBA justifies the deduction of agency fees
from his pay and the union’s entitlement thereto.50 In this aspect, the legal
basis of the union’s right to agency fees is neither contractual nor
statutory, but quasi-contractual, deriving from the established principle
that non-union employees may not unjustly enrich themselves by
benefiting from employment conditions negotiated by the bargaining
union.51
In the present case, since the absorbed FEBTC employees will pay all
union dues and fees, there is no reason to force them to join the Union
except to humiliate them by trampling upon their fundamental
constitutional right to join or not to join a union. This the Court should
not allow.
It is this Court’s solemn duty to implement the State policy of
promoting unionism. However, this duty cannot be done at the expense of
a fundamental constitutional right of a worker. We cannot exalt union
rights over and above the freedom and right of employees to join or not to
join a union.
Accordingly, I vote to GRANT the petition.
DISSENTING OPINION
BRION, J.:
I dissent.
Out at outset, I wish to clarify what this case is all about and what it is
not about.
The case is simply about the interpretation and application, in a
merger situation, of union security clauses in the petitioner’s collective
bargaining agreement (CBA) with the
_______________
Page 73 of 120
673
VOL. 627, AUGUST 10, 2010 673
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
respondent union. To be exact, the basic underlying issue of the case is
about the effects of merger on the merging corporations’ employees—an
issue that arose soon after the merger and one that is still current despite
the execution of two subsequent CBAs. It is not an issue, therefore, that
simply must be resolved because it will recur, as the ponencia posits; it
must be resolved because it is a live dispute that now exists between the
parties.
The case is not about the constitutional validity of union security
provisions in CBAs or their application. No constitutional issue has been
raised either in the petition or in the respondent’s comment, although I
invoked the Constitution in this Dissenting Opinion for interpretative
purposes. Justice Antonio T. Carpio, in his own dissent, injects a
constitutional issue by positing that the employees absorbed by the
surviving corporation in the merger have the constitutional right not to
join any union, and cannot be compelled to join, under the union, security
clauses whose interpretation and application are disputed.
The Bank of the Philippine Islands (BPI or successor corporation)
merged with the Far East Bank and Trust Company (FEBTC or merged
corporation) pursuant to an Article and Plan of Merger (Merger Plan) that
saw all the assets and liabilities of FEBTC transferred to, and absorbed
by, BPI, with the latter as the surviving as well as the successor corporate
entity. No specific provision in the Merger Plan referred to the FEBTC
employees, specifically, what their situation would be under the merger.
BPI, however, absorbed all the FEBTC employees (absorbed employees) as
its own employees with their status of employment, tenure, salaries and
benefits under the FEBTC maintained.
The BPI Employees Union–Davao Chapter Federation of Unions in BPI
Unibank (the union or respondent union) is the exclusive bargaining agent
of BPI’s rank-and-file employees in Davao City. The absorbed employees
in Davao City did not belong to any labor union while they were with the
FEBTC.
674
674 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
The union now claims that the absorbed employees whose positions fall
within the bargaining unit it represents should now join the union as
members pursuant to the following provisions of the existing CBA:
ARTICLE I
Section 1. Recognition and Bargaining Unit.—The BANK recognizes the
UNION as the sole and exclusive bargaining representative of all rank-and-file
employees of the Bank offices in Davao City.
xxxx
ARTICLE II
Section 1. Maintenance of Membership.—All employees within the bargaining
unit who are members of the Union on the date of the effectivity of
this Agreement as well as employees within the bargaining unit who
subsequently join or become members of the Union during the lifetime of
this Agreement shall, as a condition of their continued employment with the
Bank, maintain their membership in the Union in good standing. [Emphasis
supplied.]
Section 2. Union Shop.—New employees falling within the bargaining
unit as defined in Article I of this Agreement, who may hereafter be regularly
employed by the Bank shall, within thirty (30) days after they become
regular employees, join the Union as a condition of their continued
employment. It is understood that membership in good standing is a condition of
their continued employment with the Bank.” [Emphasis supplied.]
Some of the absorbed employees refused to join the union while BPI
failed to act on the grievance filed by the union after it had asked BPI to
dismiss the refusing absorbed employees. BPI took the position that the
absorbed employees are not “new” employees who, under the terms of the
union security provisions, are under obligation to join the union to
maintain their employment.
When settlement of the disagreement at the grievance machinery was
not reached, the union referred the matter to
Page 74 of 120
675
VOL. 627, AUGUST 10, 2010 675
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
voluntary arbitration. The voluntary arbitrator ruled in favor of the
refusing absorbed employees and BPI, holding that the refusing employees
are not new employees to whom the union shop provision of the CBA
applies. On appeal, the Court of Appeals reversed and set aside the
voluntary arbitrator’s ruling.
The ponencia affirms the CA decision and reiterates that all absorbed
employees falling within the bargaining unit should join the union
pursuant to the CBA’s union security clauses. In so ruling,
the ponencia holds that:
a. The absorbed employees are “new” BPI employees to whom the union
shop provision of the CBA applies;1
b. The absorbed employees do not fall within the exceptions recognized
by law and jurisprudence to be excluded from the application of union
security provisions; thus, the only issue is whether the absorbed
employees “are excluded by the express terms of the existing CBA
between the petitioner and the respondent”;2
c. Unless expressly assumed, labor contracts, such as employment
contracts and CBAs, are not enforceable against the transferee of an
enterprise, labor contracts being in personam, thus binding only
between the parties;3
d. BPI’s role as the employer of the former FEBTC employees was not by
operation of law nor a legal consequence of the merger agreement;4 BPI
simply voluntarily hired or contracted with these absorbed employees;5
_______________
676
676 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
e. It is contrary to public policy to declare the absorbed employees a part
of the assets or liabilities of FEBTC that were transferred to BPI
through the Merger Plan. The transferred assets and liabilities should
be deemed to refer only to property rights and obligations of FEBTC
and do not include employment contracts of its personnel;6 and
f. The constitutional associational right not to join the union does not
apply to the absorbed employees because they fall within a collective
bargaining unit and are covered by a CBA whose union security clauses
are constitutionally valid.7
I disagree with points (a) to (e) and submit in point (f) that the
constitutional issue raised is not material to the resolution of the issues
raised.
Parenthetically, the non-involvement of affected employees at this level
of the litigation (a new point the modified ponencia raised) is not a
stumbling block to the present petition as the ponencia now posits. In
interpreting a CBA provision, the real parties in interest are the
bargaining parties—the company and the union—the agreement is
between them. Hence, it matters not that the affected employees, mere
necessary parties, are not direct parties in the present petition for review
on certiorari. For ease of appreciation, I submit the following discussions
topically presented, not necessarily in the order of
the ponencia’s presentation of positions as shown above.
The Merger
A basic point of disagreement with the ponencia relates to the approach
in resolving the issues raised. The ponencia appears to consider only the
purely labor law aspect of the
_______________
VOL. 627, AUGUST 10, 2010 677
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Page 75 of 120
case in determining the relationships among BPI, FEBTC and the
absorbed employees. More than anything else, however, the issues before
us are rooted in the corporate merger that took place; thus, the first
priority in resolving the issues before us should be to consider and analyze
the nature and consequences of the BPI-FEBTC merger—essentially a
matter under the Corporation Code. On the basis of this analysis, the
application of labor law can follow.
Unlike the old Corporation Code that did not contain express
provisions on mergers and consolidations, the present law now authorizes,
under Section 76,8 two or more corporations to merge under one of the
participating constituent corporations, or to consolidate into a new single
corporation called the consolidated corporation. In either case, no
liquidation of the assets of the dissolved corporations takes place, and
the surviving or consolidated corporation assumes ipso jure the liabilities
of the dissolved corporations, regardless of whether the creditors consented
to the merger or consolidation.9
The transaction between BPI and FEBTC was a merger under one of
the modes provided under Section 76—i.e., the two corporations, BPI and
FEBTC, merged with FEBTC fading away as a corporate entity and BPI
surviving as FEBTC’s successor. Section 80 of the Corporation
Code10 provides for
8 Section 76 of the Corporation Code reads:
Section 76. Plan of merger or consolidation.—Two or more corporations may
merge into a single corporation which shall be one of the constituent corporations or
may consolidate into a new single corporation which shall be the consolidated
corporation.
9 Villanueva, Philippine Corporate Law, 2001 ed., pp. 606-607.
10 Section 80. Effects of merger or consolidation.—The merger or consolidation x x x
shall have the following effects:
1. The constituent corporations shall become a single corporation which, in case of
merger, shall be the surviving corporation designated in the plan of merger; and, in
case
678
678 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
the legal effects of a merger. As applied to BPI and FEBTC, the effects
were:
a. BPI and FEBTC became a single corporation with BPI as the
surviving corporation;
b. The separate corporate existence of FEBTC ceased;
_______________
of consolidation, shall be the consolidated corporation designated in the plan of
consolidation;
2. The separate existence of the constituent corporations shall cease, except that of
the surviving or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights,
privileges, immunities and powers and shall be subject to all the duties and liabilities
of a corporation organized under this Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises of each of the constituent
corporations; and all property, real or personal, and all receivables due on whatever
account including subscriptions to shares and other choses in action, and all and every
other interest of, or belonging to, or due to each constituent corporation, shall be taken
and deemed to be transferred to and vested in such surviving or consolidated
corporation without further act or deed; and
5. The surviving or consolidated corporation shall be responsible and liable for all the
liabilities and obligations of each of the constituent corporations in the same manner
as if such surviving or consolidated corporation had itself incurred such liabilities or
obligations; and any claim, action or proceeding pending by or against any of such
constituent corporations may be prosecuted by or against the surviving or consolidated
corporation, as the case may be. Neither the rights of creditors nor any lien upon the
property of any of each constituent corporations shall be impaired by such merger or
consolidation.
679
VOL. 627, AUGUST 10, 2010 679
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
c. BPI now possesses all the rights, obligations, privileges, immunities,
and franchises of both BPI and FEBTC;
d. All property, real or personal, and all receivables due on whatever
choses in action, and all other interest of, belonging to, or due to
FEBTC are deemed transferred to BPI;
Page 76 of 120
e. BPI becomes responsible and liable for all the liabilities and
obligations of FEBTC as if it had incurred these liabilities or
obligations;
f. Any claim, action, or proceeding pending by or against FEBTC should
be prosecuted by or against BPI; and
g. Neither the rights of creditors nor any lien on the property of FEBTC
is impaired by the merger.
In short, FEBTC ceased to have any legal personality, and BPI stepped
into everything that was FEBTC’s, pursuant to the law and the terms of
their Merger Plan.
An overview of the whole range or levels of transfers of corporate assets
and liabilities, as established by jurisprudence, is helpful and instructive
for the full appreciation of the nature of the BPI-FEBTC merger. These
levels of transfers are: (1) the assets-only level; (2) the business
enterprise level; and (3) the equity level. Each has its own impact on
the participating corporations and the immediately affected parties,
among them, the employees.11 Beyond and encompassing all these
levels of transfers is total corporate merger or consolidation.
The asset-only transfer affects only the corporate seller’s raw assets
and properties; the purchaser is not interested in the seller’s corporate
personality—its goodwill, or in other factors affecting the business itself.
In this transaction, no
680
680 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
complications arise affecting the employer-employee relationship, except
perhaps the redundancy of employees whose presence in the selling
company is affected by the sale of the chosen assets and properties, but
this is a development completely internal to the selling corporation.12
In the business enterprise level transaction, the purchaser’s interest
goes beyond the assets and properties and extends into the seller
corporation’s whole business and “earning capability,” short of the seller’s
juridical personality. Thus, a whole business is sold and purchased but the
parties retain their respective juridical personalities. In this type of
transaction, employer-employee and employer liability complications
arise, as can be seen from a survey of the cases on corporate transfers that
this Court has already passed upon.13
A transaction at the equity level does not disturb the participating
corporations’ separate juridical personality as both corporations continue
to remain in existence; the purchaser corporation simply buys the
underlying equity of the selling corporation which thus retains its
separate corporate personality. The selling corporation continues to run
its business, but control of the business is transferred to the purchaser
corporation whose control of the selling corporation’s equity enables it to
elect the members of the selling corporation’s board of directors.14
As pointed out above, a total merger or consolidation goes way beyond
all three levels of dealings in corporate business, assets and property. In a
total merger, the merged corporation transfers everything—figuratively
speaking, its “body and
681
VOL. 627, AUGUST 10, 2010 681
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
soul”—to the surviving corporation. This was what happened in the BPI-
FEBTC merger.
Corporate Assets and Employment Contracts
A corporation possesses tangible and intangible assets and properties
that, operated on and managed by the corporation’s human resources,
become an operating business. The intangibles consist, among others, of
the corporate goodwill, credits and other incorporeal rights. The human
resources that the corporation relies upon to run its business, strictly
speaking, are not corporate assets because the corporation does not “own”
the people running its business. But corporations are bound to their
Page 77 of 120
managers and employees by various forms of contracts of service, such as
individual employment contracts, consultancies and other instruments
evidencing personal service. In this sense, a corporation has rights over
the human resources it has contracted to run and serve its business.
These contractual rights, because they are exercised over those who
enable the company to fulfill its goal of production, can be classified as
corporate assets. But unlike the usual assets, they are unique and special,
as contracts of personal service embody rights in personam, i.e.,
intransferable rights demandable by the parties only against one
another.15
An employment contract or contract of service essentially has value
because it embodies work—the means of adding value to basic raw
materials and the processes for producing goods, materials and services
that become the lifeblood of corporations and, ultimately, of the nation.
Viewed from this perspective, the employment contract or contract of
service is not an ordinary agreement that can be viewed in
strictly contractual sense. It embodies work and production and carries
with it a very significant element of public interest; thus, the
Constitution, no less, accords full recognition and protection
682
682 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
to workers and their contribution to production. Section 18, Article II of
the Constitution provides:
SECTION 18. The State affirms labor as a primary social economic force. It
shall protect the rights of workers and promote their welfare.
Another recognition of the value of work, production and labor to the
national economy is reflected in Article XII on National Economy and
Patrimony whose Section 1 states:
“The goals of the national economy are a more equitable distribution of
opportunities, income, and wealth; a sustained increase in the amount of
goods and services produced by the nation for the benefit of the people;
and an expanding productivity as the key to raising the quality of life
for all, especially the underprivileged.
The State shall promote industrialization and full employment based on
sound agricultural development and agrarian reform, through industries that
make full and efficient use of human and natural resources, and which
are competitive in both domestic and foreign markets. However, the State shall
protect Filipino enterprises against unfair foreign competition and trade
practices.
In the pursuit of these goals, all sectors of the economy and all regions of the
country shall be given optimum opportunity to develop. Private
enterprises, including corporations, cooperatives, and similar collective
organizations, shall be encouraged to broaden the base of their ownership.”
[Emphasis supplied.]
From the point of view of labor itself, Article XIII, Section 3 commands:
“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.” [Emphasis supplied.]
These constitutional statements and directives, aside from telling us to
consider work, labor and employment beyond purely contractual terms,
also provide us directions on how
683
VOL. 627, AUGUST 10, 2010 683
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
our considerations should be made, i.e., with an eye on the interests they
represent—the individual, the corporate, and more importantly, the
national.
In a corporate merger situation—where one corporation totally
surrenders itself, giving up to another corporation even the human
resources that enable its business to operate—the terms of the
Constitution bar us from looking at the corporate transaction purely as a
contract that should be analyzed purely on the basis of the law on
contracts, in the way the ponencia suggested. Nor can we accept as valid
the ponencia’s pronouncement, apparently in line with its purely
contractual analysis, that the transfer of all assets and liabilities in a
merger situation, as in this case, refers only to FEBTC’s property rights
Page 78 of 120
and obligations and does not include the employment contracts of its
personnel.
To my mind, due consideration of Section 80 of the Corporation Code,
the constitutionally declared policies on work, labor and employment, and
the specific FEBTC-BPI situation—i.e., a merger with complete “body and
soul” transfer of all that FEBTC embodied and possessed and where both
participating banks were willing (albeit by deed, not by their written
agreement) to provide for the affected human resources by recognizing
continuity of employment—should point this Court to a declaration
that in a complete merger situation where there is total takeover by one
corporation over another and there is silence in the merger agreement on
what the fate of the human resource complement shall be, the latter should
not be left in legal limbo and should be properly provided for, by
compelling the surviving entity to absorb these employees. This is what
Section 80 of the Corporation Code commands, as the surviving
corporation has the legal obligation to assume all the obligations and
liabilities of the merged constituent corporation.
Not to be forgotten is that the affected employees managed, operated
and worked on the transferred assets and properties as their means of
livelihood; they constituted a basic compo-
684
684 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
nent of their corporation during its existence. In a merger and
consolidation situation, they cannot be treated without consideration of
the applicable constitutional declarations and directives, or, worse, be
simply disregarded. If they are so treated, it is up to this Court to read
and interpret the law so that they are treated in accordance with the legal
requirements of mergers and consolidation, read in light of the social
justice, economic and social provisions of our Constitution. Hence, there
is a need for the surviving corporation to take responsibility for
the affected employees and to absorb them into its workforce
where no appropriate provision for the merged corporation’s
human resources component is made in the Merger Plan.
This recognition is not to objectify the workers as assets and liabilities,
but to recognize—using the spirit of the law and constitutional
standards—their necessary involvement and need to be provided for in a
merger situation. Neither does this step, directly impacting on the
employees’ individual employment contracts, detract from the in
personam character of these contracts. For in a merger situation, no
change of employer is involved; the change is in the internal
personality of the employer rather than through the introduction
of a new employer which would have novated the contract. This
conclusion proceeds from the nature of a merger as a corporate
development regulated by law and the merger’s implementation through
the parties’ merger agreement.
In the context of this case, BPI’s relationship with the absorbed
employees cannot be equated with a situation involving voluntary
hiring, as the ponencia posited. Note that voluntary hiring, as the
basis of the relationship, presupposes that employment with FEBTC had
been terminated—a development that, as explained above, did not take
place; the employment of the absorbed employees simply continued by
operation of law, specifically by the combined operation of the Corporation
Code and the Labor Code under
685
VOL. 627, AUGUST 10, 2010 685
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
the backdrop of the labor and social justice provisions of the Constitution.
An individual employee can, at any time, in a consensual and in
personam employment contract, walk away from it, subject only to the
adjustment of the obligations he has incurred under the contractual
relationship that binds him; a contrary rule would violate the involuntary
service provision of the Constitution.16 Ordinarily, walking away would be
an act of voluntary resignation that entitles the employee only to benefits
that have been earned and accrued; a merger situation is differentiated by
the separation pay17 that the Merger Plan should at least provide under
the combined application of the Corporation Code,18 as well as the just and
authorized causes for termination of employment under the Labor
Page 79 of 120
Code.19 Otherwise, the employee has the right to be secure in his tenure
without loss of seniority, benefits and level of pay.20
The above view reconciles the terms of the Constitution, the
Corporation Code, and the Labor Code, and directly conflicts with
the ponencia’s views that: (1) BPI’s role as employer of the absorbed
FEBTC employees was not by operation of law or a legal consequence of
the merger, but by BPI’s voluntary act of hiring the employees after the
merger; (2) the employees’ contracts are purely in personam and are
binding
_______________
16 Article III, Section 18(2) of the Constitution states that:
Section 18. (1) x x x
(2) No involuntary servitude in any form shall exist except as a punishment for a
crime whereof the party shall have been duly convicted.
686
686 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
only between the parties; and (3) it is contrary to public policy to declare
the absorbed employees to be part of the assets or liabilities of FEBTC
that were transferred to BPI under the Merger Plan since the transferred
assets and liabilities should be deemed to refer only to property rights and
obligations of FEBTC and do not include the employment contracts of its
personnel.
To encapsulate the discussions above in relation with the ponencia’s,
BPI was the successor of FEBTC in the latter’s employment relationships,
and the succession occurred both by contract and by operation of law. The
two corporations decided to merge; necessarily, their merger—made
through a merger agreement—is governed by the Corporation Code that
recognizes the merger and its terms, including the “body and soul”
succession to BPI of everything that was FEBTC’s.
This succession included FEBTC’s employment contracts, subject to the
right of the employees to reject or accept the succession because
employment contracts are essentially in personam. It is immaterial that
BPI’s assumption of the role of employer was not embodied in the merger
agreement; in the absence of clear agreement terms, the law—specifically,
Section 80 of the Corporation Code—takes over and governs. What
appeared to be BPI’s voluntary act of “hiring” the former FEBTC
employees is legally insignificant as BPI was in fact obliged under the law
to assume the role of employer to the FEBTC employees in the absence of
an agreement on how the merging parties would treat the employment
contracts and the employees they cover.
In support of its position, the ponencia cites the American Law Reports
on “the consequences of voluntary mergers on the right to employment
and seniority rights” with the view that these are “persuasive and
illuminating.” The first case cited is Carver v. Brien,21 which relates to the
recognition of seniority in a consolidation of operations situation. Another
is
687
VOL. 627, AUGUST 10, 2010 687
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
Moore v. International Brotherhood of Teamsters,22 which refers to the
absorption by a trucker of the business of another private trucker or
common carrier, and holds that the seniority of affected employees
depends on the agreement between the trucker and the unions involved.
I do not believe that these cited cases are relevant to the present case,
particularly for the purposes the ponencia cites them; these cited cases
can neither be “persuasive nor illuminating” as they do not even
approximate the factual situation of the present case so that their rulings
can be applied to the latter. No corporate merger was involved in the cited
cases, in the same sense as in the present case; in fact, what was involved
in Carver was merely a consolidation of operations, while Moore merely
related to the absorption of the business of one corporation by another, not
to a merger. As painstakingly explained above, these are dealings in
corporate interests and properties that are lesser in extent and scope than
total merger or consolidation and should be distinguished from the latter
under the terms of Section 80 of our Corporation Code. Thus, the cited
Page 80 of 120
cases and rulings should not at all be considered in resolving the issues
posed in the present case.
From another perspective, the differing consequences, discussed
above,23 arising from the different modes of transfers of corporate assets
and liabilities and corporate consolidations, apparently escape
the ponencia. Thus, it has no hesitation at all in citing American cases
that do not at all involve fact situations equivalent to the merger
envisioned by Sections 76 and 80 of the Corporation Code. This is a fatal
error, leading no less to the ponencia’s conclusion that the issue before us
is purely a labor law issue, divorced from its corporation law context.
688
688 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
That an employment contract is in personam cannot be disputed as this
is the essence of such contract and what this contract should be in light of
the constitutional prohibition against involuntary servitude.24 But as
above pointed out, this is not wholly and strictly how an employment
contract is to be viewed under our Constitution. While these contracts are
binding only between the parties, they resonate with public interest that
the Constitution and our laws have seen fit to regulate; employment
contracts translate to service which itself translates to productive work
that the economy and the nation need.
In the BPI-FEBTC situation, these employment contracts are part of
the obligations that the merging parties have to account and make
provisions for under the Constitution and the Corporation Code; in the
absence of any clear agreement, these employment contracts subsist,
subject to the right of the employees to reject them as they cannot be
compelled to render service but can only be made to answer in damages if
the rejection constitutes a breach.25 In other words, in mergers and
consolidations, these contracts should be held to be continuing,
unless rejected by the employees themselves or declared by the
merging parties to be subject to the authorized causes for
termination of employment under Sections 282 and 283 of the
Labor Code. In this sense, the merging parties’ control and
business decision on how employees shall be affected, in the same
manner that the affected employees’ decision on whether to abide
by the merger or to opt out, remain unsullied. Unfortunately, this is
another dimension of a merger situation that escapes the ponencia’s short-
sighted reading of corporate mergers in general, and of the merger
between BPI and FEBTC in particular.
689
VOL. 627, AUGUST 10, 2010 689
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
From these perspectives, it appears clearly that the ponencia has not
fully appreciated how mergers operate and how they affect employment
contracts when it viewed employment contracts as strictly
contractual and binding only between the parties, with no effective legal
intervention from the law in terms of the combined operation of the
Constitution, the Corporation Code and the Labor Code.
BPI’s Assumption of Role as Employer
As soon as the BPI-FEBTC merger took effect, FEBTC completely
faded out as employer and BPI succeeded to this role. BPI’s assumption of
this role is not in the sense of a novation, i.e., that a change of employer
took place as the employment contracts were transferred to BPI. As stated
above, instead of the clear change or substitution of an employer for
another that would have taken place in a novated employment contract
(e.g., such that would have taken place if only a business enterprise level of
transfer took place where the whole business is transferred, accompanied
by a substitution of the employer running the business), what took place
in the BPI-FEBTC total merger was an internal change; BPI succeeded to
everything that was FEBTC’s, thereby assuming the latter’s identity and
role as employer. In this sense, BPI simply expanded its role as an
employer to encompass the employees who were previously identified as
FEBTC employees.
Page 81 of 120
 The effect of this development on the internal BPI employment
situation in a non-unionized environment would not have posed any
difficulty, as there would simply be an adjustment of working conditions
based on the premise that the absorbed employees would not suffer any
diminution of the terms and conditions of employment under their
contracts.
Where a union is present in a merger situation, complications arise as
the adjustment will not only involve the assumption of the role of the
merged corporation as employer and the non-diminution of the terms and
conditions of em-
690
690 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
ployment; existing terms and conditions of the relationship with the union
must as well be observed and respected. This union scenario gave rise to
the present case and at its core asks: what terms and conditions of
relationship with the union must be observed in light of BPI’s expanded
role as an employer.
Union presence at the workplace is generally most effective when it has
a current CBA with the employer. This agreement necessarily implies
that a bargaining unit has been properly defined and delineated in the
organized portion of the employer’s establishment. In the present case, the
establishment is BPI’s Davao Branch and the defined bargaining unit
covers the rank-and-file positions in the Branch. At the minimum, the
absorbed employees working within BPI’s Davao Branch who
are classified as rank-and-file employees and who are not expressly
excluded from coverage should be covered by the collective bargaining
unit and by the CBA. Note that this coverage by the bargaining unit is
separate from compulsory union membership which is provided under the
union security clauses discussed below. Employees may come within the
coverage of the bargaining unit, but may still be exempt from compulsory
union membership under the union security clauses.26
The CBA’s Union Security Clauses
The CBA at BPI contains two union security provisions whose
respective roles are to protect and to compel union membership within
the effective term of the CBA.
_______________
26 Note that confidential employees may occupy rank and file positions but are not
covered by the bargaining unit because of express exclusion. Rank and file employees who are
not union members because they are “old” employees not covered by the maintenance of
membership clause are covered by the CBA but are not union members; they simply pay
“agency fees” to avoid being “free riders” to the CBA.
691
VOL. 627, AUGUST 10, 2010 691
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
The first is the Maintenance of Membership provision whose role is
to protect the union’s current membership. By its express terms, it
covers and renders continued union membership compulsory for: (1) those
who were already union members at the time the CBA was signed;
and (2) the new employees who will become regular during the life of the
CBA. The first classification of union members directly implies that BPI
employees who were not members of the union, at the time of the
signing of the CBA, are not compelled to be union members.
Thus, on the basis of this union security clause and the compulsory
membership it compels, there are three kinds of employees at BPI,
namely—(1) those who are not compelled to be union
members because they were not union members at the time the CBA was
signed; (2) those who are compelled to continue membership because
they were already union members when the CBA was signed; and
(3) those who, previously non-regular employees, are compelled to be
union members after they attain regular status.
As applied to the absorbed employees, the maintenance of membership
clause would apply to them only if they voluntarily joined the union after
the BPI-FEBTC merger; they would thereafter have to maintain their
union membership under pain of dismissal.
Page 82 of 120
 The second union security provision is entitled Union Shop whose role
is to compel the membership of those who are not yet union members. To
quote its direct terms, it refers to “[N]ew employees falling within the
bargaining unit as defined in Article I of this Agreement, who may
hereafter be regularly employed by the Bank.”27 Strictly speaking,
_______________
27 Rollo, p. 17. The CBA provides that“[n]ew employees falling within the bargaining unit
as defined in Article I of this Agreement, who may hereafter be regularly employed by the
Bank, shall, within thirty (30) days after they become regular employees, join the Union
692
692 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
this definition is defective as it speaks of new non-regular employees who
are not therefore members of the bargaining unit yet. The provision
should properly read: new employees occupying positions falling within the
bargaining unit.
Read closely, this reference to “new employees” is not a definition that
specifies who are new. It simply refers to those employees whose positions
fall within the bargaining unit and who are subsequently given regular
status; they must join the union as a condition of their continued
employment.
By its reference to employees who are as yet on non-regular status,
what is clearly a requirement for the application of the union shop clause,
as framed by this provision, is the grant of regular status. In other words,
it applies to those recently given regular employment and who, by
necessary implication, were hired as non-regular employees and were
thereafter accorded regular status.
In contrast with the non-regular employees that the CBA clearly
referred to, absorbed FEBTC employees did not undergo the process of
waiting for the grant of regular status; their regular employment simply
continued from FEBTC to BPI without any break because BPI only
succeeded to the role of FEBTC as employer in a merger, where the same
employment was maintained and only the employer’s personality changed.
Thus, they cannot be “new” under the terms of the union security clause.
For that matter, they are not even “new” under the ordinary meaning of
this word which connotes something that recently came into existence,
use, or a particular state or relation.28
Even granting the validity of the ponencia’s position that the union
shop provision as written does not distinguish between non-regular
employees, who subsequently became
_______________
as a condition of their continued employment. It is understood that membership in good
standing in the Union is a condition of their continued employment with the Bank.”
28 Webster’s Third New International Dictionary, 1993 ed.
693
VOL. 627, AUGUST 10, 2010 693
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
regular, and those who were hired and immediately granted regular
status without passing through a non-regular phase, still the union
security clause would not cover the absorbed employees because they do
not fall under either classification.
An intrinsic distinction exists between the absorbed employees and
those who are hired as immediate regulars, which distinction cannot
simply be disregarded because it establishes how the absorbed employees
came to work for BPI. Those who are immediately hired as regulars
acquire their status through the voluntary act of hiring done within the
effective term or period of the CBA. The absorbed employees, on the other
hand, merely continued the employment they started with FEBTC; they
came to be BPI employees by reason of a corporate merger that changed
the personality of their employer but did not at all give them any new
employment. Thus, they are neither “new” employees nor employees who
became regular only during the term of the CBA in the way that newly
regularized employees become so. They were regular employees under
their present employment long before BPI succeeded to FEBTC’s role as
employer.
Page 83 of 120
 It may well be asked: what then is the classification under the CBA of
the absorbed employees whose positions fall within the bargaining unit?
As discussed above, they cannot be new employees. In fact, they are more
similar to the “old” employees, if their continuity of service will be
considered. This characterization, nevertheless, is clearly inapt since they
cannot also be treated in exactly the same way as the pre-merger BPI
employees. Besides, being “old” employees will not compel them to join the
union under the maintenance of membership provision as they never had
any union membership to maintain.
Ultimately, the absorbed employees are best recognized for what they
really are—a sui generis group of employees whose classification will
not be duplicated until BPI has another merger where it would be the
surviving corporation and no provision would be made to define the
situation of the
694
694 SUPREME COURT REPORTS ANNOTATED
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
employees of the merged constituent corporation. Significantly, this
classification—obviously, not within the contemplation of the CBA
parties when they executed their CBA—is not contrary to, nor
governed by, any of the agreed terms of the existing CBA on union
security, and thus occupies a gap that BPI, in the exercise of its
management prerogative, can fill.
In the meantime, whether to join or not to join the union is a choice
that these absorbed employees will have to make after the next CBA,
when their status becomes subject to the results of the collective
negotiations.
In a resulting purely maintenance of membership regime, those
who would not opt to join the union carry no obligation to maintain any
union membership. In a union shop regime, the absorbed employees may
remain non-union members until an agreed specified time when union
membership is declared obligatory as a condition for continued
employment. With the same effect would be the stricter closed
shop clause that compels management to hire only union members. In
any of these regimes, of course, compulsory membership shall
depend on the terms of the CBA on who would be subject to
compulsion and how compulsion would operate. As a cautionary
note to avoid similar problems in the future, it may be best for the parties
to incorporate terms expressly providing for the situation of employees
absorbed by reason of merger.
The Constitutional Question
The constitutional question, as framed by Justice Antonio T. Carpio,
arises under the view that the absorbed employees cannot be covered by
the union security clause and thereby be compelled to join the union. As
indicated at the beginning of this Opinion, this question was never
posed nor discussed by any of the parties and, hence, is not a question
presented for our consideration in the present case. Besides, this is a
question that may only arise when and if the absorbed employees
695
VOL. 627, AUGUST 10, 2010 695
Bank of the Philippine Island vs. BPI Employees Union-
Davao Chapter-Federation of Union in BPI UniBank
are considered bound under the union security clauses to join the union.
For these reasons, I see no need to confront and resolve this constitutional
issue.
In light of these considerations, I vote to GRANT the petition.
Petition denied, judgment affirmed.
Notes.—Although union security clauses embodied in the collective
bargaining agreement may be validly enforced and that dismissals
pursuant thereto may likewise be valid, this does not erode the
fundamental requirement of due process. (Malayang Samahan ng mga
Manggagawa sa M. Greenfield (MSMG-UWP) vs. Ramos, 326 SCRA 428
[2000])
A “closed-shop” may be defined as an enterprise in which, by agreement
between the employer and his employees or their representatives, no
person may be employed in any or certain agreed departments of the
enterprise unless he or she is, becomes, and, for the duration of the
Page 84 of 120
agreement, remains a member in good standing of a union entirely
comprised of or of which the employees in interest are a part. (Del Monte
Philippines, Inc. vs. Saldivar, 504 SCRA 192 [2006])
The doctrine that an employer is not considered guilty of unfair labor
practice if it merely complied in good faith with the request of the certified
union for the dismissal of employees expelled from the union pursuant to
the union security clause in the collective bargaining agreement has been
recently ruled by the Supreme Court that it is inconsistent with Article
279 of the Labor Code, as amended by R.A. No. 6715. (Olvido vs. Court of
Appeals, 536 SCRA 73 [2007])
——o0o——
84 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Trajano
G.R. No. 84433. June 2, 1992.*
ALEXANDER REYES, ALBERTO M. NERA, EDGARDO M. GECA, and
138 others, petitioners, vs. CRESENCIANO B. TRAJANO, as Officer-in-
Charge, Bureau of Labor Relations, Med-Arbiter PATERNO ADAP, and
TRI-UNION EMPLOY-EES UNION, et al., respondents.
Labor Law; Words and Phrases; The right to self-organization includes the
right not to form or join a union.—Logically, the right NOT to join, affiliate with,
or assist any union, and to disaffiliate or resign from a labor organization, is
subsumed in the right to join, affiliate with, or assist any union, and to maintain
membership therein. The right to form or join a labor organization necessarily
includes the right to refuse or refrain from exercising said right. It is self-evident
that just as no one should be denied the exercise of a right granted by law, so
also, no one should be compelled to exercise such a conferred right. The fact that
a person has opted to acquire membership in a labor union does not preclude his
subsequently opting to renounce such membership.
Same; Same; Same.—The purpose of a certification election is precisely the
ascertainment of the wishes of the majority of the employees in the appropriate
bargaining unit: to be or not to be represented by a labor organization, and in the
affirmative case, by which particular labor organization. If the results of the
election should disclose that the majority of the workers do not wish to be
represented by any union, then their wishes must be respected, and no union
may properly be certified as the exclusive representative of the workers in the
bargaining unit in dealing with the employer regarding wages, hours and other
terms and conditions of employment. The minority employees—who wish to have
a union represent them in collective bargaining—can do nothing but wait for
another suitable occasion to petition for a certification election and hope that the
results will be different. They may not and should not be permitted, however, to
impose their will on the majority—who do not desire to have a union certified as
the exclusive workers' benefit in the bargaining unit—upon the plea that they,
the minority workers, are being denied the right of self-organization and
collective bargaining. As repeatedly stated, the right of self-organization
embraces not only the right to form, join or
_______________
* SECOND DIVISION.
485
VOL. 209, JUNE 2, 1992 48
5
Reyes vs. Trajano
assist labor organizations, but the concomitant, converse right NOT to form,
join or assist any labor union.
Same; INK employees have the right to participate in a certification election
and vote for "No Union."—That the INK employees, as employees in the same
bargaining unit in the true sense of the term, do have the right of self-
organization, is also in truth beyond question, as well as the fact that when they
voted that the employees in their bargaining unit should be represented by "NO
UNION," they were simply exercising that right of self-organization, albeit in its
negative aspect. The respondents' argument that the petitioners are disqualified
to vote because they "are not constituted into a duly organized labor union"—
"but members of the INK which prohibits its followers, on religious grounds,
from joining or forming any labor organization"—and "hence, not one of the
unions which vied for certification as sole and exclusive bargaining
representative," is specious. Neither law, administrative rule nor jurisprudence
requires that only employees affiliated with any labor organization may take
part in a certification election. On the contrary, the plainly discernible
intendment of the law is to grant the right to vote to all bona fide employees in
the bargaining unit, whether they are members of a labor organization or not,
Same; Failure to take part in previous elections no bar to right to participate
in future elections.—Neither does the contention that petitioners should be
Page 85 of 120
denied the right to vote because they "did not participate in previous certification
elections in the company for the reason that their religious beliefs do not allow
them to form, join or assist labor organizations," persuade acceptance. No law,
administrative rule or precedent prescribes forfeiture of the right to vote by
reason of neglect to exercise the right in past certification elections. In denying
the petitioners' right to vote upon these egregiously fallacious grounds, the public
respondents exercised their discretion whimsically, capriciously and oppressively
and gravely abused the same.
PETITION for certiorari to review the decision of the Bureau of Labor
Relations.
The facts are stated in the opinion of the Court.
Eliseo M. Cruz for petitioners.
Potenciano Flores, Jr. for private respondents.
486
486 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Trajano
NARVASA, C.J.:
The officer-in-charge of the Bureau of Labor Relations (Hon. Cresenciano
Trajano) sustained the denial by the Med Arbiter of the right to vote of
one hundred forty-one (141) members of the "Iglesia ni Kristo" (INK), all
employed in the same company, at a certification election at which two (2)
labor organizations were contesting the right to be the exclusive
representative of the employees in the bargaining unit. That denial is
assailed as having been done with grave abuse of discretion in the special
civil action of certiorari at bar, commenced by the INK members adversely
affected thereby.
The certification election was authorized to be conducted by the Bureau
of Labor Relations among the employees of TriUnion Industries
Corporation on October 20, 1987. The competing unions were the Tri-
Union Employees Union-Organized Labor Association in Line Industries
and Agriculture (TUEUOLALIA), and Trade Union of the Philippines and
Allied Services (TUPAS). Of the 348 workers initially deemed to be
qualified voters, only 240 actually took part in the election, conducted
under the supervision of the Bureau of Labor Relations, Among the 240
employees who cast their votes were 141 members of the lNK.
The ballots provided for three (3) choices. They provided for votes to be
cast, of course, for either of the two (2) contending labor organizations, (a)
TUPAS and (b) TUEU-OLALIA; and, conformably with established rule
and practice, for (c) a third choice: "NO UNION."
1
The final tally of the votes showed the following results;
TUPAS 1
TUEU-OLALIA 95
NO UNION 1
SPOILED 1
CHALLENGED 141
The challenged votes were those cast by the 141 INK members. They were
segregated and excluded from the final count in
________________
SEE footnote 5, infra.
1
487
VOL. 209, JUNE 2, 1992 487
Reyes vs. Trajano
virtue of an agreement between the competing unions, reached at the pre-
election conference, that the INK members should not be allowed to vote
"because they are not members of any union and refused to participate in
the previous certification elections."
The INK employees promptly made known their protest to the
exclusion of their votes. They filed a petition to cancel the election alleging
that it "was not fair" and the result thereof did "not reflect the true
sentiments of the majority of the employees." TUEU-OLALIA opposed the
petition. It contended that the petitioners "do not have legal personality to
protest the results of the election," because "they are not members of
either contending unit, but ** of the INK" which prohibits its followers, on
religious grounds, from joining or forming any labor organization **."
The Med-Arbiter saw no merit in the INK employees' petition. By
Order dated December 21, 1987, he certified the TUEUOLALIA as the
Page 86 of 120
sole and exclusive bargaining agent of the rank-and-file employees. In
that Order he decided the fact that "religious belief was (being) utilized to
render meaningless the rights of the non-members of the Iglesia ni Kristo
to exercise the rights to be represented by a labor organization as the
bargaining agent," and declared the petitioners as "not possessed of any
legal personality to institute this present cause of action" since they were
not parties to the petition for certification election.
The petitioners brought the matter up on appeal to the Bureau of Labor
Relations. There they argued that the MedArbiter had "practically
disenfranchised petitioners who had an overwhelming majority," and "the
TUEU-OLALIA certified union cannot be legally said to have been the r
esult of a valid election where at least fifty-one percent of all eligible
voters in the appropriate bargaining unit shall have cast their votes."
Assistant Labor Secretary Cresenciano B. Trajano, then Officer-in-Charge
of the Bureau of Labor Relations, denied the appeal in his Decision of July
22, 1988. He opined that the petitioners are "bereft of legal personality to
protest their alleged disenfranchisement" since they "are not constituted
into a duly of ganized labor union, hence, not one of the unions which vied
for certification as sole and exclusive bargaining represen-
488
488 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Trajano
tative." He also pointed out that the petitioners "did not participate in
previous certification elections in the company for the reason that their
religious beliefs do not allow them to form, join or assist labor
organizations."
It is this Decision of July 22,1988 that the petitioners would have this
Court annul and set aside in the present special civil action of certiorari.
The Solicitor General having expressed concurrence with the position
taken by the petitioners, public respondent NLRC was consequently
required to file, and did thereafter file, its own comment on the petition.
In that comment it insists that "if the workers who are members of the
Iglesia ni Kristo in the exercise of their religious belief opted not to join
any labor organization as a consequence of which they themselves can not
have a bargaining representative, then the right to be represented by a
bargaining agent should not be denied to other members of the bargaining
unit."
Guaranteed to all employees or workers is the "right to selforganization
and to form, join, or assist labor organizations of their own choosing for
purposes of collective bargaining." This is made plain by no less than
three provisions of the Labor Code of the Philippines. Article 243 of the
2
Code provides as follows: 3
ART. 243. Coverage and employees right to self-organization.—All persons
employed in commercial, industrial and agricultural enterprises and in religious,
charitable, medical, or educational institutions whether operating for profit or
not, shall have the right to self-organization and to form, join, or assist labor
organizations of their own choosing for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed people,
rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.
Article 248 (a) declares it to be an unfair labor practice for an employer.
among others. to "interfere with? restrain or coerce employees in the
exercise of their right to self-organization." Similarly, Article 249 (a)
makes it an unfair labor practice for a
_______________
2As amended inter alia by R.A. Nos. 6715, 6725 and 6727.
3Italics supplied.
489
VOL. 209, JUNE 2, 1992 489
Reyes vs. Trajano
labor organization to "restrain or coerce employees in the exercise of their
rights to self-organization xx."
The same legal proposition is set out in the Omnibus Rules
Implementing the Labor Code, as amended, as might be expected. Section
1, Rule II (Registration of Unions), Book V (Labor Relations) of the
Omnibus Rules provides as follows: 4
"SEC. 1. Who may join unions; exception.—All persons employed in commercial,
industrial and agricultural enterprises, including employees of government
corporations established under the Corporation Code as well as employees of
religious, medical or educational institutions, whether operating for profit or not,
Page 87 of 120
except managerial employees, shall have the right to self-organization and to
form, join or assist labor organizations for purposes of collective
bargaining. Ambulant, intermittent and itinerant workers, self-employed people,
rural workers and those without any definite employers may form labor
organizations for their mutual aid and protection.
x x x x."
The right of self-organization includes the right to organize or affiliate
with a labor union or determine which of two or more unions in an
establishment to join, and to engage in concerted activities with co-
workers for purposes of collective bargaining through representatives of
their own choosing, or for their mutual aid and protection, i.e., the
protection, promotion, or enhancement of their rights and interests. 5
Logically, the right NOT to join, affiliate with, or assist any union, and
to disaffiliate or resign from a labor organization, is subsumed in the right
to join, affiliate with, or assist any union, and to maintain membership
therein. The right to form or join a labor organization necessarily includes
the right to refuse or refrain from exercising said right. It is self-evident
that just as no one should be denied the exercise of a right granted by law,
so also, no one should be compelled to exercise such a conferred right. The
fact that a person has opted to acquire membership in a labor union does
not preclude his subsequently opting to
_______________
4Italics supplied.
5ART. 247, Labor Code, as amended; SEE Fernandez and Quiazon, Law of Labor
Relations, p. 162,
490
490 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Trajano
renounce such membership. 6
As early as 1974 this Court had occasion to expatiate on these self-
evident propositions in Victoriano v. Elizalde Rope Workers' Union,
et al., viz.:
7
"x x What the Constitution and Industrial Peace Act recognize and guarantee is
the 'right' to form or join associations. Notwithstanding the different theories
propounded by the different schools of jurisprudence regarding the nature and
contents of a 'right/ it can be safely said that whatever theory one subscribes to, a
right comprehends at least two broad notions, namely: first, liberty or freedom,
i.e., the absence of legal restraint, whereby an employee may act for himself
without being prevented by law; second, power, whereby an employee may, as he
pleases, join or refrain from joining an association. It is therefore the employee
who should decide for himself whether he should join or not an association; and
should he choose to join, he himself makes up his mind as to which association
he would join; and even after he has joined, he still retains the liberty and the
power to leave and cancel his membership with said organization at any time
(Pagkakaisa Samahang Manggagawa ng San Miguel Brewery vs. Enriquez, et
al, 108 Phil 1010, 1019). It is clear, therefore, that the right to join a union
includes the right to abstain from joining any union (Abo, et al. vs. PHILAME
[KG] Employees Union, et al, L19912, January 20, 1965, 13 SCRA 120, 123,
quoting Rothenberg, Labor Relations). Inasmuch as what both the Constitution
and the Industrial Peace Act have recognized, and guaranteed to the employee,
is the 'right' to join associations of his choice, it would be absurd to say that the
law also imposes, in the same breath, upon the employee the duty to join
associations. The law does not enjoin an employee to sign up with any
association."
The right to refuse to join or be represented by any labor organization is
recognized not only by the law but also in the
_______________
6 To be sure, the right not to join a union, or discontinue membership therein, is subject to
certain qualifications or exceptions as e.g., when there is a closed shop or similar agreement
in effect in the establishment, although it has been held that such agreements are not
applicable to any religious sect which prohibits affiliation of their members in any labor
organization (Sec. 4(a), R.A. 875 [The Industrial Peace Act], as amended by R.A. No. 3350)
7 59 SCRA 54, 66-67 (1974).
491
VOL. 209, JUNE 2, 1992 491
Reyes vs. Trajano
rules drawn up for implementation thereof. The original Rules on
Certification promulgated by the defunct Court of Industrial Relations
required that the ballots to be used at a certification election to determine
which of two or more competing labor unions would represent the
employees in the appropriate bargaining unit should contain, aside from
Page 88 of 120
the names of each union, an alternative choice of the employee voting, to
the effect that he desires not to be represented by any union. And where
8 affirmative case, by which particular labor organization, If the results of
only one union was involved, the ballots were required to state the
question—"Do you desire to be represented by said union?"—as regards
which the employees voting would mark an appropriate square, one
indicating the answer, "Yes," the other, "No."
To be sure, the present implementing rules no longer explicitly impose
the requirement that the ballots at a certification election include a choice
for "NO UNION." Section 8 (Rule VI, Book V of the Omnibus Rules)
entitled "Marking and canvassing of votes," pertinently provides that:
"xx (a) The voter must write a cross (X) or a check (/) in the square opposite the
union of his choice. If only one union is involved, the voter shall make his cross or
check in the square indicating 'YES' or 'NO.'
x x x x."
Withal, neither the quoted provision nor any other in the Omnibus
Implementing Rules expressly bars the inclusion of that choice of "NO
UNION" in the ballots. Indeed, it is doubtful if the employee's alternative
right NOT to form, join or assist any labor organization or withdraw or
resign from one may be validly eliminated and he be consequently coerced
to vote for one or another of the competing unions and be represented by
one of them. Besides, the statement in the quoted provision that "(i)f only
one union is involved, the voter shall make his cross or check in the
square indicating 'YES' or 'NO,' is quite clear acknowledgment of the
alternative possibility that the "NO" votes may outnumber the "YES"
votes—indicating that the
492
492 SUPREME COURT REPORTS ANNOTATED
Reyes vs. Trajano
majority of the employees in the company do not wish to be represented by
any union—in which case, no union can represent the employees in
collective bargaining. And whether the prevailing "NO" votes are inspired
by considerations of religious belief or discipline or not is beside the point,
and may not be inquired into at all.
The purpose of a certification election is precisely the ascertainment of
the wishes of the majority of the employees in the appropriate bargaining
unit: to be or not to be represented by a labor organization, and in the
the election should disclose that the majority of the workers do not wish to
be represented by any union, then their wishes must be respected, and no
union may properly be certified as the exclusive representative of the
workers in the bargaining unit in dealing with the employer regarding
wages, hours and other terms and conditions of employment. The minority
employees—who wish to have a union represent them in collective
bargaining—can do nothing but wait for another suitable occasion to
petition for a certification election and hope that the results will be
different. They may not and should not be permitted, however, to impose
their will on the majority—who do not desire to have a union certified as
the exclusive workers' benefit in the bargaining unit—upon the plea that
they, the minority workers, are being denied the right of self-organization
and collective bargaining, As repeatedly stated, the right of self-
organization embraces not only the right to form, join or assist labor
organizations, but the concomitant, converse right NOT to form, join or
assist any labor union.
That the INK employees, as employees in the same bargaining unit in
the true sense of the term, do have the right of selforganization, is also in
truth beyond question, as well as the fact that when they voted that the
employees in their bargaining unit should be represented by "NO
UNION," they were simply exercising that right of self-organization,
albeit in its negative aspect.
The respondents' argument that the petitioners are disqualified to vote
because they "are not constituted into a duly organized labor union"—"but
members of the INK which prohibits its followers, on religious grounds,
from joining or forming any
493
VOL. 209, JUNE 2, 1992 493
Reyes vs. Trajano
labor organization"—and "hence, not one of the unions which vied for
certification as sole and exclusive bargaining representative," is specious.
Neither law, administrative rule nor jurisprudence requires that only
employees affiliated with any labor organization may take part in a
Page 89 of 120
certification election. On the contrary, the plainly discernible intendment
of the law is to grant the right to vote to all bona fide employees in the
bargaining unit, whether they are members of a labor organization or not.
As held in Airtime Specialists, Inc. v. Ferrer-Calleja. 9 statutorily and constitutionally recognized (Vassar Industries Employees
"In a certification election all rank-and-file employees in the appropriate
bargaining unit are entitled to vote. This principle is clearly stated in Art. 255 of
the Labor Code which states that the 'labor organization designated or selected
by the majority of the employees in an appropriate bargaining unit shall be the
exclusive representative of the employees in such unit for the purpose of
collective bargaining.' Collective bargaining covers all aspects of the employment
relation and the resultant CBA negotiated by the certified union binds all
employees in the bargaining unit. Hence, all rank-and-file employees,
probationary or permanent, have a substantial interest in the selection of the
bargaining representative. The Code makes no distinction as to their
employment status as basis for eligibility in supporting the petition for
certification election, The law refers to 'all' the employees in the bargaining unit.
All they need to be eligible to support the petition is to belong to the 'bargaining
unit.'"
Neither does the contention that petitioners should be denied the right to
vote because they "did not participate in previous certification elections in
the company for the reason that their religious beliefs do not allow them
to form, join or assist labor organizations," persuade acceptance. No law,
administrative rule or precedent prescribes forfeiture of the right to vote
by reason of neglect to exercise the right in past certification elections. In
denying the petitioners' right to vote upon these egregiously fallacious
grounds, the public respondents exercised their discretion whimsically,
capriciously and oppressively and gravely abused the same.
WHEREFORE, the petition for certiorari is GRANTED; the
Decision of the then Officer-in-Charge of the Bureau of Labor Relations
dated December 21, 1987 (affirming the Order of the Med-Arbiter dated
July 22, 1988) is ANNULLED and SET ASIDE; and the petitioners are
DECLARED to have legally exercised their right to vote, and their ballots
should be canvassed and, if validly and properly made out, counted and
tallied for the choices written therein. Costs against private respondents.
SO ORDERED.
Paras, Padilla and Regalado, JJ., concur.
Nocon, J., On leave.
Petition granted; decision annulled and set aside.
Notes.—Employees' right to form union to protect their interest in
Union (VIEU) vs. Estrella, 82 SCRA 280).
The right of employees to join any labor organization is protected by
the Constitution (Ibid, 82 SCRA 280).
——o0o——
VOL. 162, JUNE 20, 1988 367
Kapatiran sa Meat and Canning Division vs. Ferrer-
Calleja
No. L-82914. June 20, 1988. *
KAPATIRAN SA MEAT AND CANNING DIVISION (TUPAS Local
Chapter No. 1027), petitioner, vs. THE HONORABLE BLR DIRECTOR
PURA FERRER CALLEJA, MEAT AND CANNING DIVISION
UNIVERSAL ROBINA CORPORATION and MEAT AND CANNING
DIVISION NEW EMPLOYEES AND WORKERS UNITED LABOR
ORGANIZATION, respondents.
Labor; Labor Union; Right to self-organization; The right of members of the
Iglesia ni Kristo sect not to join a labor union for being contrary to their religious
beliefs does not bar the members of that sect from forming their own union;
Reason.—After deliberating on the petition and the documents annexed thereto,
We find no merit in the petition. The public respondent did not err in dismissing
the petitioner’s appeal in BLR Case No. A-12-389-87. This Court’s decision in
Victoriano vs. Elizalde Rope Workers’ Union, 59 SCRA 54, upholding the right of
members of the IGLESIA NI KRISTO sect not to join a labor union for being
contrary to their religious beliefs, does not bar the members of that sect from
forming their own union. The public respondent correctly observed that the
“recognition of the tenets of the sect x x x should not infringe on the basic right of
self-organization granted by the constitution to workers, regardless of religious
affilia-tion.”
Same; Same; Same; Fact that TUPAS was able to negotiate a new CBA with
ROBINA does not foreclose the right of the rival union NEW ULO to challenge
TUPAS’ claim to majority status.—The fact that TUPAS was able to negotiate a
new CBA with ROBINA within the 60-day freedom period of the existing CBA,
Page 90 of 120
does not foreclose the right of the rival union, NEW ULO, to challege TUPAS’
claim to majority status, by filing a timely petition for certification election on
October 13, 1987 before TUPAS’ old CBA expired on November 15, 1987 and
before it signed a new CBA with the company on December 3, 1987. As pointed
out by Med-Arbiter Abdullah, a “certification election is the best forum in
ascertaining the majority status of the contending unions wherein the workers
themselves can freely choose their bargaining representative thru secret ballot.”
Since it has not been shown that this order is tainted with unfairness, this Court
will not thwart the holding of a certification election.
PETITION for certiorari to review the order of the Director of the Bureau
of Labor Relations.
The facts are stated in the resolution of the Court.
Alar, Comia, Manalo and Associates for petitioner.
Danilo Bolos for respondent Robina Corporation.
RESOLUTION
GRIÑO-AQUINO, J.:
The petitioner, Kapatiran sa Meat and Canning Division (TUPAS Local
Chapter No. 1027) hereinafter referred to as “TUPAS,” seeks a review of
the resolution dated January 27, 1988 (Annex D) of public respondent
Pura Ferrer-Calleja, Director of the Bureau of Labor Relations, dismissing
its appeal from the Order dated November 17, 1987 (Annex C) of the Med-
Arbiter Rasidali C. Abdullah ordering a certification elec-tion to be
conducted among the regular daily paid rank and file employees/workers
of Universal Robina Corporation-Meat and Canning Division to determine
which of the contending unions:
369
VOL. 162, JUNE 20, 1988 369
Kapatiran sa Meat and Canning Division vs. Ferrer-
Calleja
1. a)Kapatiran sa Meat and Canning Division TUPAS Local Chapter No.
1027 (or “TUPAS” for brevity);
2. b)Meat and Canning Division New Employees and Workers United Labor
Organization (or “NEW ULO” for brevity);
3. c)No union.
shall be the bargaining unit of the daily wage rank and file employees in
the Meat and Canning Division of the company.
From 1984 to 1987 TUPAS was the sole and exclusive collective
bargaining representative of the workers in the Meat and Canning
Division of the Universal Robina Corporation, with a 3-year collective
bargaining agreement (CBA) which was to expire on November 15, 1987.
Within the freedom period of 60 days prior to the expiration of its CBA,
TUPAS filed an amended notice of strike on September 28, 1987 as a
means of pressuring the company to extend, renew, or negotiate a new
CBA with it.
On October 8, 1987, the NEW ULO, composed mostly of workers
belonging to the IGLESIA NI KRISTO sect, registered as a labor union.
On October 12, 1987, the TUPAS staged a strike. ROBINA obtained an
injunction against the strike, resulting in an agreement to return to work
and for the parties to negotiate a new CBA.
The next day, October 13, 1987, NEW ULO, claiming that it has “the
majority of the daily wage rank and file employees numbering 191,” filed a
petition for a certification election at the Bureau of Labor Relations
(Annex A).
TUPAS moved to dismiss the petition for being defective in form and
that the members of the NEW ULO were mostly members of the Iglesia ni
Kristo sect which three (3) years previous refused to affiliate with any
labor union. It also accused the company of using the NEW ULO to defeat
TUPAS’ bargaining rights (Annex B).
On November 17, 1987, the Med-Arbiter ordered the holding of a
certification election within 20 days (Annex C).
TUPAS appealed to the Bureau of Labor Relations (BLR). In the
meantime, it was able to negotiate a new 3-year CBA with ROBINA,
which was signed on December 3, 1987 and to expire on November 15,
1990.
370
Page 91 of 120
370 SUPREME COURT REPORTS ANNOTATED
Kapatiran sa Meat and Canning Division vs. Ferrer-
Calleja
On January 27, 1988, respondent BLR Director Calleja dismissed the
appeal (Annex D).
TUPAS’ motion for reconsideration (Annex E) was denied on March 17,
1988 (Annex F). On April 30, 1988, it filed this petition alleging that the
public respondent acted in excess of her jurisdiction and with grave abuse
of discretion in affirming the Med-Arbiter’s order for a certification
election.
After deliberating on the petition and the documents annexed thereto,
We find no merit in the petition. The public respondent did not err in
dismissing the petitioner’s appeal in BLR Case No. A-12-389-87. This
Court’s decision in Victoriano vs. Elizalde Rope Workers’ Union, 59 SCRA
54, upholding the right of members of the IGLESIA NI KRISTO sect not
to join a labor union for being contrary to their religious beliefs, does not
bar the members of that sect from forming their own union. The public
respondent correctly observed that the “recognition of the tenets of the
sect x x x should not infringe on the basic right of self-organization
granted by the constitution to workers, regardless of religious affiliation.”
The fact that TUPAS was able to negotiate a new CBA with ROBINA
within the 60-day freedom period of the existing CBA, does not foreclose
the right of the rival union, NEW ULO, to challenge TUPAS’ claim to
majority status, by filing a timely petition for certification election on
October 13, 1987 before TUPAS’ old CBA expired on November 15, 1987
and before it signed a new CBA with the company on December 3, 1987.
As pointed out by Med-Arbiter Abdullah, a “certification election is the
best forum in ascertaining the majority status of the contending unions
wherein the workers themselves can freely choose their bargaining
representative thru secret ballot.” Since it has not been shown that this
order is tainted with unfairness, this Court will not thwart the holding of
a certification election (Associated Trade Unions [ATU] vs. Noriel, 88
SCRA 96).
WHEREFORE, the petition for certiorari is denied, with costs against
the petitioner.
SO ORDERED.
Narvasa, Cruz, Gancayco and Medialdea, JJ., concur.
Petition denied.
371
Note.—Collective bargaining which is defined as negotiations towards
a collective agreement, is one of the democratic frameworks under the
New Labor Code, designed to stabilize the relation between labor and
management and to create a climate of sound and stable industrial peace.
(Kiok Loy vs. National Labor Relations Commission, 141 SCRA 179.)
——o0o——
53 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
No. L-25246. September 12, 1974. *
BENJAMIN VICTORIANO, plaintiff-appellee, vs. ELIZALDE ROPE
WORKERS’ UNION and ELIZALDE ROPE FACTORY, INC., defendants,
ELIZALDE ROPE WORKERS’ UNION, defendant-appellant.
Constitutional law; Construction and integration; There is a presumption of
constitutionality in statutes.—All presumptions are indulged in favor of
constitutionality; one who attacks a statute, alleging unconstitutionally, must
prove its invalidity beyond a reasonable doubt; that a law may work hardship
does not render it unconstitutional; that if any reasonable basis may be
conceived which supports the statute, it will be upheld, and the challenger must
negate all possible bases; that the courts are not concerned with the wisdom,
justice, policy, or expediency of a statute; and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation should be adopted.
Same; Right to form or join associations; An employee has the right to join or
not join a labor union.—What the Constitution and the Industrial Peace Act
recognize and guarantee is the “right” to form or join associations.
Notwithstanding the different theories propounded by the different schools of
jurisprudence regarding the nature and contents of a “right”, it can be safely said
that whatever theory one subscribes to, a right comprehends at least two broad
notions, namely: first, liberty or freedom, i.e., the absence of legal restraint,
whereby an employee may act for himself without being prevented by law; and
second, power, whereby an employee may, as he pleases, join or refrain from
joining an association. It is, therefore, the employee who should decide for
Page 92 of 120
himself whether he should join or not an association; and should he choose to
join, he himself makes up his mind as to which association he would join; and
even after he has joined, he still retains the liberty and the power to leave and
cancel his membership with said organization at any time. It is clear, therefore,
that the right to join a union includes the right to abstain from joining any
union.
Same; Same; Labor laws; Unfair labor practice; Right to refrain from joining
labor union limited by the Industrial Peace Act.—The right to refrain from
joining labor organizations recognized by Section 3 of the Industrial Peace Act is,
however, limited. The legal protection granted to such right to refrain from
joining is withdrawal by operation of law, where a labor union and an employer
have agreed on a closed shop, by virtue of which the employer may employ only
members of the collective bargaining union, and the employees must continue to
be members of the union for the duration of the contract in order to keep their
jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by
Republic Act No. 3350, provides that although it would be an unfair labor
practice for an employer “to discriminate in regard to hire or tenure of
employment or any term or condition of employment to encourage or discourage
membership in any labor organization” the employer is, however, not precluded
“from making an agreement with a labor organization to require as a condition of
employment membership therein, if such labor organization is the representative
of the employees.” By virtue,
56
5 SUPREME COURT REPORTS ANNOTATED
6 of-contract clause.—In order to determine whether
Victoriano vs. Elizalde Rope Workers’ Union
therefore, of a closed shop agreement, before the enactment of Republic Act
No. 3350, if any person regardless of his religious beliefs, wishes to be employed
or to keep his employment, he must become a member of the collective
bargaining union. Hence, the right of said employee not to join the labor union is
curtailed and withdrawn.
Same; Same; Same; Same; Exception to closed-shop agreement provided for
employees prohibited by their religion from joining any union.—To that all-
embracing coverage of the closed shop arrangement, Republic Act No. 3350
introduced an exception, when it added to Section 4 (a) (4) of the Industrial Peace
Act the following proviso: “but such agreement shall not cover members of any
religious sects which prohibit affiliation of their members in any such labor
organization”. Republic Act No. 3350 merely excludes ipso jure from the
application and coverage of the closed shop agreement the employees belonging
to any religious sects which prohibit affiliation of their members with any labor
organization. What the exception provides, therefore, is that members of said
religious sects cannot be compelled or coerced to join labor unions even when
said unions have closed shop agreements with the employers; that in spite of any
closed shop agreement, members of said religious sects cannot be refused
employment or dismissed from their jobs on the sole ground that they are not
members of the collective bargaining union.
Same; Impairment of contracts; Prohibition against impairment of contracts
is not absolute.—It should not be over looked that the prohibition to impair the
obligation of contracts is not absolute and unqualified. The prohibition is not to
be read with literal exactness like a mathematical formula, for it prohibits
unreasonable impairment only. In spite of the constitutional prohibition, the
State continues to possess authority to safeguard the vital interests of its people.
Legislation appropriate to safeguarding said interests may modify or abrogate
contracts already in effect. For not only are existing laws read into contracts in
order to fix the obligations as between the parties, but the reservation of
essential attributes of sovereign power is also read into contracts as a postulate
pf the legal order. All contracts made with reference to any matter that is subject
to regulation under the police power must be understood as made in reference to
the possible exercise of that power. Otherwise, important and valuable reforms
may be precluded by the simple device of entering into contracts for the purpose
of doing that which otherwise may be prohibited.
Same; Same; Test for determining whether statute violates the impairment-
57
VOL. 59, SEPTEMBER 12, 1974 5
7
Victoriano vs. Elizalde Rope Workers’ Union
legislation unconstitutionally impairs contract obligations, no unchanging
yardstick, applicable at all times and under all circumstances, by which the
validity of each statute may be measured or determined, has been fashioned, but
every case must be determined upon its own circumstances. Legislation
impairing the obligation of contracts can be sustained when it is enacted for the
promotion of the general good of the people, and when the means adopted to
secure that end are reasonable. Both the end sought and the means adopted
must be legitimate, i.e., within the scope of the reserved power of the state
construed in harmony with the constitutional limitation of that power.
Page 93 of 120
 Same; Same; Republic Act 3350 providing for exemption from closed shop
agreements does not violate the impairment-of-contract clause of the
constitution.—What then was the purpose sought to be achieved by Republic Act
No. 3350? Its purpose was to insure freedom of belief and religion, and to
promote the general welfare by preventing discrimination against those
members of religious sects which prohibit their members from joining labor
unions, confirming thereby their natural, statutory and constitutional right to
work, the fruits of which work are usually the only means whereby they can
maintain their own life and the life of their dependents. It cannot be gainsaid
that said purpose is legitimate. The questioned Act also provides protection to
members of said religious sects against two aggregates of group strength from
which the individual needs protection. The individual employee, at various times
in his working life, is confronted by two aggregates of power—collective labor,
directed by a union, and collective capital, directed by management. The union,
an institution developed to organize labor into a collective force and thus protect
the individual employee from the power of collective capital, is, paradoxically,
both the champion of employee rights, and a new source of their frustration.
Moreover, when the Union interacts with management, it produces yet a third
aggregate of group strength from which the individual also needs protection—the
collective bargaining relationship. It cannot be denied, furthermore, that the
means adopted by the Act to achieve that purpose—exempting the members of
said religious sects from coverage of union security agreements—is reasonable.
Same; Same; Religious freedom; Freedom of religion takes precedence over
the right against the impairment of contracts.—It may not be amiss to point out
here that the free exercise of religious profession or belief is superior to contract
rights. In case of conflict, the latter must, therefore, yield to the former. The
Supreme Court of the United States has also declared on several occasions that
the rights in the First Amendment, which include freedom of religion,
58
5 SUPREME COURT REPORTS ANNOTATED
8 Same; Equal protection of the law; Republic Act 3350 does not violate the
Victoriano vs. Elizalde Rope Workers‘ Union
enjoy a preferred position in the constitutional system. Religious freedom,
although not unlimited, is a fundamental personal right and liberty, and has a
preferred position in the hierarchy of values. Contractual rights, therefore, must
yield to freedom of religion. It is only where unavoidably necessary to prevent an
immediate and grave danger to the security and welfare of the community that
infringement of religious freedom may be justified, and only to the smallest
extent necessary to avoid the danger.
Same; Same; Same; Republic Act 3350 does not advance or diminish the
interest of any particular religion.—The primary effects of the exemption from
closed shop agreements in favor of members of religious sects that prohibit their
members from affiliating with a labor organization, is the protection of said
employees against the aggregate force of the collective bargaining agreement,
and relieving certain citizens of a burden on their religious beliefs; and by’
eliminating to a certain extent economic insecurity due to unemployment, which
is a serious menace to the health, morals, and welfare of the people of the State,
the Act also promotes the well-being of society. It is our view that the exemption
from the effects of closed shop agreement does not directly advance, or diminish,
the interests of any particular religion. Although the exemption may benefit
those who are members of religious sects that prohibit their members from
joining labor unions, the benefit upon the religious sects is merely incidental and
indirect. The “establishment clause” (of religion) does not ban regulation on
conduct whose reason or effect merely happens to coincide or harmonize with the
tenets of some or all religions. The free exercise clause of the Constitution has
been interpreted to require that religious exercise be preferentially aided.
Same; Same; Same; Republic Act 3350 does not require religious test for the
exercise of civil or political right—The Act does not require as a qualification, or
condition, for joining any lawful association membership in any particular
religion or in any religious sect; neither does the Act require affiliation with a
religious sect that prohibits its members from joining a labor union as a
condition or qualification for withdrawing from a labor union. Joining or
withdrawing from a labor union requires a positive act. Republic Act No. 3350
only exempts members with such religious affiliation from the coverage of closed
shop agreements. So, under this Act, a religious objector is not required to do a
positive act—to exercise the right to join or to resign from the union. He is
exempted ipso jure without need of any positive act on his part.
equal protection of the law clause of the constitution.—We
59
VOL. 59, SEPTEMBER 12, 1974 5
9
Victoriano vs. Elizalde Rope Workers’ Union
believe that Republic Act No. 3350 satisfies the aforementioned
requirements. The Act classifies employees and workers, as to the effect and
Page 94 of 120
coverage of union shop security agreements, into those who by reason of their
religious beliefs and convictions cannot sign up with a labor union, and those
whose religion does not prohibit membership in labor unions. The classification
rests on real or substantial, not merely imaginary or whimsical, distinction. The
classification introduced by said Act is also germane to its purpose. The purpose
of the law is precisely to avoid those who cannot, because of their religious belief,
join labor unions, from being deprived of their right to work and from being
dismissed from their work because of union shop security agreements.
Same; Social justice; Republic Act 3350 does not violate the concept of social
justice contained in the Constitution.—Appellant’s further contention that
Republic Act No. 3350 violates the constitutional provision on social justice is
also baseless. Social justice is intended to promote the welfare of all the people.
Republic Act No. 3350 promotes that welfare insofar as it looks after the welfare
of those who, because of their religious belief, cannot join labor unions; the Act
prevents their being deprived of work and of the means of livelihood. In
determining whether any particular measure is for public advantage, it is not
necessary that the entire state be directly benefited—it is sufficient that a
portion of the state be benefited thereby.
Same; Construction and interpretation; Statute is not unconstitutional
merely because it is not proper, necessary or denimble.—Appellant contends that
the amendment introduced by Republic Act No. 3350 is not called for—in other
words, the Act is not proper, necessary or desirable. Anent this matter, it has
been held that a statute which is not necessary is not, for that reason,
unconstitutional; that in determining the constitutional validity of legislation,
the courts are unconcerned with issues as to the necessity for the enactment of
the legislation in question. Courts do inquire into the wisdom of laws. Moreover,
legislatures, being chosen by the people, are presumed to understand and
correctly appreciate the needs of the people, and it may change the laws
accordingly.
Labor law; Labor dispute; Attorney’s fees; Case at bar, labor union liable for
attorney’s fees.—That there was a labor dispute in the instant case cannot be
disputed, for appellant sought the discharge of respondent by virtue of the closed
shop agreement and under Section 2 (j) of Republic Act No. 875 a question
involving tenure of employment is included in the term “labor dispute”. The
discharge or the act of seeking it is the labor dispute itself. It being the labor
60
6 SUPREME COURT REPORTS ANNOTATED
0 standards. There was this qualification though: “But between the freedom of
Victoriano vs. Elizalde Rope Workers’ Union
dispute itself, that very same act of the Union in asking the employer to
dismiss Appellee cannot be “an act done x x x in furtherance of an industrial
dispute”. The mere fact that appellant is a labor union does not necessarily mean
that all its acts are in furtherance of an industrial dispute. Neither does Article
2208 of the Civil Code, invoked by the Union, serve as its shield. The article
provides that attorney’s fees and expenses of litigation may be awarded “when
the defendant’s act or omission has compelled the plaintiff x x x to incur expenses
to protect his interest”; and “in any other case where the court deems it just and
equitable that attorney’s fees and expenses of litigation should be recovered”. In
the instant case, it cannot be gainsaid that appellant Union’s act in demanding
Appellee’s dismissal caused Appellee to incur expenses to prevent his being
dismissed from his job.
Fernando, J.: Concurring
Constitutional law; Religious freedom; Religious freedom stressed.—
Religious freedom is identified with the liberty every individual possesses to
worship or not a Supreme Being, and if a devotee of any sect, to any act in
accordance with its creed. This is constitutionally safeguarded, according to
Justice Laurel, that “profession of faith to an active power that binds and
elevates man to his Creator * * *.” The choice of what a man wishes to believe in
is his and his alone. That is a domain left untouched, where intrusion is not
allowed, a citadel to which the law is denied entry, whatever be his thoughts or
hopes. In that sphere, what he wills reigns supreme. The doctrine to which he
pays fealty may for some be unsupported by evidence, devoid of rational
foundation. No matter. There is no requirement as to its conformity to what has
found acceptance. It suffices that for him such a concept holds undisputed sway.
That is a recognition of man’s freedom. That for him is one of the ways of self-
realization. It would be to disregard the dignity that attaches to every human
being to deprive him of such an attribute. The “fixed star on our constitutional
constellation,” to borrow the felicitous phrase of Justice Jackson, is that no
official, not excluding the highest, has it in his power to prescribe what shall be
orthodox in matters of conscience—or to mundane affairs, for that matter.
Same; Same; Limitations on religious freedom cited.—One may believe in
most anything, however strange, bizarre and unreasonable the same may appear
to others, even heretical when weighed in the scales of orthodoxy or doctrinal
Page 95 of 120
belief and the exercise of said belief, there is quite a stretch of road to travel. If
the exercise of said religious belief clashes with the established
61
VOL. 59, SEPTEMBER 12, 1974 6 Elizalde Rope Factory, Inc. (hereinafter referred to as Company) since
1 1958. As such employee, he was a member of the Elizalde Rope Workers’
Victoriano vs. Elizalde Rope Workers’ Union
institutions of society and with the law, then the former must yield, and give
way to the latter. The Government steps in and either restrains said exercise or
even prosecutes the one exercising it.”
Same; Same; Republic Act 3350 does not diminish protection to labor.—
There is, however, the question of whether such an exception possesses an
implication that lessens the effectiveness of state efforts to protect labor,
likewise, as noted, constitutionally ordained. Such a view, on the surface, may
not be lacking in plausibility, but upon closer analysis, it cannot stand scrutiny.
Thought must be given to the freedom of association, likewise an aspect of
intellectual liberty. For the late Professor Howe, a constitutionalist and in his
lifetime the biographer of the great Holmes, it even partakes of the political
theory of pluralistic sovereignty. So great is the respect for the autonomy
accorded voluntary societies. Such a right implies at the very least that one can
determine for himself whether or not he should join or refrain from joining a
labor organization, an institutional device for promoting the welfare of the
working man. A closed shop, on the other hand, is inherently coercive. That is
why, as is unmistakably reflected in our decisions, the latest of which is Guijarno
v. Court of Industrial Relations, it is far from being a favorite of the law. For a
statutory provision then to further curtail its operation, is precisely to follow the
dictates of sound public policy.
APPEAL from a decision of the Court of First Instance of Manila.
The facts are stated in the opinion of the Court.
Salonga, Ordoñez, Yap, Sicat & Associates for plaintiff-appellee.
Cipriano Cid & Associates for defendant-appellant.
ZALDIVAR, J.,:
Appeal to this Court on purely questions of law from the decision of the
Court of First Instance of Manila in its Civil Case No. 58894.
The undisputed facts that spawned the instant case follow: Benjamin
Victoriano (hereinafter referred to as Appellee), a member of the religious
sect known as the “Iglesia ni Cristo”, had been in the employ of the
Union (hereinafter referred to as Union) which had with the
62
62 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
Company a collective bargaining agreement containing a closed shop
provision which reads as follows:
“Membership in the Union shall be required as a condition of employment for all
permanent employees workers covered by this Agreement.”
The collective bargaining agreement expired on March 3, 1964 but was
renewed the following day, March 4, 1964.
Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its
amendment by Republic Act No. 3350, the employer was not precluded
“from making an agreement with a labor organization to require as a
condition of employment membership therein, if such labor organization is
the representative of the employees.” On June 18, 1961, however,
Republic Act No. 3350 was enacted, introducing an amendment to
paragraph (4) subsection (a) of section 4 of Republic Act No. 875, as
follows: xxx “but such agreement shall not cover members of any religious
sects which prohibit affiliation of their members in any such labor
organization”.
Being a member of a religious sect that prohibits the affiliation of its
members with any labor organization, Appellee presented his resignation
to appellant Union in 1962, and when no action was taken thereon, he
reiterated his resignation on September 3, 1974. Thereupon, the Union
wrote a formal letter to the Company asking the latter to separate
Appellee from the service in view of the fact that he was resigning from
the Union as a member. The management of the Company in turn notified
Appellee and his counsel that unless the Appellee could achieve a
satisfactory arrangement with the Union, the Company would be
constrained to dismiss him from the service. This prompted Appellee to
Page 96 of 120
file an action for injunction, docketed as Civil Case No. 58894 in the Court
of First Instance of Manila to enjoin the Company and the Union from
dismissing Appellee. In its answer, the Union invoked the “union security
1 the Union is obliged to comply with its collective bargaining agreement
clause” of the collective bargaining agreement; assailed the
constitutionality of Republic Act No. 3350; and contended that the Court
had no jurisdiction over the case, pursuant to Republic Act No. 875,
Sections 24 and 9 (d) and (e). Upon the facts agreed upon by the parties
2 furthermore,
during the
63
VOL. 59, SEPTEMBER 12, 1974 63
Victoriano vs. Elizalde Rope Workers’ Union
pre-trial conference, the Court a quo rendered its decision on August
26,1965, the dispositive portion of which reads:
“IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant
Elizalde Rope Factory, Inc. from dismissing the plaintiff from his present
employment and sentencing the defendant Elizalde Rope Workers’ Union to pay
the plaintiff P500 for attorney’s fees and the costs of this action.”
3
From this decision, the Union appealed directly to this Court on purely
questions of law, assigning the following errors:
1. “I.That the lower court erred when it did not rule that Republic Act No.
3350 is unconstitutional.
2. “II.That the lower court erred when it sentenced appellant herein to pay
plaintiff the sum of P500 as attorney’s fees and the cost thereof.”
In support of the alleged unconstitutionality of Republic Act No. 3350, the
Union contented, firstly, that the Act infringes on the fundamental right
to form lawful associations; that “the very phraseology of said Republic
Act 3350, that membership in a labor organization is banned to all those
belonging to such religious sect prohibiting affiliation with any labor
organization” , “prohibits all the members of a given religious sect from
4
joining any labor union if such sect prohibits affiliations of their members
thereto” ; and, consequently, deprives said members of their constitutional
5
right to form or join lawful associations or organizations guaranteed by
the Bill of Rights, and thus becomes obnoxious to Article III, Section 1 (6)
of the 1935 Constitution.6
Secondly, the Union contended that Republic Act No. 3350 is
unconstitutional for impairing the obligation of contracts in that, while
containing a “closed shop provision,” the Act relieves the employer from its
reciprocal obligation of cooperating in the maintenance of union
membership as a condition of employment; and that said Act,
64
64 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
impairs the Union’s rights as it deprives the union of dues from members
who, under the Act, are relieved from the obligation to continue as such
members. 7
Thirdly, the Union contended that Republic Act No. 3350
discriminatorily favors those religious sects which ban their members
from joining labor unions, in violation of Article III, Section 1 (7) of the
1935 Constitution; and while said Act unduly protects certain religious
sects, it leaves no rights or protection to labor organizations.8
Fourthly, Republic Act No. 3350, asserted the Union, violates the
constitutional provision that “no religious test shall be required for the
exercise of a civil right,” in that the laborer’s exercise of his civil right to
join associations for purposes not contrary to law has to be determined
under the Act by his affiliation with a religious sect; that conversely, if a
worker has to sever his religious connection with a sect that prohibits
membership in a labor organization in order to be able to join a labor
organization, said Act would violate religious freedom. 9
Fifthly, the Union contended that Republic Act No. 3350, violates the
“equal protection of laws” clause of the Constitution, it being a
discriminatory legislation, inasmuch as by exempting from the operation
of closed shop agreement the members of the “Iglesia ni Cristo”, it has
granted said members undue advantages over their fellow workers, for
while the Act exempts them from union obligation and liability, it
nevertheless entitles them at the same time to the enjoyment of all
concessions, benefits and other emoluments that the union might secure
from the employer. 10
Page 97 of 120
 Sixthly, the Union contended that Republic Act No. 3350 violates the
constitutional provision regarding the promotion of social justice. 11
Appellant Union, furthermore, asserted that a “closed shop provision”
in a collective bargaining agreement cannot be considered violative of
religious freedom, as to call for the amendment introduced by Republic
Act No. 3350; and that
12
65
VOL. 59, SEPTEMBER 12, 1974 65
Victoriano vs. Elizalde Rope Workers’ Union
unless Republic Act No. 3350 is declared unconstitutional, trade unionism
in this country would be wiped out as employers would prefer to hire or
employ members of the Iglesia ni Cristo in order to do away with labor
organizations. 13
Appellee, assailing appellant’s arguments, contended that Republic Act
No. 3350 does not violate the right to form lawful associations, for the
right to join associations includes the right not to join or to resign from a
labor organization, if one’s conscience does not allow his membership
therein, and the Act has given substance to such right by prohibiting the
compulsion of workers to join labor organizations; that said Act does not
14
impair the obligation of contracts for said law formed part of, and was
incorporated into, the terms of the closed shop agreement; that the Act
15
does not violate the establishment of religion clause or separation of
Church and State, for Congress, in enacting said law, merely
accommodated the religious needs of those workers whose religion
prohibits its members from joining labor unions, and balanced the
collective rights of organized labor with the constitutional right of an
individual to freely exercise his chosen religion; that the constitutional
right to the free exercise of one’s religion has primacy and preference over
union security measures which are merely contractual ; that said Act does
16
not violate the constitutional provision of equal protection, for the
classification of workers under the Act depending on their religious tenets
is based on substantial distinction, is germane to the purpose of the law,
and applies to all the members of a given class; that said Act, finally,
17
does not violate the social justice policy of the Constitution, for said Act
was enacted precisely to equalize employment opportunities for all
citizens in the midst of the diversities of their religious beliefs.
18
I. Before We proceed to the discussion of the first assigned al., 205 F 2d
58, and Wicks v. Southern Pacific Co., D.C. Cal., 121 F. Supp. 454; Jenson
v. Union Pacific R. Co., et al., 121F. Supp. 454.
66 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
error, it is necessary to premise that there are some thoroughly
established principles which must be followed in all cases where questions
of constitutionality as obtains in the instant case are involved. All
presumptions are indulged in favor of constitutionality; one who attacks a
statute, alleging unconstitutionality must prove its invalidity beyond a
reasonable doubt; that a law may work hardship does not render it
unconstitutional; that if any reasonable basis may be conceived which
supports the statute, it will be upheld, and the challenger must negate all
possible bases; that the courts are not concerned with the wisdom, justice,
policy, or expediency of a statute; and that a liberal interpretation of the
constitution in favor of the constitutionality of legislation should be
adopted.19
1. Appellant Union’s contention that Republic Act No.
3350 prohibits and bans the members of such religious sects that forbid
affiliation of their members with labor unions from joining labor unions
appears nowhere in the wording of Republic Act No. 3350; neither can the
same be deduced by necessary implication therefrom. It is not surprising,
therefore, that appellant, having thus misread the Act, committed the
error of contending that said Act is obnoxious to the constitutional
provision on freedom of association.
Both the Constitution and Republic Act No. 875 recognize freedom of
association. Section 1 (6) of Article III of the Constitution of 1935, as well
as Section 7 of Article IV of the Constitution of 1973, provide that the
right to form associations or societies for purposes not contrary to law
shall not be abridged. Section 3 of Republic Act No. 875 provides that
employees shall have the right to self-organization and to form, join of
assist labor organizations of their own choosing for the purpose of
collective bargaining and to engage in concerted activities for the purpose
Page 98 of 120
of collective bargaining and other mutual aid or protection. What the
Constitution and the Industrial Peace Act recognize and guarantee is the
“right” to form or join associations. Notwithstanding the different theories
propounded by the different schools of jurisprudence regarding the nature
and contents of a “right”, it can be safely said that whatever theory one
subscribes to, a right comprehends at least two broad notions, namely:
first, liberty
67
VOL. 59, SEPTEMBER 12, 1974 67
Victoriano vs. Elizalde Rope Workers‘ Union
or freedom, Le., the absence of legal restraint, whereby an employee may
act for himself without being prevented by law; and second, power,
whereby an employee may, as he pleases, join or refrain from joining an
association. It is, therefore, the employee who should decide for himself
whether he should join or not an association; and should he choose to join,
he himself makes up his mind as to which association he would join; and
even after he has joined, he still retains the liberty and the power to leave
and cancel his membership with said organization at any time. It is clear,
20
therefore, that the right to join a union includes the right to abstain from
joining any union. Inasmuch as what both the Constitution and the
21
Industrial Peace Act have recognized, and guaranteed to the employee, is
the “right” to join associations of his choice, it would be absurd to say that
the law also imposes, in the same breath, upon the employee the duty to
join associations. The law does not enjoin an employee to sign up with any
association.
The right to refrain from joining labor organizations recognized by
Section 3 of the Industrial Peace Act is, however, limited. The legal
protection granted to such right to refrain from joining is withdrawn by
operation of law, where a labor union and an employer have agreed on a
closed shop, by virtue of which the employer may employ only members of
the collective bargaining union, and the employees must continue to be
members of the union for the duration of the contract in order to keep
their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its
amendment by Republic Act No. 3350, provides that although it would be
an unfair labor practice for an employer “to discriminate in regard to hire
or tenure of employment or any term or condition of employment to
encourage or discourage membership in any labor organization” the
employer is, however, not precluded “from making an agreement with a
labor organization to require as a condition of employment membership
therein, if such labor organization is the representative of the employees”.
By virtue, therefore, of a closed shop agreement, before the enactment of
68
68 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
Republic Act No. 3350, if any person, regardless of his religious beliefs,
wishes to be employed or to keep his employment, he must become a
member of the collective bargaining union. Hence, the right of said
employee not to join the labor union is curtailed and withdrawn.
To that all-embracing coverage of the closed shop arrangement,
Republic Act No. 3350 introduced an exception, when it added to Section 4
(a) (4) of the Industrial Peace Act the following proviso: “but such
agreement shall not cover members of any religious sects which prohibit
affiliation of their members in any such labor organization”. Republic Act
No. 3350 merely excludes ipso jure from the application and coverage of
the closed shop agreement the employees belonging to any religious sects
which prohibit affiliation of their members with any labor organization.
What the exception provides, therefore, is that members of said religious
sects cannot be compelled or coerced to join labor unions even when said
unions have closed shop agreements with the employers; that in spite of
any closed shop agreement, members of said religious sects cannot be
refused employment or dismissed from their jobs on the sole ground that
they are not members of the collective bargaining union. It is clear,
therefore, that the assailed Act, far from infringing the constitutional
provision on freedom of association, upholds and reinforces it. It does not
prohibit the members of said religious sects from affiliating with labor
unions. It still leaves to said members the liberty and the power to
affiliate, or not to affiliate, with labor unions. If, notwithstanding their
religious beliefs, the members of said religious sects prefer to sign up with
the labor union, they can do so. If in deference and fealty to their religious
faith, they refuse to sign up, they can do so; the law does not coerce them
Page 99 of 120
to join; neither does the law prohibit them from joining; and neither may
the employer or labor union compel them to join. Republic Act No. 3350,
therefore, does not violate the constitutional provision on freedom of
association.
2. Appellant Union also contends that the Act is unconstitutional for
impairing the obligation of its contract, specifically, the “union security
clause” embodied in its Collective Bargaining Agreement with the
Company, by virtue of which “membership in the union was required as a
condition for employment for all permanent employees workers”. This
agreement was already in existence at the time Republic Act
69
VOL. 59, SEPTEMBER 12, 1974 69
Victoriano vs. Elizalde Rope Workers‘ Union
No. 3350 was enacted on June 18, 1961, and it cannot, therefore, be
deemed to have been incorporated into the agreement. But by reason of
this amendment, Appellee, as well as others similarly situated, could no
longer be dismissed from his job even if he should cease to be a member,
or disaffiliate from the Union, and the Company could continue employing
him notwithstanding his disaffiliation from the Union. The Act, therefore,
introduced a change into the express terms of the union security clause;
the Company was partly absolved by law from the contractual obligation
it had with the Union of employing only Union members in permanent
positions. It cannot be denied, therefore, that there was indeed an
impairment of said union security clause.
According to Black, any statute which introduces a change into the
express terms of the contract, or its legal construction, or its validity, or
its discharge, or the remedy for its enforcement, impairs the contract. The
extent of the change is not material. It is not a question of degree or
manner or cause, but of encroaching in any respect on its obligation or
dispensing with any part of its force. There is an impairment of the
contract if either party is absolved by law from its
performance. Impairment has also been predicated on laws which,
22
without destroying contracts, derogate from substantial contractual
rights.23
It should not be overlooked, however, that the prohibition to impair the
obligation of contracts is not absolute and unqualified. The prohibition is
general, affording a broad outline and requiring construction to fill in the
details. The prohibition is not to be read with literal exactness like a
mathematical formula, for it prohibits unreasonable impairment only. In 24
spite of the constitutional prohibition, the State continues to possess
authority to safeguard the vital interests of its people. Legislation
appropriate to safeguarding said interests may modify or abrogate
contracts already in effect. For not only are existing laws read into
25
contracts in
70 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers‘ Union
order to fix the obligations as between the parties, but the reservation of
essential attributes of sovereign power is also read into contracts as a
postulate of the legal order. All contracts made with reference to any
matter that is subject to regulation under the police power must be
understood as made in reference to the possible exercise of that
power. Otherwise, important and valuable reforms may be precluded by
26
the simple device of entering into contracts for the purpose of doing that
which otherwise may be prohibited. The policy of protecting contracts
against impairment presupposes the maintenance of a government by
virtue of which contractual relations are worthwhile—a government
which retains adequate authority to secure the peace and good order of
society. The contract clause of the Constitution must, therefore, be not
only in harmony with, but also in subordination to, in appropriate
instances, the reserved power of the state to safeguard the vital interests
of the people. It follows that not all legislations, which have the effect of
impairing a contract, are obnoxious to the constitutional prohibition as to
impairment, and a statute passed in the legitimate exercise of police
power, although it incidentally destroys existing contract rights, must be
upheld by the courts. This has special application to contracts regulating
relations between capital and labor which are not merely contractual, and
said labor contracts, for being impressed with public interest, must yield
to the common good. 27
Page 100 of 120
 In several occasions this Court declared that the prohibition against
impairing the obligations of contracts has no application to statutes
relating to public subjects within the domain of the general legislative
powers of the state involving public welfare. Thus, this Court also held
28
that the Blue Sunday Law was not an infringement of the obligation of a
contract that required the employer to furnish work on Sundays to his
employees, the law having been enacted to secure the well-being and
happiness of the laboring class, and
71
VOL. 59, SEPTEMBER 12, 1974 71
Victoriano vs. Elizalde Rope Workers’ Union
being, furthermore, a legitimate exercise of the police power.
29
In order to determine whether legislation unconstitutionally impairs
contract obligations, no unchanging yardstick, applicable at all times and
under all circumstances, by which the validity of each statute may be
measured or determined, has been fashioned,, but every case must be
determined upon its own circumstances. Legislation impairing the
obligation of contracts can be sustained when it is enacted for the
promotion of the general good of the people, and when the means adopted
to secure that end are reasonable. Both the end sought and the means
adopted must be legitimate, i.e., within the scope of the reserved power of
the state construed in harmony with the constitutional limitation of that
power. 30
What then was the purpose sought to be achieved by Republic Act No.
3350? Its purpose was to insure freedom of belief and religion, and to
promote the general welfare by preventing discrimination against those
members of religious sects which prohibit their members from joining
labor unions, confirming thereby their natural, statutory and
constitutional right to work, the fruits of which work are usually the only
means whereby they can maintain their own life and the life of their
dependents. It cannot be gainsaid that said purpose is legitimate.
The questioned Act also provides protection to members of said
religious sects against two aggregates of group strength from which the
individual needs protection. The individual employee, at various times in
his working life, is confronted by two aggregates of power—collective
labor, directed by a union, and collective capital, directed by management.
The union, an institution developed to organize labor into a collective force
and thus protect the individual employee from the power of collective
capital, is, paradoxically, both the champion of employee rights, and a new
source of their frustration. Moreover, when the Union interacts with
management, it produces yet a third aggregate of group strength from
which the individual also needs protection—the
72
72 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
collective bargaining relationship. 31
The aforementioned purpose of the amendatory law is clearly seen in
the Explanatory Note to House Bill No. 5859, which later became
Republic Act No. 3350, as follows:
“It would be unthinkable indeed to refuse employing a person who, on account of
his religious beliefs and convictions, cannot accept membership in a labor
organization although he possesses all the qualifications for the job. This is
tantamount to punishing such person for believing in a doctrine he has a right
under the law to believe in. The law would not allow discrimination to flourish to
the detriment of those whose religion discards membership in any labor
organization. Likewise, the law would not commend the deprivation of their right
to work and pursue a modest means of livelihood, without in any manner
violating their religious faith and/or belief.”
32
It cannot be denied, furthermore, that the means adopted by the Act to
achieve that purpose—exempting the members of said religious sects from
coverage of union security agreements—is reasonable.
It may not be amiss to point out here that the free exercise of religious
profession or belief is superior to contract rights. In case of conflict, the
latter must, therefore, yield to the former. The Supreme Court of the
United States has also declared on several occasions that the rights in the
First Amendment, which include freedom of religion, enjoy a preferred
position in the constitutional system. Religious freedom, although not
33
unlimited, is a fundamental personal right and liberty, and has a 34
preferred position in the hierarchy of values. Contractual rights,
therefore, must yield to freedom of religion. It is only where unavoidably
Page 101 of 120
necessary to prevent an immediate and grave danger to the security and
welfare of the community that infringement of religious freedom may be
justified, and only to the smallest extent necessary to avoid the danger.
73
VOL. 59, SEPTEMBER 12, 1974 73
Victoriano vs. Elizalde Rope Workers’ Union
3. In further support of its contention that Republic Act No. 3350 is
unconstitutional, appellant Union averred that said Act discriminates in
favor of members of said religious sects in violation of Section 1 (7) of
Article III of the 1935 Constitution, and which is now Section 8 of Article
IV of the 1973 Constitution, which provides:
“No law shall be made respecting an establishment of religion, or prohibiting the
free exercise thereof, and the free exercise and enjoyment of religious profession
and worship, without discrimination and preference, shall forever be allowed. No
religious test shall be required for the exercise of civil or political rights.”
The constitutional provision into only prohibits legislation for the support
of any religious tenets or the modes of worship of any sect, thus
forestalling compulsion by law of the acceptance of any creed or the
practice of any form of worship, but also assures the free exercise of one’s
35
chosen form of religion within limits of utmost amplitude. It has been said
that the religion clauses of the Constitution are all designed to protect the
broadest possible liberty of conscience, to allow each man to believe as his
conscience directs, to profess his beliefs, and to live as he believes he
ought to live, consistent with the liberty of others and with the common
good. Any legislation whose effect or purpose is to impede the observance
36
of one or all religions, or to discriminate invidiously between the religions,
is invalid, even though the burden may be characterized as being only
indirect. But if the stage regulates conduct by enacting, within its power,
37
a general law which has for its purpose and effect to advance the state’s
secular goals, the statute is valid despite its indirect burden on religious
observance, unless the state can accomplish its purpose without imposing
such burden. 38
In Aglipay v. Ruiz , this Court had occasion to state that the
39
________________
74 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
government should not be precluded from pursuing valid objectives
secular in character even if the incidental result would be favorable to a
religion or sect. It has likewise been held that the statute, in order to
withstand the strictures of constitutional prohibition, must have a secular
legislative purpose and a primary effect that neither advances nor inhibits
religion. Assessed by these criteria, Republic Act No. 3350 cannot be said
40
to violate the constitutional inhibition of the “no-establishment” (of
religion) clause of the Constitution.
The purpose of Republic Act No. 3350 is secular, worldly, and temporal,
not spiritual or religious or holy and eternal. It was intended to serve the
secular purpose of advancing the constitutional right to the free exercise
of religion, by averting that certain persons be refused work, or be
dismissed from work, or be dispossessed of their right to work and of being
impeded to pursue a modest means of livelihood, by reason of union
security agreements. To help its citizens to find gainful employment
whereby they can make a living to support themselves and their families
is a valid objective of the state. In fact, the state is enjoined, in the 1935
Constitution, to afford protection to labor, and regulate the relations
between labor and capital and industry. More so now in the 1973
41
Constitution where it is mandated that “the State shall afford protection
to labor, promote full employment and equality in employment, ensure
equal work opportunities regardless of sex, race or creed and regulate the
relation between workers and employers.” 42
The primary effects of the exemption from closed shop agreements in
favor of members of religious sects that prohibit their members from
affiliating with a labor organization, is the protection of said employees
against the aggregate force of the collective bargaining agreement, and
relieving certain citizens of a burden on their religious beliefs; and by
eliminating to a certain extent economic insecurity due to unemployment,
which is a serious menace to the health, morals, and welfare of the people
of the State, the Act also promotes the well-being of society. It is our view
that the exemption from the effects of
75
Page 102 of 120
 VOL. 59, SEPTEMBER 12, 1974 75
Victoriano vs. Elizalde Rope Workers’ Union
closed shop agreement does not directly advance, or diminish, the
interests of any particular religion. Although the exemption may benefit
those who are members of religious sects that prohibit their members
from joining labor unions, the benefit upon the religious sects is merely
incidental and indirect. The “establishment clause” (of religion) does not
ban regulation on conduct whose reason or effect merely happens to
coincide or harmonize with the tenets of some or all religions. The free
43
exercise clause of the Constitution has been interpreted to require that
religious exercise be preferentially aided. 44
We believe that in enacting Republic Act No. 3350, Congress acted
consistently with the spirit of the constitutional provision. It acted merely
to relieve the exercise of religion, by certain persons, of a burden that is
imposed by union security agreements. It was Congress itself that
imposed that burden when it enacted the Industrial Peace Act (Republic
Act 875), and, certainly, Congress, if it so deems advisable, could take
away the same burden. It is certain that not every conscience can be
accommodated by all the laws of the land; but when general laws conflict
with scrupples of conscience, exemptions ought to be granted unless some
“compelling state interest” intervenes. In the instant case, We see no
45
such compelling state interest to withhold exemption.
Appellant bewails that while Republic Act No. 3350 protects members
of certain religious sects, it leaves no right to, and is silent as to the
protection of, labor organizations. The purpose of Republic Act No. 3350
was not to grant rights to labor unions. The rights of labor unions are
amply provided for in Republic Act No. 875 and the new Labor Code. As to
the lamented silence of the Act regarding the rights and protection of
labor unions, suffice it to say, first, that the validity of a statute is
determined by its provisions, not by its silence ; and,
46
76 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
second, the fact that the law may work hardship does not render it
unconstitutional.47
It would not be amiss to state, regarding this matter, that to compel
persons to join and remain members of a union to keep their jobs in
violation of their religious scrupples, would hurt, rather than help, labor
unions. Congress has seen it fit to exempt religious objectors lest their
resistance spread to other workers, for religious objections have
contagious potentialities more than political and philosophic objections.
Furthermore, let it be noted that coerced unity and loyalty even to the
country, and a fortiori to a labor union—assuming that such unity and
loyalty can be attained through coercion—is not a goal that is
constitutionally obtainable at the expense of religious liberty. A desirable
48
end cannot be promoted by prohibited means.
4. Appellants’ fourth contention, that Republic Act No. 3350 violates
the constitutional prohibition against requiring a religious test for the
exercise of a civil right or a political right, is not well taken. The Act does
not require as a qualification, or condition, for joining any lawful
association membership in any particular religion or in any religious sect;
neither does the Act require affiliation with a religious sect that prohibits
its members from joining a labor union as a condition or qualification for
withdrawing from a labor union. Joining or withdrawing from a labor
union requires a positive act. Republic Act No. 3350 only exempts
members with such religious affiliation from the coverage of closed shop
agreements. So, under this Act, a religious objector is not required to do a
positive act—to exercise the right to join or to resign from the union. He is
exempted ipso jure without need of any positive act on his part. A
conscientious religious objector need not perform a positive act or exercise
the right of resigning from the labor union—he is exempted from the
coverage of any closed shop agreement that a labor union may have
entered into. How then can there be a religious test required for the
exercise of a right when no right need be exercised?
We have said that it was within the police power of the State to enact
Republic Act No. 3350, and that its purpose was legal and in consonance
with the Constitution. It is never an illegal evasion of a constitutional
provision or prohibition to accomplish a desired result, which is lawful in
itself, by discovering or following a legal way to do it.
49
Page 103 of 120
 5. Appellant avers as its fifth ground that Republic Act No. 3350 is a
discriminatory legislation, inasmuch as it grants to the members of
certain religious sects undue advantages over other workers, thus
violating Section 1 of Article III of the 1935 Constitution which forbids the
denial to any person of the equal protection of the laws. 50
The guaranty of equal protection of the laws is not a guaranty of
equality in the application of the laws upon all citizens of the state. It is
not, therefore, a requirement, in order to avoid the constitutional
prohibition against inequality, that every man, woman and child should
be affected alike by a statute. Equality of operation of statutes does not
mean indiscriminate operation on persons merely as such, but on persons
according to the circumstances surrounding them. It guarantees equality,
not identity of rights. The Constitution does not require that things which
are different in fact be treated in law as though they were the same. The
equal protection clause does not forbid discrimination as to things that are
different. It does not prohibit legislation which is limited either in the
51
object to which it is directed or by the territory within which it is to
operate.
The equal protection of the laws clause of the Constitution allows
classification. Classification in law, as in the other departments of
knowledge or practice, is the grouping of things in speculation or practice
because they agree with one another in certain particulars. A law is not
invalid because of simple inequality. The very idea of classification is that
52
of inequality, so that it goes without saying that the mere fact of
inequality in no manner determines the matter of
78 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
constitutionality. All that is required of a valid classification is that it be
53
reasonable, which means that the classification should be based on
substantial distinctions which make for real differences; that it must be
germane to the purpose of the law; that it must not be limited to existing
conditions only; and that it must apply equally to each member of the
class. This Court has held that the standard is satisfied if the
54
classification or distinction is based on a reasonable foundation or rational
basis and is not palpably arbitrary.55
In the exercise of its power to make classifications for the purpose of
enacting laws over matters within its jurisdiction, the state is recognized
as enjoying a wide range of discretion. It is not necessary that the
56
classification be based on scientific or marked differences of things or in
their relation. Neither is it necessary that the classification be made with
57
mathematical nicety. Hence legislative classification may in many cases
58
properly rest on narrow distinctions, for the equal protection guaranty
59
does not preclude the legislature from recognizing degrees of evil or harm,
and legislation is addressed to evils as they may appear.
We believe that Republic Act No. 3350 satisfies the aforementioned
requirements. The Act classifies employees and workers, as to the effect
and coverage of union shop security agreements, into those who by reason
of their religious beliefs and convictions cannot sign up with a labor union,
and those whose religion does not prohibit membership in labor unions.
The classification rests on real or substantial, not merely imaginary or
whimsical, distinctions. There is such real distinction in the beliefs,
feelings and sentiments of employees. Employees do not believe in the
same religious faith and different religions differ in their dogmas and
cannons.
VOL. 59, SEPTEMBER 12, 1974 79
Victoriano vs. Elizalde Rope Workers’ Union
Religious beliefs, manifestations and practices, though they are found in
all places, and in all times, take so many varied forms as to be almost
beyond imagination. There are many views that comprise the broad
spectrum of religious beliefs among the people. There are diverse manners
in which beliefs, equally paramount in the lives of their possessors, may
be articulated. Today the country is far more heterogenous in religion
than before, differences in religion do exist, and these differences are
important and should not be ignored.
Even from the phychological point of view, the classification is based on
real and important differences. Religious beliefs are not mere beliefs, mere
ideas existing only in the mind, for they carry with them practical
Page 104 of 120
consequences and are the motives of certain rules of human conduct and
the justification of certain acts. Religious sentiment makes a man view
60
things and events in their relation to his God. It gives to human life its
distinctive character, its tone, its happiness, or unhappiness, its
enjoyment or irksomeness. Usually, a strong and passionate desire is
involved in a religious belief. To certain persons, no single factor of their
experience is more important to them than their religion, or their not
having any religion. Because of differences in religious belief and
sentiments, a very poor person may consider himself better than the rich,
and the man who even lacks the necessities of life may be more cheerful
than the one who has all possible luxuries. Due to their religious beliefs
people, like the martyrs, became resigned to the inevitable and accepted
cheerfully even the most painful and excruciating pains. Because of
differences in religious beliefs, the world has witnessed turmoil, civil
strife, persecution, hatred, bloodshed and war, generated to a large extent
by members of sects who were intolerant of other religious beliefs. The
classification, introduced by Republic Act No. 3350, therefore, rests on
substantial distinctions.
The classification introduced by said Act is also germane to its purpose.
The purpose of the law is precisely to avoid those who cannot, because of
their religious belief, join labor unions, from being deprived of their right
to work and from being dismissed from their work because of union shop
security agreements.
80
80 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
Republic Act No. 3350, furthermore, is not limited in its application to
conditions existing at the time of its enactment. The law does not provide
that it is to be effective for a certain period of time only. It is intended to
apply for all times as long as the conditions to which the law is applicable
exist. As long as there are closed shop agreements between an employer
and a labor union, and there are employees who are prohibited by their
religion from affiliating with labor unions, their exemption from the
coverage of said agreements continues.
Finally, the Act applies equally to all members of said religious sects;
this is evident from its provision.
The fact that the law grants a privilege to members of said religious
sects cannot by itself render the Act unconstitutional, for as We have
adverted to, the Act only restores to them their freedom of association
which closed shop agreements have taken away, and puts them in the
same plane as the other workers who are not prohibited by their religion
from joining labor unions. The circumstance, that the other employees,
because they are differently situated, are not granted the same privilege,
does not render the law unconstitutional, for every classification allowed
by the Constitution by its nature involves inequality.
The mere fact that the legislative classification may result in actual
inequality is not violative of the right to equal protection, for every
classification of persons or things for regulation by law produces
inequality in some degree, but the law is not thereby rendered invalid. A
classification otherwise reasonable does not offend the constitution simply
because in practice it results in some inequality. Anent this matter, it has
61
been said that whenever it is apparent from the scope of the law that its
object is for the benefit of the public and the means by which the benefit is
to be obtained are of public character, the law will be upheld even though
incidental advantage may occur to individuals beyond those enjoyed by
the general public. 62
6. Appellant’s further contention that Republic Act No. 3350 violates
the constitutional provision on social justice is also baseless. Social justice
is intended to promote the welfare
81
VOL. 59, SEPTEMBER 12, 1974 81
Victoriano vs. Elizalde Rope Workers’ Union
of all the people. Republic Act No. 3350 promotes that welfare insofar as
63
it looks after the welfare of those who, because of their religious belief,
cannot join labor unions; the Act prevents their being deprived of work
and of the means of livelihood. In determining whether any particular
measure is for public advantage, it is not necessary that the entire state
be directly benefited—it is sufficient that a portion of the state be
benefited thereby.
Page 105 of 120
 Social justice also means the adoption by the Government of measures
calculated to insure economic stability of all component elements of
society, through the maintenance of a proper economic and social
equilibrium in the inter-relations of the members of the
community. Republic Act No. 3350 insures economic stability to the
64
members of a religious sect, like the Iglesia ni Cristo, who are also
component elements of society, for it insures security in their employment,
notwithstanding their failure to join a labor union having a closed shop
agreement with the employer. The Act also advances the proper economic
and social equilibrium between labor unions and employees who cannot
join labor unions, for it exempts the latter from the compelling necessity of
joining labor unions that have closed shop agreements, and equalizes, in
so far as opportunity to work is concerned, those whose religion prohibits
membership in labor unions with those whose religion does not prohibit
said membership. Social justice does not imply social equality, because
social inequality will always exist as long as social relations depend on
personal or subjective proclivities. Social justice does not require legal
equality because legal equality, being a relative term, is necessarily
premised on differentiations based on personal or natural
conditions. Social justice guarantees equality of opportunity , and this is
65 66
precisely what Republic Act No. 3350 proposes to accomplish—it gives
laborers, irrespective of their religious scrupples, equal opportunity for
work.
7. As its last ground, appellant contends that the
82
82 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’Union
amendment introduced by Republic Act No. 3350 is not called for—in
other words, the Act is not proper, necessary or desirable. Anent this
matter, it has been held that a statute which is not necessary is not, for
that reason, unconstitutional; that in determining the constitutional
validity of legislation, the courts are unconcerned with issues as to the
necessity for the enactment of the legislation in question. Courts do
67
inquire into the wisdom of laws. Moreover, legislatures, being chosen by
68
the people, are presumed to understand and correctly appreciate the
needs of the people, and it may change the laws accordingly. The fear is
69
entertained by appellant that unless the Act is declared unconstitutional,
employers will prefer employing members of religious sects that prohibit
their members from joining labor unions, and thus be a fatal blow to
unionism. We do not agree. The threat to unionism will depend on the
number of employees who are members of the religious sects that control
the demands of the labor market. But there is really no occasion now to go
further and anticipate problems We cannot judge with the material now
before Us. At any rate, the validity of a statute is to be determined from
its general purpose and its efficacy to accomplish the end desired, not from
its effects on a particular case. The essential basis for the exercise of
70
power, and not a mere incidental result arising from its exertion, is the
criterion by which the validity of a statute is to be measured.
71
II. We now pass on the second assignment of error, in support of which
the Union argued that the decision of the trial court ordering the Union to
pay P500 for attorney’s fees directly contravenes Section 24 of Republic
Act No. 875, for the instant action involves an industrial dispute wherein
the Union was a party, and said Union merely acted in the exercise of its
rights under the union shop provision of its existing collective
VOL. 59, SEPTEMBER 12, 1974 83
Victoriano vs. Elizalde Rope Workers’ Union
bargaining contract with the Company; that said order also contravenes
Article 2208 of the Civil Code; that, furthermore, Appellee was never
actually dismissed by the defendant Company and did not therefore suffer
any damage at all.72
In refuting appellant Union’s arguments, Appellee claimed that in the
instant case there was really no industrial dispute involved in the attempt
to compel Appellee to maintain its membership in the union under pain of
dismissal, and that the Union, by its act, inflicted intentional harm on
Appellee; that since Appellee was compelled to institute an action to
protect his right to work, appellant could legally be ordered to pay
attorney’s fees under Articles 1704 and 2208 of the Civil Code. 73
The second paragraph of Section 24 of Republic Act No. 875 which is
relied upon by appellant provides that:
Page 106 of 120
“No suit, action or other proceedings shall be maintainable in any court against a
labor organization or any officer or member thereof for any act done by or on
behalf of such organization in furtherance of an industrial dispute to which it is a
party, on the ground only that such act induces some other person to break a
contract of employment or that it is in restraint of trade or interferes with the
trade, business or employment of some other person or with the right of some
other person to dispose of his capital or labor.” (Emphasis supplied)
That there was a labor dispute in the instant case cannot be disputed for
appellant sought the discharge of respondent by virtue of the closed shop
agreement and under Section 2 (j) of Republic Act No. 875 a question
involving tenure of employment is included in the term “labor
dispute”. The discharge or the act of seeking it is the labor dispute itself.
74
It being the labor dispute itself, that very same act of the Union in asking
the employer to dismiss Appellee cannot be “an act done xxx in
furtherance of an industrial dispute”. The mere fact that appellant is a
labor union does not necessarily mean that all its acts are in furtherance
of an industrial dispute. Appellant Union, therefore, cannot invoke in its
75
favor Section 24 of Republic Act No. 875. This case is not intertwined with
84
84 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
any unfair labor practice case existing at the time when Appellee filed his
complaint before the lower court.
Neither does Article 2208 of the Civil Code, invoked by the Union,
serve as its shield. The article provides that attorney’s fees and expenses
of litigation may be awarded “when the defendant’s act or omission has
compelled the plaintiff x x x to incur expenses to protect his interest’) and
“in any other case where the court deems it just and equitable that
attorney’s fees and expenses of litigation should be recovered”. In the
instant case, it cannot be gainsaid that appellant Union’s act in
demanding Appellee’s dismissal caused Appellee to incur expenses to
prevent his being dismissed from his job. Costs according to Section 1,
Rule 142, of the Rules of Court, shall be allowed as a matter of course to
the prevailing party.
WHEREFORE, the instant appeal is dismissed, and the 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.
Makalintal C.J., Castro, Teehankee, Barredo, Makasiar, Antonio, E
sguerra, Muñoz Palma and Aquino, JJ., concur.
Fernando, J., concurs fully and submits a brief separate opinion.
Fernandez, J., did not take part because he was co-author, when
he was a Senator, of Rep. Act No. 3350.
FERNANDO, J., concurring:
The decision arrived at unanimously by this Court that Republic Act No.
3350 is free from the constitutional infirmities imputed to it was
demonstrated in a manner well-nigh conclusive in the learned, scholarly,
and comprehensive opinion so typical of the efforts of the ponente, Justice
Zaldivar. Like the rest of my brethren, I concur fully. Considering
moreover, the detailed attention paid to each and every objection raised as
to its validity and the clarity and persuasiveness with which it was shown
to be devoid of support in authoritative doctrines, it would appear that the
last word has been written on this particular subject. Nonetheless, I deem
it proper to submit this brief expression of my views on
85
VOL. 59, SEPTEMBER 12, 1974 85
Victoriano vs. Elizalde Rope Workers’ Union
the transcendent character of religious freedom and its primacy even as
1
against the claims of protection to labor, also one of the fundamental
2
principles of the Constitution.
1. Religious freedom is identified with the liberty every individual
possesses to worship or not a Supreme Being, and if a devotee of any sect,
to act in accordance with its creed. Thus is constitutionally safeguarded,
according to Justice Laurel, that “profession of faith to an active power
that binds and elevates man to his Creator * * *.” The choice of what a man
3
wishes to believe in is his and his alone. That is a domain left untouched,
where intrusion is not allowed, a citadel to which the law is denied entry,
Page 107 of 120
whatever be his thoughts or hopes. In that sphere, what he wills reigns
supreme. The doctrine to which he pays fealty may for some be
unsupported by evidence, devoid of rational foundation. No matter. There
is no requirement as to its conformity to what has found acceptance. It
suffices that for him such a concept holds undisputed sway. That is a
recognition of man’s freedom. That for him is one of the ways of self-
realization. It would be to disregard the dignity that attaches to every
human being to deprive him of such an attribute. The “fixed star on our
constitutional constellation,” to borrow the felicitous phrase of Justice
Jackson, is that no official, not excluding the highest, has it in his power
to prescribe what shall be orthodox in matters of conscience—or to
mundane affairs, for that matter.
________________
1 Article IV, Section 8 of the Constitution provides: “No law shall be made respecting an
establishment of religion, or prohibiting the free exercise thereof. The free exercise and
enjoyment of religious profession and worship, without discrimination or preference, shall
forever be allowed. No religious test shall be required for the exercise
of civil or political rights.” There is thus a reiteration of such freedom as found in Article
III, Section 1, par. 7 of the 1935 Constitution.
2 Article II, Section 9 of the Constitution provides: “The State shall afford protection to
labor, promote full employment and equality in employment, ensure equal work opportunities
regardless of sex, race, or creed, and regulate the relations between workers and employers.
The State shall assure the rights of workers to self-organization, collective bargaining,
security of tenure, and just and humane conditions of work. The State may provide for
compulsory arbitration.” The above is an expanded version of what is found in Article XIV,
Section 6 of the 1935 Constitution.
86 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers‘ Union
Gerona v. Secretary of Education speaks similarly. In the language of
4
its ponente, Justice Montemayor: “The realm of belief and creed is infinite
and limitless bounded only by one’s imagination and thought. So is the
freedom of belief, including religious belief, limitless and without bounds.
One may believe in most anything, however strange, bizarre and
unreasonable the same may appear to others, even heretical when
weighed in the scales of orthodoxy or doctrinal standards.” There was this 5
qualification though: “But between the freedom of belief and the exercise
of said belief, there is quite a stretch of road to travel. If the exercise of
said religious belief clashes with the established institutions of society and
with the law, then the former must yield and give way to the latter. The
Government steps in and either restrains said exercise or even prosecutes
the one exercising it.” It was on that basis that the daily compulsory flag
6
ceremony in accordance with a statute was found free from the
7
constitutional objection on the part of a religious sect, the Jehovah’s
Witnesses, whose members alleged that their participation would be
offensive to their religious beliefs. In a case not dissimilar, West Virginia
State Board of Education v. Barnette, the American Supreme Court
8
reached a contrary conclusion. Justice Jackson’s eloquent opinion is, for
this writer, highly persuasive. Thus: “The case is made difficult not
because the principles of its decision are obscure but because the flag
involved is our own. Nevertheless, we apply the limitations of the
Constitution with no fear that freedom to be intellectually and spiritually
diverse or even contrary will disintegrate the social organization. To
believe that patriotism will not flourish if patriotic ceremonies are
voluntary and spontaneous instead of a compulsory routine is to make an
unflattering estimate of the appeal of our institutions to free minds. We
can have intellectual individualism and the rich cultural diversities that
we owe to exceptional minds only at the price of occasional eccentricity
and abnormal attitudes. When they are so harmless to others or to the
State as those we
87
VOL. 59, SEPTEMBER 12, 1974 87
Victoriano vs. Elizalde Rope Workers’ Union
deal with here, the price is not too great. But freedom to differ is not
limited to things that do not matter much. That would be a mere shadow
of freedom. The test of its substance is the right to differ as to things that
touch the heart of the existing order.” There is moreover this ringing
9
affirmation by Chief Justice Hughes of the primacy of religious freedom in
the forum of conscience even as against the command of the State itself:
“Much has been said of the paramount duty to the state, a duty to be
recognized, it is urged, even though it conflicts with convictions of duty to
God. Undoubtedly that duty to the state exists within the domain of
Page 108 of 120
power, for government may enforce obedience to laws regardless of
scruples. When one’s belief collides with the power of the state, the latter
is supreme within its sphere and submission or punishment follows. But,
in the forum of conscience, duty to a moral power higher than the state
has always been maintained. The reservation of that supreme obligation,
as a matter of principle, would unquestionably be made by many of our
conscientious and law-abiding citizens. The essence of religion is belief in
a relation to God involving duties superior to those arising from any
human relation.” The American Chief Justice spoke in dissent, it is true,
10
but with him in agreement were three of the foremost jurists who ever sat
in that Tribunal, Justices Holmes, Brandeis, and Stone.
2. As I view Justice Zaldivar’s opinion in that light, my concurrence, as
set forth earlier, is wholehearted and entire. With such a cardinal
postulate as the basis of our polity, it has a message that cannot be
misread. Thus is intoned with a reverberating clang, to paraphrase
Cardozo, a fundamental principle that drowns all weaker sounds. The
labored effort to cast doubt on the validity of the statutory provision in
question is far from persuasive. It is attended by futility. It is not for this
Court, as I conceive of the judicial function, to restrict the scope of a
preferred freedom.
3. There is, however, the question of whether such an exception
possesses an implication that lessens the effectiveness of state efforts to
protect labor, likewise, as noted, constitutionally ordained. Such a view,
on the surface, may not be lacking in plausibility, but upon closer
analysis, it
88
88 SUPREME COURT REPORTS ANNOTATED
Victoriano vs. Elizalde Rope Workers’ Union
cannot stand scrutiny. Thought must be given to the freedom of
association, likewise an aspect of intellectual liberty. For the late
Professor Howe, a constitutionalist and in his lifetime the biographer of
the great Holmes, it even partakes of the political theory of pluralistic
sovereignty. So great is the respect for the autonomy accorded voluntary
societies. Such a right implies at the very least that one can determine
11
for himself whether or not he should join or refrain from joining a labor
organization, an institutional device for promoting the welfare of the
working man. A closed shop, on the other hand, is inherently coercive.
That is why, as is unmistakably reflected in our decisions, the latest of
which is Guijarno v. Court of Industrial Relations, it is far from being a
12
favorite of the law. For a statutory provision then to further curtail its
operation, is precisely to follow the dictates of sound public policy.
The exhaustive and well-researched opinion of Justice Zaldivar thus is
in the mainstream of constitutional tradition. That, for me, is the channel
to follow.
Appeal dismissed, and decision affirmed.
Notes.—Effects of Closed-Shop Agreements.—Where the union shop
agreement requires new employees to join the union and it provides that,
should they later resign or be expelled from the contracting union, the
company would immediately dismiss them, said stipulation, ‘cannot be
extended to old workers. San Carlos Milling Co., Inc. vs. Court of
Industrial Relations, L-15453 & L-15723, March 17, 1961, 1 SCRA 734.
Union shop with closed shop provisions should be strictly construed
against the existence of union shop.
The employer, in separating some of its employees from the service
because of their refusal to disaffiliate from a labor union and join one
which had a collective bargaining agreement with it, acted in good faith
because the view then prevailing in the light of American jurisprudence,
but which no longer holds water, was that a closed-shop agreement
applied not only to persons to be hired but also to those already in the
service who were members of another union. Findlay Miller Timber Co.
vs. Philippine Land-Air-Sea Labor Union, L-18217 & L-18222, Sept. 29,
1962, 6 SCRA 227.
The provision in the closed-shop agreement to the effect that the
watchmen agency shall hire no other watchmen but members of the Union
during the duration of the agreement cannot operate retroactively so as to
compel those already employed to join the union favored by the closed-
shop provision. United States Lines Co. vs. Associated Watchmen and
Security Union, L-15508, June 29, 1963, 8 SCRA 326.
——o0o——
Page 109 of 120
 VOL. 197, MAY 20, 1991 275
Manila Electric Co. vs. Secretary of Labor and
Employment
G.R. No. 91902. May 20, 1991. *
MANILA ELECTRIC COMPANY, petitioner, vs. THE HON.
SECRETARY OF LABOR AND EMPLOYMENT, STAFF AND
TECHNICAL EMPLOYEES ASSOCIATION OF MERALCO, and FIRST
LINE ASSOCIATION OF MERALCO SUPERVISORY EMPLOYEES,
respondents.
Labor Relations; Unions; Rep. Act 6715; The implementing rules of RA 6715,
insofar as they disqualify security guards from joining a rank and file
organization, are null and void, for being not germane to the object and purposes
of EO 111 and RA 6715.—As will be noted, the second sentence of Art. 245
embodies an amendment disqualifying supervisory employees from membership
in a labor organization of the rank-and-file employees. It does not include
security guards in the disqualification. The implementing rules of RA 6715,
therefore, insofar as they disqualify security guards from joining a rank and file
organization are null and void, for being not germane to the object and purposes
of EO 111 and RA 6715 upon which such rules purportedly derive statutory
moorings.
Same; Same; Same; Security guards may now freely join a labor
organization of the rank and file, or that of the supervisory union, depending on
their rank.—While therefore under the old rules, security guards were barred
from joining a labor organization of the rank and file, under RA 6715, they may
now freely join a labor organization of the rank and file or that of the supervisory
union, depending on their rank. By accommodating supervisory employees, the
Secretary of Labor must likewise apply the provisions of RA 6715 to security
guards by favorably allowing them free access to a labor organization, whether
rank and file or supervisory, in recognition of their constitutional right to self-
organization.
PETITION to review the decision of the Secretary of Labor and
Employment.
The facts are stated in the opinion of the Court.
Rolando R. Arbues, Atilano S. Guevarra, Jr. and Gil S. San
Diego for petitioner.
The Solicitor General for public respondent.
Felipe Gojar for STEAM-PCWF.
_______________
*EN BANC.
276
276 SUPREME COURT REPORTS ANNOTATED
Manila Electric Co. vs. Secretary of Labor and
Employment
Wakay & Wakay Legal Services for First Line Association of Meralco
Supervisory Employees.
MEDIALDEA, J.:
This petition seeks to review the Resolution of respondent Secretary of
Labor and Employment Franklin M. Drilon dated November 3, 1989
which affirmed an Order of Med-Arbiter Renato P. Parungo (Case No.
NCR-O-D-M-1-70), directing the holding of a certification election among
certain employees of petitioner Manila Electric Company (hereafter
“MERALCO”) as well as the Order dated January 16, 1990 which denied
the Motion for Reconsideration of MERALCO.
The facts are as follows:
On November 22, 1988, the Staff and Technical Employees Association
of MERALCO (hereafter “STEAM-PCWF”) a labor organization of staff
and technical employees of MERALCO, filed a petition for certification
election, seeking to represent regular employees of MERALCO who are:
(a) non-managerial employees with Pay Grades VII and above; (b) non-
managerial employees in the Patrol Division, Treasury Security Services
Section, Secretaries who are automatically removed from the bargaining
unit; and (c) employees within the rank and file unit who are
automatically disqualified from becoming union members of any
organization within the same bargaining unit. Among others, the petition
alleged that “while there exists a duly-organized union for rank and file
employees in Pay Grade I-VI, which is the MERALCO Employees and
Worker’s Association (MEWA) which holds a valid CBA for the rank and
Page 110 of 120
file employees , there is no other labor organization except STEAM-PCWF
1 1. 1.Office of the Corporate Secretary
claiming to represent the MERALCO employees. 2. 2.Corporate Staff Services Department
The petition was premised on the exclusion/disqualification of certain 3. 3.Managerial Payroll Office
MERALCO employees pursuant to Art. I, Secs. 2 and 3 of the existing 4. 4.Legal Service Department
5. 5.Labor Relations Division
MEWA CBA as follows:
6. 6.Personnel Administration Division
_______________ 7. 7.Manpower Planning & Research Division
8. 8.Computer Services Department
1This CBA expired on November 30, 1989. There is an on-going CBA negotiation with 9. 9.Financial Planning & Control Department
National Capitol Region, Dole, per Comment of FLAMES, dated March 6, 1990, p. 248, Rollo. 10. 10.Treasury Department, except Cash Section
277 11. 11.General Accounting Section
VOL. 197, MAY 20, 1991 277 “x x x.” (p. 19, Rollo)
Manila Electric Co. vs. Secretary of Labor and
Employment MERALCO moved for the dismissal of the petition on the following
grounds:
“ARTICLE I
I
SCOPE
The employees sought to be represented by petitioner are either 1) managerial
xxx who are prohibited by law from forming or joining supervisory union; 2) security
services personnel who are prohibited from
SECTION 2. Excluded from the appropriate bargaining unit and therefore 278
outside the scope of this Agreement are: 278 SUPREME COURT REPORTS ANNOTATED
Manila Electric Co. vs. Secretary of Labor and
1. (a)Employees in Patrol Division; Employment
2. (b)Employees in Treasury Security Services Section;
joining or assisting the rank-and-file union; 3) secretaries who do not consent to
3. (c)Managerial Employees; and
the petitioner’s representation and whom petitioner can not represent; and 4)
4. (d)Secretaries.
rank-and-file employees represented by the certified or duly recognized
bargaining representative of the only rank-and-file bargaining unit in the
Any member of the Union who may now or hereafter be assigned or
company, the Meralco Employees Workers Association (MEWA), in accordance
transferred to Patrol Division or Treasury Security Services Section, or becomes
with the existing Collective Bargaining Agreement with the latter.
Managerial Employee or a Secretary, shall be considered automatically removed
from the bargaining unit and excluded from the coverage of this agreement. He II
shall thereby likewise be deemed automatically to have ceased to be member of
the union, and shall desist from further engaging in union activity of any kind. The petition for certification election will disturb the administration of the
SECTION 3. Regular rank-and-file employees in the organization elements existing Collective Bargaining Agreement in violation of Art. 232 of the Labor
herein below listed shall be covered within the bargaining unit, but shall be Code.
automatically disqualified from becoming union members:

Page 111 of 120

 III
The petition itself shows that it is not supported by the written consent of at
least twenty percent (20%) of the alleged 2,500 employees sought to be
represented. (Resolution, Sec. of Labor, pp. 223-224, Rollo)
Before Med-Arbiter R. Parungo, MERALCO contended that employees
from Pay Grades VII and above are classified as managerial employees
who, under the law, are prohibited from forming, joining or assisting a
labor organization of the rank and file. As regards those in the Patrol
Division and Treasury Security Service Section, MERALCO maintains
that since these employees are tasked with providing security to the
company, they are not eligible to join the rank and file bargaining unit,
pursuant to Sec. 2(c), Rule V, Book V of the then Implementing Rules and
Regulations of the Labor Code (1988) which reads as follows:
“Sec. 2. Who may file petition.—The employer or any legitimate labor
organization may file the petition.
“The petition, when filed by a legitimate labor organization, shall contain,
among others:
“x x x;
“(c) description of the bargaining unit which shall be the employer unit unless
circumstances otherwise require, and provided, further: that the appropriate
bargaining unit of the rank and file employees shall not include security guards
(As amended by Sec. 6,
279
VOL. 197, MAY 20, 1991 279
Manila Electric Co. vs. Secretary of Labor and
Employment
Implementing Rules of EO 111)
“x x x.” (p. 111, Labor Code, 1988 Ed.)
As regards those rank and file employees enumerated in Sec. 3, Art. I,
MERALCO contends that since they are already beneficiaries of the
MEWA-CBA, they may not be treated as a separate and distinct
appropriate bargaining unit.
MERALCO raised the same argument with respect to employees
sought to be represented by STEAM-PCWF, claiming that these were
already covered by the MEWA-CBA.
On March 15, 1989, the Med-Arbiter ruled that having been excluded
from the existing Collective Bargaining Agreement for rank and file
employees, these employees have the right to form a union of their own,
except those employees performing managerial functions. With respect to
those employees who had resented their alleged involuntary membership
in the existing CBA, the Med-Arbiter stated that the holding of a
certification election would allow them to fully translate their sentiment
on the matter, and thus directed the holding of a certification election. The
dispositive portion of the Resolution provides as follows:
“WHEREFORE, premises considered, a certification election is hereby ordered
conducted among the regular rank-and-file employees of MERALCO to wit:
1. “1.Non-managerial employees with Pay Grades VII and above;
2. “2.Non-managerial employees of Patrol Division, Treasury Security
Services Section and Secretaries; and
3. “3.Employees prohibited from actively participating as members of the
union.
within 20 days from receipt hereof, subject to the usual pre-election
conference with the following choices:
1. “1.Staff and Technical Employees Association of MERALCO (STEAM-
PCWF);
2. “2.No Union.
“SO ORDERED.” (p. 222, Rollo)
On April 4, 1989, MERALCO appealed, contending that “until such time
that a judicial finding is made to the effect that they are not managerial
employee, STEAM-PCWF cannot represent employees from Pay Grades
VII and above, additionally reiter-
280
280 SUPREME COURT REPORTS ANNOTATED
Manila Electric Co. vs. Secretary of Labor and
Employment
ating the same reasons they had advanced for disqualifying respondent
STEAM-PCWF.
Page 112 of 120
 On April 7, 1989, MEWA filed an appeal-in-intervention, submitting as
follows:
1. A.The Order of the Med-Arbiter is null and void for being in violation of
Article 245 of the Labor Code;
2. B.The Order of the Med-Arbiter violates Aticle 232 of the Labor Code; and
3. C.The Order is invalid because the bargaining unit it delineated is not an
appropriated (sic) bargaining unit.
On May 4, 1989, STEAM-PCWF opposed the appeal-in-intervention.
With the enactment of RA 6715 and the rules and regulations
implementing the same, STEAM-PCWF renounced its representation of
the employees in Patrol Division, Treasury Security Services Section and
rank-and-file employees in Pay Grades I-VI.
On September 13, 1989, the First Line Association of Meralco
Supervisory Employees. (hereafter FLAMES) filed a similar petition
(NCR-OD-M-9-731-89) seeking to represent those employees with Pay
Grades VII to XIV, since “there is no other supervisory union at
MERALCO.” (p. 266, Rollo). The petition was consolidated with that of
STEAM-PCWF.
On November 3, 1989, the Secretary of Labor affirmed with
modification, the assailed order of the Med-Arbiter, disposing as follows:
“WHEREFORE, premises considered, the Order appealed from is hereby
affirmed but modified as far as the employees covered by Section 3, Article I of
the existing CBA in the Company are concerned. Said employees shall remain in
the unit of the rank-and-file already existing and may exercise their right to self
organization as above enunciated.
“Further, the First Line Association of Meralco Supervisory Employees
(FLAMES) is included as among the choices in the certification election.
“Let, therefore, the pertinent records of the case be immediately forwarded to
the Office of origin for the conduct of the certification election.
“SO ORDERED.” (p. 7, Rollo)
281
VOL. 197, MAY 20, 1991 281
Manila Electric Co. vs. Secretary of Labor and
Employment
MERALCO’s motion for reconsideration was denied on January 16, 1990.
On February 9, 1990, MERALCO filed this petition, premised on the
following ground:
“RESPONDENT SECRETARY ACTED WITH GRAVE ABUSE OF
DISCRETION AND/OR IN EXCESS OF JURISDICTION AMOUNTING TO
LACK OF JURISDICTION IN RULING THAT:
1. “I.ANOTHER RANK-AND-FILE BARGAINING UNIT CAN BE
ESTABLISHED INDEPENDENT, DISTINCT AND SEPARATE FROM
THE EXISTING RANK-AND-FILE BARGAINING UNIT.
2. “II.THE EMPLOYEES FROM PAY GRADES VII AND ABOVE ARE
RANK-AND-FILE EMPLOYEES.
3. “III.THE SECURITY GUARDS OR PERSONNEL MAY BE LUMPED
TOGETHER WITH THE RANK-AND-FILE UNION AND/ OR THE
SUPERVISORY UNION.” (p. 8, Rollo)
On February 26, 1990, We issued a temporary restraining order (TRO)
against the implementation of the disputed resolution.
In its petition, MERALCO has relented and recognized respondents
STEAM-PCWF and FLAMES’ desired representation of supervisory
employees from Grades VII up. However, it believes that all that the
Secretary of Labor has to do is to establish a demarcation line between
supervisory and managerial rank, and not to classify outright the group of
employees represented by STEAM-PCWF and FLAMES as rank and file
employees.
In questioning the Secretary of Labor’s directive allowing security
guards (Treasury/Patrol Services Section) to be represented by
respondents, MERALCO contends that this contravenes the provisions of
the recently passed RA 6715 and its implementing rules (specifically par.
2, Sec. 1, Rule II, Book V) which disqualifies supervisory employees and
security guards from membership in a labor organization of the rank and
file (p. 11, Rollo).
The Secretary of Labor’s Resolution was obviously premised on the
provisions of Art. 212, then par. (k), of the 1988 Labor Code defining
“managerial” and “rank and file” employees, the law then in force when
Page 113 of 120
the complaint was filed. At the time, only two groups of employees were
recognized, the managerial
282
282 SUPREME COURT REPORTS ANNOTATED
Manila Electric Co. vs. Secretary of Labor and
Employment
and rank and file. This explains the absence of evidence on job
descriptions on who would be classified managerial employees. It is
perhaps also for this reason why the Secretary of Labor limited his
classification of the Meralco employees belonging to Pay Grades VII and
up, to only two groups, the managerial and rank and file.
However, pursuant to the Department of Labor’s goal of
strenghthening the constitutional right of workers to self-organization, RA
6715 was subsequently passed which reorganized the employee-ranks by
including a third group, or the supervisory employees, and laying down
the distinction between supervisory employees and those of managerial
ranks in Art. 212, renumbered par. [m], depending on whether the
employee concerned has the power to lay down and execute management
policies, in the case of managerial employees, or merely to recommend
them, in case of supervisory employees.
In this petition, MERALCO has admitted that the employees belonging
to Pay Grades VII and up are supervisory (p. 10, Rollo). The records also
show that STEAM-PCWF had “renounced its representation of the
employees in Patrol Division, Treasury Security Service Section and rank
and file employees in Pay Grades I-VI” (p. 6, Rollo); while FLAMES, on the
other hand, had limited its representation to employees belonging to Pay
Grades VII-XIV, generally accepted as supervisory employees, as follows:
“It must be emphasized that private respondent First Line Association of
Meralco Supervisory Employees seeks to represent only the Supervisory
Employees with Pay Grades VII to XIV.
“Supervisory Employees with Pay Grades VII to XIV are not managerial
employees. In fact the petition itself of petitioner Manila Electric Company on
page 9, paragraph 3 of the petition stated as follows, to wit:
‘There was no need for petitioner to prove that these employees are not
rank-and-file. As adverted to above, the private respondents admit that these are
not the rank-and-file but the supervisory employees, whom they seek to
represent. What needs to be established is the rank where supervisory ends and
managerial begins.’
and First Line Association of Meralco Supervisory Employees herein states
that Pay Grades VII to XIV are not managerial employees. In
283
VOL. 197, MAY 20, 1991 283
Manila Electric Co. vs. Secretary of Labor and
Employment
fact, although employees with Pay Grade XV carry the Rank of Department
Managers, these employees only enjoys (sic) the Rank Manager but their
recommendatory powers are subject to evaluation, review and final action by the
department heads and other higher executives of the company.” (FLAMES’
Memorandum, p. 305, Rollo)
Based on the foregoing, it is clear that the employees from Pay Grades VII
and up have been recognized and accepted as supervisory. On the other hand,
those employees who have been automatically disqualified have been directed by
the Secretary of Labor to remain in the existing labor organization for the rank
and file, (the condition in the CBA deemed as not having been written into the
contract, as unduly restrictive of an employee’s exercise of the right to self-
organization). We shall discuss the rights of the excluded employees (or those
covered by Sec. 2, Art. I, MEWA-CBA later.
Anent the instant petition therefore, STEAM-PCWF, and FLAMES would
therefore represent supervisory employees only. In this regard, the authority
given by the Secretary of Labor for the establishment of two labor organizations
for the rank and file will have to be disregarded since We hereby uphold
certification elections only for supervisory employees from Pay Grade VII and up,
with STEAM-PCWF and FLAMES as choices.
As to the alleged failure of the Secretary of Labor to establish a demarcation
line for purposes of segregating the supervisory from the managerial employees,
the required parameter is really not necessary since the law itself, Art. 212-m,
(as amended by Sec. 4 of RA 6715) has already laid down the corresponding
guidelines:
“Art. 212. Definitions. x x x
“(m) ‘Managerial employee’ is one who is vested with powers or prerogatives to lay
down and execute management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees. Supervisory employees are those who, in the
interest of the employer, effectively recommend such managerial actions if the exercise of
such authority is not merely routinary or clerical in nature but requires the use of
Page 114 of 120
independent judgment. All employees not falling within any of the above definitions are
considered rank-and-file employees for purposes of this Book.”
284
284 SUPREME COURT REPORTS ANNOTATED
Manila Electric Co. vs. Secretary of Labor and
Employment
In his resolution, the Secretary of Labor further elaborated:
“x x x. Thus, the determinative factor in classifying an employee as managerial,
supervisory or rank-and-file is the nature of the work of the employee concerned.
“In National Waterworks and Sewerage Authority vs. National Waterworks and
Sewerage Authority Consolidated Unions (11 SCRA 766) the Supreme Court had the
occasion to come out with an enlightening dissertation of the nature of the work of a
managerial employees as follows:
‘x x x that the employee’s primary duty consists of the management of the
establishment or of a customarily recognized department or subdivision thereof, that he
customarily and regularly directs the work of other employees therein, that he has the
authority to hire or discharge other employees or that his suggestions and
recommendations as to the hiring and discharging and or to the advancement and
promotion or any other change of status of other employees are given particular weight,
that he customarily and regularly exercises discretionary powers x x x (56 CJS, pp. 666-
668.’ ” (p. 226, Rollo)
We shall now discuss the rights of the security guards to self-organize.
MERALCO has questioned the legality of allowing them to join either the rank
and file or the supervisory union, claiming that this is a violation of par. 2, Sec.
1, Rule II, Book V of the Implementing Rules of RA 6715, which states as follows:
“Sec. 1. Who may join unions. x x x
“x x x.
“Supervisory employees and security guards shall not be eligible for membership in a
labor organization of the rank-and-file employees but may join, assist or form separate
labor organizations of their own;
xxx
“x x x.” (emphasis ours)
Paragraph 2, Sec. 1, Rule II, Book V, is similar to Sec. 2 (c), Rule V, also of
Book V of the implementing rules of RA 6715:
“Rule V.
REPRESENTATION CASES AND
INTERNAL-UNION CONFLICTS
285
VOL. 197, MAY 20, 1991 285
Manila Electric Co. vs. Secretary of Labor and
Employment
“Sec. 1. x x x.
“Sec. 2. Who may file.—Any legitimate labor organization or the employer, when
requested to bargain collectively, may file the petition.
“The petition, when filed by a legitimate labor-organization shall contain, among
others:
1. “(a)x x x.
2. “(b)x x x.
3. “(c)description of the bargaining unit which shall be the employer unit unless
circumstances otherwise require; and provided further, that the appropriate
bargaining unit of the rank-and-file employees shall not include supervisory
employees and/or security guards;
“x x x.” (emphasis ours)
Both rules, barring security guards from joining a rank and file organization,
appear to have been carried over from the old rules which implemented then Art.
245 of the Labor Code, and which provided thus:
“Art. 245. Ineligibility of security personnel to join any labor organization.—Security
guards and other personnel employed for the protection and security of the person,
properties and premises of the employer shall not be eligible for membership in any labor
organization.”
On December 24, 1986, Pres. Corazon C. Aquino issued E.O No. 111
which eliminated the above-cited provision on the disqualification of security
guards. What was retained was the disqualification of managerial employees,
renumbered as Art. 245 (previously Art. 246), as follows:
“ART. 245. Ineligibility of managerial employees to joint any labor organization.—
Managerial employees are not eligible to join, assist or form any labor organization.”
With the elimination, security guards were thus free to join a rank and file
organization.
On March 2, 1989, the present Congress passed RA 6715. 2
_______________
2 Published in two newspapers, the law took effect on March 21, 1989.
286
286 SUPREME COURT REPORTS ANNOTATED
Manila Electric Co. vs. Secretary of Labor and
Page 115 of 120
 Employment
Section 18 thereof amended Art. 245, to read as follows:
“Art. 245. Ineligibility of managerial employees to join any labor organization; right of
supervisory employees.—Managerial employees are not eligible to join, assist or form any
labor organization. Supervisory employees shall not be eligible for membership in a labor
oganization of the rank-and-file employees but may join, assist, or form separate labor
organizations of their own.” (emphasis ours)
As will be noted, the second sentence of Art. 245 embodies an amendment
disqualifying supervisory employees from membership in a labor organization of
the rank-and-file employees. It does not include security guards in the
disqualification. The implementing rules of RA 6715, therefore, insofar as they
disqualify security guards from joining a rank and file organization are null and
void, for being not germane to the object and purposes of EO 111 and RA 6715
upon which such rules purportedly derive statutory moorings. In Shell
Philippines, Inc. vs. Central Bank, G.R. No. 51353, June 27, 1988, 162 SCRA
628, We stated:
The rule-making power must be confined to details for regulating the mode or proceeding
to carry into effect the law as it has been enacted. The power cannot be extended to
amending or expanding the statutory requirements or to embrace matters not covered by
the statute. Rules that subvert the statute cannot be sanctioned.” (citing University of
Sto. Tomas vs. Board of Tax Appeals, 93 Phil. 376).
While therefore under the old rules, security guards were barred from joining
a labor organization of the rank and file, under RA 6715, they may now freely
join a labor organization of the rank and file or that of the supervisory union,
depending on their rank. By accommodating supervisory employees, the
Secretary of Labor must likewise apply the provisions of RA 6715 to security
guards by favorably allowing them free access to a labor organization, whether
rank and file or supervisory, in recognition of their constitutional right to self-
organization.
We are aware however of possible consequences in the implementation of the
law in allowing security personnel to join labor unions within the company they
serve. The law is apt to produce divided loyalties in the faithful performance of
their
287
VOL. 197, MAY 20, 1991 287
Manila Electric Co. vs. Secretary of Labor and
Employment
duties. Economic reasons would present the employees concerned with the
temptation to subordinate their duties to the allegiance they owe the union of
which they are members, aware as they are that it is usually union action that
obtains for them increased pecuniary benefits.
Thus, in the event of a strike declared by their union, security personnel may
neglect or outrightly abandon their duties, such as protection of property of their
employer and the persons of its officials and employees, the control of access to
the employer’s premises, and the maintenance of order in the event of
emergencies and untoward incidents. It is hoped that the corresponding
amendatory and/or suppletory laws be passed by Congress to avoid possible
conflict of interest in security personnel.
ACCORDINGLY, the petition is hereby DISMISSED. We AFFIRM with
modification the Resolution of the Secretary of Labor dated November 3, 1989
upholding an employee’s right to self-organization. A certification election is
hereby ordered conducted among supervisory employees of MERALCO,
belonging to Pay Grades VII and above, using as guideliness an employee’s
power to either recommend or execute management policies, pursuant to Art.
212 (m), of the Labor Code, as amended by Sec. 4 of RA 6715, with respondents
STEAM-PCWF and FLAMES as choices.
Employees of the Patrol Division, Treasury Security Services Section and
Secretaries may freely join either the labor organization of the rank and file or
that of the supervisory union depending on their employee rank. Disqualified
employees covered by Sec. 3, Art. I of the MEWA-CBA, shall remain with the
existing labor organization of the rank and file, pursuant to the Secretary of
Labor’s directive:
“By the parties’ own agreement, they find the bargaining unit, which includes the
positions enumerated in Section 3, Article I of their CBA, appropriate for purposes of
collective bargaining. The composition of the bargaining unit should be left to the
agreement of the parties, and unless there are legal infirmities in such agreement, this
Office will not substitute its judgment for that of the parties. Consistent with the history
of collective bargaining in the company, the membership of said group of employees in
the existing rank-and-file unit should continue, for it will enhance stability in that unit
already well established. However, we cannot approve of the condition set in Section 3,
Article I of the CBA that the employees covered are automatically disqualified from
becoming union members. The condition unduly restricts the exercise of the right to self
organization by the employees in question. It is contrary to law and public policy and,
therefore, should be considered to have not been written into the contract. Accordingly,
the option to join or not to join the union should be left entirely to the employees
themselves.” (p. 229, Rollo)
The Temporary Restraining Order (TRO) issued on February 26, 1990 is
hereby LIFTED. Costs against petitioner.
SO ORDERED.
Page 116 of 120
 Fernan (C.J.), Narvasa, Melencio-Herrera, Gutierrez,
Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Griño-
Aquino, Regalado and Davide, Jr., JJ., concur.
Petition dismissed, resolution affirmed with modification.
Note.—Employees have right to self-organization and to form, join or assist
labor organization of their own choosing for the purpose of collective bargaining
and to engage in concerted activities. (Adamson & Adamson vs. Court of
Industrial Relations, 127 SCRA 268.)
——o0o——
VOL. 264, NOVEMBER 21, 1996 637
Republic Planters Bank General Services Employees
Union-National Association of Trade Unions vs.
Laguesma
G.R. No. 119675. November 21, 1996. *
REPUBLIC PLANTERS BANK GENERAL SERVICES EMPLOYEES
UNION-NATIONAL ASSOCIATION OF TRADE UNIONS,
petitioner, vs. BIENVENIDO LAGUESMA and REPUBLIC PLANTERS
BANK, respondents.
Labor Law; Labor Unions; No petition for certification election shall be
conducted outside the sixty-day freedom period immediately before the
expiry date of the CBA.—We start with the restatement of the rule that no
petition for certification election may be entertained if filed outside the
sixty-day period immediately before the expiration of the collective
bargaining agreement. The purpose of the prohibition against the filing of
a petition for certification election outside the so-called freedom period is
to ensure industrial peace between the employer and its employees during
the existence of the CBA. Thus in Trade Unions of the Philippines vs.
Laguesma, we held that when a legitimate labor organization has been
certified as the sole and exclusive bargaining agent of the rank-and-file
employees of a given employer, it means that it shall remain as such
during the existence of the CBA, to the exclusion of other labor
organizations, and no petition questioning the majority status of said
incumbent agent or any certification election be conducted outside the
sixty-day freedom period immediately before the expiry date of the CBA.
Same; Same; Since the persons involved are not employees of the
company, they are not entitled to the constitutional right to join or form a
labor organization for purposes of collective bargaining.—The more
applicable case is Singer Sewing Machine Company vs. Drilon, et al.,
where we ruled that if the union members are not employees, no right to
organize for purposes of bargaining, nor to be certified as bargaining
agent can be recognized. Since the persons involved are not employees of
the company, we held that they are not entitled to the constitutional right
to join or form a labor organization for purposes of collective bargaining.
SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.
The facts are stated in the opinion of the Court.
____________________________
*SECOND DIVISION.
638
638 SUPREME COURT REPORTS ANNOTATED
Republic Planters Bank General Services Employees
Union-National Association of Trade Unions vs.
Laguesma
Felimon C. Tercero for petitioner.
The Government Corporate Counsel for respondent Bank.
PUNO, J.:
Republic Planters Bank General Services Employees Union-National
Association of Trade Unions (petitioner) seeks to annul the resolution
rendered by Undersecretary Bienvenido Laguesma, dismissing its petition
for certification election for lack of merit.
The facts show that on January 21, 1991, petitioner filed a petition for
certification election to determine the sole and exclusive bargaining
representative of all regular employees outside the bargaining unit of
Republic Planters Bank. The proposed bargaining unit is composed of
1
clerks, messengers, janitors, plumbers, telex operators, mailing and
Page 117 of 120
printing personnel, drivers, mechanics and computer personnel. Allegedly,
these employees are regular employees but are considered as contractual
employees by private respondent bank. They are excluded from the
existing collective bargaining agreement between private respondent and
Republic Planters Bank Employees Union (RPBEU), the duly certified
bargaining representative of the regular employees of private respondent.
Private respondent filed its position paper and moved to dismiss the
petition for certification election. Firstly, it contended that petitioner
union is comprised of some thirty (30) employees of Superior Maintenance
Services, Inc. (SMSI) who are assigned to the bank as messengers and
2 Order states:
janitors under a Contract of Services. The other employees in the proposed
bargaining unit are employed on “contractual basis” and are not members
of petitioner. Secondly, it stressed the
____________________________
1 Annex “A,” Rollo, p. 21; The case was docketed as NCR-OD-M-91-01-055 and raffled to
Med-Arbiter Anastacio L. Bactin.
2 SMSI is a business firm engaged in sanitation, maintenance and janitorial work.
639
VOL. 264, NOVEMBER 21, 1996 639
Republic Planters Bank General Services Employees
Union-National Association of Trade Unions vs.
Laguesma
existence of a bargaining unit represented by Republic Planters Bank
Employees Union (RPBEU). Thirdly, it alleged that the petition failed to
state the number of employees in the proposed bargaining unit and there
is no prior determination that the members of petitioner are employees of
private respondent.
Petitioner opposed the motion to dismiss and averred that the proposed
unit is not part of the existing bargaining unit. Petitioner further argued
that some of its members had been in the employ of private respondent for
more than six (6) months. Allegedly, they perform services that are
necessary and desirable to the usual business operations of private
respondent. As to its members performing janitorial and messengerial
services for private respondent, petitioner contended that Superior
Maintenance Services, Inc. (SMSI) is engaged in ‘labor-only’ contracting.
Med-Arbiter Anastacio Bactin dismissed the petition for certification
election on the ground that there is already a certified bargaining agent
representing the appropriate bargaining unit within private respondent.
Thus, if qualified, the employees who were excluded from the existing
collective bargaining agreement may join the existing bargaining unit in
accord with the one-union, one-company policy of the Department of Labor
and Employment. The dispositive portion of the Med-Arbiter’s
3
“WHEREFORE, premises considered, the petition for certification election is
hereby DISMISSED for lack of legal basis. “The employees who are rendering
services to the respondent Bank as clerks, messengers, plumbers, telex
operators, mailing and printing personnel, drivers, mechanics, and computer
personnel are hereby DECLARED as employees of Republic Planters Bank.
Since they are employees of the bank, they may join the existing bargaining
agent of the rank and file employees of the respondent bank. “However, the
janitors who are tasked to clean the premises of the bank are classified as
employees of Superior Maintenance
____________________________
3 Rollo, pp. 47-52.
640
640 SUPREME COURT REPORTS ANNOTATED
Republic Planters Bank General Services Employees
Union-National Association of Trade Unions vs.
Laguesma
Services, Incorporated since their job is not related to the main business of the
respondent bank.
“SO ORDERED.”
Private respondent interposed an appeal protesting the finding of
employer-employee relationship. On December 21, 1992, Undersecretary
Bienvenido Laguesma reversed the Order of the Med-Arbiter. 4
Petitioner filed a Motion for Reconsideration. It submitted additional
5
documentary evidence prepared by some of the contractual employees,
namely, Concepcion L. Garcia (messenger), Noel Gavarra (machine
Page 118 of 120
operator), Consuelo David (clerk typist), Maria Trinita M. Samson (clerk
typist), and Rodelio Tabernilla (messenger). 6 evidentiary value.
Private respondent opposed the motion for reconsideration on the
ground that the documents submitted for the first time on appeal are
inadmissible in evidence. The documents were also denounced as self-
serving.
On May 10, 1993, Undersecretary Laguesma modified the December
21, 1992 Resolution, thus:
“WHEREFORE, the questioned Order is hereby modified by declaring that
Concepcion L. Garcia, Noel Gavarra, Consuelo David, Maria Trinita M. Samson,
and Rodelio Tabernilla are regular employees of respondent bank and therefore,
part of the existing rank and file unit.
“SO ORDERED.”
Both parties moved for reconsideration of the May 10, 1993 Order.
Petitioner sought a ruling that the other workers in the proposed
bargaining unit should also be considered regular employees of private
respondent since they perform duties necessary to the bank’s business
operations. Petitioner
641
VOL. 264, NOVEMBER 21, 1996 641
Republic Planters Bank General Services Employees
Union-National Association of Trade Unions vs.
Laguesma
submitted additional documents containing the job descriptions of eleven
(11) employees assigned at private respondent, most of whom were
performing messengerial services. Private respondent reiterated its
objection to the admissibility of the new evidence.
On February 24, 1995, Undersecretary Laguesma issued another
Order, setting aside the May 10, 1993 Order and reinstating the
Resolution dated December 21, 1992. The pertinent portion of the Order
states:
“Indeed, the documents submitted by petitioner, including those appended to its
present motion, which purportedly are the job descriptions of the subject
workers, may not be given weight for being self-serving. It is quite obvious that
they were prepared by the workers themselves and was not approved by their
supposed employer. Being so, they are mere scraps of paper having no
“Moreover, respondent correctly pointed out that petitioner submitted the
said documents for the first time on a motion for reconsideration, after this Office
ruled that the questioned finding of the Med-Arbiter is not supported by any
evidence. To our mind, such belated submission should not be tolerated nor
encouraged, otherwise there will be no end to the proceedings.
“WHEREFORE, the motion for reconsideration of petitioner is hereby denied
for lack of merit while the motion of respondent is hereby granted. Accordingly,
our Order dated 10 May 1993 is hereby set aside and our Order (Resolution)
dated 10 [sic] December 1992, dismissing the petition, is hereby reinstated.
“SO ORDERED.”
Hence, this petition for certiorari.
Petitioner contends grave abuse of discretion on the part of public
respondent when (1) it allowed private respondent to participate or
intervene in the certification election, contrary to our decision in Golden
Farms, Inc. vs. Secretary of Labor; and (2) it did not give value to the
documents it submitted on appeal.
The petition lacks merit.
We start with the restatement of the rule that no petition for certification
election may be entertained if filed outside the sixty-day period
immediately before the expiration of the collective bargaining
agreement. The purpose of the prohibition against the filing of a petition
7
for certification election outside the so-called freedom period is to ensure
industrial peace between the employer and its employees during the
existence of the CBA. Thus in Trade Unions of the Philippines vs.
8
Laguesma, we held that when a legitimate labor organization has been
9
certified as the sole and exclusive bargaining agent of the rank-and-file
employees of a given employer, it means that it shall remain as such
during the existence of the CBA, to the exclusion of other labor
organizations, and no petition questioning the majority status of said
incumbent agent or any certification election be conducted outside the
sixty-day freedom period immediately before the expiry date of the CBA.
Page 119 of 120
 In the case at bar, the petition for certification election was filed
on January 21, 1991. The collective bargaining agreement between the
duly certified bargaining agent, Republic Planters Bank Employees
Union, and private respondent was effective from June 30, 1988 to June
30, 1991. It is crystal clear that the filing of the petition for certification
10
election was premature.
Petitioner tries to tilt the balance in its favor by assailing the legal
standing of private respondent in intervening in the certification election.
The attempt is futile. To begin with, petitioner did not raise this issue in
the proceedings below. It is too late to litigate the issue on appeal.
Besides, our ruling in Golden Farms, Inc. vs. Secretary of Labor cannot
11
be invoked by petitioner. In Golden Farms, Inc., we upheld the general
rule that “an employer has no legal standing to question a certification
election since this is the sole concern of the workers.” Its facts, however,
are different for in said case, the existence of employer-employee
relationship was not disputed. Likewise, the petition for certification
election was filed within the freedom period. The main issue involved
therein was also different, i.e., the propriety of forming a separate
bargaining unit for the monthly paid office employees despite the
existence of a bargaining unit for the daily paid rank-and-file workers
assigned at the banana fields. Considering the dissimilarity of interests
between the two groups of employees in terms of duties and obligations,
working conditions, salary rates and skills, we allowed the formation of a
separate and distinct bargaining unit for the monthly paid employees of
Golden Farms, Inc.
The more applicable case is Singer Sewing Machine Company vs.
Drilon, et al., where we ruled that if the union members are not
12
employees, no right to organize for purposes of bargaining, nor to be
certified as bargaining agent can be recognized. Since the persons
involved are not employees of the company, we held that they are not
entitled to the constitutional right to join or form a labor organization for
purposes of collective bargaining. Singer reiterated our earlier
pronouncement in La Suerte Cigar and Cigarette Factory v. Director of
Labor Relations (123 SCRA 679 [1983]), thus:
“The question of whether employer-employee relationship exists is a primordial
consideration before extending labor benefits under the workmen’s
compensation, social security, medicare, termination pay and labor relations law.
It is important in the determination of who shall be included in the proposed
bargaining unit because, it is the sine qua non, the fundamental and essential
condition that a bargaining unit be composed of employees. Failure to establish
this juridical relationship between the union members
644
644 SUPREME COURT REPORTS ANNOTATED
Republic Planters Bank General Services Employees
Union-National Association of Trade Unions vs.
Laguesma
and the employer affects the legality of the union itself. It means the ineligibility
of the union members to present a petition for certification election as well as to
vote therein.”
Finally, the public respondent did not commit grave abuse of discretion
when it rejected the documents submitted by petitioner for the first time
on appeal. Truly, technical rules of procedure need not be strictly followed
by the public respondent in rendering decisions if they are impediments in
giving justice and equity to the litigants. In the case at bar, the public
respondent rejected the documents defining the duties of the members of
petitioner union in question less because they were belatedly submitted
only on appeal but more because they were self-serving and did not bear
the approval of their employer. The rejection is based on sound reason and
we are not free to modify the findings of respondent public official.
IN VIEW WHEREOF, the present petition for certiorari is DISMISSED
for lack of merit.
SO ORDERED.
Regalado (Chairman), Romero, Mendoza and Torres, Jr.,
JJ., concur.
Petition dismissed.
Note.—Timekeeper and assistant timekeeper cannot be excluded from
the bargaining unit. (Pier 8 Arrastre and Stevedoring Services, Inc. vs.
Roldan-Confesor, 241 SCRA 294 [1995])
——o0o——
Page 120 of 120