Republic of The Philippines

1 |Title VI - Unfair Labor Practices (CASE 6- onwards except SLORD)
Republic of the Philippines Ceniza, Lorenzo Solon, Lucas Atienza, Hospicio Castillo,
SUPREME COURT Eulogio Gernale, Petronio Bustamante, Catalina Aranas and
Manila Maria Cabatingan to their former positions under the same
terms and conditions of employment with back wages from the
EN BANC time they were illegally dismissed until they are actually
reinstated by employing them either in the Photo Materials
Company, Inc., or Medel Office Materials and Paper
Company, Inc.
G.R. No. L-23010 July 9, 1971
Upon the filing of a charge for unfair labor practice with the Court of Industrial
H. ARONSON & CO., INC., THE PHOTO MATERIALS CO., INC. and Relations by herein respondents against petitioners H. Aronson & Co., Inc. —
MEDEL OFFICE MATERIALS & PAPER CO., INC., petitioners, hereinafter referred to as Aronson or the Company — and/or Photo Materials
vs. & Paper Co., and/or Photo Materials Company, Inc. — hereinafter referred to
ASSOCIATED LABOR UNION, ALEJANDRO CENIZA, LORENZO SOLON, as Photo Materials — and Medel Office Materials and Paper Co., Inc. — also
LUCAS ATIENZA, HOSPICIO CASTILLO, EULOGIO GERNALE, referred to hereinafter as Medel — a preliminary investigation was had and
PETRONIO BUSTAMANTE, CATALINA ARANAS, MARIA CABATINGAN thereafter the corresponding charge was filed against them under the
and THE COURT OF INDUSTRIAL RELATIONS, respondents. provisions of Section 4 (a), sub-sections (1), (2), and (4) of Republic Act No.
875. After hearing, the parties charged were found guilty. Their motion for
Vicente L. Faelnar, Manuel Lino G. Faelnar and Humabon G. Orlanes for reconsideration having been denied subsequently by the court en banc, they
petitioners. took the present appeal.
Seno, Mendoza, Ruiz and Associates for respondents. The following facts have been established: Aronson, originally known as
Moody Aronson & Co., Inc., was incorporated in 1920, with an authorized
capital stock of P5000,000.00 and a corporate life of 50 years expiring on
May 27, 1970. Its corporate purpose was to engage, as it actually engaged,
in the business of buying, importing and selling of goods, wares and
DIZON, J.: merchandise, wholesale and retail, including photo materials and supplies,
writing paper, school books, stationery and stationery supplies. In the course
Petitioners' appeal from an order of the Court of industrial Relations issued in of time it became an Aronson family controlled corporation.
Case No. 290-ULP-Cebu of November 11, 1963, penned by the then
Presiding Judge, Jose S. Bautista, subsequently affirmed by the court en In 1958 its President and General Manager was Francis Aronson, and its
banc, the dispositive part of which is as follows: Assistant Manager was Donato Medel. That year thirteen of its twenty-five
employees became members of the respondent Associated Labor Union,
WHEREFORE, the Court, finding the respondents guilty of among them being the individual respondents Alejandro Ceniza, Lorenzo
unfair labor practices as charged, orders them to cease and Solon, Lucas Atienza, Hospicio Castillo, Eulogio Gernale, Petronio
desist from such acts, and to reinstate complainants Alejandro Bustamante, Catalina Aranas and Maria Cabatingan. In the month of
September of that year, because of the dismissal of Eugenia Solon, a union The total authorized capital stock of the two new corporations amounting to
member, her co-employees who were union members declared a strike which P500,000.00 was exactly the same authorized capital stock of Aronson.
was soon settled as a result of concilitation negotiations initiated by the Cebu Moreover, Photo Materials was organized to engage in the business of
Regional Office of the Department of Labor. importing and exporting, buying and selling goods, specifically photographic
equipment and supplies, cameras, graphic art films, greeting cards, and to
Sometime thereafter, the respondent Union and its members made demands maintain a photo processing laboratory and a photo finishing and
for a collective bargaining agreement with the Company to obtain certain photographic studio, while the other new corporation, Medel, was organized
benefits in connection with their working conditions. When the Company to engage in the business of buying and selling wares and merchandise of all
refused to enter into a collective bargaining agreement, the employees who kinds, such as paper and other office materials. It will thus be seen that the
were union members declared a second strike in December of that year. After two new corporations were organized to engage in exactly the same business
some time the Company management acceded to their demands and entered in which Aronson had been engaged; in other words, to take over the latter's
into a collective bargaining agreement with them on January 6, 1959, the business.
same having been renewed March 23, 1960. In this manner the union
members obtained labor benefits consisting of union security clause, security On July 15, 1961, all the employees of Aronson who were members of the
of employment, conversion of daily to monthly salaries, sick and vacation respondent Union were required to stop working in spite of the fact that,
leaves, medical and dental care, etc. according to the notice of termination of employment served on them, their
services were to be terminated on the 31st of that month. On the other hand,
On January 6, 1960, management sent to the employees of the Company the employees of the Company who were not members of the respondent
letters of termination of employment of the following tenor: Union were allowed to continue working up to that date, and thereafter they
continued working because they were absorbed or re-employed by the newly
This is to notify you that on July 31, 1961 you will be separated organized corporations: Photo Materials and Medel.
from the service of this Company. Consequently August 1,
1961 you will no longer be in the employ of this Company. There is also sufficient evidence to show that Medel started its business with
the stocks and office equipment of Aronson, and occupied for that purpose
Due to poor business, the stockholders desire to dissolve this one-half of the store and bodega formerly used by the latter. The other half
Corporation or to discontinue doing business on or about July was used by the other new corporation — Photo Materials — who started
31, 1961. business at the same time as Medel.
Then on February 13, 1961 Aronson's original Articles of Incorporation were It is not disputed that the individual respondents were among the oldest in the
amended so that, instead of its corporate existence expiring on May 27, service of Aronson, as may be seen in the following table showing their date
1970, it was made to expire nine (9) years earlier, or more specifically, on of employment, salary upon termination, and number of years in the service,
July 31, 1961. On March 9, 1961, or less than a month after such amendment quoted from the appealed order:
had been accomplished, Medel was incorporated with a capital stock of
P100,000.00, and on July 17 of the same year, another new corporation, No. of Years
Photo Materials was also incorporated with an authorized capital stock of Date of Salary upon in the
P400,000.00. Name Employment Termination Service
1. Hospicio Castillo 12-1-19 P130.00 41 yrs. 7 mos. appealed order either in Aronson or in either one of the other two petitioners;
2. Alejandro Ceniza 2-18-29 200.00 32 " and lastly, in ordering them to pay back wages to the individual respondents.
3. Lucas Atienza 7-29-24 127.00 37 "
4. Maria Cabatingan 6- 1-27 170.00 34 " In view of the issues thus raised, it is quite obvious that the question of
5. Lorenzo Solon 3-27-32 130.00 29 " 4 " whether or not the shortening of the corporate life or dissolution of Aronson,
6. Catalina Aranas 4- 1-33 130.00 28 " 3 " and the subsequent incorporation of the other two petitioners were part and
7. Eulogio Gernale 3-21-48 127.00 13 " 4 " parcel of a plan, or were intended to accomplish the dismissal of the
8. Petronio Bustamante 1-13-41 120.00 20 " individual respondents. In the light of the facts set forth above and others to
be mentioned hereinafter, We have come to the conclusion that such was
To simplify the discussion of the fourteen errors allegedly committed by the really the case.
Court of Industrial Relations, We shall divide them into four groups on the
basis of the relation existing among the issues raised therein. It is clear from the record that prior to the year 1958 Aronson had no labor
trouble worth mentioning. That year, however, thirteen of its twenty-five
The first to the fourth, and the eighth to the ninth assignments of error employees became members of the respondent Union, and that same year
partially state petitioners' position as follows: that Photo Materials and Medel Aronson saw the even tenor of its business disturbed first, by a strike
are not mere successors-in-interest or subsidiaries of Aronson and that, declared in September 1958 by the union members in protest against the
therefore, there never had existed a relationship of employer and employee dismissal of Eugenia Solon, and later, by a second strike declared in
between them, on the one hand, and the individual respondents, on the other; December 1958 — lasting until January 1959 — as a result of certain
that, in view of this absence of employer and employee relationship, Court of demands made upon the Company by its employees affiliated with the
Industrial Relations had no jurisdiction over Photo Materials and Medel; that respondent Union.
the law applicable to the facts of this case is Republic Act No. 1052, as
amended by Republic Act No. 1787, and not Republic Act No. 875. So, on January 6, 1960, Aronson served written notice to its employees of the
termination of their services as of July 31, 1961, allegedly due to the desire of
The fifth to the seventh assignments of error state another phase of its stockholders to dissolve the corporation because of poor business. Then,
petitioners' position as follows: that the corporate life of Aronson expired on on February 13, 1961, obviously with the end in view of giving the termination
July 31, 1961; that as a consequence, the herein individual respondents were of employment the appearance of good faith and legality, Aronson amended
legally dismissed from its service as of that date in accordance with the its original Articles of Incorporation to make its corporate life expire on July
provisions of Republic Act No. 1052, as amended by Republic Act No. 1787; 31, 1961 instead of May 27, 1970 as provided for in said original Articles of
that, independently of this, Aronson properly terminated their services in Incorporation.
accordance with the terms of their collective bargaining agreement in force at
that time. Furthermore, evidently to further give a semblance of good faith and legality
to the termination of the services of its employees — particularly those
Lastly, in the tenth to the fourteenth assignments of error petitioners contend affiliated with the respondent Union — on March 9, 1961 petitioner Medel
that the Court of Industrial Relations erred in finding them guilty of unfair labor was established with a capital stock of P100,000.00, followed by the
practice; in ordering them to reinstate the respondents named in the incorporation on July 17 of the same year of the other petitioner Photo
Materials with an authorized capital stock of P400,000.00. The combined
capital of the two new corporations was exactly the amount of the capital likewise apparent that its business in 1960 was more profitable
stock of Aronson, and the new corporations' corporate purposes were exactly than in the previous years of 1959, 1958 and 1957. Mr.
the same as those of Aronson. Indeed, the facts established by the evidence Aronson openly admitted that there was more reason, from the
lead to no other conclusion than that the two new corporations actually took business point of view, to dissolve the Company in 1959 than
over the business of Aronson. To these circumstances so blatantly revealing in 1960 (t.s.n., pp. 685-686).
petitioners' purpose must be added these additional circumstances: that the
new corporations started business a day after the closure of business of That the Company was not losing or doing poor business in
Aronson; that the members of the Aronson family who controlled said 1960 is shown by the fact that on April 24, 1960, it increased
company are in the same controlling position in the two new corporations; its personnel by adding two (2) additional employees,
and lastly, that Aronson's employees who were not members of the Patricinio Diaza and Roberto Gorosin (t.s.n., pp. 605-606).
respondent Union later found immediate employment with the new Likewise in January, 1960, the Company gave salary
corporations. increases to two (2) employees, namely, Juanito Solon and
Andres Tugot (t.s.n., p. 597).
Petitioners' contention that the dissolution of Aronson was due to "poor
business" is, upon the record, clearly without merit. It was ably disposed of by It is true (and the evidence supporting this is uncontradicted)
Judge Bautista in the appealed order, as follows: that the H. Aronson & Company suffered reduction of its
import quota allocations beginning 1960 until its quota was
Upon careful and thorough analysis of the evidence adduced abolished in the second quarter of 1960. This court can take
and from the observation by the undersigned of the demeanor judicial notice that import quota allocations were progressively
and manner of the witnesses who testified on both sides, the cut down beginning 1961 and 1962 in order to prepare our
preponderance of evidence inclines towards the finding that international dollar reserve and that this reduction was general
the H. Aronson & Company was not doing poor business in and nationwide for it affected all import business in the
1959 or 1960 but on the other hand, it was making better Philippines. But the business engaged in by the H. Aronson &
business than in the preceding two years, 1957 and 1958. In Company did not entirely depend for its stock upon importation
1957, said Company had suffered a net loss of P6,179.50 from abroad. Thus, Mr. Aronson himself admitted that to fill up
(Exhibit "52"). In 1958 the Company recovered amazingly for it its diminishing imported stock and supplies, the Company
had a net profit of P7,796.60 (Exhibit "53"). In 1959, its net resorted to local purchases from local Companies (t.s.n., pp.
profit increased to P8,930.23 (Exhibit "34"). And in 1960, it 672-673). That this recourse to local purchases after the
doubled its net profit to the tune of P16,903.63 (Exhibit "34"). import quota allocations were altogether abolished did not as a
These facts were admitted by Mr. Francis Aronson on the whole bring about such poor business as to warrant the
witness stand (t.s.n., pp. 794-95); he also admitted as it immediate dissolution of the Company and the complete
likewise appears in Exhibit "34", that in 1960, the Company stoppage of its business is clearly indicated by the fact that on
had a surplus and profit in the total amount of P34,084.46 August 1, 1961, Mr. Aronson and the members of his family,
(t.s.n, p. 682). From these figures it is beyond dispute that the who owned majority if not most of the stocks of the dissolved
Company's business improved gradually from 1958 to 1960 as H. Aronson & Company, opened up for business the newly
its profit progressively increased during the period. It is incorporated Photo Materials Co., Inc., engaging in the
business of photography and sale of photographic supplies Our conclusion, therefore, is that the Court of Industrial Relations had
and equipments which was the same business carried by the jurisdiction over the case and the petitioners herein; that it correctly found
dissolved H. Aronson & Company. As a matter of fact, this petitioners guilty of unfair labor practice, and in granting to the individual
newly-incorporated Photo Materials Company started business respondents the relief set forth in the dispositive portion of the appealed order
with stocks of photo supplies locally purchased from Kodak (Majestic etc. vs. Court of Industrial Relations, L-12607, Feb. 28, 1962;
(Philippines) (t.s.n., pp. 672-673). If it were true that the Fernando vs. Angat Labor Union, L-17896, May 30, 1962; PLASLU vs. Sy, L-
reduction and ultimate abolition of import quota allocations 18476, May 30, 1964; Yu Ki Lam vs. Micaller, L-9565, Sept. 14, 1956; Talisay
constituted the important and immediate cause of the etc. vs. CIR, et al., 60 O.G. pp. 5143, 5151, Jan. 30, 1960).
dissolution of the H. Aronson & Company, then under the
substantial ownership and managership of Mr. Francis WHEREFORE, the appealed order being in accordance with law, the same
Aronson, it cannot be understood why said Mr. Aronson is, hereby affirmed, with costs.
opened up a business similar to that of H. Aronson &
Company which allegedly depended upon import quota Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar, Fernando, Teehankee,
allocations. If at all, the opening for business of the Photo Barredo, Villamor and Makasiar, JJ., concur.
Materials Company and the Medel Office Materials and Paper
Company for that matter after the dissolution of the H. Aronson Castro, J., took no part.
& Company, both of which newly-opened companies carry on
the same business as the H. Aronson & Company is clear
indication that the reduction and abolition of its import quota
allocations did not constitute the primary cause of the
dissolution of the H. Aronson & Company.
The true cause of the termination of the services of the

complainants is their membership with the Associated Labor
Union and their union activities. This finding is supported by
the antecedent facts related above, that is, since its
establishment in 1920 the only instance when the
management of the H. Aronson & Company began to find
interference in the conduct of its business affairs was in 1958
when the Associated Labor Union, to which the complainants
are affiliated, declared two strikes wherein the union decisively
got what it wanted from the reluctant management. Attempts
were made by the management to break the majority then held
by the Union but it was not successful.
FIRST DIVISION the NAWASA case (G.R. L-18938, August 31, 1964), the Court ruled that in
determining the pay on the basis of which overtime pay is to be computed
[G.R. Nos. L-30658-59. March 31, 1976.] only those benefits regularly and continuously enjoyed by the employees or
workers (for at least three months) are to be taken into account.
SHELL OIL WORKERS UNION and SHELL & AFFILIATES
SUPERVISORS’ UNION, Petitioners, v. SHELL COMPANY OF THE 2. ID.; ID.; ID.; ID.; NAWASA CASE NOT APPLICABLE TO CASE AT BAR.
PHILIPPINES and THE COURT OF INDUSTRIAL — Petitioners, citing the NAWASA case, claim that the money value of the
RELATIONS, Respondents. fringe benefits enjoyed by them should be included in the determination of
premium rates agreed upon in order to arrive at the correct computation of
J. C. Espinas, B. C Pineda, J.J. dela Rosa & Associates, for Petitioners. their overtime compensation from the Company. HELD: Having been
stipulated by the parties that." . . the Tin Factory Incentive Pay has ceased in
Siguion Reyna, Montecillo, Belo & Ongsiako for respondent Shell view of the closure of the factory in May 1966 the fringe benefits as described
Company of the Philippines, Ltd. show that they are occasionally not regularly enjoyed and that not all
employees are entitled to them", the petitioners have failed to meet the test
SYNOPSIS laid down by the Court in the NAWASA case. Further, the collective
bargaining agreement resorted to by the parties being in accordance with
Petitioner unions filed in the court a quo two cases claiming payment for their R.A. 875, with its provision on overtime pay far way beyond the premium rate
members of overtime pay due them in accordance with the ruling in the provided for in Sections 4 and 5 of Commonwealth Act 444, the same should
National Waterworks & Sewerage Authority v. NAWASA Consolidated govern their relationship. Since this is their contract entered into by them
Unions, Et Al., G.R. L-18938, August 31, 1964. Both petitions were denied for pursuant to bargaining negotiations under existing laws, they are bound to
lack of merit. Elevated to the Court of Industrial Relations, the court en banc respect it. It is the duty of this Court to see to it that contracts between
affirmed the questioned decision and denied petitioners’ motion for parties, not tainted with infirmity or irregularity or illegality, be strictly complied
reconsideration. Hence, this petition for review on certiorari. with by they parties themselves. This is the only way which unity and order
can be properly attained in our society.
The Supreme Court held that the ruling laid down in the NAWASA case is not
applicable to the case at bar so as to allow the payment of additional
overtime pay to petitioners by private respondent Company, notwithstanding DECISION
their collective bargaining agreement.
Judgment affirmed. ESGUERRA, J.:
SYLLABUS This is a petition for review on certiorari of the Resolution dated July 31, 1968
of the Court of Industrial Relations en banc in its CIR Case Nos. 2410-V and
2411-V, affirming the Decision dated January 29, 1968, of its Trial Court
1. LABOR RELATIONS; WAGES; OVERTIME PAY; BASIS THEREFOR denying the petitions of petitioners for additional overtime pay from their
COMPUTED ON REGULAR BENEFITS ENJOYED; SETTLED RULE. — In
employer, private respondent Shell Company of the Philippines. December, 1969.
The factual background of the case is as follows:chanrob1es virtual 1aw "2. That Exhibit "A-1, Petitioner" and "Exhibit 1-A", Respondent" (Appendix B
library which covers premium rates and allowances) form part of the agreement.
In the trial court, two cases were filed - one is CIR Case No. 2410-V entitled "3. That the manner of computing the overtime compensation of the
"Shell Oil Workers Union v. The Shell Company and its Managers", filed on employees as provided in Exhibit "A-1, Petitioner" and "Exhibit "1-A,
May 12, 1967; and the other is CIR Case No. 2411-V entitled "Shell and Respondent", in the contracts preceding this, has been the same.
Affiliates Supervisors’ Union v. Shell Company of the Philippines, Ltd. and its
General Managers", filed on May 13, 1967. The claims interposed and the "4. That Shell has been computing the overtime compensation of its
theory advanced by the two unions against the same employer, the Shell employees in the same manner throughout the period of more than ten (10)
Company of the Philippines, are one and the same, that is, — the members years without objection on the part of the SOWU and that it is based on the
of the petitioners’ unions were not and are not being paid their overtime pay basic hourly rate and basic monthly rate.
due them in accordance with the ruling in National Waterworks & Sewerage
Authority v. NAWASA Consolidated Unions, Et Al., G.R. No. L-18938, August "5. That SOWU marked in evidence Exhibit "B", a description of the fringe
31, 1964; 11 SCRA p. 766. benefits enjoyed by its members which are not provided in the collective
bargaining agreement. As agreed, however, the Tin Factory Incentive pay
On May 23, 1967, the respondent Shell Company of the Philippines filed a has ceased in view of the closure of the factory in May 1966; the fringe
motion to Dismiss but, the same was later on withdrawn on July 19, 1967. An benefits as described show that they are occasionally not regularly enjoyed
Answer instead was filed by the respondent Shell Company of the Philippines and that not all employees are entitled to them. Furthermore, there are
on July 27, 1967, claiming that the employees who rendered or are rendering conditions precedent to before one can claim the benefits.
overtime work have been paid and are being paid in accordance with law and
their collective bargaining agreement. It is also averred in the answer of the "6. That parties agree that the court may take judicial notice of the records of
respondent company that the NAWASA decision insofar as the computation the NAWASA case now with the Supreme Court and they are allowed to
of overtime pay is concerned is not applicable to the factual situation of the adopt or make reference to any part thereof as evidence here if proper." (P.
case and that claims for overtime pay filed beyond the three-year period 2, CIR Decision of January 29, 1968).
allowed by law have already prescribed.
On January 29, 1968, the trial court rendered its decision denying both
The parties agreed to submit their cases for decision by the trial court on the petitions for lack of basis.
basis alone of the testimony of Mr. B. Figueroa, Industrial Relations Manager
of respondent Shell Company, with the following stipulations of On February 2, 1968, the petitioners elevated their cases to the Court of
facts:jgc:chanrobles.com.ph Industrial Relations en banc and moved for the reconsideration of the
Decision of the trial court under date of January 29, 1968, and reiterated their
"1. That Exhibit "A-Petitioner" and "Exhibit 1-Respondent" is the collective claim for the recomputation of their overtime pay by taking into account the
bargaining agreement between the parties currently enforced and for a period fringe benefits enjoyed and adding the same to the basic rate before
of three (3) years and five (5) months commencing in August 1966 until 31 computing the overtime pay.
workman’s standpoint (International L. Ass’n v. National Terminals Corp. C.

The Court of Industrial Relations en banc rendered its Resolution on July 31, C. Wise, 50 F. Supp. 26, affirmed C.C.A. Carbunao v. National Terminals
1968, denying the petitioners’ motion for reconsideration, as Corp. 139 F. 2d 853)." (Pp. 1-2, Petition For Certiorari; National Waterworks
follows:jgc:chanrobles.com.ph & Sewerage Authority v. NWSA Consolidated Unions, Et Al., L-18938, August
31, 1964; 11 SCRA 766, 782-783).
"This refers to petitioners’ Motion seeking reconsideration of the Decision of
the Trial Court dated January 29, 1968. After a careful perusal of the records Petitioners, however, overlook the paragraph immediately following, which
as well as the written and oral arguments of the parties, the Court en banc states:jgc:chanrobles.com.ph
fails to find sufficient justification in altering or modifying the aforesaid
Decision. "Respondent court, therefore, correctly included such differential pay in
computing the weekly wages of those employees and laborers who worked
"MOTION DENIED."cralaw virtua1aw library seven days a week and were continuously receiving 25% Sunday differential
for a period of three months immediately preceding the implementation of
Hence this petition for review on certiorari. Republic Act 1880." (11 SCRA 766, 783, supra; Emphasis supplied).
The principal issue thus herein presented is whether the pertinent ruling in The theory, therefore, of the petitioners is to the effect that, notwithstanding
the NAWASA case (G.R. No. L-18938, August 31, 1964; 11 SCRA 766) is the terms and conditions of their existing collective bargaining agreement with
applicable to the case at bar so as to allow the payment of additional respondent Shell Company, particularly Exhibit "A-1" for the Petitioners and
overtime pay to the petitioners by the private respondent Shell Company, Exhibit "1-A" for the Respondent (which is Appendix "B" of the Collective
notwithstanding their collective bargaining agreement. Bargaining Agreement of the parties), considering the ruling in the NAWASA
case, a recomputation should be made of their basic wage by adding the
The pertinent ruling in the NAWASA case invoked by the petitioners in the money value of the fringe benefits enjoyed by them from whence the
proper computation of overtime pay is as follows:jgc:chanrobles.com.ph premium rates agreed upon shall be computed in order to arrive at the correct
computation of their overtime compensation from the Company. On the other
"It has been held that for purposes of computing overtime compensation a hand, respondent Shell Company maintains that the NAWASA case should
regular wage includes all payments which the parties have agreed shall be not be utilized as the basis for the alteration of their mode of computing
received during the work week, including piece work wages, differential overtime rate of pay as set forth in their collective Bargaining Agreement. It
payments for working at undesirable times, such as at night or on Sundays insists that their collective bargaining agreement should be the law between
and holidays, and the cost of board and lodging customarily furnished the them.
employee (Walling v. Yangermah-Reynolds Hardwook Co., 325 U.S. 419;
Walling v. Harischfeger Corp., 325 U.S. 427. The "regular rate" of pay also After a careful and thorough re-examination of the NAWASA case, supra, and
ordinarily includes incentive bonus or profit-sharing payments made in a minute examination of the facts and the evidence of the case now before
addition to the normal basic pay (56 C.J.S., pp. 704-705), and it was also Us, We rule that the NAWASA case is not in point and, therefore, is
held that the higher rate for night, Sunday and holiday work is just as much a inapplicable to the case at bar.
regular rate as the lower rate for daytime work. The higher rate is merely an
inducement to accept employment at times which are not as desirable from a The ruling of this Court in the NAWASA case contemplates the regularity and
continuity of the benefits enjoyed by the employees or workers (for at least collective bargaining agreement resorted to by the parties being in
three (3) months) as the condition precedent before such additional payments accordance with R.A. 875, with its provision on overtime pay far way beyond
or benefits are taken into account. This is evident in the aforequoted ruling of the premium rate provided for in Sections 4 and 5 of Commonwealth Act 444,
this Court in the NAWASA case as well as in the herein-below cited the same should govern their relationship. Since this is their contract entered
authorities, to wit:jgc:chanrobles.com.ph into by them pursuant to bargaining negotiations under existing laws, they are
bound to respect it. It is the duty of this Court to see to it that contracts
"The ‘regular rate’ of pay on the basis of which overtime must be computed between parties, not tainted with infirmity or irregularity or illegality, be strictly
must reflect all payments which parties have agreed shall be received complied with by the parties themselves. This is the only way by which unity
regularly during the work week, exclusive of overtime payments." Walling v. and order can be properly attained in our society.
Garlock Packing Co., C.C.A.N.Y., 159 F. 2d 44, 45. (Page 289, WORDS And
PHRASES, Permanent Edition, Vol. 36A; Emphasis supplied); and It should be noted in passing that Commonwealth Act 444 prescribes only a
minimum of at least 25% in addition to the regular wage or salary of an
"As a general rule the words ‘regular rate’ mean the hourly rate actually paid employee to constitute his overtime rate of pay, whereas, under Appendix
for the normal, non-overtime work week, and an employee’s regular "B", (Exhs. "A-1", Petitioners and "1-A", Respondent) of the Collective
compensation is the compensation which regularly and actually reaches Bargaining Agreement of the parties, the premium rate of overtime pay is as
him, . . .." (56 C.J.S. 704; Emphasis supplied). high as 150% on regular working days up to 250% on Sundays and
recognized national holidays.
Even in the definition of wage under the Minimum Wage Law, the words
"customarily furnished" are used in referring to the additional payments or WHEREFORE, the judgment appealed from is affirmed.
benefits, thus, —
Without pronouncement as to costs.
"‘Wage’ paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money, whether Teehankee, (Chairman), Makasiar, Muñoz Palma and Martin, JJ., concur.
fixed or ascertained on a time, task, piece, commission basis, or other
method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done
or to be done or for services rendered or to be rendered, and includes the fair
and reasonable value, as determined by the Secretary of Labor, of board,
lodging, or other facilities customarily furnished by the employer to the
employee." (Sec. 2(g), R.A. No. 602).
Having been stipulated by the parties that." . . the Tin Factory Incentive Pay
has ceased in view of the closure of the factory in May 1966 the fringe
benefits as described show that they are occasionally not regularly enjoyed
and that not all employees are entitled to them", herein petitioners failed to
meet the test laid down by this Court in the NAWASA case. Further, the
THIRD DIVISION company suspended negotiations on the CBA which moved the union
to file on November 4, 1997 another Notice of Strike, docketed as
G.R. No. 144315 July 17, 2006 NCMB-NCR-NS No. 11-465-97, on the ground of bargaining deadlock
(Annex "2", Comment, p. 566, ibid.)
PHILCOM EMPLOYEES UNION, petitioner,
vs. On November 11, 1997, at a conciliation conference held at the
PHILIPPINE GLOBAL COMMUNICATIONS and PHILCOM NCMB-NCR office, the parties agreed to consolidate the two (2)
CORPORATION, respondents. Notices of Strike filed by the union and to maintain the
status quo during the pendency of the proceedings (Annex "3",
DECISION Comment, p. 567, ibid.).
CARPIO, J.: On November 17, 1997, however, while the union and the company
officers and representatives were meeting, the remaining union
The Case officers and members staged a strike at the company premises,
barricading the entrances and egresses thereof and setting up a
This is a petition for review1 to annul the Decision2 dated 31 July 2000 of the stationary picket at the main entrance of the building. The following
Court of Appeals in CA-G.R. SP No. 53989. The Court of Appeals affirmed day, the company immediately filed a petition for the Secretary of
the assailed portions of the 2 October 1998 and 27 November 1998 Orders of Labor and Employment to assume jurisdiction over the labor dispute
the Secretary of Labor and Employment in OS-AJ-0022-97. in accordance with Article 263(g) of the Labor Code.
The Facts On November 19, 1997, then Acting Labor Secretary Cresenciano B.
Trajano issued an Order assuming jurisdiction over the dispute,
enjoining any strike or lockout, whether threatened or actual, directing
The facts, as summarized by the Court of Appeals, are as follows:
the parties to cease and desist from committing any act that may
exacerbate the situation, directing the striking workers to return to
Upon the expiration of the Collective Bargaining Agreement (CBA) work within twenty-four (24) hours from receipt of the Secretary's
between petitioner Philcom Employees Union (PEU or union, for Order and for management to resume normal operations, as well as
brevity) and private respondent Philippine Global Communications, accept the workers back under the same terms and conditions prior to
Inc. (Philcom, Inc.) on June 30, 1997, the parties started negotiations the strike. The parties were likewise required to submit their
for the renewal of their CBA in July 1997. While negotiations were respective position papers and evidence within ten (10) days from
ongoing, PEU filed on October 21, 1997 with the National Conciliation receipt of said order (Annex "4", Comment, pp. 610-611, ibid.). On
and Mediation Board (NCMB) – National Capital Region, a Notice of November 28, 1997, a second order was issued reiterating the
Strike, docketed as NCMB-NCR-NS No. 10-435-97, due to perceived previous directive to all striking employees to return to work
unfair labor practice committed by the company (Annex "1", immediately.
Comment, p. 565, ibid.). In view of the filing of the Notice of Strike, the
On November 27, 1997, the union filed a Motion for Reconsideration "(i) Issuance of memorandum/notice to employees without
assailing, among others, the authority of then Acting Secretary giving copy to union, change in work schedule at Traffic
Trajano to assume jurisdiction over the labor dispute. Said motion was Records Section and ITTO policies; and
denied in an Order dated January 7, 1998.
"(j) Inadequate transportation allowance, water and facilities."
As directed, the parties submitted their respective position papers. In
its position paper, the union raised the issue of the alleged unfair labor (Annex A, Petition; pp. 110-182, ibid.)
practice of the company hereunder enumerated as follows:
The company, on the other hand, raised in its position paper the sole
"(a) PABX transfer and contractualization of PABX service and issue of the illegality of the strike staged by the union (Annex B,
position; Petition; pp. 302-320, ibid.).
"(b) Massive contractualization; On the premise that public respondent Labor Secretary cannot rule on
the issue of the strike since there was no petition to declare the same
"(c) Flexible labor and additional work/function; illegal, petitioner union filed on March 4, 1998 a Manifestation/Motion
to Strike Out Portions of & Attachments in Philcom's Position Paper
"(d) Disallowance of union leave intended for union seminar; for being irrelevant, immaterial and impertinent to the issues assumed
for resolution (Annex C, Petition; pp. 330-333, ibid.).
"(e) Misimplementation and/or non-implementation of
employees' benefits like shoe allowance, rainboots, raincoats, In opposition to PEU's Manifestation/Motion, the company argued that
OIC shift allowance, P450.00 monthly allowance, driving it was precisely due to the strike suddenly staged by the union on
allowance, motorcycle award and full-time physician; November 17, 1997 that the dispute was assumed by the Labor
Secretary. Hence, the case would necessarily include the issue of the
"(f) Non-payment, discrimination and/or deprivation of legality of the strike (Opposition to PEU'S Motion to Strike Out; Annex
overtime, restday work, waiting/stand by time and staff F, Petition; pp. 389-393, ibid.).3
meetings;
On 2 October 1998, the Secretary of Labor and Employment ("Secretary")
"(g) Economic inducement by promotion during CBA issued the first assailed order. The pertinent parts of the Order read:
negotiation;
Going now to the first issue at hand, a reading of the complaints
"(h) Disinformation scheme, surveillance and interference with charged by the Union as unfair labor practices would reveal that these
union affairs; are not so within the legal connotation of Article 248 of the Labor
Code. On the contrary, these complaints are actually mere grievances
which should have been processed through the grievance machinery
or voluntary arbitration outlined under the CBA. The issues of flexible
labor and additional functions, misimplementation or non-
implementation of employee benefits, non-payment of overtime and latter in good faith until the strike was initiated. The Union, on the
other monetary claims and inadequate transportation allowance, are other hand, contends otherwise and further prays that the remaining
all a matter of implementation or interpretation of the economic CBA proposals of the Union be declared reasonable and equitable
provisions of the CBA subject to the grievance procedure. and thus be ordered incorporated in the new CBA to be executed.
Neither do these complaints amount to gross violations which, thus, As pointed out by the Union, there are already thirty-seven (37) items
may be treated as unfair labor practices outside of the coverage of agreed upon by the parties during the CBA negotiations even before
Article 261. The Union failed to convincingly show that there is these were suspended. Prior to this Office's assumption over the
flagrant and/or malicious refusal by the Company to comply with the case, the Company furnished the Union its improved CBA counter-
economic provisions stipulated in the CBA. proposal on the matter of promotional and wage increases which
however was rejected by the Union as divisive. Even as the Union has
With respect to the charges of contractualization and economic submitted its remaining CBA proposals for resolution, the Company
inducement, this Office is convinced that the acts of said company remains silent on the matter. In the absence of any basis, other than
qualify as a valid exercise of management prerogative. The act of the the Union's position paper, on which this Office may make its
Company in contracting out work or certain services being performed determination of the reasonableness and equitableness of these
by Union members should not be seen as an unfair labor practice act remaining CBA proposals, this Office finds it proper to defer deciding
per se. First, the charge of massive contractualization has not been on the matter and first allow the Company to submit its position
substantiated while the contractualization of the position of PABX thereon.
operator is an isolated instance. Secondly, in the latter case, there
was no proof that such contracting out interfered with, restrained or We now come to the question of whether or not the strike staged by
coerced the employees in the exercise of their right to self- the Union on November 17, 1997 is illegal. The Company claims it is,
organization. Thus, it is not unfair labor practice to contract out work having been held on grounds which are non-strikeable, during the
for reason of reduction of labor cost through the acquisition of pendency of preventive mediation proceedings in the NCMB, after this
automatic machines. Office has assumed jurisdiction over the dispute, and with the strikers
committing prohibited and illegal acts. The Company further prays for
Likewise, the promotion of certain employees, who are incidentally the termination of some 20 Union officers who were positively
members of the Union, to managerial positions is a prerogative of identified to have initiated the alleged illegal strike. The Union, on the
management. A promotion which is manifestly beneficial to an other hand, refuses to submit this issue for resolution.
employee should not give rise to a gratuitous speculation that such a
promotion was made simply to deprive the union of the membership Considering the precipitous nature of the sanctions sought by the
of the promoted employee (Bulletin Publishing Co. v. Sanchez, et. al., Company, i.e., declaration of illegality of the strike and the
G.R. No. 74425, October 7, 1986). corresponding termination of the errant Union officers, this Office
deems it wise to defer the summary resolution of the same until both
There remains the issue on bargaining deadlock. The Company has parties have been afforded due process. The non-compliance of the
denied the existence of any impasse in its CBA negotiations with the strikers with the return-to-work orders, while it may warrant dismissal,
Union and instead maintains that it has been negotiating with the is not by itself conclusive to hold the strikers liable. Moreover, the
Union's position on the alleged commission of illegal acts by the Pending resolution of the issues of illegal strike and bargaining
strikers during the strike is still to be heard. Only after a full-blown deadlock which are yet to be heard, all the striking workers are
hearing may the respective liabilities of Union officers and members directed to return to work within twenty-four (24) hours from receipt of
be determined. The case of Telefunken Semiconductors Employees this Order and Philcom and/or Philcom Corporation are hereby
Union-FFW v. Secretary of Labor and Employment and Temic directed to unconditionally accept back to work all striking Union
Telefunken Micro-Electronics (Phils.), Inc. (G.R. No. 122743 and officers and members under the same terms and conditions prior to
127215, December 12, 1997) is instructive on this point: the strike. The parties are directed to cease and desist from
committing any acts that may aggravate the situation.
It may be true that the workers struck after the Secretary of
Labor and Employment had assumed jurisdiction over the Atty. Lita V. Aglibut, Officer-In-Charge of the Legal Service, this
case and that they may have failed to immediately return to Department is hereby designated as the Hearing Officer to hear and
work even after the issuance of a return-to-work order, making receive evidence on all matters and issues arising from the present
their continued strike illegal. For, a return-to-work order is labor dispute and, thereafter, to submit a report/recommendation
immediately effective and executory notwithstanding the filing within twenty (20) days from the termination of the proceedings.
of a motion for reconsideration. But, the liability of each of the
union officers and the workers, if any, has yet to be The parties are further directed to file their respective position papers
determined. xxx xxx xxx.4 with Atty. Lita V. Aglibut within ten (10) days from receipt of this Order.
The dispositive portion of the Order reads: SO ORDERED.5
WHEREFORE, in view of all the foregoing, judgment is hereby Philcom Corporation ("Philcom") filed a motion for reconsideration. Philcom
rendered as follows: prayed for reconsideration of the Order impleading it as party-litigant in the
present case and directing it to accept back to work unconditionally all the
The Union's Manifestation/Motion to Implead Philcom Corporation is officers and members of the union who participated in the strike.6 Philcom
hereby granted. Let summons be issued to respondent Philcom also filed a Motion to Certify Labor Dispute to the National Labor Relations
Corporation to appear before any hearing that may hereafter be Commission for Compulsory Arbitration.7
scheduled and to submit its position paper as may be required.
For its part, Philcom Employees Union (PEU) filed a Motion for Partial
The Union's Manifestation/Motion to Strike Out Portions of and Reconsideration. PEU asked the Secretary to "partially reconsider" the 2
Attachments in Philcom's Position Paper is hereby denied for lack of October 1998 Order insofar as it dismissed the unfair labor practices charges
merit. against Philcom and included the illegal strike issue in the labor dispute.8
The Union's charges of unfair labor practice against the Company are The Secretary denied both motions for reconsideration of Philcom and PEU
hereby dismissed. in its assailed Order of 27 November 1998. The pertinent parts of the Order
read:
The question of whether or not Philcom Corporation should be now being raised by the Union are the same issues discussed and
impleaded has been properly disposed of in the assailed Order. We passed upon in our earlier Order.
reiterate that neither the Company herein nor its predecessor was
able to convincingly establish that each is a separate entity in the Finally, it is our determination that the issue of the legality of the strike
absence of any proof that there was indeed an actual closure and is well within the jurisdiction of this Office. The same has been
cessation of the operations of the predecessor-company. We would properly submitted and assumed jurisdiction by the Office for
have accommodated the Company for a hearing on the matter had it resolution.9
been willing and prepared to submit evidence to controvert the finding
that there was a mere merger. As it now stands, nothing on record The dispositive portion of the Order reads:
would prove that the two (2) companies are separate and distinct from
each other. WHEREFORE, there being no merit in the remaining Motions for
Reconsideration filed by both parties, the same are hereby DENIED.
Having established that what took place was a mere merger, we Our 2 October 1998 Order STANDS. To expedite the resolution of the
correspondingly conclude that the employer-employee relations Motion to Certify Labor Dispute to the NLRC for Compulsory
between the Company and the Union officers and members was Arbitration, Philcom Employees Union is hereby directed to submit its
never severed. And in merger, the employees of the merged Opposition thereto within ten (10) days from receipt of the copy of this
companies or entities are deemed absorbed by the new company Order.
(Filipinas Port Services, Inc. v. NLRC, et. al., G.R. No. 97237, August
16, 1991). Considering that the Company failed miserably to adduce SO ORDERED.10
any evidence to provide a basis for a contrary ruling, allegations to the
effect that employer-employee relations and positions previously PEU filed with this Court a petition for certiorari and prohibition under Rule 65
occupied by the workers no longer exist remain just that — mere of the Rules of Court assailing the Secretary's Orders of 2 October 1998 and
allegations. Consequently, the Company cannot now exempt itself 27 November 1998. This Court, in accordance with its Decision of 10 March
from compliance with the Order. Neither can it successfully argue that 1999 in G.R. No. 123426 entitled National Federation of Labor (NFL) vs. Hon.
the employees were validly dismissed. As held in Telefunken Bienvenido E. Laguesma, Undersecretary of the Department of Labor and
Semiconductor Employees Union-FFW v. Secretary of Labor and Employment, and Alliance of Nationalist Genuine Labor Organization,
Employment (G.R. Nos. 122743 and 122715, December 12, 1997), to Kilusang Mayo Uno (ANGLO-KMU),11 referred the case to the Court of
exclude the workers without first ascertaining the extent of their Appeals.12
individual participation in the strike or non-compliance with the return-
to-work orders will be tantamount to dismissal without due process of
The Ruling of the Court of Appeals
law.
On 31 July 2000, the Court of Appeals rendered judgment as follows:
With respect to the unfair labor practice charges against the
Company, we have carefully reviewed the records and found no
reason to depart from the findings previously rendered. The issues WHEREFORE, PREMISES CONSIDERED, this petition is hereby
DENIED. The assailed portions of the Orders of the Secretary of
Labor and Employment dated October 2, 1998 and November 27, The Court of Appeals also held that even if by Philcom's acts, Philcom had
1998 are AFFIRMED. violated the provisions of the CBA, still those acts do not constitute unfair
labor practices under Article 248 of the Labor Code. The Court of Appeals
SO ORDERED.13 held that PEU failed to show that those violations were gross or that there
was flagrant or malicious refusal on the part of Philcom to comply with the
The Court of Appeals ruled that, contrary to PEU's view, the Secretary could economic provisions of the CBA.
take cognizance of an issue, even only incidental to the labor dispute,
provided the issue must be involved in the labor dispute itself or otherwise The Court of Appeals stated that as of 21 March 1989, as held in PAL vs.
submitted to him for resolution. NLRC,14 violations of CBAs will no longer be deemed unfair labor practices,
except those gross in character. Violations of CBAs, except those gross in
The Court of Appeals pointed out that the Secretary assumed jurisdiction character, are mere grievances resolvable through the appropriate grievance
over the labor dispute upon Philcom's petition as a consequence of the strike machinery or voluntary arbitration as provided in the CBAs.
that PEU had declared and not because of the notices of strike that PEU filed
with the National Conciliation and Mediation Board (NCMB). Hence, this petition.
The Court of Appeals stated that the reason of the Secretary's assumption of The Issues
jurisdiction over the labor dispute was the staging of the strike. Consequently,
any issue regarding the strike is not merely incidental to the labor dispute In assailing the Decision of the Court of Appeals, petitioner contends that:
between PEU and Philcom, but also part of the labor dispute itself. Thus, the
Court of Appeals held that it was proper for the Secretary to take cognizance 1. The Honorable Court of Appeals has failed to faithfully adhere with
of the issue on the legality of the strike. the decisions of the Supreme Court when it affirmed the
order/resolution of the Secretary of Labor denying the Union's
The Court of Appeals also ruled that for an employee to claim an unfair labor Manifestation/Motion to Strike Out Portions of & Attachments in
practice by the employer, the employee must show that the act charged as Philcom's Position Paper and including the issue of illegal strike
unfair labor practice falls under Article 248 of the Labor Code. The Court of notwithstanding the absence of any petition to declare the strike
Appeals held that the acts enumerated in Article 248 relate to the workers' illegal.
right to self-organization. The Court of Appeals stated that if the act
complained of has nothing to do with the acts enumerated in Article 248, 2. The Honorable Court of Appeals has decided a question of
there is no unfair labor practice. substance in a way not in accord with law and jurisprudence when it
affirmed the order/resolution of the Secretary of Labor dismissing the
The Court of Appeals held that Philcom's acts, which PEU complained of as Union's charges of unfair labor practices.
unfair labor practices, were not in any way related to the workers' right to self-
organization under Article 248 of the Labor Code. The Court of Appeals held 3. The Honorable Court of Appeals has departed from the edict of
that PEU's complaint constitutes an enumeration of mere grievances which applicable law and jurisprudence when it failed to issue such order
should have been threshed out through the grievance machinery or voluntary mandating/directing the issuance of a writ of execution directing the
arbitration outlined in the Collective Bargaining Agreement (CBA). Company to unconditionally accept back to work the Union officers
and members under the same terms and conditions prior to the strike Article 263(g) of the Labor Code provides:
and as well as to pay their salaries/backwages and the monetary
equivalent of their other benefits from October 6, 1998 to date.15 When, in his opinion, there exists a labor dispute causing or likely to
cause a strike or lockout in an industry indispensable to the national
The Ruling of the Court interest, the Secretary of Labor and Employment may assume
jurisdiction over the dispute and decide it or certify the same to the
The petition must fail. Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the
PEU contends that the Secretary should not have taken cognizance of the intended or impending strike or lockout as specified in the assumption
issue on the alleged illegal strike because it was not properly submitted to the or certification order. If one has already taken place at the time of
Secretary for resolution. PEU asserts that after Philcom submitted its position assumption or certification, all striking or locked out employees shall
paper where it raised the issue of the legality of the strike, PEU immediately immediately return to work and the employer shall immediately
opposed the same by filing its Manifestation/Motion to Strike Out Portions of resume operations and readmit all workers under the same terms and
and Attachments in Philcom's Position Paper. PEU asserts that it stated in its conditions prevailing before the strike or lockout. The Secretary of
Manifestation/Motion that certain portions of Philcom's position paper and Labor and Employment or the Commission may seek the assistance
some of its attachments were "irrelevant, immaterial and impertinent to the of law enforcement agencies to ensure the compliance with this
issues assumed for resolution." Thus, PEU asserts that the Court of Appeals provision as well as with such orders as he may issue to enforce the
should not have affirmed the Secretary's order denying PEU's same.
Manifestation/Motion.
x x x x.
PEU also contends that, contrary to the findings of the Court of Appeals, the
Secretary's assumption of jurisdiction over the labor dispute was based on The powers granted to the Secretary under Article 263(g) of the Labor Code
the two notices of strike that PEU filed with the NCMB. PEU asserts that only have been characterized as an exercise of the police power of the State, with
the issues on unfair labor practice and bargaining deadlock should be the aim of promoting public good.16 When the Secretary exercises these
resolved in the present case. powers, he is granted "great breadth of discretion" in order to find a
solution to a labor dispute. The most obvious of these powers is the
PEU insists that to include the issue on the legality of the strike despite its automatic enjoining of an impending strike or lockout or its lifting if one has
opposition would convert the case into a petition to declare the strike illegal. already taken place.17
PEU's contentions are untenable. In this case, the Secretary assumed jurisdiction over the dispute because it
falls in an industry indispensable to the national interest. As noted by the
The Secretary properly took cognizance of the issue on the legality of the Secretary.
strike. As the Court of Appeals correctly pointed out, since the very reason of
the Secretary's assumption of jurisdiction was PEU's declaration of the strike, [T]he Company has been a vital part of the telecommunications
any issue regarding the strike is not merely incidental to, but is essentially industry for 73 years. It is particularly noted for its expertise and
involved in, the labor dispute itself. dominance in the area of international telecommunications. Thus, it
performs a vital role in providing critical services indispensable to the petitioner's notices of strike filed on 21 October and 4 November 1997 were
national interest. It is for this very reason that this Office strongly what prompted the assumption of jurisdiction, the Secretary would have
opines that any concerted action, particularly a prolonged work issued the assumption order as early as those dates.
stoppage is fraught with dire consequences. Surely, the on-going
strike will adversely affect not only the livelihood of workers and their Moreover, after an examination of the position paper21 Philcom submitted to
dependents, but also the company's suppliers and dealers, both in the the Secretary, we see no reason to strike out those portions which PEU seek
public and private sectors who depend on the company's facilities in to expunge from the records. A careful study of all the facts alleged, issues
the day-to-day operations of their businesses and commercial raised, and arguments presented in the position paper leads us to hold that
transactions. The operational viability of the company is likewise the portions PEU seek to expunge are necessary in the resolution of the
adversely affected, especially its expansion program for which it has present case.
incurred debts in the approximate amount of P2 Billion. Any prolonged
work stoppage will also bring about substantial losses in terms of lost On the documents attached to Philcom's position paper, except for Annexes
tax revenue for the government and would surely pose a serious set MM-2 to MM-22 inclusive22 which deal with the supposed consolidation of
back in the company's modernization program. Philippine Global Communications, Inc. and Philcom Corporation, we find the
other annexes relevant and material in the resolution of the issues that have
At this critical time when government is working to sustain the emerged in this case.
economic gains already achieved, it is the paramount concern of this
Office to avert any unnecessary work stoppage and, if one has PEU also claims that Philcom has committed several unfair labor practices.
already occurred, to minimize its deleterious effect on the workers, the PEU asserts that there are "factual and evidentiary bases" for the charge of
company, the industry and national economy as a whole.18 unfair labor practices against Philcom.
It is of no moment that PEU never acquiesced to the submission for On unfair labor practices of employers, Article 248 of the Labor Code
resolution of the issue on the legality of the strike. PEU cannot prevent provides:
resolution of the legality of the strike by merely refusing to submit the issue
for resolution. It is also immaterial that this issue, as PEU asserts, was not Unfair labor practices of employers. - It shall be unlawful for an
properly submitted for resolution of the Secretary. employer to commit any of the following unfair labor practice:
The authority of the Secretary to assume jurisdiction over a labor dispute (a) To interfere with, restrain or coerce employees in the exercise of
causing or likely to cause a strike or lockout in an industry indispensable to their right to self-organization;
national interest includes and extends to all questions and controversies
arising from such labor dispute. The power is plenary and discretionary (b) To require as a condition of employment that a person or an
in nature to enable him to effectively and efficiently dispose of the employee shall not join a labor organization or shall withdraw from
dispute.19 one to which he belongs;
Besides, it was upon Philcom's petition that the Secretary immediately
assumed jurisdiction over the labor dispute on 19 November 1997.20 If
(c) To contract out services or functions being performed by union payment of overtime and other monetary claims, inadequate transportation
members when such will interfere with, restrain or coerce employees allowance, water, and other facilities, are all a matter of implementation or
in the exercise of their rights to self-organization; interpretation of the economic provisions of the CBA between Philcom and
PEU subject to the grievance procedure.
(d) To initiate, dominate, assist or otherwise interfere with the
formation or administration of any labor organization, including the We find it pertinent to quote certain portions of the assailed Decision, thus —
giving of financial or other support to it or its organizers or supporters;
A reading of private respondent's justification for the acts complained
(e) To discriminate in regard to wages, hours of work, and other terms of would reveal that they were actually legitimate reasons and not in
and conditions of employment in order to encourage or discourage anyway related to union busting. Hence, as to compelling employees
membership in any labor organization. x x x to render flexible labor and additional work without additional
compensation, it is the company's explanation that the employees
(f) To dismiss, discharge, or otherwise prejudice or discriminate themselves voluntarily took on work pertaining to other assignments
against an employee for having given or being about to give testimony but closely related to their job description when there was slack in the
under this Code; business which caused them to be idle. This was the case of the
International Telephone Operators who tried telemarketing when they
(g) To violate the duty to bargain collectively as prescribed by this found themselves with so much free time due to the slowdown in the
Code; demand for international line services. With respect to the Senior
Combination Technician at the Cebu branch who was allegedly made
(h) To pay negotiation or attorney's fees to the union or its officers or to do all around work, the same happened only once when the
agents as part of the settlement of any issue in collective bargaining lineman was absent and the lineman's duty was his ultimate concern.
or any other dispute; or Moreover, the new assignment of the technicians at CTSS who were
promoted to QCE were based on the job description of QCE, while
(i) To violate a collective bargaining agreement. those of the other technicians were merely temporary due to the
promotion of several technicians to QCE (pars. 9-12, Philcom's Reply
to PEU's Position Paper; Annex "E", Petition; pp. 350-351, ibid.).
Unfair labor practice refers to acts that violate the workers' right to organize.
The prohibited acts are related to the workers' right to self-organization and to
the observance of a CBA. Without that element, the acts, no matter how On the alleged misimplementation and/or non-implementation of
unfair, are not unfair labor practices.23 The only exception is Article 248(f), employees' benefits, such as shoe allowance, rainboots, raincoats,
which in any case is not one of the acts specified in PEU's charge of unfair OIC shift allowance, P450.00 monthly allowance, driving allowance,
labor practice. motorcycle award and full-time physician, the company gave the
following explanation which this Court finds plausible, to wit:
A review of the acts complained of as unfair labor practices of Philcom
convinces us that they do not fall under any of the prohibited acts defined and 16. The employees at CTSS were given One Thousand Pesos
enumerated in Article 248 of the Labor Code. The issues of (P1,000.00) cash or its equivalent in purchase orders because
misimplementation or non-implementation of employee benefits, non- it was their own demand that they be given the option to buy
the pair of leather boots they want. For the Cebu branch, the On the issue of non-payment, discrimination and/or deprivation of
employees themselves failed to include these benefits in the overtime, restday work, waiting/stand by time and staff meeting
list of their demands during the preparation of the budget for allowance, suffice it to state that there is nothing on record to prove
the year 1997 despite the instruction given to them by the the same. Petitioner did not present evidence substantial enough to
branch manager. According to the employees, they were not support its claim.
aware that they were entitled to these benefits. They thought
that because they have been provided with two vans to get to As to the alleged inadequate transportation allowance and facilities,
their respective assignments, these benefits are available only the company posits that:
to collectors, messengers and technicians in motorcycles.
30. The transportation allowances given to the Dasmarinas
17. The P450.00 monthly allowance was provided by the CBA and Pinugay employees are more than adequate to defray
to be given to counter clerks. However, the position of counter their daily transportation cost. Hence, there is absolutely no
clerks had been abolished in accordance with the justification for an increase in the said allowance. In fact, said
reorganization plan undertaken by the company in April 1995, employees at Dasmarinas and Pinugay, who are only residing
with the full knowledge of the Union membership. As a result in areas near their place of work, are more privileged as they
of the abolition of the position of counter clerks, there was no receive transportation expenses while the rest of the company
more reason for granting the subject allowance. workers do not.
18. The company more than satisfied the provision in the CBA 31. As to the demand for clean drinking water, the company
to engage the services of a physician and provided adequate has installed sufficient and potable water inside the Head
medical services. Aside from a part time physician who reports Office even before the strike was staged by the Union. Any
for duty everyday, the company has secured the services of person who visits the Makati Head Office can attest to this
Prolab Diagnostics, which has complete medical facilities and fact.
personnel, to serve the medical needs of the employees. x x x
(Philcom's Reply to PEU's Position Paper, p. 357, ibid.)
19. The Union demands that a full-time physician to be
assigned at the Head Office. This practice, is not provided in Anent the allegation of PABX transfer and contractualization of PABX
the CBA and, moreover is too costly to maintain. The medical service and position, these were done in anticipation of the company
services offered by Prolab [D]iagnostics are even better and to switch to an automatic PABX machine which requires no operator.
more comprehensive than any full time physician can give. It This cannot be treated as ULP since management is at liberty, absent
places at the employees' disposal numerous specialists in any malice on its part, to abolish positions which it deems no longer
various fields of medicine. It is beyond understanding why the necessary (Arrieta vs. National Labor Relations Commission, 279
Union would insist on having a full-time physician when they SCRA 326, 332). Besides, at the time the company hired a temporary
could avail of better services from Prolab Diagnostics. employee to man the machine during daytime, the subject position
was vacant while the assumption of the function by the company
(Philcom's Reply to PEU's Position Paper, pp.352, 354, ibid.) guard during nighttime was only for a brief period.
With respect to the perceived massive contractualization of the evidence submitted by the union itself. In a letter to PEU's President,
company, said charge cannot be considered as ULP since the hiring the company granted the leave of several union officers and members
of contractual workers did not threaten the security of tenure of to attend a seminar notwithstanding that its request to be given more
regular employees or union members. That only 160 employees out of details about the affair was left unheeded by the union (Annex "Y",
400 employees in the company's payroll were considered rank and file PEU's Position Paper; p. 222, ibid.). Those who were denied leave
does not of itself indicate unfair labor practice since this is but a were urgently needed for the operation of the company.
company prerogative in connection with its business concerns.
On the ULP issue of disinformation scheme, surveillance and
Likewise, the offer or promotions to a few union members is neither interference with union affairs, these are mere allegations
unlawful nor an economic inducement. These offers were made in unsupported by facts. The charge of "black propaganda" allegedly
accordance with the legitimate need of the company for the services committed by the company when it supposedly posted two (2) letters
of these employees to fill positions left vacant by either retirement or addressed to the Union President is totally baseless. Petitioner
resignation of other employees. Besides, a promotion is part of the presents no proof that it was the company which was behind the
career growth of employees found competent in their work. Thus, incident. On the purported disallowance of union members to observe
in Bulletin Publishing Corporation vs. Sanchez (144 SCRA 628, 641), the July 27, 1997 CBA meeting, the company explained that it only
the Supreme Court held that "(T)he promotion of employees to allowed one (1) employee from ITTO, instead of two (2), as it would
managerial or executive positions rests upon the discretion of adversely affect the operation of the group. It also took into
management. Managerial positions are offices which can only be held consideration the fact that ITTO members represent only 20% of the
by persons who have the trust of the corporation and its officers. It is union. Other union members from other departments of the company
the prerogative of management to promote any individual working should have equal representation (Annex "L", Position Paper for the
within the company to a higher position. It should not be inhibited or Union; pp. 205-206, ibid.). As to the alleged surveillance of the
prevented from doing so. A promotion which is manifestly beneficial to company guards during a union seminar, We find the idea of sending
an employee should not give rise to a gratuitous speculation that such guards to spy on a mere union seminar quite preposterous. It is thus
a promotion was made simply to deprive the union of the membership not likely for the company which can gain nothing from it to waste its
of the promoted employee, who after all appears to have accepted his resources in such a scheme.
promotion."
On the issuance of memorandum/notice to employees without giving
That the promotions were made near or around the time when CBA copy to union, change in work schedule at Traffic Records Section
negotiations were about to be held does not make the company's and ITTO policies, the company has sufficiently rebutted the same,
action an unfair labor practice. As explained by the company, these thus:
promotions were based on the availability of the position and the
qualification of the employees promoted (p. 6, Annex "4", Philcom's 27. The Union also whines about the failure of the company to
Reply to PEU's Position Paper; p. 380, ibid.) furnish copies of memoranda or notices sent to employees
and change of work schedules at the Traffic Records Section
On the union's charge that management disallowed leave of union and ITTO policies. The CBA, however, does not obligate the
officers and members to attend union seminar, this is belied by the Company to give the Union a copy of each and every
memorandum or notice sent to employees. This would be to comply with its economic provisions. The law mandates that such
unreasonable and impractical. Neither did the Union demand violations should not be treated as unfair labor practices.27
that they be furnished copies of the same. This is clearly a
non-issue as copies of all memoranda or notices issued by PEU also asserts that the Court of Appeals should have issued an order
management are readily available upon request by any directing the issuance of a writ of execution ordering Philcom to accept back
employee or the Union. to work unconditionally the striking union officers and members under the
same terms and conditions prevailing before the strike. PEU asserts that the
28. Contrary to the allegations of the Union, the rationale and union officers and members should be paid their salaries or backwages and
mechanics for the abolishment of the midnight schedule at the monetary equivalent of other benefits beginning 6 October 1998 when PEU
Traffic Record Services had been thoroughly and adequately received a copy of the Secretary's 2 October 1998 return-to-work order.
discussed with the Union's President, Robert Benosa, and the
staff of Traffic Record Services in the meeting held on May 9, PEU claims that even if the "issue of illegal strike can be included in the
1997. The midnight services were abolished for purely assailed orders and that the union officers and members have been
economic reasons. The company realized that the midnight terminated as a result of the alleged illegal strike, still, the Secretary has to
work can be handled in the morning without hampering normal rule on the illegality of the strike and the liability of each striker." PEU asserts
operations. At the same time, the company will be able to save that the union officers and members should first be accepted back to work
on cost. For this objective, the employees concerned agreed because a return-to-work order is immediately executory.28
to create a manning and shifting schedule starting at 6:00 a.m.
up to 10:00 p.m., with each employee rendering only eight We rule on the legality of the strike if only to put an end to this protracted
hours of work every day without violating any provision of the labor dispute. The facts necessary to resolve the legality of the strike are not
labor laws or the CBA.24 in dispute.
The Court has always respected a company's exercise of its prerogative to The strike and the strike activities that PEU had undertaken were patently
devise means to improve its operations. Thus, we have held that illegal for the following reasons:
management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, 1. Philcom is engaged in a vital industry protected by Presidential Decree No.
supervision and transfer of employees, working methods, time, place and 823 (PD 823), as amended by Presidential Decree No. 849, from strikes and
manner of work.25 lockouts. PD 823, as amended, provides:
This is so because the law on unfair labor practices is not intended to deprive Sec. 1. It is the policy of the State to encourage free trade unionism
employers of their fundamental right to prescribe and enforce such rules as and free collective bargaining within the framework of compulsory and
they honestly believe to be necessary to the proper, productive and profitable voluntary arbitration. Therefore, all forms of strikes, picketings and
operation of their business.26 lockouts are hereby strictly prohibited in vital industries, such as in
public utilities, including transportation and communications, x x x.
Even assuming arguendo that Philcom had violated some provisions in the (Emphasis supplied)
CBA, there was no showing that the same was a flagrant or malicious refusal
Enumerating the industries considered as vital, Letter of Instruction No. 368 PEU could not have validly anchored its defiance to the return-to-work orders
provides: on the motion for reconsideration that it had filed on the assumption of
jurisdiction order. A return-to-work order is immediately effective and
For the guidance of workers and employers, some of whom have executory despite the filing of a motion for reconsideration. It must be
been led into filing notices of strikes and lockouts even in vital strictly complied with even during the pendency of any petition
industries, you are hereby instructed to consider the following as vital questioning its validity.30
industries and companies or firms under PD 823 as amended:
The records show that on 22 November 1997, Philcom published in
1. Public Utilities: the Philippine Daily Inquirer a notice to striking employees to return to
work.31 These employees did not report back to work but continued their
xxxx mass action. In fact, they lifted their picket lines only on 22 December
1997.32 Philcom formally notified twice these employees to explain in writing
B. Communications: why they should not be dismissed for defying the return-to-work
order.33 Philcom held administrative hearings on these disciplinary
1) Wire or wireless telecommunications such as cases.34 Thereafter, Philcom dismissed these employees for abandonment of
telephone, telegraph, telex, and cable work in defiance of the return-to-work order.35
companies or firms; (Emphasis supplied)
A return-to-work order imposes a duty that must be discharged more than it
xxxx confers a right that may be waived. While the workers may choose not to
obey, they do so at the risk of severing their relationship with their employer.36
It is therefore clear that the striking employees violated the no-strike policy of
the State in regard to vital industries. The following provision of the Labor Code governs the effects of defying a
return-to-work order:
2. The Secretary had already assumed jurisdiction over the dispute. Despite
the issuance of the return-to-work orders dated 19 November and 28 ART. 264. Prohibited activities. ─ (a) x x x x
November 1997, the striking employees failed to return to work and
continued with their strike. No strike or lockout shall be declared after assumption of
jurisdiction by the President or the Minister or after certification or
Regardless of their motives, or the validity of their claims, the striking submission of the dispute to compulsory or voluntary arbitration or
employees should have ceased or desisted from all acts that would during the pendency of cases involving the same grounds for the
undermine the authority given the Secretary under Article 263(g) of the Labor strike or lockout x x x x
Code. They could not defy the return-to-work orders by citing Philcom's
alleged unfair labor practices to justify such defiance.29 Any union officer who knowingly participates in illegal strike and any
worker or union officer who knowingly participates in the
commission of illegal acts during a strike may be declared to
have lost his employment status: Provided, That mere participation
of a worker in a lawful strike, shall not constitute sufficient ground for addressed to PEU President Roberto B. Benosa. She told Benosa that PEU's
termination of his employment, even if a replacement had been hired act of obstructing the free ingress to and egress from the company premises
by the employer during such lawful strike. (Emphasis supplied) "has badly disrupted normal operations of their organization."41
A strike undertaken despite the Secretary's issuance of an assumption or The right to strike, while constitutionally recognized, is not without legal
certification order becomes a prohibited activity, and thus, illegal, under constrictions. Article 264(e) of the Labor Code, on prohibited activities,
Article 264(a) of the Labor Code. The union officers who knowingly provides:
participate in the illegal strike are deemed to have lost their employment
status. The union members, including union officers, who commit specific No person engaged in picketing shall commit any act of violence,
illegal acts or who knowingly defy a return-to-work order are also deemed to coercion or intimidation or obstruct the free ingress to or egress from
have lost their employment status.37 Otherwise, the workers will simply refuse the employer's premises for lawful purposes, or obstruct public
to return to their work and cause a standstill in the company operations while thoroughfares.
retaining the positions they refuse to discharge and preventing management
to fill up their positions.38 The Labor Code is emphatic against the use of violence, coercion, and
intimidation during a strike and to this end prohibits the obstruction of free
Hence, the failure of PEU's officers and members to comply immediately with passage to and from the employer's premises for lawful purposes. A picketing
the return-to-work orders dated 19 November and 28 November 1997 cannot labor union has no right to prevent employees of another company from
be condoned. Defiance of the return-to-work orders of the Secretary getting in and out of its rented premises, otherwise, it will be held liable for
constitutes a valid ground for dismissal.39 damages for its acts against an innocent by-stander.42
3. PEU staged the strike using unlawful means and methods. The sanction provided in Article 264(a) is so severe that any worker or union
officer who knowingly participates in the commission of illegal acts during a
Even if the strike in the present case was not illegal per se, the strike strike may be declared to have lost his employment status.43
activities that PEU had undertaken, especially the establishment of human
barricades at all entrances to and egresses from the company premises and By insisting on staging the prohibited strike and defiantly picketing Philcom's
the use of coercive methods to prevent company officials and other personnel premises to prevent the resumption of company operations, the striking
from leaving the company premises, were definitely illegal.40 PEU is deemed employees have forfeited their right to be readmitted.44
to have admitted that its officers and members had committed these illegal
acts, as it never disputed Philcom's assertions of PEU's unlawful strike 4. PEU declared the strike during the pendency of preventive mediation
activities in all the pleadings that PEU submitted to the Secretary and to this proceedings at the NCMB.
Court.
On 17 November 1997, while a conciliation meeting was being held at the
PEU's picketing officers and members prohibited other tenants at the Philcom NCMB in NCMB-NCR-NS 10-435-97, PEU went on strike. It should be noted
building from entering and leaving the premises. Leonida S. Rabe, Country that in their meeting on 11 November 1997, both Philcom and PEU were
Manager of Societe Internationale De Telecommunications even "advised to maintain the status quo."45 Such disregard of the mediation
Aeronautiques (SITA), a tenant at the Philcom building, wrote two letters proceedings was a blatant violation of Section 6, Book V, Rule XXII of the
Omnibus Rules Implementing the Labor Code, which explicitly obliges the acted unreasonably. The law cannot interpose its hand to protect them from
parties to bargain collectively in good faith and prohibits them from impeding the consequences of their illegal acts.52
or disrupting the proceedings.46 The relevant provision of the Implementing
Rules provides: A strike declared on the basis of grievances which have not been submitted
to the grievance committee as stipulated in the CBA of the parties is
Section 6. Conciliation. ─ x x x x premature and illegal.53
During the proceedings, the parties shall not do any act which may Having held the strike illegal and having found that PEU's officers and
disrupt or impede the early settlement of dispute. They are obliged, as members have committed illegal acts during the strike, we hold that no writ of
part of their duty, to bargain collectively in good faith, to participate execution should issue for the return to work of PEU officers who participated
fully and promptly in the conciliation meetings called by the regional in the illegal strike, and PEU members who committed illegal acts or who
branch of the Board. x x x x defied the return-to-work orders that the Secretary issued on 19 November
1997 and 28 November 1997. The issue of who participated in the illegal
Article 264(a) of the Labor Code also considers it a prohibited activity to strike, committed illegal acts, or defied the return-to-work orders is a question
declare a strike "during the pendency of cases involving the same grounds for of fact that must be resolved in the appropriate proceedings before the
the same strike." Secretary of Labor.
Lamentably, PEU defiantly proceeded with their strike during the pendency of WHEREFORE, we DISMISS the petition and AFFIRM the Decision of the
the conciliation proceedings. Court of Appeals in CA-G.R. SP No. 53989, with the MODIFICATION that the
Secretary of Labor is directed to determine who among the Philcom
5. PEU staged the strike in utter disregard of the grievance procedure Employees Union officers participated in the illegal strike, and who among the
established in the CBA. union members committed illegal acts or defied the return-to-work orders of
19 November 1997 and 28 November 1997. No pronouncement as to costs.
By PEU's own admission, "the Union's complaints to the management began
in June 1997 even before the start of the 1997 CBA renegotiations."47 Their SO ORDERED.
CBA expired on 30 June 1997.48 PEU could have just taken up their
grievances in their negotiations for the new CBA. This is what a Philcom Quisumbing, Chairman, Carpio-Morales, Tinga, Velasco, Jr., J.J., concur.
officer had suggested to the Dasmariñas staff when the latter requested on
16 June 1997 for an increase in transportation allowance.49 In fact, when PEU
declared the strike, Philcom and PEU had already agreed on 37 items in their
negotiations for the new CBA.50
50
Id. at 583.
The bottom line is that PEU should have immediately resorted to the
grievance machinery provided for in the CBA.51 In disregarding this 51
Id. at 507-508.
procedure, the union leaders who knowingly participated in the strike have
Tiu v. NLRC, 343 Phil. 478 (1997).

52
53
II The Labor Code with Comments and Cases 443.
Republic of the Philippines Petitioner AHS/Philippines Employees Union [FFW] was the recognized
SUPREME COURT collective bargaining agent of the rank-and-file employees of private
Manila respondent AHS/Philippines Inc., a company engaged in the sale of hospital
and laboratory equipment and Berna and Pharmaton products. A collective
SECOND DIVISION bargaining agreement [CBA] was concluded between the parties for the
period commencing December 1, 1981 to November 30, 1984.
G.R. No. 73721 March 30, 1987
On July 26, 1984, petitioner union filed a notice of strike with the Bureau of
AHS/PHILIPPINES EMPLOYEES UNION [FFW], B.A. AGANON, D.T. Labor Relations, listing as ground therefor unfair labor practice consisting in:
GUILLES, E.G. SULIT and E.C. RODRIGUEZ, * petitioners, 1] diminution of benefits, 2] union busting, 3] illegal termination and 4]
vs. harassment. 2 A second notice of strike was thereafter filed on August 3,
THE NATIONAL LABOR RELATIONS COMMISSIONS and 1984 on substantially the same grounds and the additional charges of refusal
AHS/PHILIPPINES, INC., respondents. to bargain, violation of the CBA and dismissal of union officers and
members. 3
Felicitas S. Aquino for petitioners.
On August 15, 1984, petitioner union struck. A picket was staged at private
Beatriz C Alo for respondents. respondent company's premises at Pasong Tamo in Makati.
When the conciliation meetings conducted by the Bureau of Labor Relations

proved unavailing, private respondent company filed a petition to declare the
FERNAN, J.: strike illegal 4 After issues had been joined with petitioner union's submission
of its position paper, hearings ensued before Labor Arbiter Virginia Son.
Assailed in this petition for certiorari with prayer for a writ of preliminary
injunction is the decision dated December 27, 1985 of the National Labor On March 26, 1985, Labor Arbiter Son rendered a decision declaring the
Relations Commission [NLRC] in NCR-9-3217-84 entitled, "ASH/Philippines, strike staged by petitioner union illegal and ordering the lifting of the picket
Inc., Complainant-Appellee, versus AHS/Philippines Employees Union established in the premises of private respondent company. All the officers of
[FFW], B.A. Aganon, D.T. Guilles, e.g. Sulit and E.C. Rodriguez, the union who joined and were responsible for the declaration of said strike
Respondents-Appellants," which affirmed the labor arbiter's decision were deemed to have lost their employment status, while the other non-
declaring the strike held by petitioners as illegal but with the modification that officer employees who symphathized and joined the strike were ordered
individual petitioners be reinstated to their former positions, or paid reinstated to their former or equivalent positions without strike duration pay,
separation pay or the economic package offered by the company, if or paid separation pay or the economic package offered by the company,
reinstatement is impossible. 1 whichever is higher, in case reinstatement was not possible. 5
Dissatisfied, petitioners appealed the labor arbiter's ruling to the NLRC en

banc, which rendered the assailed decision. Hence, this petition.
On July 30, 1986, after public and private respondents had submitted their resolutions of July 30 and September 8, 1986 and to give due course to the
respective comments to the petition, the Court resolved to discuss the petition petition.
for lack of merit. 6 A motion for reconsideration filed by union president
Lorenzo Leones and vice- president Ernesto Ilagan 7 was denied on In concluding that the strike declared by petitioners was illegal for being
September 8, 1986. 8 Upon receipt of the notice of said denial petitioners based on trivial grounds, public respondent NLRC ruled on the issues alleged
forthwith filed a motion with leave of Court to allow petitioners to file last or in the notice of strike in this wise:
final motion for reconsideration, on the ground, among others, that the first
motion for reconsideration was filed by the aforesaid union officers without 1] On the dismissal of fourteen [14] rank and file employees by respondent
the assistance of counsel. 9 The motion was opposed by private respondent company, which according to petitioner union triggered the first notice of
company. 10 strike, the NLRC, while conceding that these employees had rendered
service to respondent company for more than six [6] months when they were
Pending action on this motion, the Kilusang Mayo Uno [KMU] staged a picket dismissed and that they performed activities which were usually necessary or
in front of the P. Faura gate of this Court on October 27, 1986 in protest of desirable in the usual business of respondent company, took note that their
the dismissal by the Court of the petition at bar. Reacting to the circular services were engaged under a contract entered into by respondent company
signed by Nick Elman of the KMU distributed to the public during the picket, with a placement agency and that petitioner union never demanded that they
respondent company filed a motion to cite petitioners, the KMU and Nick be converted into regular employees nor instituted any grievance or
Elman in contempt of court. The alleged contemptors, upon being required, complaint in behalf of said employees until some of them wrote petitioner
submitted their joint comment on the contempt charge, 11 to which union for assistance after their dismissal. On the basis of these observations,
respondent company filed a reply. 12 respondent NLRC concluded that petitioner union had no personality to
represent said employees as their category as regular employees eligible for
Meanwhile, the case was heard on November 10, 1986, 13 after which the membership in the union under the terms of the CBA has not yet been finally
Court resolved to require the parties to file their respective memoranda within determined at grievance or by final judgment and the assistance sought by
20 days. 14 The parties complied with this order. them did not vest petitioner union with the legal personality to represent the
much less use their dismissal as a ground to strike. 17
In a manifestation dated December 2, 1986, counsel for private respondent
company informed the Court that in January 1987, private respondent would 2] With respect to the increase in the area sales quota of the union president
close its operations in the Philippines because of the continuing losses being and vice-president, the NLRC found the increase justified by the change in
sustained by its Philippine operations and the uncertainty of business the sales organization in January 1984, whereby each field representative,
recovery in the immediate future. 15 Petitioners filed a counter-manifestation instead of carrying both Berna and Pharmaton products, would concentrate
and motion for early resolution. 16 only on either one. It further observed that it was only after six [6] months
after the plan had been in operation and when the union president failed to
Because petitioners submitted a supplemental memorandum the Court meet his quota that said union president filed his grievance; that the
required private respondent company to file its own supplemental grievance was being threshed out in accordance with the grievance
memorandum in reply to petitioners' supplemental memorandum. After procedure outlined in the CBA and that any delay in the resolution thereof
private respondent had done so, the Court resolved to set aside its was not entirely attributable to the company. Moreover, respondent NLRC
found the setting of the area sales quota not to be ill-motivated nor related to
the president's union activities. Hence, it concluded that the union president's cash L/C basis or full guarantee by the mother company. As respondent
grievance was not a valid ground for a strike. 18 company could not comply with these requirements, it decided to strengthen
its other division, the HML Division, which sold hospital and laboratory
3] As regards the non-implementation of the yearly increase in per diems and equipment bought from the parent company. It posted a job-opening notice
allowances, public respondent concurred with the observation of the Labor for 7 to 10 medical representatives and one field supervisor for the HML
Arbiter that there was no such provision in the CBA so that said issue could Division. Amelita Calderon, a member of petitioner union applied for the
not be a proper ground for the notice of strike or the strike itself. 19 position of medical representative, but was rejected for lack of the necessary
educational attainment and unwillingness to accept provincial assignments.
4] Likewise not considered by the NLRC as a valid ground for strike was the
failure of respondent company to provide space for a union office as When the economic crisis continued until mid-year of 1984, respondent
stipulated under Art. XV, Section 1 of the CBA. The NLRC attributed such company decided to change its marketing strategy for the Berna and
failure to the complacency exhibited by petitioner union in not taking up the Pharmaton products to ensure the whole company's viability. Instead of
matter again with respondent company after petitioner union rejected the set ethical selling through the field representatives, it was decided to shift to the
of rules drawn up by respondent company with respect to the use of the office over-the counter [OTC] method and to appoint Zuellig Pharma as national
in accordance with the CBA provision that the use of such office would be distributor. As this move would result in the abolition of the Pharmaceutical
subject to any rules and regulations to be agreed upon by both union and Division, the union president was advised on July 26, 1984 of the impending
company. 20 dissolution of said division and was asked to suggest ways and means by
which the termination could be effected in the smoothest manner possible
5] Anent the recall by respondent company of the cars assigned to the field and with least pain. When on August 1, 1984, the union president
representatives, the NLRC found no violation of the CBA nor any unfair labor categorically stated to the company president that the union would oppose
practice to have been committed by respondent company by reason thereof. any termination at all costs, respondent company decided to proceed with the
Referring to Art. XIV, Sec. 2 of the CBA which granted to the assignee of a announcement of the termination by serving notice on the same day to the 31
car to be disposed of the first priority to purchase the car at fifty [50] percent employees of the Pharmaceutical Division, said termination to take effect
of the appraised market value, the NLRC found no indication that the cars immediately upon service thereof. In lieu of the 30-day notice required by law,
were to be disposed of and therefore the CBA provision invoked by petitioner the employees were paid one month's salary. Fifteen accepted their
union had not come into operation. This being the case, such recall could not termination.
be a ground for a strike. 21
Petitioners seek reversal of the above-cited NLRC findings and conclusions
6] The dismissal of 31 employees of respondent company's Pharmaceutical on the following grounds:
Division, the additional ground cited in the second notice of strike, was found
by the NLRC to have been dictated by the change in the marketing strategy A. THE ASSAILED DECISION WHOLLY DISREGARDED VIOLATIONS BY
of Berna and Pharmaton products and not for the purpose of union-busting. THE COMPANY OF ART. 284 OF THE LABOR CODE AS WELL AS THE
Respondent NLRC gave credence to respondent company's claim that as STIPULATED PROCEDURES GOVERNING DISMISSALS IN THE
early as October 1983, its operations had been seriously affected by the PARTIES' COLLECTIVE BARGAINING AGREEMENT;
suspension of trade and foreign credit facilities, which situation grew worse in
early 1984 when its suppliers of Berna and Pharmaton products insisted on a
B. THE NLRC ACTED WITH GRAVE ABUSE OF DISCRETION WHEN IT petitioners were trying to drive home, i.e. that the banner by which the
AFFIRMED THAT THE DISMISSAL OF THE FOURTEEN [14] EMPLOYEES retrenchment was effected by respondent-company ran counter to both law
ON JULY 26, 1984 WAS NOT A PROPER GROUND FOR A STRIKE and the collective bargaining agreement.
DESPITE CONFERMENT BY LAW OF REGULAR STATUS TO THEIR
EMPLOYMENT; Art. 284 of the Labor Code of the Philippines, as amended by Sec. 15 of
Batas Pambansa Blg. 130, provides:
C. THE NLRC GRAVELY ERRED IN HOLDING THAT THE QUADRUPLING
OF THE UNION PRESIDENT'S AREA SALES QUOTA WAS NOT AN ACT Art. 284. Closure of establishment and reduction of personnel.
OF DISCRIMINATION AND HENCE NOT A VALID GROUND FOR STRIKE; — The employer may also terminate the employment of any
and, employee due to the installation of labor-saving devices,
redundancy, retrenchment to present losses, or the closing or
D. THE COMMISSION ACTED CAPRICIOUSLY, UNREASONABLY AND cessation of operation of the establishment or undertaking
WITHOUT LEGAL BASIS WHEN IT RULED THAT THE CLOSURE OF THE unless the closing is for the purpose of circumventing the
PHARMACEUTICAL DIVISION AND THE SUBSEQUENT TRANSFER OF provisions of this title, by serving a written notice on the
ITS DISTRIBUTION FUNCTIONS TO ANOTHER COMPANY IS NOT AN workers and the Ministry of Labor and Employment at least
UNFAIR LABOR PRACTICE. one [1] month before the intended date thereof. ... In case of
retrenchment to prevent losses and in case of closure or
Grounds A and B cited by petitioners are interrelated and will be discuss cessation of operations of establishment or undertaking not
jointly. due to serious business losses or financial reverses, the
separation pay shall be equivalent to one [1] month or at least
Concededly, retrenchment to prevent losses is considered a just cause for one-half [1/2] month pay for every year of service, whichever is
terminating employment 22 and the decision whether to resort to such move or higher. A fraction of at least six [6] months shall be considered
not is a management prerogative. 23 Basic, however, in human relations is the one [1] whole year.
precept that "every person must, in the exercise of his rights, and in the
performance of his duties, act with justice, give everyone his due and In the case at bar, respondent company offered to pay the 31 dismissed
observed honesty and good faith." 24 Thus, in the case of Remerco Garment employees one month salary in lieu of the one [1] month written notice
Manufacturing v. Minister of Labor and Employment, et al, 25 We stated that: required by law. This practice was allowed under the termination Pay
Laws 26 whereby if the employee is dismissed on the basis of just cause, the
Basically, the right of an employer to dismiss an employee employer is not required to serve advance written notice based on the
differs from and should not be confused with the manner in number of years the employee has served the employer, nor is the employer
which such right is exercised. It must not be oppressive and required to grant termination pay. It is only where the dismissal is without just
abusive since it affects one's person and property. cause that the employer must serve timely notice on the employee, otherwise
the employer is obliged to pay the required termination compensation, except
Due perhaps to the fact that private respondent company presented a legally where other applicable statutes provide a different remedy. 27 Otherwise
tenable ground for dismissing the 31 employees of its Pharmaceutical stated, it was the employer's failure to serve notice upon the employee, not
Division, both the labor arbiter and respondent NLRC totally missed the point the cause for the dismissal, that rendered the employer answerable for
terminal pay. 28 Thus, notice may effectively be substituted by payment of the Verily, union president Lorenzo Leones was told by respondent company's
termination pay. president and managing director, Constancio V. Halili, Jr. on July 25, 1984
about the impending closure, but contrary to the NLRC's assessment, said
Under the New Labor Code, however, even if the dismissal is based on a just notice cannot be taken as a substantial compliance with the above-cited CBA
cause under Art. 284, the one-month written notice to both the affected provision. The July 25, 1984 meeting was called by Halt for the purpose of
employee and the Minister labor is required, on top of the separation pay. discussing Leones grievance over the latter's increase in area sales quota.
Hence, unlike in the old termination pay laws, payment of a month's salary The information about the closure was a mere "by the way" or an
cannot be considered substantial compliance with the provisions of Art. 284 "incidentally," a lip service, which does not constitute compliance in good faith
of the Labor Code. Since the dismissal of the 31 employees of the of the CBA provision on consultation.
Pharmaceutical Division of respondent company was effected in violation of
the above-cited provision, the same is illegal. It appears that paying up service to the CBA is a practice resorted to by
respondent company. Thus, it posted for two days a job-opening notice for 7-
Needless to say, in the absence of a showing that the illegal dismissal was 10 field representatives and one supervisor in the HML Division as required
dictated by anti-union motives, the same does not constitute an unfair labor by the CBA, but without disclosing that the Pharmaceutical Division was
practice as would be a valid ground for a strike. The remedy is an action for about to be dissolved. Feeling secure in their positions, the field
reinstatement with backwages and damages, Nevertheless, We take this representatives in the Pharmaceutical Division would naturally be
actuation of respondent company as evidence of the abusive and oppressive uninterested in applying for the same position in the other division.
manner by which the retrenchment was effected. And while the lack of proper Furthermore, respondent company listed educational requirements calculated
notice could not be a ground for a strike, this does not mean that the strike to disqualify would be applicants from the Pharmaceutical Division who were
staged by petitioner union was illegal because it was likewise grounded on a mostly commerce graduates, but eventually hired applicants who did not
violation by respondent company of the CBA, enumerated as an unfair labor possess the required educational attainment.
practice under Art. 249 [i] of the Labor Code.
Another evidence that respondent company intended to terminate the 31
Appearing on record is the testimony of Carlito V. Santos, Controller of employees of the Pharmaceutical Division without prior consultation with
respondent company that the "principal strategy to shift to one distributor petitioner union is the recall of the cars assigned to the field representatives.
came as early as July. 29 Inspire of this, petitioner union was never consulted, Two memoranda dated July 23 and 24 addressed to the HML Division and
on the matter as provided under Section 4, Article VIII of the CBA as follows: the Pharmaceutical Division, respectively, were sent out, directing the field
representatives to turnover their respective cars for inspection at the nearby
Section 4. Consultations on Lay-Offs and Terminations. Cressida Motors. The memorandum to the HML Division indicated July 26,
1984 as the date of release of the cars to the field representatives, while that
a] the COMPANY agrees that whenever it will lay-off or to the Pharmaceutical Division merely mentioned "cut-off dates this
terminate any covered employee for economic or other July. 31 The reason given by respondent company for the recall was that
reasons, the UNION shall be consulted prior to such lay estimates of car maintenance and repair costs were to be reported by Carlito
off/termination. 30 Santos to its Regional Office in Australia. This is obviously an afterthought
because the testimony of said Carlito Santos was that he left for Sydney,
Australia on July 24, 1984 and stayed there only for three [3] days or until
July 27, 1984. 32 While the recall of the cars per se did not constitute a discrimination, considered as an unfair labor practice under Art. 249[e] of the
violation of Section 2, Article XIV of the CBA on the car purchase option, We Labor Code.
consider the same as an indicia of the blatant disregard by private
respondent company of the CBA provision on consultation. It has previously been indicated that an employer may treat
freely with an employee and is not obliged to support his
In the same manner that We found the dismissal of the 31 employees of the actions with a reason or purpose. However, where the
Pharmaceutical Division in itself not to be constitutive of an unfair labor attendant circumstances, the history of employer's past
practice, so must the dismissal of the 14 rank-and-file employees be conduct and like considerations, coupled with an intimate
characterized. In the first instance it is not disputed that these employees connection between the employer's action and the union
were hired by respondent company thru a placement agency. In the absence affiliations or activities of the particular employee or employees
of any evidence that the placement agency did not have substantial capital or taken as a whole raise a suspicion as to the motivation for the
investment in the form of tools, equipment machineries, work premises, employer's action, the failure of the employer to ascribe a valid
among others, We cannot conclude that the arrangement between reason therefor may justify an inference that his unexplained
respondent company and said placement agency was "Labor-only" conduct in respect of the particular employee or employees
contracting as to make respondent company the direct employer of these 14 was inspired by the latter's union membership or activities.
employees. 33 In the second place, even if such conclusion is reached and the While the presence of this mere suspicion neither takes the
14 employees be deemed regular employees of respondent company, their place of evidence that the employer's conduct was improperly
dismissal not having been shown in the least manner to be connected with motivated nor dispenses with the requirement of proof of the
union affiliation or activities cannot be considered an unfair labor practice, fact, such suspicion, when coupled with other facts which in
and therefore, not a valid ground for a strike. themselves, might have been inadequate to support an
adverse finding against the employer, may suffice to sustain a
We agree with petitioners that respondent NLRC gravely abused its finding that the employer's action violated the prohibition of the
discretion in concluding that the increase in the area sales quota of union Act. 35
president Leones was not an act of discrimination. The NLRC found the
increase in the area sales quota justified by the change in the sales The contempt charge against petitioner union, KMU and Nick Elman was
organization. It, however, overlooked a very important and crucial factor: that predicated mainly on the statement appearing in the circular apparently
unlike the other field representatives whose quotas were increased by an authored by Nick Elman, to wit:
average of 98%, that of the union president and vice-president were increase
400% and 300%, respectively. No valid explanation was advanced by It is an open secret, that most of the Supreme Court Justices
respondent company for such marked difference. Considered in the light of belong to the upper privileged class and some of them
the anti-union attitude exhibited by respondent company in transferring union belonged at one time or another, to law firms that serve the
president Leones from the main office in Manila to Cebu when the union was interests of giant transnational corporations as corporate
still being organized, and which act was found by the NLRC as constituting counsels and retainers and this ruling merely confirmed the
unfair labor practice and union-busting in connection with the application for perceived apparent pro-multinational, pro-capital anti-labor,
clearance to terminate Leones filed by respondent company, 34 the uneven anti-union and anti-strike posture of personalities in the
application of its marketing plan by respondent company is patently an act of Supreme Court. 36
and on the fact that at the time the picket was staged, the case was still sub August 15, 1984 until Respondent company's closure as well as the
judice. separation pay mandated under Art. 284 of the Labor Code. Furthermore,
respondent company is hereby ordered to pay the fifteen [15] employees of
Oliveros v. Villaluz, 57 SCRA 163, is but one of the numerous authorities the Pharmaceutical Division who did not accept their termination, backwages
enunciating the principle that "the power to punish for contempt should be from August 1, 1984 until Respondent company's closure and the economic
used sparingly, with caution, deliberation and with due regard to the package being offered by respondent company as stated in its letters of
provisions of the law and the constitutional rights of the individual." On this termination.
basis, We clear the alleged contemptors of the charge against them.
The contempt charge against petitioner union, KMU and Nick Elman is
To our mind, the statements complained of are mere expressions of opinion dismissed.
intended not so much to bring the Court in disrepute as to advance the cause
of labor. It must be noted that the picket was staged only eight [8] months SO ORDERED.
after the EDSA Revolution which saw the ouster of the past dispensation and
the restoration of the basic rights to the people. Freedom of speech, much Gutierrez, Jr., Paras, Padilla, Bidin and Cortes, JJ., concur.
repressed during the previous regime, had only begun to take wings again.
Taken against this background, We understand the overzealousness
demonstrated by the KMU and Nick Elman in exercising their freedom of
speech and expression and are inclined to give more weight to said Footnotes
constitutional rights than to the Court's inherent power to preserve its dignity
to which the power to punish for contempt appertains. * Petitioner E.C. Rodriguez submitted his resignation and
accepted his resignation benefits from respondent company
Although the picket was staged when the motion for leave to file a final and during the pendency of the case. [Comment on the Petition, p.
last motion for reconsideration was still pending action by the Court, the KMU 68, Rollo.]
and Nick Elman, not being parties to the case, were unaware of such fact.
They believed the case to have been finally disposed of in view of the final 1 Annex "A", Petition, pp. 50-51, Rollo.
denial of the first motion for reconsideration. On the other hand, there is no
sufficient proof that petitioner union had participated in the picket nor in the
2 Annex "D", Supplemental Memorandum of the Petitioners, p.
preparation of the circular under consideration.
285, Rollo.
WHEREFORE, the petition is hereby granted. The decision of the NLRC
3 Annex "D-2", Supplemental Memo, p. 287, Rollo.
dated December 27, 1985 in NCR-9-3217-84 is set aside and the strike
staged by petitioner union is declared to be legal. Respondent company
AHS/Philippines, Inc. is hereby found guilty of unfair labor practices. Since 4 Annex "H" Supplemental Memo, p. 292, Rollo.
reinstatement of individual petitioners is no longer possible in view of the
cessation of its operations in the Philippines, respondent company is ordered 5 p. 24, Rollo.
to pay said individual petitioners, except E.C. Rodriguez, backwages from
6 p. 104, Rollo. and regulations attending their employment, except laws that have been or
will be enacted for the protection of employees.
Accordingly, the School hires both foreign and local teachers as members of
11. International School Alliance Of Educators (ISAE) v Quisumbing, GR its faculty, classifying the same into two: (1) foreign-hires and (2) local-hires.
No. 128845, June 1, 2000 The School employs four tests to determine whether a faculty member should
be classified as a foreign-hire or a local hire:
G.R. No. 128845 June 1, 2000
a. What is one's domicile?
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS
(ISAE), petitioner, b. Where is one's home economy?
vs.
HON. LEONARDO A. QUISUMBING in his capacity as the Secretary of c. To which country does one owe economic allegiance?
Labor and Employment; HON. CRESENCIANO B. TRAJANO in his
capacity as the Acting Secretary of Labor and Employment; DR. BRIAN d. Was the individual hired abroad specifically to work in the School
MACCAULEY in his capacity as the Superintendent of International and was the School responsible for bringing that individual to the
School-Manila; and INTERNATIONAL SCHOOL, INC., respondents. Philippines?2
KAPUNAN, J.: Should the answer to any of these queries point to the Philippines, the faculty
member is classified as a local hire; otherwise, he or she is deemed a
Receiving salaries less than their counterparts hired abroad, the local-hires of foreign-hire.
private respondent School, mostly Filipinos, cry discrimination. We agree.
That the local-hires are paid more than their colleagues in other schools is, of The School grants foreign-hires certain benefits not accorded local-
course, beside the point. The point is that employees should be given equal hires.1avvphi1 These include housing, transportation, shipping costs, taxes,
pay for work of equal value. That is a principle long honored in this and home leave travel allowance. Foreign-hires are also paid a salary rate
jurisdiction. That is a principle that rests on fundamental notions of justice. twenty-five percent (25%) more than local-hires. The School justifies the
That is the principle we uphold today.1âwphi1.nêt difference on two "significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School
Private respondent International School, Inc. (the School, for short), pursuant explains:
to Presidential Decree 732, is a domestic educational institution established
primarily for dependents of foreign diplomatic personnel and other temporary A foreign-hire would necessarily have to uproot himself from his home
residents.1 To enable the School to continue carrying out its educational country, leave his family and friends, and take the risk of deviating
program and improve its standard of instruction, Section 2(c) of the same from a promising career path — all for the purpose of pursuing his
decree authorizes the School to employ its own teaching and management profession as an educator, but this time in a foreign land. The new
personnel selected by it either locally or abroad, from Philippine or other foreign hire is faced with economic realities: decent abode for oneself
nationalities, such personnel being exempt from otherwise applicable laws and/or for one's family, effective means of transportation, allowance
for the education of one's children, adequate insurance against illness The School disputes these claims and gives a breakdown of its faculty
and death, and of course the primary benefit of a basic members, numbering 38 in all, with nationalities other than Filipino, who have
salary/retirement compensation. been hired locally and classified as local hires.5 The Acting Secretary of Labor
found that these non-Filipino local-hires received the same benefits as the
Because of a limited tenure, the foreign hire is confronted again with Filipino local-hires.
the same economic reality after his term: that he will eventually and
inevitably return to his home country where he will have to confront The compensation package given to local-hires has been shown to
the uncertainty of obtaining suitable employment after along period in apply to all, regardless of race. Truth to tell, there are foreigners who
a foreign land. have been hired locally and who are paid equally as Filipino local
hires.6
The compensation scheme is simply the School's adaptive measure
to remain competitive on an international level in terms of attracting The Acting secretary upheld the point-of-hire classification for the distinction
competent professionals in the field of international education.3 in salary rates:
When negotiations for a new collective bargaining agreement were held on The Principle "equal pay for equal work" does not find applications in
June 1995, petitioner International School Alliance of Educators, "a legitimate the present case. The international character of the School requires
labor union and the collective bargaining representative of all faculty the hiring of foreign personnel to deal with different nationalities and
members"4 of the School, contested the difference in salary rates between different cultures, among the student population.
foreign and local-hires. This issue, as well as the question of whether foreign-
hires should be included in the appropriate bargaining unit, eventually caused We also take cognizance of the existence of a system of salaries and
a deadlock between the parties. benefits accorded to foreign hired personnel which system is
universally recognized. We agree that certain amenities have to be
On September 7, 1995, petitioner filed a notice of strike. The failure of the provided to these people in order to entice them to render their
National Conciliation and Mediation Board to bring the parties to a services in the Philippines and in the process remain competitive in
compromise prompted the Department of Labor and Employment (DOLE) to the international market.
assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting
Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and Furthermore, we took note of the fact that foreign hires have limited
representation issues in favor of the School. Then DOLE Secretary Leonardo contract of employment unlike the local hires who enjoy security of
A. Quisumbing subsequently denied petitioner's motion for reconsideration in tenure. To apply parity therefore, in wages and other benefits would
an Order dated March 19, 1997. Petitioner now seeks relief in this Court. also require parity in other terms and conditions of employment which
include the employment which include the employment contract.
Petitioner claims that the point-of-hire classification employed by the School
is discriminatory to Filipinos and that the grant of higher salaries to foreign- A perusal of the parties' 1992-1995 CBA points us to the conditions
hires constitutes racial discrimination. and provisions for salary and professional compensation wherein the
parties agree as follows:
All members of the bargaining unit shall be compensated only Congress to "give highest priority to the enactment of measures that protect
in accordance with Appendix C hereof provided that the and enhance the right of all people to human dignity, reduce social,
Superintendent of the School has the discretion to recruit and economic, and political inequalities." The very broad Article 19 of the Civil
hire expatriate teachers from abroad, under terms and Code requires every person, "in the exercise of his rights and in the
conditions that are consistent with accepted international performance of his duties, [to] act with justice, give everyone his due, and
practice. observe honesty and good faith.
Appendix C of said CBA further provides: International law, which springs from general principles of law, 9 likewise
proscribes discrimination. General principles of law include principles of
The new salary schedule is deemed at equity with the equity, 10 i.e., the general principles of fairness and justice, based on the test
Overseas Recruited Staff (OSRS) salary schedule. The 25% of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the
differential is reflective of the agreed value of system International Covenant on Economic, Social, and Cultural Rights, 13 the
displacement and contracted status of the OSRS as International Convention on the Elimination of All Forms of Racial
differentiated from the tenured status of Locally Recruited Staff Discrimination, 14 the Convention against Discrimination in Education, 15 the
(LRS). Convention (No. 111) Concerning Discrimination in Respect of Employment
and Occupation 16 — all embody the general principle against discrimination,
To our mind, these provisions demonstrate the parties' recognition of the very antithesis of fairness and justice. The Philippines, through its
the difference in the status of two types of employees, hence, the Constitution, has incorporated this principle as part of its national laws.
difference in their salaries.
In the workplace, where the relations between capital and labor are often
The Union cannot also invoke the equal protection clause to justify its skewed in favor of capital, inequality and discrimination by the employer are
claim of parity. It is an established principle of constitutional law that all the more reprehensible.
the guarantee of equal protection of the laws is not violated by
legislation or private covenants based on reasonable classification. A The Constitution 17 specifically provides that labor is entitled to "humane
classification is reasonable if it is based on substantial distinctions and conditions of work." These conditions are not restricted to the physical
apply to all members of the same class. Verily, there is a substantial workplace — the factory, the office or the field — but include as well the
distinction between foreign hires and local hires, the former enjoying manner by which employers treat their employees.
only a limited tenure, having no amenities of their own in the
Philippines and have to be given a good compensation package in The Constitution 18 also directs the State to promote "equality of employment
order to attract them to join the teaching faculty of the School.7 opportunities for all." Similarly, the Labor Code 19 provides that the State shall
"ensure equal work opportunities regardless of sex, race or creed." It would
We cannot agree. be an affront to both the spirit and letter of these provisions if the State, in
spite of its primordial obligation to promote and ensure equal employment
That public policy abhors inequality and discrimination is beyond contention. opportunities, closes its eyes to unequal and discriminatory terms and
Our Constitution and laws reflect the policy against these evils. The conditions of employment. 20
Constitution8 in the Article on Social Justice and Human Rights exhorts
Discrimination, particularly in terms of wages, is frowned upon by the Labor employer pays one employee less than the rest, it is not for that employee to
Code. Article 135, for example, prohibits and penalizes 21 the payment of explain why he receives less or why the others receive more. That would be
lesser compensation to a female employee as against a male employee for adding insult to injury. The employer has discriminated against that
work of equal value. Article 248 declares it an unfair labor practice for an employee; it is for the employer to explain why the employee is treated
employer to discriminate in regard to wages in order to encourage or unfairly.
discourage membership in any labor organization.
The employer in this case has failed to discharge this burden. There is no
Notably, the International Covenant on Economic, Social, and Cultural evidence here that foreign-hires perform 25% more efficiently or effectively
Rights, supra, in Article 7 thereof, provides: than the local-hires. Both groups have similar functions and responsibilities,
which they perform under similar working conditions.
The States Parties to the present Covenant recognize the right of
everyone to the enjoyment of just and favourable conditions of work, The School cannot invoke the need to entice foreign-hires to leave their
which ensure, in particular: domicile to rationalize the distinction in salary rates without violating the
principle of equal work for equal pay.
a. Remuneration which provides all workers, as a minimum,
with: "Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or
recompense for services performed." Similarly, the Philippine Legal
(i) Fair wages and equal remuneration for work of equal Encyclopedia states that "salary" is the "[c]onsideration paid at regular
value without distinction of any kind, in particular intervals for the rendering of services." In Songco v. National Labor Relations
women being guaranteed conditions of work not inferior Commission, 24 we said that:
to those enjoyed by men, with equal pay for equal
work; "salary" means a recompense or consideration made to a person for
his pains or industry in another man's business. Whether it be derived
x x x x x x x x x from "salarium," or more fancifully from "sal," the pay of the Roman
soldier, it carries with it the fundamental idea of compensation for
The foregoing provisions impregnably institutionalize in this jurisdiction the services rendered. (Emphasis supplied.)
long honored legal truism of "equal pay for equal work." Persons who work
with substantially equal qualifications, skill, effort and responsibility, under While we recognize the need of the School to attract foreign-hires, salaries
similar conditions, should be paid similar salaries. 22 This rule applies to the should not be used as an enticement to the prejudice of local-hires. The local-
School, its "international character" notwithstanding. hires perform the same services as foreign-hires and they ought to be paid
the same salaries as the latter. For the same reason, the "dislocation factor"
The School contends that petitioner has not adduced evidence that local- and the foreign-hires' limited tenure also cannot serve as valid bases for the
hires perform work equal to that of foreign-hires. 23 The Court finds this distinction in salary rates. The dislocation factor and limited tenure affecting
argument a little cavalier. If an employer accords employees the same foreign-hires are adequately compensated by certain benefits accorded them
position and rank, the presumption is that these employees perform equal which are not enjoyed by local-hires, such as housing, transportation,
work. This presumption is borne by logic and human experience. If the shipping costs, taxes and home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and always treated separately. Foreign-hires have limited tenure; local-hires enjoy
promote their welfare," 25 "to afford labor full protection." 26 The State, security of tenure. Although foreign-hires perform similar functions under the
therefore, has the right and duty to regulate the relations between labor and same working conditions as the local-hires, foreign-hires are accorded certain
capital. 27 These relations are not merely contractual but are so impressed benefits not granted to local-hires. These benefits, such as housing,
with public interest that labor contracts, collective bargaining agreements transportation, shipping costs, taxes, and home leave travel allowance, are
included, must yield to the common good. 28 Should such contracts contain reasonably related to their status as foreign-hires, and justify the exclusion of
stipulations that are contrary to public policy, courts will not hesitate to strike the former from the latter. To include foreign-hires in a bargaining unit with
down these stipulations. local-hires would not assure either group the exercise of their respective
collective bargaining rights.
In this case, we find the point-of-hire classification employed by respondent
School to justify the distinction in the salary rates of foreign-hires and local WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby
hires to be an invalid classification. There is no reasonable distinction GRANTED IN PART. The Orders of the Secretary of Labor and Employment
between the services rendered by foreign-hires and local-hires. The practice dated June 10, 1996 and March 19, 1997, are hereby REVERSED and SET
of the School of according higher salaries to foreign-hires contravenes public ASIDE insofar as they uphold the practice of respondent School of according
policy and, certainly, does not deserve the sympathy of this Court.1avvphi1 foreign-hires higher salaries than local-hires.
We agree, however, that foreign-hires do not belong to the same bargaining SO ORDERED.
unit as the local-hires.
A bargaining unit is "a group of employees of a given employer, comprised of

all or less than all of the entire body of employees, consistent with equity to
the employer, indicate to be the best suited to serve the reciprocal rights and
duties of the parties under the collective bargaining provisions of the
law." 29 The factors in determining the appropriate collective bargaining unit
are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of work and duties, or
similarity of compensation and working conditions (Substantial Mutual
Interests Rule); (3) prior collective bargaining history; and (4) similarity of
employment status. 30 The basic test of an asserted bargaining unit's
acceptability is whether or not it is fundamentally the combination which will
best assure to all employees the exercise of their collective bargaining
rights. 31
It does not appear that foreign-hires have indicated their intention to be

grouped together with local-hires for purposes of collective bargaining. The
collective bargaining history in the School also shows that these groups were
Republic of the Philippines JOINT AFFIDAVIT

SUPREME COURT
Baguio City We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN
OGOY, MACARIA JUGUETA, ADELAIDA NONOG, NORMA
FIRST DIVISION MABEZA, JONATHAN PICART and JOSE DIZON, all of legal
ages (sic), Filipinos and residents of Baguio City, under oath,
depose and say:
G.R. No. 118506 April 18, 1997 1. That we are employees of Mr. Peter L. Ng of his Hotel
Supreme situated at No. 416 Magsaysay Ave., Baguio City.
NORMA MABEZA, petitioner,
vs. 2. That the said Hotel is separately operated from the Ivy's
NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL Grill and Restaurant;
SUPREME, respondents.
3. That we are all (8) employees in the hotel and assigned in
each respective shifts;
KAPUNAN, J.: 4. That we have no complaints against the management of the

Hotel Supreme as we are paid accordingly and that we are
This petition seeking the nullification of a resolution of public respondent treated well.
National Labor Relations Commission dated April 28, 1994 vividly illustrates
why courts should be ever vigilant in the preservation of the constitutionally 5. That we are executing this affidavit voluntarily without any
enshrined rights of the working class. Without the protection accorded by our force or intimidation and for the purpose of informing the
laws and the tempering of courts, the natural and historical inclination of authorities concerned and to dispute the alleged report of the
capital to ride roughshod over the rights of labor would run unabated. Labor Inspector of the Department of Labor and Employment
conducted on the said establishment on February 2, 1991.
The facts of the case at bar, culled from the conflicting versions of petitioner
and private respondent, are illustrative. IN WITNESS WHEREOF, we have hereunto set our hands
this 7th day of May, 1991 at Baguio City, Philippines.
Petitioner Norma Mabeza contends that around the first week of May, 1991,
she and her co-employees at the Hotel Supreme in Baguio City were asked (Sgd.) (Sgd.) (Sgd.)
by the hotel's management to sign an instrument attesting to the latter's SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
compliance with minimum wage and other labor standard provisions of
law. 1 The instrument provides: 2
(Sgd.) (Sgd.) (Sgd.) wages, non-payment of holiday pay, service incentive leave pay, 13th month
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA. pay, night differential and other benefits. The complaint was docketed as
NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe
(Sgd.) (Sgd.) P. Pati.
JONATHAN PICART JOSE DIZON
Responding to the allegations made in support of petitioner's complaint for
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at illegal dismissal, private respondent Peter Ng alleged before Labor Arbiter
Baguio City, Philippines. Pati that petitioner "surreptitiously left (her job) without notice to the
management" 6 and that she actually abandoned her work. He maintained
Asst. City Prosecutor that there was no basis for the money claims for underpayment and other
benefits as these were paid in the form of facilities to petitioner and the hotel's
Petitioner signed the affidavit but refused to go to the City Prosecutor's Office other employee. 7 Pointing to the Affidavit of May 7, 1991, the private
to swear to the veracity and contents of the affidavit as instructed by respondent asserted that his employees actually have no problems with
management. The affidavit was nevertheless submitted on the same day to management. In a supplemental answer submitted eleven (11) months after
the Regional Office of the Department of Labor and Employment in Baguio the original complaint for illegal dismissal was filed, private respondent raised
City. a new ground, loss of confidence, which was supported by a criminal
complaint for Qualified Theft he filed before the prosecutor's office of the City
As gleaned from the affidavit, the same was drawn by management for the of Baguio against petitioner on July 4, 1991. 8
sole purpose of refuting findings of the Labor Inspector of DOLE (in an
inspection of respondent's establishment on February 2, 1991) apparently On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing
adverse to the private respondent. 3 petitioner's complaint on the ground of loss of confidence. His disquisitions in
support of his conclusion read as follows:
After she refused to proceed to the City Prosecutor's Office — on the same
day the affidavit was submitted to the Cordillera Regional Office of DOLE — It appears from the evidence of respondent that complainant
petitioner avers that she was ordered by the hotel management to turn over carted away or stole one (1) blanket, 1 piece bedsheet, 1
the keys to her living quarters and to remove her belongings from the hotel piece thermos, 2 pieces towel (Exhibits "9", "9-A," "9-B," "9-C"
premises. 4 According to her, respondent strongly chided her for refusing to and "10" pages 12-14 TSN, December 1, 1992).
proceed to the City Prosecutor's Office to attest to the affidavit. 5 She
thereafter reluctantly filed a leave of absence from her job which was denied In fact, this was the reason why respondent Peter Ng lodged a
by management. When she attempted to return to work on May 10, 1991, the criminal complaint against complainant for qualified theft and
hotel's cashier, Margarita Choy, informed her that she should not report to perjury. The fiscal's office finding a prima facie evidence that
work and, instead, continue with her unofficial leave of absence. complainant committed the crime of qualified theft issued a
Consequently, on May 13, 1991, three days after her attempt to return to resolution for its filing in court but dismissing the charge of
work, petitioner filed a complaint for illegal dismissal before the Arbitration perjury (Exhibit "4" for respondent and Exhibit "B-7" for
Branch of the National Labor Relations Commission — CAR Baguio City. In complainant). As a consequence, complainant was charged in
addition to her complaint for illegal dismissal, she alleged underpayment of
court for the said crime (Exhibit "5" for respondent and Exhibit 3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL
"B-6" for the complainant). LABOR RELATIONS COMMISSION COMMITTED A PATENT
AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE
With these pieces of evidence, complainant committed serious OF DISCRETION IN FAILING TO CONSIDER THE
misconduct against her employer which is one of the just and EVIDENCE ADDUCED BEFORE THE LABOR ARBITER AS
valid grounds for an employer to terminate an employee CONSTITUTING UNFAIR LABOR PRACTICE COMMITTED
(Article 282 of the Labor Code as amended). 9 BY THE RESPONDENT.
On April 28, 1994, respondent NLRC promulgated its assailed The Solicitor General, in a Manifestation in lieu of Comment dated August 8,
Resolution 10 — affirming the Labor Arbiter's decision. The resolution 1995 rejects private respondent's principal claims and defenses and urges
substantially incorporated the findings of the Labor Arbiter. 11 Unsatisfied, this Court to set aside the public respondent's assailed resolution. 13
petitioner instituted the instant special civil action for certiorari under Rule 65
of the Rules of Court on the following grounds: 12 We agree.
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL It is settled that in termination cases the employer bears the burden of proof
LABOR RELATIONS COMMISSION COMMITTED A PATENT to show that the dismissal is for just cause, the failure of which would mean
AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE that the dismissal is not justified and the employee is entitled to
OF DISCRETION IN ITS FAILURE TO CONSIDER THAT THE reinstatement. 14
ALLEGED LOSS OF CONFIDENCE IS A FALSE CAUSE AND
AN AFTERTHOUGHT ON THE PART OF THE In the case at bar, the private respondent initially claimed that petitioner
RESPONDENT-EMPLOYER TO JUSTIFY, ALBEIT abandoned her job when she failed to return to work on May 8, 1991.
ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT Additionally, in order to strengthen his contention that there existed sufficient
FROM HER EMPLOYMENT; cause for the termination of petitioner, he belatedly included a complaint for
loss of confidence, supporting this with charges that petitioner had stolen a
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL blanket, a bedsheet and two towels from the hotel. 15 Appended to his last
LABOR RELATIONS COMMISSION COMMITTED A PATENT complaint was a suit for qualified theft filed with the Baguio City prosecutor's
AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE office.
OF DISCRETION IN ADOPTING THE RULING OF THE
LABOR ARBITER THAT THERE WAS NO UNDERPAYMENT From the evidence on record, it is crystal clear that the circumstances upon
OF WAGES AND BENEFITS ON THE BASIS OF EXHIBIT "8" which private respondent anchored his claim that petitioner "abandoned" her
(AN UNDATED SUMMARY OF COMPUTATION PREPARED job were not enough to constitute just cause to sanction the termination of her
BY ALLEGEDLY BY RESPONDENT'S EXTERNAL services under Article 283 of the Labor Code. For abandonment to arise,
ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN there must be concurrence of two things: 1) lack of intention to work; 16 and 2)
EVIDENCE TO PROVE PAYMENT OF WAGES AND the presence of overt acts signifying the employee's intention not to work. 17
BENEFITS;
In the instant case, respondent does not dispute the fact that petitioner tried employees occupying positions of trust and confidence or to those situations
to file a leave of absence when she learned that the hotel management was where the employee is routinely charged with the care and custody of the
displeased with her refusal to attest to the affidavit. The fact that she made employer's money or property. To the first class belong managerial
this attempt clearly indicates not an intention to abandon but an intention to employees, i.e., those vested with the powers or prerogatives to lay down
return to work after the period of her leave of absence, had it been granted, management policies and/or to hire, transfer, suspend, lay-off, recall,
shall have expired. discharge, assign or discipline employees or effectively recommend such
managerial actions; and to the second class belong cashiers, auditors,
Furthermore, while absence from work for a prolonged period may suggest property custodians, etc., or those who, in the normal and routine exercise of
abandonment in certain instances, mere absence of one or two days would their functions, regularly handle significant amounts of money or property.
not be enough to sustain such a claim. The overt act (absence) ought Evidently, an ordinary chambermaid who has to sign out for linen and other
to unerringly point to the fact that the employee has no intention to return to hotel property from the property custodian each day and who has to account
work, 18 which is patently not the case here. In fact, several days after she for each and every towel or bedsheet utilized by the hotel's guests at the end
had been advised to take an informal leave, petitioner tried to resume of her shift would not fall under any of these two classes of employees for
working with the hotel, to no avail. It was only after she had been repeatedly which loss of confidence, if ably supported by evidence, would normally
rebuffed that she filed a case for illegal dismissal. These acts militate against apply. Illustrating this distinction, this Court in Marina Port Services,
the private respondent's claim that petitioner abandoned her job. As the Inc. vs. NLRC, 20 has stated that:
Solicitor General in his manifestation observed:
To be sure, every employee must enjoy some degree of trust
Petitioner's absence on that day should not be construed as and confidence from the employer as that is one reason why
abandonment of her job. She did not report because the he was employed in the first place. One certainly does not
cashier told her not to report anymore, and that private employ a person he distrusts. Indeed, even the lowly janitor
respondent Ng did not want to see her in the hotel premises. must enjoy that trust and confidence in some measure if only
But two days later or on the 10th of May, after realizing that because he is the one who opens the office in the morning and
she had to clarify her employment status, she again reported closes it at night and in this sense is entrusted with the care or
for work. However, she was prevented from working by private protection of the employer's property. The keys he holds are
respondents. 19 the symbol of that trust and confidence.
We now come to the second cause raised by private respondent to support By the same token, the security guard must also be
his contention that petitioner was validly dismissed from her job. considered as enjoying the trust and confidence of his
employer, whose property he is safeguarding. Like the janitor,
Loss of confidence as a just cause for dismissal was never intended to he has access to this property. He too, is charged with its care
provide employers with a blank check for terminating their employees. Such a and protection.
vague, all-encompassing pretext as loss of confidence, if unqualifiedly given
the seal of approval by this Court, could readily reduce to barren form the Notably, however, and like the janitor again, he is entrusted
words of the constitutional guarantee of security of tenure. Having this in only with the physical task of protecting that property. The
mind, loss of confidence should ideally apply only to cases involving employer's trust and confidence in him is limited to that
ministerial function. He is not entrusted, in the Labor Arbiter's The manipulations of private respondents should not be
words, with the duties of safekeeping and safeguarding countenanced. 23
company policies, management instructions, and company
secrets such as operation devices. He is not privy to these Clearly, the efforts to justify petitioner's dismissal — on top of the private
confidential matters, which are shared only in the higher respondent's scheme of inducing his employees to sign an affidavit absolving
echelons of management. It is the persons on such levels him from possible violations of the Labor Code — taints with evident bad faith
who, because they discharge these sensitive duties, may be and deliberate malice petitioner's summary termination from employment.
considered holding positions of trust and confidence. The
security guard does not belong in such category. 21 Having said this, we turn to the important question of whether or not the
dismissal by the private respondent of petitioner constitutes an unfair labor
More importantly, we have repeatedly held that loss of confidence should not practice.
be simulated in order to justify what would otherwise be, under the provisions
of law, an illegal dismissal. "It should not be used as a subterfuge for causes The answer in this case must inevitably be in the affirmative.
which are illegal, improper and unjustified. It must be genuine, not a mere
afterthought to justify an earlier action taken in bad faith." 22 The pivotal question in any case where unfair labor practice on the part of the
employer is alleged is whether or not the employer has exerted pressure, in
In the case at bar, the suspicious delay in private respondent's filing of the form of restraint, interference or coercion, against his employee's right to
qualified theft charges against petitioner long after the latter exposed the institute concerted action for better terms and conditions of employment.
hotel's scheme (to avoid its obligations as employer under the Labor Code) Without doubt, the act of compelling employees to sign an instrument
by her act of filing illegal dismissal charges against the private respondent indicating that the employer observed labor standards provisions of law when
would hardly warrant serious consideration of loss of confidence as a valid he might have not, together with the act of terminating or coercing those who
ground for dismissal. Notably, the Solicitor General has himself taken a refuse to cooperate with the employer's scheme constitutes unfair labor
position opposite the public respondent and has observed that: practice. The first act clearly preempts the right of the hotel's workers to seek
better terms and conditions of employment through concerted action.
If petitioner had really committed the acts charged against her
by private respondents (stealing supplies of respondent hotel), We agree with the Solicitor General's observation in his manifestation that
private respondents should have confronted her before "[t]his actuation . . . is analogous to the situation envisaged in paragraph (f) of
dismissing her on that ground. Private respondents did not do Article 248 of the Labor Code" 24 which distinctly makes it an unfair labor
so. In fact, private respondent Ng did not raise the matter practice "to dismiss, discharge or otherwise prejudice or discriminate against
when petitioner went to see him on May 9, 1991, and handed an employee for having given or being about to give testimony" 25 under the
him her application for leave. It took private respondents 52 Labor Code. For in not giving positive testimony in favor of her employer,
days or up to July 4, 1991 before finally deciding to file a petitioner had reserved not only her right to dispute the claim and proffer
criminal complaint against petitioner, in an obvious attempt to evidence in support thereof but also to work for better terms and conditions of
build a case against her. employment.
For refusing to cooperate with the private respondent's scheme, petitioner employee's written authorization; and, he failed to show how he arrived at the
was obviously held up as an example to all of the hotel's employees, that they valuations. 29
could only cause trouble to management at great personal inconvenience.
Implicit in the act of petitioner's termination and the subsequent filing of Curiously, in the case at bench, the only valuations relied upon by the labor
charges against her was the warning that they would not only be deprived of arbiter in his decision were figures furnished by the private respondent's own
their means of livelihood, but also possibly, their personal liberty. accountant, without corroborative evidence. On the pretext that records prior
to the July 16, 1990 earthquake were lost or destroyed, respondent failed to
This Court does not normally overturn findings and conclusions of quasi- produce payroll records, receipts and other relevant documents, where he
judicial agencies when the same are ably supported by the evidence on could have, as has been pointed out in the Solicitor General's manifestation,
record. However, where such conclusions are based on a misperception of "secured certified copies thereof from the nearest regional office of the
facts or where they patently fly in the face of reason and logic, we will not Department of Labor, the SSS or the BIR." 30
hesitate to set aside those conclusions. Going into the issue of petitioner's
money claims, we find one more salient reason in this case to set things right: More significantly, the food and lodging, or the electricity and water
the labor arbiter's evaluation of the money claims in this case incredibly consumed by the petitioner were not facilities but supplements. A benefit or
ignores existing law and jurisprudence on the matter. Its blatant one- privilege granted to an employee for the convenience of the employer is not a
sidedness simply raises the suspicion that something more than the facts, the facility. The criterion in making a distinction between the two not so much lies
law and jurisprudence may have influenced the decision at the level of the in the kind (food, lodging) but the purpose. 31 Considering, therefore, that
Arbiter. hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter in
Labor Arbiter Pati accepted hook, line and sinker the private respondent's the operations of a small hotel, such as the private respondent's hotel.
bare claim that the reason the monetary benefits received by petitioner
between 1981 to 1987 were less than minimum wage was because petitioner It is therefore evident that petitioner is entitled to the payment of the
did not factor in the meals, lodging, electric consumption and water she deficiency in her wages equivalent to the full wage applicable from May 13,
received during the period in her computations. 26 Granting that meals and 1988 up to the date of her illegal dismissal.
lodging were provided and indeed constituted facilities, such facilities could
not be deducted without the employer complying first with certain legal Additionally, petitioner is entitled to payment of service incentive leave pay,
requirements. Without satisfying these requirements, the employer simply emergency cost of living allowance, night differential pay, and 13th month pay
cannot deduct the value from the employee's ages. First, proof must be for the periods alleged by the petitioner as the private respondent has never
shown that such facilities are customarily furnished by the trade. Second, the been able to adduce proof that petitioner was paid the aforestated benefits.
provision of deductible facilities must be voluntarily accepted in writing by the
employee. Finally, facilities must be charged at fair and reasonable value. 27 However, the claims covering the period of October 1987 up to the time of
filing the case on May 13, 1988 are barred by prescription as P.D. 442 (as
These requirements were not met in the instant case. Private respondent amended) and its implementing rules limit all money claims arising out of
"failed to present any company policy or guideline to show that the meal and employer-employee relationship to three (3) years from the time the cause of
lodging . . . (are) part of the salary;" 28 he failed to provide proof of the action accrues. 32
We depart from the settled rule that an employee who is unjustly dismissed WHEREFORE, premises considered, the RESOLUTION of the National
from work normally should be reinstated without loss of seniority rights and Labor Relations Commission dated April 24, 1994 is REVERSED and SET
other privileges. Owing to the strained relations between petitioner and ASIDE, with costs. For clarity, the economic benefits due the petitioner are
private respondent, allowing the former to return to her job would only subject hereby summarized as follows:
her to possible harassment and future embarrassment. In the instant case,
separation pay equivalent to one month's salary for every year of continuous 1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the
service with the private respondent would be proper, starting with her job at date of petitioner's illegal dismissal;
the Belfront Hotel.
2) Service incentive leave pay; night differential pay and 13th month pay for
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 the same period;
and our decision in Osmalik Bustamante, et al. vs. National Labor Relations
Commission, 33 petitioner is entitled to full backwages from the time of her 3) Separation pay equal to one month's salary for every year of petitioner's
illegal dismissal up to the date of promulgation of this decision without continuous service with the private respondent starting with her job at the
qualification or deduction. Belfront Hotel;
Finally, in dismissal cases, the law requires that the employer must furnish 4) Full backwages, without qualification or deduction, from the date of
the employee sought to be terminated from employment with two written petitioner's illegal dismissal up to the date of promulgation of this decision
notices before the same may be legally effected. The first is a written notice pursuant to our ruling in Bustamante vs. NLRC. 34
containing a statement of the cause(s) for dismissal; the second is a notice
informing the employee of the employer's decision to terminate him stating 5) P1,000.00.
the basis of the dismissal. During the process leading to the second notice,
the employer must give the employee ample opportunity to be heard and ORDERED.
defend himself, with the assistance of counsel if he so desires.
Padilla, Bellosillo and Vitug, JJ., concur.
Given the seriousness of the second cause (qualified theft) of the petitioner's
dismissal, it is noteworthy that the private respondent never even bothered to
Hermosisima, Jr., J., is on leave.
inform petitioner of the charges against her. Neither was petitioner given the
opportunity to explain the loss of the articles. It was only almost two months
after petitioner had filed a complaint for illegal dismissal, as an afterthought, Footnotes
that the loss was reported to the police and added as a supplemental answer
to petitioner's complaint. Clearly, the dismissal of petitioner without the benefit
of notice and hearing prior to her termination violated her constitutional right
to due process. Under the circumstance an award of One Thousand Pesos
(P1,000.00) on top of payment of the deficiency in wages and benefits for the
period aforestated would be proper.
EN BANC 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
[G.R. No. 164301 : August 10, 2010] from any union shop clause or any variant thereof.
BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. BPI We find it significant to note that it is only the employer, Bank of the Philippine
EMPLOYEES UNION-DAVAO CHAPTER-FEDERATION OF UNIONS IN Islands (BPI), that brought the case up to this Court via the instant petition for
BPI UNIBANK, RESPONDENT. 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
DECISION 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
LEONARDO-DE CASTRO, J.: East Bank and Trust Company (FEBTC), which decision had already become
final and executory as to the aforesaid employees. By not appealing the
May a corporation invoke its merger with another corporation as a valid decision of the Court of Appeals, the aforesaid employees are bound by the
ground to exempt its "absorbed employees" from the coverage of a union said Court of Appeals' decision to join BPI's duly certified labor union. In view
shop clause contained in its existing Collective Bargaining Agreement (CBA) of the apparent acquiescence of the affected FEBTC employees in the Court
with its own certified labor union? That is the question we shall endeavor to of Appeals' decision, BPI should not have pursued this petition for review.
answer in this petition for review filed by an employer after the Court of However, even assuming that BPI may do so, the same still cannot prosper.
Appeals decided in favor of respondent union, which is the employees'
recognized collective bargaining representative. What is before us now is a petition for review under Rule 45 of the Rules of
Court of the Decision[2] dated September 30, 2003 of the Court of Appeals, as
At the outset, we should call to mind the spirit and the letter of the Labor reiterated in its Resolution[3] of June 9, 2004, reversing and setting aside the
Code provisions on union security clauses, specifically Article 248 (e), which Decision[4] dated November 23, 2001 of Voluntary Arbitrator Rosalina
states, "x x x Nothing in this Code or in any other law shall stop the parties Letrondo-Montejo, in CA-G.R. SP No. 70445, entitled BPI Employees Union-
from requiring membership in a recognized collective bargaining agent as a Davao Chapter-Federation of Unions in BPI Unibank v. Bank of the Philippine
condition for employment, except those employees who are already members Islands, et al.
of another union at the time of the signing of the collective bargaining
agreement."[1] This case which involves the application of a collective The antecedent facts are as follows:
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 On March 23, 2000, the Bangko Sentral ng Pilipinas approved the Articles of
terms of the CBA in question, and not by inference from the general Merger executed on January 20, 2000 by and between BPI, herein petitioner,
consequence of the merger of corporations under the Corporation Code, and FEBTC.[5] This Article and Plan of Merger was approved by the
which obviously does not deal with and, therefore, is silent on the terms and Securities and Exchange Commission on April 7, 2000.[6]
conditions of employment in corporations or juridical entities.
Pursuant to the Article and Plan of Merger, all the assets and liabilities of
This issue must be resolved NOW, instead of postponing it to a future time FEBTC were transferred to and absorbed by BPI as the surviving
when the CBA is renegotiated as suggested by the Honorable Justice Arturo corporation. FEBTC employees, including those in its different branches
across the country, were hired by petitioner as its own employees, with their as defined in Article I of this Agreement, who may hereafter be regularly
status and tenure recognized and salaries and benefits maintained. 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
Respondent BPI Employees Union-Davao Chapter - Federation of Unions in understood that membership in good standing in the Union is a condition of
BPI Unibank (hereinafter the "Union," for brevity) is the exclusive bargaining their continued employment with the Bank.[8] (Emphases supplied.)
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 After the meeting called by the Union, some of the former FEBTC employees
the time of the merger. Prior to the effectivity of the merger, or on March 31, joined the Union, while others refused. Later, however, some of those who
2000, respondent Union invited said FEBTC employees to a meeting initially joined retracted their membership.[9]
regarding the Union Shop Clause (Article II, Section 2) of the existing CBA
between petitioner BPI and respondent Union.[7] Respondent Union then sent notices to the former FEBTC employees who
refused to join, as well as those who retracted their membership, and called
The parties both advert to certain provisions of the existing CBA, which are them to a hearing regarding the matter. When these former FEBTC
quoted below: employees refused to attend the hearing, the president of the Union
requested BPI to implement the Union Shop Clause of the CBA and to
ARTICLE I
terminate their employment pursuant thereto.[10]
Section 1. Recognition and Bargaining Unit - The BANK recognizes the
After two months of management inaction on the request, respondent Union
UNION as the sole and exclusive collective bargaining representative of all
informed petitioner BPI of its decision to refer the issue of the implementation
the regular rank and file employees of the Bank offices in Davao City.
of the Union Shop Clause of the CBA to the Grievance Committee. However,
the issue remained unresolved at this level and so it was subsequently
Section 2. Exclusions
submitted for voluntary arbitration by the parties.[11]
Section 3. Additional Exclusions
Voluntary Arbitrator Rosalina Letrondo-Montejo, in a Decision[12] dated
November 23, 2001, ruled in favor of petitioner BPI's interpretation that the
Section 4. Copy of Contract
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
ARTICLE II
employees were not new employees who were hired and subsequently
regularized, but were absorbed employees "by operation of law" because the
Section 1. Maintenance of Membership - All employees within the bargaining
"former employees of FEBTC can be considered assets and liabilities of
unit who are members of the Union on the date of the effectivity of this
the absorbed corporation." The Voluntary Arbitrator concluded that the
Agreement as well as employees within the bargaining unit who subsequently
former FEBTC employees could not be compelled to join the Union, as it was
join or become members of the Union during the lifetime of this Agreement
their constitutional right to join or not to join any organization.
shall as a condition of their continued employment with the Bank, maintain
their membership in the Union in good standing.
Respondent Union filed a Motion for Reconsideration, but the Voluntary
Arbitrator denied the same in an Order dated March 25, 2002.[13]
Section 2. Union Shop - New employees falling within the bargaining unit
be terminated from the company, and other union-related obligations. On the

Dissatisfied, respondent then appealed the Voluntary Arbitrator's decision to other hand, the "absorbed" employees shall enjoy the "fruits of labor" of the
the Court of Appeals. In the herein assailed Decision dated September 30, petitioner-union and its members for nothing in exchange. Certainly, this
2003, the Court of Appeals reversed and set aside the Decision of the would disturb industrial peace in the company which is the paramount reason
Voluntary Arbitrator.[14] Likewise, the Court of Appeals denied herein for the existence of the CBA and the union.
petitioner's Motion for Reconsideration in a Resolution dated June 9, 2004.
The voluntary arbitrator's interpretation of the provisions of the CBA
The Court of Appeals pertinently ruled in its Decision: concerning the coverage of the "union-shop" clause is at war with the spirit
and the rationale why the Labor Code itself allows the existence of such
A union-shop clause has been defined as a form of union security provision provision.
wherein non-members may be hired, but to retain employment must become
union members after a certain period. The Supreme Court in the case of Manila Mandarin Employees Union vs.
NLRC (G.R. No. 76989, September 29, 1987) rule, to quote:
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 "This Court has held that a valid form of union security, and such a provision
application to the "absorbed" employees. in a collective bargaining agreement is not a restriction of the right of freedom
of association guaranteed by the Constitution.
This Court agrees with the voluntary arbitrator that the ABSORBED
employees are distinct and different from NEW employees BUT only in so far A closed-shop agreement is an agreement whereby an employer binds
as their employment service is concerned. The distinction ends there. In the himself to hire only members of the contracting union who must continue to
case at bar, the absorbed employees' length of service from its former remain members in good standing to keep their jobs. It is "THE MOST
employer is tacked with their employment with BPI. Otherwise stated, the PRIZED ACHIEVEMENT OF UNIONISM." IT ADDS MEMBERSHIP AND
absorbed employees service is continuous and there is no gap in their COMPULSORY DUES. By holding out to loyal members a promise of
service record. employment in the closed-shop, it wields group solidarity." (Emphasis
supplied)
This Court is persuaded that the similarities of "new" and "absorbed"
employees far outweighs the distinction between them. The similarities lies Hence, the voluntary arbitrator erred in construing the CBA literally at the
on the following, to wit: (a) they have a new employer; (b) new working expense of industrial peace in the company.
conditions; (c) new terms of employment and; (d) new company policy to
follow. As such, they should be considered as "new" employees for purposes With the foregoing ruling from this Court, necessarily, the alternative prayer of
of applying the provisions of the CBA regarding the "union-shop" clause. the petitioner to require the individual respondents to become members or if
they refuse, for this Court to direct respondent BPI to dismiss them, follows.[15]
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 Hence, petitioner's present recourse, raising the following issues:
by virtue of the "union-shop" clause are required to pay the monthly union
dues, remain as members in good standing of the union otherwise, they shall I
Union Shop Clause of the CBA were only those employees who were "new"
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN to BPI, on account of having been hired initially on a temporary or
RULING THAT THE FORMER FEBTC EMPLOYEES SHOULD BE probationary status for possible regular employment at some future date. BPI
CONSIDERED `NEW' EMPLOYEES OF BPI FOR PURPOSES OF argues that the FEBTC employees absorbed by BPI cannot be considered as
APPLYING THE UNION SHOP CLAUSE OF THE CBA "new employees" of BPI for purposes of applying the Union Shop Clause of
the CBA.[18]
II
According to petitioner, the contrary interpretation made by the Court of
WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN Appeals of this particular CBA provision ignores, or even defies, what
FINDING THAT THE VOLUNTARY ARBITRATOR'S INTERPRETATION OF petitioner assumes as its clear meaning and scope which allegedly
THE COVERAGE OF THE UNION SHOP CLAUSE IS "AT WAR WITH THE contradicts the Court's strict and restrictive enforcement of union security
SPIRIT AND THE RATIONALE WHY THE LABOR CODE ITSELF ALLOWS agreements.
THE EXISTENCE OF SUCH PROVISION"[16]
We do not agree.
In essence, the sole issue in this case is whether or not the former FEBTC
employees that were absorbed by petitioner upon the merger between Section 2, Article II of the CBA is silent as to how one becomes a "regular
FEBTC and BPI should be covered by the Union Shop Clause found in the employee" of the BPI for the first time. There is nothing in the said
existing CBA between petitioner and respondent Union. provision which requires that a "new" regular employee first undergo a
temporary or probationary status before being deemed as such under
Petitioner is of the position that the former FEBTC employees are not new the union shop clause of the CBA.
employees of BPI for purposes of applying the Union Shop Clause of the
CBA, on this note, petitioner points to Section 2, Article II of the CBA, which "Union security" is a generic term which is applied to and comprehends
provides: "closed shop," "union shop," "maintenance of membership" or any other form
of agreement which imposes upon employees the obligation to acquire or
New employees falling within the bargaining unit as defined in Article I of retain union membership as a condition affecting employment. There is union
this Agreement, who may hereafter be regularly employed by the shop when all new regular employees are required to join the union within a
Bank shall, within thirty (30) days after they become certain period for their continued employment. There is maintenance of
regular employees, join the Union as a condition of their continued membership shop when employees, who are union members as of the
employment. It is understood that membership in good standing in the effective date of the agreement, or who thereafter become members, must
Union is a condition of their continued employment with the Bank. maintain union membership as a condition for continued employment until
[17]
(Emphases supplied.) 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
Petitioner argues that the term "new employees" in the Union Shop Clause of or their representatives, no person may be employed in any or certain agreed
the CBA is qualified by the phrases "who may hereafter be regularly departments of the enterprise unless he or she is, becomes, and, for the
employed" and "after they become regular employees" which led petitioner to duration of the agreement, remains a member in good standing of a union
conclude that the "new employees" referred to in, and contemplated by, the
entirely comprised of or of which the employees in interest are a part.[19]

When certain employees are obliged to join a particular union as a requisite
In the case of Liberty Flour Mills Employees v. Liberty Flour Mills, Inc.,[20] we for continued employment, as in the case of Union Security Clauses, this
ruled that: 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
It is the policy of the State to promote unionism to enable the workers even held that a union security clause in a CBA is not a restriction of the right
to negotiate with management on the same level and with more of freedom of association guaranteed by the Constitution.[24]
persuasiveness than if they were to individually and independently
bargain for the improvement of their respective conditions. To this end, Moreover, a closed shop agreement is an agreement whereby an employer
the Constitution guarantees to them the rights "to self-organization, collective binds himself to hire only members of the contracting union who must
bargaining and negotiations and peaceful concerted actions including the continue to remain members in good standing to keep their jobs. It is "the
right to strike in accordance with law." There is no question that these most prized achievement of unionism." It adds membership and
purposes could be thwarted if every worker were to choose to go his own compulsory dues. By holding out to loyal members a promise of employment
separate way instead of joining his co-employees in planning collective action in the closed shop, it wields group solidarity.[25]
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 Indeed, the situation of the former FEBTC employees in this case clearly
the union shop and the closed shop as a means of encouraging the workers does not fall within the first three exceptions to the application of the Union
to join and support the labor union of their own choice as their representative Shop Clause discussed earlier. No allegation or evidence of religious
in the negotiation of their demands and the protection of their interest vis-ï¿½ exemption or prior membership in another union or engagement as a
-vis the employer. (Emphasis ours.) confidential employee was presented by both parties. The sole category
therefore in which petitioner may prove its claim is the fourth recognized
In other words, the purpose of a union shop or other union security exception or whether the former FEBTC employees are excluded by the
arrangement is to guarantee the continued existence of the union through express terms of the existing CBA between petitioner and respondent.
enforced membership for the benefit of the workers.
To reiterate, petitioner insists that the term "new employees," as the same is
All employees in the bargaining unit covered by a Union Shop Clause in their used in the Union Shop Clause of the CBA at issue, refers only to employees
CBA with management are subject to its terms. However, under law and hired by BPI as non-regular employees who later qualify for regular
jurisprudence, the following kinds of employees are exempted from its employment and become regular employees, and not those who, as a legal
coverage, namely, employees who at the time the union shop agreement consequence of a merger, are allegedly automatically deemed regular
takes effect are bona fide members of a religious organization which prohibits employees of BPI. However, the CBA does not make a distinction as to how
its members from joining labor unions on religious grounds;[21] employees a regular employee attains such a status. Moreover, there is nothing in the
already in the service and already members of a union other than the Corporation Law and the merger agreement mandating the automatic
majority at the time the union shop agreement took effect;[22] confidential employment as regular employees by the surviving corporation in the merger.
employees who are excluded from the rank and file bargaining unit;
[23]
and employees excluded from the union shop by express terms of It is apparent that petitioner hinges its argument that the former FEBTC
the agreement. employees were absorbed by BPI merely as a legal consequence of a
merger based on the characterization by the Voluntary Arbiter of these merger; and, in case of consolidation, shall be the consolidated corporation
absorbed employees as included in the "assets and liabilities" of the designated in the plan of consolidation;
dissolved corporation - assets because they help the Bank in its operation
and liabilities because redundant employees may be terminated and 2. The separate existence of the constituent corporations shall cease, except
company benefits will be paid to them, thus reducing the Bank's financial that of the surviving or the consolidated corporation;
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 3. The surviving or the consolidated corporation shall possess all the rights,
Certificate of Filing of the Articles of Merger and Plan of Merger between privileges, immunities and powers and shall be subject to all the duties and
FEBTC and BPI stated that "x x x the entire assets and liabilities of FAR liabilities of a corporation organized under this Code;
EASTERN BANK & TRUST COMPANY will be transferred to and absorbed
by the BANK OF THE PHILIPPINE ISLANDS x x x (underlining supplied)."[26] 4. The surviving or the consolidated corporation shall thereupon and
In sum, the Voluntary Arbiter upheld the reasoning of petitioner that the thereafter possess all the rights, privileges, immunities and franchises of each
FEBTC employees became BPI employees by "operation of law" because of the constituent corporations; and all property, real or personal, and all
they are included in the term "assets and liabilities." 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
Absorbed FEBTC Employees are Neither Assets nor Liabilities due to each constituent corporation, shall be taken and deemed to be
transferred to and vested in such surviving or consolidated corporation
In legal parlance, however, human beings are never embraced in the term without further act or deed; and
"assets and liabilities." Moreover, BPI's absorption of former FEBTC
employees was neither by operation of law nor by legal consequence of 5. The surviving or the consolidated corporation shall be responsible and
contract. There was no government regulation or law that compelled the liable for all the liabilities and obligations of each of the constituent
merger of the two banks or the absorption of the employees of the dissolved corporations in the same manner as if such surviving or consolidated
corporation by the surviving corporation. Had there been such law or corporation had itself incurred such liabilities or obligations; and any claim,
regulation, the absorption of employees of the non-surviving entities of the action or proceeding pending by or against any of such constituent
merger would have been mandatory on the surviving corporation.[27] In the corporations may be prosecuted by or against the surviving or consolidated
present case, the merger was voluntarily entered into by both banks corporation, as the case may be. Neither the rights of creditors nor any lien
presumably for some mutually acceptable consideration. In fact, the upon the property of any of such constituent corporations shall be impaired
Corporation Code does not also mandate the absorption of the by such merger or consolidated.
employees of the non-surviving corporation by the surviving
corporation in the case of a merger. Section 80 of the Corporation Code Significantly, too, the Articles of Merger and Plan of Merger dated April 7,
provides: 2000 did not contain any specific stipulation with respect to the employment
contracts of existing personnel of the non-surviving entity which is FEBTC.
SEC. 80. Effects of merger or consolidation. - The merger or consolidation,
Unlike the Voluntary Arbitrator, this Court cannot uphold the reasoning that
as provided in the preceding sections shall have the following effects:
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
1. The constituent corporations shall become a single corporation which, in
all FEBTC employees into the employ of BPI and neither BPI nor the FEBTC
case of merger, shall be the surviving corporation designated in the plan of
employees allegedly could do anything about it. Even if it is so, it does not business management decision as to whether or not employ FEBTC's
follow that the absorbed employees should not be subject to the terms employees. FEBTC employees likewise retained the prerogative to allow
and conditions of employment obtaining in the surviving corporation. themselves to be absorbed or not; otherwise, that would be tantamount to
involuntary servitude.
The rule is that unless expressly assumed, labor contracts such as
employment contracts and collective bargaining agreements are not There appears to be no dispute that with respect to FEBTC employees that
enforceable against a transferee of an enterprise, labor contracts being in BPI chose not to employ or FEBTC employees who chose to retire or be
personam, thus binding only between the parties. A labor contract merely separated from employment instead of "being absorbed," BPI's assumed
creates an action in personam and does not create any real right which liability to these employees pursuant to the merger is FEBTC's liability to
should be respected by third parties. This conclusion draws its force from the them in terms of separation pay,[29] retirement pay[30] or other benefits that
right of an employer to select his employees and to decide when to engage may be due them depending on the circumstances.
them as protected under our Constitution, and the same can only be
restricted by law through the exercise of the police power.[28] Legal Consequences of Mergers
Furthermore, this Court believes that it is contrary to public policy to declare Although not binding on this Court, American jurisprudence on the
the former FEBTC employees as forming part of the assets or liabilities of consequences of voluntary mergers on the right to employment and seniority
FEBTC that were transferred and absorbed by BPI in the Articles of Merger. rights is persuasive and illuminating. We quote the following pertinent
Assets and liabilities, in this instance, should be deemed to refer only to discussion from the American Law Reports:
property rights and obligations of FEBTC and do not include the employment
contracts of its personnel. A corporation cannot unilaterally transfer its Several cases have involved the situation where as a result of mergers,
employees to another employer like chattel. Certainly, if BPI as an employer consolidations, or shutdowns, one group of employees, who had
had the right to choose who to retain among FEBTC's employees, FEBTC accumulated seniority at one plant or for one employer, finds that their jobs
employees had the concomitant right to choose not to be absorbed by BPI. have been discontinued except to the extent that they are offered
Even though FEBTC employees had no choice or control over the merger of employment at the place or by the employer where the work is to be carried
their employer with BPI, they had a choice whether or not they would allow on in the future. Such cases have involved the question whether such
themselves to be absorbed by BPI. Certainly nothing prevented the FEBTC's transferring employees should be entitled to carry with them their
employees from resigning or retiring and seeking employment elsewhere accumulated seniority or whether they are to be compelled to start over at the
instead of going along with the proposed absorption. 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
Employment is a personal consensual contract and absorption by BPI of a transferred to the "new" job.
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 In Carver v Brien (1942) 315 Ill App 643, 43 NE2d 597, the shop work of
there was an express provision in the articles of merger that as a condition for three formerly separate railroad corporations, which had previously operated
the merger, BPI was being required to assume all the employment contracts separate facilities, was consolidated in the shops of one of the roads.
of all existing FEBTC employees with the conformity of the employees. In the Displaced employees of the other two roads were given preference for the
absence of such a provision in the articles of merger, then BPI clearly had 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 absorption of the dissolved corporation's employees or the recognition of the
they had accumulated with their prior employers, that is, whether the rosters absorbed employees' service with their previous employer may be demanded
of the three corporations, for seniority purposes, should be "dovetailed" or from the surviving corporation if required by provision of law or contract. The
whether the transferring employees should go to the bottom of the roster of dissent of Justice Arturo D. Brion tries to make a distinction as to the terms
their new employer. Labor representatives of the various systems involved and conditions of employment of the absorbed employees in the case of a
attempted to work out an agreement which, in effect, preserved the seniority corporate merger or consolidation which will, in effect, take away from
status obtained in the prior employment on other roads, and the action was corporate management the prerogative to make purely business decisions on
for specific performance of this agreement against a demurring group of the the hiring of employees or will give it an excuse not to apply the CBA in force
original employees of the railroad which was operating the consolidated to the prejudice of its own employees and their recognized collective
shops. The relief sought was denied, the court saying that, absent some bargaining agent. In this regard, we disagree with Justice Brion.
specific contract provision otherwise, seniority rights were ordinarily limited to
the employment in which they were earned, and concluding that the contract Justice Brion takes the position that because the surviving corporation
for which specific performance was sought was not such a completed and continues the personality of the dissolved corporation and acquires all the
binding agreement as would support such equitable relief, since the railroad, latter's rights and obligations, it is duty-bound to absorb the dissolved
whose concurrence in the arrangements made was essential to their corporation's employees, even in the absence of a stipulation in the plan of
effectuation, was not a party to the agreement. merger. He proposes that this interpretation would provide the necessary
protection to labor as it spares workers from being "left in legal limbo."
Where the provisions of a labor contract provided that in the event that a
trucker absorbed the business of another private contractor or common However, there are instances where an employer can validly discontinue or
carrier, or was a party to a merger of lines, the seniority of the terminate the employment of an employee without violating his right to
employees absorbed or affected thereby should be determined by mutual security of tenure. Among others, in case of redundancy, for example,
agreement between the trucker and the unions involved, it was held in Moore superfluous employees may be terminated and such termination would be
v International Brotherhood of Teamsters, etc. (1962, Ky) 356 SW2d 241, authorized under Article 283 of the Labor Code.[32]
that the trucker was not required to absorb the affected employees as well as
the business, the court saying that they could find no such meaning in the Moreover, assuming for the sake of argument that there is an obligation to
above clause, stating that it dealt only with seniority, and not with initial hire or absorb all employees of the non-surviving corporation, there is still no
employment. Unless and until the absorbing company agreed to take the basis to conclude that the terms and conditions of employment under a valid
employees of the company whose business was being absorbed, no collective bargaining agreement in force in the surviving corporation should
seniority problem was created, said the court, hence the provision of the not be made to apply to the absorbed employees.
contract could have no application. Furthermore, said the court, it did not
require that the absorbing company take these employees, but only that if it The Corporation Code and the Subject
did take them the question of seniority between the old Merger Agreement are Silent on Efficacy,
and new employees would be worked out by agreement or else be Terms and Conditions of Employment
submitted to the grievance procedure.[31] (Emphasis ours.) Contracts
Indeed, from the tenor of local and foreign authorities, in voluntary mergers, The lack of a provision in the plan of merger regarding the transfer of
employment contracts to the surviving corporation could have very well been employment even if his previous tenure and salary rate is recognized by BPI.
deliberate on the part of the parties to the merger, in order to grant the It is reasonable to assume that BPI would have different rules and regulations
surviving corporation the freedom to choose who among the dissolved and company practices than FEBTC and it is incumbent upon the former
corporation's employees to retain, in accordance with the surviving FEBTC employees to obey these new rules and adapt to their new
corporation's business needs. If terminations, for instance due to redundancy environment. Not the least of the changes in employment condition that the
or labor-saving devices or to prevent losses, are done in good faith, they absorbed FEBTC employees must face is the fact that prior to the merger
would be valid. The surviving corporation too is duty-bound to protect the they were employees of an unorganized establishment and after the merger
rights of its own employees who may be affected by the merger in terms of they became employees of a unionized company that had an existing
seniority and other conditions of their employment due to the merger. Thus, collective bargaining agreement with the certified union. This presupposes
we are not convinced that in the absence of a stipulation in the merger plan that the union who is party to the collective bargaining agreement is the
the surviving corporation was compelled, or may be judicially compelled, to certified union that has, in the appropriate certification election, been shown
absorb all employees under the same terms and conditions obtaining in the to represent a majority of the members of the bargaining unit.
dissolved corporation as the surviving corporation should also take into
consideration the state of its business and its obligations to its own Likewise, with respect to FEBTC employees that BPI chose to employ and
employees, and to their certified collective bargaining agent or labor union. 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
Even assuming we accept Justice Brion's theory that in a merger situation the respect the years of service of these FEBTC employees and to pay the same,
surviving corporation should be compelled to absorb the dissolved or commensurate salaries and other benefits that these employees previously
corporation's employees as a legal consequence of the merger and as a enjoyed with FEBTC.
social justice consideration, it bears to emphasize his dissent also recognizes
that the employee may choose to end his employment at any time by As the Union likewise pointed out in its pleadings, there were benefits under
voluntarily resigning. For the employee to be "absorbed" by BPI, it requires the CBA that the former FEBTC employees did not enjoy with their
the employees' implied or express consent. It is because of this human previous employer. As BPI employees, they will enjoy all these CBA
element in employment contracts and the personal, consensual nature benefits upon their "absorption." Thus, although in a sense BPI is continuing
thereof that we cannot agree that, in a merger situation, employment FEBTC's employment of these absorbed employees, BPI's employment of
contracts are automatically transferable from one entity to another in the these absorbed employees was not under exactly the same terms and
same manner that a contract pertaining to purely proprietary rights - such as conditions as stated in the latter's employment contracts with FEBTC. This
a promissory note or a deed of sale of property - is perfectly and further strengthens the view that BPI and the former FEBTC employees
automatically transferable to the surviving corporation. voluntarily contracted with each other for their employment in 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 Proper Appreciation of the Term
the merged corporations and the persons that deal with them. Although in a "New Employees" Under the CBA
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 In any event, it is of no moment that the former FEBTC employees retained
employee is absorbed, there are presumably changes in his condition of the regular status that they possessed while working for their former
employer upon their absorption by petitioner. This fact would not remove of the Labor Code in point mandates that nothing in the said Code or
them from the scope of the phrase "new employees" as contemplated in the any other law should stop the parties from requiring membership in a
Union Shop Clause of the CBA, contrary to petitioner's insistence that the recognized collective bargaining agent as a condition of employment.
term "new employees" only refers to those who are initially hired as non-
regular employees for possible regular 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
The Union Shop Clause in the CBA simply states that "new employees" who covered by the Union Shop Clause. This is not surprising.
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 By law and jurisprudence, a merger only becomes effective upon approval by
nothing in the said clause that limits its application to only new employees the Securities and Exchange Commission (SEC) of the articles of merger.
who possess non-regular status, meaning probationary status, at the start In Associated Bank v. Court of Appeals,[33] we held:
of their employment. Petitioner likewise failed to point to any provision in the
CBA expressly excluding from the Union Shop Clause new employees who The procedure to be followed is prescribed under the Corporation Code.
are "absorbed" as regular employees from the beginning of their Section 79 of said Code requires the approval by the Securities and
employment. What is indubitable from the Union Shop Clause is that upon Exchange Commission (SEC) of the articles of merger which, in turn, must
the effectivity of the CBA, petitioner's new regular employees (regardless of have been duly approved by a majority of the respective stockholders of the
the manner by which they became employees of BPI) are required to join constituent corporations. The same provision further states that the merger
the Union as a condition of their continued employment. 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
The dissenting opinion of Justice Brion dovetails with Justice Carpio's view when the merged or absorbed corporation ceases to exist; and when its
only in their restrictive interpretation of who are "new employees" under the rights, privileges, properties as well as liabilities pass on to the
CBA. To our dissenting colleagues, the phrase "new employees" (who are surviving corporation. (Emphasis ours.)
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 In other words, even though BPI steps into the shoes of FEBTC as the
regular status. They propose that the former FEBTC employees who were surviving corporation, BPI does so at a particular point in time, i.e., the
deemed regular employees from the beginning of their employment with BPI effectivity of the merger upon the SEC's issuance of a certificate of merger. In
should be treated as a special class of employees and be excluded from the fact, the articles of merger themselves provided that both BPI and FEBTC will
union shop clause. continue their respective business operations until the SEC issues the
certificate of merger and in the event SEC does not issue such a certificate,
Justice Brion himself points out that there is no clear, categorical definition of they agree to hold each other blameless for the non-consummation of the
"new employee" in the CBA. In other words, the term "new employee" as merger.
used in the union shop clause is used broadly without any qualification or
distinction. However, the Court should not uphold an interpretation of the Considering the foregoing principle, BPI could have only become the
term "new employee" based on the general and extraneous provisions of the employer of the FEBTC employees it absorbed after the approval by the SEC
Corporation Code on merger that would defeat, rather than fulfill, the purpose of the merger. If the SEC did not approve the merger, BPI would not be in
of the union shop clause. To reiterate, the provision of the Article 248(e) 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 who are non-regular at their hiring but who subsequently become
employees in BPI effective April 10, 2000, or after the SEC's approval of the regular and new employees who are "absorbed" as regular and permanent
merger.[34] In other words, BPI became the employer of the absorbed from the beginning of their employment. The Union Shop Clause did not so
employees only at some point after the effectivity of the merger, distinguish, and so neither must we.
notwithstanding the fact that the absorbed employees' years of service with
FEBTC were voluntarily recognized by BPI. No Substantial Distinction Under the CBA
Between Regular Employees Hired After
Even assuming for the sake of argument that we consider the absorbed Probationary Status and Regular Employees
FEBTC employees as "old employees" of BPI who are not members of any Hired After the Merger
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 Verily, we agree with the Court of Appeals that there are no substantial
the union security clause in the CBA. The CBA subject of this case was differences between a newly hired non-regular employee who was
effective from April 1, 1996 until March 31, 2001. Based on the allegations of regularized weeks or months after his hiring and a new employee who was
the former FEBTC employees themselves, there were former FEBTC absorbed from another bank as a regular employee pursuant to a merger, for
employees who were hired by FEBTC after April 1, 1996 and if their date of purposes of applying the Union Shop Clause. Both employees were
hiring by FEBTC is considered as their date of hiring by BPI, they would hired/employed only after the CBA was signed. At the time they are being
undeniably be considered "new employees" of BPI within the contemplation required to join the Union, they are both already regular rank and file
of the Union Shop Clause of the said CBA. Otherwise, it would lead to the employees of BPI. They belong to the same bargaining unit being
absurd situation that we would discriminate not only between new BPI represented by the Union. They both enjoy benefits that the Union was able
employees (hired during the life of the CBA) and former FEBTC employees to secure for them under the CBA. When they both entered the employ of
(absorbed during the life of the CBA) but also among the former FEBTC BPI, the CBA and the Union Shop Clause therein were already in effect and
employees themselves. In other words, we would be treating employees who neither of them had the opportunity to express their preference for unionism
are exactly similarly situated (i.e., the group of absorbed FEBTC employees) or not. We see no cogent reason why the Union Shop Clause should not be
differently. This hardly satisfies the demands of equality and justice. applied equally to these two types of new employees, for they are undeniably
similarly situated.
Petitioner limited itself to the argument that its absorbed employees do not
fall within the term "new employees" contemplated under the Union Shop The effect or consequence of BPI's so-called "absorption" of former FEBTC
Clause with the apparent objective of excluding all, and not just some, of the employees should be limited to what they actually agreed to, i.e. recognition
former FEBTC employees from the application of the Union Shop Clause. 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
However, in law or even under the express terms of the CBA, there is no to exempt former FEBTC employees from the existing CBA terms, company
special class of employees called "absorbed employees." In order for the policies and rules which apply to employees similarly situated. If the Union
Court to apply or not apply the Union Shop Clause, we can only classify the Shop Clause is valid as to other new regular BPI employees, there is no
former FEBTC employees as either "old" or "new." If they are not "old" reason why the same clause would be a violation of the "absorbed"
employees, they are necessarily "new" employees. If they are new employees' freedom of association.
employees, the Union Shop Clause did not distinguish between new
Non-Application of Union Shop Clause regular employment even at the onset of his engagement. Moreover, no law
Contrary to the Policy of the Labor Code prohibits an employer from voluntarily recognizing the length of service of a
and Inimical to Industrial Peace new employee with a previous employer in relation to computation of benefits
or seniority but it should not unduly be interpreted to exclude them from the
It is but fair that similarly situated employees who enjoy the same privileges coverage of the CBA which is a binding contractual obligation of the employer
of a CBA should be likewise subject to the same obligations the CBA and employees.
imposes upon them. A contrary interpretation of the Union Shop Clause will
be inimical to industrial peace and workers' solidarity. This unfavorable Indeed, a union security clause in a CBA should be interpreted to give
situation will not be sufficiently addressed by asking the former FEBTC meaning and effect to its purpose, which is to afford protection to the certified
employees to simply pay agency fees to the Union in lieu of union bargaining agent and ensure that the employer is dealing with a union that
membership, as the dissent of Justice Carpio suggests. The fact remains represents the interests of the legally mandated percentage of the members
that other new regular employees, to whom the "absorbed employees" should of the bargaining unit.
be compared, do not have the option to simply pay the agency fees and they
must join the Union or face termination. The union shop clause offers protection to the certified bargaining agent by
ensuring that future regular employees who (a) enter the employ of the
Petitioner's restrictive reading of the Union Shop Clause could also company during the life of the CBA; (b) are deemed part of the collective
inadvertently open an avenue, which an employer could readily use, in order bargaining unit; and (c) whose number will affect the number of members of
to dilute the membership base of the certified union in the collective the collective bargaining unit will be compelled to join the union. Such
bargaining unit (CBU). By entering into a voluntary merger with a non- compulsion has legal effect, precisely because the employer by voluntarily
unionized company that employs more workers, an employer could get rid of entering in to a union shop clause in a CBA with the certified bargaining
its existing union by the simple expedient of arguing that the "absorbed agent takes on the responsibility of dismissing the new regular employee who
employees" are not new employees, as are commonly understood to be does not join the union.
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 Without the union shop clause or with the restrictive interpretation thereof as
the existing union and, ultimately, spell its demise as the CBU's bargaining proposed in the dissenting opinions, the company can jeopardize the majority
representative. Such a dreaded but not entirely far-fetched scenario is no status of the certified union by excluding from union membership all new
different from the ingenious and creative "union-busting" schemes that regular employees whom the Company will "absorb" in future mergers and all
corporations have fomented throughout the years, which this Court has foiled new regular employees whom the Company hires as regular from the
time and again in order to preserve and protect the valued place of labor in beginning of their employment without undergoing a probationary period. In
this jurisdiction consistent with the Constitution's mandate of insuring social this manner, the Company can increase the number of members of the
justice. collective bargaining unit and if this increase is not accompanied by a
corresponding increase in union membership, the certified union may lose its
There is nothing in the Labor Code and other applicable laws or the CBA majority status and render it vulnerable to attack by another union who
provision at issue that requires that a new employee has to be of wishes to represent the same bargaining unit.[35]
probationary or non-regular status at the beginning of the employment
relationship. An employer may confer upon a new employee the status of Or worse, a certified union whose membership falls below twenty percent
(20%) of the total members of the collective bargaining unit may lose its of All Members of the Bargaining Unit
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 The dissenting opinions place a premium on the fact that even if the former
for the cancellation of the union's certificate of registration with the Bureau of FEBTC employees are not old employees, they nonetheless were employed
Labor Relations.[37] as regular and permanent employees without a gap in their service.
However, an employee's permanent and regular employment status in itself
Plainly, the restrictive interpretation of the union shop clause would place the does not necessarily exempt him from the coverage of a union shop clause.
certified union's very existence at the mercy and control of the
employer. Relevantly, only BPI, the employer appears to be interested in In the past this Court has upheld even the more stringent type of union
pursuing this case. The former FEBTC employees have not joined BPI in security clause, i.e., the closed shop provision, and held that it can be made
this appeal. applicable to old employees who are already regular and permanent but have
chosen not to join a union. In the early case of Juat v. Court of Industrial
For the foregoing reasons, Justice Carpio's proposal to simply require the Relations,[38] the Court held that an old employee who had no union may be
former FEBTC to pay agency fees is wholly inadequate to compensate the compelled to join the union even if the collective bargaining agreement (CBA)
certified union for the loss of additional membership supposedly guaranteed imposing the closed shop provision was only entered into seven years after of
by compliance with the union shop clause. This is apart from the fact that the hiring of the said employee. To quote from that decision:
treating these "absorbed employees" as a special class of new employees
does not encourage worker solidarity in the company since another class of A closed-shop agreement has been considered as one form of union security
new employees (i.e. those whose were hired as probationary and later whereby only union members can be hired and workers must remain union
regularized during the life of the CBA) would not have the option of members as a condition of continued employment. The requirement for
substituting union membership with payment of agency fees. employees or workers to become members of a union as a condition for
employment redounds to the benefit and advantage of said
Justice Brion, on the other hand, appears to recognize the inherent employees because by holding out to loyal members a promise of
unfairness of perpetually excluding the "absorbed" employees from the ambit employment in the closed-shop the union wields group solidarity. In fact, it
of the union shop clause. He proposes that this matter be left to negotiation is said that "the closed-shop contract is the most prized achievement of
by the parties in the next CBA. To our mind, however, this proposal does not unionism."
sufficiently address the issue. With BPI already taking the position that
employees "absorbed" pursuant to its voluntary mergers with other banks are xxxx
exempt from the union shop clause, the chances of the said bank ever
agreeing to the inclusion of such employees in a future CBA is next to nil - This Court had categorically held in the case of Freeman Shirt Manufacturing
more so, if BPI's narrow interpretation of the union shop clause is sustained Co., Inc., et al. vs. Court of Industrial Relations, et al., G.R. No. L-16561, Jan.
by this Court. 28, 1961, that the closed-shop proviso of a collective bargaining agreement
entered into between an employer and a duly authorized labor union
Right of an Employee not to Join a is applicable not only to the employees or laborers that are employed
Union is not Absolute and Must after the collective bargaining agreement had been entered into but
Give Way to the Collective Good 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 The right to refrain from joining labor organizations recognized by
different from the union that entered into a collective bargaining agreement Section 3 of the Industrial Peace Act is, however, limited. The legal
with the employer providing for a closed-shop, said employee or worker protection granted to such right to refrain from joining is withdrawn by
cannot be obliged to become a member of that union which had entered into operation of law, where a labor union and an employer have agreed on a
a collective bargaining agreement with the employer as a condition for his closed shop, by virtue of which the employer may employ only member
continued employment. (Emphasis and underscoring supplied.) 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
Although the present case does not involve a closed shop provision that keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its
included even old employees, the Juat example is but one of the cases that amendment by Republic Act No. 3350, provides that although it would be
laid down the doctrine that the right not to join a union is not absolute. an unfair labor practice for an employer "to discriminate in regard to
Theoretically, there is nothing in law or jurisprudence to prevent an employer hire or tenure of employment or any term or condition of employment to
and a union from stipulating that existing employees (who already attained encourage or discourage membership in any labor organization" the
regular and permanent status but who are not members of any union) are to employer is, however, not precluded "from making an agreement with a
be included in the coverage of a union security clause. Even Article 248(e) of labor organization to require as a condition of employment membership
the Labor Code only expressly exempts old employees who already have a therein, if such labor organization is the representative of the
union from inclusion in a union security clause.[39] employees." By virtue, therefore, of a closed shop agreement, before the
enactment of Republic Act No. 3350, if any person, regardless of his religious
Contrary to the assertion in the dissent of Justice Carpio, Juat has not been beliefs, wishes to be employed or to keep his employment, he must become
overturned by Victoriano v. Elizalde Rope Workers' Union[40] nor by Reyes v. a member of the collective bargaining union. Hence, the right of said
Trajano.[41] The factual milieus of these three cases are vastly different. employee not to join the labor union is curtailed and withdrawn.
[43]
(Emphases supplied.)
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 If Juat exemplified an exception to the rule that a person has the right not to
compelled to join the union under a closed shop provision, despite the fact join a union, Victoriano merely created an exception to the exception on the
that their religious beliefs prohibited them from joining a union. In that case, ground of religious freedom.
the Court was asked to balance the constitutional right to religious freedom
against a host of other constitutional provisions including the freedom of Reyes, on the other hand, did not involve the interpretation of any union
association, the non-establishment clause, the non-impairment of contracts security clause. In that case, there was no certified bargaining agent yet
clause, the equal protection clause, and the social justice provision. In the since the controversy arose during a certification election. In Reyes, the
end, the Court held that "religious freedom, although not unlimited, is a Court highlighted the idea that the freedom of association included the right
fundamental personal right and liberty, and has a preferred position in the not to associate or join a union in resolving the issue whether or not the votes
hierarchy of values."[42] 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
However, Victoriano is consistent with Juat since they both affirm that the not members of the two contesting unions and were expected to have voted
right to refrain from joining a union is not absolute. The relevant portion for "NO UNION" in view of their religious affiliation. The Court upheld the
of Victoriano is quoted below: 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 Commercial Employees and Workers Organization v. People's Industrial and
on the ground of religious freedom and even without Victoriano every Commercial Corporation,[53] we recognized that "[l]abor, being the weaker in
employee has the right to vote "no union" in a certification election as part of economic power and resources than capital, deserve protection that is
his freedom of association. However, Reyes is not authority for Justice actually substantial and material."
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 The rationale for upholding the validity of union shop clauses in a CBA, even
already has regular and permanent status but simply prefers not to join a if they impinge upon the individual employee's right or freedom of association,
union. is not to protect the union for the union's sake. Laws and jurisprudence
promote unionism and afford certain protections to the certified bargaining
The other cases cited in Justice Carpio's dissent on this point are likewise agent in a unionized company because a strong and effective union
inapplicable. Basa v. Federacion Obrera de la Industria Tabaquera y Otros presumably benefits all employees in the bargaining unit since such a
Trabajadores de Filipinas,[44] Anucension v. National Labor Union, union would be in a better position to demand improved benefits and
[45]
and Gonzales v. Central Azucarera de Tarlac Labor Union[46] all involved conditions of work from the employer. This is the rationale behind the State
members of the INK. In line with Victoriano, these cases upheld the INK policy to promote unionism declared in the Constitution, which was elucidated
members' claimed exemption from the union security clause on religious in the above-cited case of Liberty Flour Mills Employees v. Liberty Flour Mills,
grounds. In the present case, the former FEBTC employees never claimed Inc.[54]
any religious grounds for their exemption from the Union Shop Clause. As
for Philips Industrial Development, Inc. v. National Labor Relations In the case at bar, since the former FEBTC employees are deemed covered
Corporation[47] and Knitjoy Manufacturing, Inc. v. Ferrer-Calleja,[48] the by the Union Shop Clause, they are required to join the certified bargaining
employees who were exempted from joining the respondent union or who agent, which supposedly has gathered the support of the majority of workers
were excluded from participating in the certification election were found to within the bargaining unit in the appropriate certification proceeding. Their
be not members of the bargaining unit represented by respondent joining the certified union would, in fact, be in the best interests of the former
union and were free to form/join their own union. In the case at bar, it is FEBTC employees for it unites their interests with the majority of employees
undisputed that the former FEBTC employees were part of the bargaining in the bargaining unit. It encourages employee solidarity and affords
unit that the Union represented. Thus, the rulings in Philips and Knitjoy have sufficient protection to the majority status of the union during the life of the
no relevance to the issues at hand. 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
Time and again, this Court has ruled that the individual employee's right not balance the interests of individual employees as against the State policy of
to join a union may be validly restricted by a union security clause in a promoting unionism, since the employees, who were parties in the court
CBA[49] and such union security clause is not a violation of the employee's below, no longer contested the adverse Court of Appeals' decision.
constitutional right to freedom of association.[50] Nonetheless, settled jurisprudence has already swung the balance in favor of
unionism, in recognition that ultimately the individual employee will be
It is unsurprising that significant provisions on labor protection of the 1987 benefited by that policy. In the hierarchy of constitutional values, this Court
Constitution are found in Article XIII on Social Justice. The constitutional has repeatedly held that the right to abstain from joining a labor organization
guarantee given the right to form unions[51] and the State policy to promote is subordinate to the policy of encouraging unionism as an instrument of
unionism[52] have social justice considerations. In People's Industrial and social justice.
WHEREFORE, the petition is hereby DENIED, and the Decision dated

Also in the dissenting opinion of Justice Carpio, he maintains that one of the September 30, 2003 of the Court of Appeals is AFFIRMED, subject to the
dire consequences to the former FEBTC employees who refuse to join the thirty (30) day notice requirement imposed herein. Former FEBTC
union is the forfeiture of their retirement benefits. This is clearly not the case employees who opt not to become union members but who qualify for
precisely because BPI expressly recognized under the merger the length of retirement shall receive their retirement benefits in accordance with law, the
service of the absorbed employees with FEBTC. Should some refuse to applicable retirement plan, or the CBA, as the case may be.
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 SO ORDERED.
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 Corona, C.J., Peralta, Del Castillo, Abad, Villarama,
eligibility to apply for retirement if qualified under the law, the existing
retirement plan, or the CBA as the case may be. Republic of the Philippines
SUPREME COURT
In sum, this Court finds it reasonable and just to conclude that the Union Manila
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 FIRST DIVISION
petitioner describes as "absorption." A contrary appreciation of the facts of
this case would, undoubtedly, lead to an inequitable and very volatile labor G.R. No. L-27029 November 12, 1981
situation which this Court has consistently ruled against.
LIRAG TEXTILE MILLS, INC., petitioner,
In the case of former FEBTC employees who initially joined the union but vs.
later withdrew their membership, there is even greater reason for the union to EPIFANIO D. BLANCO and COURT OF INDUSTRIAL
request their dismissal from the employer since the CBA also contained a RELATIONS, respondents.
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 MELENCIO-HERRERA, J.:
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 Submitted for review is the Resolution of the Court of Industrial Relations en
should be given a fresh thirty (30) days from notice of finality of this decision banc affirming the Decision in Case No. 4219-ULP finding petitioner Lirag
to join the union before the union demands BPI to terminate their employment Textile Mills, Inc. (LITEX, for brevity) to have committed an unfair labor
under the Union Shop Clause, assuming said clause has been carried over in practice act in dismissing its employee, respondent Epifanio D. Blanco, for
the present CBA and there has been no material change in the situation of union activities and ordering his restatement with back wages.
the parties.
The records disclose that since 1957 there had existed in LITEX a union
known as Litex Employees Association (LEA, for short). Private respondent
Epifanio D. Blanco, who was employed by LITEX on April 3, 1959, joined that 3. Acts prejudicial to the interest of the union and/or its
union a few months thereafter. On January 2, 1960, LEA entered into its first members.
collective bargaining agreement with LITEX for a period of two (2) years,
which was subsequently renewed for three (3) years, or up to March 31, xxx xxx xxx 1
1965. The agreement contained a closed-shop provision as follows:
Sometime in January, 1964, BLANCO and several employees organized the
Section 1. Union Security. — The COMPANY recognizes the Confederation of Industrial and Allied Labor Organization (CIALO). On April
UNION AS THE SOLE and exclusive collective bargaining 1, 1964, CIALO filed a petition for certification election at LITEX before the
representative of all its employees and/or members. Court of Industrial Relations (Case No. 1332-MC) The petition was
dismissed, however, and said Court certified LEA as the sole bargaining
Section 2. Union Shop. — It is mutually agreed between the representative of the rank and file employees of LITEX. 2
COMPANY and the UNION that newly-hired employees on
probationary basis in accordance with Section 2, Article III of In the same month of April, 1964, LEA's grievance committee conducted an
this AGREEMENT, are required as a condition or prerequisite investigation of its members suspected of having joined CIALO.
of continued employment on a regular basis to join and be
member of the UNION in good standing. It is a continuing On April 24, 1964, BLANCO was dismissed by LITEX for violation of
condition of employment with the COMPANY that employees company rules and regulations in a letter reading as follows:
coming under this AGREEMENT should be and must remain
as good standing members of the UNION. The UNION Dear Mr. Blanco,
therefore may from time to time recommend to the
COMPANY, the separation from the service of any of its This is to inform you that as per report of the Security Guards,
members for reasons that he or she is no longer a member of dated April 10, 1964, you were a) found distributing leaflets
the UNION in good standing. Accordingly, those losing their and reading materials inside the Service Bus, b) subsequently
membership in the UNION could not be retained in the employ apprehended at the gate with several other leaflets and an
of the COMPANY. envelope with leaflets for distribution to company employees
and c) refused to be searched upon entrance at the gate, in
The constitution and by-laws of the union also provided, inter alia: violation of existing company rules and regulations.
Sec. 5, Art. III — Expulsion — By a majority vote of the Board Inasmuch as you were previously warned for misconduct and
of Officers, including the President's, any member of the union inefficiency on September 27, 1961 and June 1, 1963,
may be expelled therefrom for any of the following grounds: respectively, and suspended twice on June 29, 1961 for act of
f resulting in injury to a co-employee and on July 29, 1963 for
1. Being affiliated with other labor union. refusal to be searched and utterance of bad words against
the guards and other offenses contained in our letter of July
2. Refusal to obey constitution and by-laws and the duly 10, 1963, we have decided after giving you a definite last
enacted rules and regulations of the union.
warning on July 11, 1963, to terminate your services effective 3) Eduardo Canlas — April 28, 1964
on Friday, April 24, 1964
4) Leovigildo Roldan — April 28, 1964
.Very truly yours,KHRISNAMURTI A. AFRICANO
5) Romeo Florentino — April 28, 1964
On April 27, 1964, LEA addressed a letter to LITEX recommending the
immediate dismissal of 18 members named therein, who had been found to 6) Daniel Fontaina — April 28, 1964
have violated the Union's constitution and by laws and the Revised Collective
Bargaining Agreement by joining CIALO 4 , attaching thereto the minutes of a 7) Epifanio Blanco — April 24, 1964 8
meeting held by the Board of Officers of LEA on April 24, 1964 adopting a
resolution of expulsion. 5 BLANCO's name was not included in the list In its Answer, LITEX denied the charge and raised defenses. The case was
presumably because he had been dismissed by the company on April 24, subsequently heard on the merits.
1964, or three days before.
LEA endeavored to intervene but its Motion was denied by respondent Court
On April 27, 1964, LITEX advised LEA of its reluctance to effect the for lack of legal basis.
termination from the service of the 18 employees, and asked for
reconsideration. 6 LEA insisted on the dismissal of the 18 employees On October 17, 1966, the Court of Industrial Relations rendered judgment,
threatening to go to Court should LITEX refuse to honor its commitment the dispositive portion of which reads:
under their collective bargaining agreement. 7
WHEREFORE, in the case of complainant Epifanio Blanco, the
The 18 employees were dismissed on different dates. They filed separate court finds respondents to have violated the Industrial Peace
complaints against LITEX. After investigation, Case No. 4219-ULP for Unfair Act and hereby orders them to cease and desist from
Labor Practice against LITEX was filed before the CIR on behalf of BLANCO committing the censurable acts herein found, to reinstate him
and six others upon the following allegations: to his former or equivalent position without loss of seniority
and other privileges, and to pay him backwages at the rate of
4. That the respondent company thru Khrisnamurti Africano, fifty (50) per cent from the time of his dismissal up to his
discriminated against the complaints with regards to their reinstatement.
tenure of employment by dismissing them on the dates
appearing opposite their names listed hereunder for no other With respect to all the other complainants, for lack of merit and
reason than their willingness to join the complainant union insufficiency of evidence, the complaint is hereby DISMISSED.
and/or affiliation therein and union activities so as to
discourage membership thereto, as follows:
Respondent court rationalized its holding in respect of BLANCO, thus:
1) Francisco Pineda — April 24, 1964
Exhibit "A — Blanco", an unobjected piece of material
evidence, shows beyond doubt that the consequent act of
2) Antonio S. Lalucis — April 29, 1964
respondent company interfered with the exercise of the dismissed occurred within nine (9) months from the time the
employee's right to self-organization. Blanco was not even definite last warning was issued to him.
investigated by the company to find out whether or not he did
refuse to be searched, as this is the only regulation alleged to The petition is meritorious.
have been violated (Exhibit "A-Blanco"). Under the
circumstances, the concurrence of other grounds, stale as Respondent Court ruled that the five other complainants (Lalucis, Canlas,
they were, reeks with pretext and cannot justify the dismissal. Roldan, Florentino and Fontaina) were legally separated from the service
It is explicitly clear that the prevailing reason for his separation pursuant to the closed- shop agreement and the constitution and by-laws of
from the service was his union activities. 9 LEA, which have binding effect on the parties, but ruled as unfair labor
practice the dismissal of BLANCO, his name not having been included in the
LITEX moved for reconsideration, but this was denied by respondent list of member-employees who were expelled from the union and
Court en banc on November 16, 1966. LITEX appealed to this instance recommended to the company for dismissal from the service.
assigning the following errors to respondent CIR:
There is no justifiable reason to single out BLANCO. He was in an Identical
I position as the five other complainants. If his name was not included in the
list of 18 employees recommended for dismissal it was because he had been
The Respondent Court erred in holding that the Litex dismissed three days before by the company. And if he had not been
Employees Association (LEA) did not demand the dismissal of dismissed by the company, his dismissal would have been demanded by LEA
the respondent Epifanio Blanco pursuant to the Union Shop considering that he was one of those investigated by LEA's grievance
provision of the Collective Bargaining Contract (Exhibit 2) just committee which had approved the recommendation to dismiss them on the
because his name did not appear in the letter (Exhibit 4) in charge of being members of another union. In fact, in paragraph 4 of the
spite of sufficient testimonial and documentary evidence to the Complaint (supra) BLANCO made common cause with the other
contrary. complainants for having been dismissed "for no other reason than their
willingness to join the CIALO union and/or affiliation therein and union
II activities so as to discourage membership thereto ... ." BLANCO admitted his
affiliation with CIALO. There is evidence, too, that he, together with his co-
The Respondent Court erred in holding that the dismissal of employees organized a rival union, CIALO, in contravention of the collective
respondent Epifanio Blanco for violation of company rules was bargaining agreement and the constitution and by-laws of LEA, of which they
an unfair labor practice just because the violation was at the were then members. These acts of BLANCO and his co-workers of
same time a union activity, and in justifying this holding to organizing a rival union and distributing leaflets and propaganda papers,
consider a just warning for inefficiency and post violations for clearly constituted a ground for expulsion under Section 5 of LEA's
misconduct for which he was warned the first time, and for constitution and by-laws, quoted hereinabove.
subsequent misconducts for which he was twice suspended,
as a result of which he was given a definite last warning, as This Court has held that closed-shop is a valid form of union security and
"stale" grounds although the last violation for which he was such provision in a collective bargaining agreement is not a restriction of the
right of freedom of association guaranteed by the Constitution. 10 Respondent
Court upheld the validity of the closed-shop agreement of LEA and LITEX, dismissed, namely, previous misconduct and violations of company rules and
when it ruled as legal the dismissal of complainants except respondent, regulations. Again, this is reversible error.
pursuant thereto. Respondent Court should have also upheld as legal the
separation from the service of BLANCO on the same ground in the face of BLANCO himself admitted that he was suspended for mischief on June 21,
evidence that he committed the same violation. 1961; warned for misconduct and inefficiency on September 27, 1961 and
June 1, 1963; suspended on June 25, 1963 13 ; nearly dismissed on July 13,
The case of Manalang vs. Artex Development Company, Inc., supra, is 1963 pursuant to a letter of dismissal, dated July 10, 1963, but through LEA's
authority for the view that: intercession was given a last warning instead on July 11, 1963, as follows:
Even if we assume, in gratia argumentis, that the petitioners We are giving a reconsideration to the case of Mr. Epifanio Blanco, on the
were unaware of the stipulations set forth in the collective representation of the Litex Employees Association although the facts of the
bargaining agreement, since their membership in the BBLU case warrant immediate termination.
prior to their expulsion therefrom is undenied, there can be no
question that as long as the agreement with closed-shop Mr. Blanco, is however, to be given a maximum suspension of six (6) working
provision was in force, they are bound by it. Neither their days with a last warning that any other offense will be subject to outright
ignorance of, nor their dissatisfaction with, its terms and dismissal for cause.
conditions would justify breach thereof or the formation by
them of a union of their own. KHRISNAMURTI A. AFRICANO
In his Answer to the present Petition, BLANCO claimed that the closed-shop Personnel Officer
provision applies only to newly hired employees and not to old employees like
himself. He abandoned this argument in his Brief, however. Suffice it to say ACCEPTED:
that he was already a member of LEA when the collective bargaining
agreement containing the closed- shop provision was executed, and EPIFANIO D. BLANCO 14
therefore, he was bound by the same.
Accordingly, a suspension order for six days, from July 29 to August 3, 1963,
As a general rule, the findings of facts of the Industrial Court are final and was duly approved by LITEX. 15
conclusive when supported by substantial evidence. 11 However, where, as in
this case, respondent Court ignored the evidence adduced by the parties, it is
It is noteworthy that one of the grounds of dismissal cited by LITEX in its
guilty of grave abuse of discretion as to warrant a review by this Court of its
letter of April 23, 1964 was BLANCO's refusal to be searched upon entrance
findings of fact. 12
at the company gate in violation of company rules and regulations. This was
the same offense for which he was almost dismissed on July 13, 1963.
We come now to the second assigned error. Respondent Court ruled that the
prevailing reason for BLANCO's separation from the service was his union
Prior violations, misconduct or misdemeanors form part of an employee's
activities, and it considered as "stale" the other grounds for which he was
record. BLANCO's present infraction coupled with his blemished employment
record, with a last warning given some nine months before, inevitably led to
his dismissal on April 24, 1964. An employee may be dismissed on the
ground of willful disobedience to rules, orders and instructions of the
employer, which must be reasonable and lawful, known to the employee and
pertain to duties which the employee discharges. 16
It is true that BLANCO denied that he refused to be searched. 17 Even

granting, however, that he could not be dismissed on the ground of refusal to
be searched for lack of sufficient proof, he can still be legally dismissed for
his affiliation with CIALO which is specifically prohibited by the CBA and the
Constitution and by-laws of LEA, in respect of which, evidence had been
satisfactorily adduced.
WHEREFORE, the appealed Decision in so far as it held that petitioner

violated the Industrial Peace Act in dismissing respondent Epifanio D. Blanco
and ordering his reinstatement by petitioner, is hereby set aside.
No costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez arid Guerrero, JJ., concur.
Footnotes
ho had been found to

have violated the Union's
constitution and by laws
and the Revised
Collective Bargaining
Agreement by joining
CIALO
thereto the minutes of a
meeting held by the
Board of Officers of LEA
on April 24, 1964
adopting a resolution of
expulsion.
name was not included in
the list presumably
because he had been
dismissed by the
company on April 24,
1964, or three days
before

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1 |Title VI - Unfair Labor Practices (CASE 6- onwards except SLORD)

The true cause of the termination of the services of the

Judgment affirmed. ESGUERRA, J.:

employer, private respondent Shell Company of the Philippines. December, 1969.

workman’s standpoint (International L. Ass’n v. National Terminals Corp. C.

The dispositive portion of the Order reads: SO ORDERED.5

Tiu v. NLRC, 343 Phil. 478 (1997).

When the conciliation meetings conducted by the Bureau of Labor Relations

Dissatisfied, petitioners appealed the labor arbiter's ruling to the NLRC en

A bargaining unit is "a group of employees of a given employer, comprised of

It does not appear that foreign-hires have indicated their intention to be

Republic of the Philippines JOINT AFFIDAVIT

KAPUNAN, J.: 4. That we have no complaints against the management of the

be terminated from the company, and other union-related obligations. On the

entirely comprised of or of which the employees in interest are a part.[19]

WHEREFORE, the petition is hereby DENIED, and the Decision dated

It is true that BLANCO denied that he refused to be searched. 17 Even

WHEREFORE, the appealed Decision in so far as it held that petitioner

Teehankee (Chairman), Makasiar, Fernandez arid Guerrero, JJ., concur.

ho had been found to

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