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Republic of the PhilippinesSUPREME COURTManila

SECOND DIVISION

G.R. No. 176249 November 27, 2009

FVC LABOR UNION-PHILIPPINE TRANSPORT AND GENERAL WORKERSORGANIZATION (FVCLU-PTGWO), Petitioner,vs.SAMA-SAMANG NAGKAKAISANG MANGGAGAWA SA FVC-SOLIDARITY OFINDEPENDENT AND GENERAL LABOR ORGANIZATIONS (SANAMA-FVC-SIGLO), Respondent.

D E C I S I O N

BRION, J.:

We pass upon the petition for review on certiorari under Rule 45 of the Rules ofCourt1 filed by FVC Labor Union – Philippine Transport and General WorkersOrganization (FVCLU-PTGWO) to challenge the Court of Appeals’ (CA) decision

of July 25, 20062 and its resolution rendered on January 15, 20073 in C.A. G.R. SPNo. 83292.4

THE ANTECEDENTS

The facts are undisputed and are summarized below.

On December 22, 1997, the petitioner FVCLU-PTGWO – the recognizedbargaining agent of the rank-and-file employees of the FVC Philippines,Incorporated (company) – signed a five-year collective bargaining agreement(CBA) with the company. The five-year CBA period was from February 1, 1998 toJanuary 30, 2003.5 At the end of the 3rd year of the five-year term and pursuantto the CBA, FVCLU-PTGWO and the company entered into the renegotiation ofthe CBA and modified, among other provisions, the CBA’s duration. Article XXV,Section 2 of the renegotiated CBA provides that "this re-negotiation agreementshall take effect beginning February 1, 2001 and until May 31, 2003" thusextending the original five-year period of the CBA by four (4) months.

On January 21, 2003, nine (9) days before the January 30, 2003 expiration of theoriginally-agreed five-year CBA term (and four [4] months and nine [9] daysaway from the expiration of the amended CBA period), the respondent Sama-Samang Nagkakaisang Manggagawa sa FVC-Solidarity of Independent and

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General Labor Organizations (SANAMA-SIGLO) filed before the Department ofLabor and Employment (DOLE) a petition for certification election for the samerank-and-file unit covered by the FVCLU-PTGWO CBA. FVCLU-PTGWO moved todismiss the petition on the ground that the certification election petition was filedoutside the freedom period or outside of the sixty (60) days before the expiration

of the CBA on May 31, 2003.

Action on the Petition and Related Incidents

On June 17, 2003, Med-Arbiter Arturo V. Cosuco dismissed the petition on theground that it was filed outside the 60-day period counted from the May 31, 2003expiry date of the amended CBA.6 SANAMA-SIGLO appealed the Med-Arbiter’s

Order to the DOLE Secretary, contending that the filing of the petition on January21, 2003 was within 60-days from the January 30, 2003 expiration of the originalCBA term.

DOLE Secretary Patricia A. Sto. Tomas sustained SANAMA-SIGLO’s position,

thereby setting aside the decision of the Med-Arbiter.7 She ordered the conductof a certification election in the company. FVCLU-PTGWO moved for thereconsideration of the Secretary’s decision.

On November 6, 2003, DOLE Acting Secretary Manuel G. Imson granted themotion; he set aside the August 6, 2003 DOLE decision and dismissed the petitionas the Med-Arbiter’s Order of June 17, 2003 did.8 The Acting Secretary held thatthe amended CBA (which extended the representation aspect of the originalCBA by four [4] months) had been ratified by members of the bargaining unit

some of whom later organized themselves as SANAMA-SIGLO, the certificationelection applicant. Since these SANAMA-SIGLO members fully accepted and infact received the benefits arising from the amendments, the Acting Secretaryrationalized that they also accepted the extended term of the CBA and cannotnow file a petition for certification election based on the original CBA expirationdate.

SANAMA-SIGLO moved for the reconsideration of the Acting Secretary’s Order, but Secretary Sto. Tomas denied the motion in her Order of January 30, 2004.9

SANAMA-SIGLO sought relief from the CA through a petition for certiorari underRule 65 of the Rules of Court based on the grave abuse of discretion the LaborSecretary committed when she reversed her earlier decision calling for acertification election. SANAMA-SIGLO pointed out that the Secretary’s new ruling

is patently contrary to the express provision of the law and established jurisprudence.

THE CA DECISION



















The CA found SANAMA-SIGLO’s petition meritorious on the basis of the

applicable law10 and the rules,11 as interpreted in the congressional debates. Itset aside the challenged DOLE Secretary decisions and reinstated her earlierruling calling for a certification election. The appellate court declared:

It is clear from the foregoing that while the parties may renegotiate the otherprovisions (economic and non-economic) of the CBA, this should not affect thefive-year representation aspect of the original CBA. If the duration of therenegotiated agreement does not coincide with but rather exceeds the originalfive-year term, the same will not adversely affect the right of another union tochallenge 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. In the event anew union wins in the certification election, such union is required to honor andadminister the renegotiated CBA throughout the excess period.

FVCLU-PTGWO moved to reconsider the CA decision but the CA denied themotion in its resolution of January 15, 2007.12 With this denial, FVCLU-PTGWO nowcomes before us to challenge the CA rulings.13 It argues that in light of thepeculiar attendant circumstances of the case, the CA erred in strictly applyingSection 11 (11b), Rule XI, Book V of the Omnibus Rules Implementing the LaborCode, as amended by Department Order No. 9, s. 1997.14

Apparently, the "peculiar circumstances" the FVCLU-PTGWO referred to relate tothe economic and other provisions of the February 1, 1998 to January 30, 2003CBA that it renegotiated with the company. The renegotiated CBA changed theCBA’s remaining term from February 1, 2001 to May 31, 2003. To FVCLU-PTGWO,

this extension of the CBA term also changed the union’s exclusive bargainingrepresentation status and effectively moved the reckoning point of the 60-dayfreedom period from January 30, 2003 to May 30, 2003. FVCLU-PTGWO thusmoved to dismiss the petition for certification election filed on January 21, 2003(9 days before the expiry date on January 30, 2003 of the original CBA) bySANAMA-SIGLO on the ground that the petition was filed outside the authorized60-day freedom period.

It also submits in its petition that the SANAMA-SIGLO is estopped fromquestioning the extension of the CBA term under the amendments because its

members are the very same ones who approved the amendments, includingthe expiration date of the CBA, and who benefited from these amendments.

Lastly, FVCLU-PTGWO posits that the representation petition had been renderedmoot by a new CBA it entered into with the company covering the period June1, 2003 to May 31, 2008.151avvphi1

























Required to comment by the Court16 and to show cause for its failure tocomply,17 SANAMA-SIGLO manifested on October 10, 2007 that: since thepromulgation of the CA decision on July 25, 2006 or three years after the petitionfor certification election was filed, the local leaders of SANAMA-SIGLO hadstopped reporting to the federation office or attending meetings of the council of

local leaders; the SANAMA-SIGLO counsel, who is also the SIGLO nationalpresident, is no longer in the position to pursue the present case because thelocal union and its leadership, who are principals of SIGLO, had given up andabandoned their desire to contest the representative status of FVCLU-PTGWO;and a new CBA had already been signed by FVCLU-PTGWO and thecompany.18 Under these circumstances, SANAMA-SIGLO contends that pursuingthe case has become futile, and accordingly simply adopted the CA decision ofJuly 25, 2006 as its position; its counsel likewise asked to be relieved from filing acomment in the case. We granted the request for relief and dispensed with thefiling of a comment.19

THE COURT’S RULING

While SANAMA-SIGLO has manifested its abandonment of its challenge to theexclusive bargaining representation status of FVCLU-PTGWO, we deem itnecessary in the exercise of our discretion to resolve the question of law raisedsince this exclusive representation status issue will inevitably recur in the futureas workplace parties avail of opportunities to prolong workplace harmony byextending the term of CBAs already in place.20

The legal question before us centers on the effect of the amended or extended

term of the CBA on the exclusive representation status of the collectivebargaining agent and the right of another union to ask for certification asexclusive bargaining agent. The question arises because the law allows achallenge to the exclusive representation status of a collective bargainingagent through the filing of a certification election petition only within 60 daysfrom the expiration of the five-year CBA.

Article 253-A of the Labor Code covers this situation and it provides:

Terms of a collective bargaining agreement. – Any Collective Bargaining

Agreement that the parties may enter into, shall, insofar as the representationaspect is concerned, be for a term of five (5) years. No petition questioning themajority status of the incumbent bargaining agent shall be entertained and nocertification election shall be conducted by the Department of Labor andEmployment outside of the sixty day period immediately before the date ofexpiry of such five-year term of the Collective Bargaining Agreement. All otherprovisions of the Collective Bargaining Agreement shall be renegotiated notlater than three (3) years after its execution.























Any agreement on such other provisions of the Collective Bargaining Agreemententered into within six (6) months from the date of expiry of the term of suchother provisions as fixed in such Collective Bargaining Agreement, shall retroactto the day immediately following such date. If any such agreement is enteredinto beyond six months, the parties shall agree on the duration of retroactivity

thereof. In case of a deadlock in the renegotiation of the collective bargainingagreement, the parties may exercise their rights under this Code.

This Labor Code provision is implemented through Book V, Rule VIII of the RulesImplementing the Labor Code21 which states:

Sec. 14. Denial of the petition; grounds. – The Med-Arbiter may dismiss thepetition on any of the following grounds:

x x x x

(b) the petition was filed before or after the freedom period of a duly registeredcollective bargaining agreement;provided that the sixty-day period based onthe original collective bargaining agreement shall not be affected by anyamendment, extension or renewal of the collective bargainingagreement (underscoring supplied).

x x x x

The root of the controversy can be traced to a misunderstanding of theinteraction between a union’s exclusive bargaining representation status in a

CBA and the term or effective period of the CBA.

FVCLU-PTGWO has taken the view that its exclusive representation status shouldfully be in step with the term of the CBA and that this status can be challengedonly within 60 days before the expiration of this term. Thus, when the term of theCBA was extended, its exclusive bargaining status was similarly extended sothat the freedom period for the filing of a petition for certification election shouldbe counted back from the expiration of the amended CBA term.

We hold this FVCLU-PTGWO position to be correct, but only with respect to theoriginal five-year term of the CBA which, by law, is also the effective period ofthe union’s exclusive bargaining representation status. While the parties mayagree to extend the CBA’s original five-year term together with all other CBAprovisions, any such amendment or term in excess of five years will not carrywith it a change in the union’s exc lusive collective bargaining status. By expressprovision of the above-quoted Article 253-A, the exclusive bargaining statuscannot go beyond five years and the representation status is a legal matter notfor the workplace parties to agree upon. In other words, despite an agreement






for a CBA with a life of more than five years, either as an original provision or byamendment, the bargaining union’s exclusive bargaining status is effective only

for five years and can be challenged within sixty (60) days prior to the expirationof the CBA’s first five years. As we said in San Miguel Corp. Employees Union–

PTGWO, et al. v. Confesor, San Miguel Corp., Magnolia Corp. and San Miguel

Foods, Inc.,22 where we cited the Memorandum of the Secretary of Labor andEmployment dated February 24, 1994:

In the event however, that the parties, by mutual agreement, enter into arenegotiated contract with a term of three (3) years or one which does notcoincide with the said five-year term and said agreement is ratified by majorityof the members in the bargaining unit, the subject contract is valid and legaland therefore, binds the contracting parties. The same will however notadversely affect the right of another union to challenge the majority status of theincumbent bargaining agent within sixty (60) days before the lapse of the

original five (5) year term of the CBA.In the present case, the CBA was originally signed for a period of five years, i.e.,from February 1, 1998 to January 30, 2003, with a provision for the renegotiationof the CBA’s other provisions at the end of the 3rd year of the five -year CBAterm. Thus, prior to January 30, 2001 the workplace parties sat down forrenegotiation but instead of confining themselves to the economic and non-economic CBA provisions, also extended the life of the CBA for another fourmonths, i.e., from the original expiry date on January 30, 2003 to May 30, 2003.

As discussed above, this negotiated extension of the CBA term has no legal

effect on the FVCLU-PTGWO’s exclusive bargaining representation status whichremained effective only for five years ending on the original expiry date ofJanuary 30, 2003. Thus, sixty days prior to this date, or starting December 2, 2002,SANAMA-SIGLO could properly file a petition for certification election. Itspetition, filed on January 21, 2003 or nine (9) days before the expiration of theCBA and of FVCLU-PTGWO’s exclusive bargaining status, was seasonably filed.

We thus find no error in the appellate court’s ruling reinstating the DOLE order for

the conduct of a certification election. If this ruling cannot now be given effect,the only reason is SANAMA-SIGLO’s own desistance; we cannot disregard its

manifestation that the members of SANAMA themselves are no longer interestedin contesting the exclusive collective bargaining agent status of FVCLU-PTGWO.This recognition is fully in accord with the Labor Code’s intent to foster industrial

peace and harmony in the workplace.

WHEREFORE, premises considered, we AFFIRM the correctness of the challengedDecision and Resolution of the Court of Appeals and accordingly DISMISS thepetition, but nevertheless DECLARE that no certification election, pursuant to the







underlying petition for certification election filed with the Department of Laborand Employment, can be enforced as this petition has effectively beenabandoned.

SO ORDERED.

ARTURO D. BRIONAssociate Justice


THIRD DIVISION

G.R. No. 182836 October 13, 2009

CONTINENTAL STEEL MANUFACTURING CORPORATION, Petitioner,vs.HON. ACCREDITED VOLUNTARY ARBITRATOR ALLAN S. MONTAÑO andNAGKAKAISANG MANGGAGAWA NG CENTRO STEEL CORPORATION-SOLIDARITYOF UNIONS IN THE PHILIPPINES FOR EMPOWERMENT AND REFORMS (NMCSC-

SUPER), Respondents.

D E C I S I O N

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court,assailing the Decision1dated 27 February 2008 and the Resolution2 dated 9 May2008 of the Court of Appeals in CA-G.R. SP No. 101697, affirming theResolution3 dated 20 November 2007 of respondent Accredited VoluntaryArbitrator Atty. Allan S. Montaño (Montaño) granting bereavement leave andother death benefits to Rolando P. Hortillano (Hortillano), grounded on the deathof his unborn child.

The antecedent facts of the case are as follows:

Hortillano, an employee of petitioner Continental Steel ManufacturingCorporation (Continental Steel) and a member of respondent Nagkakaisang

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Manggagawa ng Centro Steel Corporation-Solidarity of Trade Unions in thePhilippines for Empowerment and Reforms (Union) filed on 9 January 2006, aclaim for Paternity Leave, Bereavement Leave and Death and AccidentInsurance for dependent, pursuant to the Collective Bargaining Agreement(CBA) concluded between Continental and the Union, which reads:

ARTICLE X: LEAVE OF ABSENCE

x x x x

Section 2. BEREAVEMENT LEAVE — The Company agrees to grant a bereavementleave with pay to any employee in case of death of the employee’s legitimate

dependent (parents, spouse, children, brothers and sisters) based on thefollowing:

2.1 Within Metro Manila up to Marilao, Bulacan - 7 days

2.2 Provincial/Outside Metro Manila - 11 days

x x x x

ARTICLE XVIII: OTHER BENEFITS

x x x x

Section 4. DEATH AND ACCIDENT INSURANCE — The Company shall grant death

and accidental insurance to the employee or his family in the following manner:

x x x x

4.3 DEPENDENTS — Eleven Thousand Five Hundred Fifty Pesos (Php11,550.00) incase of death of the employees legitimate dependents (parents, spouse, andchildren). In case the employee is single, this benefit covers the legitimateparents, brothers and sisters only with proper legal document to be presented(e.g. death certificate).4

The claim was based on the death of Hortillano’s unborn child. Hortillano’s wife,

Marife V. Hortillano, had a premature delivery on 5 January 2006 while she wasin the 38th week of pregnancy.5 According to the Certificate of Fetal Deathdated 7 January 2006, the female fetus died during labor due to fetal Anoxiasecondary to uteroplacental insufficiency.6















Continental Steel immediately granted Hortillano’s claim for paternity leave butdenied his claims for bereavement leave and other death benefits, consisting ofthe death and accident insurance.7

Seeking the reversal of the denial by Continental Steel of Hortillano’s claims for

bereavement and other death benefits, the Union resorted to the grievancemachinery provided in the CBA. Despite the series of conferences held, theparties still failed to settle their dispute,8 prompting the Union to file a Notice toArbitrate before the National Conciliation and Mediation Board (NCMB) of theDepartment of Labor and Employment (DOLE), National Capital Region(NCR).9 In a Submission Agreement dated 9 October 2006, the Union andContinental Steel submitted for voluntary arbitration the sole issue of whetherHortillano was entitled to bereavement leave and other death benefits pursuantto Article X, Section 2

and Article XVIII, Section 4.3 of the CBA.10

The parties mutually chose Atty.Montaño, an Accredited Voluntary Arbitrator, to resolve said issue.11

When the preliminary conferences again proved futile in amicably settling thedispute, the parties proceeded to submit their respective PositionPapers, 12 Replies,13 and Rejoinders14 to Atty. Montaño.

The Union argued that Hortillano was entitled to bereavement leave and otherdeath benefits pursuant to the CBA. The Union maintained that Article X, Section2 and Article XVIII, Section 4.3 of the CBA did not specifically state that thedependent should have first been born alive or must have acquired juridical

personality so that his/her subsequent death could be covered by the CBAdeath benefits. The Union cited cases wherein employees of MKK SteelCorporation (MKK Steel) and Mayer Steel Pipe Corporation (Mayer Steel), sistercompanies of Continental Steel, in similar situations as Hortillano were able toreceive death benefits under similar provisions of their CBAs.

The Union mentioned in particular the case of Steve L. Dugan (Dugan), anemployee of Mayer Steel, whose wife also prematurely delivered a fetus, whichhad already died prior to the delivery. Dugan was able to receive paternityleave, bereavement leave, and voluntary contribution under the CBA between

his union and Mayer Steel.15

Dugan’s child was only 24 weeks in the womb anddied before labor, as opposed to Hortillano’s child who was already 37-38weeks in the womb and only died during labor.

The Union called attention to the fact that MKK Steel and Mayer Steel arelocated in the same compound as Continental Steel; and the representatives ofMKK Steel and Mayer Steel who signed the CBA with their respective employees’







































unions were the same as the representatives of Continental Steel who signed theexisting CBA with the Union.

Finally, the Union invoked Article 1702 of the Civil Code, which provides that alldoubts in labor legislations and labor contracts shall be construed in favor of the

safety of and decent living for the laborer.

On the other hand, Continental Steel posited that the express provision of theCBA did not contemplate the death of an unborn child, a fetus, without legalpersonality. It claimed that there are two elements for the entitlement to thebenefits, namely: (1) death and (2) status as legitimate dependent, none ofwhich existed in Hortillano’s case. Continental Steel, relying on Articles 40, 41

and 4216 of the Civil Code, contended that only one with civil personality coulddie. Hence, the unborn child never died because it never acquired juridicalpersonality. Proceeding from the same line of thought, Continental Steel

reasoned that a fetus that was dead from the moment of delivery was not aperson at all. Hence, the term dependent could not be applied to a fetus thatnever acquired juridical personality. A fetus that was delivered dead could notbe considered a dependent, since it never needed any support, nor did it everacquire the right to be supported.

Continental Steel maintained that the wording of the CBA was clear andunambiguous. Since neither of the parties qualified the terms used in the CBA,the legally accepted definitions thereof were deemed automatically acceptedby both parties. The failure of the Union to have unborn child included in thedefinition of dependent, as used in the CBA – the death of whom would have

qualified the parent-employee for bereavement leave and other death benefits – bound the Union to the legally accepted definition of the latter term.

Continental Steel, lastly, averred that similar cases involving the employees of itssister companies, MKK Steel and Mayer Steel, referred to by the Union, wereirrelevant and incompetent evidence, given the separate and distinctpersonalities of the companies. Neither could the Union sustain its claim that thegrant of bereavement leave and other death benefits to the parent-employeefor the loss of an unborn child constituted "company practice."

On 20 November 2007, Atty. Montaño, the appointed Accredited VoluntaryArbitrator, issued a Resolution17ruling that Hortillano was entitled to bereavementleave with pay and death benefits.

Atty. Montaño identified the elements for entitlement to said benefits, thus:

This Office declares that for the entitlement of the benefit of bereavement leavewith pay by the covered employees as provided under Article X, Section 2 of









the parties’ CBA, three (3) indispensable elements must be present: (1) there is"death"; (2) such death must be of employee’s "dependent"; and (3) such

dependent must be "legitimate".

On the otherhand, for the entitlement to benefit for death and accident

insurance as provided under Article XVIII, Section 4, paragraph (4.3) of theparties’ CBA, four (4) indispensable elements must be present: (a) there is

"death"; (b) such death must be of employee’s "dependent"; (c) such

dependent must be "legitimate"; and (d) proper legal document to bepresented.18

Atty. Montaño found that there was no dispute that the death of an employee’s

legitimate dependent occurred. The fetus had the right to be supported by theparents from the very moment he/she was conceived. The fetus had to rely onanother for support; he/she could not have existed or sustained himself/herself

without the power or aid of someone else, specifically, his/her mother. Therefore,the fetus was already a dependent, although he/she died during the labor ordelivery. There was also no question that Hortillano and his wife were lawfullymarried, making their dependent, unborn child, legitimate.

In the end, Atty. Montaño decreed:

WHEREFORE, premises considered, a resolution is hereby rendered ORDERING[herein petitioner Continental Steel] to pay Rolando P. Hortillano the amount ofFour Thousand Nine Hundred Thirty-Nine Pesos (P4,939.00), representing hisbereavement leave pay and the amount of Eleven Thousand Five Hundred Fifty

Pesos (P11,550.00) representing death benefits, or a total amount of P16,489.00

The complaint against Manuel Sy, however, is ORDERED DISMISSED for lack ofmerit.

All other claims are DISMISSED for lack of merit.

Further, parties are hereby ORDERED to faithfully abide with the hereindispositions.

Aggrieved, Continental Steel filed with the Court of Appeals a Petition for Reviewon Certiorari,19 under Section 1, Rule 43 of the Rules of Court, docketed as CA-G.R. SP No. 101697.

Continental Steel claimed that Atty. Montaño erred in granting Hortillano’s

claims for bereavement leave with pay and other death benefits because nodeath of an employee’s dependent had occurred. The death of a fetus, at

whatever stage of pregnancy, was excluded from the coverage of the CBA











since what was contemplated by the CBA was the death of a legal person, andnot that of a fetus, which did not acquire any juridical personality. ContinentalSteel pointed out that its contention was bolstered by the fact that the termdeath was qualified by the phrase legitimate dependent. It asserted that thestatus of a child could only be determined upon said child’s birth, otherwise, no

such appellation can be had. Hence, the conditions sine qua non for Hortillano’sentitlement to bereavement leave and other death benefits under the CBA werelacking.

The Court of Appeals, in its Decision dated 27 February 2008, affirmed Atty.Montaño’s Resolution dated 20 November 2007. The appellate court interpreted

death to mean as follows:

[Herein petitioner Continental Steel’s] exposition on the legal sense in which the

term "death" is used in the CBA fails to impress the Court, and the same is

irrelevant for ascertaining the purpose, which the grant of bereavement leaveand death benefits thereunder, is intended to serve. While there is no arguingwith [Continental Steel] that the acquisition of civil personality of a child or fetusis conditioned on being born alive upon delivery, it does not follow that suchevent of premature delivery of a fetus could never be contemplated as a"death" as to be covered by the CBA provision, undoubtedly an event causingloss and grief to the affected employee, with whom the dead fetus stands in alegitimate relation. [Continental Steel] has proposed a narrow and technicalsignificance to the term "death of a legitimate dependent" as condition forgranting bereavement leave and death benefits under the CBA. Following[Continental Steel’s] theory, there can be no experience of "death" to speak of.

The Court, however, does not share this view. A dead fetus simply cannot beequated with anything less than "loss of human life", especially for the expectantparents. In this light, bereavement leave and death benefits are meant toassuage the employee and the latter’s immediate family, extend to them solace

and support, rather than an act conferring legal status or personality upon theunborn child. [Continental Steel’s] insistence that the certificate of fetal death is

for statistical purposes only sadly misses this crucial point.20

Accordingly, the fallo of the 27 February 2008 Decision of the Court of Appealsreads:

WHEREFORE, premises considered, the present petition is hereby DENIED for lackof merit. The assailed Resolution dated November 20, 2007 of AccreditedVoluntary Arbitrator Atty. Allan S. Montaño is hereby AFFIRMED and UPHELD.

With costs against [herein petitioner Continental Steel].21











In a Resolution22 dated 9 May 2008, the Court of Appeals denied the Motion forReconsideration23 of Continental Steel.

Hence, this Petition, in which Continental Steel persistently argues that the CBA isclear and unambiguous, so that the literal and legal meaning of death should

be applied. Only one with juridical personality can die and a dead fetus neveracquired a juridical personality.

We are not persuaded.

As Atty. Montaño identified, the elements for bereavement leave under ArticleX, Section 2 of the CBA are: (1) death; (2) the death must be of a dependent,i.e., parent, spouse, child, brother, or sister, of an employee; and (3) legitimaterelations of the dependent to the employee. The requisites for death andaccident insurance under Article XVIII, Section 4(3) of the CBA are: (1) death; (2)the death must be of a dependent, who could be a parent, spouse, or child of amarried employee; or a parent, brother, or sister of a single employee; and (4)presentation of the proper legal document to prove such death, e.g., deathcertificate.

It is worthy to note that despite the repeated assertion of Continental Steel thatthe provisions of the CBA are clear and unambiguous, its fundamental argumentfor denying Hortillano’s claim for bereavement leave and other death benefits

rests on the purportedly proper interpretation of the terms "death" and"dependent" as used in the CBA. If the provisions of the CBA are indeed clearand unambiguous, then there is no need to resort to the interpretation or

construction of the same. Moreover, Continental Steel itself admitted that neithermanagement nor the Union sought to define the pertinent terms forbereavement leave and other death benefits during the negotiation of the CBA.

The reliance of Continental Steel on Articles 40, 41 and 42 of the Civil Code forthe legal definition of death is misplaced. Article 40 provides that a conceivedchild acquires personality only when it is born, and Article 41 defines when achild is considered born. Article 42 plainly states that civil personality isextinguished by death.

First, the issue of civil personality is not relevant herein. Articles 40, 41 and 42 ofthe Civil Code on natural persons, must be applied in relation to Article 37 of thesame Code, the very first of the general provisions on civil personality, whichreads:

Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations,is inherent in every natural person and is lost only through death. Capacity toact, which is the power to do acts with legal effect, is acquired and may be lost.









We need not establish civil personality of the unborn child herein since his/her juridical capacity and capacity to act as a person are not in issue. It is not aquestion before us whether the unborn child acquired any rights or incurred anyobligations prior to his/her death that were passed on to or assumed by thechild’s parents. The rights to bereavement leave and other death benefits in the

instant case pertain directly to the parents of the unborn child upon the latter’sdeath.

Second, Sections 40, 41 and 42 of the Civil Code do not provide at all adefinition of death. Moreover, while the Civil Code expressly provides that civilpersonality may be extinguished by death, it does not explicitly state that onlythose who have acquired juridical personality could die.

And third, death has been defined as the cessation of life.24 Life is notsynonymous with civil personality. One need not acquire civil personality first

before he/she could die. Even a child inside the womb already has life. No lessthan the Constitution recognizes the life of the unborn from conception,25 thatthe State must protect equally with the life of the mother. If the unborn alreadyhas life, then the cessation thereof even prior to the child being delivered,qualifies as death.

Likewise, the unborn child can be considered a dependent under the CBA. AsContinental Steel itself defines, a dependent is "one who relies on another forsupport; one not able to exist or sustain oneself without the power or aid ofsomeone else." Under said general definition,26 even an unborn child is adependent of its parents. Hortillano’s child could not have reached 38-39 weeks

of its gestational life without depending upon its mother, Hortillano’s wife, forsustenance. Additionally, it is explicit in the CBA provisions in question thatthe dependent may be the parent, spouse, or child of a married employee; orthe parent, brother, or sister of a single employee. The CBA did not provide aqualification for the child dependent , such that the child must have been born ormust have acquired civil personality, as Continental Steel avers. Without suchqualification, then child shall be understood in its more general sense, whichincludes the unborn fetus in the mother’s womb.

The term legitimate merely addresses the dependent child’s status in relation to

his/her parents. In Angeles v. Maglaya,27

we have expounded on who is alegitimate child, viz:

A legitimate child is a product of, and, therefore, implies a valid and lawfulmarriage. Remove the element of lawful union and there is strictly no legitimatefiliation between parents and child. Article 164 of the Family Code cannot bemore emphatic on the matter: "Children conceived or born during the marriageof the parents are legitimate." (Emphasis ours.)



















Conversely, in Briones v. Miguel,28 we identified an illegitimate child to be asfollows:

The fine distinctions among the various types of illegitimate children have beeneliminated in the Family Code. Now, there are only two classes of children --

legitimate (and those who, like the legally adopted, have the rights of legitimatechildren) and illegitimate. All children conceived and born outside a validmarriage are illegitimate, unless the law itself gives them legitimate status.(Emphasis ours.)

It is apparent that according to the Family Code and the afore-cited jurisprudence, the legitimacy or illegitimacy of a child attaches upon his/herconception. In the present case, it was not disputed that Hortillano and his wifewere validly married and that their child was conceived during said marriage,hence, making said child legitimateupon her conception.1avvphi1

Also incontestable is the fact that Hortillano was able to comply with the fourthelement entitling him to death and accident insurance under the CBA, i.e.,presentation of the death certificate of his unborn child.

Given the existence of all the requisites for bereavement leave and other deathbenefits under the CBA, Hortillano’s claims for the same should have been

granted by Continental Steel.

We emphasize that bereavement leave and other death benefits are granted toan employee to give aid to, and if possible, lessen the grief of, the said

employee and his family who suffered the loss of a loved one. It cannot be saidthat the parents’ grief and sense of loss arising from the death of their unborn

child, who, in this case, had a gestational life of 38-39 weeks but died duringdelivery, is any less than that of parents whose child was born alive but diedsubsequently.

Being for the benefit of the employee, CBA provisions on bereavement leaveand other death benefits should be interpreted liberally to give life to theintentions thereof. Time and again, the Labor Code is specific in enunciating thatin case of doubt in the interpretation of any law or provision affecting labor, such

should be interpreted in favor of labor.29

In the same way, the CBA and CBAprovisions should be interpreted in favor of labor. In Marcopper Mining v.

National Labor Relations Commission,30 we pronounced:

Finally, petitioner misinterprets the declaration of the Labor Arbiter in the assaileddecision that "when the pendulum of judgment swings to and fro and the forcesare equal on both sides, the same must be stilled in favor of labor." Whilepetitioner acknowledges that all doubts in the interpretation of the Labor Code















shall be resolved in favor of labor, it insists that what is involved-here is theamended CBA which is essentially a contract between private persons. Whatpetitioner has lost sight of is the avowed policy of the State, enshrined in ourConstitution, to accord utmost protection and justice to labor, a policy, we are,likewise, sworn to uphold.

In Philippine Telegraph & Telephone Corporation v. NLRC [183 SCRA 451 (1990)],we categorically stated that:

When conflicting interests of labor and capital are to be weighed on the scalesof social justice, the heavier influence of the latter should be counter-balancedby sympathy and compassion the law must accord the underprivileged worker.

Likewise, in Terminal Facilities and Services Corporation v. NLRC [199 SCRA 265(1991)], we declared:

Any doubt concerning the rights of labor should be resolved in its favor pursuantto the social justice policy.

IN VIEW WHEREOF, the Petition is DENIED. The Decision dated 27 February 2008and Resolution dated 9 May 2008 of the Court of Appeals in CA-G.R. SP No.101697, affirming the Resolution dated 20 November 2007 of AccreditedVoluntary Arbitrator Atty. Allan S. Montaño, which granted to Rolando P.Hortillano bereavement leave pay and other death benefits in the amounts ofFour Thousand Nine Hundred Thirty-Nine Pesos (P4,939.00) and Eleven ThousandFive Hundred Fifty Pesos (P11,550.00), respectively, grounded on the death of his

unborn child, are AFFIRMED. Costs against Continental Steel ManufacturingCorporation.

SO ORDERED.

MINITA V. CHICO-NAZARIOAssociate Justice


THIRD DIVISION

G.R. No. 172013 October 2, 2009



PATRICIA HALAGUEÑA, MA. ANGELITA L. PULIDO, MA. TERESITA P. SANTIAGO,MARIANNE V. KATINDIG, BERNADETTE A. CABALQUINTO, LORNA B. TUGAS, MARYCHRISTINE A. VILLARETE, CYNTHIA A. STEHMEIER, ROSE ANNA G. VICTA, NOEMI R.CRESENCIO, and other flight attendants of PHILIPPINE AIRLINES, Petitioners,vs.

PHILIPPINE AIRLINES INCORPORATED, Respondent.

D E C I S I O N

PERALTA, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules ofCourt seeking to annul and set aside the Decision1 and the Resolution2 of theCourt of Appeals (CA) in CA-G.R. SP. No. 86813.

Petitioners were employed as female flight attendants of respondent PhilippineAirlines (PAL) on different dates prior to November 22, 1996. They are membersof the Flight Attendants and Stewards Association of the Philippines (FASAP), alabor organization certified as the sole and exclusive certified as the sole andexclusive bargaining representative of the flight attendants, flight stewards andpursers of respondent.

On July 11, 2001, respondent and FASAP entered into a Collective BargainingAgreement3 incorporating the terms and conditions of their agreement for theyears 2000 to 2005, hereinafter referred to as PAL-FASAP CBA.

Section 144, Part A of the PAL-FASAP CBA, provides that:

A. For the Cabin Attendants hired before 22 November 1996:

x x x x

3. Compulsory Retirement

Subject to the grooming standards provisions of this Agreement, compulsoryretirement shall be fifty-five (55) for females and sixty (60) for males. x x x.

In a letter dated July 22, 2003,4 petitioners and several female cabin crewsmanifested that the aforementioned CBA provision on compulsory retirement isdiscriminatory, and demanded for an equal treatment with their malecounterparts. This demand was reiterated in a letter5 by petitioners' counseladdressed to respondent demanding the removal of gender discriminationprovisions in the coming re-negotiations of the PAL-FASAP CBA.





















On July 12, 2004, Robert D. Anduiza, President of FASAP submitted their 2004-2005 CBA proposals6 and manifested their willingness to commence thecollective bargaining negotiations between the management and theassociation, at the soonest possible time.

On July 29, 2004, petitioners filed a Special Civil Action for Declaratory Relief withPrayer for the Issuance of Temporary Restraining Order and Writ of PreliminaryInjunction7 with the Regional Trial Court (RTC) of Makati City, Branch 147,docketed as Civil Case No. 04-886, against respondent for the invalidity ofSection 144, Part A of the PAL-FASAP CBA. The RTC set a hearing on petitioners'application for a TRO and, thereafter, required the parties to submit theirrespective memoranda.

On August 9, 2004, the RTC issued an Order8 upholding its jurisdiction over thepresent case. The RTC reasoned that:

In the instant case, the thrust of the Petition is Sec. 144 of the subject CBA whichis allegedly discriminatory as it discriminates against female flight attendants, inviolation of the Constitution, the Labor Code, and the CEDAW. The allegations inthe Petition do not make out a labor dispute arising from employer-employeerelationship as none is shown to exist. This case is not directed specificallyagainst respondent arising from any act of the latter, nor does it involve a claimagainst the respondent. Rather, this case seeks a declaration of the nullity of thequestioned provision of the CBA, which is within the Court's competence, withthe allegations in the Petition constituting the bases for such relief sought.

The RTC issued a TRO on August 10, 2004,9 enjoining the respondent forimplementing Section 144, Part A of the PAL-FASAP CBA.

The respondent filed an omnibus motion10 seeking reconsideration of the orderoverruling its objection to the jurisdiction of the RTC the lifting of the TRO. It furtherprayed that the (1) petitioners' application for the issuance of a writ ofpreliminary injunction be denied; and (2) the petition be dismissed or theproceedings in this case be suspended.

On September 27, 2004, the RTC issued an Order11 directing the issuance of a

writ of preliminary injunction enjoining the respondent or any of its agents andrepresentatives from further implementing Sec. 144, Part A of the PAL-FASAP CBApending the resolution of the case.

Aggrieved, respondent, on October 8, 2004, filed a Petition for Certiorari andProhibition with Prayer for a Temporary Restraining Order and Writ of PreliminaryInjunction12 with the Court of Appeals (CA) praying that the order of the RTC,which denied its objection to its jurisdiction, be annuled and set aside for having




























been issued without and/or with grave abuse of discretion amounting to lack of jurisdiction.

The CA rendered a Decision, dated August 31, 2005, granting the respondent'spetition, and ruled that:

WHEREFORE, the respondent court is by us declared to have NO JURISDICTIONOVER THE CASE BELOW and, consequently, all the proceedings, orders andprocesses it has so far issued therein are ANNULED and SET ASIDE. Respondentcourt is ordered to DISMISS its Civil Case No. 04-886.

SO ORDERED.

Petitioner filed a motion for reconsideration,13 which was denied by the CA in itsResolution dated March 7, 2006.

Hence, the instant petition assigning the following error:

THE COURT OF APPEALS' CONCLUSION THAT THE SUBJECT MATTER IS A LABORDISPUTE OR GRIEVANCE IS CONTRARY TO LAW AND JURISPRUDENCE.

The main issue in this case is whether the RTC has jurisdiction over the petitioners'action challenging the legality or constitutionality of the provisions on thecompulsory retirement age contained in the CBA between respondent PAL andFASAP.

Petitioners submit that the RTC has jurisdiction in all civil actions in which thesubject of the litigation is incapable of pecuniary estimation and in all cases notwithin the exclusive jurisdiction of any court, tribunal, person or body exercising

judicial or quasi-judicial functions. The RTC has the power to adjudicate allcontroversies except those expressly witheld from the plenary powers of thecourt. Accordingly, it has the power to decide issues of constitutionality orlegality of the provisions of Section 144, Part A of the PAL-FASAP CBA. As theissue involved is constitutional in character, the labor arbiter or the NationalLabor Relations Commission (NLRC) has no jurisdiction over the case and, thus,the petitioners pray that judgment be rendered on the merits declaring Section144, Part A of the PAL-FASAP CBA null and void.

Respondent, on the other hand, alleges that the labor tribunals have jurisdictionover the present case, as the controversy partakes of a labor dispute. Thedispute concerns the terms and conditions of petitioners' employment in PAL,specifically their retirement age. The RTC has no jurisdiction over the subjectmatter of petitioners' petition for declaratory relief because the VoluntaryArbitrator or panel of Voluntary Arbitrators have original and exclusive







jurisdiction to hear and decide all unresolved grievances arising from theinterpretation or implementation of the CBA. Regular courts have no power to setand fix the terms and conditions of employment. Finally, respondent alleged thatpetitioners' prayer before this Court to resolve their petition for declaratory reliefon the merits is procedurally improper and baseless.

The petition is meritorious.

Jurisdiction of the court is determined on the basis of the material allegations ofthe complaint and the character of the relief prayed for irrespective of whetherplaintiff is entitled to such relief.14

In the case at bar, the allegations in the petition for declaratory relief plainlyshow that petitioners' cause of action is the annulment of Section 144, Part A ofthe PAL-FASAP CBA. The pertinent portion of the petition recites:

CAUSE OF ACTION

24. Petitioners have the constitutional right to fundamental equality withmen under Section 14, Article II, 1987 of the Constitution and, within thespecific context of this case, with the male cabin attendants of PhilippineAirlines.

26. Petitioners have the statutory right to equal work and employmentopportunities with men under Article 3, Presidential Decree No. 442, TheLabor Code and, within the specific context of this case, with the male

cabin attendants of Philippine Airlines.

27. It is unlawful, even criminal, for an employer to discriminate againstwomen employees with respect to terms and conditions of employmentsolely on account of their sex under Article 135 of the Labor Code asamended by Republic Act No. 6725 or the Act Strengthening Prohibitionon Discrimination Against Women.

28. This discrimination against Petitioners is likewise against theConvention on the Elimination of All Forms of Discrimination AgainstWomen (hereafter, "CEDAW"), a multilateral convention that thePhilippines ratified in 1981. The Government and its agents, including ourcourts, not only must condemn all forms of discrimination against women,but must also implement measures towards its elimination.

29. This case is a matter of public interest not only because of PhilippineAirlines' violation of the Constitution and existing laws, but also because it







highlights the fact that twenty-three years after the Philippine Senateratified the CEDAW, discrimination against women continues.

31. Section 114, Part A of the PAL-FASAP 2000-20005 CBA on compulsoryretirement from service is invidiously discriminatory against and manifestly

prejudicial to Petitioners because, they are compelled to retire at a lowerage (fifty-five (55) relative to their male counterparts (sixty (60).

33. There is no reasonable, much less lawful, basis for Philippine Airlines todistinguish, differentiate or classify cabin attendants on the basis of sexand thereby arbitrarily set a lower compulsory retirement age of 55 forPetitioners for the sole reason that they are women.

37. For being patently unconstitutional and unlawful, Section 114, Part A ofthe PAL-FASAP 2000-2005 CBA must be declared invalid and strickendown to the extent that it discriminates against petitioner.

38. Accordingly, consistent with the constitutional and statutory guaranteeof equality between men and women, Petitioners should be adjudgedand declared entitled, like their male counterparts, to work until they aresixty (60) years old.

PRAYER

WHEREFORE, it is most respectfully prayed that the Honorable Court:

c. after trial on the merits:

(I) declare Section 114, Part A of the PAL-FASAP 2000-2005 CBA INVALID, NULLand VOID to the extent that it discriminates against Petitioners; x x x x

From the petitioners' allegations and relief prayed for in its petition, it is clear thatthe issue raised is whether Section 144, Part A of the PAL-FASAP CBA is unlawfuland unconstitutional. Here, the petitioners' primary relief in Civil Case No. 04-886is the annulment of Section 144, Part A of the PAL-FASAP CBA, which allegedlydiscriminates against them for being female flight attendants. The subject oflitigation is incapable of pecuniary estimation, exclusively cognizable by theRTC, pursuant to Section 19 (1) of Batas Pambansa Blg. 129, as amended.15 Beingan ordinary civil action, the same is beyond the jurisdiction of labor tribunals.

The said issue cannot be resolved solely by applying the Labor Code. Rather, itrequires the application of the Constitution, labor statutes, law on contracts andthe Convention on the Elimination of All Forms of Discrimination AgainstWomen,16 and the power to apply and interpret the constitution and CEDAW is











within the jurisdiction of trial courts, a court of general jurisdiction. In Georg

Grotjahn GMBH & Co. v. Isnani,17 this Court held that not every dispute betweenan employer and employee involves matters that only labor arbiters and theNLRC can resolve in the exercise of their adjudicatory or quasi-judicial powers.The jurisdiction of labor arbiters and the NLRC under Article 217 of the Labor

Code is limited to disputes arising from an employer-employee relationshipwhich can only be resolved by reference to the Labor Code, other labor

statutes, or their collective bargaining agreement .

Not every controversy or money claim by an employee against the employer orvice-versa is within the exclusive jurisdiction of the labor arbiter. Actionsbetween employees and employer where the employer-employee relationshipis merely incidental and the cause of action precedes from a different source ofobligation is within the exclusive jurisdiction of the regular court.18 Here, theemployer-employee relationship between the parties is merely incidental and

the cause of action ultimately arose from different sources of obligation, i.e., theConstitution and CEDAW.

Thus, where the principal relief sought is to be resolved not by reference to theLabor Code or other labor relations statute or a collective bargaining agreementbut by the general civil law, the jurisdiction over the dispute belongs to theregular courts of justice and not to the labor arbiter and the NLRC. In suchsituations, resolution of the dispute requires expertise, not in labor managementrelations nor in wage structures and other terms and conditions of employment,but rather in the application of the general civil law. Clearly, such claims falloutside the area of competence or expertise ordinarily ascribed to labor arbiters

and the NLRC and the rationale for granting jurisdiction over such claims tothese agencies disappears.19

If We divest the regular courts of jurisdiction over the case, then which tribunal orforum shall determine the constitutionality or legality of the assailed CBAprovision?

This Court holds that the grievance machinery and voluntary arbitrators do nothave the power to determine and settle the issues at hand. They have no

jurisdiction and competence to decide constitutional issues relative to the

questioned compulsory retirement age. Their exercise of jurisdiction is futile, as itis like vesting power to someone who cannot wield it.

In Gonzales v. Climax Mining Ltd.,20 this Court affirmed the jurisdiction of courtsover questions on constitutionality of contracts, as the same involves theexercise of judicial power. The Court said:



















Whether the case involves void or voidable contracts is still a judicial question. Itmay, in some instances, involve questions of fact especially with regard to thedetermination of the circumstances of the execution of the contracts. But theresolution of the validity or voidness of the contracts remains a legal or judicialquestion as it requires the exercise of judicial function. It requires the

ascertainment of what laws are applicable to the dispute, the interpretation andapplication of those laws, and the rendering of a judgment based thereon.Clearly, the dispute is not a mining conflict. It is essentially judicial. Thecomplaint was not merely for the determination of rights under the miningcontracts since the very validity of those contracts is put in issue.

In Saura v. Saura, Jr.,21 this Court emphasized the primacy of the regular court's judicial power enshrined in the Constitution that is true that the trend is towardsvesting administrative bodies like the SEC with the power to adjudicate matterscoming under their particular specialization, to insure a more knowledgeable

solution of the problems submitted to them. This would also relieve the regularcourts of a substantial number of cases that would otherwise swell their alreadyclogged dockets. But as expedient as this policy may be, it should not deprive

the courts of justice of their power to decide ordinary cases in accordance with

the general laws that do not require any particular expertise or training to

interpret and apply. Otherwise, the creeping take-over by the administrative

agencies of the judicial power vested in the courts would render the judiciary

virtually impotent in the discharge of the duties assigned to it by the Constitution.

To be sure, in Rivera v. Espiritu,22 after Philippine Airlines (PAL) and PALEmployees Association (PALEA) entered into an agreement, which includes the

provision to suspend the PAL-PALEA CBA for 10 years, several employeesquestioned its validity via a petition for certiorari directly to the Supreme Court.They said that the suspension was unconstitutional and contrary to public policy.Petitioners submit that the suspension was inordinately long, way beyond themaximum statutory life of 5 years for a CBA provided for in Article 253-A of theLabor Code. By agreeing to a 10-year suspension, PALEA, in effect, abdicatedthe workers' constitutional right to bargain for another CBA at the mandatedtime.

In that case, this Court denied the petition for certiorari, ruling that there is

available to petitioners a plain, speedy, and adequate remedy in the ordinarycourse of law. The Court said that while the petition was denominated as one forcertiorari and prohibition, its object was actually the nullification of the PAL-PALEA agreement. As such, petitioners' proper remedy is an ordinary civil actionfor annulment of contract, an action which properly falls under the jurisdiction ofthe regional trial courts.











The change in the terms and conditions of employment, should Section 144 ofthe CBA be held invalid, is but a necessary and unavoidable consequence ofthe principal relief sought, i.e., nullification of the alleged discriminatoryprovision in the CBA. Thus, it does not necessarily follow that a resolution ofcontroversy that would bring about a change in the terms and conditions of

employment is a labor dispute, cognizable by labor tribunals. It is unfair topreclude petitioners from invoking the trial court's jurisdiction merely because itmay eventually result into a change of the terms and conditions of employment.Along that line, the trial court is not asked to set and fix the terms and conditionsof employment, but is called upon to determine whether CBA is consistent withthe laws.

Although the CBA provides for a procedure for the adjustment of grievances,such referral to the grievance machinery and thereafter to voluntary arbitrationwould be inappropriate to the petitioners, because the union and the

management have unanimously agreed to the terms of the CBA and theirinterest is unified.

In Pantranco North Express, Inc., v. NLRC ,23 this Court held that:

x x x Hence, only disputes involving the union and the company shall bereferred to the grievance machinery or voluntary arbitrators.

In the instant case, both the union and the company are united or have come toan agreement regarding the dismissal of private respondents. No grievancebetween them exists which could be brought to a grievance machinery. The

problem or dispute in the present case is between the union and the companyon the one hand and some union and non-union members who were dismissed,on the other hand. The dispute has to be settled before an impartial body. Thegrievance machinery with members designated by the union and the companycannot be expected to be impartial against the dismissed employees. Dueprocess demands that the dismissed workers’ grievances be ventilated before

an impartial body. x x x .

Applying the same rationale to the case at bar, it cannot be said that the"dispute" is between the union and petitioner company because both have

previously agreed upon the provision on "compulsory retirement" as embodiedin the CBA. Also, it was only private respondent on his own who questioned thecompulsory retirement. x x x.

In the same vein, the dispute in the case at bar is not between FASAP andrespondent PAL, who have both previously agreed upon the provision on thecompulsory retirement of female flight attendants as embodied in the CBA. Thedispute is between respondent PAL and several female flight attendants who







questioned the provision on compulsory retirement of female flight attendants.Thus, applying the principle in the aforementioned case cited, referral to thegrievance machinery and voluntary arbitration would not serve the interest ofthe petitioners.

Besides, a referral of the case to the grievance machinery and to the voluntaryarbitrator under the CBA would be futile because respondent alreadyimplemented Section 114, Part A of PAL-FASAP CBA when several of its femaleflight attendants reached the compulsory retirement age of 55.

Further, FASAP, in a letter dated July 12, 2004, addressed to PAL, submitted itsassociation's bargaining proposal for the remaining period of 2004-2005 of thePAL-FASAP CBA, which includes the renegotiation of the subject Section 144.However, FASAP's attempt to change the questioned provision was shallow andsuperficial, to say the least, because it exerted no further efforts to pursue its

proposal. When petitioners in their individual capacities questioned the legalityof the compulsory retirement in the CBA before the trial court, there was noshowing that FASAP, as their representative, endeavored to adjust, settle ornegotiate with PAL for the removal of the difference in compulsory ageretirement between its female and male flight attendants, particularly thoseemployed before November 22, 1996. Without FASAP's active participation onbehalf of its female flight attendants, the utilization of the grievance machineryor voluntary arbitration would be pointless.

The trial court in this case is not asked to interpret Section 144, Part A of the PAL-FASAP CBA. Interpretation, as defined in Black's Law Dictionary, is the art of or

process of discovering and ascertaining the meaning of a statute, will, contract,or other written document.24 The provision regarding the compulsory retirementof flight attendants is not ambiguous and does not require interpretation. Neitheris there any question regarding the implementation of the subject CBA provision,because the manner of implementing the same is clear in itself. The onlycontroversy lies in its intrinsic validity.

Although it is a rule that a contract freely entered between the parties should berespected, since a contract is the law between the parties, said rule is notabsolute.

In Pakistan International Airlines Corporation v. Ople ,25 this Court held that:

The principle of party autonomy in contracts is not, however, an absoluteprinciple. The rule in Article 1306, of our Civil Code is that the contracting partiesmay establish such stipulations as they may deem convenient, "provided theyare not contrary to law, morals, good customs, public order or public policy."Thus, counter-balancing the principle of autonomy of contracting parties is the











equally general rule that provisions of applicable law, especially provisionsrelating to matters affected with public policy, are deemed written into thecontract. Put a little differently, the governing principle is that parties may notcontract away applicable provisions of law especially peremptory provisionsdealing with matters heavily impressed with public interest. The law relating to

labor and employment is clearly such an area and parties are not at liberty toinsulate themselves and their relationships from the impact of labor laws andregulations by simply contracting with each other.

Moreover, the relations between capital and labor are not merely contractual.They are so impressed with public interest that labor contracts must yield to thecommon good.x x x 26 The supremacy of the law over contracts is explained bythe fact that labor contracts are not ordinary contracts; these are imbued withpublic interest and therefore are subject to the police power of the state .27 Itshould not be taken to mean that retirement provisions agreed upon in the CBA

are absolutely beyond the ambit of judicial review and nullification. A CBA, as alabor contract, is not merely contractual in nature but impressed with publicinterest. If the retirement provisions in the CBA run contrary to law, public morals,or public policy, such provisions may very well be voided.28

Finally, the issue in the petition for certiorari brought before the CA by therespondent was the alleged exercise of grave abuse of discretion of the RTC intaking cognizance of the case for declaratory relief. When the CA annuled andset aside the RTC's order, petitioners sought relief before this Court through theinstant petition for review under Rule 45. A perusal of the petition before Us,petitioners pray for the declaration of the alleged discriminatory provision in the

CBA against its female flight attendants.

This Court is not persuaded. The rule is settled that pure questions of fact may notbe the proper subject of an appeal by certiorari under Rule 45 of the RevisedRules of Court. This mode of appeal is generally limited only to questions of lawwhich must be distinctly set forth in the petition. The Supreme Court is not a trierof facts.29

The question as to whether said Section 114, Part A of the PAL-FASAP CBA isdiscriminatory or not is a question of fact. This would require the presentation

and reception of evidence by the parties in order for the trial court to ascertainthe facts of the case and whether said provision violates the Constitution,statutes and treaties. A full-blown trial is necessary, which jurisdiction to hear thesame is properly lodged with the the RTC. Therefore, a remand of this case to theRTC for the proper determination of the merits of the petition for declaratory reliefis just and proper.1avvphi1



















WHEREFORE, the petition is PARTLY GRANTED. The Decision and Resolution of theCourt of Appeals, dated August 31, 2005 and March 7, 2006, respectively, in CA-G.R. SP. No. 86813 are REVERSED and SET ASIDE. The Regional Trial Court ofMakati City, Branch 147 is DIRECTED to continue the proceedings in Civil CaseNo. 04-886 with deliberate dispatch.

SO ORDERED.

DIOSDADO M. PERALTAAssociate Justice


THIRD DIVISION

G.R. No. 169940 September 14, 2009

UNIVERSITY OF SANTO TOMAS, Petitioner,vs.SAMAHANG MANGGAGAWA NG UST (SM-UST), Respondent.

D E C I S I O N

YNARES-SANTIAGO, J.:

Assailed in this petition for review on certiorari is the January 31, 2005Decision1 of the Court of Appeals in CA-G.R. SP No. 72965, which affirmed theMay 31, 2002 Order of the Secretary of the Department of Labor andEmployment (DOLE) directing the parties to execute a Collective BargainingAgreement incorporating the terms in said Order with modification that thesigning bonus is increased to P18,000.00. Also assailed is the September 23, 2005Resolution2 denying the motion for reconsideration.

Respondent Samahang Manggagawa ng U.S.T. (SM-UST) was the authorizedbargaining agent of the non-academic/non-teaching rank-and-file daily- andmonthly-paid employees (numbering about 619) of petitioner, the Pontifical andRoyal University of Santo Tomas, The Catholic University of the Philippines (orUST), a private university in the City of Manila run by the Order of Preachers. In

http://www.lawphil.net/judjuris/juri2009/sep2009/gr_169940_2009.html#fnt1








October 2001, during formal negotiations for a new collective bargainingagreement (CBA) for the academic year 2001 through 2006, petitioner submittedits "2001-2006 CBA Proposals" which, among others, contained the followingeconomic provisions:

A. ACADEMIC YEAR 2001-2002

1. Salary increase of P800.00 per month

2. Signing bonus of P10,000.00

3. Additional Christmas bonus of P2,000.00

B. ACADEMIC YEAR 2002-2003

1. Salary increase of P1,500.00 per month


3. P6,000,000.00 for salary restructuring

C. ACADEMIC YEAR 2003-2004



In November 2001, the parties agreed in principle on all non-economicprovisions of the proposed CBA, except those pertaining to Agency Contract orcontractualization (Art. III, Sec. 3 of the proposed CBA), Union Leave of the SM-UST President (No. 4 of the Addendum to the proposed CBA), and hiringpreference.

In December 2001, petitioner submitted its final offer on the economic provisions,thus:

A. ACADEMIC YEAR 2001-2002


2. Signing bonus of P10,000.00




B. ACADEMIC YEAR 2002-2003



3. P6,190,000.00 to be distributed in the form of salary restructuring

C. ACADEMIC YEAR 2003-2004



On the other hand, respondent reduced its demands for the first year fromP8,000.00 monthly salary increase per employee to P7,000.00, and fromP75,000.00 signing bonus to P60,000.00 for each employee, but petitioner insistedon its final offer. As a result, respondent declared a deadlock and filed a noticeof strike with the National Conciliation and Mediation Board -National CapitalRegion (NCMB-NCR).

Conciliation and mediation proved to be futile, such that in January 2002,majority of respondent’s members voted to stage a strike. However, the DOLE

Secretary timely assumed jurisdiction over the dispute, and the parties weresummoned and heard on their respective claims, and were required to submittheir respective position papers.

On May 31, 2002, the DOLE Secretary issued an Order,3 the pertinent portions ofwhich read, as follows:

x x x In arguing on the reasonableness of its demands, it cites the income of theschool from tuition fee increases and the allocation of this amount to the facultyand non-teaching employees of the School x x x. According to the Union, theSchool’s estimate of the tuition fee increase for the school year 2003-2004 atP76,410,000.00 is erroneous. The Union argues that the total income of the Schoolfrom tuition fee increases for school year 2003-2004 is P101,000,000.00 more orless, or a net of P98,252,187.36, after deducting adjustments for additionalcharges, allowances and discounts. This is based on the computation of theSchool’s Assistant Chief Accountant x x x.

x x x x

The Union feels that the members of the bargaining unit are the least favored. Onthe wage increases alone, the Union points out that a comparison of the







average monthly salary of the non-academic personnel from school year 1995-1996 up to school year 1999-2000 shows a declining relative percentage. For thisperiod, the bargaining unit enjoyed an average monthly salary increase of14.234%, the lowest being 8.9% in school year 1998-1999 and the highest being15.38% in school year 1995-1996. The School’s offer for this CBA cycle translates

to an increase of only 8.23%, specified as follows: (1) 5.69% increase in schoolyear 2000-2001 (P1,000.00); (2) 9.15% increase in school year 2001-2002(P1,700.00); and (3) 9.86% increase in 2002-2003 (P2,000.00).

The Union also submits a comparative chart of the allocation to non-academicpersonnel of the 70% increase in tuition fees from school year 1996-1997 to 1999-2000 x x x. The average percentage allocation to non-academic personnelduring this period is 32.8% of the total 70% of total tuition fee increases, thelowest being 20.83% for the school year 1999-2000 and the highest being 43.11%of the total allocation in 1997-1998. Using P101,036,330.37 as the estimated

increase in tuition fee, 70% of this amount, net of adjustment, is P68,775,831.15 xx x. The Union argues that it is entitled to at least the average percentage ofallocation to it for the past four (4) school years which is at 32.85%, orP22,592,860.53 of the total allocation of P68,775,831.15.

It maintains, however, that it is entitled to more than the average percentage ofits allocation of the total 70% because it is School practice to allocate more than70% of the total tuition fee increases for the salaries and benefits of Schoolemployees. Comparing the employees’ share in the tuition fee increases from

school year 1996-1997 to 1999-2000, the School allocated an averagepercentage of 76.75% for the benefits and salaries of its personnel, or from a low

of 72% in 1998-1999 to a high of 84.4% in 1996-1997 x x x. If the average isapplied this year, the Union argues that the available amount is P75,407,786.29.Because of this practice, the Union maintains that the School is alreadyestopped from arguing that the allocation for employee wages and benefitsshould not exceed 70% of tuition fee increases.

Aside from this amount, the Union maintains that it is entitled to an additionalP15,475,000.00, sourced from other income, for the signing bonus or one-timegrant of P25,000.00 per member x x x. The Union alleges that it is school practiceto appropriate other funds for the wages and benefits of its employees. For the

school year 1996-1997, the School used funds from other sources to fund theP2,000,000.00 hospitalization fund and 50% of the signing bonus for theacademic personnel; in 1997-1998 and 1998-1999, it used additional funds forthe P1,000,000.00 hospitalization fund of the academic personnel; and in 1999-2000, it used other funds to finance the one-time grant of P10,000.00 each to thenon-academic personnel and additional P4,000,000.00 for the hospitalizationfund of the academic employees or a total of P17,592,500.00 for the past four (4)academic years x x x.



The School cannot claim that the funds are insufficient to cover the expenses forthe CBA because for the fiscal year 2000-2001 alone, the accumulated excessof revenues over expenses at the end of the year totaled P148,881,678.00 x x x.The Statement of Revenues and Expenses from School Operations collated fromthe audited Financial Statements of the School for the school years 1996-1997 up

to 2000-2001 shows that except for school years 1996-1997 and 2000-2001, theSchool posted a net income from school operations. Its average annual netincome from school operations alone is P7,956,187.00 and the net loss in 2000-2001 was a result of the revaluation of the Main Building as part of the assetsfrom its fully depreciated value so that a new depreciation cost was reportedand charged to general expenses.

From the foregoing arguments, the Union demands that an amount should beallocated to it annually to finance its demands as follows:

1st Year – P38,067,860.00 distributed as follows: P22,592,860.53 (share fromtuition fee increases) for the economic benefits with sliding effect on thesucceeding years; plus P15,475,000.00 for the one-time signing bonus ofP25,000.00 for each employee sourced from other funds.

2nd Year – P33,568,970.00 to apply to its demand for salary increase,Christmas bonus, rice subsidy and clothing/uniform allowance.

3rd Year – P46,653,295.37 to apply to its demand for salary increase,Christmas bonus, medicine allowance, mid-year bonus allowance andmeal allowance.

Based on the Union’s computation, its demands will cost the School a total of

P133,765,125.37 for the entire three (3) year period.

x x x x

Given all the foregoing, we cannot follow the Union’s formula and in effect

disregard the School’s two other bargaining units; to do so is a distortion of

economic reality that will not bring about long term industrial peace. We cannotsimply adopt the School’s proposal in light of the parties’ bargaining history,

particularly the pattern of increases in the last cycle. Considering all these, webelieve the following to be a fair and reasonable resolution of the wage issue.

1st Year – P1,000.00/month

2nd Year – P2,000.00/month

3rd Year – P2,200.00/month



These increases, at a three-year total of P68,337,600, are less than the three (3)-year increases in the last CBA cycle to accommodate the School’s proven lack

of capacity to afford a higher increase, but are still substantial enough toaccommodate the workers’ needs while taking into account the symmetry thatmust be maintained with the wages of the other bargaining units. On a straight

line aggregate of P5,200.00, the non-academic personnel will receive P498.48less than an Instructor I (member of the faculty union) who received anaggregate of P5,698.48, thus maintaining the gap between the teaching andnon-teaching personnel. The salary difference will as well be maintained overthe three (3)-year period of the CBA. An RFI employee (member of the union’s

bargaining unit) will receive a monthly salary of P21,695.95 while an Instructor I(faculty union member) will have a salary of P22,948.00; while an RF5-5/A(member of the union’s bargaining unit) will receive a salary of P23,462.97

compared to an Asst. Prof. 1 (faculty) who will receive P29,250.96. From a totalcost of salary increases for the first year at P7,428,000, these costs will escalate to

P22,284,000 in the second year, and to P38,625,000 at the third year. Given thesefigures, the amounts available for distribution and the member of groups sharingthese amounts, these increases are by no means minimal.

Signing Bonus

A review of the past bargaining history of the parties shows that the School as amatter of course grants a signing bonus. This ranged from P8,000.00 during thefirst three (3) years of the last CBA to P10,000.00 during the remaining two (2)years of the re-negotiated term. In this instance, the School’s offer of P10,000.00

signing bonus is already reasonable considering that the School could have

taken the position that no signing bonus is due on compulsory arbitration in linewith the ruling in Meralco v. Quisumbing et al., G.R. No. 127598, 27 January 1999.

Christmas Bonus

We note that the members of the bargaining unit receive a P6,500.00 Christmasbonus. Considering this current level, we believe that the School’s offer of

P2,000.00 for each of the next three (3) years of the CBA is already reasonable.Under this grant, the workers’ Christmas bonus will stand at a total of P12,500 at

the end of the third year.

Hospitalization Benefit

We believe that the current practice is already reasonable and should bemaintained.

Meal Allowance



The Union failed to show any justification for its demand on this item, hence itsdemand on the increase of meal allowance is denied.

Rice Allowance

We believe an additional 2 sacks of rice on top of the existing 6 sacks of rice isreasonable and is hereby granted, effective on the second year.

Medical Allowance

In the absence of any clear justification for an improvement of this benefit, wefind the existing practice to be already reasonable and should be maintained.

Uniform/Clothing

The Union has not established why the School should grant the benefit; hencethis demand is denied.

Mid-year Bonus

The P3,000.00 bonus is already fair and should be maintained.

Hazard Pay

There is no basis to increase this benefit, the current level being fair andreasonable.

Educational Benefit

The existing provision is already generous and should be maintained.

Retirement Plan

We are convinced that the 100% of basic salary per year of service is alreadyreasonable and should be maintained.

Hiring Preference

Based on the Minutes of Meeting on 18 October 2001 and 8 November 2001, theparties agreed to retain the existing provision; hence, our ruling on this matter isno longer called for.

Contractualization



The Union’s proposed amendments are legal prohibitions which need not be

incorporated in the CBA. The Union has alternative remedies if it desires to assailthe School’s contracts with agencies.

Full-time Union Leave of Union President

The Union failed to provide convincing reasons why this demand should befavorably granted; hence, the same is denied.

Other Demands

All other demands not included in the defined deadlock issues are deemedabandoned, except for existing benefits which the School shall continue to grantat their current levels consistent with the principle of non-diminution of benefits.

WHEREFORE, premises considered, the parties are hereby directed to executewithin ten (10) days from receipt of this Order a Collective BargainingAgreement incorporating the terms and conditions of this Order as well as otheragreements made in the course of negotiations and on conciliation.4

Respondent filed a motion for reconsideration but it was denied by the Secretaryof Labor. Thus, respondent filed an original petition for certiorari with the Court ofAppeals, claiming that the awards made by the DOLE Secretary are notsupported by the evidence on record and are contrary to law and

jurisprudence.

On January 31, 2005, the appellate court rendered the assailed Decision, thedispositive portion of which reads, as follows:

WHEREFORE, premises considered, the petition is partially GRANTED. The assailedOrder of May 31, 2002 of Secretary Patricia Sto. Tomas is hereby AFFIRMED withthe modification that the P10,000.00 signing bonus awarded is increased toP18,000.00.

SO ORDERED.5

In arriving at the foregoing disposition, the appellate court noted that:

Based on UST Chief Accountant Antonio J. Dayag’s Certification, the tuition fee

increment for the SY 2001-2002 amounted to P101,036,330.37. From this amount,the tuition fee adjustment amounting to P2,785,143.00 was deducted leaving anet tuition fee increment of P98,251,189.36.











Pursuant to Section 5 (2) RA 6728, seventy percent (70%) of P98,251,187.36 orP68,775,831.15 is the amount UST has to allocate for salaries, wages, allowancesand other benefits of its 2,290 employees, categorized as follows: 619 non-teaching personnel represented by herein petitioner SM-UST; 1,452 facultymembers represented by UST-Faculty Union (UST-FU) and 219

academic/administrative officials. The last group of employees is excluded fromthe coverage of the two bargaining units.

Public respondent, taking into consideration the bargaining history of the parties,the needs of the members of Union in relation to the capability of its employer,UST, to grant its demands, the impact of the award on the UST-Faculty Unionmembers (UST-FU), and how the present salary and benefits of the non-academic personnel compare with the compensation of the employees of otherlearning institutions, arrived at the following "fair and reasonable" resolution tothe wage issue:

1st year – P1,000.00/month

2nd year – P2,000.00/month

3rd year – P2,000.00/month

Based on public respondent’s arbitral award for the first year (AY 2001-2002), Wedetermine the allocation that SM-UST would get from the 70% of the tuition feeincrement for AY 2001-2002 by approximating UST’s expense on the increment of

salaries/wages, allowances and benefits of the non-teaching personnel:

1. Increment on Salaries/Wages+ 13th month pay(P1,000 x 13 months x 619 employees)

P 8,047,000.00

2. Signing Bonus(P10,000/employee)

6,190,000.00

3. P2,000 Christmas Bonus 1,238,000.00

Total P15,475,000.00=============

The amount of P15,475,000.00 represents 22.50% of the allocated P68,775,831.00(70% of the tuition fee increment for AY 2001-2002). UST has allocated P45 millionor 65.43% of the P68,775,831 to UST-Faculty Union.



Is the distribution equitable? If the share from the allocated P68,775,831.00 foreach bargaining unit would be based on the union’s membership, then the

distribution appears fair and reasonable:

x x x x

Academic 1,452 employees awarded P45 million

Non-academic 619 employees awarded P15.475 million

Academic &Administrative 219 employees awarded P8 million

Total awarded P68,475,000.00

The difference between P68,775,831 (70% of incremental tuition fee proceeds)and P68,475,000 (total actual allocation or award to the two bargaining unitsand the school officials) is P300,831.00, which is only .437% of the 70%mandatory allocation (P68,775,831.00).

The Supreme Court in the case of Cebu Institute of Medicine v. Cebu Institute ofMedicine Employees’ Union National Federation of Labor held that SSS,

Medicare and Pag-Ibig employer’s share may be charged against the "seventypercent (70%) incremental tuition fee increase (sic)" as they are, after all, for thebenefit of the University’s teaching and non-teaching personnel. The High Court

further ruled that "the private educational institution concerned has thediscretion on the disposition of the seventy percent (70%) incremental tuition feeincrease (sic). It enjoys the privilege of determining how much increase insalaries to grant and the kind and amount of allowances and other benefits togive. The only precondition is that seventy percent (70%) of the incrementaltuition fee increase (sic) goes to the payment of salaries, wages, allowancesand other benefits of teaching and non-teaching personnel."a1f

In the (sic) light of the foregoing jurisprudence, the University, in order to complywith R.A. 6728, must fully allocate the 70% of the tuition fee increases to salaries,wages, allowances and other benefits of the teaching and non-teaching

personnel. The amount of P300,831.00 must therefore be allocated either assalary increment or fringe benefits of the non-teaching personnel.

We noted that UST’s non-teaching employees enjoy several fringe benefits.

We listed them down and estimated their costs for AY 2001-2002:



1.P3,000.00 mid-year bonus

P1,857,000.00

2. 6 sacks of rice/employee@ P1,000.00/sack 3,714,000.00

3. Hospitalization benefit 2,476,000.00

4. Meal allowance(P600/month/employee) 4,456,800.00

5. Hazard pay (P200/month for198 entitled employees) 8,430,780.00

6. Medicine Allowance(P1,000/month/employee) 7,428,000.00 20,407,000.00

7. SSS (P910.00 employer’s share per employee) 6,759,480.00

8. Pag-Ibig (2% of the basic pay) 742,800.00

9. Phil Health (P125.00/employee) 928,500.00

TotalP28,837,780.00=============

The allocation for salary increases, 13th month pay, signing bonus and Christmasbonus for UST’s teaching and non-teaching employees, as well as the schoolofficials, amount to P68.475 million. This represents almost 70% of the USTincremental tuition fee proceeds for AY 2001-2002. Considering the fringebenefits being extended to UST employees, it is safe to assume that the funds forsuch benefits need to be sourced from the University’s other revenues. We

looked into UST’s financial statements to determine its financial standing. Thefinancial statements duly audited by independent and credible externalauditors constitute the normal method of proof of profit and loss performance ofa company. We examined UST audited financial statements from 1997 to 2001and found that the University’s "other incomes" come from parking fees, rent

income and interest income. It, likewise, derives income from school operations:

1999 2000 2001

Income fromOperations P19,874,937.00 (24,222,602) (40,905,598)

Other Income 85,995,039.00 77,335,032.00 78,358,303



Excess of Revenues OverExpenses BeforeIncome Tax 96,869,976.00 53,112,480.00 (29,726,651)

Provision for

Income Tax 2,122,518.00 2,602,305.00Excess of RevenuesOver Expenses 94,747,458.00 50,510,175.00 (32,115,272)

ACCUMULATEDEXCESS OFREVENUES OVEREXPENSES ATEND OF YEAR P180,996,950.00 P130,486,775.00 P148,881,678

Thus, if We charge the employees’ other benefits from theaccumulated excess of revenues, We will come up with thefollowing:

Accumulated Excess of RevenuesOver Expenses (2001) P148,881,678.00

Less:Other Benefits of Non-Teaching Personnel 28,837,780.00

Balance P120,043,898.00

Even if the other benefits of the faculty members were to be charged from theremaining balance of the Accumulated Excess of Revenues Over Expenses,there would still be sufficient amount to fund the other benefits of the non-teaching personnel.

x x x x

However, while We subscribe to UST’s position on "salary distortion", Our earlier

findings support the petitioner’s contention that the UST has substantialaccumulated income and thus, We deem it proper to award an increase, not insalary, to prevent any salary distortion, but in signing bonus. The arbitral awardof P10,000 signing bonus per employee awarded by public respondent is herebyincreased to P18,000.00.



We are well aware of the need for the University to maintain a sound and viablefinancial condition in the light of the decreasing number of its enrollees and theincreasing costs of construction of buildings and modernization of equipment,libraries, laboratories and other similar facilities. To balance this concern of theUniversity with the need of its non-academic employees, the additional award,

which We deem reasonable, and to be funded from the University’saccumulated income, is thus limited to the increase in signing bonus.6

Petitioner filed a motion for reconsideration, which the appellate court denied inits September 23, 2005 Resolution. Hence, the instant petition which raises thefollowing issues:

I.

THE HONORABLE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCEWHEN IT RULED THAT THE MEMBERS OF PRIVATE RESPONDENT DID NOTVOLUNTARILY AND KNOWINGLY ACCEPT THE ARBITRAL AWARD OF THE SECRETARYOF DOLE.

II.

THE HONORABLE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCEAMOUNTING TO GRAVE ABUSE OF DISCRETION WHEN IT INCREASED THE SIGNINGBONUS AWARDED BY THE SECRETARY OF DOLE TO EACH OF THE MEMBERS OFPRIVATE RESPONDENT FROM P10,000.00 TO P18,000.00.

III.

THE HONORABLE COURT OF APPEALS HAS COMPLETELY IGNORED THE CLEARMANDATE AND INTENTION OF R.A. 6728 OTHERWISE KNOWN AS THE GOVERNMENTASSISTANCE TO STUDENTS AND TEACHERS IN PRIVATE EDUCATION ACT.

IV.

THE HONORABLE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCEAMOUNTING TO GRAVE ABUSE OF DISCRETION WHEN IT RULED THAT THE FRINGEBENEFITS BEING ENJOYED BY THE ACADEMIC AND NON-ACADEMIC EMPLOYEESOF PETITIONER WERE SOURCED OUT FROM ITS OTHER INCOME.

V.

THE HONORABLE COURT OF APPEALS COMMITTED PALPABLE ERROR OF SUBSTANCEAMOUNTING TO GRAVE ABUSE OF DISCRETION WHEN IT IGNORED THE TIME







HONORED PRINCIPLES GOVERNING PETITION FOR CERTIORARI INVOLVING LABORCASES.7

Petitioner alleges that, as of December 11, 2002, 526 regular non-academicemployees – out of a total of 619 respondent’s members – have decided to

unconditionally abide by the May 31, 2002 Order of the DOLE Secretary.8 A lettersigned by the 526 non-academic employees allegedly reads:

December 3, 2002

TO: REV. FR. TAMERLANE R. LANA, O.P.Rector

REV. FR. JUAN V. PONCE, O.P.Vice-Rector

KAMI NA NAKALAGDA SA IBABA AY NAGPAPAABOT NG AMING TAHASANGPAGTANGGAP SA AWARD NG SECRETARY OF LABOR SA AMING (CBA)DEADLOCK CASE.

SANA PO AY MA-RELEASE ANG AMING MGA WAGE ADJUSTMENTS AT IBA PANGBENEPISYO BAGO MAG DECEMBER 15, 2002.

x x x x9

Petitioner claims that it began paying the wage adjustment and other benefits

pursuant to the May 31, 2002 Order of the DOLE Secretary; and that to date, 572out of the 619 members of respondent have been paid. It now argues that bytheir acceptance of the award and the resulting payments made to them, thesaid union members have ratified its offer and thus rendered moot the casebefore the Court of Appeals (CA-G.R. SP No. 72965).

Petitioner also argues that the Court of Appeals erred in ordering it to source partof its judgment award from the school’s other income, claiming that Republic

Act 672810 does not compel or require schools to allocate more than 70% of theincremental tuition fee increase for the salaries and benefits of its employees.Citing an authority in education law, it stresses that –

Clearly, only 70% may be used for the "payment of salaries, wages, allowancesand other benefits of teaching and non-teaching personnel," since 20% "shall goto the improvement or modernization of buildings, equipment, libraries,laboratories, gymnasia and similar facilities and the payment of other costs ofoperation."

















A school does not exist solely for the benefit of its teachers and non-teachingpersonnel. A school is principally established to deliver quality education at alllevels, as the Constitution requires. Therefore, any tuition fee increase authorizedby either the DepEd Secretary, the CHED or the Director General of the TESDA forprivate schools should not solely benefit the teaching and non-teaching

personnel but should rather be used for the welfare of the entire schoolcommunity, particularly the students. The students are entitled as a matter ofright to the improvement and modernization of the school "buildings,equipment," as this is fundamental to the maintenance or improvement of thequality of education they receive.

Thus, if schools use any part of the 20% reserved for the upgrading of schoolfacilities to supplement the salaries of their academic and non-academicpersonnel, they would not only be violating the students’ constitutional right toquality education through "improvement and modernization" but also

committing a serious infraction of the mandatory provisions of RA 6728.The law is silent, however, on the remaining ten percent of the tuition feeincrease. The DepEd has referred to it as the "return of investment" for proprietaryschools and the "free portion" for non-stock, non-profit educational institutions.This ten percent (10%) is the only portion of the tuition fee increase whichschools may use as they wish.11

Petitioner thus concedes liability only up to P300,831.00, which is the remainingbalance of the undistributed amount of P68,775,831.00, which represents 70% ofthe incremental tuition fee proceeds for the period in question.

Petitioner contends further that the appellate court’s award of additional signing

bonus (from P10,000.00 to P18,000.00) is contrary to the nature and principlebehind the grant of such benefit, which is one given as a matter of discretionand cannot be demanded by right,12 a consideration paid for the goodwill thatexisted in the negotiations, which culminate in the signing of a CBA.13 Petitionerclaims that since this condition is absent in the parties’ case, it was erroneous to

have rewarded respondent with an increased signing bonus.

Finally, petitioner endorses the original award of the DOLE Secretary, calling her

disposition of the case "fair and equitable"14

and deserving of our attention, inlight of the principle that –

The conclusions reached by public respondent (Secretary of Labor) in thedischarge of her statutory duty as compulsory arbitrator, demand the highrespect of this Court. The study and settlement of these disputes fall within publicrespondent's distinct administrative expertise. She is especially trained for thisdelicate task, and she has within her cognizance such data and information as



















will assist her in striking the equitable balance between the needs ofmanagement, labor, and the public. Unless there is clear showing of graveabuse of discretion, this Court cannot and will not interfere with the laborexpertise of public respondent x x x.15

On the other hand, respondent seeks to sustain the appellate court’s disposition,echoing its ruling that even though majority of the non-teaching employeesagreed to petitioner’s offer and accepted payment thereupon, they are notprecluded from receiving additional benefits that the courts may award later on,bearing in mind that –

the employer and the employee do not stand on the same footing. Consideringthe country’s prevailing economic conditions, the employee oftentimes findshimself in no position to resist money proffered, thus, his case becomes one ofadherence and not of choice. This being the case, they are deemed not to have

waived any of their rights.16

As regards petitioner’s assertion that the funds to cover for the cost of the other

benefits awarded by the DOLE Secretary may not be sourced from its otherincome pursuant to R.A. 6728 as these benefits should only be paid out from the70% tuition fee increment, respondent argues that R.A. 6728 –

does not provide that the increase or improvement of the salaries and fringebenefits of the employees should be exclusively funded from the income of theUniversity which is derived from the increase in tuition fees. In fact, the statutehas no application with respect to the manner of disposition of the other

incomes (as distinguished from income derived from tuition fee increases) of theUniversity, nor does it preclude or exempt the latter from using its other incomeor part thereof to fund the cost of increases or improvements in the salaries andbenefits of its employees. x x x

15. Contrary to the assertion of Petitioner, it is very clear that the funds used bythe University to cover the cost of other fringe benefits (under the existing CBA)granted to the non-academic employees for AY 2001-2002 in the amount ofP28,837,780.00 as observed by the Court of Appeals, came from the otherincome of the University and not from the share of the said employees in the

income derived from the tuition fee increases during the same period. Logically,the grant of the said fringe benefits could not have come from the amount ofP15,475,000.00 which was already allocated by the University to cover the totalcost of the increases in the salaries, grant of signing bonus, and increase in theChristmas bonus to the non-academic employees for AY 2001-2002.17

On the appellate court’s award of additional signing bonus, respondent argues

that since no strike or any untoward incident occurred, goodwill between the















parties remained, which entitles respondent’s members to receive their signing

bonus. Besides, respondent asserts that since petitioner did not appeal the DOLESecretary’s award, it may not now argue against its grant, the issue remaining

being the propriety of the awarded amount; that is, whether or not it was properfor the appellate court to have raised it from P10,000.00 to P18,000.00.

We resolve to PARTIALLY GRANT the petition.

To put matters in their proper context, we must first simplify the facts.

Although the parties were negotiating on the CBA for academic years 2001through 2006 (2001-2006 CBA Proposals), we are here concerned only with theeconomic provisions for the academic year (AY) 2001-2002, specifically theappellate court’s increased award of signing bonus, from P10,000.00 as originally

granted by the DOLE Secretary, to P18,000.00; the parties do not appear toquestion any other disposition made by the DOLE Secretary.

Thus, it has been determined that from the tuition fees for the academic year inquestion, petitioner earned an increment of P101,036,330.37. Under R.A. 6728,70% of that amount – or the net18 amount of P68,775,831.15 – should be allottedfor payment of salaries, wages, allowances and other benefits of teaching andnon-teaching personnel except administrators who are principal stockholders ofthe school.

Of this amount (P68,775,831.15), an aggregate of P15,475,000.00 (or 22.5 %) wasallocated to the university’s non-teaching or non-academic personnel, by way

of the following:

Increment on Salaries/Wagesplus 13th month pay(P1,000 x 13 months x 619non-academic personnel)

P 8,047,000.00

Signing Bonus(P10,000 per employee)

6,190,000.00

P2,000 Christmas Bonus 1,238,000.00

TOTAL 15,475,000.00

On the other hand, the amount of P45 million (or 65.43% of P68,775,831.15) wasallocated to the teaching personnel.







After distribution of the respective shares of the teaching and non-teachingpersonnel, there remained a balance of P300,831.00 from the P68,775,831.15.

In addition to the salary increase, signing and Christmas bonuses, the Court ofAppeals extended to respondent’s members the following fringe benefits for AY

2001-2002, which benefits petitioner has been giving its non-teachingemployees in the past, and which are included in the DOLE Secretary’s award – an award which petitioner prays for this Court to affirm in toto:

1.P3,000.00 mid-year bonus

P1,857,000.00

2. 6 sacks of rice/employee@ P1,000/sack 3,714,000.00

3. Hospitalization benefit 2,476,000.00

4. Meal allowance(P600/month/employee)

4,456,800.00

5. Hazard pay (P200/month for198 entitled employees)

8,430,780.00

6. Medicine Allowance(P1,000/month/employee) 7,428,000.00 20,407,000.00

7. SSS (P910.00 employer’s share per employee)

6,759,480.00

8. Pag-Ibig (2% of the basic pay) 742,800.00

9. Philhealth (P125.00/employee) 928,500.00

Total P28,837,780.00

Clearly, these fringe benefits would have to be obtained from sources other thanthe incremental tuition fee proceeds (P68,775,831.15), since only P15,475,000.00

thereof was set aside for the non-teaching personnel; the rest was allocated tothe teaching personnel.

The appellate court, moreover, granted an increase in the signing bonus, that is,from the DOLE Secretary’s award of P10,000.00, to P18,000.00. This, exactly, is theparties’ point of contention.



Going now to the question of whether respondent’s members’ individual

acceptance of the award and the resulting payments made by petitioneroperate as a ratification of the DOLE Secretary’s award which renders CA-G.R. SPNo. 72965 moot, we find that such do not operate as a ratification of the DOLESecretary’s award; nor a waiver of their right to receive further benefits, or what

they may be entitled to under the law. The appellate court correctly ruled thatthe respondent’s members were merely constrained to accept payment at the

time. Christmas was then just around the corner, and the union members were inno position to resist the temptation to accept much-needed cash for use duringthe most auspicious occasion of the year. Time and again, we have held thatnecessitous men are not, truly speaking, free men; but to answer a presentemergency, will submit to any terms that the crafty may impose upon them.19

Besides, as individual components of a union possessed of a distinct andseparate corporate personality, respondent’s members should realize that in

joining the organization, they have surrendered a portion of their individualfreedom for the benefit of all the other members; they submit to the will of themajority of the members in order that they may derive the advantages to begained from the concerted action of all.20 Since the will of the members ispersonified by its board of directors or trustees, the decisions it makes shouldaccordingly bind them. Precisely, a labor union exists in whole or in part for thepurpose of collective bargaining or of dealing with employers concerning termsand conditions of employment.21 What the individual employee may not doalone, as for example obtain more favorable terms and conditions of work, thelabor organization, through persuasive and coercive power gained as a group,can accomplish better.1avvphi1

Regarding petitioner’s assertion that it was unlawful for the Court of Appeals tohave required it to source the award of fringe benefits (in the amount ofP28,837,780.00) from the school’s other income, since R.A. 6728 does not compel

or require schools to allocate more than 70% of the incremental tuition feeincrease for the salaries and benefits of its employees, we find it unnecessary torule on this matter. These fringe benefits are included in the DOLE Secretary’s

award – an award which petitioner seeks to affirm in toto; this being so, it cannotnow argue otherwise. Since it abides by the DOLE Secretary’s award, which it

finds "fair and equitable," it must raise the said amount through sources other

than incremental tuition fee proceeds.

Finally, we come to the appellate court’s award of additional signing bonus,which we find to be unwarranted under the circumstances. A signing bonus is agrant motivated by the goodwill generated when a CBA is successfullynegotiated and signed between the employer and the union.22 In the instantcase, no CBA was successfully negotiated by the parties. It is only becausepetitioner prays for this Court to affirm in toto the DOLE Secretary’s May 31, 2002



















Order that we shall allow an award of signing bonus. There would have been noother basis to grant it if petitioner had not so prayed. We shall take it as amanifestation of petitioner’s liberality, which we cannot now allow it to withdraw.

A bonus is a gratuity or act of liberality of the giver;23 when petitioner filed theinstant petition seeking the affirmance of the DOLE Secretary’s Order in its

entirety, assailing only the increased amount of the signing bonus awarded, it isconsidered to have unqualifiedly agreed to grant the original award to therespondent union’s members.

WHEREFORE, the petition is PARTIALLY GRANTED. The signing bonus of EIGHTEENTHOUSAND PESOS (P18,000.00) per member of respondent SamahangManggagawa ng U.S.T. as awarded by the Court of Appeals is REDUCED to TENTHOUSAND PESOS (P10,000.00). All other findings and dispositions made by theCourt of Appeals in its January 31, 2005 Decision and September 23, 2005Resolution in CA-G.R. SP No. 72965 are AFFIRMED.

SO ORDERED.

CONSUELO YNARES-SANTIAGOAssociate Justice


G.R. No. 181531 July 31, 2009

NATIONAL UNION OF WORKERS IN HOTELS, RESTAURANTS AND ALLIED INDUSTRIES-MANILA PAVILION HOTEL CHAPTER, Petitioner,

vs.SECRETARY OF LABOR AND EMPLOYMENT, BUREAU OF LABOR RELATIONS,HOLIDAY INN MANILA PAVILION HOTEL LABOR UNION AND ACESITE PHILIPPINESHOTEL CORPORATION, Respondents.

D E C I S I O N







CARPIO MORALES, J.:

National Union of Workers in Hotels, Restaurants and Allied Industries – ManilaPavilion Hotel Chapter (NUWHRAIN-MPHC), herein petitioner, seeks the reversalof the Court of Appeals November 8, 2007 Decision1and of the Secretary of

Labor and Employment’s January 25, 2008 Resolution2 in OS-A-9-52-05 whichaffirmed the Med-Arbiter’s Resolutions dated January 22, 20073 and March 22,2007.4

A certification election was conducted on June 16, 2006 among the rank-and-file employees of respondent Holiday Inn Manila Pavilion Hotel (the Hotel) withthe following results:

EMPLOYEES IN VOTERS’ LIST = 353

TOTAL VOTES CAST = 346

NUWHRAIN-MPHC = 151

HIMPHLU = 169

NO UNION = 1

SPOILED = 3

SEGREGATED = 22

In view of the significant number of segregated votes, contending unions,petitioner, NUHWHRAIN-MPHC, and respondent Holiday Inn Manila PavillionHotel Labor Union (HIMPHLU), referred the case back to Med-Arbiter Ma.Simonette Calabocal to decide which among those votes would be openedand tallied. Eleven (11) votes were initially segregated because they were castby dismissed employees, albeit the legality of their dismissal was still pendingbefore the Court of Appeals. Six other votes were segregated because theemployees who cast them were already occupying supervisory positions at thetime of the election. Still five other votes were segregated on the ground thatthey were cast by probationary employees and, pursuant to the existingCollective Bargaining Agreement (CBA), such employees cannot vote. It bears

noting early on, however, that the vote of one Jose Gatbonton (Gatbonton), aprobationary employee, was counted.

By Order of August 22, 2006, Med-Arbiter Calabocal ruled for the opening of 17out of the 22 segregated votes, specially those cast by the 11 dismissedemployees and those cast by the six supposedly supervisory employees of theHotel.

http://www.lawphil.net/judjuris/juri2009/jul2009/gr_181531_2009.html#fnt1














Petitioner, which garnered 151 votes, appealed to the Secretary of Labor andEmployment (SOLE), arguing that the votes of the probationary employeesshould have been opened considering that probationary employeeGatbonton’s vote was tallied. And petitioner averred that respondent HIMPHLU,which garnered 169 votes, should not be immediately certified as the bargaining

agent, as the opening of the 17 segregated ballots would push the number ofvalid votes cast to 338 (151 + 169 + 1 + 17), hence, the 169 votes which HIMPHLUgarnered would be one vote short of the majority which would then become169.

By the assailed Resolution of January 22, 2007, the Secretary of Labor andEmployment (SOLE), through then Acting Secretary Luzviminda Padilla, affirmedthe Med-Arbiter’s Order. It held that pursuant to Section 5, Rule IX of the Omnibus

Rules Implementing the Labor Code on exclusion and inclusion of voters in acertification election, the probationary employees cannot vote, as at the time

the Med-Arbiter issued on August 9, 2005 the Order granting the petition for theconduct of the certification election, the six probationary employees were notyet hired, hence, they could not vote.

The SOLE further held that, with respect to the votes cast by the 11 dismissedemployees, they could be considered since their dismissal was still pendingappeal.

As to the votes cast by the six alleged supervisory employees, the SOLE held thattheir votes should be counted since their promotion took effect months after theissuance of the above-said August 9, 2005 Order of the Med-Arbiter, hence, they

were still considered as rank-and-file.

Respecting Gatbonton’s vote, the SOLE ruled that the same could be the basis to

include the votes of the other probationary employees, as the records show thatduring the pre-election conferences, there was no disagreement as to hisinclusion in the voters’ list, and neither was it timely challenged when he voted

on election day, hence, the Election Officer could not then segregate his vote.

The SOLE further ruled that even if the 17 votes of the dismissed and supervisoryemployees were to be counted and presumed to be in favor of petitioner, still,

the same would not suffice to overturn the 169 votes garnered by HIMPHLU.

In fine, the SOLE concluded that the certification of HIMPHLU as the exclusivebargaining agent was proper.

Petitioner’s motion for reconsideration having been denied by the SOLE by

Resolution of March 22, 2007, it appealed to the Court of Appeals.



By the assailed Decision promulgated on November 8, 2007, the appellatecourt affirmed the ruling of the SOLE. It held that, contrary to petitioner’s

assertion, the ruling in Airtime Specialist, Inc. v. Ferrer Calleja5 stating that in acertification election, all rank-and-file employees in the appropriate bargainingunit, whether probationary or permanent, are entitled to vote, is inapplicable to

the case at bar. For, the appellate court continued, the six probationaryemployees were not yet employed by the Hotel at the time the August 9, 2005Order granting the certification election was issued. It thus held that AirtimeSpecialist applies only to situations wherein the probationary employeeswere already employed as of the date of filing of the petition for certificationelection.

Respecting Gatbonton’s vote, the appellate court upheld the SOLE’s finding that

since it was not properly challenged, its inclusion could no longer bequestioned, nor could it be made the basis to include the votes of the six

probationary employees.The appellate court brushed aside petitioner’s contention that the opening of the

17 segregated votes would materially affect the results of the election as therewould be the likelihood of a run-off election in the event none of the contendingunions receive a majority of the valid votes cast. It held that the "majority"contemplated in deciding which of the unions in a certification election is thewinner refers to the majority of valid votes cast, not the simple majority of votescast, hence, the SOLE was correct in ruling that even if the 17 votes were in favorof petitioner, it would still be insufficient to overturn the results of the certificationelection.

Petitioner’s motion for reconsideration having been denied by Resolution of

January 25, 2008, the present recourse was filed.

Petitioner’s contentions may be summarized as follows:

1. Inclusion of Jose Gatbonton’s vote but excluding the vote of the six

other probationary employees violated the principle of equal protectionand is not in accord with the ruling in Airtime Specialists, Inc. v. Ferrer-Calleja;

2. The time of reckoning for purposes of determining when theprobationary employees can be allowed to vote is not August 9, 2005 – the date of issuance by Med-Arbiter Calabocal of the Order granting theconduct of certification elections, but March 10, 2006 – the date the SOLEOrder affirmed the Med-Arbiter’s Order.






3. Even if the votes of the six probationary employees were included, still,HIMPHLU could not be considered as having obtained a majority of thevalid votes cast as the opening of the 17 ballots would increase thenumber of valid votes from 321 to 338, hence, for HIMPHLU to be certifiedas the exclusive bargaining agent, it should have garnered at least 170,

not 169, votes.

Petitioner justifies its not challenging Gatbonton’s vote because it was precisely

its position that probationary employees should be allowed to vote. It thus aversthat justice and equity dictate that since Gatbonton’s vote was counted, then

the votes of the 6 other probationary employees should likewise be included inthe tally.

Petitioner goes on to posit that the word "order" in Section 5, Rule 9 ofDepartment Order No. 40-03 reading "[A]ll employees who are members of the

appropriate bargaining unit sought to be represented by the petitioner at thetime of the issuance of the order granting the conduct of certification electionshall be allowed to vote" refers to an order which has already become final andexecutory, in this case the March 10, 2002 Order of the SOLE.

Petitioner thus concludes that if March 10, 2006 is the reckoning date for thedetermination of the eligibility of workers, then all the segregated votes cast bythe probationary employees should be opened and counted, they havingalready been working at the Hotel on such date.

Respecting the certification of HIMPHLU as the exclusive bargaining agent,

petitioner argues that the same was not proper for if the 17 votes would becounted as valid, then the total number of votes cast would have been 338, not321, hence, the majority would be 170; as such, the votes garnered by HIMPHLUis one vote short of the majority for it to be certified as the exclusive bargainingagent.

The relevant issues for resolution then are first, whether employees onprobationary status at the time of the certification elections should be allowed tovote, and second, whether HIMPHLU was able to obtain the required majority forit to be certified as the exclusive bargaining agent.

On the first issue, the Court rules in the affirmative.

The inclusion of Gatbonton’s vote was proper not because it was not questioned

but because probationary employees have the right to vote in a certificationelection. The votes of the six other probationary employees should thus alsohave been counted. As Airtime Specialists, Inc. v. Ferrer-Calleja holds:



In a certification election, all rank and file employees in the appropriatebargaining unit, whether probationary or permanent are entitled to vote. Thisprinciple is clearly stated in Art. 255 of the Labor Code which states that the"labor organization designated or selected by the majority of the employees inan appropriate bargaining unit shall be the exclusive representative of the

employees in such unit for purposes of collective bargaining." Collectivebargaining covers all aspects of the employment relation and the resultant CBAnegotiated by the certified union binds all employees in the bargaining unit.Hence, all rank and file employees, probationary or permanent, have asubstantial interest in the selection of the bargaining representative. The Codemakes no distinction as to their employment status as basis for eligibility insupporting the petition for certification election. The law refers to "all" theemployees in the bargaining unit. All they need to be eligible to support thepetition is to belong to the "bargaining unit." (Emphasis supplied)

Rule II, Sec. 2 of Department Order No. 40-03, series of 2003, which amendedRule XI of the Omnibus Rules Implementing the Labor Code, provides:

Rule II

Section 2. Who may join labor unions and workers' associations. - All personsemployed in commercial, industrial and agricultural enterprises, includingemployees of government owned or controlled corporations without originalcharters established under the Corporation Code, as well as employees ofreligious, charitable, medical or educational institutions whether operating forprofit or not, shall have the right to self-organization and to form, join or assist

labor unions for purposes of collective bargaining: provided, however, thatsupervisory employees shall not be eligible for membership in a labor union ofthe rank-and-file employees but may form, join or assist separate labor unions oftheir own. Managerial employees shall not be eligible to form, join or assist anylabor unions for purposes of collective bargaining. Alien employees with validworking permits issued by the Department may exercise the right to self-organization and join or assist labor unions for purposes of collective bargainingif they are nationals of a country which grants the same or similar rights toFilipino workers, as certified by the Department of Foreign Affairs.

For purposes of this section, any employee, whether employed for a definiteperiod or not, shall beginning on the first day of his/her service, be eligible formembership in any labor organization.

All other workers, including ambulant, intermittent and other workers, the self-employed, rural workers and those without any definite employers may formlabor organizations for their mutual aid and protection and other legitimatepurposes except collective bargaining. (Emphasis supplied)



The provision in the CBA disqualifying probationary employees from votingcannot override the Constitutionally-protected right of workers to self-organization, as well as the provisions of the Labor Code and its ImplementingRules on certification elections and jurisprudence thereon.

A law is read into, and forms part of, a contract. Provisions in a contract are validonly if they are not contrary to law, morals, good customs, public order or publicpolicy.6

Rule XI, Sec. 5 of D.O. 40-03, on which the SOLE and the appellate court rely tosupport their position that probationary employees hired after the issuance ofthe Order granting the petition for the conduct of certification election must beexcluded, should not be read in isolation and must be harmonized with the otherprovisions of D.O. Rule XI, Sec. 5 of D.O. 40-03, viz:

Rule XI

x x x x

Section 5. Qualification of voters; inclusion-exclusion. - All employees who aremembers of the appropriate bargaining unit sought to be represented by thepetitioner at the time of the issuance of the order granting the conduct of acertification election shall be eligible to vote. An employee who has beendismissed from work but has contested the legality of the dismissal in a forum ofappropriate jurisdiction at the time of the issuance of the order for the conductof a certification election shall be considered a qualified voter, unless his/her

dismissal was declared valid in a final judgment at the time of the conduct ofthe certification election. (Emphasis supplied)

x x x x

Section 13. Order/Decision on the petition. - Within ten (10) days from the date ofthe last hearing, the Med-Arbiter shall issue a formal order granting the petitionor a decision denying the same. In organized establishments, however, no orderor decision shall be issued by the Med-Arbiter during the freedom period.

The order granting the conduct of a certification election shall state thefollowing:

(a) the name of the employer or establishment;

(b) the description of the bargaining unit;







(c) a statement that none of the grounds for dismissal enumerated in thesucceeding paragraph exists;

(d) the names of contending labor unions which shall appear as follows:petitioner union/s in the order in which their petitions were filed, forced

intervenor, and no union; and

(e) a directive upon the employer and the contending union(s) to submitwithin ten (10) days from receipt of the order, the certified list ofemployees in the bargaining unit, or where necessary, the payrollscovering the members of the bargaining unit for the last three (3) monthsprior to the issuance of the order. (Emphasis supplied)

x x x x

Section 21. Decision of the Secretary. - The Secretary shall have fifteen (15) daysfrom receipt of the entire records of the petition within which to decide theappeal. The filing of the memorandum of appeal from the order or decision ofthe Med-Arbiter stays the holding of any certification election.

The decision of the Secretary shall become final and executory after ten (10)days from receipt thereof by the parties. No motion for reconsideration of thedecision shall be entertained. (Emphasis supplied)

In light of the immediately-quoted provisions, and prescinding from the principlethat all employees are, from the first day of their employment, eligible for

membership in a labor organization, it is evident thatthe period ofreckoning in determining who shall be included in the list of eligiblevoters is, in cases where a timely appeal has beenfiled from the Order of the Med-Arbiter, the date when the Order of the Secretary of Labor andEmployment,whether affirming or denying the appeal, becomes final and executory.

The filing of an appeal to the SOLE from the Med-Arbiter’s Order stays its

execution, in accordance with Sec. 21, and rationally, the Med-Arbiter cannotdirect the employer to furnish him/her with the list of eligible voters pending the

resolution of the appeal.During the pendency of the appeal, the employer may hire additionalemployees. To exclude the employees hired after the issuance of the Med-Arbiter’s Order but before the appeal has been resolved would violate the

guarantee that every employee has the right to be part of a labor organizationfrom the first day of their service.



In the present case, records show that the probationary employees, includingGatbonton, were included in the list of employees in the bargaining unitsubmitted by the Hotel on May 25, 2006 in compliance with the directive of theMed-Arbiter after the appeal and subsequent motion for reconsideration havebeen denied by the SOLE, rendering the Med-Arbiter’s August 22, 2005 Order

final and executory 10 days after the March 22, 2007 Resolution (denying themotion for reconsideration of the January 22 Order denying the appeal), andrightly so. Because, for purposes of self-organization, those employees are, inlight of the discussion above, deemed eligible to vote.

A certification election is the process of determining the sole and exclusivebargaining agent of the employees in an appropriate bargaining unit forpurposes of collective bargaining. Collective bargaining, refers to thenegotiated contract between a legitimate labor organization and the employerconcerning wages, hours of work and all other terms and conditions of

employment in a bargaining unit.7

The significance of an employee’s right to vote in a certification election cannot

thus be overemphasized. For he has considerable interest in the determinationof who shall represent him in negotiating the terms and conditions of hisemployment.

Even if the Implementing Rules gives the SOLE 20 days to decide the appealfrom the Order of the Med-Arbiter, experience shows that it sometimes takesmonths to be resolved. To rule then that only those employees hired as of thedate of the issuance of the Med-Arbiter’s Order are qualified to vote would

effectively disenfranchise employees hired during the pendency of the appeal.More importantly, reckoning the date of the issuance of the Med-Arbiter’s Order

as the cut-off date would render inutile the remedy of appeal to theSOLE.1avvph!1

But while the Court rules that the votes of all the probationary employees shouldbe included, under the particular circumstances of this case and the period oftime which it took for the appeal to be decided, the votes of the six supervisoryemployees must be excluded because at the time the certification electionswas conducted, they had ceased to be part of the rank and file, their promotion

having taken effect two months before the election.

As to whether HIMPHLU should be certified as the exclusive bargaining agent,the Court rules in the negative. It is well-settled that under the so-called "doublemajority rule," for there to be a valid certification election, majority of thebargaining unit must have voted AND the winning union must have garneredmajority of the valid votes cast.







Prescinding from the Court’s ruling that all the probationary employees’ votes

should be deemed valid votes while that of the supervisory employees shouldbe excluded, it follows that the number of valid votes cast would increase – from321 to 337. Under Art. 256 of the Labor Code, the union obtaining the majority ofthe valid votes cast by the eligible voters shall be certified as the sole and

exclusive bargaining agent of all the workers in the appropriate bargaining unit.This majority is 50% + 1. Hence, 50% of 337 is 168.5 + 1 or at least 170.

HIMPHLU obtained 169 while petitioner received 151 votes. Clearly, HIMPHLU wasnot able to obtain a majority vote. The position of both the SOLE and theappellate court that the opening of the 17 segregated ballots will not materiallyaffect the outcome of the certification election as for, so they contend, even ifsuch member were all in favor of petitioner, still, HIMPHLU would win, is thusuntenable.

It bears reiteration that the true importance of ascertaining the number of validvotes cast is for it to serve as basis for computing the required majority, and not just to determine which union won the elections. The opening of the segregatedbut valid votes has thus become material. To be sure, the conduct of acertification election has a two-fold objective: to determine the appropriatebargaining unit and to ascertain the majority representation of the bargainingrepresentative, if the employees desire to be represented at all by anyone. It isnot simply the determination of who between two or more contending unionswon, but whether it effectively ascertains the will of the members of thebargaining unit as to whether they want to be represented and which union theywant to represent them.

Having declared that no choice in the certification election conducted obtainedthe required majority, it follows that a run-off election must be held to determinewhich between HIMPHLU and petitioner should represent the rank-and-fileemployees.

A run-off election refers to an election between the labor unions receiving thetwo (2) highest number of votes in a certification or consent election with three(3) or more choices, where such a certified or consent election results in none ofthe three (3) or more choices receiving the majority of the valid votes cast;

provided that the total number of votes for all contending unions is at least fiftypercent (50%) of the number of votes cast.8 With 346 votes cast, 337 of which arenow deemed valid and HIMPHLU having only garnered 169 and petitionerhaving obtained 151 and the choice "NO UNION" receiving 1 vote, then theholding of a run-off election between HIMPHLU and petitioner is in order.

WHEREFORE, the petition is GRANTED. The Decision dated November 8, 2007 andResolution dated January 25, 2008 of the Court of Appeals affirming the







Resolutions dated January 22, 2007 and March 22, 2007, respectively, of theSecretary of Labor and Employment in OS-A-9-52-05 are ANNULLED and SETASIDE.

The Department of Labor and Employment-Bureau of Labor Relations is DIRECTED

to cause the holding of a run-off election between petitioner, National Union ofWorkers in Hotels, Restaurants and Allied Industries-Manila Pavilion HotelChapter (NUWHRAIN-MPC), and respondent Holiday Inn Manila Pavilion HotelLabor Union (HIMPHLU).

SO ORDERED.

CONCHITA CARPIO MORALESAssociate Justice

WE CONCUR:


G.R. No. 177594 July 23, 2009

UNIVERSITY OF SAN AGUSTIN, INC. Petitioners,

vs.UNIVERSITY OF SAN AGUSTIN EMPLOYEES UNION- FFW, Respondent.

D E C I S I O N

CARPIO MORALES, J.:

The University of San Agustin, Inc. (petitioner) seeks via the present petition forreview on certiorari partial reconsideration of the Court of Appeals Decision ofApril 28, 20061 and Resolution of April 18, 20072 which modified the VoluntaryArbitrator’s Decision dated June 16, 20033 and Resolution dated July 17, 20034 inVA Case No. 139-06-03-2003.

On July 27, 2000, petitioner forged with the University of San Agustin EmployeesUnion-FFW (respondent) a Collective Bargaining Agreement5 (CBA) effective forfive (5) years or from July, 2000 to July, 2005. Among other things, the partiesagreed to include a provision on salary increases based on the incrementaltuition fee increases or tuition incremental proceeds (TIP) and pursuant to



















Republic Act No. 6728, The Tuition Fee Law. The said provision on salaryincreases reads:

ARTICLE VIIIEconomic Provisions

x x x x

Section 3. Salary Increases. The following shall be the increases under thisAgreement.

SY 2000-2001 – P2,000.00 per month, across the board.

SY 2001-2002 – P1,500.00 per month or 80% of the TIP, whichever is higher,across the board.

SY 2002-2003 – P1,500.00 per month or 80% of the TIP, whichever is higher,across the board. (Emphasis supplied)

It appears that for the School Year 2001-2002, the parties disagreed on thecomputation of the salary increases.

Respondent refused to accept petitioner’s proposed across-the-board salaryincrease of P1,500 per month and its subtraction from the computation of the TIPof the scholarships and tuition fee discounts it grants to deserving students andits employees and their dependents.

Respondent likewise rejected petitioner’s interpretation of the term "salary

increases" as referring not only to the increase in salary but also tocorresponding increases in other benefits.

Respondent argued that the provision in question referred to "salary increases"alone, hence, the phrase "P1,500.00 or 80% of the TIP, whichever is higher,"should apply only to salary increases and should not include the other increasesin benefits received by employees.

Resort to the existing grievance machinery having failed, the parties agreed tosubmit the case to voluntary arbitration.

By Decision of June 16, 2003, Voluntary Arbitrator (VA) Indalecio P. Arriola of theDepartment of Labor and Employment- National Conciliation and MediationBoard, Sub-Regional Office No. VI found for respondent, holding that the salaryincreases shall be paid out of 80% of the TIP should the same be higherthan P1,500. The VA ratiocinated that the existing CBA is the law between the



parties, and as it is not contrary to law, morals and public policy and it havingbeen shown that the parties entered into it voluntarily, it should be respected.

As to petitioner’s deduction of scholarship grants and tuition fee discounts from

the TIP, the VA ruled that it is invalid, petitioner having waived the collection

thereof when it granted the same – a waiver which its employees had nothing todo with – and the employees should not be made to bear or suffer from theburden.

Petitioner’s move to reconsider the VA Decision was denied by Order of July 27,2003, hence, it appealed to the Court of Appeals.

By Decision of April 28, 2006, the appellate court sustained the VA’s

interpretation of the questioned CBA provision but reversed its finding on the TIPcomputation.

The appellate court held that the questioned CBA provision is clear andunambiguous, hence, it should be interpreted literally to mean that 80% of theTIP or P1,500, whichever is higher, is to be allotted for the employees’ salary

increases.

Respecting the deduction of scholarship grants and tuition fee discounts fromthe computation of the TIP, the appellate court held that by its very nature, theTIP excludes any sum which petitioner did not obtain or realize, hence, it is onlyfair that the same be deducted. The appellate court noted, however, that as toscholarship grants and tuition fee discounts which are fully or partly subsidized

by the government or private institutions and individuals, petitioner shouldinclude them in the TIP computation.

Petitioner’s motion for partial reconsideration of the appellate court’s Decision

on the interpretation of the questioned CBA provision, as well respondent’s

motion for reconsideration of the Decision on computation of the TIP, wasdenied.

Hence, the present petition which seeks only the review of the appellate court’s

interpretation of the questioned provision of the CBA.

Petitioner maintains that, like the VA, the appellate court erred in interpreting thequestioned provision of the above-quoted Sec. 3, Art. VIIII of the CBA, since Sec.5(2) of R.A. 6728 only mandates that 70% of the TIP of academic institutions is tobe set aside for employees’ salaries, allowances and other benefits, while at

least 20% thereof is to go to the improvement, modernization of buildings,equipment, libraries and other school facilities.



Petitioner adds that the interpretation of the provision that 80% of the TIP shouldgo to salary increases alone, to the exclusion of other benefits, is contrary to R.A.6728, citing Cebu Institute of Medicine v. Cebu Institute of Medicine Employees’

Union-NFL.6

Petitioner thus concludes that the general principle that the CBA is the lawbetween the parties is unavailing as it is the law, not the stipulations of theparties, which should prevail.

Upon the other hand, respondent, in its Comment7, maintains that thequestioned provision speaks of salary increases alone and was not intended toinclude other benefits. It asserts that petitioner, in refusing to utilize the 80% of theTIP for salary increases alone, does not want to honor what it voluntarily andknowingly agreed upon in the CBA.

Additionally, respondent points out that petitioner never claimed that its consentto the CBA was vitiated with fraud, mistake or intimidation, and that petitionerhas always been aware of the provisions of R.A. 6728 and was even assisted byits accountants, internal and external legal counsels during the CBAnegotiations, hence, it can not now renege on its commitment under Sec. 3. Art.VIII of the CBA.

The petition is bereft of merit.

Sec. 3, Art. VIII of the 2000-20005 CBA reads:

ARTICLE VIIIEconomic Provisions

x x x x

Section 3. Salary Increases. The following shall be the increases under thisAgreement.

SY 2000-2001 – P2,000.00 per month, across the board.

SY 2001-2002 – P1,500.00 per month or 80% of the TIP, whichever is higher,across the board.

SY 2002-2003 – P1,500.00 per month or 80% of the TIP, whichever is higher,across the board. (Emphasis supplied)

It is a familiar and fundamental doctrine in labor law that the CBA is the lawbetween the parties and they are obliged to comply with its provisions.8 If the















terms of a contract, in this case the CBA, are clear and leave no doubt upon theintention of the contracting parties, the literal meaning of their stipulations shallcontrol.9

A reading of the above-quoted provision of the CBA shows that the parties

agreed that 80% of the TIP or at the least the amount of P1,500 is to be allocatedfor individual salary increases.

The CBA does not speak of any other benefits or increases which would becovered by the employees’ share in the TIP, except salary increases. The CBAreflects the incorporation of different provisions to cover other benefits such asChristmas bonus (Art. VIII, Sec. 1), service award (Art. VIII, Sec.5), leaves (ArticleIX), educational benefits (Sec.2, Art. X), medical and hospitalization benefits(Secs. 3, 4 and 5, Art. 10), bereavement assistance (Sec. 6, Art. X), and signingbonus (Sec. 8, Art. VIII), without mentioning that these will likewise be sourced

from the TIP. Thus, petitioner’s belated claim that the 80% TIP should be taken tomean as covering ALL increases and not merely the salary increases ascategorically stated in Sec. 3, Art. VIII of the CBA does not lie.1avvphi1

Apropos is the ruling in St. John Colleges, Inc., vs. St. John Academy Faculty andEmployees’ Union10 where the Court held that the school committed Unfair LaborPractice (ULP) when it unceremoniously closed down allegedly because of theunion’s unreasonable demands including its insistence on having 100% of theincremental tuition fee increase allotted for their members’ benefits to be

embodied in the CBA. In striking down the school’s defense, the Court held:

That SJCI agreed to appropriate 100% of the tuition fee increase to the workers’benefits sometime in 1995 does not mean that it was helpless in the face of theUnion’s demands because neither party is obligated to precipitately give in to

the proposal of the other party during collective bargaining. (Emphasis supplied)

In the present case, petitioner could have, during the CBA negotiations,opposed the inclusion of or renegotiated the provision allotting 80% of the TIP tosalary increases alone, as it was and is not under any obligation to acceptrespondent’s demands hook, line and sinker. Art. 252 of the Labor Code is clear

on the matter:

ART. 252. Meaning of duty to bargain collectively. – The duty to bargaincollectively means the performance of a mutual obligation to meet andconvene promptly and expeditiously in good faith for the purpose of negotiatingan agreement with respect to wages, hours, of work and all other terms andconditions of employment including proposals for adjusting any grievances orquestions arising under such agreement and executing a contract incorporatingsuch agreements if requested by either party but such duty does not compel










any party to agree to a proposal or to make any concession. (Emphasissupplied)

The records are thus bereft of any showing that petitioner had made it clearduring the CBA negotiations that it intended to source not only the salary

increases but also the increases in other employee benefits from the 80% of theTIP. Absent any proof that petitioner’s consent was vitiated by fraud, mistake or

duress, it is presumed that it entered into the CBA voluntarily, had full knowledgeof the contents thereof, and was aware of its commitments under the contract.

Contrary to petitioner’s assertion, the rulings in Cebu Institute of Medicine v.

Cebu Institute of Medicine Employees Union-NFL and in Centro Escolar UniversityFaculty and Allied Workers Union-Independent v. Court of Appeals11 are notapplicable to the present case.

In Cebu Institute, the Court held that SSS contributions and other benefits can becharged to the 70% and that the academic institution has the discretion todispose of the said 70% with the precondition that the disposition goes to thepayment of salaries, wages, allowances and other benefits of its personnel, viz:

For sure, the seventy percent (70%) is not to be delivered whole to theemployees but packaged in the form of salaries, wages,allowances, and other benefits which may be in the form of SSS, Medicare andPag-Ibig premiums, all intended for the benefit of the employees. In other words,the private educational institution concerned has the discretion on thedisposition of the seventy percent (70%) incremental tuition fee increase. It

enjoys the privilege of determining how much increase in salaries to grant andthe kind and amount of allowances and other benefits to give. The onlyprecondition is that seventy percent (70%) of the incremental tuition feeincrease goes to the payment of salaries, wages, allowances and other benefitsof teaching and non-teaching personnel. (Emphasis supplied)1avvphi1

Significantly, this ruling was arrived at in the absence of a CBA between theparties, unlike in the present case.

On the other hand, in Centro Escolar University, the issue was whether the

University may source from the 70% incremental proceeds (IP) the integrated IPincorporated into the salaries of its teaching and non-teaching staff pursuant tothe CBAs entered into by their union. The controversy arose because the CBAprovided different types of salary increases – some sourced from the Universityfund and the salary increases brought about by the IP integration which arededucted from the IP. The Court held that the charging of the integrated IPagainst the 70% is not violative of the CBA which prohibits the deduction of theCBA-won benefits from the 70% of the IP because the integrated IP provided for







in the CBAs of the teaching and the non-teaching staff is actually the share ofthe employees in the 70% of the IP that is incorporated into their salaries as aresult of the negotiation between the university and its personnel.

Clearly, the above-cited cases have totally different milieus from the case at

bar.

Even a perusal of the law will show that it does not make 70% as the mandatedceiling. It reads:

SEC. 5. Tuition Fee Supplement for Student in Private High School

(1) Financial assistance for tuition for students in private high schools shallbe provided by the government through a voucher system in the followingmanners:

(a) For students enrolled in schools charging less than one thousandfive hundred pesos (P1,500) per year in tuition and other fees duringschool year 1988-89 or such amount in subsequent years as may bedetermined from time to time by the State Assistance Council: TheGovernment shall provide them with a voucher equal to twohundred ninety pesos P290.00: Provided, That the student pays in the1989-1990 school year, tuition and other fees equal to the tuitionand other fees paid during the preceding academic year: Provided,further, That the Government shall reimburse the vouchers from theschools concerned within sixty (60) days from the close of the

registration period: Provided, furthermore, That the student's familyresides in the same city or province in which the high school islocated unless the student has been enrolled in that school duringthe previous academic year.

(b) For students enrolled in schools charging above one thousandfive hundred pesos (P1,500) per year in tuition and other fees duringthe school year 1983-1989 or such amount in subsequent years asmay be determined from time to time by the State AssistanceCouncil, no assistance for tuition fees shall be granted by the

Government: Provided, however, That the schools concerned mayraise their tuition fee subject to Section 10 hereof.

(2) Assistance under paragraph (1), subparagraphs (a) and (b) shall begranted and tuition fee under subparagraph (c) may be increased, on thecondition that seventy percent (70%) of the amount subsidized allotted fortuition fee or of the tuition fee increases shall go to the payment ofsalaries, wages, allowances and other benefits of teaching and non-



teaching personnel except administrators who are principal stockholdersof the school, and may be used to cover increases as provided for in thecollective bargaining agreements existing or in force at the time when thisAct is approved and made effective: Provided, That government subsidiesare not used directly for salaries of teachers of nonsecular subjects. At

least twenty percent (20%) shall go to the improvement or modernizationof buildings, equipment, libraries, laboratories, gymnasia and similarfacilities and to the payment of other costs of operation. For this purpose,schools shall maintain a separate record of accounts for all assistancereceived from the government, any tuition fee increase, and the detaileddisposition and use thereof, which record shall be determined by the StateAssistance Council, during business hours, by the faculty, the non-teaching personnel, students of the school concerned, and Department ofEducation, Culture and Sports and other concerned governmentagencies.12

Unmistakably, what the law sets is the minimum, not the maximum percentage,and there is even a 10% portion the disposition of which the law does notregulate. Hence, if academic institutions wish to allot a higher percentage forsalary increases and other benefits, nothing in the law prohibits them from doingso.

It is axiomatic that labor laws setting employee benefits only mandate theminimum that an employer must comply with, but the latter is not proscribedfrom granting higher or additional benefits if it so desires, whether as an act ofgenerosity or by virtue of company policy or a CBA, as it would appear in this

case. While, in following to the letter the subject CBA provision petitioner will, ineffect, be giving more than 80% of the TIP as its personnel’s share in the tuition

fee increase, petitioner’s remedy lies not in the Court’s invalidating the provision,

but in the parties’ clarifying the same in their subsequent CBA negotiations.

WHEREFORE, the Decision of the Court of Appeals dated April 28, 2006 and theResolution dated April 18, 2007, which modified the Decision and Resolutiondated July 17, 2003 of the Voluntary Arbitrator in VA Case No. 139-06-03-2003,are AFFIRMED.

SO ORDERED.

CONCHITA CARPIO MORALESAssociate Justice

WE CONCUR:








THIRD DIVISION

G.R. No. 165407 June 5, 2009

HERMINIGILDO INGUILLO and ZENAIDA BERGANTE, Petitioners,vs.FIRST PHILIPPINE SCALES, Inc. and/or AMPARO POLICARPIO,Manager, Respondents.

D E C I S I O N

PERALTA, J.:

Assailed in this petition for review under Rule 45 of the Rules of Court are theCourt of Appeals (1) Decision1dated March 11, 2004 in CA-G.R. SP No. 73992,which dismissed the Petition for Certiorari of petitioners Zenaida Bergante(Bergante) and Herminigildo Inguillo (Inguillo); and (2) Resolution2 datedSeptember 17, 2004 denying petitioners' Motion for Reconsideration. Theappellate court sustained the ruling of the National Labor Relations Commission(NLRC) that petitioners were validly dismissed pursuant to a Union Security

Clause in the collective bargaining agreement.

The facts of the case are as follows:

First Philippine Scales, Inc. (FPSI), a domestic corporation engaged in themanufacturing of weighing scales, employed Bergante and Inguillo asassemblers on August 15, 1977 and September 10, 1986, respectively.

In 1991, FPSI and First Philippine Scales Industries Labor Union (FPSILU)3 enteredinto a Collective Bargaining Agreement (CBA),4 the duration of which was for aperiod of five (5) years starting on September 12, 1991 until September 12, 1996.On September 19, 1991, the members of FPSILU ratified the CBA in a documententitledRATIPIKASYON NG KASUNDUAN.5 Bergante and Inguillo, who weremembers of FPSILU, signed the said document.6

During the lifetime of the CBA, Bergante, Inguillo and several FPSI employees joined another union, the Nagkakaisang Lakas ng Manggagawa (NLM), whichwas affiliated with a federation called KATIPUNAN (NLM-KATIPUNAN, for brevity).

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Subsequently, NLM-KATIPUNAN filed with the Department of Labor andEmployment (DOLE) an intra-union dispute7 against FPSILU and FPSI. In said case,the Med-Arbiter decided8 in favor of FPSILU. It also ordered the officers andmembers of NLM-KATIPUNAN to return to FPSILU the amount ofP90,000.00pertaining to the union dues erroneously collected from the employees. Upon

finality of the Med-Arbiter's Decision, a Writ of Execution9 was issued to collectthe adjudged amount from NLM-KATIPUNAN. However, as no amount wasrecovered, notices of garnishment were issued to United Coconut Planters Bank(Kalookan City Branch)10 and to FPSI11 for the latter to hold for FPSILU the earningsof Domingo Grutas, Jr. (Grutas) and Inguillo, formerly FPSILU's President andSecretary for Finance, respectively, to the extent ofP13,032.18. Resultantly, theamount of P5,140.55 was collected,12 P1,695.72 of which came from the salary ofGrutas, while the P3,444.83 came from that of Inguillo.

Meanwhile, on March 29, 1996, the executive board and members of the FPSILU

addressed a document dated March 18, 1996 denominated as "Petisyon"13

toFPSI's general manager, Amparo Policarpio (Policarpio), seeking the terminationof the services of the following employees, namely: Grutas, Yolanda Tapang,Shirley Tapang, Gerry Trinidad, Gilbert Lucero, Inguillo, Bergante, and VicenteGo, on the following grounds:14 (1) disloyalty to the Union by separating from itand affiliating with a rival Union, the NLM-KATIPUNAN; (2) dereliction of duty byfailing to call periodic membership meetings and to give financial reports; (3)depositing Union funds in the names of Grutas and former Vice-PresidentYolanda Tapang, instead of in the name of FPSILU, care of the President; (4)causing damage to FPSI by deliberately slowing down production, preventingthe Union to even attempt to ask for an increase in benefits from the former; and

(5) poisoning the minds of the rest of the members of the Union so that theywould be enticed to join the rival union.

On May 13, 1996, Inguillo filed with the NLRC a complaint against FPSI and/orPolicarpio (respondents) for illegal withholding of salary and damages,docketed as NLRC-NCR-Case No. 00-05-03036-96.15

On May 16, 1996, respondents terminated the services of the employeesmentioned in the "Petisyon."

The following day, two (2) separate complaints for illegal dismissal,reinstatement and damages were filed against respondents by: (1) NLM-KATIPUNAN, Grutas, Trinidad, Bergante, Yolanda Tapang, Go, Shirley Tapang andLucero16 (Grutas complaint, for brevity); and (2) Inguillo17 (Inguillo complaint).Both complaints were consolidated with Inguillo's prior complaint for illegalwithholding of salary, which was pending before Labor Arbiter ManuelManansala. After the preliminary mandatory conference, some of thecomplainants agreed to amicably settle their cases. Consequently, the Labor










































Arbiter issued an Order18 dated October 1, 1996, dismissing with prejudice thecomplaints of Go, Shirley Tapang, Yolanda Tapang, Grutas, andTrinidad.19 Lucero also settled the case after receiving his settlement money andexecuting a Quitclaim and Release in favor of FPSI and Policarpio.20

Bergante and Inguillo, the remaining complainants, were directed to submit theirrespective position papers, after which their complaints were submitted forresolution on February 20, 1997.21

In their Position Paper,22 Bergante and Inguillo claimed that they were not awareof a petition seeking for their termination, and neither were they informed of thegrounds for their termination. They argued that had they been informed, theywould have impleaded FPSILU in their complaints. Inguillo could not think of avalid reason for his dismissal except the fact that he was a very vocal and activemember of the NLM-KATIPUNAN. Bergante, for her part, surmised that she was

dismissed solely for being Inguillo's sister-in-law. She also reiterated the absenceof a memorandum stating that she committed an infraction of a company ruleor regulation or a violation of law that would justify her dismissal.1avvphi1

Inguillo also denounced respondents' act of withholding his salary, arguing thathe was not a party to the intra-union dispute from which the notice ofgarnishment arose. Even assuming that he was, he argued that his salary wasexempt from execution.

In their Position Paper,23 respondents maintained that Bergante and Inguillo'sdismissal was justified, as the same was done upon the demand of FPSILU, and

that FPSI complied in order to avoid a serious labor dispute among its officersand members, which, in turn, would seriously affect production. They also

justified that the dismissal was in accordance with the Union Security Clause inthe CBA, the existence and validity of which was not disputed by Bergante andInguillo. In fact, the two had affixed their signatures to the document whichratified the CBA.

In his Decision24 dated November 27, 1997, the Labor Arbiter dismissed theremaining complaints of Bergante and Inguillo and held that they were notillegally dismissed. He explained that the two clearly violated the Union Security

Clause of the CBA when they joined NLM-KATIPUNAN and committed actsdetrimental to the interests of FPSILU and respondents. The dispositive portion ofthe said Decision states:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Declaring respondents First Philippines Scales, Inc. (First PhilippineScales Industries [FPSI] and Amparo Policarpio, in her capacity as






























President and General Manager of respondent FPSI, not guilty of illegaldismissal as above discussed. However, considering the length of servicesrendered by complainants Herminigildo Inguillo and Zenaida Bergante asemployees of respondent FPSI, plus the fact that the other complainants inthe above-entitled cases were previously granted financial

assistance/separation pay through amicable settlement, the afore-namedrespondents are hereby directed to pay complainants HerminigildoInguillo and Zenaida Bergante separation pay and accrued legal holidaypay, as earlier computed, to wit:

Herminigildo Inguillo

Separation pay ................ P22,490.00

Legal Holiday Pay........... 839.00

Total 23,329.00

Zenaida Bergante

Separation pay................. P43,225.00

Legal Holiday Pay........... 839.00

Total 44,064.00

2. Directing the afore-named respondents to pay ten (10%) percentattorney's fees based on the total monetary award to complainantsInguillo and Bergante.

3. Dismissing the claim for illegal withholding of salary of complainantInguillo for lack of merit as above discussed.

4. Dismissing the other money claims and/or other charges ofcomplainants Inguillo and Bergante for lack of factual and legal basis.

5. Dismissing the complaint of complainant Gilberto Lucero with prejudicefor having executed a Quitclaim and Release and voluntary resignation infavor of respondents FPSI and Amparo Policarpio as above-discussedwhere the former received the amount of P23,334.00 as financialassistance/separation pay and legal holiday pay from the latter.

SO ORDERED.25







Bergante and Inguillo appealed before the NLRC, which reversed the LaborArbiter's Decision in a Resolution26dated June 8, 2001, the dispositive portion ofwhich provides:

WHEREFORE, the assailed decision is set aside. Respondents are hereby ordered

to reinstate complainants Inguillo and Bergante with full backwages from thetime of their dismissal up [to] their actual reinstatement. Further, respondents arealso directed to pay complainant Inguillo the amount representing his withheldsalary for the period March 15, 1998 to April 16, 1998. The sum corresponding toten percent (10%) of the total judgment award by way of attorney's fees islikewise ordered. All other claims are ordered dismissed for lack of merit.

SO ORDERED.27

In reversing the Labor Arbiter, the NLRC28 ratiocinated that respondents failed topresent evidence to show that Bergante and Inguillo committed acts inimical toFPSILU's interest. It also observed that, since the two (2) were not informed of theirdismissal, the justification given by FPSI that it was merely constrained to dismissthe employees due to persistent demand from the Union clearly proved theclaim of summary dismissal and violation of the employees' right to due process.

Respondents filed a Motion for Reconsideration, which was referred by the NLRCto Executive Labor Arbiter Vito C. Bose for report and recommendation. In itsResolution29 dated August 26, 2002, the NLRC adopted in toto the report andrecommendation of Arbiter Bose which set aside its previous Resolutionreversing the Labor Arbiter's Decision. This time, the NLRC held that Bergante and

Inguillo were not illegally dismissed as respondents merely put in force the CBAprovision on the termination of the services of disaffiliating Union members uponthe recommendation of the Union. The dispositive portion of the said Resolutionprovides:

WHEREFORE, the resolution of the Commission dated June 8, 2001 is set aside.Declaring the dismissal of the complainants as valid, [t]his complaint for illegaldismissal is dismissed. However, respondents are hereby directed to paycomplainant Inguillo the amount representing his withheld salary for the periodMarch 15, 1998 to April 16, 1998, plus ten (10%) percent as attorney's fees.

All other claims are ordered dismissed for lack of merit.

SO ORDERED.30

Not satisfied with the disposition of their complaints, Bergante and Inguillo filed apetition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals(CA). The CA dismissed the petition for lack of merit31and denied the subsequent






















motion for reconsideration.32 In affirming the legality of the dismissal, the CAratiocinated, thus:

x x x on the merits, we sustain the view adopted by the NLRC that:

x x x it cannot be said that the stipulation providing that the employer maydismiss an employee whenever the union recommends his expulsion either fordisloyalty or for any violation of its by-laws and constitution is illegal orconstitutive of unfair labor practice, for such is one of the matters on whichmanagement and labor can agree in order to bring about the harmoniousrelations between them and the union, and cohesion and integrity of theirorganization. And as an act of loyalty, a union may certainly require itsmembers not to affiliate with any other labor union and to consider itsinfringement as a reasonable cause for separation.

The employer FPSI did nothing but to put in force their agreement when itseparated the disaffiliating union members, herein complainants, upon therecommendation of the union. Such a stipulation is not only necessary tomaintain loyalty and preserve the integrity of the union, but is allowed by theMagna Carta of Labor when it provided that while it is recognized that anemployee shall have the right of self-organization, it is at the same timepostulated that such rights shall not injure the right of the labor organization toprescribe its own rules with respect to the acquisition or retention of membershiptherein. Having ratified their CBA and being then members of FPSILU, thecomplainants owe fealty and are required under the Union Security clause tomaintain their membership in good standing with it during the term thereof, a

requirement which ceases to be binding only during the 60-day freedom periodimmediately preceding the expiration of the CBA, which was not present in thiscase.

x x x the dismissal of the complainants pursuant to the demand of the majorityunion in accordance with their union security [clause] agreement following theloss of seniority rights is valid and privileged and does not constitute unfair laborpractice or illegal dismissal.

Indeed, the Supreme Court has for so long a time already recognized a union

security clause in the CBA, like the one at bar, as a specie of closed-shoparrangement and trenchantly upheld the validity of the action of the employerin enforcing its terms as a lawful exercise of its rights and obligations under thecontract.

The collective bargaining agreement in this case contains a union securityclause-a closed-shop agreement.







A closed-shop agreement is an agreement whereby an employer binds himselfto hire only members of the contracting union who must continue to remainmembers in good standing to keep their jobs. It is "the most prized achievementof unionism." It adds membership and compulsory dues. By holding out to loyalmembers a promise of employment in the closed-shop, it welds group solidarity.

(National Labor Union v. Aguinaldo's Echague Inc., 97 Phil. 184). It is a veryeffective form of union security agreement.

This Court has held that a closed-shop is a valid form of union security, and sucha provision in a collective bargaining agreement is not a restriction of the right offreedom of association guaranteed by the Constitution. (Lirag Textile Mills, Inc. v.Blanco, 109 SCRA 87; Manalang v. Artex Development Company, Inc., 21 SCRA561.)33

Hence, the present petition.

Essentially, the Labor Code of the Philippines has several provisions under whichan employee may be validly terminated, namely: (1) just causes under Article282;34 (2) authorized causes under Article 283;35 (3) termination due to diseaseunder Article 284;36 and (4) termination by the employee or resignation underArticle 285.37 While the said provisions did not mention as ground theenforcement of the Union Security Clause in the CBA, the dismissal fromemployment based on the same is recognized and accepted in our

jurisdiction.38

"Union security" is a generic term, which is applied to and comprehends "closed

shop," "union shop," "maintenance of membership" or any other form ofagreement which imposes upon employees the obligation to acquire or retainunion membership as a condition affecting employment.39 There is union shopwhen all new regular employees are required to join the union within a certainperiod as a condition for their continued employment. There is maintenance ofmembership shop when employees, who are union members as of the effectivedate of the agreement, or who thereafter become members, must maintainunion membership as a condition for continued employment until they arepromoted or transferred out of the bargaining unit or the agreement isterminated.40 A closed-shop, on the other hand, may be defined as an

enterprise in which, by agreement between the employer and his employees ortheir representatives, no person may be employed in any or certain agreeddepartments of the enterprise unless he or she is, becomes, and, for the durationof the agreement, remains a member in good standing of a union entirelycomprised of or of which the employees in interest are a part.41







































In their Petition, Bergante and Inguillo assail the legality of their terminationbased on the Union Security Clause in the CBA between FPSI and FPSILU. ArticleII42 of the CBA pertains to Union Security and Representatives, which provides:

The Company hereby agrees to a UNION SECURITY [CLAUSE] with the following

terms:

1. All bonafide union members as of the effective date of this agreementand all those employees within the bargaining unit who shall subsequentlybecome members of the UNION during the period of this agreement shall,as a condition to their continued employment, maintain theirmembership with the UNION under the FIRST PHIL. SCALES INDUSTRIESLABOR UNION Constitution and By-laws and this Agreement;

2. Within thirty (30) days from the signing of this Agreement, all workerseligible for membership who are not union members shall become and toremain members in good standing as bonafide union members therein asa condition of continued employment;

3. New workers hired shall likewise become members of the UNION fromdate they become regular and permanent workers and shall remainmembers in good standing as bonafide union members therein as acondition of continued employment;

4. In case a worker refused to join the Union, the Union will undertake tonotify workers to join and become union members. If said worker or

workers still refuses, he or they shall be notified by the Company of his/herdismissal as a consequence thereof and thereafter terminated after 30days notice according to the Labor Code.

5. Any employee/union member who fails to retain union membership ingood standing may be recommended for suspension or dismissal by theUnion Directorate and/or FPSILU Executive Council for any of the followingcauses:

a) Acts of Disloyalty;

b) Voluntary Resignation or Abandonment from the UNION;

c) Organization of or joining another labor union or any labor groupthat would work against the UNION;

d) Participation in any unfair labor practice or violation of theAgreement, or activity derogatory to the UNION decision;







e) Disauthorization of, or Non-payment of, monthly membershipdues, fees, fines and other financial assessments to the Union;

f) Any criminal violation or violent conduct or activity against anyUNION member without justification and affecting UNION rights or

obligations under the said Agreement.

Verily, the aforesaid provision requires all members to maintain theirmembership with FPSILU during the lifetime of the CBA. Failing so, and for any ofthe causes enumerated therein, the Union Directorate and/or FPSILU ExecutiveCouncil may recommend to FPSI an employee/union member's suspension ordismissal. Records show that Bergante and Inguillo were former members ofFPSILU based on their signatures in the document which ratified the CBA. It canalso be inferred that they disaffiliated from FPSILU when the CBA was still in forceand subsisting, as can be gleaned from the documents relative to the intra-

union dispute between FPSILU and NLM-KATIPUNAN. In view of their disaffiliation,as well as other acts allegedly detrimental to the interest of both FPSILU and FPSI,a "Petisyon" was submitted to Policarpio, asking for the termination of theservices of employees who failed to maintain their Union membership.

The Court is now tasked to determine whether the enforcement of the aforesaidUnion Security Clause justified herein petitioners' dismissal from the service.

In terminating the employment of an employee by enforcing the Union SecurityClause, the employer needs only to determine and prove that: (1) the unionsecurity clause is applicable; (2) the union is requesting for the enforcement of

the union security provision in the CBA; and (3) there is sufficient evidence tosupport the union's decision to expel the employee from the union orcompany.43

We hold that all the requisites have been sufficiently met and FPSI was justified inenforcing the Union Security Clause, for the following reasons:

First. FPSI was justified in applying the Union Security Clause, as it was a validprovision in the CBA, the existence and validity of which was not questioned byeither party. Moreover, petitioners were among the 93 employees who affixed

their signatures to the document that ratified the CBA. They cannot now turn theirback and deny knowledge of such provision.

Second. FPSILU acted on its prerogative to recommend to FPSI the dismissal ofthe members who failed to maintain their membership with the Union. Aside from

joining another rival union, FPSILU cited other grounds committed by petitionersand the other employees which tend to prejudice FPSI’s interests, i.e., dereliction

of duty - by failing to call periodic membership meetings and to give financial







reports; depositing union funds in the names of Grutas and former Vice-PresidentYolanda Tapang, instead of in the name of FPSILU care of the President; causingdamage to FPSI by deliberately slowing down production, preventing the Unionfrom even attempting to ask for an increase in benefits from the former; andpoisoning the minds of the rest of the members of the Union so that they would

be enticed to join the rival union.

Third. FPSILU's decision to ask for the termination of the employees in the"Petisyon" was justified and supported by the evidence on record. Bergante andInguillo were undisputably former members of FPSILU. In fact, Inguillo was theSecretary of Finance, the underlying reason why his salary was garnished tosatisfy the judgment of the Med-Arbiter who ordered NLM-KATIPUNAN to returnthe Union dues it erroneously collected from the employees. Their then affiliationwith FPSILU was also clearly shown by their signatures in the document whichratified the CBA. Without a doubt, they committed acts of disloyalty to the Union

when they failed not only to maintain their membership but also disaffiliatedfrom it. They abandoned FPSILU and even joined another union which worksagainst the former's interests. This is evident from the intra-union dispute filed byNLM-KATIPUNAN against FPSILU. Once affiliated with NLM-KATIPUNAN, Berganteand Inguillo proceeded to recruit other employees to disaffiliate from FPSILU andeven collected Union dues from them.

In Del Monte Philippines,44 the stipulations in the CBA authorizing the dismissal ofemployees are of equal import as the statutory provisions on dismissal under theLabor Code, since a CBA is the law between the company and the Union, andcompliance therewith is mandated by the express policy to give protection to

labor. In Caltex Refinery Employees Association (CREA) v. Brillantes,45 the Courtexpounded on the effectiveness of union security clause when it held that it isone intended to strengthen the contracting union and to protect it from thefickleness or perfidy of its own members. For without such safeguards, groupsolidarity becomes uncertain; the union becomes gradually weakened andincreasingly vulnerable to company machinations. In this security clause lies thestrength of the union during the enforcement of the collective bargainingagreement. It is this clause that provides labor with substantial power incollective bargaining.

Nonetheless, while We uphold dismissal pursuant to a union security clause, thesame is not without a condition or restriction. For to allow its untrammeledenforcement would encourage arbitrary dismissal and abuse by the employer,to the detriment of the employees. Thus, to safeguard the rights of theemployees, We have said time and again that dismissals pursuant to unionsecurity clauses are valid and legal, subject only to the requirement of dueprocess, that is, notice and hearing prior to dismissal.46 In like manner, Weemphasized that the enforcement of union security clauses is authorized by law,















provided such enforcement is not characterized by arbitrariness, and alwayswith due process.47

There are two (2) aspects which characterize the concept of due process underthe Labor Code: one is substantive –– whether the termination of employment was

based on the provisions of the Labor Code or in accordance with the prevailing jurisprudence; the other is procedural - the manner in which the dismissal waseffected.

The second aspect of due process was clarified by the Court in King of Kings

Transport v. Mamac,48 stating, thus:

(1) The first written notice to be served on the employees should containthe specific causes or grounds for termination againstthem, and a directive that the employees are given the opportunity tosubmit their written explanation within a reasonable period. x x x

(2) After serving the first notice, the employers should schedule andconduct a hearing or conference wherein the employees will be given theopportunity to: (1) explain and clarify their defenses to the charge againstthem; (2) present evidence in support of their defenses; and (3) rebut theevidence presented against them by the management. During thehearing or conference, the employees are given the chance to defendthemselves personally, with the assistance of a representative or counselof their choice. Moreover, this conference or hearing could be used bythe parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, theemployers shall serve the employees a written notice of terminationindicating that: (1) all circumstances involving the charge against theemployees have been considered; and (2) grounds have beenestablished to justify the severance of their employment.

Corollarily, procedural due process in the dismissal of employees requires noticeand hearing. The employer must furnish the employee two written notices beforetermination may be effected. The first notice apprises the employee of the

particular acts or omissions for which his dismissal is sought, while the secondnotice informs the employee of the employer’s decision to dismiss him.49 Therequirement of a hearing, on the other hand, is complied with as long as therewas an opportunity to be heard, and not necessarily that an actual hearing wasconducted.50

In the present case, the required two notices that must be given to hereinpetitioners Bergante and Inguillo were lacking. The records are bereft of any



















notice that would have given a semblance of substantial compliance on thepart of herein respondents. Respondents, however, aver that they had furnishedthe employees concerned, including petitioners, with a copy of FPSILU's"Petisyon." We cannot consider that as compliance with the requirement ofeither the first notice or the second notice. While the "Petisyon" enumerated the

several grounds that would justify the termination of the employees mentionedtherein, yet such document is only a recommendation by the Union upon whichthe employer may base its decision. It cannot be considered a notice oftermination. For as agreed upon by FPSI and FPSILU in their CBA, the latter mayonly recommend to the former a Union member's suspension or dismissal.Nowhere in the controverted Union Security Clause was there a mention thatonce the union gives a recommendation, the employer is bound outright toproceed with the termination.

Even assuming that the "Petisyon" amounts to a first notice, the employer cannot

be deemed to have substantially complied with the procedural requirements.True, FPSILU enumerated the grounds in said "Petisyon." But a perusal of each ofthem leads Us to conclude that what was stated were general descriptions,which in no way would enable the employees to intelligently prepare theirexplanation and defenses. In addition, the "Petisyon" did not provide a directivethat the employees are given opportunity to submit their written explanationwithin a reasonable period. Finally, even if We are to assume that the "Petisyon"is a second notice, still, the requirement of due process is wanting. For as Wehave said, the second notice, which is aimed to inform the employee that hisservice is already terminated, must state that the employer has considered allthe circumstances which involve the charge and the grounds in the first notice

have been established to justify the severance of employment. After theclaimed dialogue between Policarpio and the employees mentioned in the"Petisyon," the latter were simply told not to report for work anymore.

These defects are bolstered by Bergante and Inguillo who remain steadfast indenying that they were notified of the specific charges against them nor werethey given any memorandum to that effect. They averred that had they beeninformed that their dismissal was due to FPSILU's demand/petition, they couldhave impleaded the FPSILU together with the respondents. The Court has alwaysunderscored the significance of the two-notice rule in dismissing an employee

and has ruled in a number of cases that non-compliance therewith istantamount to deprivation of the employee’s right to due process.51

As for the requirement of a hearing or conference, We hold that respondentsalso failed to substantially comply with the same. Policarpio alleged that shehad a dialogue with the concerned employees; that she explained to them thedemand of FPSILU for their termination as well as the consequences of the"Petisyon"; and that she had no choice but to act accordingly. She further







averred that Grutas even asked her to pay all the involved employees one (1)-month salary for every year of service, plus their accrued legal holiday pay, butwhich she denied. She informed them that it has been FPSI's practice to giveemployees, on a case-to-case basis, only one-half (½) month salary for everyyear of service and after they have tendered their voluntary resignation. The

employees refused her offer and told her that they will just file their claims withthe DOLE.52

Policarpio's allegations are self-serving. Except for her claim as stated in therespondent's Position Paper, nowhere from the records can We find thatBergante and Inguillo were accorded the opportunity to present evidence insupport of their defenses. Policarpio relied heavily on the "Petisyon" of FPSILU.She failed to convince Us that during the dialogue, she was able to ascertain thevalidity of the charges mentioned in the "Petisyon." In her futile attempt to provecompliance with the procedural requirement, she reiterated that the objective

of the dialogue was to provide the employees "the opportunity to receive theact of grace of FPSI by giving them an amount equivalent to one-half (½) monthof their salary for every year of service." We are not convinced. We cannot evenconsider the demand and counter-offer for the payment of the employees as anamicable settlement between the parties because what took place was merelya discussion only of the amount which the employees are willing to accept andthe amount which the respondents are willing to give. Such non-compliance isalso corroborated by Bergante and Inguillo in their pleadings denouncing theirunjustified dismissal. In fine, We hold that the dialogue is not tantamount to thehearing or conference prescribed by law.

We reiterate, FPSI was justified in enforcing the Union Security Clause in the CBA.However, We cannot countenance respondents' failure to accord hereinpetitioners the due process they deserve after the former dismissed themoutright "in order to avoid a serious labor dispute among the officers andmembers of the bargaining agent."53 In enforcing the Union Security Clause inthe CBA, We are upholding the sanctity and inviolability of contracts. But indoing so, We cannot override an employee’s right to due process.54 In Carino v.

National Labor Relations Commission,55 We took a firm stand in holding that:

The power to dismiss is a normal prerogative of the employer. However, this is

not without limitation. The employer is bound to exercise caution in terminatingthe services of his employees especially so when it is made upon the request ofa labor union pursuant to the Collective Bargaining Agreement x x x. Dismissalsmust not be arbitrary and capricious. Due process must be observed indismissing an employee because it affects not only his position but also hismeans of livelihood. Employers should respect and protect the rights of theiremployees, which include the right to labor."



















Thus, as held in that case, "the right of an employee to be informed of thecharges against him and to reasonable opportunity to present his side in acontroversy with either the company or his own Union is not wiped away by aUnion Security Clause or a Union Shop Clause in a collective bargainingagreement. An employee is entitled to be protected not only from a company

which disregards his rights but also from his own Union, the leadership of whichcould yield to the temptation of swift and arbitrary expulsion from membershipand mere dismissal from his job."56

In fine, We hold that while Bergante and Inguillo's dismissals were valid pursuantto the enforcement of Union Security Clause, respondents however did notcomply with the requisite procedural due process. As in the case of Agabon v.National Labor Relations Commission,57 where the dismissal is for a causerecognized by the prevailing jurisprudence, the absence of the statutory dueprocess should not nullify the dismissal or render it illegal, or ineffectual.

Accordingly, for violating Bergante and Inguillo's statutory rights, respondentsshould indemnify them the amount of P30,000.00 each as nominal damages.

In view of the foregoing, We see no reason to discuss the other matters raised bypetitioners.

WHEREFORE, premises considered, the instant Petition is DENIED. The Court ofAppeals Decision dated March 11, 2004 and Resolution dated September 17,2004, in CA-G.R. SP No. 73992, are hereby AFFIRMED WITH MODIFICATION in thatwhile there was a valid ground for dismissal, the procedural requirements fortermination, as mandated by law and jurisprudence, were not observed.

Respondents First Philippine Scales, Inc. and/or Amparo Policarpio are herebyORDERED to PAY petitioners Zenaida Bergante and Herminigildo Inguillo theamount of P30,000.00 each as nominal damages. No pronouncement as tocosts.

SO ORDERED.

DIOSDADO M. PERALTAAssociate Justice

WE CONCUR:












FIRST DIVISION

G.R. No. 168716 April 16, 2009

HFS PHILIPPINES, INC., RUBEN T. DEL ROSARIO and IUM SHIPMANAGEMENTAS, Petitioners,vs.RONALDO R. PILAR, Respondent.

D E C I S I O N

CORONA, J.:

This petition1 seeks to reverse and set aside the November 22, 2004decision2 and June 22, 2005 resolution3 of the Court of Appeals (CA) in CA-G.R.SP No. 85197.

On October 4, 2001, respondent Ronaldo R. Pilar was engaged by petitionersIUM Shipmanagement AS and its Philippine manning agent, HFS Philippines, Inc.(HFS), as a crew member of the Norwegian vessel M/V Hual Triumph under thefollowing terms and conditions:

Duration of the contract : 9 monthsPosition : Electrician

Basic monthly salary : US $981 per month

Hours of work : 44 hours per week

Overtime : US $646 per month

Vacation leave with pay : 8 days per month

Point of hire : Manila4

Respondent boarded the vessel on October 27, 2001.5

In March 2002 or roughly four months after he boarded M/V Hual Triumph,respondent complained of loss of appetite, nausea, vomiting and severenervousness. Despite being given medical treatment, his condition did notimprove.

When the vessel reached Nagoya, Japan on April 3, 2002, respondent wasbrought to the Komatsu Hospital where he was diagnosed with depression and

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gastric ulcer.6 The attending physician declared him unfit for work andrecommended his hospitalization and repatriation.7 Respondent returned toManila on the same day.

Upon reaching Manila, respondent was met by a representative of HFS who

immediately brought him to the Medical Center Manila. HFS-designatedphysician Dr. Nicomedes G. Cruz confirmed that respondent was suffering frommajor depression. Thus, he placed respondent under continuous medicaltreatment for several months.8

On September 19, 2003, respondent was declared fit to work .9

Meanwhile, respondent likewise sought the opinion of other physicians.

Dr. Anselmo T. Tronco of the Philippine General Hospital10 and Dr. Raymond JudeL. Changco of the Mary Chiles Hospital11 opined that respondent continued tosuffer from major depression.

Dr. Arlito C. Veneracion of the Mary Chiles Hospital, on the other hand,evaluated the results of respondent’s ultrasound and endoscopy. He revealed

that respondent was suffering "cholecystolithiasis, mild fatty liver and chronicgastritis."12 Thus, Dr. Veneracion declared respondent unfit to work .13

On November 27, 2002, respondent filed a complaint for underpayment ofdisability and medical benefits and for moral and exemplary damages in theNational Labor Relations Commission (NLRC).14 Because respondent was a

registered member of the Associated Marine Officers and Seaman’s Union of thePhilippines (AMOSUP), the NLRC referred the complaint to the NationalConciliation and Mediation Board (NCMB) on May 6, 2003.15

In his position paper, respondent claimed that, while sleeping during his resthours on March 9, 2002, he was suddenly awakened by his officer who hit himon the head. He was so traumatized by the incident that thereafter, he lost hisappetite, vomited incessantly and experienced severe nervousness. He claimedto be entitled to disability compensation under Article 12 of the CollectiveBargaining Agreement (CBA) between AMOSUP and the Norwegian Shipowner’s

Association which provides:ARTICLE 12DISABILITY COMPENSATION

If a seafarer due to no fault of his own, suffers injury as a result of an accidentwhile serving on board or while traveling to or from the vessel on the company’s

business or due to marine peril, and as a result his ability to work is permanently











































reduced, totally or partially, the Company shall pay him a disabilitycompensation which including the amounts stipulated by the [PhilippineOverseas Employment Agency’s] rules and regulation shall be maximum:

Radio officers, chief stewards,electricians, electro technicians US $90,000

Ratings US $70,000

The disability compensation shall be calculated on the basis of the POEA’s

schedule of disability or impediment for injuries at a percentage recommendedby a doctor authorized by the Norwegian authorities for the medicalexamination of seafarers.

The company shall take out the necessary insurance to cover the benefits

mentioned above. Coverage arranged with P & I Club recognized by theNorwegian authorities will meet these requirements. (emphasis supplied)

Petitioners, on the other hand, asserted that in the absence of proof hisdepression was caused by an accident, respondent was not entitled to disabilityand medical benefits under Article 12 of the CBA. Instead, he was only entitledto the 120-day sick pay provided under Article 10 of the CBA which provides:

ARTICLE 10SICKNESS AND INJURY

During the period of employment and at the time of signing off, the officer shallsubmit to a medical examination when requested by the company or itsrepresentative, at the company’s expense.

While serving on board, a sick or injured officer is entitled to treatment at thecompany’s expense. The company is not responsible for conservative denialtreatment. If the officer is sick or injured at the termination of the service period,he has the same entitlement for a maximum period of one hundred and twenty(120) days from the date of signing off. In accordance with Part II, Section C ofthe [Philippine Overseas Employment Agency’s (POEA)] rules and regulations,

the officer must submit to a post-employment medical examination within three(3) working days after his return to the Philippines to obtain these benefits. If heshould be unable by reason of physical incapacity to do so, a written notice tothe agency within the same period is deemed as compliance provided theincapacity is certified by the Master or an authorized physician.

In the event of sickness or injury necessitating signing-off, the officer is entitled totravel to Manila at the company’s expense.



The officer is entitled to sick pay (at the same rate as basic wage) for up to 120days after signing off, provided the sickness or the injury is verified by writtenstatement from an authorized physician. The sick pay will be in addition to thevacation leave compensation mentioned in Art. 8 but not in the addition to thetermination pay compensation mentioned in Art. 5 points a to c.

It is understood that an officer who is signed off by reason of sickness or injurymust return to the Philippines within the usual period of travel from the date andplace of disembarkation indicated in homeward bound ticket. On arrival in thePhilippines, he shall report to the company’s designated physician within three

(3) working days from the time of arrival for post employment medicalexamination, otherwise, the employer’s liability shall be deemed terminated. In

case however, of failure to report due to officers’ physical incapacity, a written

notice to the company within three (3) working days from arrival is deemed ascompliance provided the incapacity is certified by the Master or an authorized

physician. (emphasis supplied)16

Pursuant to this provision, Section 20(B) of the Standard Employment Contract ofthe POEA between respondent and petitioners (employment contract) stated:

B. COMPENSATION AND BENEFITS FOR ILLNESS AND INJURY

The liabilities of the employer when the seafarer suffers injury or illness during theterm of his contract are as follows:

x x x x x x x x x

3. Upon sign-off from the vessel for medical treatment, the seafarer is entitled tosickness allowance equivalent to his basic wage until he is declared fit towork or of the degree of permanent disability has been assessed by thecompany-designated physician, but in no case shall this period exceed one-hundred twenty (120) days.

For this purpose, the seafarer shall submit himself to a post-employment medicalexamination by a company designated physician within three working daysupon his return except when he is physically incapacitated to do so, in which

case, a written notice to the agency within the same period is deemed ascompliance. Failure of the seafarer to comply with the mandatory reportingrequirement shall result in his forfeiture of the right to claim the above benefits.(emphasis supplied)

x x x x x x x x x







The NCMB held that the nature of respondent’s occupation significantly

contributed to the deterioration of his psychological condition. Respondent’s

depression was therefore a compensable sickness since it arose out of hisemployment. In view of the principle of social justice (that those who have lessin life should have more in the law), the NCMB awarded disability compensation

to him:17

WHEREFORE, judgment is hereby rendered in favor of [respondent]. [Petitioners], jointly and severally, are hereby ordered to pay disability benefits claimed by[respondent] in accordance with the [AMOSUP]-CBA in the amount of US$90,000and attorney’s fees equivalent to 10% of the total amount awarded.

SO ORDERED.

Aggrieved, petitioners assailed the NCMB decision in the CA via petition forcertiorari18 asserting that it committed grave abuse of discretion in awardingdisability compensation to respondent. The NCMB erred in applying Article 12 ofthe CBA since the respondent’s depression and gastric ulcer were not due to an

accident.

In a decision dated November 22, 2004, the CA held that Article 12 of the CBAapplies when a seafarer suffers an injury (1) as a consequence of an accidentthat took place on board the vessel or (2) while traveling to and from the vesselon company business or (3) due to a marine peril. Since respondent’s illnesses

were not the result of any of the said circumstances, he was not entitled todisability compensation granted by the CBA. Nonetheless, because he proved

that his illnesses impaired him, he is entitled to disability benefits granted bySection 3219 of the employment contract.20

Unsatisfied with the decision of the CA, petitioners moved for reconsideration butit was denied.21

The primordial issue in this petition is whether respondent is entitled to disabilitypay.

Petitioners contend that the CA erred in awarding disability pay to respondent.

Section 20(B) of the employment contract requires that the seafarer should bedeclared unfit for work by the company physician. Respondent, in this instance,was declared fit for work by Dr. Cruz.

We deny the petition.

Just like any other contract, a CBA is the law between the contracting partiesand compliance therewith in good faith is required by law.22 Inasmuch as


























respondent was a registered member of the AMOSUP, the present controversyshould be decided in accordance with the CBA.

It is undisputed that respondent fell ill while he was onboard M/V Hual Triumph.This fact was confirmed not only by petitioner’s accredited physicians but also

by respondent’s own independent physicians.

In view thereof, respondent is clearly entitled to sick-pay. Article 10 of the CBAand Section 20(B) of the employment contract apply when a seafarer contractsan illness in the course of his employment. They provide that if, in the opinion ofthe employer-accredited physician, the nature of the seafarer’s

illness, regardless of its cause, requires a sign-off (or repatriation to Manila), theseafarer is entitled to sick-pay equivalent to not more than 120-days worth ofregular wage.

However, with regard to whether respondent is entitled to disabilitycompensation, we rule in the negative. Article 12 of the CBA requires:

(a) the seafarer must suffer an injury;

(b) injury must have been the result of an accident while on board orwhile traveling to or from the vessel on company’s business or it must have

been due to marine peril and

(c) as a result of the injury, he becomes totally or partially disabled.

This provision is limited to injuries. It does not cover all kinds of illnesses such asthose suffered by respondent. Moreover, neither the NCMB nor the CA found thatrespondent’s illnesses were the result of an accident or a marine peril.

Nonetheless, while respondent is not entitled to disability compensation underthe CBA, Section 20(B) of the Contract provides:

5. In case of permanent total or partial disability of the seafarer during the termof employment caused by either injury or illness the seafarer shall becompensated in accordance with the schedule of benefits enumerated inSection [32] of this Contract. Computations arising from any illness or diseaseshall be governed by the rates and rules of compensation applicable at the timethe illness or disease was contracted. (emphasis supplied)

Under this provision, a seafarer may be entitled to disability compensation if (1)he is shown to have contracted an illness or suffered an injury in the course of hisemployment and (2) such illness or injury resulted in his total or partial disability.



In this case, the company-accredited doctor opined that respondent was fit towork but respondent’s own physicians declared otherwise.

We note that Section 20(B) of the employment contract states that it is thecompany-designated physician who determines a seafarer’s fitness to work or

his degree of disability. Nonetheless, a claimant may dispute the company-designated physician’s report by seasonably consulting another doctor. In such

a case, the medical report issued by the latter shall be evaluated by the labortribunal and the court, based on its inherent merit.231avvphi1

Dr. Tronco made the following observations about respondent:

The [patient] started to feel weak, anxious, depressed, with loss of interest andfeeling of hopelessness one month before consultation. These symptomsinterfered with work. He was thus repatriated on the fifth month of work as aseaman. He was given anti-depressants which led to his gradual improvement.

Presently, [patient] is energetic and not anxious.

Impression: major depression

He will be maintained on Zoloft pills within the next [six to nine] months. Prognosisis good.24

However, Dr. Chango found that respondent’s depression persisted:

Patient is under medication but persists to be depressed. In view of this, Irecommend that in the Schedule of Disability he be graded 6 (moderate mentaldisorder) which limits worker to ADL with some directed care.25

Dr. Veneracion, on the other hand, issued a certification to the following effect:

This is to certify that I have seen and examined Mr. Ronaldo Pilar on September22, 2003 at Mary Chiles General Hospital. Ultrasound done at March 26, 2003showed cholecystilithiasis and mild fatty liver. Endoscopy with gastric biopsydone April 2, 2003 revealed chronic gastritis.

Diagnosis : CholecystilithiasisMild fatty liverChronic gastritis

Remarks : POEA Disability Grade 7Unfit to work














This certification was issued upon Mr. Rolando Pilar’s request fo r the purpose ofclaiming disability benefits. 26

There was clearly a discrepancy between the certification of the company-designated physician and those of respondent’s chosen doctors. The company-

designated physician expectedly downplayed his findings on the ratings.27 It isfor this reason that the employment contract affords the seaman the option toseek the opinion of an independent physician.28

The company-designated physician declared respondent as having suffered amajor depression but was already cured and therefore fit to work. On the otherhand, the independent physicians stated that respondent’s major depression

persisted and constituted a disability. More importantly, while the former totallyignored the diagnosis of the Japanese doctor that respondent was also sufferingfrom gastric ulcer, the latter addressed this. The independent physicians thus

found that respondent was suffering from chronic gastritis and declared him unfitfor work.

The bottomline is this: the certification of the company-designated physicianwould defeat respondent’s claim while the opinion of the independent

physicians would uphold such claim. In such a situation, we adopt the findingsfavorable to respondent.

The law looks tenderly on the laborer. Where the evidence may be reasonablyinterpreted in two divergent ways, one prejudicial and the other favorable tohim, the balance must be tilted in his favor consistent with the principle of social

justice.29

WHEREFORE, the petition is hereby DENIED. The November 22, 2004 decision andJune 22, 2005 resolution of the Court of Appeals in CA-G.R. SP No. 85197affirming the May 27, 2002 decision of the National Conciliation Mediation Boardin NCMB Case No. NCMB-NCR-CRN Case No. 06-007-03 are AFFIRMED.

Costs against petitioners.

SO ORDERED.




















FIRST DIVISION

G.R. No. 169254 August 23, 2012

DE LA SALLE UNIVERSITY, Petitioner,

vs.DE LA SALLE UNIVERSITY EMPLOYEES ASSOCIATION (DLSUEA-NAFTEU), Respondent.

LEONARDO-DE CASTRO,*

PERLAS-BERNABE, **

D E C I S I O N

LEONARDO-DE CASTRO, J.:

Before this Court is a petition for review on certiorari under Rule 45 of the Rules ofCourt assailing the March 4, 2005 Decision 1 and August 5, 2005 Resolution2 ofthe Court of Appeals in CA-G.R. SP No. 82472, entitled De La Salle University

versus the Honorable Secretary of Labor and De La Salle University Employees

Association(DLSUEA-NAFTEU), which affirmed the November 17, 2003Decision3 and January 20, 2004 Order4 of the Secretary of Labor in OS-AJ-0033-2003 (NCMB-NCR-NS-08-246-03). These decisions and resolutions consistentlyfound petitioner guilty of unfair labor practice for failure to bargain collectivelywith respondent.

This petition involves one of the three notices of strike filed by respondent De LaSalle University Employees Association (DLSUEANAFTEU) against petitioner De LaSalle University due to its refusal to bargain collectively with it in light of the intra-union dispute between respondent’s two opposing factions. The following

narration of facts will first discuss the circumstances surrounding the said intra-union conflict between the rival factions of respondent union and, thereafter,recite the cases relating to the aforementioned conflict, from the complaint forunfair labor practice to the subsequent notices of strike, and to the assumptionof jurisdiction by the Secretary of Labor.

Petition for Election of UnionOfficers

On May 30, 2000, some of respondent’s members headed by Belen Aliazas (theAliazas faction) filed a petition for the election of union officers in the Bureau ofLabor Relations (BLR).5 They alleged therein that there has been no election forrespondent’s officers since 1992 in supposed violation of the respondent union’s

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constitution and by-laws which provided for an election of officers every threeyears.6 It would appear that respondent’s members repeatedly voted to

approve the hold-over of the previously elected officers led by Baylon R. Bañez(Bañez faction) and to defer the elections to expedite the negotiations of theeconomic terms covering the last two years of the 1995-2000 collective

bargaining agreement (CBA)7 pursuant to Article 253-A of the Labor Code.8

On March 19, 2001, BLR Regional Director Alex E. Maraan issued a Decisionordering the conduct of an election of union officers to be presided by the LaborRelations Division of the Department of Labor and Employment-National CapitalRegion (DOLE-NCR).9 He noted therein that the members of the Bañez factionwere not elected by the general membership but were appointed by theExecutive Board to their positions since 1985.10

The Bañez faction appealed the said March 19, 2001 Decision of the BLR

Regional Director.While the appeal was pending, the Aliazas faction filed a Very Urgent Motion forIntervention in the BLR. They alleged therein that the Bañez faction, in completedisregard of the March 19, 2001 Decision, scheduled a "regular" election ofunion officers without notice to or participation of the DOLE-NCR.11

In an Order dated July 6, 2001, BLR Director IV Hans Leo J. Cacdac granted themotion for intervention.12 He held that the unilateral act of setting the date ofelection on July 9, 2001 and the disqualification of the Aliazas faction by theDLSUEA-COMELEC supported the intervening faction’s fear of biased elections.13

Thereafter, in a Resolution dated May 23, 2002, BLR Director Cacdac dismissedthe appeal of the Bañez faction. The salient portions thereof stated:

The exercise of a union member’s basic liberty to choose the union leadership is

guaranteed in Article X of [respondent’s] constitution and by-laws. Section 4mandates the conduct of a regular election of officers on the first Saturday ofJuly and on the same date every three years thereafter.

In unequivocal terms, Article 241(c) of the Labor Code states that "[t]he

members shall directly elect their officers, including those of the national unionor federation, to which they or their union is affiliated, by secret ballot at intervalsof five (5) years."

[The Bañez faction] admitted that no elections were conducted in 1992 and1998, when the terms of office of the officers expired. This Office emphasizes thateven the decision to dispense with the elections and allow the hold-over officers



































to continue should have been subjected to a secret ballot under Article 241(d)which states:

The members shall determine by secret ballot, after due deliberation, anyquestion of major policy affecting the entire membership of the organization,

unless the nature of the organization or force majeure renders such secret ballotimpractical, in which case the board of directors of the organization may makethe decision in behalf of the general membership.

With the clear and open admission that no election transpired even after theexpiration of the union officers’ terms of office, the call for the conduct ofelections by the Regional Director was valid and should besustained.14 (Emphases supplied.)

Subsequently, in a memorandum dated May 16, 2003, BLR Director Cacdacstated that there was no void in the union leadership as the March 19, 2001Decision of Regional Director Maraan did not automatically terminate the Bañezfaction’s tenure in office. He explained therein that "[a]s duly-elected officers of[respondent], their leadership is not deemed terminated by the expiration oftheir terms of office, for they shall continue their functions and enjoy the rightsand privileges pertaining to their respective positions in a hold-over capacity,until their successors shall have been elected and qualified."15

On August 28, 2003, an election of union officers under the supervision of theDOLE was conducted. The Bañez faction emerged as the winner thereof.16 TheAliazas faction contested the election results.

On October 29, 2003, the Bañez faction was formally proclaimed as the winner inthe August 28, 2003 election of union officers.17

The Complaint for Unfair LaborPractices and Three Notices ofStrike

On March 20, 2001, despite the brewing conflict between the Aliazas and Bañezfactions, petitioner entered into a five-year CBA covering the period from June

1, 2000 to May 31, 2005.18

On August 7, 2001, the Aliazas faction wrote a letter to petitioner requesting it toplace in escrow the union dues and other fees deducted from the salaries ofemployees pending the resolution of the intra-union conflict. We quote thepertinent portion of the letter here:























The [BLR], in its March 19, 2001 [decision], declared that the hold-over capacityas president of Mr. Baylon Bañez, as well as that of the other officers [ofrespondent] has been extinguished. It was likewise stated in the [decision] that"to further defer the holding of a local election is whimsical, capricious and is aviolation of the union members’ rights under Article 241 and is punishable by

expulsion."

This being so, we would like to request [petitioner] to please put on escrow allunion dues/agency fees and whatever money considerations deducted fromsalaries of the concerned co-academic personnel until such time that anelection of union officials has been scheduled and subsequent elections hasbeen held. We fully understand that putting the collection on escrow means thecontinuance of our monthly deductions but the same will not be remitted torespondent’s funds.19

Petitioner acceded to the request of the Aliazas faction and informed the Bañezfaction of such fact in a letter dated August 16, 2001. Petitioner explained:

It is evident that the intra-union dispute between the incumbent set of officers ofyour Union on one hand and a sizeable number of its members on the otherhand has reached serious levels. By virtue of the 19 March 2001 Decision andthe 06 July 2001 Order of the Department of Labor and Employment (DOLE), thehold-over authority of your incumbent set of officers has been consideredextinguished and an election of new union officers, to be conducted andsupervised by the DOLE, has been directed to be held. Until the result of thiselection [come] out and a declaration by the DOLE of the validly elected officers

is made, a void in the Union leadership exists.

In light of these circumstances, the University has no other alternative but totemporarily do the following:

1. Establish a savings account for the Union where all the collected uniondues and agency fees will be deposited and held in trust; and

2. Discontinue normal relations with any group within the Union includingthe incumbent set of officers.

We are informing you of this decision of [petitioner] not only for your guidancebut also for the apparent reason that [it] does not want itself to be unnecessarilyinvolved in your intra-union dispute. This is the only way [petitioner] can maintainneutrality on this matter of grave concern.20 (Emphasis supplied.)

In view of the foregoing decision of petitioner, respondent filed a complaint forunfair labor practice in the National Labor Relations Commission (NLRC) on











August 21, 2001.21 It alleged that petitioner committed a violation of Article248(a) and (g) of the Labor Code which provides:

Article 248. Unfair labor practices of employers. It shall be unlawful for anemployer to commit any of the following unfair labor practice:

(a) To interfere with, restrain or coerce employees in the exercise of their right toself-organization.

x x x x

(d) To initiate, dominate, assist or otherwise interfere with the formation oradministrator of any labor organization, including the giving of financial or othersupport to it or its organizers or supporters.

Respondent union asserted that the creation of escrow accounts was not an actof neutrality as it was influenced by the Aliazas factions’s letter and was an act

of interference with the internal affairs of the union. Thus, petitioner’s non-remittance of union dues and discontinuance of normal relations with itconstituted unfair labor practice.

Petitioner, for its defense, denied the allegations of respondent and insisted thatits actions were motivated by good faith.

Meanwhile, on March 7, 2002, respondent filed a notice of strike in the NationalConciliation and Mediation Board (NCMB).22

Shortly thereafter, or on July 12, 2002, Labor Arbiter Felipe P. Pati dismissed theAugust 21, 2001 complaint for unfair labor practice against petitioner for lack ofmerit in view of the May 23, 2002 decision of the BLR, affirming the need toconduct an election of the union’s officers.23 The labor arbiter, in effect, upheldthe validity of petitioner’s view that there was a void in the leadership of

respondent.

The July 12, 2002 Decision of Labor Arbiter Pati, however, did not settle mattersbetween respondent and petitioner.

On March 15, 2003, respondent sent a letter to petitioner requesting for therenegotiation of the economic terms for the fourth and fifth years of the thencurrent CBA, to wit:

This refers to the re-negotiation of the economic provisions for the [fourth andfifth] year[s] of the 2000-2005 [CBA] that will commence sometime in March2003.















In this regard, the [Bañez faction] for and in behalf of [respondent] would like torespectfully request your good office to provide us a copy of the latest AuditedFinancial Statements of [petitioner,] including its budget performance report sothat [petitioner] and [respondent through] their respective authorizedrepresentatives could facilitate the negotiations thereof.

We are furnishing [petitioner through] your good self a copy of [our] CBAeconomic proposals for the [fourth and fifth] year[s] of the 2000-2005 CBA signedby its authorized negotiating panel.

We also request [petitioner] to furnish us a copy of its counter proposals as wellas a list of its negotiating panel not later than ten (10) days from receipts of [our]CBA proposals so that [we] and [petitioner] can now proceed with the initialconference to discuss the ground rules that will govern the CBA negotiation.24

In a letter dated March 20, 2003,25 petitioner denied respondent’s request. It

stated therein:

Pursuant to the [d]ecisions of appropriate government authority, and consistentwith the position enunciated and conveyed to you by [petitioner] in my letterdated August 16, 2001, there is a conclusion of fact that there is an absolute voidin the leadership of [respondent]. Accordingly, your representation as Presidentor officer of, as well as, that of all persons purporting to be officers and membersof the board of the said employees association [will] not [be] recognized.Normal relations with the union cannot occur until the said void in the leadershipof [respondent] is appropriately filled. Affected by the temporary suspension of

normal relations with[respondent] is the renegotiation of the economic provisionsof the 2002-2005 CBA. No renegotiation can occur given the void in theleadership of [respondent.]26

As a consequence of the aforementioned letter, respondent filed a secondnotice of strike on April 4, 2003.27Upon the petition filed by petitioner on April 11,2003,28 the Secretary of Labor assumed jurisdiction over the matter pursuant toArticle 263 of the Labor Code29 as petitioner, an educational institution, wasconsidered as belonging to an industry indispensable to national interest anddocketed the case as OS-AJ-0015-2003.30

On June 26, 2003, the Second Division of the NLRC affirmed the July 12, 2002Decision of Labor Arbiter Pati.31Respondent moved for reconsideration but it wasdenied by the NLRC in a Resolution dated September 30, 2003.32

Meanwhile, on July 28, 2003, the Secretary of Labor issued a Decision33 in OS-AJ-0015-2003, finding petitioner guilty of violating Article 248(g) in relation to Article252 of the Labor Code.34 The salient portion thereof stated:











































The University is guilty of refusal to bargain amounting to an unfair labor practiceunder Article 248(g) of the Labor Code. Indeed there was a requirement on bothparties of the performance of the mutual obligation to meet and convenepromptly and expeditiously in good faith for the purpose of negotiating anagreement. Undoubtedly, both [petitioner] and [respondent] entered into a

[CBA] on [March 20, 2001. The term of the said CBA commenced on [June 1,2000 and with the expiration of the economic provisions on the third year,[respondent] initiated negotiation by sending a letter dated March 15, 2003,together with the CBA proposal. In reply to the letter of [respondent], [petitioner]in its letter dated [March 20, 2003 refused.

Such an act constituted an intentional avoidance of a duty imposed by law.There was nothing in the [March 19, 2001 and July 6, 2001 orders] of DirectorMaraan and Cacdac which restrained or enjoined compliance by the partieswith their obligations under the CBA and under the law. The issue of union

leadership is distinct and separate from the duty to bargain.In fact, BLR Director Cacdac clarified that there was no void in [respondent’s]

leadership. The pertinent decision dated March 19, 2001 x x x reads35:

We take this opportunity to clarify that there is no void in [respondent’s]leadership. The [March 19, 2001 decision] x x x should not be construed as anautomatic termination of the incumbent officers[’] tenure of office. As duly-elected officers of [respondent], their leadership is not deemed terminated bythe expiration of their terms of office, for they shall continue their functions andenjoy the rights and privileges pertaining to their respective positions in a hold-

over capacity, until their successors shall have been elected and qualified.

It is thus very clear. x x x. This official determination by the BLR Director [Cacdac]removes whatever cloud of doubt on the authority of the incumbent to negotiatefor and in behalf of [respondent] as the bargaining agent of all the coveredemployees. [Petitioner] is duty bound to negotiate collectively pursuant to Art.252 of the Labor Code, as amended.

x x x x

On the question: [i]s [petitioner] guilty of unfair labor practice? This officeresolves the issue in the affirmative. Citing the case of the Divine Word University

of Tacloban v. Secretary of Labor , [petitioner] is guilty of unfair labor practice inrefusing to abide by its duty to bargain collectively. The refusal of [petitioner] tobargain is tainted with bad faith amounting to unfair labor practice. There is noother way to resolve the issue given the facts of the case and the law on thematter.







WHEREFORE, premises considered, this Office finds [petitioner] guilty of refusal tobargain collectively in violation of Article 252 in relation to Article 248 of theLabor Code, as amended. Management is hereby directed to cease and desistfrom refusing to bargain collectively. The parties are therefore directed tocommence negotiations effective immediately.36 (Citations omitted.)

On August 1, 2003, respondent reiterated its demand on petitioner to bargaincollectively pursuant to the aforementioned Decision of the Secretary of Labor.37

On August 4, 2003, petitioner sent a letter to respondent explaining that it cannotact on the latter’s letter. The August 4, 2003 letter of petitioner stated:

[Petitioner’s] counsel is preparing a Motion for Reconsideration that would befiled with the Office of the Secretary of Labor and Employment. Under the Rule,[petitioner] still has the remedy of filing such Motion with the Office of theSecretary before elevating the matter to higher authorities should it becomenecessary.

We, therefore, regret to advise you that [petitioner] cannot accede to yourdemand to immediately commence negotiations for the CBA with your group orany other group of Union members, as the case may be, until such time that thecase before the Secretary is resolved with finality. We will, therefore, continue todefer the CBA negotiations pending final resolution of the matter.

As regards your other demands, [petitioner] is of the position that the matterssubject of said demands are still pending before the various offices of the Labor

Arbiters and NLRC and, therefore, it cannot act on the same until such time thatsaid cases are likewise resolved with finality. It cannot be assumed that all thesecases that you filed have been rendered moot and academic by theSecretary’s Decision, otherwise you would, in effect, be admitting that you have

engaged in "forum shopping."38

Failing to secure a reconsideration of the July 28, 2003 Decision of the Secretaryof Labor, petitioner assailed the same in the Court of Appeals via a petitionfor certiorari docketed as CA-G.R. SP No. 81649.

On August 27, 2003, respondent filed the third notice of strike,39

in the wake ofpetitioner’s August 4, 2003 letter and citing among others petitioner’s alleged

violation of the CBA and continuing refusal to bargain in good faith. Petitioner,on the other hand, filed a petition for assumption of jurisdiction for this thirdnotice of strike.40 Again, the Secretary of Labor assumed jurisdiction. This casewas docketed as OS-AJ-0033-2003.























On November 17, 2003, the Secretary of Labor, in resolving OS-AJ-0033-2003,cited the July 28, 2003 Decision in OS-AJ-0015-2003, and consequently declaredthat petitioner committed an unfair labor practice. The salient portions of saidDecision stated:

Considering that this case, docketed as Case No. OS-AJ-0033-2003 is based onthe same set of facts with another case, involving the same parties numbered asOS-AJ-0015-2003, and based on the same factual and legal circumstances, wehave to consistently hold that the [petitioner] has indeed failed to comply with itsobligation under the law. As a matter of fact, it admits in persisting to refusedespite the fact that there is no more legal obstacle preventing thecommencement of the Collective Bargaining Negotiation between theparties. Anent the so called void in the Union leadership, We declared that thesame does not constitute a valid ground to refuse to negotiatebecause [petitioner’s] duty to bargain under the law is due and demandable

under the law by [respondent] as a whole and not by any faction within theunion.

x x x x

x x x Events have lately turned out in favor of [respondent], thereby obliteratingany further justification on the part of [petitioner] not to bargain. On October 29,2003, the new Regional Director of DOLENCR, Ciriaco E. Lagunzad III, issued aresolution declaring the Bañez group as the duly elected officers of the Union. xx x.

x x x x

The above election results were the outcome of a duly-held union election,supervised by the Department’s Regional Office. This was the election ordered in

the [July 6, 2001 and March 19, 2001 orders of the BLR]. This was also the sameelection invoked by [petitioners] in trying to justify it continuing refusal tobargain.

The [members of the Bañez faction have] reportedly taken their oath of officeand have qualified. [Petitioner] is now under estoppel from recognizing them,

considering that it committed in writing to recognize and commence bargainingonce a set of duly elected officers [is] proclaimed after an election dulyconducted under the supervision of the Department.

x x x x

Not only has [petitioner] refused to negotiate with [respondent], it has undulywithheld the money belonging to the bargaining agent. Both these acts are



illegal and are tantamount to Unfair Labor Practice under Article 248 in relationto Article 252 of the Labor Code x x x.

ACCORDINGLY, all the foregoing premises being duly considered, this Officehereby declares that [petitioner] committed Unfair Labor Practice in violation of

[Article 248 in relation to Article 252 of the Labor Code x x x. [Petitioner] and itsduly authorized officers and personnel are therefore ordered to cease and desistfrom committing said acts under pain of legal sanction.

[Petitioner] is therefore specifically directed to commence collective bargainingnegotiation with [respondents] without further delay and to immediately turnover to the Bañez group the unlawfully withheld union dues and agency feeswith legal interest corresponding to the period of the unlawful withholding. Allthese specific directives should be done within ten (10) days from receipt of thisDecision and with sufficient proof of compliance herewith to be submitted

immediately thereafter.41

In accordance with the terms of the aforementioned Decision, petitioner turnedover to respondent the collected union dues and agency fees from employeeswhich were previously placed in escrow amounting to P441,924.99.42

Nonetheless, petitioner moved for the reconsideration of the November 17, 2003Decision of the Secretary of Labor but it was denied in an Order dated January20, 2004.

Aggrieved, petitioner filed a petition for certiorari under Rule 65 of the Rules of

Court with the Court of Appeals. Petitioner alleged therein that the Secretary ofLabor committed grave abuse of discretion by holding that it (petitioner) wasliable for unfair labor practice. Taking a contrary stance to the findings of theSecretary of Labor, petitioner stressed that it created the escrow accounts for thebenefit of the winning faction and undertook temporary measures in light of theMarch 19, 2001 and July 6, 2001 Orders of the BLR. Thus, it should not bepenalized for taking a hands-off stance in the intra-union controversy betweenthe Aliazas and Bañez factions.

In a Decision dated March 4, 2005, the Court of Appeals affirmed the November

17, 2003 Decision and January 20, 2004 Order of the Secretary of Labor anddismissed the said petition. It held:

[Petitioner] finds reason to refuse to negotiate with [respondent’s incumbentofficers] because of the alleged "void in the union leadership" declared by theRegional Director in his March 19, 2001 decision, [but] after the election of theunion officers held on August 28, 2003, continued refusal by the University tonegotiate amounts to unfair labor practice. The non-proclamation of the newly











elected union officers cannot be used as an excuse to fulfill the duty to bargaincollectively.43(Emphasis supplied.)

Petitioner moved for reconsideration but it was denied in a Resolution datedAugust 5, 2005. The Court of Appeals noted that petitioner’s arguments were a

mere "rehash of the issues and discussions it presented in its petition and in therelevant pleadings submitted x x x."44

Meanwhile, the Court of Appeals dismissed CA-G.R. SP No. 81649 (whichassailed the July 28, 2003 Decision in OS-AJ-0015-2003), in a Decision datedMarch 18, 2005.45 The said decision likewise found that petitioner erred inunilaterally suspending negotiations with respondent since the pendency of theintra-union dispute was not a justifiable reason to do so.

Petitioner moved for reconsideration of the aforesaid decision in CAG. R. SP No.81649 but it was denied in a Resolution dated June 7, 200546 due to lack of merit.

Aggrieved, petitioner elevated both the assailed decisions and resolutions in thiscase and in CA-G.R. SP No. 81649, which was docketed as G.R. No. 168477, tothis Court. Petitioner, in both instances, essentially argued that it did notmaliciously evade its duty to bargain. On the contrary, it asserts that it merelyrelied in good faith on the March 19, 2001 Decision of the BLR that there was avoid in respondent’s leadership.47

This Court, through its Third Division, denied G.R. No. 168477 in a minuteresolution dated July 20, 2005 due to the petition’s "failure x x x to show that a

reversible error had been committed by the appellate court."48 The motion forreconsideration was denied with finality on September 21,

200549 and entry of judgment was made on November 3, 2005.50

Meanwhile, respondent was ordered to file a comment herein, and,subsequently, this petition was given due course.

We note that both G.R. No. 168477 and this petition are offshoots of petitioner’s

purported temporary measures to preserve its neutrality with regard to theperceived void in the union leadership. While these two cases arose out ofdifferent notices to strike filed on April 3, 2003 and August 27, 2003, it isundeniable that the facts cited and the arguments raised by petitioner arealmost identical. Inevitably, G.R. No. 168477 and this petition seek only onerelief, that is, to absolve petitioner from respondent’s charge of committing an

unfair labor practice, or specifically, a violation of Article 248(g) in relation toArticle 252 of the Labor Code.

































For this reason, we are constrained to apply the law of the case doctrine in lightof the finality of our July 20, 2005 and September 21, 2005 resolutions in G.R. No.168477. In other words, our previous affirmance of the Court of Appeals’ finding – that petitioner erred in suspending collective bargaining negotiations with theunion and in placing the union funds in escrow considering that the intra-union

dispute between the Aliazas and Bañez factions was not a justification therefor — is binding herein. Moreover, we note that entry of judgment in G.R. No. 168477was made on November 3, 2005, and that put to an end to the litigation of saidissues once and for all.51

The law of the case has been defined as the opinion delivered on a formerappeal. It means that whatever is once irrevocably established as thecontrolling legal rule or decision between the same parties in the same casecontinues to be the law of the case, whether correct on general principles or

not , so long as the facts on which such decision was predicated continue to be

the facts of the case before the court.52

In any event, upon our review of the records of this case, we find that the Courtof Appeals committed no reversible error in its assailed Decision dated March 4,2005 and Resolution dated August 5, 2005. Petitioner’s reliance on the July 12,

2002 Decision of Labor Arbiter Pati, and the NLRC’s affirmance thereof, is

misplaced. The unfair labor practice complaint dismissed by Labor Arbiter Patiquestioned petitioner’s actions immediately after the March 19, 2001 Decision of

BLR Regional Director Maraan, finding that "the reason for the hold-over [of thepreviously elected union officers] is already extinguished." The presentcontroversy involves petitioner’s actions subsequent to (1) the clarification of

said March 19, 2001 Maraan Decision by BLR Director Cacdac who opined in aMay 16, 2003 memorandum that the then incumbent union officers (i.e., theBañez faction) continued to hold office until their successors have been electedand qualified, and (2) the July 28, 2003 Decision of the Secretary of Labor in OS-AJ-0015-2003 ruling that the very same intra-union dispute (subject of severalnotices of strike) is insufficient ground for the petitioner to suspend CBAnegotiations with respondent union. We take notice, too, that the aforesaidDecision of Labor Arbiter Pati has since been set aside by the Court of Appealsand such reversal was upheld by this Court’s Second Division in its Decision

dated April 7, 2009 in G.R. No. 177283, wherein petitioner was found liable for

unfair labor practice.53

Neither can petitioner seek refuge in its defense that as early as November 2003it had already released the escrowed union dues to respondent and normalizedrelations with the latter. The fact remains that from its receipt of the July 28, 2003Decision of the Secretary of Labor in OS-AJ-0015-2003 until its receipt of theNovember 17, 2003 Decision of the Secretary of Labor in OS-AJ-0033-2003,petitioner failed in its duty to collectively bargain with respondent union without















valid reason. At most, such subsequent acts of compliance with the issuances inOS-AJ-0015-2003 and OS-AJ-0033-2003 merely rendered moot and academicthe Secretary of Labor’s directives for petitioner to commence collectivebargaining negotiations within the period provided.

To conclude, we hold that the findings of fact of the Secretary of Labor and theCourt of Appeals, as well as the conclusions derived therefrom, were amplysupported by evidence on record. Thus, in line with jurisprudence that suchfindings are binding on this Court, we see no reason to disturb the same.54

WHEREFORE, the petition is DENIED.

SO ORDERED.


SECOND DIVISION

G.R. No. 162324 February 4, 2009

RFM CORPORATION-FLOUR DIVISION and SFI FEEDS DIVISION, Petitioner,vs.

KASAPIAN NG MANGGA-GAWANG PINAGKAISA-RFM (KAMPI-NAFLU-KMU) andSANDIGAN AT UGNAYAN NG MANGGAGAWANG PINAGKAISA-SFI (SUMAPI-NAFLU-KMU) Respondents.

D E C I S I O N

CARPIO MORALES, J.:

Petitioner RFM Corporation (RFM) is a domestic corporation engaged in flour-milling and animal feeds manufacturing. Sometime in 2000, its Flour Division andSFI Feeds Division entered into collective bargaining agreements (CBAs) withtheir respective labor unions, the Kasapian ng Manggagawang Pinagkaisa-RFM(KAMPI-NAFLU-KMU) for the Flour Division, and Sandigan at Ugnayan ngManggagawang Pinagkaisa-SFI (SUMAPI-NAFLU-KMU) for the Feeds Division(respondents). The CBAs, which contained similar provisions, were effective forfive years, from July 1, 2000 up to June 30, 2005.

Sec. 3, Art. XVI of each of the CBAs reads:







Section. 3. Special Holidays with Pay – The COMPANY agrees to make paymentto all daily paid employees, in respect of any of the days enumeratedhereunto if declared as special holidays by the national government:

a) Black Saturday

b) November 1

c) December 31

The compensation rate shall be the regular rate. Any work beyond eight (8)hours shall be paid the standard ordinary premium. (Emphasis and underscoringsupplied)

During the first year of the effectivity of the CBAs in 2000, December 31 which fellon a Sunday was declared by the national government as a special holiday.Respondents thus claimed payment of their members’ salaries, invoking the

above-stated CBA provision. Petitioner refused the claims for payment, averringthat December 31, 2000 was not compensable as it was a rest day. Thecontroversy resulted in a deadlock, drawing the parties to submit the same forvoluntary arbitration.

Following the submission by the parties of their respective position papers,Voluntary Arbitrator (VA) Bernardino M. Volante, by Decision1 of October 11,2001, declared that the above-quoted provision of the CBA is clear. Itaccordingly ruled in favor of respondents and ordered petitioner to pay the

salaries of respondents’ members for December 31, 2000, and to pay attorney’sfees to respondents equivalent to 10% of the monetary award.

Its motion for reconsideration of the VA ruling having been denied,2 petitionerappealed to the Court of Appeals which affirmed the same by Decision3 datedOctober 30, 2003.

The appellate court held that if it was indeed petitioner’s intent to pay the

salaries of daily-paid employees during a special holiday, even if unworked,only if such special holiday fell on weekdays, then it should have been clearlyand expressly stipulated in the CBAs. And it held inapplicable Kimberly ClarkPhilippines v. Lorredo4cited by petitioner which case held that whenever there isa conflict between the words in the CBA and the evident intention of the parties,the latter prevails. For, so the appellate court explained, there were no words orprovisions in the CBAs which would result in an absurd interpretation vis a vis theparties’ true intention.1avvphi1

http://www.lawphil.net/judjuris/juri2009/feb2009/gr_162324_2009.html#fnt1














In sustaining the award of attorney’s fees, the appellate court ruled that

respondents were entitled thereto as they were compelled to engage a lawyerto pursue their claims.

Petitioner’s motion for reconsideration having been denied, the present petition

was filed.

Petitioner insists that the CBA provision in question was intended to protect theemployees from reduction of their take-home pay, hence, it was not meant toremunerate them on Sundays, which are rest days, nor to increase their salaries.

On the award of attorney’s fees, petitioner argues that it is not warranted as it did

not arbitrarily refuse to pay respondents’ demands.

The petition is bereft of merit.

If the terms of a CBA are clear and have no doubt upon the intention of thecontracting parties, as in the herein questioned provision, the literal meaningthereof shall prevail. That is settled.5 As such, the daily-paid employees must bepaid their regular salaries on the holidays which are so declared by the nationalgovernment, regardless of whether they fall on rest days.

Holiday pay is a legislated benefit enacted as part of the Constitutionalimperative that the State shall afford protection to labor. Its purpose is notmerely "to prevent diminution of the monthly income of the workers on accountof work interruptions. In other words, although the worker is forced to take a rest,

he earns what he should earn, that is, his holiday pay."6 (Emphasis andunderscoring supplied)1avvphi1.zw+

The CBA is the law between the parties, hence, they are obliged to comply withits provisions.7 Indeed, if petitioner and respondents intended the provision inquestion to cover payment only during holidays falling on work or weekdays, itshould have been so incorporated therein.

Petitioner maintains, however, that the parties failed to foresee a situation wherethe special holiday would fall on a rest day. The Court is not persuaded. TheLabor Code specifically enjoins that in case of doubt in the interpretation of anylaw or provision affecting labor, it should be interpreted in favor of labor.8

Respondents having been compelled to litigate as a result of petitioner’s failure

to satisfy their valid claim, the Court deems it just and equitable to sustain theaward of attorney’s fees.

WHEREFORE, the petition is DENIED.



















SO ORDERED.


FIRST DIVISION

G.R. No. 145561 June 15, 2005

HONDA PHILS., INC., petitioner,vs.SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

D E C I S I O N


This petition for review under Rule 45 seeks the reversal of the Court of Appeals’

decision1 dated September 14, 20002 and its resolution3 dated October 18, 2000,in CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2,2000 rendered by the Voluntary Arbitrator who ruled that petitioner HondaPhilippines, Inc.’s (Honda) pro-rated payment of the 13th and 14th month payand financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective Bargaining

Agreement (CBA) forged between petitioner Honda and respondent unionSamahan ng Malayang Manggagawa sa Honda (respondent union) whichcontained the following provisions:

Section 3. 13th Month Pay

The COMPANY shall maintain the present practice in the implementation [of] the13th month pay.


The COMPANY shall grant a 14th Month Pay, computed on the same basis ascomputation of 13th Month Pay.

Section 7. The COMPANY agrees to continue the practice of granting, in itsdiscretion, financial assistance to covered employees in December of eachyear, of not less than 100% of basic pay.












This CBA is effective until year 2000. In the latter part of 1998, the parties startedre-negotiations for the fourth and fifth years of their CBA. When the talks betweenthe parties bogged down, respondent union filed a Notice of Strike on theground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. OnMarch 31, 1999, then Department of Labor and Employment (DOLE) Secretary

Laguesma assumed jurisdiction over the labor dispute and ordered the parties tocease and desist from committing acts that would aggravate the situation. Bothparties complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike onthe ground of unfair labor practice alleging that Honda illegally contracted outwork to the detriment of the workers. Respondent union went on strike andpicketed the premises of Honda on May 19, 1999. On June 16, 1999, DOLE ActingSecretary Felicisimo Joson, Jr. assumed jurisdiction over the case and certifiedthe same to the National Labor Relations Commission (NLRC) for compulsory

arbitration. The striking employees were ordered to return to work and themanagement accepted them back under the same terms prior to the strikestaged.

On November 22, 1999, the management of Honda issued amemorandum4 announcing its new computation of the 13th and 14th month payto be granted to all its employees whereby the thirty-one (31)-day long strikeshall be considered unworked days for purposes of computing said benefits. Asper the company’s new formula, the amount equivalent to 1/12 of the

employees’ basic salary shall be deducted from these bonuses, with a

commitment however that in the event that the strike is declared legal, Honda

shall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letterdated November 25, 1999. Honda sought the opinion of the Bureau of WorkingConditions (BWC) on the issue. In a letter dated January 4, 2000,5 the BWCagreed with the pro-rata payment of the 13th month pay as proposed byHonda.

The matter was brought before the Grievance Machinery in accordance withthe parties’ existing CBA but when the issue remained unresolved, it was

submitted for voluntary arbitration. In his decision6

dated May 2, 2000, VoluntaryArbitrator Herminigildo C. Javen invalidated Honda’s computation, to wit:

WHEREFORE, in view of all foregoing premises being duly considered andevaluated, it is hereby ruled that the Company’s implementation of pro-rated13th Month pay, 14th Month pay and Financial Assistance [is] invalid. TheCompany is thus ordered to compute each provision in full month basic pay and













pay the amounts in question within ten (10) days after this Decision shall havebecome final and executory.

The three (3) days Suspension of the twenty one (21) employees is herebyaffirmed.

SO ORDERED.7

Honda’s Motion for Partial Reconsideration was denied in a resolution dated May22, 2000. Thus, a petition was filed with the Court of Appeals, however, thepetition was dismissed for lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-ratedcomputation of the 13th month pay and the other bonuses in question is validand lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between alegitimate labor organization and the employer concerning wages, hours ofwork and all other terms and conditions of employment in a bargaining unit.8 Asin all contracts, the parties in a CBA may establish such stipulations, clauses,terms and conditions as they may deem convenient provided these are notcontrary to law, morals, good customs, public order or public policy.9 Thus,where the CBA is clear and unambiguous, it becomes the law between theparties and compliance therewith is mandated by the express policy of the

law.10

In some instances, however, the provisions of a CBA may become contentious,as in this case. Honda wanted to implement a pro-rated computation of thebenefits based on the "no work, no pay" rule. According to the company, thephrase "present practice" as mentioned in the CBA refers to the manner andrequisites with respect to the payment of the bonuses, i.e., 50% to be given inMay and the other 50% in December of each year. Respondent union, however,insists that the CBA provisions relating to the implementation of the 13th monthpay necessarily relate to the computation of the same.

We agree with the findings of the arbitrator that the assailed CBA provisions arefar from being unequivocal. A cursory reading of the provisions will show thatthey did not state categorically whether the computation of the 13th month pay,14th month pay and the financial assistance would be based on one full month’s

basic salary of the employees, or pro-rated based on the compensationactually received. The arbitrator thus properly resolved the ambiguity in favor oflabor as mandated by Article 1702 of the Civil Code.11 The Court of Appeals























affirmed the arbitrator’s finding and added that the computation of the 13thmonth pay should be based on the length of service and not on the actualwage earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findings

of labor officials, who are deemed to have acquired expertise in matters withintheir respective jurisdiction, are generally accorded not only respect but evenfinality, and bind us when supported by substantial evidence. It is not ourfunction to assess and evaluate the evidence all over again, particularly wherethe findings of both the arbiter and the Court of Appeals coincide.12

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, whichrequired all employers to pay their employees a 13 th month pay, was issued toprotect the level of real wages from the ravages of worldwide inflation. It wasenacted on December 16, 1975 after it was noted that there had been no

increase in the minimum wage since 1970 and the Christmas season was anopportune time for society to show its concern for the plight of the workingmasses so that they may properly celebrate Christmas and New Year.13

Under the Revised Guidelines on the Implementation of the 13 th month payissued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851was removed. It further provided that the minimum 13 th month pay required bylaw shall not be less than one-twelfth (1/12) of the total basic salary earned by

an employee within a calendar year. The guidelines pertinently provides:

The "basic salary" of an employee for the purpose of computing the 13th month

pay shall include all remunerations or earnings paid by his employer for services rendered but does not include allowances and monetary benefits which are notconsidered or integrated as part of the regular or basic salary, such as the cashequivalent of unused vacation and sick leave credits, overtime premium, nightdifferential and holiday pay, and cost-of-living allowances.14 (Emphasissupplied)

For employees receiving regular wage, we have interpreted "basic salary" tomean, not the amount actually received by an employee, but 1/12 of theirstandard monthly wage multiplied by their length of service within a given

calendar year. Thus, we exclude from the computation of "basic salary"payments for sick, vacation and maternity leaves, night differentials, regularholiday pay and premiums for work done on rest days and specialholidays.15 In Hagonoy Rural Bank v. NLRC,16 St. Michael Academy v.

NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the13th month pay due an employee was computed based on the employee’s

basic monthly wage multiplied by the number of months worked in a calendaryear prior to separation from employment.































The revised guidelines also provided for a pro-ration of this benefit only in casesof resignation or separation from work. As the rules state, under thesecircumstances, an employee is entitled to a pay in proportion to the length oftime he worked during the year, reckoned from the time he started workingduring the calendar year.19The Court of Appeals thus held that:

Considering the foregoing, the computation of the 13th month pay should bebased on the length of service and not on the actual wage earned by theworker. In the present case, there being no gap in the service of the workers

during the calendar year in question, the computation of the 13th month pay

should not be pro-rated but should be given in full.20 (Emphasis supplied)

More importantly, it has not been refuted that Honda has not implemented anypro-rating of the 13th month pay before the instant case. Honda did not adduceevidence to show that the 13th month, 14th month and financial assistance

benefits were previously subject to deductions or pro-rating or that these weredependent upon the company’s financial standing. As held by the Voluntary

Arbitrator:

The Company (Honda) explicitly accepted that it was the strike held thatprompt[ed] them to adopt a pro-rata computation, aside [from] being in [a]state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior tothe strike, a full month basic pay computation was the "present practice"intended to be maintained in the CBA.21

The memorandum dated November 22, 1999 which Honda issued shows that itwas the first time a pro-rating scheme was to be implemented in the company.It was a convenient coincidence for the company that the work stoppage heldby the employees lasted for thirty-one (31) days or exactly one month. Thisenabled them to devise a formula using 11/12 of the total annual salary as baseamount for computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice atHonda is further bolstered by the affidavits executed by Feliteo Bautista andEdgardo Cruzada. Both attested that when they were absent from work due to

motorcycle accidents, and after they have exhausted all their leave credits andwere no longer receiving their monthly salary from Honda, they still received thefull amount of their 13th month, 14th month and financial assistance pay.22

The case of Davao Fruits Corporation v. Associated Labor Unions, et

al.23 presented an example of a voluntary act of the employer that has ripenedinto a company practice. In that case, the employer, from 1975 to 1981, freelyand continuously included in the computation of the 13th month pay those items






















that were expressly excluded by the law. We have held that this act, which wasfavorable to the employees though not conforming to law, has ripened into apractice and therefore can no longer be withdrawn, reduced, diminished,discontinued or eliminated. Furthermore, in Sevilla Trading Company v.

Semana,24 we stated:

With regard to the length of time the company practice should have beenexercised to constitute voluntary employer practice which cannot beunilaterally withdrawn by the employer, we hold that jurisprudence has not laiddown any rule requiring a specific minimum number of years. In the abovequoted case of Davao Fruits Corporation vs. Associated Labor Unions, thecompany practice lasted for six (6) years. In another case, Davao Integrated

Port Stevedoring Services vs. Abarquez, the employer, for three (3) years andnine (9) months, approved the commutation to cash of the unenjoyed portion ofthe sick leave with pay benefits of its intermittent workers. While in Tiangco vs.

Leogardo, Jr. the employer carried on the practice of giving a fixed monthlyemergency allowance from November 1976 to February 1980, or three (3) yearsand four (4) months. In all these cases, this Court held that the grant of these

benefits has ripened into company practice or policy which cannot be

peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept thepractice of including non-basic benefits such as paid leaves for unused sickleave and vacation leave in the computation of their 13th-month pay for at leasttwo (2) years. This, we rule likewise constitutes voluntary employer practice

which cannot be unilaterally withdrawn by the employer without violating Art.

100 of the Labor Code.25 (Emphasis supplied)

Lastly, the foregoing interpretation of law and jurisprudence is more in keepingwith the underlying principle for the grant of this benefit. It is primarily given toalleviate the plight of workers and to help them cope with the exorbitantincreases in the cost of living. To allow the pro-ration of the 13 th month pay in thiscase is to undermine the wisdom behind the law and the mandate that theworkingman’s welfare should be the primordial and paramountconsideration.26 What is more, the factual milieu of this case is such that to ruleotherwise inevitably results to dissuasion, if not a deterrent, for workers from thefree exercise of their constitutional rights to self-organization and to strike inaccordance with law.27

WHEREFORE, the instant petition is DENIED. The decision and the resolution of theCourt of Appeals dated September 14, 2000 and October 18, 2000, respectively,in CA-G.R. SP No. 59052, affirming the decision rendered by the VoluntaryArbitrator on May 2, 2000, are hereby AFFIRMED in toto.

SO ORDERED.

http://www.lawphil.net/judjuris/juri2004/apr2004/gr_152456_2004.html























Republic of the Philippines

SUPREME COURTManila

FIRST DIVISION

G.R. No. 145561 June 15, 2005

HONDA PHILS., INC., petitioner,vs.SAMAHAN NG MALAYANG MANGGAGAWA SA HONDA, respondent.

D E C I S I O N


This petition for review under Rule 45 seeks the reversal of the Court of Appeals’

decision1 dated September 14, 20002 and its resolution3 dated October 18, 2000,in CA-G.R. SP No. 59052. The appellate court affirmed the decision dated May 2,2000 rendered by the Voluntary Arbitrator who ruled that petitioner HondaPhilippines, Inc.’s (Honda) pro-rated payment of the 13th and 14th month payand financial assistance to its employees was invalid.

As found by the Court of Appeals, the case stems from the Collective BargainingAgreement (CBA) forged between petitioner Honda and respondent unionSamahan ng Malayang Manggagawa sa Honda (respondent union) whichcontained the following provisions:


The COMPANY shall maintain the present practice in the implementation [of] the13th month pay.


The COMPANY shall grant a 14th Month Pay, computed on the same basis ascomputation of 13th Month Pay.












Section 7. The COMPANY agrees to continue the practice of granting, in itsdiscretion, financial assistance to covered employees in December of eachyear, of not less than 100% of basic pay.

This CBA is effective until year 2000. In the latter part of 1998, the parties started

re-negotiations for the fourth and fifth years of their CBA. When the talks betweenthe parties bogged down, respondent union filed a Notice of Strike on theground of bargaining deadlock. Thereafter, Honda filed a Notice of Lockout. OnMarch 31, 1999, then Department of Labor and Employment (DOLE) SecretaryLaguesma assumed jurisdiction over the labor dispute and ordered the parties tocease and desist from committing acts that would aggravate the situation. Bothparties complied accordingly.

On May 11, 1999, however, respondent union filed a second Notice of Strike onthe ground of unfair labor practice alleging that Honda illegally contracted out

work to the detriment of the workers. Respondent union went on strike andpicketed the premises of Honda on May 19, 1999. On June 16, 1999, DOLE ActingSecretary Felicisimo Joson, Jr. assumed jurisdiction over the case and certifiedthe same to the National Labor Relations Commission (NLRC) for compulsoryarbitration. The striking employees were ordered to return to work and themanagement accepted them back under the same terms prior to the strikestaged.

On November 22, 1999, the management of Honda issued amemorandum4 announcing its new computation of the 13th and 14th month payto be granted to all its employees whereby the thirty-one (31)-day long strike

shall be considered unworked days for purposes of computing said benefits. Asper the company’s new formula, the amount equivalent to 1/12 of theemployees’ basic salary shall be deducted from these bonuses, with a

commitment however that in the event that the strike is declared legal, Hondashall pay the amount deducted.

Respondent union opposed the pro-rated computation of the bonuses in a letterdated November 25, 1999. Honda sought the opinion of the Bureau of WorkingConditions (BWC) on the issue. In a letter dated January 4, 2000,5 the BWCagreed with the pro-rata payment of the 13th month pay as proposed by

Honda.

The matter was brought before the Grievance Machinery in accordance withthe parties’ existing CBA but when the issue remained unresolved, it wassubmitted for voluntary arbitration. In his decision6 dated May 2, 2000, VoluntaryArbitrator Herminigildo C. Javen invalidated Honda’s computation, to wit:













WHEREFORE, in view of all foregoing premises being duly considered andevaluated, it is hereby ruled that the Company’s implementation of pro-rated13th Month pay, 14th Month pay and Financial Assistance [is] invalid. TheCompany is thus ordered to compute each provision in full month basic pay andpay the amounts in question within ten (10) days after this Decision shall have

become final and executory.

The three (3) days Suspension of the twenty one (21) employees is herebyaffirmed.

SO ORDERED.7

Honda’s Motion for Partial Reconsideration was denied in a resolution dated May

22, 2000. Thus, a petition was filed with the Court of Appeals, however, thepetition was dismissed for lack of merit.

Hence, the instant petition for review on the sole issue of whether the pro-ratedcomputation of the 13th month pay and the other bonuses in question is validand lawful.

The petition lacks merit.

A collective bargaining agreement refers to the negotiated contract between alegitimate labor organization and the employer concerning wages, hours ofwork and all other terms and conditions of employment in a bargaining unit.8 Asin all contracts, the parties in a CBA may establish such stipulations, clauses,

terms and conditions as they may deem convenient provided these are notcontrary to law, morals, good customs, public order or public policy.9 Thus,where the CBA is clear and unambiguous, it becomes the law between theparties and compliance therewith is mandated by the express policy of thelaw.10

In some instances, however, the provisions of a CBA may become contentious,as in this case. Honda wanted to implement a pro-rated computation of thebenefits based on the "no work, no pay" rule. According to the company, thephrase "present practice" as mentioned in the CBA refers to the manner andrequisites with respect to the payment of the bonuses, i.e., 50% to be given inMay and the other 50% in December of each year. Respondent union, however,insists that the CBA provisions relating to the implementation of the 13th monthpay necessarily relate to the computation of the same.

We agree with the findings of the arbitrator that the assailed CBA provisions arefar from being unequivocal. A cursory reading of the provisions will show thatthey did not state categorically whether the computation of the 13th month pay,



















14th month pay and the financial assistance would be based on one full month’s

basic salary of the employees, or pro-rated based on the compensationactually received. The arbitrator thus properly resolved the ambiguity in favor oflabor as mandated by Article 1702 of the Civil Code.11 The Court of Appealsaffirmed the arbitrator’s finding and added that the computation of the 13th

month pay should be based on the length of service and not on the actualwage earned by the worker.

We uphold the rulings of the arbitrator and the Court of Appeals. Factual findingsof labor officials, who are deemed to have acquired expertise in matters withintheir respective jurisdiction, are generally accorded not only respect but evenfinality, and bind us when supported by substantial evidence. It is not ourfunction to assess and evaluate the evidence all over again, particularly wherethe findings of both the arbiter and the Court of Appeals coincide.12

Presidential Decree No. 851, otherwise known as the 13th Month Pay Law, whichrequired all employers to pay their employees a 13 th month pay, was issued toprotect the level of real wages from the ravages of worldwide inflation. It wasenacted on December 16, 1975 after it was noted that there had been noincrease in the minimum wage since 1970 and the Christmas season was anopportune time for society to show its concern for the plight of the workingmasses so that they may properly celebrate Christmas and New Year.13

Under the Revised Guidelines on the Implementation of the 13 th month payissued on November 16, 1987, the salary ceiling of P1,000.00 under P.D. No. 851was removed. It further provided that the minimum 13 th month pay required by

law shall not be less than one-twelfth (1/12) of the total basic salary earned byan employee within a calendar year. The guidelines pertinently provides:

The "basic salary" of an employee for the purpose of computing the 13th monthpay shall include all remunerations or earnings paid by his employer for services

rendered but does not include allowances and monetary benefits which are notconsidered or integrated as part of the regular or basic salary, such as the cashequivalent of unused vacation and sick leave credits, overtime premium, nightdifferential and holiday pay, and cost-of-living allowances.14 (Emphasissupplied)

For employees receiving regular wage, we have interpreted "basic salary" tomean, not the amount actually received by an employee, but 1/12 of theirstandard monthly wage multiplied by their length of service within a givencalendar year. Thus, we exclude from the computation of "basic salary"payments for sick, vacation and maternity leaves, night differentials, regularholiday pay and premiums for work done on rest days and specialholidays.15 In Hagonoy Rural Bank v. NLRC,16 St. Michael Academy v.



























NLRC,17 Consolidated Food Corporation v. NLRC,18 and similar cases, the13th month pay due an employee was computed based on the employee’s

basic monthly wage multiplied by the number of months worked in a calendaryear prior to separation from employment.

The revised guidelines also provided for a pro-ration of this benefit only in casesof resignation or separation from work. As the rules state, under thesecircumstances, an employee is entitled to a pay in proportion to the length oftime he worked during the year, reckoned from the time he started workingduring the calendar year.19The Court of Appeals thus held that:

Considering the foregoing, the computation of the 13th month pay should bebased on the length of service and not on the actual wage earned by theworker. In the present case, there being no gap in the service of the workers

during the calendar year in question, the computation of the 13th month pay

should not be pro-rated but should be given in full.20

(Emphasis supplied)More importantly, it has not been refuted that Honda has not implemented anypro-rating of the 13th month pay before the instant case. Honda did not adduceevidence to show that the 13th month, 14th month and financial assistancebenefits were previously subject to deductions or pro-rating or that these weredependent upon the company’s financial standing. As held by the VoluntaryArbitrator:

The Company (Honda) explicitly accepted that it was the strike held thatprompt[ed] them to adopt a pro-rata computation, aside [from] being in [a]

state of rehabilitation due to 227M substantial losses in 1997, 114M in 1998 and215M lost of sales in 1999 due to strike. This is an implicit acceptance that prior tothe strike, a full month basic pay computation was the "present practice"intended to be maintained in the CBA.21

The memorandum dated November 22, 1999 which Honda issued shows that itwas the first time a pro-rating scheme was to be implemented in the company.It was a convenient coincidence for the company that the work stoppage heldby the employees lasted for thirty-one (31) days or exactly one month. Thisenabled them to devise a formula using 11/12 of the total annual salary as base

amount for computation instead of the entire amount for a 12-month period.

That a full month payment of the 13th month pay is the established practice atHonda is further bolstered by the affidavits executed by Feliteo Bautista andEdgardo Cruzada. Both attested that when they were absent from work due tomotorcycle accidents, and after they have exhausted all their leave credits andwere no longer receiving their monthly salary from Honda, they still received thefull amount of their 13th month, 14th month and financial assistance pay.22


























The case of Davao Fruits Corporation v. Associated Labor Unions, et

al.23 presented an example of a voluntary act of the employer that has ripenedinto a company practice. In that case, the employer, from 1975 to 1981, freelyand continuously included in the computation of the 13th month pay those itemsthat were expressly excluded by the law. We have held that this act, which was

favorable to the employees though not conforming to law, has ripened into apractice and therefore can no longer be withdrawn, reduced, diminished,discontinued or eliminated. Furthermore, in Sevilla Trading Company v.

Semana,24 we stated:

With regard to the length of time the company practice should have beenexercised to constitute voluntary employer practice which cannot beunilaterally withdrawn by the employer, we hold that jurisprudence has not laiddown any rule requiring a specific minimum number of years. In the abovequoted case of Davao Fruits Corporation vs. Associated Labor Unions, the

company practice lasted for six (6) years. In another case, Davao IntegratedPort Stevedoring Services vs. Abarquez, the employer, for three (3) years andnine (9) months, approved the commutation to cash of the unenjoyed portion ofthe sick leave with pay benefits of its intermittent workers. While in Tiangco vs.

Leogardo, Jr. the employer carried on the practice of giving a fixed monthlyemergency allowance from November 1976 to February 1980, or three (3) yearsand four (4) months. In all these cases, this Court held that the grant of these

benefits has ripened into company practice or policy which cannot be

peremptorily withdrawn. In the case at bar, petitioner Sevilla Trading kept thepractice of including non-basic benefits such as paid leaves for unused sickleave and vacation leave in the computation of their 13th-month pay for at least

two (2) years. This, we rule likewise constitutes voluntary employer practicewhich cannot be unilaterally withdrawn by the employer without violating Art.

100 of the Labor Code.25 (Emphasis supplied)

Lastly, the foregoing interpretation of law and jurisprudence is more in keepingwith the underlying principle for the grant of this benefit. It is primarily given toalleviate the plight of workers and to help them cope with the exorbitantincreases in the cost of living. To allow the pro-ration of the 13 th month pay in thiscase is to undermine the wisdom behind the law and the mandate that theworkingman’s welfare should be the primordial and paramount

consideration.26

What is more, the factual milieu of this case is such that to ruleotherwise inevitably results to dissuasion, if not a deterrent, for workers from thefree exercise of their constitutional rights to self-organization and to strike inaccordance with law.27

WHEREFORE, the instant petition is DENIED. The decision and the resolution of theCourt of Appeals dated September 14, 2000 and October 18, 2000, respectively,




























in CA-G.R. SP No. 59052, affirming the decision rendered by the VoluntaryArbitrator on May 2, 2000, are hereby AFFIRMED in toto.

SO ORDERED.

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