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Republic of the Philippines


SUPREME COURT
Manila
G.R. No. 146728

February 11, 2004

GENERAL MILLING CORPORATION, petitioner,


vs
HON. COURT OF APPEALS, GENERAL MILLING CORPORATION INDEPENDENT LABOR UNION
(GMC-ILU), and RITO MANGUBAT, respondents.
DECISION
Before us is a petition for certiorari assailing the decision1 dated July 19, 2000, of the Court of Appeals in
CA-G.R. SP No. 50383, which earlier reversed the decision 2 dated January 30, 1998 of the National
Labor Relations Commission (NLRC) in NLRC Case No. V-0112-94.
The antecedent facts are as follows:
In its two plants located at Cebu City and Lapu-Lapu City, petitioner General Milling Corporation
(GMC) employed 190 workers. They were all members of private respondent General Milling
Corporation Independent Labor Union (union, for brevity), a duly certified bargaining agent.
On April 28, 1989, GMC and the union concluded a collective bargaining agreement (CBA) which
included the issue of representation effective for a term of three years. The CBA was effective for
three years retroactive to December 1, 1988. Hence, it would expire on November 30, 1991.
On November 29, 1991, a day before the expiration of the CBA, the union sent GMC a proposed
CBA, with a request that a counter-proposal be submitted within ten (10) days.
As early as October 1991, however, GMC had received collective and individual letters from
workers who stated that they had withdrawn from their union membership, on grounds of religious
affiliation and personal differences. Believing that the union no longer had standing to negotiate a
CBA, GMC did not send any counter-proposal.
On December 16, 1991, GMC wrote a letter to the unions officers, Rito Mangubat and Victor
Lastimoso. The letter stated that it felt there was no basis to negotiate with a union which no
longer existed, but that management was nonetheless always willing to dialogue with them on
matters of common concern and was open to suggestions on how the company may improve its
operations.
In answer, the union officers wrote a letter dated December 19, 1991 disclaiming any massive
disaffiliation or resignation from the union and submitted a manifesto, signed by its members,
stating that they had not withdrawn from the union.
On January 13, 1992, GMC dismissed Marcia Tumbiga, a union member, on the ground of
incompetence. The union protested and requested GMC to submit the matter to the grievance
procedure provided in the CBA. GMC, however, advised the union to "refer to our letter dated
December 16, 1991."3
Thus, the union filed, on July 2, 1992, a complaint against GMC with the NLRC, Arbitration Division, Cebu
City. The complaint alleged unfair labor practice on the part of GMC for: (1) refusal to bargain collectively;
(2) interference with the right to self-organization; and (3) discrimination. The labor arbiter dismissed the

case with the recommendation that a petition for certification election be held to determine if the union still
enjoyed the support of the workers.lawphi1.nt
The union appealed to the NLRC.
On January 30, 1998, the NLRC set aside the labor arbiters decision. Citing Article 253-A of the Labor
Code, as amended by Rep. Act No. 6715,4 which fixed the terms of a collective bargaining agreement, the
NLRC ordered GMC to abide by the CBA draft that the union proposed for a period of two (2) years
beginning December 1, 1991, the date when the original CBA ended, to November 30, 1993. The NLRC
also ordered GMC to pay the attorneys fees.5
In its decision, the NLRC pointed out that upon the effectivity of Rep. Act No. 6715, the duration of a CBA,
insofar as the representation aspect is concerned, is five (5) years which, in the case of GMCIndependent Labor Union was from December 1, 1988 to November 30, 1993. All other provisions of the
CBA are to be renegotiated not later than three (3) years after its execution. Thus, the NLRC held that
respondent union remained as the exclusive bargaining agent with the right to renegotiate the economic
provisions of the CBA. Consequently, it was unfair labor practice for GMC not to enter into negotiation
with the union.
The NLRC likewise held that the individual letters of withdrawal from the union submitted by 13 of its
members from February to June 1993 confirmed the pressure exerted by GMC on its employees to resign
from the union. Thus, the NLRC also found GMC guilty of unfair labor practice for interfering with the right
of its employees to self-organization.
With respect to the unions claim of discrimination, the NLRC found the claim unsupported by substantial
evidence.
On GMCs motion for reconsideration, the NLRC set aside its decision of January 30, 1998, through a
resolution dated October 6, 1998. It found GMCs doubts as to the status of the union justified and the
allegation of coercion exerted by GMC on the unions members to resign unfounded. Hence, the union
filed a petition for certioraribefore the Court of Appeals. For failure of the union to attach the required
copies of pleadings and other documents and material portions of the record to support the allegations in
its petition, the CA dismissed the petition on February 9, 1999. The same petition was subsequently filed
by the union, this time with the necessary documents. In its resolution dated April 26, 1999, the appellate
court treated the refiled petition as a motion for reconsideration and gave the petition due course.
On July 19, 2000, the appellate court rendered a decision the dispositive portion of which reads:
WHEREFORE, the petition is hereby GRANTED. The NLRC Resolution of October 6, 1998 is
hereby SET ASIDE, and its decision of January 30, 1998 is, except with respect to the award of
attorneys fees which is hereby deleted, REINSTATED.6
A motion for reconsideration was seasonably filed by GMC, but in a resolution dated October 26, 2000,
the CA denied it for lack of merit.
Hence, the instant petition for certiorari alleging that:
I
THE COURT OF APPEALS DECISION VIOLATED THE CONSTITUTIONAL RULE THAT NO DECISION
SHALL BE RENDERED BY ANY COURT WITHOUT EXPRESSING THEREIN CLEARLY AND
DISTINCTLY THE FACTS AND THE LAW ON WHICH IT IS BASED.

II
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING THE
DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION IN THE ABSENCE OF ANY
FINDING OF SUBSTANTIAL ERROR OR GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION.
III
THE COURT OF APPEALS COMMITTED SERIOUS ERROR IN NOT APPRECIATING THAT THE NLRC
HAS NO JURISDICTION TO DETERMINE THE TERMS AND CONDITIONS OF A COLLECTIVE
BARGAINING AGREEMENT.7
Thus, in the instant case, the principal issue for our determination is whether or not the Court of Appeals
acted with grave abuse of discretion amounting to lack or excess of jurisdiction in (1) finding GMC guilty
of unfair labor practice for violating the duty to bargain collectively and/or interfering with the right of its
employees to self-organization, and (2) imposing upon GMC the draft CBA proposed by the union for two
years to begin from the expiration of the original CBA.lawphi1.nt
On the first issue, Article 253-A of the Labor Code, as amended by Rep. Act No. 6715, states:
ART. 253-A. Terms of a collective bargaining agreement. Any Collective Bargaining
Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of the
incumbent bargaining agent shall be entertained and no certification election shall be conducted
by the Department of Labor and Employment outside of the sixty-day period immediately before
the date of expiry of such five year term of the Collective Bargaining Agreement. All other
provisions of the Collective Bargaining Agreement shall be renegotiated not later than three (3)
years after its execution....
The law mandates that the representation provision of a CBA should last for five years. The relation
between labor and management should be undisturbed until the last 60 days of the fifth year. Hence, it is
indisputable that when the union requested for a renegotiation of the economic terms of the CBA on
November 29, 1991, it was still the certified collective bargaining agent of the workers, because it was
seeking said renegotiation within five (5) years from the date of effectivity of the CBA on December 1,
1988. The unions proposal was also submitted within the prescribed 3-year period from the date of
effectivity of the CBA, albeit just before the last day of said period. It was obvious that GMC had no valid
reason to refuse to negotiate in good faith with the union. For refusing to send a counter-proposal to the
union and to bargain anew on the economic terms of the CBA, the company committed an unfair labor
practice under Article 248 of the Labor Code, which provides that:
ART. 248. Unfair labor practices of employers. It shall be unlawful for an employer to commit
any of the following unfair labor practice:

(g) To violate the duty to bargain collectively as prescribed by this Code;


...
Article 252 of the Labor Code elucidates the meaning of the phrase "duty to bargain collectively,"
thus:

ART. 252. Meaning of duty to bargain collectively. The duty to bargain collectively
means the performance of a mutual obligation to meet and convene promptly and
expeditiously in good faith for the purpose of negotiating an agreement....
We have held that the crucial question whether or not a party has met his statutory duty to
bargain in good faith typically turn$ on the facts of the individual case. 8 There is no per se test of
good faith in bargaining.9Good faith or bad faith is an inference to be drawn from the facts. 10 The
effect of an employers or a unions actions individually is not the test of good-faith bargaining, but
the impact of all such occasions or actions, considered as a whole. 11
Under Article 252 abovecited, both parties are required to perform their mutual obligation to meet and
convene promptly and expeditiously in good faith for the purpose of negotiating an agreement. The union
lived up to this obligation when it presented proposals for a new CBA to GMC within three (3) years from
the effectivity of the original CBA. But GMC failed in its duty under Article 252. What it did was to devise a
flimsy excuse, by questioning the existence of the union and the status of its membership to prevent any
negotiation.
It bears stressing that the procedure in collective bargaining prescribed by the Code is mandatory
because of the basic interest of the state in ensuring lasting industrial peace. Thus:
ART. 250. Procedure in collective bargaining. The following procedures shall be observed in
collective bargaining:
(a) When a party desires to negotiate an agreement, it shall serve a written notice upon
the other party with a statement of its proposals. The other party shall make a reply
thereto not later than ten (10) calendar days from receipt of such notice. (Underscoring
supplied.)
GMCs failure to make a timely reply to the proposals presented by the union is indicative of its utter lack
of interest in bargaining with the union. Its excuse that it felt the union no longer represented the workers,
was mainly dilatory as it turned out to be utterly baseless.
We hold that GMCs refusal to make a counter-proposal to the unions proposal for CBA negotiation is an
indication of its bad faith. Where the employer did not even bother to submit an answer to the bargaining
proposals of the union, there is a clear evasion of the duty to bargain collectively.12
Failing to comply with the mandatory obligation to submit a reply to the unions proposals, GMC violated
its duty to bargain collectively, making it liable for unfair labor practice. Perforce, the Court of Appeals did
not commit grave abuse of discretion amounting to lack or excess of jurisdiction in finding that GMC is,
under the circumstances, guilty of unfair labor practice.
Did GMC interfere with the employees right to self-organization? The CA found that the letters between
February to June 1993 by 13 union members signifying their resignation from the union clearly indicated
that GMC exerted pressure on its employees. The records show that GMC presented these letters to
prove that the union no longer enjoyed the support of the workers. The fact that the resignations of the
union members occurred during the pendency of the case before the labor arbiter shows GMCs
desperate attempts to cast doubt on the legitimate status of the union. We agree with the CAs conclusion
that the ill-timed letters of resignation from the union members indicate that GMC had interfered with the
right of its employees to self-organization. Thus, we hold that the appellate court did not commit grave
abuse of discretion in finding GMC guilty of unfair labor practice for interfering with the right of its
employees to self-organization.
Finally, did the CA gravely abuse its discretion when it imposed on GMC the draft CBA proposed by the
union for two years commencing from the expiration of the original CBA?

The Code provides:


ART. 253. Duty to bargain collectively when there exists a collective bargaining
agreement. .... It shall be the duty of both parties to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement during the 60-day period
[prior to its expiration date] and/or until a new agreement is reached by the parties. (Underscoring
supplied.)
The provision mandates the parties to keep the status quo while they are still in the process of working
out their respective proposal and counter proposal. The general rule is that when a CBA already exists, its
provision shall continue to govern the relationship between the parties, until a new one is agreed upon.
The rule necessarily presupposes that all other things are equal. That is, that neither party is guilty of bad
faith. However, when one of the parties abuses this grace period by purposely delaying the bargaining
process, a departure from the general rule is warranted.
In Kiok Loy vs. NLRC,13 we found that petitioner therein, Sweden Ice Cream Plant, refused to submit any
counter proposal to the CBA proposed by its employees certified bargaining agent. We ruled that the
former had thereby lost its right to bargain the terms and conditions of the CBA. Thus, we did not hesitate
to impose on the erring company the CBA proposed by its employees union - lock, stock and barrel. Our
findings in Kiok Loy are similar to the facts in the present case, to wit:
petitioner Companys approach and attitude stalling the negotiation by a series of
postponements, non-appearance at the hearing conducted, and undue delay in submitting its
financial statements, lead to no other conclusion except that it is unwilling to negotiate and reach
an agreement with the Union. Petitioner has not at any instance, evinced good faith or willingness
to discuss freely and fully the claims and demands set forth by the Union much less justify its
objection thereto.14
Likewise, in Divine Word University of Tacloban vs. Secretary of Labor and Employment,15 petitioner
therein, Divine Word University of Tacloban, refused to perform its duty to bargain collectively. Thus, we
upheld the unilateral imposition on the university of the CBA proposed by the Divine Word University
Employees Union. We said further:
That being the said case, the petitioner may not validly assert that its consent should be a
primordial consideration in the bargaining process. By its acts, no less than its action which
bespeak its insincerity, it has forfeited whatever rights it could have asserted as an employer.16
Applying the principle in the foregoing cases to the instant case, it would be unfair to the union and its
members if the terms and conditions contained in the old CBA would continue to be imposed on GMCs
employees for the remaining two (2) years of the CBAs duration. We are not inclined to gratify GMC with
an extended term of the old CBA after it resorted to delaying tactics to prevent negotiations. Since it was
GMC which violated the duty to bargain collectively, based on Kiok Loy and Divine Word University of
Tacloban, it had lost its statutory right to negotiate or renegotiate the terms and conditions of the draft
CBA proposed by the union.
We carefully note, however, that as strictly distinguished from the facts of this case, there was no preexisting CBA between the parties in Kiok Loy and Divine Word University of Tacloban. Nonetheless, we
deem it proper to apply in this case the rationale of the doctrine in the said two cases. To rule otherwise
would be to allow GMC to have its cake and eat it too.
Under ordinary circumstances, it is not obligatory upon either side of a labor controversy to precipitately
accept or agree to the proposals of the other. But an erring party should not be allowed to resort with
impunity to schemes feigning negotiations by going through empty gestures. 17 Thus, by imposing on GMC
the provisions of the draft CBA proposed by the union, in our view, the interests of equity and fair play

were properly served and both parties regained equal footing, which was lost when GMC thwarted the
negotiations for new economic terms of the CBA.
The findings of fact by the CA, affirming those of the NLRC as to the reasonableness of the draft CBA
proposed by the union should not be disturbed since they are supported by substantial evidence. On this
score, we see no cogent reason to rule otherwise. Hence, we hold that the Court of Appeals did not
commit grave abuse of discretion amounting to lack or excess of jurisdiction when it imposed on GMC,
after it had committed unfair labor practice, the draft CBA proposed by the union for the remaining two (2)
years of the duration of the original CBA. Fairness, equity, and social justice are best served in this case
by sustaining the appellate courts decision on this issue.
WHEREFORE, the petition is DISMISSED and the assailed decision dated July 19, 2000, and the
resolution dated October 26, 2000, of the Court of Appeals in CA-G.R. SP No. 50383, are AFFIRMED.
Costs against petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. L-54334 January 22, 1986
KIOK LOY, doing business under the name and style SWEDEN ICE CREAM PLANT, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) and PAMBANSANG KILUSAN NG
PAGGAWA (KILUSAN), respondents.

Petition for certiorari to annul the decision 1 of the National Labor Relations Commission (NLRC) dated
July 20, 1979 which found petitioner Sweden Ice Cream guilty of unfair labor practice for unjustified
refusal to bargain, in violation of par. (g) of Article 249 2 of the New Labor Code, 3 and declared the draft
proposal of the Union for a collective bargaining agreement as the governing collective bargaining
agreement between the employees and the management.
The pertinent background facts are as follows:
In a certification election held on October 3, 1978, the Pambansang Kilusang Paggawa (Union for short),
a legitimate late labor federation, won and was subsequently certified in a resolution dated November 29,
1978 by the Bureau of Labor Relations as the sole and exclusive bargaining agent of the rank-and-file
employees of Sweden Ice Cream Plant (Company for short). The Company's motion for reconsideration
of the said resolution was denied on January 25, 1978.
Thereafter, and more specifically on December 7, 1978, the Union furnished 4 the Company with two
copies of its proposed collective bargaining agreement. At the same time, it requested the Company for
its counter proposals. Eliciting no response to the aforesaid request, the Union again wrote the Company
reiterating its request for collective bargaining negotiations and for the Company to furnish them with its
counter proposals. Both requests were ignored and remained unacted upon by the Company.
Left with no other alternative in its attempt to bring the Company to the bargaining table, the Union, on
February 14, 1979, filed a "Notice of Strike", with the Bureau of Labor Relations (BLR) on ground of
unresolved economic issues in collective bargaining. 5
Conciliation proceedings then followed during the thirty-day statutory cooling-off period. But all attempts
towards an amicable settlement failed, prompting the Bureau of Labor Relations to certify the case to the
National Labor Relations Commission (NLRC) for compulsory arbitration pursuant to Presidential Decree
No. 823, as amended. The labor arbiter, Andres Fidelino, to whom the case was assigned, set the initial
hearing for April 29, 1979. For failure however, of the parties to submit their respective position papers as
required, the said hearing was cancelled and reset to another date. Meanwhile, the Union submitted its
position paper. The Company did not, and instead requested for a resetting which was granted. The
Company was directed anew to submit its financial statements for the years 1976, 1977, and 1978.
The case was further reset to May 11, 1979 due to the withdrawal of the Company's counsel of record,
Atty. Rodolfo dela Cruz. On May 24, 1978, Atty. Fortunato Panganiban formally entered his appearance
as counsel for the Company only to request for another postponement allegedly for the purpose of
acquainting himself with the case. Meanwhile, the Company submitted its position paper on May 28,
1979.
When the case was called for hearing on June 4, 1979 as scheduled, the Company's representative, Mr.
Ching, who was supposed to be examined, failed to appear. Atty. Panganiban then requested for another
postponement which the labor arbiter denied. He also ruled that the Company has waived its right to
present further evidence and, therefore, considered the case submitted for resolution.
On July 18, 1979, labor arbiter Andres Fidelino submitted its report to the National Labor Relations
Commission. On July 20, 1979, the National Labor Relations Commission rendered its decision, the
dispositive portion of which reads as follows:
WHEREFORE, the respondent Sweden Ice Cream is hereby declared guilty of unjustified
refusal to bargain, in violation of Section (g) Article 248 (now Article 249), of P.D. 442, as
amended. Further, the draft proposal for a collective bargaining agreement (Exh. "E ")
hereto attached and made an integral part of this decision, sent by the Union (Private
respondent) to the respondent (petitioner herein) and which is hereby found to be

reasonable under the premises, is hereby declared to be the collective agreement which
should govern the relationship between the parties herein.
SO ORDERED. (Emphasis supplied)
Petitioner now comes before Us assailing the aforesaid decision contending that the National Labor
Relations Commission acted without or in excess of its jurisdiction or with grave abuse of discretion
amounting to lack of jurisdiction in rendering the challenged decision. On August 4, 1980, this Court
dismissed the petition for lack of merit. Upon motion of the petitioner, however, the Resolution of dismissal
was reconsidered and the petition was given due course in a Resolution dated April 1, 1981.
Petitioner Company now maintains that its right to procedural due process has been violated when it was
precluded from presenting further evidence in support of its stand and when its request for further
postponement was denied. Petitioner further contends that the National Labor Relations Commission's
finding of unfair labor practice for refusal to bargain is not supported by law and the evidence considering
that it was only on May 24, 1979 when the Union furnished them with a copy of the proposed Collective
Bargaining Agreement and it was only then that they came to know of the Union's demands; and finally,
that the Collective Bargaining Agreement approved and adopted by the National Labor Relations
Commission is unreasonable and lacks legal basis.
The petition lacks merit. Consequently, its dismissal is in order.
Collective bargaining which is defined as negotiations towards a collective agreement, 6 is one of the
democratic frameworks under the New Labor Code, designed to stabilize the relation between labor and
management and to create a climate of sound and stable industrial peace. It is a mutual responsibility of
the employer and the Union and is characterized as a legal obligation. So much so that Article 249, par.
(g) of the Labor Code makes it an unfair labor practice for an employer to refuse "to meet and convene
promptly and expeditiously in good faith for the purpose of negotiating an agreement with respect to
wages, hours of work, and all other terms and conditions of employment including proposals for adjusting
any grievance or question arising under such an agreement and executing a contract incorporating such
agreement, if requested by either party.
While it is a mutual obligation of the parties to bargain, the employer, however, is not under any legal duty
to initiate contract negotiation. 7 The mechanics of collective bargaining is set in motion only when the
following jurisdictional preconditions are present, namely, (1) possession of the status of majority
representation of the employees' representative in accordance with any of the means of selection or
designation provided for by the Labor Code; (2) proof of majority representation; and (3) a demand to
bargain under Article 251, par. (a) of the New Labor Code . ... all of which preconditions are undisputedly
present in the instant case.
From the over-all conduct of petitioner company in relation to the task of negotiation, there can be no
doubt that the Union has a valid cause to complain against its (Company's) attitude, the totality of which is
indicative of the latter's disregard of, and failure to live up to, what is enjoined by the Labor Code to
bargain in good faith.
We are in total conformity with respondent NLRC's pronouncement that petitioner Company is GUILTY of
unfair labor practice. It has been indubitably established that (1) respondent Union was a duly certified
bargaining agent; (2) it made a definite request to bargain, accompanied with a copy of the proposed
Collective Bargaining Agreement, to the Company not only once but twice which were left unanswered
and unacted upon; and (3) the Company made no counter proposal whatsoever all of which conclusively
indicate lack of a sincere desire to negotiate. 8 A Company's refusal to make counter proposal if
considered in relation to the entire bargaining process, may indicate bad faith and this is specially true
where the Union's request for a counter proposal is left unanswered. 9 Even during the period of
compulsory arbitration before the NLRC, petitioner Company's approach and attitude-stalling the

negotiation by a series of postponements, non-appearance at the hearing conducted, and undue delay in
submitting its financial statements, lead to no other conclusion except that it is unwilling to negotiate and
reach an agreement with the Union. Petitioner has not at any instance, evinced good faith or willingness
to discuss freely and fully the claims and demands set forth by the Union much less justify its opposition
thereto. 10
The case at bar is not a case of first impression, for in the Herald Delivery Carriers Union (PAFLU) vs.
Herald Publications11 the rule had been laid down that "unfair labor practice is committed when it is shown
that the respondent employer, after having been served with a written bargaining proposal by the
petitioning Union, did not even bother to submit an answer or reply to the said proposal This doctrine was
reiterated anew in Bradman vs. Court of Industrial Relations 12 wherein it was further ruled that "while the
law does not compel the parties to reach an agreement, it does contemplate that both parties will
approach the negotiation with an open mind and make a reasonable effort to reach a common ground of
agreement
As a last-ditch attempt to effect a reversal of the decision sought to be reviewed, petitioner capitalizes on
the issue of due process claiming, that it was denied the right to be heard and present its side when the
Labor Arbiter denied the Company's motion for further postponement.
Petitioner's aforesaid submittal failed to impress Us. Considering the various postponements granted in
its behalf, the claimed denial of due process appeared totally bereft of any legal and factual support. As
herein earlier stated, petitioner had not even honored respondent Union with any reply to the latter's
successive letters, all geared towards bringing the Company to the bargaining table. It did not even bother
to furnish or serve the Union with its counter proposal despite persistent requests made therefor.
Certainly, the moves and overall behavior of petitioner-company were in total derogation of the policy
enshrined in the New Labor Code which is aimed towards expediting settlement of economic disputes.
Hence, this Court is not prepared to affix its imprimatur to such an illegal scheme and dubious
maneuvers.
Neither are WE persuaded by petitioner-company's stand that the Collective Bargaining Agreement which
was approved and adopted by the NLRC is a total nullity for it lacks the company's consent, much less its
argument that once the Collective Bargaining Agreement is implemented, the Company will face the
prospect of closing down because it has to pay a staggering amount of economic benefits to the Union
that will equal if not exceed its capital. Such a stand and the evidence in support thereof should have
been presented before the Labor Arbiter which is the proper forum for the purpose.
We agree with the pronouncement that it is not obligatory upon either side of a labor controversy to
precipitately accept or agree to the proposals of the other. But an erring party should not be tolerated and
allowed with impunity to resort to schemes feigning negotiations by going through empty gestures. 13 More
so, as in the instant case, where the intervention of the National Labor Relations Commission was
properly sought for after conciliation efforts undertaken by the BLR failed. The instant case being a
certified one, it must be resolved by the NLRC pursuant to the mandate of P.D. 873, as amended, which
authorizes the said body to determine the reasonableness of the terms and conditions of employment
embodied in any Collective Bargaining Agreement. To that extent, utmost deference to its findings of
reasonableness of any Collective Bargaining Agreement as the governing agreement by the employees
and management must be accorded due respect by this Court.
WHEREFORE, the instant petition is DISMISSED. The temporary restraining order issued on August 27,
1980, is LIFTED and SET ASIDE.
No pronouncement as to costs.
SO ORDERED.

10

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. 113856 September 7, 1998
SAMAHANG MANGGAGAWA SA TOP FORM MANUFACTURING UNITED WORKERS OF THE
PHILIPPINES (SMTFM-UWP), its officers and members, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON. JOSE G. DE VERA and TOP FORM
MANUFACTURING PHIL., INC., respondents.
The issue in this petition for certiorari is whether or not an employer committed an unfair labor practice by
bargaining in bad faith and discriminating against its employees. The charge arose from the employer's
refusal to grant across-the-board increases to its employees in implementing Wage Orders Nos. 01 and
02 of the Regional Tripartite Wages and Productivity Board of the National Capital Region (RTWPBNCR). Such refusal was aggravated by the fact that prior to the issuance of said wage orders, the
employer allegedly promised at the collective bargaining conferences to implement any governmentmandated wage increases on an across-the-board basis.
Petitioner Samahang Manggagawa sa Top Form Manufacturing United Workers of the Philippines
(SMTFM) was the certified collective bargaining representative of all regular rank and file employees of
private respondent Top Form Manufacturing Philippines, Inc. At the collective bargaining negotiation held
at the Milky Way Restaurant in Makati, Metro Manila on February 27, 1990, the parties agreed to discuss
unresolved economic issues. According to the minutes of the meeting, Article VII of the collective
bargaining agreement was discussed. The following appear in said Minutes:
Art. VII, Wages
Sect. 1. Defer
Sect. 2. Status quo
Sec. 3. Union proposed that any future wage increase given by the government should
be implemented by the company across-the-board or non-conditional.
Management requested the union to retain this provision since their sincerity was already
proven when the P25.00 wage increase was granted across-the-board. The union
acknowledges management's sincerity but they are worried that in case there is a new
set of management, they can just show their CBA. The union decided to defer this
provision. 1
In their joint affidavit dated January 30, 1992, 2 union members Salve L. Barnes, Eulisa Mendoza,
Lourdes Barbero and Concesa Ibaez affirmed that at the subsequent collective bargaining negotiations,
the union insisted on the incorporation in the collective bargaining agreement (CBA) of the union proposal
on "automatic across-the-board wage increase." They added that:
11. On the strength of the representation of the negotiating panel of the company and the
above undertaking/promise made by its negotiating panel, our union agreed to drop said
proposal relying on the undertakings made by the officials of the company who
negotiated with us, namely, Mr. William Reynolds, Mr. Samuel Wong and Mrs. Remedios
Felizardo. Also, in the past years, the company has granted to us government mandated
wage increases on across-the-board basis.

11

On October 15, 1990, the RTWPB-NCR issued Wage Order No. 01 granting an increase of P17.00 per
day in the salary of workers. This was followed by Wage Order No. 02 dated December 20, 1990
providing for a P12.00 daily increase in salary.
As expected, the union requested the implementation of said wage orders. However, they demanded that
the increase be on an across-the-board basis. Private respondent refused to accede to that demand.
Instead, it implemented a scheme of increases purportedly to avoid wage distortion. Thus, private
respondent granted the P17.00 increase under Wage Order No. 01 to workers/employees receiving
salary of P125.00 per day and below. The P12.00 increase mandated by Wage Order No. 02 was granted
to those receiving the salary of P140.00 per day and below. For employees receiving salary higher than
P125.00 or P140.00 per day, private respondent granted an escalated increase ranging from P6.99 to
P14.30 and from P6.00 to P10.00, respectively. 3
On October 24, 1991, the union, through its legal counsel, wrote private respondent a letter demanding
that it should "fulfill its pledge of sincerity to the union by granting an across-the-board wage increases
(sic) to all employees under the wage orders." The union reiterated that it had agreed to "retain the old
provision of CBA" on the strength of private respondent's "promise and assurance" of an across-theboard salary increase should the government mandate salary increases. 4Several conferences between
the parties notwithstanding, private respondent adamantly maintained its position on the salary increases
it had granted that were purportedly designed to avoid wage distortion.
Consequently, the union filed a complaint with the NCR NLRC alleging that private respondent's act of
"reneging on its undertaking/promise clearly constitutes act of unfair labor practice through bargaining in
bad faith." It charged private respondent with acts of unfair labor practices or violation of Article 247 of the
Labor Code, as amended, specifically "bargaining in bad faith," and prayed that it be awarded actual,
moral and exemplary damages. 5 In its position paper, the union added that it was charging private
respondent with "violation of Article 100 of the Labor Code." 6
Private respondent, on the other hand, contended that in implementing Wage Orders Nos. 01 and 02, it
had avoided "the existence of a wage distortion" that would arise from such implementation. It
emphasized that only "after a reasonable length of time from the implementation" of the wage orders "that
the union surprisingly raised the question that the company should have implemented said wage orders
on an across-the-board basis." It asserted that there was no agreement to the effect that future wage
increases mandated by the government should be implemented on an across-the-board basis. Otherwise,
that agreement would have been incorporated and expressly stipulated in the CBA. It quoted the
provision of the CBA that reflects the parties' intention to "fully set forth" therein all their agreements that
had been arrived at after negotiations that gave the parties "unlimited right and opportunity to make
demands and proposals with respect to any subject or matter not removed by law from the area of
collective bargaining." The same CBA provided that during its effectivity, the parties "each voluntarily and
unqualifiedly waives the right, and each agrees that the other shall not be obligated, to bargain
collectively, with respect to any subject or matter not specifically referred to or covered by this Agreement,
even though such subject or matter may not have been within the knowledge or contemplation of either or
both of the parties at the time they negotiated or signed this Agreement." 7
On March 11, 1992, Labor Arbiter Jose G. de Vera rendered a decision dismissing the complaint for lack
of merit. 8 He considered two main issues in the case: (a) whether or not respondents are guilty of unfair
labor practice, and (b) whether or not the respondents are liable to implement Wage Orders Nos. 01 and
02 on an across-the-board basis. Finding no basis to rule in the affirmative on both issues, he explained
as follows:
The charge of bargaining in bad faith that the complainant union attributes to the
respondents is bereft of any certitude inasmuch as based on the complainant union's own
admission, the latter vacillated on its own proposal to adopt an across-the-board stand or
future wage increases. In fact, the union acknowledges the management's sincerity when
the latter allegedly implemented Republic Act 6727 on an across-the-board basis. That

12

such union proposal was not adopted in the existing CBA was due to the fact that it was
the union itself which decided for its deferment. It is, therefore, misleading to claim that
the management undertook/promised to implement future wage increases on an acrossthe-board basis when as the evidence shows it was the union who asked for the
deferment of its own proposal to that effect.
The alleged discrimination in the implementation of the subject wage orders does not
inspire belief at all where the wage orders themselves do not allow the grant of wage
increases on an across-the-board basis. That there were employees who were granted
the full extent of the increase authorized and some others who received less and still
others who did not receive any increase at all, would not ripen into what the complainants
termed as discrimination. That the implementation of the subject wage orders resulted
into an uneven implementation of wage increases is justified under the law to prevent any
wage distortion. What the respondents did under the circumstances in order to deter an
eventual wage distortion without any arbitral proceedings is certainly commendable.
The alleged violation of Article 100 of the Labor Code, as amended, as well as Article
XVII, Section 7 of the existing CBA as herein earlier quoted is likewise found by this
Branch to have no basis in fact and in law. No benefits or privileges previously enjoyed by
the employees were withdrawn as a result of the implementation of the subject orders.
Likewise, the alleged company practice of implementing wage increases declared by the
government on an across-the-board basis has not been duly established by the
complainants' evidence. The complainants asserted that the company implemented
Republic Act No. 6727 which granted a wage increase of P25.00 effective July 1, 1989 on
an across-the-board basis. Granting that the same is true, such isolated single act that
respondents adopted would definitely not ripen into a company practice. It has been said
that "a sparrow or two returning to Capistrano does not a summer make."
Finally, on the second issue of whether or not the employees of the respondents are
entitled to an across-the-board wage increase pursuant to Wage Orders Nos. 01 and 02,
in the face of the above discussion as well as our finding that the respondents correctly
applied the law on wage increases, this Branch rules in the negative.
Likewise, for want of factual basis and under the circumstances where our findings above
are adverse to the complainants, their prayer for moral and exemplary damages and
attorney's fees may not be granted.
Not satisfied, petitioner appealed to the NLRC that, in turn, promulgated the assailed Resolution of April
29, 19939 dismissing the appeal for lack of merit. Still dissatisfied, petitioner sought reconsideration which,
however, was denied by the NLRC in the Resolution dated January 17, 1994. Hence, the instant petition
for certiorari contending that:
- ATHE PUBLIC RESPONDENTS GROSSLY ERRED IN NOT DECLARING THE PRIVATE
RESPONDENTS GUILTY OF ACTS OF UNFAIR LABOR PRACTICES WHEN,
OBVIOUSLY, THE LATTER HAS BARGAINED IN BAD FAITH WITH THE UNION AND
HAS VIOLATED THE CBA WHICH IT EXECUTED WITH THE HEREIN PETITIONER
UNION.
-B-

13

THE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT DECLARING THE


PRIVATE RESPONDENTS GUILTY OF ACTS OF DISCRIMINATION IN THE
IMPLEMENTATION OF NCR WAGE ORDER NOS. 01 AND 02.
-CTHE PUBLIC RESPONDENTS SERIOUSLY ERRED IN NOT FINDING THE PRIVATE
RESPONDENTS GUILTY OF HAVING VIOLATED SECTION 4, ARTICLE XVII OF THE
EXISTING CBA.
-DTHE PUBLIC RESPONDENTS GRAVELY ERRED IN NOT DECLARING THE PRIVATE
RESPONDENTS GUILTY OF HAVING VIOLATED ARTICLE 100 OF THE LABOR CODE
OF THE PHILIPPINES, AS AMENDED.
-EASSUMING, WITHOUT ADMITTING THAT THE PUBLIC RESPONDENTS HAVE
CORRECTLY RULED THAT THE PRIVATE RESPONDENTS ARE GUILTY OF ACTS OF
UNFAIR LABOR PRACTICES, THEY COMMITTED SERIOUS ERROR IN NOT FINDING
THAT THERE IS A SIGNIFICANT DISTORTION IN THE WAGE STRUCTURE OF THE
RESPONDENT COMPANY.
-FTHE PUBLIC RESPONDENTS ERRED IN NOT AWARDING TO THE PETITIONERS
HEREIN ACTUAL, MORAL, AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES.
As the Court sees it, the pivotal issues in this petition can be reduced into two, to wit: (a) whether or not
private respondent committed an unfair labor practice in its refusal to grant across-the-board wage
increases in implementing Wage Orders Nos. 01 and 02, and (b) whether or not there was a significant
wage distortion of the wage structure in private respondent as a result of the manner by which said wage
orders were implemented.
With respect to the first issue, petitioner union anchors its arguments on the alleged commitment of
private respondent to grant an automatic across-the-board wage increase in the event that a statutory or
legislated wage increase is promulgated. It cites as basis therefor, the aforequoted portion of the Minutes
of the collective bargaining negotiation on February 27, 1990 regarding wages, arguing additionally that
said Minutes forms part of the entire agreement between the parties.
The basic premise of this argument is definitely untenable. To start with, if there was indeed a promise or
undertaking on the part of private respondent to obligate itself to grant an automatic across-the-board
wage increase, petitioner union should have requested or demanded that such "promise or undertaking"
be incorporated in the CBA. After all, petitioner union has the means under the law to compel private
respondent to incorporate this specific economic proposal in the CBA. It could have invoked Article 252 of
the Labor Code defining "duty to bargain," thus, the duty includes "executing a contract incorporating such
agreements if requested by either party." Petitioner union's assertion that it had insisted on the
incorporation of the same proposal may have a factual basis considering the allegations in the
aforementioned joint affidavit of its members. However, Article 252 also states that the duty to bargain
"does not compel any party to agree to a proposal or make any concession." Thus, petitioner union may
not validly claim that the proposal embodied in the Minutes of the negotiation forms part of the CBA that it
finally entered into with private respondent.

14

The CBA is the law between the contracting parties 10 the collective bargaining representative and the
employer-company. Compliance with a CBA is mandated by the expressed policy to give protection to
labor. 11 In the same vein, CBA provisions should be "construed liberally rather than narrowly and
technically, and the courts must place a practical and realistic construction upon it, giving due
consideration to the context in which it is negotiated and purpose which it is intended to serve." 12 This is
founded on the dictum that a CBA is not an ordinary contract but one impressed with public interest. 13 It
goes without saying, however, that only provisions embodied in the CBA should be so interpreted and
complied with. Where a proposal raised by a contracting party does not find print in the CBA, 14 it is not a
part thereof and the proponent has no claim whatsoever to its implementation.
Hence, petitioner union's contention that the Minutes of the collective bargaining negotiation meeting
forms part of the entire agreement is pointless. The Minutes reflects the proceedings and discussions
undertaken in the process of bargaining for worker benefits in the same way that the minutes of court
proceedings show what transpired therein. 15 At the negotiations, it is but natural for both management
and labor to adopt positions or make demands and offer proposals and counter-proposals. However,
nothing is considered final until the parties have reached an agreement. In fact, one of management's
usual negotiation strategies is to ". . . agree tentatively as you go along with the understanding that
nothing is binding until the entire agreement is reached." 16 If indeed private respondent promised to
continue with the practice of granting across-the-board salary increases ordered by the government,
such promise could only be demandable in law if incorporated in the CBA.
Moreover, by making such promise, private respondent may not be considered in bad faith or at the very
least, resorting to the scheme of feigning to undertake the negotiation proceedings through empty
promises. As earlier stated, petitioner union had, under the law, the right and the opportunity to insist on
the foreseeable fulfillment of the private respondent's promise by demanding its incorporation in the CBA.
Because the proposal was never embodied in the CBA, the promise has remained just that, a promise,
the implementation of which cannot be validly demanded under the law.
Petitioner's reliance on this Court's pronouncements 17 in Kiok Loy v. NLRC 18 is, therefore, misplaced. In
that case, the employer refused to bargain with the collective bargaining representative, ignoring all
notices for negotiations and requests for counter proposals that the union had to resort to conciliation
proceedings. In that case, the Court opined that "(a) Company's refusal to make counter-proposal, if
considered in relation to the entire bargaining process, may indicate bad faith and this is specially true
where the Union's request for a counter-proposal is left unanswered." Considering the facts of that case,
the Court concluded that the company was "unwilling to negotiate and reach an agreement with the
Union." 19
In the case at bench, however, petitioner union does not deny that discussion on its proposal that all
government-mandated salary increases should be on an across-the-board basis was "deferred,"
purportedly because it relied upon the "undertaking" of the negotiating panel of private
respondent. 20 Neither does petitioner union deny the fact that "there is no provision of the 1990 CBA
containing a stipulation that the company will grant across-the-board to its employees the mandated wage
increase." They simply assert that private respondent committed "acts of unfair labor practices by virtue of
its contractual commitment made during the collective bargaining process." 21 The mere fact, however,
that the proposal in question was not included in the CBA indicates that no contractual
commitment thereon was ever made by private respondent as no agreement had been arrived at by the
parties. Thus:
Obviously the purpose of collective bargaining is the reaching of an agreement resulting
in a contract binding on the parties; but the failure to reach an agreement after
negotiations continued for a reasonable period does not establish a lack of good faith.
The statutes invite and contemplate a collective bargaining contract, but they do not
compel one. The duty to bargain does not include the obligation to reach an
agreement. . . . 32

15

With the execution of the CBA, bad faith bargaining can no longer be imputed upon any of the parties
thereto. All provisions in the CBA are supposed to have been jointly and voluntarily incorporated therein
by the parties. This is not a case where private respondent exhibited an indifferent attitude towards
collective bargaining because the negotiations were not the unilateral activity of petitioner union. The CBA
is proof enough that private respondent exerted "reasonable effort at good faith bargaining." 23
Indeed, the adamant insistence on a bargaining position to the point where the negotiations reach an
impasse does not establish bad faith. Neither can bad faith be inferred from a party's insistence on the
inclusion of a particular substantive provision unless it concerns trivial matters or is obviously
intolerable. 24
The question as to what are mandatory and what are merely permissive subjects of
collective bargaining is of significance on the right of a party to insist on his position to the
point of stalemate. A party may refuse to enter into a collective bargaining contract unless
it includes a desired provision as to a matter which is a mandatory subject of collective
bargaining; but a refusal to contract unless the agreement covers a matter which is not a
mandatory subject is in substance a refusal to bargain about matters which are
mandatory subjects of collective bargaining, and it is no answer to the charge of refusal
to bargain in good faith that the insistence on the disputed clause was not the sole cause
of the failure to agree or that agreement was not reached with respect to other disputed
clauses. 25
On account of the importance of the economic issue proposed by petitioner union, it could have refused
to bargain and to enter into a CBA with private respondent. On the other hand, private respondent's firm
stand against the proposal did not mean that it was bargaining in bad faith. It had the right "to insist on
(its) position to the point of stalemate." On the part of petitioner union, the importance of its proposal
dawned on it only after the wage orders were issued after the CBA had been entered into. Indeed, from
the facts of this case, the charge of bad faith bargaining on the part of private respondent was nothing but
a belated reaction to the implementation of the wage orders that private respondent made in accordance
with law. In other words, petitioner union harbored the notion that its members and the other employees
could have had a better deal in terms of wage increases had it relentlessly pursued the incorporation in
the CBA of its proposal. The inevitable conclusion is that private respondent did not commit the unfair
labor practices of bargaining in bad faith and discriminating against its employees for implementing the
wage orders pursuant to law.
The Court likewise finds unmeritorious petitioner union's contention that by its failure to grant across-theboard wage increases, private respondent violated the provisions of Section 5, Article VII of the existing
CBA 26 as well as Article 100 of the Labor Code. The CBA provision states:
Sec. 5. The COMPANY agrees to comply with all the applicable provisions of the Labor
Code of the Philippines, as amended, and all other laws, decrees, orders, instructions,
jurisprudence, rules and regulations affecting labor.
Art. 100 of the Labor Code on prohibition against elimination or diminution of benefits provides
that "(n)othing in this Book shall be construed to eliminate or in any way diminish supplements, or
other employee benefits being enjoyed at the time of promulgation of this Code."
We agree with the Labor Arbiter and the NLRC that no benefits or privileges previously enjoyed by
petitioner union and the other employees were withdrawn as a result of the manner by which private
respondent implemented the wage orders. Granted that private respondent had granted an across-theboard increase pursuant to Republic Act No. 6727, that single instance may not be considered an
established company practice. Petitioner union's argument in this regard is actually tied up with its claim
that the implementation of Wage Orders Nos. 01 and 02 by private respondent resulted in wage
distortion.

16

The issue of whether or not a wage distortion exists is a question of


fact 27 that is within the jurisdiction of the quasi-judicial tribunals below. Factual findings of administrative
agencies are accorded respect and even finality in this Court if they are supported by substantial
evidence. 28 Thus, in Metropolitan Bank and Trust Company, Inc. v. NLRC, the Court said:
The issue of whether or not a wage distortion exists as a consequence of the grant of a
wage increase to certain employees, we agree, is, by and large, a question of fact the
determination of which is the statutory function of the NLRC. Judicial review of labor
cases, we may add, does not go beyond the evaluation of the sufficiency of the evidence
upon which the labor officials' findings rest. As such, the factual findings of the NLRC are
generally accorded not only respect but also finality provided that its decisions are
supported by substantial evidence and devoid of any taint of unfairness or arbitrariness.
When, however, the members of the same labor tribunal are not in accord on those
aspects of a case, as in this case, this Court is well cautioned not to be as so conscious
in passing upon the sufficiency of the evidence, let alone the conclusions derived
therefrom. 29
Unlike in above-cited case where the Decision of the NLRC was not unanimous, the NLRC Decision in
this case which was penned by the dissenter in that case, Presiding Commissioner Edna Bonto-Perez
unanimously ruled that no wage distortions marred private respondent's implementation of the wage
orders. The NLRC said:
On the issue of wage distortion, we are satisfied that there was a meaningful
implementation of Wage Orders Nos. 01 and 02. This debunks the claim that there was
wage distortion as could be shown by the itemized wages implementation quoted above.
It should be noted that this itemization has not been successfully traversed by the
appellants. . . . . 30
The NLRC then quoted the labor arbiter's ruling on wage distortion.
We find no reason to depart from the conclusions of both the labor arbiter and the NLRC. It is apropos to
note, moreover, that petitioner's contention on the issue of wage distortion and the resulting allegation of
discrimination against the private respondent's employees are anchored on its dubious position that
private respondent's promise to grant an across-the-board increase in government-mandated salary
benefits reflected in the Minutes of the negotiation is an enforceable part of the CBA.
In the resolution of labor cases, this Court has always been guided by the State policy enshrined in the
Constitution that the rights of workers and the promotion of their welfare shall be protected. 31 The Court is
likewise guided by the goal of attaining industrial peace by the proper application of the law. It cannot
favor one party, be it labor or management, in arriving at a just solution to a controversy if the party has
no valid support to its claims. It is not within this Court's power to rule beyond the ambit of the law.
WHEREFORE, the instant petition for certiorari is hereby DISMISSED and the questioned Resolutions of
the NLRC AFFIRMED. No costs.
SO ORDERED.

17

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. 75321 June 20, 1988
ASSOCIATED TRADE UNIONS (ATU), petitioner,
vs.
HON. CRESENCIO B. TRAJANO, in his capacity as Director of the Bureau of Labor Relations,
MOLE, BALIWAG TRANSIT, INC. and TRADE UNIONS OF THE PHILIPPINES AND ALLIED
SERVICES (TUPAS)-WFTU, respondents.
The resolution of this case has been simplified because it has been, in Justice Vicente Abad Santos's
felicitous phrase, "overtaken by events."
This case arose when on March 25, 1986, the private respondent union (TUPAS) filed with the Malolos
labor office of the MOLE a petition for certification election at the Baliwag Transit, Inc. among its rank-andfile workers.1 Despite opposition from the herein petitioner, Associated Trade Unions (ATU), the petition
was granted by the med-arbiter on May 14, 1986, and a certification election was ordered "to determine
the exclusive bargaining agent (of the workers) for purposes of collective bargaining with respect to (their)
terms and conditions of employment." 2 On appeal, this order was sustained by the respondent Director
of Labor Relations in his order dated June 20, 1986, which he affirmed in his order of July 17, 1986,
denying the motion for reconsideration. 3 ATU then came to this Court claiming that the said orders are
tainted with grave abuse of discretion and so should be reversed. On August 20, 1986, we issued a
temporary restraining order that has maintained the status quo among the parties. 4
In support of its petition, ATU claims that the private respondent's petition for certification election is
defective because (1) at the time it was filed, it did not contain the signatures of 30% of the workers, to
signify their consent to the certification election; and (2) it was not allowed under the contract-bar rule
because a new collective bargaining agreement had been entered into by ATU with the company on April
1, 1986. 5
TUPAS for its part, supported by the Solicitor General, contends that the 30% consent requirement has
been substantially complied with, the workers' signatures having been subsequently submitted and
admitted. As for the contract-bar rule, its position is that the collective bargaining agreement, besides
being vitiated by certain procedural defects, was concluded by ATU with the management only on April 1,
1986 after the filing of the petition for certification election on March 25, 1986. 6
This initial sparring was followed by a spirited exchange of views among the parties which insofar as the
first issue is concerned has become at best only academic now. The reason is that the 30% consent
required under then Section 258 of the Labor Code is no longer in force owing to the amendment of this
section by Executive Order No. 111, which became effective on March 4, 1987.
As revised by the said executive order, the pertinent articles of the Labor Code now read as follows:
Art. 256. Representation issue in organized establishments. In organized establishments, when a
petition questioning the majority status of the incumbent bargaining agent is filed before the Ministry
within the sixty-day period before the expiration of the collective bargaining agreement, the Med-Arbiter
shall automatically order an election by secret ballot to ascertain the will of the employees in the
appropriate bargaining unit. To have a valid election, at least a majority of all eligible voters in the unit
must have cast their votes. The labor union receiving the majority of the valid votes cast shall be certified
as the exclusive bargaining agent of all the workers in the unit. When an election which provides for three
or more choices results in no choice receiving a majority of the valid votes cast, a runoff election shall be
conducted between the choices receiving the two highest number of votes.

18

Art. 257. Petitions in unorganized establishments. In any establishment where there is no certified
bargaining agent, the petition for certification election filed by a legitimate labor organization shall be
supported by the written consent of at least twenty (20%) percent of all the employees in the bargaining
unit. Upon receipt and verification of such petition, the Med-Arbiter shall automatically order the conduct
of a certification election.
The applicable provision in the case at bar is Article 256 because Baliwag transit, Inc. is an organized
establishment. Under this provision, the petition for certification election need no longer carry the
signatures of the 30% of the workers consenting to such petition as originally required under Article 258.
The present rule provides that as long as the petition contains the matters 7 required in Section 2, Rule 5,
Book V of the Implementing Rules and Regulations, as amended by Section 6, Implementing Rules of
E.O. No. 111, the med-arbiter "shall automatically order" an election by secret ballot "to ascertain the will
of the employees in the appropriate bargaining unit." The consent requirement is now applied only to
unorganized establishments under Article 257, and at that, significantly, has been reduced to only 20%.
The petition must also fail on the second issue which is based on the contract-bar rule under Section 3,
Rule 5, Book V of the Implementing Rules and Regulations. This rule simply provides that a petition for
certification election or a motion for intervention can only be entertained within sixty days prior to the
expiry date of an existing collective bargaining agreement. Otherwise put, the rule prohibits the filing of a
petition for certification election during the existence of a collective bargaining agreement except within
the freedom period, as it is called, when the said agreement is about to expire. The purpose, obviously, is
to ensure stability in the relationships of the workers and the management by preventing frequent
modifications of any collective bargaining agreement earlier entered into by them in good faith and for the
stipulated original period.
ATU insists that its collective bargaining agreement concluded by it with Baliwag Transit, Inc, on April 1,
1986, should bar the certification election sought by TUPAS as this would disturb the said new
agreement. Moreover, the agreement had been ratified on April 3, 1986, by a majority of the workers and
is plainly beneficial to them because of the many generous concessions made by the management. 8
Besides pointing out that its petition for certification election was filed within the freedom period and five
days before the new collective bargaining agreement was concluded by ATU with Baliwag Transit, Inc.
TUPAS contends that the said agreement suffers from certain fatal procedural flaws. Specifically, the CBA
was not posted for at least five days in two conspicuous places in the establishment before ratification, to
enable the workers to clearly inform themselves of its provisions. Moreover, the CBA submitted to the
MOLE did not carry the sworn statement of the union secretary, attested by the union president, that the
CBA had been duly posted and ratified, as required by Section 1, Rule 9, Book V of the Implementing
Rules and Regulations. These requirements being mandatory, non-compliance therewith rendered the
said CBA ineffective. 9
The Court will not rule on the merits and/or defects of the new CBA and shall only consider the fact that it
was entered into at a time when the petition for certification election had already been filed by TUPAS and
was then pending resolution. The said CBA cannot be deemed permanent, precluding the
commencement of negotiations by another union with the management. In the meantime however, so as
not to deprive the workers of the benefits of the said agreement, it shall be recognized and given effect on
a temporary basis, subject to the results of the certification election. The agreement may be continued in
force if ATU is certified as the exclusive bargaining representative of the workers or may be rejected and
replaced in the event that TUPAS emerges as the winner.
This ruling is consistent with our earlier decisions on interim arrangements of this kind where we declared:
... we are not unmindful that the supplemental collective bargaining contract, entered into in the
meanwhile between management and respondent Union contains provisions beneficial to labor. So as not
to prejudice the workers involved, it must be made clear that until the conclusion of a new collective

19

bargaining contract entered into by it and whatever labor organization may be chosen after the
certification election, the existing labor contract as thus supplemented should be left undisturbed. Its
terms call for strict compliance. This mode of assuring that the cause of labor suffers no injury from the
struggle between contending labor organization follows the doctrine announced in the recent case
of Vassar Industries Employees v. Estrella (L-46562, March 31, 1978). To quote from the opinion. "In the
meanwhile, if as contended by private respondent labor union the interim collective bargaining agreement
which it engineered and entered into on September 26, 1977 has, much more favorable terms for the
workers of private respondent Vassar Industries, then it should continue in full force and effect until the
appropriate bargaining representative is chosen and negotiations for a new collective bargaining
agreement thereafter concluded." 10
It remains for the Court to reiterate that the certification election is the most democratic forum for the
articulation by the workers of their choice of the union that shall act on their behalf in the negotiation of a
collective bargaining agreement with their employer. Exercising their suffrage through the medium of the
secret ballot, they can select the exclusive bargaining representative that, emboldened by their
confidence and strengthened by their support shall fight for their rights at the conference table. That is
how union solidarity is achieved and union power is increased in the free society. Hence, rather than
being inhibited and delayed, the certification election should be given every encouragement under the
law, that the will of the workers may be discovered and, through their freely chosen representatives,
pursued and realized.
WHEREFORE, the petition is DENIED. The temporary restraining order of August 20, 1986, is LIFTED.
Cost against the petitioner.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

20

G.R. No. L-77282 May 5, 1989


ASSOCIATED LABOR UNIONS (ALU) petitioner,
vs.
HON. PURA FERRER-CALLEJA, as Director of the Bureau of Labor Relations, Ministry of Labor
and Employment; PHILIPPINE SOCIAL SECURITY LABOR UNION (PSSLU); SOUTHERN
PHILIPPINES FEDERATION OF LABOR (SPFL) and GAW TRADING, INC., respondents.
Petitioner Associated Labor Unions (ALU, for brevity) instituted this special civil action for certiorari and
prohibition to overturn the decision of the respondent direcstor 1 dated December 10, 1986, which ordered
the holding of a certification election among the rank-and-file workers of the private respondent GAW
Trading, Inc. The averments in the petition therefor, which succinctly but sufficiently detail the relevant
factual antecedents of this proceedings, justify their being quoted in full, thus:
1. The associated Labor Unions (ALU) thru its regional Vice-Presidents Teofanio C.
Nuez, in a letter dated May 7, 1986 (ANNEX C) informed GAW Trading, Inc. that
majority of the latter's employees have authorized ALU to be their sole and exclusive
bargaining representative, and requested GAW Trading Inc., in the same Letter for a
conference for the execution of an initial Collective Bargaining Agreement (CBA);
2. GAW Trading Inc. received the Letter of ALU aforesaid on the same day of May 7,
1986 as acknowledged thereunder and responded (sic) ALU in a letter dated May 12,
1986 (Annex D) indicating its recognition of ALU as the sole and exclusive bargaining
agent for the majority of its employees and for which it set the time for conference and/or
negotiation at 4:00 P.M. on May 12, 1986 at the Pillsbury Office, Aboitiz Building Juan
Luna Street, Cebu City;
3. On the following day of May13, 1986, ALU in behalf of the majority of the employees of
GAW Trading Inc. signed and excuted the Collective Bargaining (ANNEX F) ...
4. On May 15, 1986, ALU in behalf of the majority of the employees of GAW Trading Inc.
and GAW Trading Inc. signed and executed the Collective Bargaining Agreements
(ANNEX F) . . . .
5. In the meantime, at about 1:00 P.M. of May 9, 1986, the Southern Philippines
Federation of Labor (SPFL) together with Nagkahiusang Mamumuo sa GAW (NAMGAW)
undertook a ... Strike ... after it failed to get the management of GAW Trading Inc. to sit
for a conference respecting its demands presented at 11: A.M. on the same day in an
effort to pressure GAW Trading Inc. to make a turnabout of its standign recognition of
ALU as the sole and exclusive bargaining representative of its employees, as to which
strike GAW Trading Inc. filed a petition for Restraining Order/Preliminary Injunction,
dfated June 1, 1986 (Annex H) and which strike Labor Arbiter Bonifacio B. Tumamak held
as illegal in a decision dated August 5, 1986 (ANNEX I);
6. On May 19, 1986, GAW Lumad Labor Union (GALLU-PSSLU) Federation ... filed a
Certification Election petition (ANNEX J), but as found by Med-Arbiter Candido M. Cumba
in its (sic) Order dated Ju ne 11, 1986 (ANNEX K), without having complied (sic) the
subscription requirement for which it was merely considered an intervenor until
compliance thereof in the other petition for direct recogbnition as bargaining agent filed
on MAy 28, 1986 by southern Philippines Federation of Labor (SPFL) as found in the
same order (ANNEX K);

21

7. Int he meantime, the Collective Bargaining Agreement executed by ALU and GAW
Trading Inc. (ANNEX F) was duly filed May 27, 1986 with the Ministry of Labor and
Employment in Region VII, Cebu city;
8. Nevertheless, Med-Arbiter Candido M. Cumba in his order of June 11, 1986 (Annex K)
ruled for the holding of a ceritfication election in all branches of GAW Trading Inc. in Cebu
City, as to which ALU filed a Motion for Reconsideration dated June 19, 1986 (ANNEX L)
which was treated as an appeal on that questioned Order for which reason the entire
record of subject certification case was forwarded for the Director, Bureau of LAbor
Relations, Ministry of Labor and Employment, Manila (ANNEX M);
9. Bureau of Labor Relations Director Cresencio B. Trajano, rendered a Decision on
August 13, 1986 (Annex B) granting ALU's appeal (Motion for Reconsideration) and set
aside the questioned Med-Arbiter Order of June 11, 1986 (Annex K), on the ground that
the CBA has been effective and valid and the contract bar rule applicable;
10. But the same Decision of Director Crecensio B. Trajano was sought for
reconsideratrion both by Southern Philippines Federation of Labor (SPFL) on August 26,
1986 (ANNEX N), supplemented by the 'SUBMISSION OD ADDITIONAL EVIDENCE'
dated September 29, 1986 (ANNEX O), and the Philppine Social Security Labor Union
(PSSLU) on October 2, 1986 (ANNEX P), which were opposed by both GAW Trading,
Inc. on September 2, 1986 (ANNEX Q) and ALU on September 12, 1986 (ANNEX R); 2
The aforesaid decision of then Director Trajano was thereafter reversed by respondent director in her
aforecited decision which is now assailed in this action. A motion for reconsideration of ALU 3 appears to
have been disregarded, hence, its present resort grounded on grave abuse of discretion by public
respondent.
Public respondent ordered the holding of a certification election ruling that the "contract bar rule" relied
upon by her predecessor does not apply in the present controversy. According to the decision of said
respondent, the collective bargaining agreement involved herein is defective because it "was not duly
submitted in accordance with Section I, Rule IX, Book V of the Implementing Rules of Batas Pambansa
Blg. 130." It was further observed that "(t)here is no proof tending to show that the CBA has been posted
in at least two conspicuous places in the 1 establishment at least five days before its ratification and that it
has been ratified by the majority of the employees in the bargaining unit."
We find no reversible error in the challenged decision of respondent director. A careful consideration of
the facts culled from the records of this case, especially the allegations of petitioner itself as hereinabove
quoted, yields the conclusion that the collective bargaining agreement in question is indeed defective
hence unproductive of the legal effects attributed to it by the former director in his decision which was
subsequently and properly reversed.
We have previously held that the mechanics of collective bargaining are set in motion only when the
following jurisdictional preconditions are present, namely, (1) possession of the status of majority
representation by the employees' representative in accordance with any of the means of selection and/or
designation provided for by the Labor Code; (2) proof of majority representation; and (3) a demand to
bargain under Article 251, paragraph (a), of the New Labor Code. 4 In the present case, the standing of
petitioner as an exclusive bargaining representative is dubious, to say the least. It may be recalled that
respondent company, in a letter dated May 12, 1986 and addressed to petitioner, merely indicated that it
was "not against the desire of (its) workers" and required petitioner to present proof that it was supported
by the majority thereof in a meeting to be held on the same date. 5 The only express recognition of
petitioner as said employees' bargaining representative that We see in the records is in the collective
bargaining agreement entered into two days thereafter. 6 Evidently, there was precipitate haste on the part
of respondent company in recognizing petitioner union, which recognition appears to have been based on

22

the self-serving claim of the latter that it had the support of the majority of the employees in the bargaining
unit. Furthermore, at the time of the supposed recognition, the employer was obviously aware that there
were other unions existing in the unit. As earlier stated, respondent company's letter is dated May 12,
1986 while the two other unions, Southern Philippine Federation of Labor (hereafter, SPFL and Philippine
Social Security Labor Union (PSSLU, for short), went on strike earlier on May 9, 1986. The unusual
promptitude in the recognition of petitioner union by respondent company as the exclusive bargaining
representative of the workers in GAW Trading, Inc. under the fluid and amorphous circumstances then
obtaining, was decidedly unwarranted and improvident.
It bears mention that even in cases where it was the then Minister of Labor himself who directly certified
the union as the bargaining representative, this Court voided such certification where there was a failure
to properly determine with legal certainty whether the union enjoyed a majority representation. In such a
case, the holding of a certification election at a proper time would not necessarily be a mere formality as
there was a compelling reason not to directly and unilaterally certify a union. 7
An additional infirmity of the collective bargaining agreement involved was the failure to post the same in
at least two (2) conspicuous places in the establishment at least five days before its
ratification. 8 Petitioners rationalization was that "(b)ecause of the real existence of the illegal strike staged
by SPFL in all the stores of GAW Trading, Inc. it had become impossible to comply with the posting
requirement in so far as the realization of tits purpose is concerned as there were no impartial members
of the unit who could be appraised of the CBA's contents. " 9 This justification is puerile and unacceptable.
In the first place, the posting of copies of the collective bargaining agreement is the responsibility of the
employer which can easily comply with the requirement through a mere mechanical act. The fact that
there were "no impartial members of the unit" is immaterial. The purpose of the requirement is precisely to
inform the employees in the bargaining unit of the contents of said agreement so that they could
intelligently decide whether to accept the same or not. The assembly of the members of ALU wherein the
agreement in question was allegedly explained does not cure the defect. The contract is intended for all
employees and not only for the members of the purpoted representative alone. It may even be said the
the need to inform the non-members of the terms thereof is more exigent and compelling since, in all
likehood, their contact with the persons who are supposed to represent them is limited. Moreover, to
repeat, there was an apparent and suspicious hurry in the formulation and finalization of said collective
bargaining accord. In the sforementioned letter where respondent company required petitioner union to
present proof of its support by the employees, the company already suggested that petitioner ALU at the
same time submit the proposals that it intended to embody in the projected agreement. This was on May
12, 1986, and prompltly on thre following day the negoltiation panel; furnish respondent company final
copies of the desired agreement whcih, with equal dispatch, was signed on May 15, 1986.
Another potent reason for annulling the disputed collective bargaining is the finding of respondent director
that one hundred eighty-one( 181) of the two hundred eighty-one (281) workers who "ratified" the same
now " strongly and vehemently deny and/or repudiate the alleged negotiations and ratification of the CBA.
" 10 Although petitioner claims that only sev en (7) of the repudiating group of workers belong to the total
number who allegedly ratified the agreement, nevertheless such substantiated contention weighed
against the factujal that the controverted contract will not promote industrial stability . The Court has long
since declared that:
... Basic to the contract bar rule is the proposition that the delay of the right to select
represen tatives can be justified only where stability is deemed paramount. Excepted
from the contract which do not foster industrial stability, such as contracts where the
identity of the representative is in doubt. Any stability derived from such contracts must
be subordinated to the employees' freedom of choice because it does nto establish the
type of industrial peace contemplated by the law. 11
At this juncture, petitioner should be reminded that the technical rules of rpocedure do not strictly apply in
the adjudication of labor disputes. 12 Consequently, its objection that the evidence with respect to the

23

aforesaid repudiiation of the supposed collective bargaining agreement cannot be considered for the first
time on appeal on the Bureau of Labor Relations should be disregarded, especially considering the
weighty significance thereof.
Both petitioner and private respondent GAW Trading, Inc. allege that the employees of the latter are now
enjoying the benefits of the collective bargaining agreement that both parties had forged. However, We
cannot find sufficient evidence of record to support this contention. The only evidence cited by petitioner
is supposed payment of union fees by said employees, a premise too tenuous to sustain the desired
conclusion. Even the actual number of workers in the respondent company is not clear from the records.
Said private respondent claims that it is two hundred eighty-one (281) 13 but petitioner suggests that it is
more than that number. The said parties should be aware that this Court is not an adjudicator of facts.
Worse, to borrow a trite but apt phrase, they would heap the Ossa of confusion upon the Pelion of
uncertainty and still expect a definitive ruling on the matter thus confounded.
Additionally, the inapplicability of the contract bar rule is further underscored by the fact that when the
disputed agreement was filed before the Labor Regional Office on May 27, 1986, a petition for
certification election had already been filed on May 19, 1986. Although the petition was not supported by
the signatures of thirty percent (30%) of the workers in the bargaining unit, the same was enough to
initiate said certification election.
WHEREFORE, the order of the public respondent for the conduct of a certification election among the
rank-and-file workers of respondent GAW Trading Inc. is AFFIRMED. The temporary restraining order
issued in this case pursuant to the Resolution of March 25, 1987 is hereby lifted.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

24

G.R. No. 111359 August 15, 1995


CALTEX REGULAR EMPLOYEES AT MANILA OFFICE, LEGAZPI BULK DEPOT AND
MARINDUQUE BULK DEPOT-(MACLU), petitioners,
vs.
CALTEX (PHILIPPINES), INC. and NATIONAL LABOR RELATIONS COMMISSION (FIRST
DIVISION),respondents.
In this petition for certiorari, petitioner Caltex Regular Employees Association at the Manila
Office, Legazpi Bulk Depot and the Marinduque Bulk Depot (hereinafter referred to as "Union"),
seeks to annul and set aside the decision of the National Labor Relations Commission ("NLRC"),
promulgated on 5 March 1993, which reversed the decision of Labor Arbiter Valentin Guanio.
On 12 December 1985, petitioner Union and private respondent Caltex (Philippines), Inc.
("Caltex") entered into a Collective Bargaining Agreement ("1985 CBA") which was to be in effect
until midnight of 31 December 1988. The CBA included, among others, the following provision:
ARTICLE III
HOURS OF WORK
In conformity with Presidential Decree 442, otherwise known as the Labor Code of the
Philippines, as amended, the regular work week shall consist of eight (8) hours per day,
seven (7) days, Monday through Sunday, during which regular rates of pay shall be paid
in accordance with Annex B andwork on the employee's one "Day of Rest," shall be
considered a special work day, during which "Day of Rest" rates of pay shall be paid as
provided in Annex B. Daily working schedules shall be established by management in
accordance with the requirements of efficient operations on the basis of eight (8) hours
per day for any five (5) days. Provided, however employees required to work in excess of
forty (40) hours in any week shall be compensated in accordance with Annex B of this
Agreement. 1 (Emphasis supplied).
Pertinent portions of Annex "B" of the 1985 CBA are also quoted here as follows:
Annex "B"
Computation of:
Regular Day Pay
Overtime Pay
Night Shift Differential Pay
Day Off Pay
Excess of 40 hours within a calendar week
Sunday Premium Pay
Holiday Premium Pay

Employee's Basic Hourly Wage Rate:


Monthly Base Pay

25

X = (21.667) (8)
A. Regular Pay
1) Hourly rate
=X
2) OT Hourly Rate 12 MN
= (X + 50% X)
3) NSD 6 PM - 12 MN
= (X + 25% X)
4) OT Hourly Rate NSD 6 PM - 12 MN
= (X + 25% X) + 50% (X + 25% X)
5) NSD 12 MN - 6 AM
= (X + 50% X)
6) OT Hourly Rate NSD 12 MN - 6 AM
= (X + 50% X) + 50% (X + 50% X)
B. Regular First Day Off
1. Hourly Rate
= (X + 50% X)
2. OT Hourly Rate
= (X + 50% X) + 50% (x + 50% X)
3. NSD 6 PM - 12 MN
= [ (X + 50% X) + 25% (X + 50% X) ]
4. OT Hourly Rate NSD 6 PM - 12 MN
= [ (X + 50% X) + 25% (X + 50% X) ] +
50% [ (X + 50% X) + 25% (X + 50%) ]
5. NSD 12 MN - 6 AM
= [ (X + 50% X) + 50% (X + 50% X) ]
6. OT Hourly Rate NSD 12 MN - 6 AM
= [ (X + 50% X) + 50% (X + 50% X) ] +
50% [ (X + 50% X) + 50% (X + 50% X) ]
C. Regular Second Day Off
1. Hourly Rate
= (X + 100% X)
2. OT Hourly Rate
= (X + 100% X) + 50% (X + 100% X)

26

3. NSD 6 PM - 12MN
= [ (X + 100% X) + 25% (X + 100%) ]
4. OT Hourly Rate NSD 6 PM - 12 MN
= [ (X + 100% X) + 25% (X + 100% X) ] +
50% [ (X + 100% X) + 25% (X + 100% X) ]
5. NSD 12 MN - 6 AM
= [ (X + 100% X) + 50% (X + 100% X) ]
6. OT Hourly Rate NSD 12 MN - 6 AM
= [ (X + 100% X) + 50% (X + 100% X) ] +
50% [ (X + 100% X) + 50% (X + 100% X) ]
D. Excess of 40 Hours within a Calendar Week
1. Hourly Rate
= (X + 50% X)
2. OT Hourly Rate
= (X + 50% X) + 50% (X + 50% X)
3. NSD 6 PM - 12MN
= [ (X + 50% X) + 25% (X + 50% X) ]
4. OT Hourly Rate NSD 6 PM - 12 MN
= [ (X + 50% X) + 25% (X + 50% X) ] +
50% [ (X + 50% X) + 25% (X + 50% X) ]
5. NSD 12 MN - 6 AM
= [ (X + 50% X) + 50% (X + 50% X) ]
6. OT Hourly Rate NSD 12 MN - 6 AM
= [ (X + 50% X) + 50% (X + 50% X) ] +
50% [ (X + 50% X) + 50% (X + 50% X) ]
E. Sunday as a Normal Work Day
1. Hourly Rate
= (X + 100% X)
2. OT Hourly Rate
= (X + 100% X) + 50% (X + 100% X)
3. NSD 6 PM - 12 MN
= [ (X + 100% X) + 25% (X + 100% X) ]
4. OT Hourly Rate NSD 6 PM - 12 MN
= [ (X + 100% X) + 25% (X + 100% X) ] +
50% [ (X + 100% X) + 25% (X + 100% X) ]

27

5. NSD 12 MN - 6 AM
= [ (X + 100% X) + 50% (X + 100% X) ]
6. OT Hourly Rate NSD 12 MN - 6 AM
= [ (X + 100% X) + 50% (X + 100% X) ] +
50% [ (X + 100% X) + 50% (X + 100% X) ]
F. Sunday as day off
1. Hourly Rate
= (X + 100% X)
2. OT Hourly Rate
= (X + 100% X) + 50% (X + 100% X)
3. NSD 6 PM - 12 MN
= [ (X + 100% X) + 25% (X+ 100% X) ]
4. OT Hourly Rate NSD 6 PM - 12 MN
= [ (X + 100% X) + 25% (X + 100% X) ] +
50% [ (X+ 100% X) + 25% (X + 100% X) ]
5. NSD 12 MN - 6 AM
= [ (X + 100% X) + 50% (X + 100% X) ]
6. OT Hourly Rate NSD 12 MN - 6 AM
= [ (X + 100% X) + 50% (X + 100% X) ] +
50% [ (X + 100% X) + 50% (X + 100% X) ]
G. Holiday as Normal Work Day
1. Hourly Rate
= (X + 150% X)
2. OT Hourly Rate
= (X + 150% X) + 50% (X + 150% X)
3. NSD 6 PM - 12 MN
= [ (X + 150% X) + 25% (X + 150% X) ]
4. OT Hourly Rate NSD 6 PM - 12 MN
= [ (X + 150% X) + 25% (X + 150% X) ] +
50% [ (X + 150% X) + 25% (X + 150% X) ]
5. NSD 12 MN - 6 AM
= [ (X + 150% X) + 50% (X + 150% X) ]
6. OT Hourly Rate NSD 12 MN - 6 AM
= [ (X + 150% X) + 50% (X + 150% X) ] +
50% [ (X + 150% X) + 50% (X + 150% X) ]
H. Holiday as Day Off

28

1. Hourly Rate
= (X + 150% X)
2. OT Hourly Rate
= (X + 150% X) + 50% (X + 150% X)
3. NSD 6 PM - 12 MN
= [ (X + 150% X) + 25% (X + 150% X) ]
4. OT Hourly Rate NSD 6 PM - 12 MN
= [ (X + 150% X) + 25% (X + 150% X) ] + 50%
[ (X + 150% X) + 25% (X + 150% X) ]
5. NSC 12 MN - 6 AM
= [ (X + 150% X) + 50% (X + 150% X) ]
6. OT Hourly Rate
= [ (X + 150% X) + 50% (X + 150% X) ] + 50%
[ (X + 150% X) + 50% (X + 150% X) ]
7. * Hourly Rate for less than 8 hours
= (150% X)
* For work of less than 8 hours, the employee will receive his basic daily rate
(Monthly Base Pay)

21.667
plus the hourly rate multiplied by the number of hours worked.

Sometime in August 1986, the Union called Caltex's attention to alleged violations by Caltex of
Annex "B" of the 1985 CBA, e.g. non-payment of night-shift differential, non-payment of overtime
pay and non-payment at "first day-off rates" for work performed on a Saturday.
Caltex's Industrial Relations manager immediately evaluated petitioner's claims and accordingly
informed petitioner Union that differential payments would be timely implemented. In the
implementation of the re-computed claims, however, no differential payment was made with
respect to work performed on the first 2 1/2 hours on a Saturday.
On 7 July 1987, the Union instituted a complaint for unfair labor practice against Caltex alleging
violation of the provisions of the 1985 CBA. Petitioner Union charged Caltex with shortchanging
its employees when Caltex compensated work performed on the first 2 1/2 hours of Saturday, an
employees' day of rest, at regular rates, when it should be paying at "day of rest" or "day off"
rates.
Caltex denied the accusations of the Union. It averred that Saturday was never designated as a
day of rest, much less a "day-off". It maintained that the 1985 CBA provided only 1 day of rest for
employees at the Manila Office, as well as employees similarly situated at the Legazpi and
Marinduque Bulk Depots. This day of rest, according to Caltex, was Sunday.

29

In due time, the Labor Arbiter ruled in favor of petitioner Union, while finding at the same time that
private respondent Caltex was not guilty of any unfair labor practice. Labor Arbiter Valentin C.
Guanio, interpreting Article III and Annex "B" of the 1985 CBA, concluded that Caltex's employees
had been given two (2) days (instead of one [1] day) of rest, with the result that work performed
on the employee's first day of rest, viz. Saturday, should be compensated at "First day-off" rates.
On appeal by Caltex, public respondent NLRC set aside the decision of Labor Arbiter Guanio.
The NLRC found that the conclusions of the Labor Arbiter were not supported by the evidence on
record. The NLRC, interpreting the provisions of the 1985 CBA, concluded that that CBA granted
only one (1) day of rest, e.g., Sunday. The Union's motion for reconsideration was denied on 9
June 1993.
The controversy we must address in this Petition for Certiorari relates to the appropriate
interpretation of Article III in relation to Annex "B" of the parties' 1985 CBA.
After carefully examining the language of Article III, in relation to Annex "B" of the 1985 CBA,
quoted in limine, as well as relevant portions of earlier CBAs between the parties, we agree with
the NLRC that the intention of the parties to the 1985 CBA was to provide the employees with
only one (1) day of rest. The plain and ordinary meaning of the language of Article III is that
Caltex and the Union had agreed to pay "day of rest" rates for work performed on "an
employee's one day of rest". To the Court's mind, the use of the word "one" describing the phrase
"day of rest [of an employee]" emphasizes the fact that the parties had agreed that only a single
day of rest shall be scheduled and shall be provided to the employee.
It is useful to note that the contract clauses governing hours of work in previous CBAs executed
between private respondent Caltex and petitioner Union in 1973, 1976, 1979 and 1982 contained
provisions parallel if not identical to those set out in Article III of the 1985 CBA here before us.
Article III of the 1973 Collective Bargaining Agreement 3 provided as follows:
Article III
Hours of Work
Sec. 1. In conformity with Presidential Decree No. 143, the regular work week shall
consist of eight (8) hours per day, seven (7) days, Monday through Sunday, during which
regular rates of pay shall be paid in accordance with Article IV, Section 1 and work on the
employee's one "Day of Rest" shall be paid as provided in Article IV, Section 8. Daily
working schedules shall be established by management in accordance with the
requirements of efficient operations on the basis of eight (8) hours per day for any five (5)
days; provided, however, employees required to work in excess of forty (40) hours in any
week shall be compensated in accordance with Article IV, Section 7 of this Agreement.
(Emphasis supplied)
Article III of the 1976 Collective Bargaining Agreement 4 read:
Article III
Hours of Work
Sec. 1. In conformity with Presidential Decree No. 143, the regular work week shall
consist of eight (8) hours per day, seven (7) days, Monday through Sunday, during which
regular rates of pay shall be paid in accordance with Article IV, Section 1 and work on the

30

employee's one "Day of Rest" shall be paid as provided in Article IV, Section 8. Daily
working schedules shall be established by management in accordance with the
requirements of efficient operations on the basis of eight (8) hours per day for any five (5)
days; provided, however, employees required to work in excess of forty (40) hours in any
week shall be compensated in accordance with Article IV, Section 7 of this Agreement.
(Emphasis supplied)
Article III of the 1979 Collective Bargaining Agreement 5 said:
Article III
Hours of Work
Sec. 1. In conformity with Presidential Decree 442, otherwise known as the Labor Code
of the Philippines, as mended, the regular work week shall consist of eight (8) hours per
day, seven (7) days, Monday thru Sunday during which regular rates of pay shall be paid
in accordance with Article IV, Section 1 and work on the employee's one "Day of Rest"
shall be paid as provided in Article IV, Section 7. Daily working schedules shall be
established by management in accordance with the requirements of efficient
operations on the basis of eight hours per day for any five (5) days; provided, however,
employees required to work in excess of forty (40) hours in any week shall be
compensated in accordance with Article IV, Section 6 of this Agreement. (Emphasis
supplied).
Article III of the 1982 Collective Bargaining Agreement 6 also provided as follows:
Article III
Hours of Work
Sec. 1. In conformity with Presidential Decree 442, otherwise known as the Labor Code
of the Philippines, as amended, the regular work week shall consist of eight (8) hours per
day, seven (7) days, Monday thru Sunday, during which regular rates of pay shall be paid
in accordance with Article IV, Section 1 and work on the employee's one "Day of
Rest" shall be paid as provided in Article IV, Section 7. Daily working schedules shall be
established by management in accordance with the requirements of efficient
operations on the basis of eight hours per day for any five (5) days;provided, however
employees required to work in excess of forty (40) hours in any week shall be
compensated in accordance with Article IV, Section 6 of this Agreement. (Emphasis
supplied)
In all these CBAs (1973, 1976, 1979, 1982), Article III provide that only "work on an
employee's one day of rest "shall be paid on the basis of "day of rest rates". The relevant point
here is that petitioner Union had never suggested that more than 1 day of rest had been agreed
upon, and certainly Caltex had never treated Article III or any other portion of the CBAs as
providing two (2) days of rest. It is well settled that the contemporaneous and subsequent
conduct of the parties may be taken into account by a court called upon to interpret and apply a
contract entered into by them. 7
We note that Labor Arbiter Guanio surmised that the intention he implied from the contents of
Annex "B" was in conflict with the intention expressed in Article III (which, the Labor Arbiter
admitted, stipulated only one day of rest). According to the Labor Arbiter, when Annex "B" referred
to "First Day-off Rates" and "Second Day-off Rates", these were meant to express an agreement

31

that the parties intended to provide employees two (2) days of rest. He then declared that Annex
"B" should prevail over Article III because the former was a more specific provision than the latter.
An annex expresses the idea of joining a smaller or subordinate thing with another, larger or of
higher importance. 8 An annex has a subordinate role, without any independent significance
separate from that to which it is tacked on. Annex "B," in the case at bar, is one such document. It
is not a memorandum of amendments or a codicil containing additional or new terms or
stipulations. Annex "B" cannot be construed as modifying or altering the terms expressed in the
body of the agreement contained in the 1985 CBA. It did not confer any rights upon employees
represented by petitioner Union; neither did it impose any obligations upon private respondent
Caltex. In fact, the contents of Annex "B" have no intelligible significance in and of themselves
when considered separately from the 1985 CBA.
Moreover, we are persuaded by private respondent's argument that Annex "B" was intended to
serve as acompany wide guide in computing compensation for work performed by all its
employees, including but not limited to the Manila Office employees represented by petitioner
Union. Private respondent also points out that the mathematical formulae contained in Annex "B"
are not all applicable to all classes of employees, there being some formulae applicable only to
particular groups or classes of employees. Thus, "First Day-off rates" and "Second Day-off rates"
are applicable only to employees stationed at the refinery and associated facilities like depots and
terminals which must be in constant twenty-four (24) hours a day, seven (7) days a week,
operation, hence necessitating the continuous presence of operations personnel. The work of
such operations personnel required them to be on duty for six (6) consecutive days. Upon the
other hand, "First Day-off rates" and "Second Day-off rates" are not applicable to personnel of the
Manila Office which consisted of other groups or categories of employees (e.g., office clerks,
librarians, computer operators, secretaries, collectors, etc.), 9 since the nature of their work did
not require them to be on duty for six (6) consecutive days.
We find, under the foregoing circumstances, that the purported intention inferred from Annex "B"
by the Labor Arbiter was based merely on conjecture and speculation.
We also note that the Labor Arbiter merely suspected that the parties agreed to provide two (2)
days of rest on the ground that they had so stipulated in their 1970 CBA. 10 A principal difficulty
with this view is that it disregards the fact that Article III of the 1985 CBA no longer contained a
particular proviso found in the 1970 CBA. In fact, all the CBAs subsequent to 1970 (1973, 1976,
1979, 1982) had similarly deleted the proviso in the 1970 CBA providing for two (2) days-off. To
the Court's mind, such deletion means only one thing that is the parties had agreed to
remove such stipulation. Accordingly, the proviso found in Article III of the 1970 CBA ceased to be
a demandable obligation. Petitioner Union cannot now unilaterally re-insert such a stipulation by
strained inference from Annex "B." Upon the foregoing circumstances, we must hold that the
Labor Arbiter's suspicion is without basis in the facts of record.
Petitioner Union also contended that private respondent Caltex in the instant petition was
violating the statutory prohibition against off-setting undertime for overtime work on another
day. 11 Union counsel attempted to establish this charge by asserting that the employees had
been required to render "overtime work" on a Saturday but compensated only at regular rates of
pay, because they had not completed the eight (8)-hour work period daily from Monday thru
Friday.
The Court finds petitioner's contention bereft of merit. Overtime work consists of hours worked on
a given day in excess of the applicable work period, which here is eight (8) hours. 12 It is not
enough that the hours worked fall on disagreeable or inconvenient hours. In order that work may
be considered as overtime work, the hours worked must be in excess of and in addition to the
eight (8) hours worked during the prescribed daily work period, or the forty (40) hours worked
during the regular work week Monday thru Friday.

32

In the present case, under the 1985 CBA, hours worked on a Saturday do not, by that fact alone,
necessarily constitute overtime work compensable at premium rates of pay, contrary to
petitioner's assertion. These are normal or regular work hours, compensable at regular rates of
pay, as provided in the 1985 CBA; under that CBA, Saturday is not a rest day or a "day off". It is
only when an employee has been required on a Saturday to render work in excess of the forty
(40) hours which constitute the regular work week that such employee may be considered as
performing overtime work on that Saturday. We consider that the statutory prohibition against
offsetting undertime one day with overtime another day has no application in the case at bar. 13
Petitioner's counsel, in his final attempt to lay a basis for compelling private respondent to pay
premium rates of pay for all hours worked on a Saturday, regardless of the number of hours
actually worked earlier during the week, i.e., on Monday to Friday, insists that private respondent
cannot require its employees to complete the 40-hour regular work week on a Saturday, after it
has allowed its employees to render only 37-1/2 hours of work.
The company practice of allowing employees to leave thirty (30) minutes earlier than the
scheduled off-time had been established primarily for the convenience of the employees most of
whom have had to commute from work place to home and in order that they may avoid the heavy
rush hour vehicular traffic. There is no allegation here by petitioner Union that such practice was
resorted to by Caltex in order to escape its contractual obligations. This practice, while it
effectively reduced to 37-1/2 the number of hours actually worked by employees who had opted
to leave ahead of off-time, is not be construed as modifying the other terms of the 1985 CBA. As
correctly pointed out by private respondent, the shortened work period did not result in likewise
shortening the work required for purposes of determining overtime pay, as well as for purposes of
determining premium pay for work beyond forty (40) hours within the calendar week. It follows
that an employee is entitled to be paid premium rates, whether for work in excess of eight (8)
hours on any given day, or for work beyond the forty (40)-hour requirement for the calendar week,
only when the employee had, in fact already rendered the requisite number of hours 8 or 40
prescribed in the 1985 CBA.
In recapitulation, the parties' 1985 CBA stipulated that employees at the Manila Office, as well as
those similarly situated at the Legazpi and Marinduque Bulk Depots, shall be provided only one
(1) day of rest; Sunday, and not Saturday, was designated as this day of rest. Work performed on
a Saturday is accordingly to be paid at regular rates of pay, as a rule, unless the employee shall
have been required to render work in excess of forty (40) hours in a calendar week. The
employee must, however, have in fact rendered work in excess of forty (40) hours before
hours subsequently worked become payable at premium rates. We conclude that the NLRC
correctly set aside the palpable error committed by Labor Arbiter Guanio, when the latter imposed
upon one of the parties to the 1985 CBA, an obligation which it had never assumed.
WHEREFORE, petitioner Union having failed to show grave abuse of discretion amounting to
lack or excess of jurisdiction on the part of public respondent National Labor Relations
Commission in rendering its decision dated 5 March 1993, the Court Resolved to DISMISS the
Petition for lack of merit.
SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila
G.R. No. 127598

February 22, 2000

33

MANILA ELECTRIC COMPANY, petitioner,


vs.
Hon. SECRETARY OF LABOR LEONARDO QUISUMBING and MERALCO EMPLOYEES and
WORKERS ASSOCIATION (MEWA), respondent.
RESOLUTION
In the Decision promulgated on January 27, 1999, the Court disposed of the case as follows:
WHEREFORE, the petition is granted and the orders of public respondent Secretary of Labor
dated August 19, 1996 and December 28, 1996 are set aside to the extent set forth above. The
parties are directed to execute a Collective Bargaining Agreement incorporating the terms and
conditions contained in the unaffected portions of the Secretary of Labor's orders of August 19,
1996 and December 28, 1996, and the modifications set forth above. The retirement fund issue is
remanded to the Secretary of Labor for reception of evidence and determination of the legal
personality of the MERALCO retirement fund.1
The modifications of the public respondent's resolutions include the following:
January 27, 1999 decision

Secretary's resolution

Wages

P1,900.00 for 1995-96

P2,200.00

X'mas bonus

modified to one month

2 months

Retirees

remanded to the Secretary

granted

Loan to coops

denied

granted

GHSIP, HMP and


Housing loans

granted up to P60,000.00

granted

Signing bonus

denied

granted

Union leave

40 days (typo error)

30 days

High voltage/pole

not apply to those who are


not exposed to the risk

members of a team

Collectors

no need for cash bond, no


need to reduce quota and MAPL

CBU

exclude confidential employees

include

Union security

maintenance of membership

closed shop

Contracting out

no need to consult union

consult first

All benefits

existing terms and conditions

all terms

Retroactivity

Dec. 28, 1996-Dec. 27, 199(9)

from Dec. 1, 1995

Dissatisfied with the Decision, some alleged members of private respondent union (Union for brevity) filed
a motion for intervention and a motion for reconsideration of the said Decision. A separate intervention
was likewise made by the supervisor's union (FLAMES2) of petitioner corporation alleging that it has bona
fide legal interest in the outcome of the case.3 The Court required the "proper parties" to file a comment to
the three motions for reconsideration but the Solicitor-General asked that he be excused from filing the
comment because the "petition filed in the instant case was granted" by the Court. 4 Consequently,
petitioner filed its own consolidated comment. An "Appeal Seeking Immediate Reconsideration" was also

34

filed by the alleged newly elected president of the Union. 5 Other subsequent pleadings were filed by the
parties and intervenors.
The issues raised in the motions for reconsideration had already been passed upon by the Court in the
January 27, 1999 decision. No new arguments were presented for consideration of the Court.
Nonetheless, certain matters will be considered herein, particularly those involving the amount of wages
and the retroactivity of the Collective Bargaining Agreement (CBA) arbitral awards.
Petitioner warns that if the wage increase of P2,200.00 per month as ordered by the Secretary is allowed,
it would simply pass the cost covering such increase to the consumers through an increase in the rate of
electricity. This is a non sequitur. The Court cannot be threatened with such a misleading argument. An
increase in the prices of electric current needs the approval of the appropriate regulatory government
agency and does not automatically result from a mere increase in the wages of petitioner's employees.
Besides, this argument presupposes that petitioner is capable of meeting a wage increase. The All Asia
Capital report upon which the Union relies to support its position regarding the wage issue cannot be an
accurate basis and conclusive determinant of the rate of wage increase. Section 45 of Rule 130 Rules of
Evidence provides:
Commercial lists and the like. Evidence of statements of matters of interest to persons
engaged in an occupation contained in a list, register, periodical, or other published compilation is
admissible as tending to prove the truth of any relevant matter so stated if that compilation is
published for use by persons engaged in that occupation and is generally used and relied upon
by them therein.
Under the afore-quoted rule, statement of matters contained in a periodical, may be admitted only "if that
compilation is published for use by persons engaged in that occupation and is generally used and relied
upon by them therein." As correctly held in our Decision dated January 27, 1999, the cited report is a
mere newspaper account and not even a commercial list. At most, it is but an analysis or opinion which
carries no persuasive weight for purposes of this case as no sufficient figures to support it were
presented. Neither did anybody testify to its accuracy. It cannot be said that businessmen generally rely
on news items such as this in their occupation. Besides, no evidence was presented that the publication
was regularly prepared by a person in touch with the market and that it is generally regarded as
trustworthy and reliable. Absent extrinsic proof of their accuracy, these reports are not admissible. 6 In the
same manner, newspapers containing stock quotations are not admissible in evidence when the source of
the reports is available.7 With more reason, mere analyses or projections of such reports cannot be
admitted. In particular, the source of the report in this case can be easily made available considering that
the same is necessary for compliance with certain governmental requirements.
Nonetheless, by petitioner's own allegations, its actual total net income for 1996 was P5.1 billion. 8 An
estimate by the All Asia financial analyst stated that petitioner's net operating income for the same year
was about P5.7 billion, a figure which the Union relies on to support its claim. Assuming without admitting
the truth thereof, the figure is higher than the P4.171 billion allegedly suggested by petitioner as its
projected net operating income. The P5.7 billion which was the Secretary's basis for granting the
P2,200.00 is higher than the actual net income of P5.1 billion admitted by petitioner. It would be proper
then to increase this Court's award of P1,900.00 to P2,000.00 for the two years of the CBA award. For
1992, the agreed CBA wage increase for rank-and-file was P1,400.00 and was reduced to P1,350.00; for
1993; further reduced to P1,150.00 for 1994. For supervisory employees, the agreed wage increase for
the years 1992-1994 are P1,742.50, P1,682.50 and P1,442.50, respectively. Based on the foregoing
figures, the P2,000.00 increase for the two-year period awarded to the rank-and-file is much higher than
the highest increase granted to supervisory employees. 9 As mentioned in the January 27, 1999 Decision,
the Court does "not seek to enumerate in this decision the factors that should affect wage determination"
because collective bargaining disputes particularly those affecting the national interest and public service
"requires due consideration and proper balancing of the interests of the parties to the dispute and of those
who might be affected by the dispute."10 The Court takes judicial notice that the new amounts granted
herein are significantly higher than the weighted average salary currently enjoyed by other rank-and-file

35

employees within the community. It should be noted that the relations between labor and capital is
impressed with public interest which must yield to the common good. 11 Neither party should act
oppressively against the other or impair the interest or convenience of the public. 12 Besides, matters of
salary increases are part of management prerogative.13
On the retroactivity of the CBA arbitral award, it is well to recall that this petition had its origin in the
renegotiation of the parties' 1992-1997 CBA insofar as the last two-year period thereof is concerned.
When the Secretary of Labor assumed jurisdiction and granted the arbitral awards, there was no question
that these arbitral awards were to be given retroactive effect. However, the parties dispute the reckoning
period when retroaction shall commence. Petitioner claims that the award should retroact only from such
time that the Secretary of Labor rendered the award, invoking the 1995 decision in Pier 8 case 14 where
the Court, citing Union of Filipino Employees v. NLRC,15 said:
The assailed resolution which incorporated the CBA to be signed by the parties was promulgated
on June 5, 1989, the expiry date of the past CBA. Based on the provision of Section 253-A, its
retroactivity should be agreed upon by the parties. But since no agreement to that effect was
made, public respondent did not abuse its discretion in giving the said CBA a prospective effect.
The action of the public respondent is within the ambit of its authority vested by existing law.
On the other hand, the Union argues that the award should retroact to such time granted by the
Secretary, citing the 1993 decision of St. Luke's.16
Finally, the effectivity of the Order of January 28, 1991, must retroact to the date of the expiration
of the previous CBA, contrary to the position of petitioner. Under the circumstances of the case,
Article 253-A cannot be properly applied to herein case. As correctly stated by public respondent
in his assailed Order of April 12, 1991 dismissing petitioner's Motion for Reconsideration
Anent the alleged lack of basis for the retroactivity provisions awarded; we would stress
that the provision of law invoked by the Hospital, Article 253-A of the Labor Code, speaks
of agreements by and between the parties, and not arbitral awards . . .
Therefore, in the absence of a specific provision of law prohibiting retroactivity of the effectivity of
arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of the Labor Code,
such as herein involved, public respondent is deemed vested with plenary and discretionary
powers to determine the effectivity thereof.
In the 1997 case of Mindanao Terminal,17 the Court applied the St. Luke's doctrine and ruled that:
In St. Luke's Medical Center v. Torres, a deadlock also developed during the CBA negotiations
between management and the union. The Secretary of Labor assumed jurisdiction and ordered
the retroaction of the CBA to the date of expiration of the previous CBA. As in this case, it was
alleged that the Secretary of Labor gravely abused its discretion in making his award retroactive.
In dismissing this contention this Court held:
Therefore, in the absence of a specific provision of law prohibiting retroactive of the
effectivity of arbitral awards issued by the Secretary of Labor pursuant to Article 263(g) of
the Labor Code, such as herein involved, public respondent is deemed vested with
plenary and discretionary powers to determine the effectivity thereof.
The Court in the January 27, 1999 Decision, stated that the CBA shall be "effective for a period of 2 years
counted from December 28, 1996 up to December 27, 1999." Parenthetically, this actually covers a threeyear period. Labor laws are silent as to when an arbitral award in a labor dispute where the Secretary had
assumed jurisdiction by virtue of Article 263 (g) of the Labor Code shall retroact. In general, a CBA
negotiated within six months after the expiration of the existing CBA retroacts to the day immediately

36

following such date and if agreed thereafter, the effectivity depends on the agreement of the parties. 18 On
the other hand, the law is silent as to the retroactivity of a CBA arbitral award or that granted not by virtue
of the mutual agreement of the parties but by intervention of the government. Despite the silence of the
law, the Court rules herein that CBA arbitral awards granted after six months from the expiration of the
last CBA shall retroact to such time agreed upon by both employer and the employees or their union.
Absent such an agreement as to retroactivity, the award shall retroact to the first day after the six-month
period following the expiration of the last day of the CBA should there be one. In the absence of a CBA,
the Secretary's determination of the date of retroactivity as part of his discretionary powers over arbitral
awards shall control.
It is true that an arbitral award cannot per se be categorized as an agreement voluntarily entered into by
the parties because it requires the interference and imposing power of the State thru the Secretary of
Labor when he assumes jurisdiction. However, the arbitral award can be considered as an approximation
of a collective bargaining agreement which would otherwise have been entered into by the parties. 19 The
terms or periods set forth in Article 253-A pertains explicitly to a CBA. But there is nothing that would
prevent its application by analogy to an arbitral award by the Secretary considering the absence of an
applicable law. Under Article 253-A: "(I)f any such agreement is entered into beyond six months, the
parties shall agree on the duration of retroactivity thereof." In other words, the law contemplates
retroactivity whether the agreement be entered into before or after the said six-month period. The
agreement of the parties need not be categorically stated for their acts may be considered in determining
the duration of retroactivity. In this connection, the Court considers the letter of petitioner's Chairman of
the Board and its President addressed to their stockholders, which states that the CBA "for the rank-andfile employees covering the period December 1, 1995 to November 30, 1997 is still with the Supreme
Court,"20 as indicative of petitioner's recognition that the CBA award covers the said period. Earlier,
petitioner's negotiating panel transmitted to the Union a copy of its proposed CBA covering the same
period inclusive.21 In addition, petitioner does not dispute the allegation that in the past CBA arbitral
awards, the Secretary granted retroactivity commencing from the period immediately following the last
day of the expired CBA. Thus, by petitioner's own actions, the Court sees no reason to retroact the
subject CBA awards to a different date. The period is herein set at two (2) years from December 1, 1995
to November 30, 1997.
On the allegation concerning the grant of loan to a cooperative, there is no merit in the union's claim that
it is no different from housing loans granted by the employer. The award of loans for housing is justified
because it pertains to a basic necessity of life. It is part of a privilege recognized by the employer and
allowed by law. In contrast, providing seed money for the establishment of the employee's cooperative is
a matter in which the employer has no business interest or legal obligation. Courts should not be utilized
as a tool to compel any person to grant loans to another nor to force parties to undertake an obligation
without justification. On the contrary, it is the government that has the obligation to render financial
assistance to cooperatives and the Cooperative Code does not make it an obligation of the employer or
any private individual.22
Anent the 40-day union leave, the Court finds that the same is a typographical error. In order to avoid any
confusion, it is herein declared that the union leave is only thirty (30) days as granted by the Secretary of
Labor and affirmed in the Decision of this Court.
The added requirement of consultation imposed by the Secretary in cases of contracting out for six (6)
months or more has been rejected by the Court. Suffice it to say that the employer is allowed to contract
out services for six months or more. However, a line must be drawn between management prerogatives
regarding business operations per se and those which affect the rights of employees, and in treating the
latter, the employer should see to it that its employees are at least properly informed of its decision or
modes of action in order to attain a harmonious labor-management relationship and enlighten the workers
concerning their rights.23 Hiring of workers is within the employer's inherent freedom to regulate and is a
valid exercise of its management prerogative subject only to special laws and agreements on the matter
and the fair standards of justice.24 The management cannot be denied the faculty of promoting efficiency
and attaining economy by a study of what units are essential for its operation. It has the ultimate

37

determination of whether services should be performed by its personnel or contracted to outside


agencies. While there should be mutual consultation, eventually deference is to be paid to what
management decides.25 Contracting out of services is an exercise of business judgment or management
prerogative.26 Absent proof that management acted in a malicious or arbitrary manner, the Court will not
interfere with the exercise of judgment by an employer.27 As mentioned in the January 27, 1999 Decision,
the law already sufficiently regulates this matter.28 Jurisprudence also provides adequate limitations, such
that the employer must be motivated by good faith and the contracting out should not be resorted to
circumvent the law or must not have been the result of malicious or arbitrary actions. 29 These are matters
that may be categorically determined only when an actual suit on the matter arises.
WHEREFORE, the motion for reconsideration is PARTIALLY GRANTED and the assailed Decision is
MODIFIED as follows: (1) the arbitral award shall retroact from December 1, 1995 to November 30, 1997;
and (2) the award of wage is increased from the original amount of One Thousand Nine Hundred Pesos
(P1,900.00) to Two Thousand Pesos (P2,000.00) for the years 1995 and 1996. This Resolution is subject
to the monetary advances granted by petitioner to its rank-and-file employees during the pendency of this
case assuming such advances had actually been distributed to them. The assailed Decision is
AFFIRMED in all other respects.1wphi1.nt
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. 104624 October 11, 1996
SAN PEDRO HOSPITAL OF DIGOS, INC., petitioner,
vs.
SECRETARY OF LABOR, THE SAN PEDRO HOSPITAL EMPLOYEES UNION NATIONAL
FEDERATION OF LABOR, respondents.
When is temporary suspension of business considered not done in good faith? Can the Secretary of
Labor compel management to enter into a new collective bargaining agreement with the union while the

38

business enterprise is undergoing a temporary suspension of operations? Can the Secretary grant
backwages without deciding the legality of a strike?
These questions are addressed by the Court in resolving this Petition for Certiorari, which seeks
nullification of the Orders dated October 16, 1991 1 and January 31, 1992 2 of the Secretary of Labor and
Employment 3 rendered in COLE Case No. NCMB-RBXI-NS-03-017-91 entitled "In Re: Labor Dispute at
San Pedro Hospital of Digos". Said orders directed herein petitioner hospital to pay backwages for the
period from June 21, 1991, to December 15, 1991 to returning workers who are members of the San
Pedro Hospital Employees Union and to enter into a new collective bargaining agreement with the union.
The Facts
Petitioner San Pedro Hospital of Digos, Inc. is a charitable, non-stock, non-profit medical and educational
training corporation. Petitioner had a three-year collective bargaining agreement (CBA) covering the
period December 15, 1987 until December 15, 1990, 4 with herein private respondent, Nagkabiusang
Mamumuo sa San Pedro Hospital of Digos National Federation of Labor (NAMASAP-NFL), the
exclusive bargaining agent of the hospital's rank-and-file workers.
On February 12, 1991, the parties formally commenced negotiations for the renewal of their CBA, and
presented their respective proposals. The union's demands include wage increases and inclusion in the
CBA of a provision for union shop. 5
Respondent union proposed a cumulative salary increase of sixty pesos per day for three years, broken
down as follows: (a) thirty pesos per day for the first year; (b) twenty pesos per day for the second year;
and (c) ten pesos per day for the third year. Petitioner, claiming it was incurring losses on account of a
serious financial crisis, counter-offered an increase of two pesos per day for each of the three years of the
new CBA, with a wage reopening clause. Petitioner also adamantly opposed the proposal for a union
security clause.
After the parties failed to reach agreement on the issues, the union during the meeting of February 19,
1991 declared a deadlock.
On February 20, 1991, respondent union saturated petitioner's premises with streamers and picketed the
hospital. The operations of the hospital having come to a grinding halt, the hospital management
considered the union actions as tantamount to a strike. However, it was only on March 4, 1991 that
respondent union filed a Notice of Strike with the National Conciliation and Mediation Board (NCMB). On
April 10, 11, and 18, 1991, the NCMB held conciliation conferences but failed to settle the deadlock, as
the parties remained adamant in their positions. 6
On May 28, 1991, respondent union struck. Despite the NCMB's call for a conciliation conference, nurses
and nurse aides who were members of the union abandoned their respective department and joined the
picket line a week later. Doctors began leaving the hospital and the number of patients dwindled. The last
patient was discharged on June 10, 1991.
On June 12, 1991, a "Notice of Temporary Suspension of Operation" was issued by petitioner hospital
and submitted to the local office of the NCMB on June 14, 1991. Similar notices were individually
delivered to union members, but only fourteen out of the seventy-four rank-and-file employees/union
members acknowledged receipt thereof. Petitioner also alleged that on June 13, 1991, the
resident/consultant physicians abandoned the hospital because there were no more patients. 7
On the same day, June 13, 1991, then Secretary of Labor Nieves Confessor assumed jurisdiction over
the labor dispute and issued an order 8 providing that:

39

WHEREFORE, ABOVE PREMISES CONSIDERED, this Office hereby assumes


jurisdiction over the entire labor dispute at the San Pedro Hospital of Digos.
Accordingly, all striking workers are hereby directed to return to work within twenty-four
(24) hours from receipt of copy of this Order and for the Hospital to accept all returning
workers under the same terms and conditions of employment existing prior to the work
stoppage.
The parties are likewise directed to cease and desist from committing any act that may
aggravate the prevailing precarious situation.
To expedite the resolution of this dispute, the parties are directed to submit their
respective position papers and evidence within ten (10) days from receipt of this Order.
However, this order was received by petitioner only on June 20, 1991. In the meantime, it had already
notified the DOLE via its letter dated June 13, 1991, which was received by the DOLE on June 14, 1991,
that it would temporarily suspend operations for six (6) months effective June 15, 1991, or up to
December 15, 1991. Petitioner thus refused the return of its striking workers on account of such
suspension of operations.
Several conferences were held by the NCMB Conciliator where petitioner stated that it would submit the
necessary documents showing its serious financial condition "should the need be in earnest". 9
On June 24, 1991, respondent union through its legal counsel wrote the Executive Conciliator/Mediator of
the NCMB in Davao City informing the latter that the union members were willing to return to their former
work assignment at the hospital in compliance with the June 13, 1991 order of the Labor Secretary.
On June 27, 1991, petitioner filed its position paper in which it maintained that the aforementioned order
to accept all returning workers had become moot and academic in view of the suspension of its
operations. Moreover, said order could not substitute for (and override) the decision of the petitioner
hospital's Board of Trustees to suspend operations for six months, such decision being purely a
management prerogative. 10
Respondent union filed its own position paper on July 13, 1991 alleging that its very existence was
threatened because management was convincing new employees not to join respondent union; that the
union shop provision was necessitated precisely because of management's actuations; that petitioner
was not in serious financial condition; and that petitioner acted in bad faith and circumvented the returnto-work order when it suspended operations. 11
On October 11, 1991, DOLE Secretary Ruben D. Torres went to Digos, Davao del Sur and met
respondent union's officers and members in a restaurant; petitioner was not represented in that meeting.
The Secretary also visited the hospital without notice to petitioner.
Shortly thereafter, On October 16, 1991, Secretary Torres resolved the labor dispute and issued the
questioned Order, wherein he ruled that the suspension of operations was not for a valid or justifiable
cause but was actually for the purpose of defeating the workers' right to self-organization. But because
the hospital had actually cease operations, he held that it would be unjust and a sheer abuse of discretion
to compel the hospital to continue operations and accept the returning workers, as it would infringe on
petitioner's inherent right to manage and conduct its own business affairs. He thus decided to grant, by
way of penalty, backwages for the workers from June 21, 1991, the date they were refused admittance by
petitioner, until December 15, 1991, the expiration of the temporary suspension of the hospital's
operation. 12

40

Sec. Torres also enjoined petitioner to enter into a new CBA with respondent union and to adopt and
incorporate therein a union shop provision because it was proven that petitioner had intervened in the
workers' right to join or not to join a labor organization of their own choosing. 13 Petitioner was also
directed to grant a wage increase of P3.00 each for the first three years of the new CBA. This last
directive was prompted by the finding that petitioner's Financial Statements for the years 1989 and 1990
(copies of which, incidentally, were submitted not by petitioner but by respondent union) showed that
although petitioner incurred a loss of some P200,000 in 1990, its Balance Sheet revealed that it had a
Fund Balance (Retained Earnings) of P3,159,791.00 as of year-end 1990, and therefore, it was financially
capable of granting an increase in its employees' wages. 14 This dispositive portion of Secretary Torres'
Order
reads: 15
WHEREFORE, judgment is hereby rendered:
1. Ordering the hospital to pay the wages of the returning workers who are members of
the Union covering the period 21 June 1991 to 15 December 1991; and,
2. Ordering the parties to enter and formalize a new collective bargaining agreement
(CBA) embodying therein the dispositions hereinabove set forth as well as the provisions
of the old CBA not otherwise touched upon by this Order.
On November 4, 1991, petitioner filed a Motion for Reconsideration of the abovequoted Order alleging
that: (1) the Office of the Secretary of Labor had no jurisdiction to resolve the issue of the legality or
illegality of the union's strike [since, in ordering the payment of backwages, he in effect ruled on the
legality of the strike, which he was not authorized to do, jurisdiction therefor pertaining only to labor
arbiters]; (2) the union members were not entitled to backwages because the temporary cessation of
petitioner's operation suspended the employer-employee relationship between the union members and
petitioner; and (3) petitioner could not be obligated to enter into a new CBA because said employeremployee relationship no longer existed.
On December 15, 1991, petitioner formally ceased operations. Notices of its permanent closure were sent
to NCMB and individual rank-and-file employees.
On January 31, 1992, the Secretary denied the Monitor for Reconsideration, holding among other things
that his Order of October 16, 1991 did not rule on the legality of the strike. Hence, his petition filed under
Rule 65 of the Revised Rules of Court.
The Issues
Petitioner alleges that the Secretary of Labor gravely abused his discretion thus:

16

1. . . . when he issued the two orders, subject of this case, without affording the hospital
the opportunity to present evidence on its behalf.
2. . . . in ordering the hospital to execute a new collective bargaining agreement with the
union knowing fully well, as he himself conceded, that the hospital had actually ceased
operations.
3. . . . in ordering the hospital to pay backwages to the members of the union; for in doing
so, said public respondent to all intents and purposes ruled that the strike staged by the
union was legal.

41

The main question is whether the Secretary of Labor and Employment acted correctly in issuing the
Orders of October 16, 1991 and January 31, 1992.
The Court's Ruling
First Issue: Petitioner Was Afforded
Opportunity to Present Evidence
Petitioner alleges that it was never given an opportunity to present its evidence, and that the Order of
October 16, 1991 was influenced by the Secretary of Labor's meeting with the officers and members of
respondent union when the former went to Digos, Davao del Sur on October 11, 1991.
Admittedly, Secretary Torres did visit petitioner's premises without notice to see for himself the actual
situation therein obtaining. However, the evidence on record clearly shows that, contrary to petitioner's
allegation, it was afforded opportunity to present its evidence, and that the Secretary's visit and meeting
were not the reasons for the ruling in favor of respondent union, nor did they affect said Order. One , the
assumption order of Secretary Confessor inter alia directed the parties to submit their respective position
papers and evidence to enable the Secretary to resolve the dispute. 17 Two, petitioner submitted its
position paper where it questioned the authenticity of the said order claiming that it (petitioner) received
only an uncertified photocopy, and informed the Secretary of its suspension of operations. 18 It did not
bother to prove its serious financial condition and thereby justify its suspension of operations and its
refusal to accede to the demanded wage increases. Respondent union, on the other hand, attached a
copy of petitioner's financial statements to its position paper to show that petitioner was not in dire
financial straits as it had a significant fund balance in 1990. Respondent union further alleged that
petitioner could have afforded the wage increases since it had previously proposed an increase of P 2.00
every year for each year of the new CBA which it later reduced to just P2.00 for three years. Also attached
were the affidavits of Armand Anthony Gallardo, staff nurse, and Evangeline Montues, pharmacist, to
show that petitioner had been persuading the new regular workers not to join respondent union. 19
(In its Supplemental Position Paper, respondent union also alleged that when it struck, it complied fully
with the law on strikes because a skeletal force was left to man the hospital and the gate was left open
and not barricaded, and that it was petitioner that refused to admit patients and hired replacements for the
strikers. It also alleged that the doctors did not withdraw from the hospital because it happened to be the
best equipped in the locality. 20)
Three, based on these pleadings and supporting papers, the Secretary noted that petitioner hospital did
not discuss and support its claim of serious financial crisis on account of losses incurred, necessitating
temporary suspension of operations. He thus found that the temporary suspension was to avoid
compliance with the return-to-work order, and not due to the supposed financial hemorrhage. His October
16, 1991 Order stated as follows:21
In the case under consideration, the Hospital failed to meet the conditional requirements
that would justify the temporary cessation of its operations. To be sure, the facts and
circumstances attendant to this case do not warrant a finding that the temporary
suspension of the hospital's operations was for a valid or justifiable cause, and not for the
purpose of defeating the rights of the workers to self-organization. This conclusion finds
support from the following undisputed facts:
First, during the CBA negotiation and immediately prior to the closure, the Hospital never
brought the issue of its alleged financial losses necessitating the temporary suspension
of its operations;
Secondly, the notice of temporary suspension dated 13 June 1991 filed by the Hospital
made mention of its intention to submit the necessary documents of its alleged financial

42

losses (Annex "A", Hospital's position paper). Until the present, however, the Hospital has
not submitted these documents thereby creating serious doubts on the validity of the
suspension of its operations. Be that as it may, a copy of the Financial Statements of the
Hospital for the years 1989 and 1990, submitted by the Union, reveals that it (hospital)
was not actually losing in its operation. While the Hospital may have incurred losses of
P200,942.00 in 1990, its Balance Sheet reveals a Fund Balance (Retained Earnings) of
P3,159,791.00 for the year 1990 (Annex "G-2" Union's Position Paper dated 4 July 1991);
and
Thirdly, the Union was not furnished a copy of the notice of temporary suspension. Worse
still, the notice was filed on 14 June 1991 and was made effective the following day or on
15 June 1991, leaving the Union without sufficient time to adjust to the sudden and
unexpected cessation of the hospital's operation, much less the opportunity to controvert
the same.
In the light of the undisputed facts narrated above, we are more inclined to sustain the
view that the temporary suspension of the hospital's operations (was done) by the
hospital, not because it is in financial crisis, but merely for the purpose of avoiding
compliance with our Order dated 13 June 1991, directing it to accept all returning workers
under the same terms and conditions of employment existing prior to the work stoppage.
This being the case, we cannot give imprimatur to the actuation exhibited herein by the
Hospital. For indeed, the Hospital had shown scant regard to the constitutional right of
the members of the Union to self-organization and to negotiate for better terms and
conditions of employment.
The foregoing excerpt clearly shows that Secretary Torres' visit was not the turning point insofar as his
Order was concerned. On the contrary, said Order is clearly based on substantial evidence or record.
Petitioner also attacks Secretary Torres' conclusion that its temporary cessation of operations was not
legitimate but for the purpose of circumventing the return-to-work order previously issued.
We are not persuaded. Temporary suspension of operations is recognized as a valid exercise of
management prerogative provided it is not carried out in order to circumvent the provisions of the Labor
Code or to defeat the rights of the employees under the Code. 22 The determination to case or suspend
operations is a prerogative of management that the State usually does not interfere with, as no business
can be required to continue operating at a loss simply to maintain the workers in employment. Such an
act would be tantamount to a taking of property without due process of law, which the employer has a
right to resist. But where it is shown that the closure is motivated not by a desire to prevent further losses,
but to discourage the workers from organizing themselves into a union for more effective negotiation with
management, the State is bound to intervene. 23
The burden of proving that such a temporary suspension is bona fide falls upon the employer. In this
instance, petitioner had to establish the fact of its precarious financial health, that its cessation of
operation was really necessitated by its financial condition, and that said condition would probably be
alleviated or improved, or its losses abated, by undertaking such suspension of operation. Petitioner could
have at least party met the foregoing requirements by submitting its financial statements or records as
proof of its financial crisis, since the purported financial hemorrhage would definitely have been reflected
therein. Thus, petitioner's unexplained and continued failure to submit its financial statements could not
but raise grave doubts as to the truth of the claimed financial crisis and the real purpose of the
suspension of operations. It is not enough to merely raise this issue nor to discuss it only in passing. The
precarious financial condition must be established by evidence, e.g., balance sheets and income
statements, and the figures therein must be interpreted and discussed at length. Petitioner was recklessly
pushing its luck when it believed that the Secretary could be convinced without first obtaining and
examining petitioner's financial statements and the notes thereto. The fact that the conciliator never asked
for them is no sufficient excuse for not presenting the same, as such was petitioner's duty. Neither is it

43

acceptable for petitioner to allege that latest financial statement (for the year 1991) were still being
prepared by its accountants and not yet ready for submission, since the financial statement for the prior
years 1989 and 1990 would have sufficed.
It is a hornbook rule that employers who contemplate terminating the services of their workers must base
their decisions on more than just flimsy excuses, 24 considering that the dismissal of an employee from
work involves not only the loss of his position but, what is more important, his means of livelihood. The
same principle applies in temporary suspension of operations, as in this case, considering that it involves
laying off employees for a period of six months.
Petitioner, having wretchedly failed to justify by even the most rudimentary proof its temporary suspension
of operations, must bear the consequences thereof. We thus hold that the Secretary of Labor and
Employment did not act with grave abuse of discretion in finding the temporary suspension unjustified and
illegal.
Second Issue: New CBA Despite Temporary Suspension?
Petitioner alleges that respondent Secretary acted in grave abuse of discretion when he ordered
petitioner to enter into a new CBA despite his knowledge that it had actually ceased operations. As proof
thereof, petitioner cites the portion of the assailed Order which reads that:
It must be noted, however, that the hospital had actually ceased operations. It would thus
be sheer abuse of discretion on our part to compel the hospital to continue its operations
and admit the returning workers, . . . .
We disagree. Clearly, the respondent Secretary was of the impression that petitioner would operate again
after the lapse of the six-month suspension of operations on December 16, 1991, and so ordered the
parties to enter into and formalize a new CBA to govern their relations upon resumption of operations. On
the other hand, the aforequoted portion of the Order must be understood in the context of the Secretary's
finding that the temporary suspension was only for circumventing the return-to-work order, but in spite of
which he held that he could not order petitioner to continue operations as "this would infringe on its
inherent right to manage and conduct its own business affairs"; he thus ordered instead the payment of
backwages to the returning workers who were refused admittance by petitioner on June 21, 1991. And as
above adverted to, he also ordered the parties to execute a new CBA to govern their relations upon the
expiry of the period of suspension and the resumption of normal operations.
Art. 286 of the Labor Code provides: "The bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months . . . shall not terminate employment." Section 12,
Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code provides that the employeremployee relationship shall be deemed suspended in case of the suspension of operation referred to
above, it being implicitly assumed that once operations are resumed, the employer-employee relationship
is revived and restored.
If a legitimate, valid and legal suspension of operation does not terminate but merely suspends the
employee-employer relationship, with more reason will an invalid and illegal suspension of operations, as
in this case, notaffect the employment relationship.
The foregoing premises considered, it is clear that there is no basis for petitioner to claim that a new CBA
should not be entered into or that collective bargaining should not be conducted during the effectivity of a
temporary suspension of operations. In this instance, petitioner expressly represented that the
suspension was to be for six months only. In the absence of any other information, the plain and natural
presumption will be that petitioner would resume operations after six months, and therefore, it follows that
a new CBA will be needed to govern the employment relations of the parties, the old one having already

44

expired. Clearly then, under the circumstances, the respondent Secretary cannot be faulted nor
considered to have gravely abused his discretion for ordering the parties to enter into a new CBA.
Did the Secretary act in excess of jurisdiction in imposing the wage increase and union shop provision on
the petitioner? We hold that he did not. While petitioner cannot be forced to abandon its suspension of
operations even if said suspension be declared unjustified, illegal and invalid, neither can petitioner evade
its obligation to bargain with the union, using the cessation of its business as reason therefor. For, as
already indicated above, the employer-employee relationship was merely suspended (and not terminated)
for the duration of the temporary suspension. Using the suspension as an excuse to evade the duty to
bargain is further proof of its illegality. It shows abuse of this option and bad faith on the part of petitioner.
And since it refused to bargain, without valid and sufficient cause, the Secretary in the exercise of his
powers under Article 263(i) of the Labor Code to decide and resolve labor disputes, properly granted the
wage increase and imposed the union shop provision.
Considering that after the lapse of the six-month period on December 16, 1991, petitioner did not resume
operations, it would border on the ridiculous to still try to enforce the October 16, 1991 Order and require
the parties to negotiate the terms and conditions of employment. It goes without saying that the said
Order directing the parties to enter into a new CBA is already moot and academic. We shall delve more
into the complete cessation of business when discussing the fourth issue below.
Third Issue: Grant of Backwages Is Not An
Adjudication on the Legality of the Strike
Petitioner charges the respondent Secretary with having gravely abused his discretion in ordering it to pay
backwages to the union members because it is tantamount to ruling that the union's strike was legal
jurisdiction over which question pertains to the labor arbiter.
As support, petitioner cites Philippine Airlines, Inc. vs. Secretary of Labor and Employment,
Court ruled that:

25

where this

Under Art. 263 of the Labor Code, the Labor Secretary's authority to resolve a labor
dispute within 30 days from the date of assumption of jurisdiction, encompasses only the
issues in the dispute, not the legality or illegality of any strike that may have been
resorted to in the meantime (Binamira vs. Ogan-Occena, 148 SCRA 677, 685 [1987]).
xxx xxx xxx
In ruling on the legality of the PALEA strike, the Secretary of Labor acted without or in
excess of his jurisdiction.
There is merit in PAL's contention that the Labor Secretary erred in declaring the strike
valid and in prohibiting PAL from taking retaliatory or disciplinary action against the
strikers for the damages suffered by the Airlines as a result of the illegal work stoppage.
xxx xxx xxx
The Labor Secretary exceeded his jurisdiction when he restrained PAL from taking
disciplinary action against its guilty employees, for, under Art. 263 of the Labor Code, all
that the Secretary may enjoin is the holding of the strike, but not the company's right to
take action against union officers who participated in the illegal strike and committed
illegal acts. The prohibition which the Secretary issued to PAL constitutes an unlawful
deprivation of property and denial of due process for it prevents PAL from seeking

45

redress for the huge property losses that if suffered as a result of the union's illegal mass
action.
We disagree. As pointed out by the Solicitor General, the said case is not in point because in this case the
Secretary did not rule on the legality of the strike.
Respondent union struck before the Secretary of Labor assumed jurisdiction over the dispute. Thus, at
first glance, the grant of backwages was not only dependent on the legality of the temporary suspension
of operations by petitioner but also on the legality of the strike of respondent union.
However, it is undisputed that petitioner never questioned the legality of the strike. When Secretary
Confessor assumed jurisdiction over the labor dispute, she ordered the immediate return to work of the
striking employees in order to restore the conditions of employment prior to the strike. The legality of the
strike was not in question as far as Secretary Torres was concerned, when he assumed the office, and
was not within the ambit of the jurisdiction conferred upon him by law. His concern was the labor
dispute, i.e., the deadlock and the temporary suspension of operations. Thus, he ruled only on these
matters, and not, as claimed by petitioner, on the legality or illegality of the strike. On the other hand, the
grant of backwages was due to the illegality of the temporary suspension, not the illegality of the strike.
Under Article 263 (g) of the Labor Code, the Secretary is authorized to penalize an erring employer who
refuses to accept returning employees by ordering such employer to pay backwages. This is within his
jurisdiction and is warranted by his finding as to the invalidity of the temporary suspension.
In fine, the respondent Secretary of Labor did not act with grave abuse of discretion in ordering
petitioner to pay backwages because it is not an adjudication on the legality of the strike.
Fourth Issue: Supervening Event
Notwithstanding that respondent Secretary did not act with grave abuse of discretion in issuing the
challenged Orders, we cannot ignore the supervening event which occurred after December 15,
1991, i.e., the subsequentpermanent cessation of petition of petitioner on account of losses.
Business reverses or losses are recognized by law as a just cause for terminating employment. This
Court held inColumbia Development Corporation vs. Minister of Labor and Employment 26 that:
Precisely because reverses in a business venture are expected, the law recognizes the
same as a just cause for terminating an employment [Art. 283(a) of the Labor Code] and
in many instances, this Court has "affirmed the right of an employer to lay off or dismiss
employees because of losses in the operation of its business, lack of work and
considerable reduction in the volume of his business." [LVN Pictures and Workers Asso.
vs. LVN Pictures, Inc., 35 SCRA 147 and the cases cited therein].
Since this ground can be abused by scheming employers feigning business losses to ease out
employees, substantive and procedural requirements are imposed before it can be resorted to. The Labor
Code provides that:
Art. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the . . . cessation of operation of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this title, by serving a written notice on the workers and the Department of
Labor and Employment at least one (1) month before the intended date thereof. . . .

46

Further, it is necessary that business reverses or losses be serious, actual and real. 27 The burden of
establishing the truth as to these losses or reverses falls upon the employer.
Petitioner finally submitted its financial statements for 1990 as an annex to its petition. 28 And attached to
its Reply to Comment were its financial statements for 1991. 29 The Statements of Revenues and
Expenses revealed that in 1989, petitioner had a net profit of P106,102.00, but this was due to other
income of P202,772.00, which offset losses from operations of P96,670.00. 30 In the following years,
operating losses could not be offset by other income. In 1990, petitioner sustained a net loss of
P200,942.00 despite other income of P203,092.00. In 1991, net loss mounted to
P3,180,268.00, 31completely wiping out its entire Fund Balance (retained earnings) of P3,159,791.00 from
the previous year, and leaving anegative figure of P20,477.00. This means that nothing was left of the
entire capital of petitioner, which is why petitioner contends that it is not in any position to resume
operations. Furthermore, petitioner's external auditors reported that the 1991 financial statement have not
yet made any provisions for petitioner's liability resulting from this and other labor disputes. 32
In both 1989 and 1990, the hospital's cost and operating expenses exceeded gross revenues, signaling
serious financial trouble. When petitioner suspended operation in the second half of 1991, its gross
revenues covered only 56% of operating expenses. The decrease in expenses to about half the prior
years' was still too small to offset the revenues foregone. It seems that the temporary suspension turned
out to have been more costly rather than beneficial. Eventually, its financial troubles resulted in the
demise of petitioner as a going concern.
Petitioner's total assets in 1991 registered a drop of about P2.5 million from the previous year's P7.8
million, a staggering decline. 33 It had exhausted its Fund Balance completely. Considering that it had
been operating mainly on the revenues it generated, the high risks of continuing operations were enough
to make petitioner bail out.
We should mention that this case is different from Union of Filipino Workers vs. National Labor Relations
Commission 34 because in the case at bar, financial trouble is reflected in petitioner's financial statements
since 1989 and the cessation of operations was total.
The losses registered in 1989, 1990 and 1991 cannot be deemed
"paltry." 35 Consider also the loss of doctors and patients prior to the temporary suspension. It is beyond
cavil then that petitioner suffered serious and actual business reverse. In such a case, management has
the final say as to whether it will continue to risk its capital in its business or not. This is properly its
prerogative. Since there is basis for the permanent closure of the business, we cannot read into it any
attempt to defeat the rights of its employees under the law, nor any oppressive and high-handed motives.
Thus, despite the absence of grave abuse of discretion on the part of the respondent Secretary, this Court
cannot impose upon petitioner the directive to enter into a new CBA with the union for the very simple
reason that to do so would be to compel petitioner to continue its business when it had already decided to
close shop, and that would be judicial tyranny on our part.
Epilogue
It will be noted that while the Court ruled as improper the temporary suspension of petitioner's operation,
it nonetheless sustained its permanent closure thereafter. To resolve this seeming contradiction, we
repeat: we found no arbitrariness in the ruling of the then Secretary of Labor finding the suspension of
operations as unwarranted because petitioner failed to adduce evidence before the conciliator to show
that the hospital's financial condition at that time justified such suspension. On the other hand, before us,
by presenting its later financial statements, petitioner was able to prove conclusively a supervening
event, i.e., that its financial health had deteriorated to such an extent as to justify the complete cessation
of its operations, and its permanent closure. Ironically, it was petitioner's temporary suspension of

47

operations that made inevitable and irreversible (as well as legally tenable) its subsequent permanent
closure.
The Court is grieved by the closure of the petitioner hospital, and what such closure meant, not only to
petitioner, but to the public and especially patients and those in need of medical attention. It is even more
sad that, by reason of such closure, petitioner's employees and staff, including doctors, nurses and other
hospital workers, have had to be laid off. We would have wanted to see the parties amicably settle their
differences and patch things up, in view of the crucial public service they rendered, particularly since, up
to the time of its suspension of operation, the hospital was "the best equipped in the locality". However, all
that is water under the bridge now, and there is really not much that this Court can do in the premises and
at this time except to decide the instant case on the basis of the legal issues raised.
WHEREFORE, the petition is partially GRANTED. The assailed Orders, insofar as they grant backwages
form June 21, 1991 until December 15, 1991, are AFFIRMED. However, they are MODIFIED insofar as
they directed the parties to enter into a new collective bargaining agreement, which directives are hereby
SET ASIDE for being moot and academic.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. L-24711

April 30, 1968

BENGUET CONSOLIDATED, INC., plaintiff-appellant,


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

48

The contending parties in this case Benguet Consolidated, Inc., ("BENGUET") on the one hand, and on
the other, BCI Employees & Workers Union ("UNION") and the Philippine Association of Free Labor
Unions ("PAFLU") do not dispute the following factual settings established by the lower court.
On June 23, 1959, the Benguet-Balatoc Workers Union ("BBWU"), for and in behalf of all BENGUET
employees in its mines and milling establishment located at Balatoc, Antamok and Acupan, Municipality of
Itogon, Mt. Province, entered into a Collective Bargaining Contract, Exh. "Z" ("CONTRACT") with
BENGUET. Pursuant to its very terms, said CONTRACT became effective for a period of four and a half
(4-) years, or from June 23, 1959 to December 23, 1963. It likewise embodied a No-Strike, No-Lockout
clause. 1
About three years later, or on April 6, 1962, a certification election was conducted by the Department of
Labor among all the rank and file employees of BENGUET in the same collective bargaining units.
UNION obtained more than 50% of the total number of votes, defeating BBWU, and accordingly, the
Court of Industrial Relations, on August 18, 1962, certified UNION as the sole and exclusive collective
bargaining agent of all BENGUET employees as regards rates of pay, wages, hours of work and such
other terms and conditions of employment allowed them by law or contract.
Subsequently, separate meetings were conducted on November 22, 23 and 24, 1962 at Antamok, Balatoc
and Acupan Mines respectively by UNION. The result thereof was the approval by UNION members of a
resolution 2directing its president to file a notice of strike against BENGUET for:
1. [Refusal] to grant any amount as monthly living allowance for the workers;
2. Violation of Agreements reached in conciliation meetings among which is the taking down of
investigation [sic] and statements of employees without the presence of union representative;
3. Refusal to dismiss erring executive after affidavits had been presented, thereby company
showing [sic] bias and partiality to company personnel;
4. Discrimination against union members in the enforcement of disciplinary actions.
The Notice of Strike 3 was filed on December 28, 1962. Three months later, in the evening of March 2,
1963, UNION members who were BENGUET employees in the mining camps at Acupan, Antamok and
Balatoc, went on strike. Regarding the conduct of the strike, the trial court reports: 4
... Picket lines were formed at strategic points within the premises of the plaintiff. The picketers,
by means of threats and intimidation, and in some instances by the use of force and violence,
prevented passage thru the picket lines by personnel of the plaintiff who were reporting for work.
Human blocks were formed on points of entrance to working areas so that even vehicles could
not pass thru, while the officers of the plaintiff were not allowed for sometime to leave the "staff"
area.
The strikers forming picket lines bore placards with the letters BBWU-PAFLU written thereon. As
a general rule, the picketers were unruly, aggressive and uttered threatening remarks to staff
members and non-strikers who desire to pass thru the picket lines. On some occasions, the
picketers resorted to violence by pushing back the car wherein staff officers were riding who
would like to enter the mine working area. The picketers lifted one side of the vehicle and were in
the act of overturning it when they were prevented from doing so by the timely intervention of PC
soldiers, who threw tear gas bombs to make the crowd disperse. Many of the picketers were
apprehended by the PC soldiers and criminal charges for grave coercion were filed against them
before the Court of First Instance of Baguio. Two of the strike leaders and twenty-two picketers,
however, were found guilty of light coercion while nineteen other accused were acquitted.

49

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

xxx

xxx

On May 2, 1963, the parties agreed to end the raging dispute. Accordingly, BENGUET and UNION
executed the AGREEMENT, Exh. 1. PAFLU placed its conformity thereto and said agreement was
attested to by the Director of the Bureau of Labor Relations. About a year later or on January 29, 1964, a
collective bargaining contract was finally executed between UNION-PAFLU and BENGUET. 5
Meanwhile, as a result, allegedly, of the strike staged by UNION and its members, BENGUET had to incur
expenses for the rehabilitation of mine openings, repair of mechanical equipment, cost of pumping water
out of the mines, value of explosives, tools and supplies lost and/or destroyed, and other miscellaneous
expenses, all amounting to P1,911,363.83. So, BENGUET sued UNION, PAFLU and their respective
Presidents to recover said amount in the Court of First Instance of Manila, on the sole premise that said
defendants breached their undertaking in the existing CONTRACT not to strike during the effectivity
thereof .
In answer to BENGUET's complaint, defendants unions and their respective presidents put up the
following defenses: (1) they were not bound by the CONTRACT which BBWU, the defeated union, had
executed with BENGUET; (2) the strike was due, inter alia, to unfair labor practices of BENGUET; and (3)
the strike was lawful and in the exercise of the legitimate rights of UNION-PAFLU under Republic Act 875.
Issues having been joined, trial commenced. On February 23, 1965, the trial court rendered judgment
dismissing the complaint on the ground that the CONTRACT, particularly the No-Strike clause, did not
bind defendants. The latters' counterclaim was likewise denied. Failing to get a reconsideration of said
decision, BENGUET interposed the present appeal.
The several errors assigned by BENGUET basically ask three questions:
(1) Did the Collective Bargaining Contract executed between BENGUET and BBWU on June 23,
1959 and effective until December 23, 1963 automatically bind UNION-PAFLU upon its
certification, on August 18, 1962, as sole bargaining representative of all BENGUET employees?
(2) Are defendants labor unions and their respective presidents liable for the illegal acts
committed during the course of the strike and picketing by some union members?
(3) Are defendants liable to pay the damages claimed by BENGUET?
In support of an affirmative answer to the first question, BENGUET first invokes the so-called "Doctrine of
Substitution" referred to in General Maritime Stevedores' Union v. South Sea Shipping Lines, L-14689,
July 26, 1960. There it was remarked:
xxx

xxx

xxx

We also hold that where the bargaining contract is to run for more than two years, the principle of
substitution may well be adopted and enforced by the CIR to the effect that after two years of the
life of a bargaining agreement, a certification election may be allowed by the CIR; that if a
bargaining agent other than the union or organization that executed the contract, is elected, said
new agent would have to respect said contract, but that it may bargain with the management for

50

the shortening of the life of the contract if it considers it too long, or refuse to renew the contract
pursuant to an automatic renewal clause. (Emphasis supplied)
xxx

xxx

xxx

The submission utterly fails to persuade Us. The above-quoted pronouncement was obiter dictum. The
only issue in the General Maritime Stevedores' Union case was whether a collective bargaining
agreement which had practically run for 5 years constituted a bar to certification proceedings. We held it
did not and accordingly directed the court a quo to order certification elections. With that, nothing more
was necessary for the disposition of the case. Moreover, the pronouncement adverted to was rather
premature. The possible certification of a union different from that which signed the bargaining contract
was a mere contingency then since the elections were still to be held. Clearly, the Court was not called
upon to rule on possible effects of such proceedings on the bargaining agreement. 6
But worse, BENGUET's reliance upon the Principle of Substitution is totally misplaced. This principle,
formulated by the NLRB 7 as its initial compromise solution to the problem facing it when there occurs a
shift in employees' union allegiance after the execution of a bargaining contract with their employer,
merely states that even during the effectivity of a collective bargaining agreement executed between
employer and employees thru their agent, the employees can change said agent but the contract
continues to bind them up to its expiration date. They may bargain however for the shortening of said
expiration date. 8
In formulating the "substitutionary" doctrine, the only consideration involved was the employees' interest
in the existing bargaining agreement. The agent's interest never entered the picture. In fact, the
justification 9 for said doctrine was:
... that the majority of the employees, as an entity under the statute, is the true party in interest to
the contract, holding rights through the agency of the union representative. Thus, any exclusive
interest claimed by the agent is defeasible at the will of the principal.... (Emphasis supplied)
Stated otherwise, the "substitutionary" doctrine only provides that the employees cannot revoke the
validly executed collective bargaining contract with their employer by the simple expedient of changing
their bargaining agent. And it is in the light of this that the phrase "said new agent would have to respect
said contract" must be understood. It only means that the employees, thru their new bargaining agent,
cannot renege on their collective bargaining contract, except of course to negotiate with management for
the shortening thereof.
The "substitutionary" doctrine, therefore, cannot be invoked to support the contention that a newly
certified collective bargaining agent automatically assumes all the personal undertakings like the nostrike stipulation here in the collective bargaining agreement made by the deposed union. When
BBWU bound itself and its officers not to strike, it could not have validly bound also all the other rival
unions existing in the bargaining units in question. BBWU was the agent of the employees, not of the
other unions which possess distinct personalities. To consider UNION contractually bound to the no-strike
stipulation would therefore violate the legal maxim that res inter alios nec prodest nec nocet. 10
Of course, UNION, as the newly certified bargaining agent, could always voluntarily assume all the
personal undertakings made by the displaced agent. But as the lower court found, there was no showing
at all that, prior to the strike, 11 UNION formally adopted the existing CONTRACT as its own and assumed
all the liability ties imposed by the same upon BBWU.
BENGUET also alleges that UNION is now in estoppel to claim that it is not contractually bound by the
CONTRACT for having filed on September 28, 1962, in Civil Case No. 1150 of the Court of First Instance
of Baguio, entitled "Bobok Lumber Jack Ass'n. vs. Benguet Consolidated, Inc. and BCI Employees

51

Workers Union-PAFLU" 12 a motion praying for the dissolution of the ex parte writ of preliminary injunction
issued therein, wherein the following appears:
In that case, the CIR transfered the contactual rights of the BBWU to the defendant union. One of
such rights transferred was the right to the modified union-shop checked off union dues
arrangement now under injunction.
The collective bargaining contract mentioned in the plaintiff's complaint did not expire by the mere
fact that the defendant union was certified as bargaining agent in place of the BBWU. The Court
of Industrial Relations in the case above mentioned made it clear that the collective bargaining
contract would be respected unless and until the parties act otherwise. In effect, the defendant
union by act of subrogation took the place of the BBWU as the UNION referred to in the contract.
(Emphasis supplied)
There is no estoppel. UNION did not assert the above statement against BENGUET to force it to rely
upon the same to effect the union check-off in its favor. UNION and BENGUET were together as codefendants in said Civil Case No. 1150. Rather, the statement was directed against Bobok Lumber Jack
Ass'n., plaintiff therein, to weaken its cause of action. Moreover, BENGUET did not rely upon said
statement. What prompted Bobok Lumber Jack Ass'n. to file the complaint for declaratory relief was the
fact that "... the defendants [UNION and BENGUET] are planning to agree to the continuation of a
modified union shop in the three camps mentioned above without giving the employees concerned the
opportunity to express their wishes on the matter ..." BENGUET even went further in its answer filed on
October 18, 1962, by asserting that "... defendants havealready agreed to the continuation of the modified
union shop provision in the collective bargaining agreement...." 13
Neither can we accept BENGUET's contention that the inclusion of said aforequoted motion in the record
on appeal filed in said Civil Case No. 1150, now on appeal before Us docketed as case No. L-24729,
refutes UNION's allegation that it has subsequently abandoned its stand against Bobok Lumber Jack
Ass'n., in said case. The mere appearance of such motion in the record on appeal is but a compliance
with the procedural requirement of Rule 41, Sec. 6, of the Rules of Court, that all matters necessary for a
proper understanding of the issues involved be included in the record on appeal. This therefore cannot be
taken as a rebuttal of the UNION's explanation.
There is nothing then, in law as well as in fact, to support plaintiff BENGUET's contention that defendants
are contractually bound by the CONTRACT. And the stand taken by the trial court all the more becomes
unassailable in the light of Art. 1704 of the Civil Code providing that:
In the collective bargaining, the labor union or members of the board or committee signing the
contractshall be liable for non-fulfillment thereof. (Emphasis supplied)
There is no question, defendants were not signatories nor participants in the CONTRACT.
Lastly, BENGUET contends, citing Clause II in connection with Clause XVIII of the CONTRACT, that since
all the employees, as principals, continue being bound by the no-strike stipulation until the CONTRACT's
expiration, UNION, as their agent, must necessarily be bound also pursuant to the Law on Agency. This is
untenable. The way We understand it, everything binding on a duly authorized agent, acting as such, is
binding on the principal; not vice-versa, unless there is a mutual agency, or unless the agent expressly
binds himself to the party with whom he contracts. As the Civil Code decrees it: 14
The agent who acts as such is not personally liable to the party with whom he contracts, unless
he expressly binds himself or exceeds the limits of his authority without giving such party
sufficient notice of his powers. (Emphasis supplied)1wph1.t

52

Here, it was the previous agent who expressly bound itself to the other party, BENGUET. UNION, the new
agent, did not assume this undertaking of BBWU.
In view of all the foregoing, We see no further necessity of delving further into the other less important
points raised by BENGUET in connection with the first question.
On the second question, it suffices to consider, in answer thereto, that the rule of vicarious liability has,
since the passage of Republic Act 875, been expressly legislated out. 15 The standing rule now is that for
a labor union and/or its officials and members to be liable, there must be clear proof of actual participation
in, or authorization or ratification of the illegal acts. 16 While the lower court found that some strikers and
picketers resorted to intimidation and actual violence, it also found that defendants presented
uncontradicted evidence that before and during the strike, the strike leaders had time and again warned
the strikers not to resort to violence but to conduct peaceful picketing only. 17 Assuming that the strikers
did not heed these admonitions coming from their leaders, the failure of the union officials to go against
the erring union members pursuant to the UNION and PAFLU constitutions and by-laws exposes, at the
most, only a flaw or weakness in the defense which, however, cannot be the basis for plaintiff BENGUET
to recover.
Lastly, paragraph VI of the Answer 18 sufficiently traverses the material allegations in paragraph VI of the
Complaint, 19 thus precluding a fatal admission on defendants' part. The purpose behind the rule requiring
specific denial is obtained: defendants have set forth the matters relied upon in support of their denial.
Paragraph VI of the Answer may not be a model pleading, but it suffices for purposes of the rule.
Pleadings should, after all, be liberally construed. 20
Since defendants were not contractually bound by the no-strike clause in the CONTRACT, for the simple
reason that they were not parties thereto, they could not be liable for breach of contract to plaintiff. The
lower court therefore correctly absolved them from liability.
WHEREFORE, the judgment of the lower court appealed from is hereby affirmed. No costs. So
ordered.1wph1.t

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. 81144 May 7, 1990
MEYCAUAYAN COLLEGE, petitioner,
vs.
HONORABLE FRANKLIN M. DRILON, in his capacity as Secretary of the Department of Labor and
Employment and MEYCAUAYAN COLLEGE FACULTY AND PERSONNEL ASSOCIATION
(MCFPA),respondents.

53

The pivotal issue in this petition for certiorari is whether increases in employees' salaries resulting from
the implementation of presidential decrees and wage orders, which are over and above the agreed salary
scale contracted for between the employer and the employees in a collective bargaining agreement,
preclude the employees from claiming the difference between their old salaries and those provided for
under said salary scale.
Petitioner is a private educational institution duly organized and existing under Philippine laws, and
operating in Meycauayan, Bulacan. On January 16, 1987, its board of trustees recognized the
Meycauayan College Faculty and Personnel Association as the employees' union in the Meycauayan
College.
Prior to said recognition or on July 17, 1983, petitioner and the union, then headed by Mrs. Teresita V.
Lim, entered into a collective bargaining agreement for 1983-1986. Article IV thereof provides:
SALARY SCALE
IV. 4.0 ANG ANTAS NG PAGPAPASUWELDO SA MGA GURO SA MATAAS NG
PAARALAN AY UMAALINSUNOD SA PARAAN NG PAGRARANGGONG KALAKIP NITO
BILANG "TAKDA" AT AYON PA RIN SA SUMUSUNOD NA HALAGA NG
PAGPAPASUWELDO (IPATUTUPAD SA AO-ESCOLAR 1983-1986):
PAGSUBOK A (1-3 TAON) P51.50
KLASE 1 (4-5 TAON) P52.00
(6-8 TAON) P53.00
KLASE II (9-12 TAON) P54.00
KLASE III (13-14 TAON) P57.00
KLASE IV (15-17 TAON) P60.00
KLASE V (18-21 TAON) P63.00
(22 PATAAS) P70.00
When the collective bargaining agreement was entered into, the following presidential decrees were in
effect: (a) P.D No. 1389 dated May 29, 1978 adjusting the existing statutory minimum wages; (b) P.D. No.
1713 dated August 18, 1980 providing for an increase in the minimum daily wage rates and for additional
mandatory living allowances, and (c) P.D. No. 1751 dated May 14, 1980 increasing the statutory daily
minimum wage at all levels by P4.00 after integrating the mandatory emergency living allowance under
P.D. Nos. 525 and 1123 into the basic pay of all covered workers. Wage Order No. 2 increasing the
mandatory basic minimum wage and living allowance was also issued on July 6, 1983 just before the
collective bargaining agreement herein involved was entered into.
During the lifetime of the collective bargaining agreement, the following were issued: (a) Wage Order No.
3 dated November 7, 1983 increasing the minimum daily living allowance in the private sector; (b) Wage
Order No. 4 dated May 1, 1984 integrating as of said date the emergency cost of living allowances under
P.D. Nos. 1614, 1634 and 1713 into the basic pay of covered workers in the private sector; (c) Wage
Order No. 5 dated June 11, 1984 increasing the cost of living allowance of workers in the private sector
whose basic salary or wage is not more than P1,800 a month; and (d) Wage Order No. 6 dated October
26, 1984 increasing the daily living allowances.

54

The union admits herein that its members were paid all these increases in pay mandated by law. It
appears, however, that in 1987, shortly after union president Mrs. Teresita V. Lim, who held the
managerial position of registrar of the college, had turned over the presidency of the union to Mrs. Fe
Villarico, the latter unintentionally got a copy of the collective bargaining agreement and discovered that
Article IV thereof had not been implemented by the petitioner. 1
Consequently, on March 27, 1987, the union filed with the Department of Labor and Employment,
Regional Office No. III in San Fernando, Pampanga, a notice of strike on the ground of unfair labor
practice alleging therein violation of the collective bargaining agreement particularly the provisions of
Article IV thereof on salary scale. 2
The union having struck and picketed the petitioner's premises on May 20, 1987, the Secretary of Labor
assumed jurisdiction over the labor dispute and, in his order of May 26, 1987, instructed Regional Office
No. III to hear and receive the evidence of the parties and to submit a report thereon.
In his report, the Director of Regional Office No. III stated that the management had indeed complied with
the salary and allowance increases ordained by law. However, he observed that the college's compliance
with said increases in salary and allowance were "not an ipso facto compliance with the collective
bargaining agreement without violating the very aims and purpose of free collective bargaining for better
terms and conditions of employment." According to the Director, the two should be distinguished from
each other. Thus, while compliance with increases provided by law was mandatory, compliance with the
provisions of a collective bargaining agreement was contractual and obligatory.
He added: "Non-compliance with the mandate of a standards law or decree may give rise to an ordinary
action for recovery while violation of a collective bargaining agreement may even give rise to a criminal
action for unfair labor practice. And while the relief sought for violation of a standards law or decree is
primarily for restitution of (an) unpaid benefits, the relief sought for violating a CBA is ordinarily for
compliance and desistance. Moreover, there is no provision in the aforecited Presidential Decrees
providing that compliance thereto is sufficient compliance with a provision of a collective bargaining
agreement and vice-versa."
To illustrate his finding that the collective bargaining agreement had not been complied with by the
college, the Director cited the example of a union member who had been with the college for twenty
years. Under the standards law, she was entitled to a rate of P58.65 per period whereas under the
collective bargaining agreement, she should receive P63.00 per period considering that the ranking
system is observed therein.
Accordingly, the Director recommended that the management of Meycauayan College be directed to
immediately comply with the salary scale provision of the collective bargaining agreement and "to pay all
covered union members their salary differential both during regular classes and summer vacations as well
as the 13th month differential pay for the school years 1983-1984, 1984-1985 and 1985-1986 utilizing the
computations" mentioned in the report. 3
Upon review of said report and the record of the case, the Secretary of Labor agreed with the Director's
findings noting further that the college "failed to controvert the assertion of the faculty members that: (a)
the salary period being paid to them is always P7.00 less than that provided for in the CBA; (b) the salary
for the extra period handled is almost always P4.00 more than the salary per period but still less than
P3.00 as provided in the CBA. 4The dispositive portion of the Secretary's order of September 9, 1987
states:
WHEREFORE, the Management of Meycauayan College is hereby ordered to:
1) Strictly effect the payment of salaries of the union members in accordance with the
provisions of the collective bargaining agreement;

55

2) Pay the covered union members salary differential computed by subtracting the salary
actually paid and received by them per period provided in the collective bargaining
agreement for school years 1983-1984; 1984-1985 and 1985-1986 including the
differential for the 13th month pay for the same period. 5
Its motion for reconsideration having been denied on December 3, 1987, Meycauayan College filed the
instant petition for certiorari with prayer for the issuance of a writ of preliminary injunction and/or a
temporary restraining order enjoining the Secretary of Labor from enforcing his orders of September 9,
1987 and December 3, 1987. On February 15, 1988, the Court issued said temporary restraining order.

In this petition, Meycauayan College contends that the Secretary of Labor abused his discretion when he
ruled that "the college did not pay its teachers what was due them under the collective bargaining
agreement" and when, in the "unfair labor practice strike case," he promulgated a decision "with a
retroactive effect beyond the one-year period provided in Art. 290 of the Labor Code." 7
The petition has no merit.
As correctly ruled by public respondent, a collective bargaining agreement is a contractual obligation. It is
distinct from an obligation imposed by law. The terms and conditions of a collective bargaining contract
constitute the law between the parties. Beneficiaries thereof are therefore, by right, entitled to the
fulfillment of the obligation prescribed therein. 8 Consequently, to deny binding force to the collective
bargaining agreement would place a premium on a refusal by a party thereto to comply with the terms of
the agreement. Such refusal would constitute an unfair labor practice. 9
Moreover, compliance with a collective bargaining agreement is mandated by the expressed policy to give
protection to labor. 10 Unless otherwise provided by law, said policy should be given paramount
consideration. Hence, inasmuch as the petitioner has failed to point to any provision of law or even of the
collective bargaining agreement itself to the effect that benefits provided by the former encompass those
provided by the latter, benefits derived from either the law of a contract should be treated as distinct and
separate from each other.
What seems to be the life-force of petitioner's case is its contention that an agreement on a
salary scale should be distinguished from an agreement on a salary increase. Thus, it argues in fine that
an agreement on a salary scale should be considered as an addition to the salary increase imposed by
law and viceversa. 11 This contention is fallacious.
Increments to the laborers' financial gratification, be they in the form of salary increases or changes in the
salary scale are aimed at one thing improvement of the economic predicament of the laborers. As
such, they should be viewed in the light of the State's avowed policy to protect labor. Thus, having
entered into an agreement with its employees, an employer may not be allowed to renege on its
obligation under a collective bargaining agreement should, at the same time, the law grant the employees
the same or better terms and conditions of employment. Employee benefits derived from law are
exclusive of benefits arrived at through negotiation and agreement unless otherwise provided by the
agreement itself or by law. 12
Nevertheless, as the key to the interpretation of contracts, including collective bargaining agreements, is
the intention of the parties, 13 we examined the record and found the undisputed allegation of private
respondent that the collective bargaining agreement herein involved was entered into by the parties to
improve the plight of the teachers byincreasing their salary. The parties increased the teachers' salary or
rate per period, by drafting a salary scale "based on the length of service" of the teachers and eventually
came up with Article IV aforequoted. 14 From this unrebutted allegation, it is clear that the parties wanted
to attain one goal increase the salaries of the teachers on the basis of their length of service. Hence, it
is immaterial that the means by which said goal is achieved is through the alteration of the salary scale.

56

On the issue of prescription, Article 291 (now Art. 290) of the Labor Code herein invoked by petitioner,
provides:
Offenses. Offenses penalized under this Code and the rules and regulations issued
pursuant thereto shall prescribe in three (3) years.
All unfair labor practices arising from Book V shall be filed with the appropriate agency
within one (1) year from accrual of such unfair labor practice; otherwise, they shall be
forever barred.
Petitioner herein asserts that under said article, the Secretary of Labor abused his discretion when he
promulgated a decision applicable even to school years 1983-1984 and 1984-1985 when in fact he
assumed jurisdiction over the strike only on May 26, 1987 or more than a year from the accrual of the
unfair labor practice. It further avers that the labor dispute herein involved was not presented by the union
"as a money claim which would make the strike illegal since a money claim is not a strikable issue under
the Labor Code, nor is it under the original jurisdiction of the Secretary of Labor." 15
The one-year prescriptive period is inapplicable in this case because of peculiar factual circumstances
which petitioner has not denied. Although the collective bargaining agreement covers school years 1983
to 1986, a copy of the agreement was only made available to the union in 1987. Immediately thereafter,
the union sought its implementation. The union members might have been aware of the existence of the
collective bargaining agreement but that fact that their president was actually a management employee
being petitioner's registrar, they must have been deterred from demanding its implementation earlier.
Hence, to apply the provisions of Article 290 (Art. 291) would be unfair and prejudicial to the union
members particularly those who have served petitioner for a number of years who stand to benefit most
from the salary scale.
Article 264(g), now Article 263(g) of the Labor Code is broad enough to give the Secretary of Labor the
power to take jurisdiction over what appears at first blush to be an ordinary money claim. Claims for pay
differentials may have that character but, as earlier stated, if they arise out of a violation of a collective
bargaining agreement, they assume the character of an unfair labor practice and are, therefore, well
within the ambit of the jurisdiction of the Secretary of Labor to decide.
WHEREFORE, the decision of the Secretary of Labor is hereby AFFIRMED and the temporary restraining
order of February 15,1989 is LIFTED.
This decision is immediately executory. Costs against the petitioner.
Republic of the Philippines
SUPREME COURT
Manila
G.R. No. 104682 July 14, 1995
CAPITOL WIRELESS, INC., petitioner,
vs.
THE HON. VICENTE S. BATE and KILUSAN MAKA-MANGGAGAWA SA CAPWIRE
(NAFLU), respondents.
In this petition for certiorari, petitioner assails the Decision dated March 23, 1992 of respondent Voluntary
Arbitrator in ordering petitioner to grant to all employees covered by the collective bargaining agreement
the increase in the daily minimum wage under Wage Order No. NCR-01 as supplemented by Wage
Orders Nos. NCR-01-A and NCR-02 without regard to the ceiling stated in said Wage Orders.

57

I
On November 15, 1990, petitioner and respondent Kilusan Maka-Manggagawa sa Capwire (NAFLU)
signed a collective bargaining agreement (CBA) with a duration of five years or from July 1, 1990 to June
30, 1995.
Included in the CBA is Section 2 of Article XIV on wages, which provides:
The COMPANY shall grant to all rank and file employees covered by this Agreement the
following across the board increases:
First Year July 1, 1990 to June 30, 1991 an across the board increase
of P200.00 per month to basic rate;
Second Year July 1, 1991 to June 30, 1992 an across
the board increase of P250.00 per month to basic rate;
Third Year July 1, 1992 to June 30, 1993 an across
the board increase of P300.00 per month of basic rate.
Should there be any government mandated wage increases and/or allowances, the same
shall be over and above the benefits herein granted.(Rollo, p. 31; Emphasis supplied).
Subsequent to the signing of the CBA, the Regional Tripartite Wages and Productivity Board of the
National Capital Region issued several orders providing for an across-the-board increase in the statutory
minimum wage of all workers and employees in the private sector. The Wage Orders are:
a) Wage Order No. NCR-01 mandating an across the board increase per day effective
November 1, 1990.
b) Wage Order No. NCR-01-A supplementing Wage Order No. NCR-01, and providing
that the P17.00 increase also applied to all private sector workers and employees in the
National Capital Region already receiving wages above the statutory minimum wage
rates up to P125.00 per day.
c) Wage Order No. NCR-2 mandating that all employers in the private sector at NCR
shall provide all employees and workers receiving the minimum wage rate up to P142.00
per day a provisional wage increase of P12.00 per day effective January 8, 1991.
Petitioner implemented the wage increases as mandated by law only to those employees covered by the
said wage orders, that is those employees receiving not more than P125.00 under Wage Order No.
NCR-0l as supplemented by Wage Order No. NCR-01-A, and those employees receiving not more than
P142.00 under Wage Order No. NCR-02.
Private respondent felt aggrieved by the increases given by petitioner, contending that any and all
government-mandated increases in salaries and allowances should be granted to all employees acrossthe-board without any qualification whatsoever pursuant to paragraph 2, Section 2 of Article XIV of the
CBA.
Failing to resolve the dispute, petitioner and private respondent agreed to submit it to voluntary arbitration
before the National Conciliation and Mediation Board (NCMB).

58

After the parties have submitted their position papers, a decision was rendered by respondent Voluntary
Arbitrator in favor of private respondent, the dispositive portion of which reads:
WHEREFORE, Capwire is hereby ordered to grant the two government-mandated
increases in daily minimum wage rates to all the employees covered by the CBA without
regard to the ceiling in the (sic) stated therein. Further, Capwire is directed to reinstate
the dismissed employees due to the retrenchment and pay their salaries, allowances and
other emolument from the time of their dismissal until their actual reinstatement (Rollo, p.
30).
Petitioner filed this petition, contending that the Voluntary Arbitrator erroneously concluded that the phrase
"over and above" appearing in paragraph 2, Section 2 of Article XIV of the CBA connotes an application of
government-mandated increases indiscriminately irrespective of the ceiling provided for under Wage
Order No. NCR-01 as supplemented by Wage Order Nos. NCR-01-A and NCR-02.
On the other hand, private respondent argues that paragraph 2, Section 2 of Article XIV of the CBA acts
as a waiver on the part of petitioner with respect to the ceiling imposed under the wage orders.
Furthermore, it claims petitioner's interpretation of the CBA provision will result in substantial wage
distortions.
II
To decide the controversy submitted to him for resolution, the voluntary arbitrator had to construe the
provision in Section 2 of Article XIV of the CBA that "[s]hould there be any government-mandated wage
increases and/or allowances, the same shall be over and above the benefits herein granted." He was of
the view that the government-mandated increases of P17.00 per day under Wage Order Nos. NCR-01
and NCR-01-A and P12.00 per day under Wage Order No. NCR-02 should be given to all employees of
petitioner regardless of their daily minimum-wage rates. This is where he fell into error. The wage orders
did not grant across-the-board increases to all employees in the National Capital Region but limited such
increases only to those already receiving wage rates not more than P125.00 per day under Wage Orders
Nos. NCR-01 and NCR-01-A and P142.00 per day under Wage Order No. NCR-02. Since the wage
orders specified who among the employees are entitled to the statutory wage increases, then the
increases applied only to those mentioned therein. The provisions of the CBA should be read in harmony
with the wage orders, whose benefits should be given only to those employees covered thereby.
Private respondent also contends that a substantial wage distortion will result in petitioner's interpretation
is upheld. The Wage Orders issued by the Regional Tripartite Wages Productivity Board and Article 124 of
the Labor Code of the Philippines, as amended, provide for the procedure to follow when the application
of the prescribed minimum wage increase results in distortions of the wage structure in any
establishment. Hence, any wage distortion created by the wage increase granted to specified employees
pursuant to the wage order can be remedied.
WHEREFORE, the petition is GRANTED. The Decision dated March 23, 1992 of respondent Voluntary
Arbitrator is REVERSED and SET ASIDE.
SO ORDERED.

59

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. 124224

March 17, 2000

NEW PACIFIC TIMBER & SUPPLY COMPANY, CO., INC., petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION, MUSIB M. BUAT, LEON G. GONZAGA, JR., ET AL.,
NATIONAL FEDERATION OF LABOR, MARIANO AKILIT and 350 OTHERS, respondents.
May the term of a Collective Bargaining Agreement (CBA) as to its economic provisions be extended
beyond the term expressly stipulated therein, and, in the absence of a new CBA, even beyond the threeyear period provided by law? Are employees hired after the stipulated term of a CBA entitled to the
benefits provided thereunder?

60

These are the issues at the heart of the instant petition for certiorari with prayer for the issuance of
preliminary injunction and/or temporary restraining order filed by petitioner New Pacific Timber & Supply
Company, Incorporated against the National Labor Relations Commission (NLRC), et. al., and the
National Federation of Labor, et. al.
The antecedents facts, as found by the NLRC, are as follows:
The National Federation of Labor (NFL, for brevity) was certified as the sole and exclusive bargaining
representative of all the regular rank-and-file employees of New Pacific Timber & Supply Co., Inc.
(hereinafter referred to as petitioner Company). 1 As such, NFL started to negotiate for better terms and
conditions of employment for the employees in the bargaining unit which it represented. However, the
same was allegedly met with stiff resistance by petitioner Company, so that the former was prompted to
file a complaint for unfair labor practice (ULP) against the latter on the ground of refusal to bargain
collectively. 2
On March 31, 1987, then Executive Labor Arbiter Hakim S. Abdulwahid issued an order declaring (a)
herein petitioner Company guilty of ULP; and (b) the CBA proposals submitted by the NFL as the CBA
between the regular rank-and-file employees in the bargaining unit and petitioner Company. 3
Petitioner Company appealed the above order to the NLRC. On November 15, 1989, the NLRC rendered
a decision dismissing the appeal for lack of merit. A motion for reconsideration thereof was, likewise,
denied in a Resolution, dated November 12, 1990. 4
Unsatisfied, petitioner Company filed a petition for certiorari with this Court. But the Court dismissed said
petition in a Resolution, dated January 21, 1991. 5
Thereafter, the records of the case were remanded to the arbitration branch of origin of the execution of
Labor Arbiter Abdulwahid's Order, dated March 31, 1987, granting monetary benefits consisting of wage
increases, housing allowances, bonuses, etc. to the regular rank-and-file employees. Following a series
of conferences to thresh out the details of computation, Labor Arbiter Reynaldo S. Villena issued an
Order, dated October 18, 1993, directing petitioner Company to pay the 142 employees entitled to the
aforesaid benefits the respective amounts due them under the CBA. Petitioner Company complied; and
the corresponding quitclaims were executed. The case was considered closed following NFL's
manifestation that it will no longer appeal the October 18, 1993 Order of Labor Arbiter Villena. 6
However, notwithstanding such manifestation, a "Petition for Relief" was filed in behalf of 186 of the
private respondents "Mariano J. Akilit and 350 others" on May 12, 1994. In their petition, they claimed that
they were wrongfully excluded from enjoying the benefits under the CBA since the agreement with NFL
and petitioner Company limited the CBA's implementation to only the 142 rank-and-file employees
enumerated. They claimed that NFL's misrepresentations had precluded them from appealing their
exclusion. 7
Treating the petition for relief as an appeal, the NLRC entertained the same. On August 4, 1994, said
commission issued a resolution 8 declaring that the 186 excluded employees "form part and parcel of the
then existing rank-and-file bargaining unit" and were, therefore, entitled to the benefits under the CBA.
The NLRC held, thus:
WHEREFORE, the appeal is hereby granted and the Order of the Labor arbiter dated October 18,
1993 is hereby. Set Aside and Vacated. In lieu hereof, a new Order is hereby issued directing
respondent New Pacific Timber & Supply Co., Inc. to pay all its regular rank-and-file workers their
wage differentials and other benefits arising from the decreed CBA as explained above, within ten
(10) days from receipt of this order.
SO ORDERED. 9

61

Petitioner Company filed a motion for reconsideration of the aforequoted resolution.


Meanwhile, four separate groups of the private respondents, including the original 186 who had filed the
"Petition for Relief" filed individual money claims, docketed as NLRC Cases Nos. M-001991-94 to M001994-94, before the Arbitration Branch of the NLRC, Cagayan de Oro City. However, Labor Arbiter
Villena dismissed these cases in Orders, dated March 11, 1994; April 13, 1994; March 9, 1994; and, May
10, 1994. The employees appealed the respective dismissals of their complainants to the NLRC. The
latter consolidated these appeals with the aforementioned motion for reconsideration filed by petitioner
Company.
On February 29, 1996, the NLRC issued a resolution, the dispositive portions of which reads as follows:
WHEREFORE, the instant petition for reconsideration of respondent is DENIED for lack of merit
and the Resolution of the Commission dated August 4, 1994 Sustained. The separate orders of
the Labor Arbiter dated March 11, 1994, April 13, 1994, March 9, 1994 and May 10, 1994,
respectively, in NLRC Cases Nos. M-001991-94 to M-001994-94 are Set Aside and Vacated for
lack of legal bases.
Conformably, respondent New Pacific Timber and Supply Co., Inc., is hereby directed to pay
individual complainants their CBA benefits in the aggregate amount of P13,559,510.37, the
detailed computation thereof is contained in Annex "A" which forms an integral part of this
resolution, plus ten (10%) percent thereof as Attorney's fees.
SO ORDERED. 10
Hence, the instant petition wherein petitioner Company raises the following issues:
I
THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN
ALLOWING THE "PETITION FOR RELIEF" TO PROSPER.
II
THE PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN RULING
THAT PRIVATE RESPONDENTS MARIANO AKILIT AND 350 OTHERS ARE ENTITLED TO
BENEFITS UNDER THE COLLECTIVE BARGAINING AGREEMENT IN SPITE OF THE FACT
THAT THEY WERE NOT EMPLOYED BY THE PETITIONER MUCH LESS WERE THEY
MEMBERS OF THE BARGAINING UNIT DURING THE TERM OF THE CBA.
III
PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION IN MAKING
FACTUAL FINDINGS WITHOUT BASIS.
IV
THE DISPOSITIVE PORTIONS OF THE ASSAILED RESOLUTIONS ARE DEFECTIVE AND/OR
REVEAL THE GRAVE ABUSE OF DISCRETION COMMITTED BY PUBLIC RESPONDENT. 11
Petitioner company contends that a "Petition of Relief" is not the proper mode of seeking a review of a
decision rendered by the arbitration branch of the NLRC. 12 According to the petitioner, nowhere in the

62

Labor Code or in the NLRC Rules of Procedure is there such a pleading. Rather, the remedy of a party
aggrieved by an unfavorable of the labor arbiter is to appeal said judgment to the NLRC. 13
Petitioners asseverates that even assuming that the NLRC correctly treated the petition for relief as an
appeal, still, it should not have allowed the same to prosper, because the petition was filed several
months after the ten-day reglementary period for filing an appeal had expired; and therefore, it failed to
comply with the requirements of an appeal under the Labor Code and the NLRC Rules of Procedure.
Petitioner Company further contends that in filing separate complaints and/or money claims at the
arbitration level in spite of their pending petition for relief and in spite of the final order, dated October 18,
1993, in NLRC Case No. RAB-IX-0334-82, the private respondents were in fact forum-shopping, an act
which is proscribed as trifling with the courts and abusing their practices.
Anent the second issue, petitioners argues that the private respondents are not entitled to the benefits
under the CBA because employees hired after the term of a CBA are not parties to the agreement, and
therefore, may not claim benefits thereunder, even if they subsequently become members of the
bargaining unit.
As for the term of the CBA, petitioner maintains that Article 253 of the Labor Code refers to the
continuation in full force and effect of the previous CBA's terms and conditions. By necessity, it could not
possibly refers to terms and conditions which, as expressly stipulated, ceased to have force and effect. 14
According to petitioner, the provision on wage increase in the 1981 to 1984 CBA between petitioner
Company and NFL provided for yearly wage increases. Logically, these provisions ended in the years
1984 the last year that the economic provisions of the CBA were, to contract and law, effective.
Petitioner claims that there is no contractual basis for the grant of CBA benefits such as wage increases
in 1985 and subsequent years, since the CBA stipulated only the increases for the years 1981 to 1984.
Moreover, petitioner alleges that it was through no fault of theirs that no new CBA was entered pending
appeal of the decision in NLRC Case No. RAB-IX-0334-82.
Finally, petitioner Company claims that it was never given the opportunity to submit a countercomputation of the benefits supposedly due the private respondents. Instead, the NLRC allegedly relied
on the self-serving computations of private respondents.
Petitioner's contentions as untenable.
We find no grave abuse of discretion on the part of the NLRC, when it entertained the petition for relief
filed by the private respondents and treated it as an appeal, even if it was filed beyond the reglementary
period for filing an appeal. Ordinarily, once a judgment has become final and executory, it can no longer
be disturbed, altered or modified. However, a careful scrutiny of the facts and circumstances of the instant
case warrants liberality in the application of technical rules and procedure. It would be a greater injustice
to deprive the concerned employees of the monetary benefits rightly due them because of a circumstance
over which they had no control. As stated above, private respondents, in their petition for relief, claimed
that they were wrongfully excluded from the list of those entitled to the CBA benefits by their union, NFL,
without their knowledge; and, because they were under the impression that they were ably represented,
they were not able to appeal their case on time.
The Supreme Court has allowed appeals from decisions of the labor arbiter to the NLRC, even if filed
beyond the reglementary period, in the interest of justice. 15 Moreover, under Article 218 (c) of the Labor
Code, the NLRC may, in the exercise of its appellate powers, "correct, amend or waive any error, defect
or irregularity whether in the substance or in form." Further, Article 221 of the same provides that "In any
proceeding before the Commission or any of the Labor Arbiters, the rules of evidence prevailing in courts
of law or equity shall not be controlling and it is the spirit and intention of this Code that the Commission

63

and its members and the Labor Arbiter shall use every and all reasonable means to ascertain the facts in
each case speedily and objectively and without regard to technicalities of law or procedure, all in the
interest of due process. . . . 16
Anent the issue of whether or not the term of an existing CB, particularly as to its economic provisions,
can be extended beyond the period stipulated therein, and even beyond the three-year period prescribed
by law, in the absence of a new agreement, Article 253 of the Labor Code explicitly provides:
Art. 253. Duty to bargain collectively when there exists a collective bargaining agreement.
When there is a collective bargaining agreement, the duty to bargain collectively shall also mean
that neither party shall terminate nor modify such agreement during its lifetime. However, either
party can serve a written notice to terminate or modify the agreement at least sixty (60) days prior
to its expiration date. It shall be the duty of both parties to keep the status quo and to continue in
full force and effect the terms and conditions of the existing agreement during the 60-day period
and/or until a new agreement is reached by the parties. (Emphasis supplied.)
It is clear from the above provision of law that until a new Collective Bargaining Agreement has been
executed by and between the parties, they are duty-bound to keep the status quo and to continue in full
force and effect the terms and conditions of the existing agreement. The law does not provide for any
exception nor qualification as to which of the economic provisions of the existing agreement are to retain
force and effect, therefore, it must be understood as encompassing all the terms and conditions in the
said agreement.
In the case at bar, no new agreement was entered into by and between petitioner Company and NFL
pending appeal of the decision in NLRC Case No. RAB-IX-0334-82; nor were any of the economic
provisions and/or terms and conditions pertaining to monetary benefits in the existing agreement modified
or altered. Therefore, the existing CBA in its entirety, continues to have legal effect.
In a recent case, the Court had occasion to rule that Article 253 and 253-A 17 mandate the parties to keep
thestatus quo and to continue in full force and effect the terms and conditions of the existing agreement
during the 60-day period prior to the expiration of the old CBA and/or until a new agreement is reached by
the parties. Consequently, the automatic renewal clause provided for by the law, which is deemed
incorporated in all CBA's, provides the reason why the new CBA can only be given a prospective effect. 18
In the case of Lopez Sugar Corporation vs. Federation of Free Workers, et. al, 19 this Court reiterated the
rule although a CBA has expired, it continues to have legal effects as between the parties until a new CBA
has been entered into. It is the duty of both parties to the CBA to keep the status quo, and to continue in
full force and effect the terms and conditions of the existing agreement during the 60-day period and/or
until a new agreement is reached by the parties. 20
To rule otherwise, i.e., that the economic provisions of the existing CBA in the instant case ceased to have
force and effect in the year 1984 would be to create a gap during which no agreement would govern, from
the time the old contract expired to the time a new agreement shall have been entered into. For if, as
contended by the petitioner, the economic provisions of the existing CBA were to have no legal effect,
what agreement as to wage increases and other monetary benefits would govern at all? None, it would
seem, if we are to follow the logic of petitioner Company. Consequently, the employees from the year
1985 onwards would be deprived of a substantial amount of monetary benefits which they could have
enjoyed had the terms and conditions of the CBA remained in force and effect. Such a situation runs
contrary to the very intent and purpose of Article 253 and 253-A of the Labor Code which is to curb labor
unrest and to promote industrial peace, as can be gleaned from the discussion of the legislators leading
to the passage of the said laws, thus:

64

HON. CHAIRMAN HERRERA: Pag nag-survey tayo sa mga unyon, ganoon ang mangyayari. And
I think our responsibility here is to create a legal framework to promote industrial peace and to
develop responsible and fair labor movement.
HON. CHAIRMAN VELOSO: In other words, the longer the period of the effectivity.
xxx

xxx

xxx

HON. CHAIRMAN VELOSO: (continuing) . . . . in other words, the longer the period of effectivity of the
CBA, the better for industrial peace.
xxx

xxx

x x x 21

Having established that the CBA between petitioner Company and NFL remained in full force and effect
even beyond the stipulated term, in the absence of a new agreement; and, therefore, that the economic
provisions such as wage increases continued to have legal effect, we are now faced with the question of
who are entitled to the benefits provided thereunder.
Petitioner Company insists that the rank-and-file employees hired after the term of the CBA inspite of their
subsequent membership in the bargaining unit, are not parties to the agreement, and certainly may not
claim the benefits thereunder.
We do not agree. In a long line of cases, this Court has held that when a collective bargaining contract is
entered into by the union representing the employees and the employer, even the non-member
employees are entitled to the benefits of the contract. To accord its benefits only to members of the union
without any valid reason would constitute undue discrimination against nonmembers. 22 It is even
conceded, that a laborer can claim benefits from the CBA entered into between the company and the
union of which he is a member at the time of the conclusion of the agreement, after he has resigned from
the said union. 23
In the same vein, the benefits under the CBA in the instant case should be extended to those employees
who only became such after the year 1984. To exclude them would constitute undue discrimination and
deprive them of monetary benefits they would otherwise be entitled to under a new collective bargaining
contract to which they would have been parties. Since in this particular case, no new agreement had been
entered into after the CBA's stipulated term, it is only fair and just that the employees hired thereafter be
included in the existing CBA. This is in consonance with our ruling that the terms and conditions of a
collective bargaining agreement continue to have force and effect even beyond the stipulated term when
no new agreement is executed by and between the parties to avoid or prevent the situation where no
collective bargaining agreement at all would govern between the employer company and its employees.
Anent the other issues raised by petitioner Company, the Court finds that these pertain to questions of
fact that have already been passed upon by the NLRC. It is axiomatic that, the factual findings of the
National Labor Relations Commissions, which have acquired expertise because its jurisdiction is confined
to specific matters, are accorded respect and finality by the Supreme Court, when these are supported by
substantial evidence. "A perusal of the assailed resolution reveals that the same was reached on the
basis of the required quantum of evidence.
WHEREFORE, in view of the foregoing, the instant petition for certiorari is hereby DISMISSED for lack of
merit.1wphi1.nt
SO ORDERED.

65

Republic of the Philippines


SUPREME COURT
Manila
G.R. No. 111262 September 19, 1996
SAN MIGUEL CORPORATION EMPLOYEES UNION-PTGWO, represented by its President
RAYMUNDO HIPOLITO, JR., petitioner,
vs.
HON. MA. NIEVES D. CONFESOR, Secretary of Labor, Dept. of Labor & Employment, SAN MIGUEL
CORPORATION, MAGNOLIA CORPORATION (Formerly, Magnolia Plant) and SAN MIGUEL FOODS,
INC. (Formerly, B-Meg Plant), respondents.
This is a petition for certiorari assailing the Order of the Secretary of Labor rendered on February
15, 1993 involving a labor dispute at San Miguel Corporation.
The facts are as follows:
On June 28, 1990, petitioner-union San Miguel Corporation Employees Union PTGWO
entered into a Collective Bargaining Agreement (CBA) with private respondent San Miguel
Corporation (SMC) to take effect upon the expiration of the previous CBA or on June 30, 1989.

66

This CBA provided, among others, that:


ARTICLE XIV
DURATION OF AGREEMENT
Sec. 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and
effect until June 30, 1992.
Sec. 2. In accordance with Article 253-A of the Labor Code as amended, the term of this
Agreement insofar as the representation aspect is concerned, shall be for five (5) years
from July 1, 1989 to June 30, 1994. Hence, the freedom period for purposes of such
representation shall be sixty (60) days prior to June 30, 1994.
Sec. 3. Sixty (60) days prior to June 30, 1992 either party may initiate negotiations of all
provisions of this Agreement, except insofar as the representation aspect is concerned. If
no agreement is reached in such negotiations, this Agreement shall nevertheless remain
in force up to the time a subsequent agreement is reached by the parties. 1
In keeping with their vision and long term strategy for business expansion, SMC management
informed its employees in a letter dated August 13, 1991 2 that the company which was
composed of four operating divisions namely: (1) Beer, (2) Packaging, (3) Feeds and Livestocks,
(4) Magnolia and Agri-business would undergo a restructuring. 3
Effective October 1, 1991, Magnolia and Feeds and Livestock Division were spun-off and became
two separate and distinct corporations: Magnolia Corporation (Magnolia) and San Miguel Foods,
Inc. (SMFI). Notwithstanding the spin-offs, the CBA remained in force and effect.
After June 30, 1992, the CBA was renegotiated in accordance with the terms of the CBA and
Article 253-A of the Labor Code. Negotiations started sometime in July, 1992 with the two parties
submitting their respective proposals and counterproposals.
During the negotiations, the petitioner-union insisted that the bargaining unit of SMC should still
include the employees of the spun-off corporations: Magnolia and SMFI; and that the
renegotiated terms of the CBA shall be effective only for the remaining period of two years or until
June 30, 1994.
SMC, on the other hand, contended that the members/employees who had moved to Magnolia
and SMFI, automatically ceased to be part of the bargaining unit at the SMC. Furthermore, the
CBA should be effective for three years in accordance with Art. 253-A of the Labor Code.
Unable to agree on these issues with respect to the bargaining unit and duration of the CBA,
petitioner-union declared a deadlock on September 29, 1990.
On October 2, 1992, a Notice of Strike was filed against SMC.
In order to avert a strike, SMC requested the National Conciliation and Mediation Board (NCMB)
to conduct preventive mediation. No settlement was arrived at despite several meetings held
between the parties.
On November 3, 1992, a strike vote was conducted which resulted in a "yes vote" in favor of a
strike.

67

On November 4, 1992, private respondents SMC, Magnolia and SMFI filed a petition with the
Secretary of Labor praying that the latter assume jurisdiction over the labor dispute in a vital
industry.
As prayed for, the Secretary of Labor assumed jurisdiction over the labor dispute on November
10, 1992. 4Several conciliation meetings were held but still no agreement/settlement was arrived
at by both parties.
After the parties submitted their respective position papers, the Secretary of Labor issued the
assailed Order on February 15, 1993 directing, among others, that the renegotiated terms of the
CBA shall be effective for the period of three (3) years from June 30, 1992; and that such CBA
shall cover only the employees of SMC and not of Magnolia and SMFI.
Dissatisfied, petitioner-union now comes to this Court questioning this Order of the Secretary of
Labor.
Subsequently, on March 30, 1995, 5 petitioner-union filed a Motion for Issuance of a Temporary
Restraining Order or Writ of Preliminary Injunction to enjoin the holding of the certification
elections in the different companies, maintaining that the employees of Magnolia and SMFI fall
within the bargaining unit of SMC.
On March 29, 1995, the Court issued a resolution granting the temporary restraining order prayed
for. 6
Meanwhile, an urgent motion for leave to intervene 7 in the case was filed by the Samahan ng
Malayang Manggagawa-San Miguel Corporation-Federation of Free Workers (SMM-SMC-FFW)
through its authorized representative, Elmer S. Armando, alleging that it is one of the contending
parties adversely affected by the temporary restraining order.
The Intervenor cited the case of Daniel S.L. Borbon v. Hon. Bienvenido B. Laguesma, 8 G.R. No.
101766, March 5, 1993, where the Court recognized the separation of the employees of Magnolia
from the SMC bargaining unit. It then prayed for the lifting of the temporary restraining order.
Likewise, Efren Carreon, Acting President of the SMCEU-PTGWO, filed a petition for the
withdrawal/dismissal of the petition considering that the temporary restraining order jeopardized
the employees' right to conclude a new CBA. At the same time, he challenged the legal
personality of Mr. Raymundo Hipolito, Jr. to represent the Union as its president when the latter
was already officially dismissed from the company on October 4, 1994.
Amidst all these pleadings, the following primordial issues arise:
1) Whether or not the duration of the renegotiated terms of the CBA is to be effective for three
years of for only two years; and
2) Whether or not the bargaining unit of SMC includes also the employees of the Magnolia and
SMFI.
Petitioner-union contends that the duration for the non-representation provisions of the CBA
should be coterminous with the term of the bargaining agency which in effect shall be for the
remaining two years of the current CBA, citing a previous decision of the Secretary of Labor on
December 14, 1992 in the matter of the labor dispute at Philippine Refining Company.

68

However, the Secretary of Labor, in her questioned Order of February 15, 1993 ruled that the
renegotiated terms of the CBA at SMC should run for a period of three (3) years.
We agree with the Secretary of Labor.
Pertinent to the first issue is Art. 253-A of the Labor Code as amended which reads:
Art. 253-A. Terms of a Collective Bargaining Agreement. Any Collective Bargaining
Agreement that the parties may enter into shall, insofar as the representation aspect is
concerned, be for a term of five (5) years. No petition questioning the majority status of
the incumbent bargaining agent shall be entertained and no certification election shall be
conducted by the Department of Labor and Employment outside of the sixty-day period
immediately before the date of expiry of such five year term of the Collective Bargaining
Agreement. All other provisions of the Collective Bargaining Agreement shall be
renegotiated not later than three (3) years after its execution. Any agreement on such
other provisions of the Collective Bargaining Agreement entered into within six (6) months
from the date of expiry of the term of such other provisions as fixed in such Collective
Bargaining Agreement, shall retroact to the day immediately following such date. If any
such agreement is entered into beyond six months, the parties shall agree on the
duration of retroactivity thereof. In case of a deadlock in the renegotiation of the collective
bargaining agreement, the parties may exercise their rights under this Code. (Emphasis
supplied.)
Article 253-A is a new provision. This was incorporated by Section 21 of Republic Act No. 6715
(the Herrera-Veloso Law) which took effect on March 21, 1989. This new provision states that the
CBA has a term of five (5) years instead of three years, before the amendment of the law as far
as the representation aspect is concerned. All other provisions of the CBA shall be negotiated not
later than three (3) years after its execution. The "representation aspect" refers to the identity and
majority status of the union that negotiated the CBA as the exclusive bargaining representative of
the appropriate bargaining unit concerned. "All other provisions" simply refers to the rest of the
CBA, economic as well as non-economic provisions, except representation. 10
As the Secretary of Labor herself observed in the instant case, the law is clear and definite on the
duration of the CBA insofar as the representation aspect is concerned, but is quite ambiguous
with the terms of the other provisions of the CBA. It is a cardinal principle of statutory construction
that the Court must ascertain the legislative intent for the purpose of giving effect to any statute.
The history of the times and state of the things existing when the act was framed or adopted must
be followed and the conditions of the things at the time of the enactment of the law should be
considered to determine the legislative intent. 11 We look into the discussions leading to the
passage of the law:
THE CHAIRMAN (REP. VELASCO): . . .the CBA, insofar as the economic provisions are
concerned . . .
THE CHAIRMAN (SEN. HERRERA): Maximum of three years?
THE CHAIRMAN (SEN. VELOSO): Maximum of three years.
THE CHAIRMAN (SEN. HERRERA): Present practice?
THE CHAIRMAN (REP. VELOSO): In other words, after three years pwede nang
magnegotiate in the CBA for the remaining two years.

69

THE CHAIRMAN (REP. HERRERA): You can negotiate for one year, two years or three
years but assuming three years which, I think, that's the likelihood. . .
THE CHAIRMAN (REP. VELOSO): Yes.
THE CHAIRMAN (SEN. HERRERA): Three years, the new union, assuming there will be
a change of agent, at least he has one year to administer and to adjust, to develop
rapport with the management. Yan ang importante.
You know, for us na nagne-negotiate, ang hazard talaga sa negotiation, when we
negotiate with somebody na hindi natin kilala, then, we are governed by our biases na ito
ay destroyer ng Labor; ang mga employer, ito bayaran ko lang ito okay na.
'Yan ang nangyayari, but let us give that allowance for the one year to let them know.
Actually, ang thrust natin ay industrial peace, and there can be no industrial peace if you
encourage union to fight each other. 'Yan ang problema. 12
xxx xxx xxx
HON. ISIDRO: Madali iyan, kasi these two periods that are mentioned in the CBA seem
to provide some doubts later on in the implementation. Sabi kasi rito, insofar as
representation issue is concerned, seven years and lifetime. . .
HON. CHAIRMAN HERRERA: Five years.
HON. ISIDRO: Five years, all the others three years.
HON. CHAIRMAN HERRERA: No. Ang three years duon sa terms and conditions, not
later than three years.
HON. ISIDRO: Not later than three years, so within three years you have to make a new
CBA.
HON. CHAIRMAN HERRERA: Yes.
HON. ISIDRO: That is again for purposes of renewing the terms, three years na naman
iyan then, seven years. . .
HON. CHAIRMAN HERRERA: Not later than three years.
HON. ISIDRO: Assuming that they usually follow the period three years nang three
years, but under this law with respect to representation five years, ano? Now, after
three years, nagkaroon ng bagong terms, tapos na iyong term, renewed na iyong terms,
ang karapatan noon sa representation issue mayroon pang two years left.
HON. CHAIRMAN HERRERA: One year na lang because six years nang lahat, three
plus three.
HON. ISIDRO: Hindi, two years pa rin ang natitira, eh. Three years pa lang ang
natatapos. So, another CBA was formed and this CBA mayroon na naman siyang bagong
five years with respect to representation issue.

70

HON. CHAIRMAN HERRERA: Hindi. Hindi na. Ganito iyan. Iyong terms and conditions
for three years.
HON. ISIDRO: Yes.
HON. CHAIRMAN HERRERA: One the third year you can start negotiating to change the
terms and conditions.
HON. ISIDRO: Yes.
HON. CHAIRMAN HERRERA: Assuming you will follow the practice . . .
HON. ISIDRO: Oo.
HON. CHAIRMAN HERRERA: But on the fifth year, ang representation status now can
be questioned, so baka puwedeng magkaroon ng certification election. If the incumbent
union loses, then the new union administers the contract for one year to give him time to
know his counterpart the employer, before he can negotiate for a new term. Iyan ang
advantage.
HON. ISIDRO: Kasi, when the CBA has only a three-year lifetime with respect to the
terms and conditions and then, so you have to renew that in three years you renew for
another three years, mayroon na naman another five years iyong ano . . .
HON. ANIAG: Hindi, ang natitira duon sa representation two years na lang.
HON. CHAIRMAN HERRERA: Two years na lang sa representation.
HON. ANIAG: So that if they changed the union, iyong last year . . .
HON. CHAIRMAN HERRERA: Iyon lang, that you have to administer the contract. Then,
voluntary arbitration na kayo and then mayroon ka nang probisyon "retroact on the date
of the expiry date". Pagnatalo ang incumbent unyon, mag-aassume ang new union,
administer the contract. As far as the term and condition, for one year, and that will give
him time and the employer to know each other.
HON. JABAR: Boy, let us be realistic. I think if a new union wins a certification election, it
would not want to administer a CBA which has not been negotiated by the union itself.
HON. CHAIRMAN HERRERA: That is not true, Hon. This is true because what is
happening now in the country is that the term ng contract natin, duon din mage-expire
ang representation. Iyon ang nangyari. That is where you have the gulo. Ganoon ang
nangyari. So, ang nangyari diyan, pag-mayroon certification election, expire ang contract,
ano ang usual issue company union. I can you (sic) give you more what the incumbent
union is giving. So ang mangyayari diyan, pag-negotiate mo hardline na agad.
HON. CHAIRMAN VELOSO : Mon, for four years?
HON. ISIDRO: Ang tingin ko lang dito, iyong distinction between the terms and the
representation aspect why do we have to distinguish between three and five? What's
wrong with having a uniform expiration period?

71

HON. CHAIRMAN HERRERA: Five years.


HON. ISIDRO: Puro three years.
HON. CHAIRMAN HERRERA: That is what we are trying to avoid because ang reality
diyan, Mart, pagpasok mo sa kumpanya, mag-ne-negotiate ka ng six months, that's the
average, aabot pa minsan ng one year. Pagktapos ng negotiation mo, signing kayo.
There will be an allowed period of one year. Third year na, uumpisahan naman ang
organizations, papasok na ang ibang unyon because the reality in Trade Union
committee, they organize, we organize. So, actually, you have only industrial peace for
one year, effective industrial peace. That is what we are trying to change. Otherwise, we
will continue to discourage the investors and the union will never grow because every
other year it has to use its money for the certification election. Ang grabe pang practice
diyan, mag-a-advance ang federation for three years union dues para panggastos lang
sa certification election. That is what we are trying to avoid.
HON. JABAR: Although there are unions which really get advances.
HON. CHAIRMAN HERRERA: Pag nag-survey tayo sa mga unyon, ganoon ang
mangyayari. And I think our responsibility here is to create a legal framework to promote
industrial peace and to develop responsible and fair labor movement.
HON. CHAIRMAN VELOSO: In other words, the longer the period of the effectivity . . .
xxx xxx xxx
HON CHAIRMAN VELOSO. (continuing) . . . in other words, the longer the period of
effectivity of the CBA, the better for industrial peace.
HON. CHAIRMAN HERRERA: representation status.
HON. CHAIRMAN VELOSO: Only on
HON. CHAIRMAN HERRERA: the representations.
HON. CHAIRMAN VELOSO: But on the economic issues.
HON. CHAIRMAN HERRERA: You have to review that. The parties will have to review
that.
HON. CHAIRMAN VELOSO: At least on second year.
HON. CHAIRMAN HERRERA: Not later than 3 years, ang karamihan ng mga magnegotiate when the companyis (interrupted) 13
From the aforesaid discussions, the legislators were more inclined to have the period of effectivity
for three (3) years insofar as the economic as well as non-economic provisions are concerned,
except representation.
Obviously, the framers of the law wanted to maintain industrial peace and stability by having both
management and labor work harmoniously together without any disturbance. Thus, no outside
union can enter the establishment within five (5) years and challenge the status of the incumbent

72

union as the exclusive bargaining agent. Likewise, the terms and conditions of employment
(economic and non-economic) can not be questioned by the employers or employees during the
period of effectivity of the CBA. The CBA is a contract between the parties and the parties must
respect the terms and conditions of the agreement. 14 Notably, the framers of the law did not give
a fixed term as to the effectivity of the terms and conditions of employment. It can be gleaned
from their discussions that it was left to the parties to fix the period.
In the instant case, it is not difficult to determine the period of effectivity for the non-representation
provisions of the CBA. Taking it from the history of their CBAs, SMC intended to have the terms of
the CBA effective for three (3) years reckoned from the expiration of the old or previous CBA
which was on June 30, 1989, as it provides:
Sec. 1. This Agreement which shall be binding upon the parties hereto and their
respective successors-in-interest, shall become effective and shall remain in force and
effect until June 30, 1992.
The argument that the PRC case is applicable is indeed misplaced. We quote with favor the
Order of the Secretary of Labor in the light of SMC's peculiar situation as compared with PRC's
company situation.
It is true that in the Philippine Refining Company case (OS-AJ-0031-91) (sic), Labor
Dispute at Philippine Refining Company), we ruled that the term of the renegotiated
provisions of the CBA should coincide with the remaining term of the agency. In doing so,
we placed premium on the fact that PRC has only two (2) unions and no other union had
yet executed a renewed term of 3 years. Nonetheless, in ruling for a shortened term, we
were guided by our considered perception that the said term would improve, rather than
ruin, the general welfare of both the workers and the company. It is equally true that once
the economic provisions of the CBA expire, the residual representative status of the union
is effective for only 2 more years. However, if circumstances warrant that the contract
duration which it is soliciting from the company for the benefit of the workers, shall be a
little bit longer than its lifespan, then this Office cannot stand in the way of a more ideal
situation. We must not lose sight of the fact that the primordial purpose of a collective
contract is to promote industrial harmony and stability in the terms and conditions of
employment. To our mind, this objective cannot be achieved without giving due
consideration to the peculiarities and unique characteristics of the employer. In the case
at bar, there is no dispute that the mother corporation (SMC) spun-off two of its divisions
and thereby gave birth to two (2) other entities now known as Magnolia Corporation and
San Miguel Foods, Inc. In order to effect a smooth transition, the companies concerned
continued to recognize the existing unions as the bargaining agents of their respective
bargaining units. In the meantime, the other unions in these companies eventually
concluded their CBA negotiations on the remaining term and all of them agreed on a 3year cycle. Notably, the following CBAs were forged incorporating a term of 3-years on
the renegotiated provisions, to wit:
1. SMC daily-paid employees union (IBM)
2. SMFI monthly-paid employees and daily-paid employees at the Cabuyao Plant.
There is a direct link between the voluntary recognition by the company of the continuing
representative status of the unions after the aforementioned spin-offs and the stand of the
company for a 3-year renegotiated cycle when the economic provisions of the existing
CBAs expired, i.e., the maintain stability and avoid confusion when the umbilical cord of
the two divisions were severed from their parent. These two cannot be considered
independently of each other for they were intended to reinforce one another. Precisely,

73

the company conceded to face the same union notwithstanding the spin-offs in order to
preserve industrial peace during the infancy of the two corporations. If the union would
insist on a shorter renegotiated term, then all the advantages gained by both parties in
this regard, would have gone to naught. With this in mind, this office feels that it will
betray its mandate should we order the parties to execute a 2-year renegotiated term for
then chaos and confusion, rather than tranquillity, would be the order of the day. Worse,
there is a strong likelihood that such a ruling might spawn discontent and possible mass
actions against the company coming from the other unions who had already agreed to a
3-year renegotiated terms. If this happens, the purpose of this Office's intervention into
the parties' controversy would have been defeated. 15
The issue as to the term of the non-representation provisions of the CBA need not belabored
especially when we take note of the Memorandum of the Secretary of Labor dated February 24,
1994 which was mentioned in the Resolution of Undersecretary Bienvenido Laguesma on
January 16, 1995 in the certification election case involving the SMC employees. 16 In said
memorandum, the Secretary of Labor had occasion to clarify the term of the renegotiated terms
of the CBA vis-a-vis the term of the bargaining agent, to wit:
As a matter of policy the parties are encourages (sic) to enter into a renegotiated CBA
with a term which would coincide (sic) with the aforesaid five (5) year term of the
bargaining representative.
In the event however, that the parties, by mutual agreement, enter into a renegotiated
contract with a term of three (3) years or one which does not coincide with the said 5-year
term, and said agreement is ratified by majority of the members in the bargaining unit, the
subject contract is valid and legal and therefore, binds the contracting parties. The same
will however not adversely affect the right of another union to challenge the majority
status of the incumbent bargaining agent within sixty (60) days before the lapse of the
original five (5) year term of the CBA.
Thus, we do not find any grave abuse of discretion on the part of the Secretary of Labor in ruling
that the effectivity of the renegotiated terms of the CBA shall be for three (3) years.
With respect to the second issue, there is, likewise, no merit in petitioner-union's assertion that
the employees of Magnolia and SMFI should still be considered part of the bargaining unit of
SMC.
Magnolia and SMFI were spun-off to operate as distinct companies on October 1, 1991.
Management saw the need for these transformations in keeping with its vision and long term
strategy as it explained in its letter addressed to the employees dated August 13, 1991:
. . . As early as 1986, we announced the decentralization program and spoke of the need
for structures that can react fast to competition, a changing environment, shorter product
life cycles and shifts in consumer preference. We further stated in the 1987 Annual
Report to Stockholders that San Miguel's businesses will be more autonomous and self
sufficient so as to better acquire and master new technologies, cope with a labor force
with different expertises and expectations, and master and satisfy the changing needs of
our customers and end-consumers. As subsidiaries, Magnolia and FLD will gain better
industry focus and flexibility, greater awareness of operating results, and speedier, more
responsive decision making.
xxx xxx xxx

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We only have to look at the experience of Coca-Cola Bottlers Philippines, Inc., since this
company was organized about ten years ago, to see the benefits that arise from
restructuring a division of San Miguel into a more competitive organization. As a standalone enterprise, CCBPI engineered a dramatic turnaround and has sustained its sales
and market share leadership ever since.
We are confident that history will repeat itself, and the transformation of Magnolia and
FLD will be successful as that of CCBPI. 17
Undeniably, the transformation of the companies was a management prerogative and business
judgment which the courts can not look into unless it is contrary to law, public policy or morals.
Neither can we impute any bad faith on the part of SMC so as to justify the application of the
doctrine of piercing the corporate veil.18 Ever mindful of the employees' interests, management
has assured the concerned employees that they will be absorbed by the new corporations without
loss of tenure and retaining their present pay and benefits according to the existing CBAs. 19 They
were advised that upon the expiration of the CBAs, new agreements will be negotiated between
the management of the new corporations and the bargaining representatives of the employees
concerned. As a result of the spin-offs:
1. Each of the companies are run by, supervised and controlled by different management
teams including separate human resource/personnel managers.
2. Each Company enforces its own administrative and operational rules and policies and
are not dependent on each other in their operations.
3. Each entity maintains separate financial statements and are audited separately from
each other.20
Indubitably, therefore, Magnolia and SMFI became distinct entities with separate juridical
personalities. Thus, they can not belong to a single bargaining unit as held in the case
of Diatagon Labor Federation Local 110 of the ULGWP v. Ople. 21 We elucidate:
The fact that their businesses are related and that the 236 employees of the Georgia
Pacific International Corporation were originally employees of Lianga Bay Logging Co.,
Inc. is not a justification for disregarding their separate personalities. Hence, the 236
employees, who are now attached to Georgia Pacific International Corporation, should
not be allowed to vote in the certification election at the Lianga Bay Logging Co., Inc.
They should vote at a separate certification election to determine the collective
bargaining representative of the employees of Georgia Pacific International Corporation.
Petition-union's attempt to include the employees of Magnolia and SMFI in the SMC bargaining
unit so as to have a bigger mass base of employees has, therefore, no more valid ground.
Moreover, in determining an appropriate bargaining unit, the test of grouping is mutuality or
commonality of interests. The employees sought to be represented by the collective bargaining
agent must have substantial mutual interests in terms of employment and working conditions as
evinced by the type of work they performed. 22 Considering the spin-offs, the companies would
consequently have their respective and distinctive concerns in terms of the nature of work,
wages, hours of work and other conditions of employment. Interests of employees in the different
companies perforce differ. SMC is engaged in the business of the beer manufacturing. Magnolia
is involved in the manufacturing and processing of diary products 23 while SMFI is involved in the
production of feeds and the processing of chicken. 24 The nature of their products and scales of
business may require different skills which must necessarily be commensurated by different
compensation packages. The different companies may have different volumes of work and

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different working conditions. For such reason, the employees of the different companies see the
need to group themselves together and organize themselves into distinctive and different groups.
It would then be best to have separate bargaining units for the different companies where the
employees can bargain separately according to their needs and according to their own working
conditions.
We reiterate what we have explained in the case of University of the Philippines v. FerrerCalleja 25 that:
[T]here are various factors which must be satisfied and considered in determining the
proper constituency of a bargaining unit. No one particular factor is itself decisive of the
determination. The weight accorded to any particular factor varies in accordance with the
particular question or questions that may arise in a given case. What are these factors?
Rothenberg mentions a good number, but the most pertinent to our case are: (1) will of
the employees (Globe Doctrine); (2) affinity and unit of employees' interest, such as
substantial similarity of work and duties, or similarity of compensation and working
conditions; (3) prior collective bargaining history; and (4) employment status, such as
temporary, seasonal and probationary employees. . . .
xxx xxx xxx
An enlightening appraisal of the problem of defining an appropriate bargaining unit is
given in the 10th Annual Report of the National Labor Relations Board wherein it is
emphasized that the factors which said board may consider and weigh in fixing
appropriate units are: the history, extent and type of organization of employees; the
history of their collective bargaining; the history, extent and type of organization of
employees in other plants of the same employer, or other employers in the same
industry; the skill, wages, work, and working conditions of the employees; the desires of
the employees; the eligibility of the employees for membership in the union or unions
involved; and the relationship between the unit or units proposed and the employer's
organization, management, and operation . . .
. . . In said report, it is likewise emphasized that the basic test in determining the
appropriate bargaining unit is that a unit, to be appropriate, must affect a grouping of
employees who have substantial, mutual interests in wages, hours, working conditions
and other subjects of collective bargaining (citing Smith on Labor Laws, 316-317;
Francisco, Labor Laws, 162). . .
Finally, we take note of the fact that the separate interests of the employees of Magnolia and
SMFI from those of SMC has been recognized in the case of Daniel Borbon v. Laguesma. 26 We
quote:
Even assuming in gratia argumenti that at the time of the election they were regular
employees of San Miguel, nonetheless, these workers are no longer connected with San
Miguel Corporation in any manner because Magnolia has ceased to be a division of San
Miguel Corporation and has been formed into a separate corporation with a personality of
its own (p. 305, Rollo). This development, which was brought to our attention by private
respondents, necessarily renders moot and academic any further discourse on the
propriety of the elections which petitioners impugn via the recourse (p. 319, Rollo).
In view of all the foregoing, we do not find any grave abuse of discretion on the part of the
Secretary of Labor in rendering the assailed Order.

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WHEREFORE, the petition is DISMISSED for lack of merit. The Temporary Restraining Order
issued on March 29, 1995 is lifted.
SO ORDERED.

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