Republic of the PhilippinesSUPREME COURTManilaEN BANC G.R. No. 107590 February 21, 1995PAMANTASAN NG LUNGSOD NG MAYNILA (PLM), petitioner, vs.CIVIL SERVICE COMMISSION (CSC), PAMANTASAN NG LUNGSOD NG MAYNILA FACULTY ORGANIZATION (PLMFO), ROBERTO AMORES, ROLANDO AUSTRIA, VICENTE BANAGALE, NEMENCIO CABATUANDO, MANOLO HINA, ELEANOR JIMENEZ, ANITA LEYSON, JONATHAN MANZANO, JOSE MEJIA, ESTELITA PINEDA, LORDEO POQUIZ, ALFREDO RAZON, MA. ZELDA REYES, SALVACION RODRIGUEZ, BELINDA SANTOS, and VIRGILIO ZAMORA respondents.

VITUG, J.:

This petition stemmed from a complaint for illegal dismissal and unfair labor practice filed with public respondent Civil Service Commission ("CSC") by private respondents, through Pamantasan Ng Lungsod Ng Maynila Faculty Organization ("PLMFO"), against petitioner Pamantasan Ng Lungsod Ng Maynila ("PLM") and its officers.

The sixteen (16) individual private respondents were full-time instructors of PLM under "temporary contracts" of employment renewable on a yearly basis. They, among other instructors, joined the PLMFO.

Uniform notices of termination, all dated 24 April 1990, were individually sent to private respondents informing them of "the expiration of their temporary appointments at the close of office hours on 31 May 1990" and the non-renewal of their appointments for the school year (SY) 1990-1991. A series of letter-complaints addressed to the CSC by private respondents evoked a letter-response from PLM, dated 16 May 1990, traversing the complainants' right to compel a renewal of the appointments. They were advised that their retention was not recommended by their respective Deans.

On 29 May 1990, private respondents, through PLMFO, filed with the CSC a verified complaint for illegal dismissal and unfair labor practice against petitioner and its officers.

In a letter-comment, dated 13 July 1990, petitioner denied having committed any unfair labor practice or having illegally dismissed private respondents. In its defense, PLM interposed (1) the temporary nature of private respondents' contracts of employment and (2) reasons that could justify the non- renewal of the contracts.

Public respondent CSC referred the case to the Public Sector Labor-Management Council 1 ("PSLMC"). The latter, through its deputized hearing officer, Med-Arbiter Hope Ruiz-Valenzuela of the Bureau of Labor Relations of the Department of Labor and Employment, after due notice, heard the case (PSLMC Case No. 00-06-91). During the proceedings, petitioner relied in main on the temporary nature of private respondents' employment contracts.

In a Resolution, 2 dated 16 December 1991, the PSLMC found petitioner guilty of "Unfair Labor Practice" and held that private respondents "should be reinstated." The dispositive portion of its Resolution read:

WHEREFORE, premises considered, the Council finds that PLM Management committed Unfair Labor Practice when it terminated the services of herein complainants, and for which the latter should be reinstated.

Accordingly, let this Resolution be forwarded to the Civil Service Commission for appropriate action.

SO ORDERED. 3

Petitioner's request for reconsideration was denied in PSLMC's Order of 30 April 1992. Forthwith, the PSLMC transmitted the case to the CSC for appropriate action.

On 15 May 1992, petitioner filed with this Court a petition for certiorari, entitled "Pamantasan Ng Lungsod Ng Maynila vs. Public Sector Labor-Management Council, et al.," docketed G.R. No. 105157, that sought the annulment of the aforementioned PSLMC resolutions. In a Minute Resolution, dated 27 May 1992, the Court dismissed the petition for PLM's failure to submit the certification required under Circular 28-91 on forum-shopping. The motion for the reconsideration of this resolution was dismissed with finality, no compelling reason having been shown to reconsider the dismissal of the petition. On 30 July 1992, the resolution became final and executory and, in due course, was recorded in the Book of Entries of Judgment.

In the meantime, public respondent CSC, acting on the case forwarded to it by the PSLMC, issued its Resolution No. 92-814, dated 25 June 1992, sustaining the findings of the PSLMC. The CSC, accordingly, directed the reinstatement, with back salaries, of private respondents; thus —

WHEREFORE, foregoing premises considered, the Commission hereby resolves to rule that the termination of the services of Estelita Pineda, Vicente Banagale, Salvacion Rodriguez, Anita Leyson, Eleanor Jimenez, Ma. Zelda Reyes, Belinda Santos, Lordeo Poquiz, Rolando Austria, Jonathan Manzano, Manolo Hina, Nemencio Cabatuando, Alfredo Razon, Virgilio Zamora, Roberto Amores and Jose Mejia, all of the Pamantasan ng Lungsod ng Maynila, is illegal.

The PLM Management is hereby directed to reinstate these employees to their former or equivalent positions and pay them back salaries and other benefits from the time of their illegal termination until their actual reinstatement. 4

The request for the reconsideration of the order was denied by the CSC in its Resolution No. 92-1573 of 20 October 1992. Respondent CSC, in denying petitioner's motion, held, among other things, that the findings of fact by the PSLMC deserved the respect of the Commission and that there was no further need for it, to conduct a hearing of its own.

The PLM cites the following reasons for its instant petition for certiorari (under Rule 65, not Rule 45 such as mistakenly referred to by petitioner):

1. The Civil Service Commission acted with grave abuse of discretion tantamount to lack of jurisdiction and denial of due process when it adopted entirely, without according the petitioner the opportunity to be heard, the findings of facts and resolutions of the Public Sector Labor and Management Council, a body separate and distinct and with different jurisdiction from that of the Commission.

2. The Civil Service Commission acted with grave abuse discretion in effectively denying the petitioner the opportunity to present evidence to substantiate its allegations in its defense against the charge of illegal dismissal, to the prejudice of civil service and public interest.

3. The Civil Service Commission committed a grave abuse of discretion in directing reinstatement and payment of backwages to private respondents whose temporary contracts of employment had already expired.

On 11 May 1993, this Court, acting on petitioner's motion for the issuance of a writ of preliminary injunction, issued, on 18 May 1993, a temporary   restraining   order directing respondent CSC "to cease and desist from executing (its) assailed Resolutions No. 92-814 and No. 92-1573. 5

In our resolution, dated 17 August 1993, following the receipt of respondents' comment, we gave due course to the petition and ordered the parties to file their respective memoranda.

The Solicitor General took an adverse position to that of public respondent and prayed that the petition be given due course, contending that it was inappropriate for respondent CSC to rule on the aspect of illegal dismissal, an act that involved an exercise of its original jurisdiction, without affording anew petitioner an opportunity to be heard.

Public respondent CSC manifested its intention to file its own comment to the instant petition; however, it failed to file any such comment within the allotted period. The Court finally dispensed with the filing of the comment and ordered CSC to instead file its memorandum in accordance with this Court's resolution of 24 August 1993. 6

On 20 January 1994, the Court dismissed the petition for failure to prosecute on the part of petitioner, which likewise failed to file its memorandum, as well as because of the "evident

lack of interest of the parties" 7 to pursue the case. On petitioner's motion for reconsideration, however, the Court resolved, on 24 February 1994, to reinstate the petition.

Petitioner stresses that the CSC and the PSLMC both exercise quasi-judicial functions but not on identical issues and subject matter; that the PSLMC possesses jurisdiction only over the unfair labor practice aspect of private respondents' complaint but that it is the CSC which alone can take cognizance over the question of illegal dismissal; and that, therefore, when the CSC has simply adopted the recommendations of the PSLMC in the unfair labor practice case in resolving the issue of illegal dismissal and ordering the reinstatement of private respondents without conducting further proceedings of its own, it has effectively denied petitioner of its right to due process.

PSLMC's jurisdiction over the unfair labor practice case filed by private respondents against petitioner is not disputed. The PSLMC, in case No. 00-06-91, has conducted its proceedings in accordance with its legal mandate.8 The proceedings before Med-Arbiter Valenzuela, who had been deputized to so act as the hearing officer, conform with the "Rules and Regulations to Govern the Exercise of the Right of Government Employees to Self Organization" —

Sec. 3. The Council may call on any officer or agency for assistance. It may deputize officers to hear and recommend action on complaints or grievances filed with the council.

Sec. 4. The procedure in the Council shall be non-adversarial in nature. The parties may be required to submit their respective position papers, together with all evidences available in support of their respective positions within 15 days from receipt of notices.

Sec. 5. The decision of the Council shall be final.

The conclusion of the PSLMC regarding petitioner's alleged commission of unfair labor practice against private respondents can no longer be considered a proper issue either before the CSC or in this instance since this particular matter has already been adjudged with finality in accordance with this Court's resolution in G.R. No. 105157 heretofore mentioned.

The PSLMC, in part, said:

. . . Individual sixteen (16) complainants were part of the original founders of the PLMFO and claim to be active members thereof. Complainants Vicente Benagale, Roberto Amores, and Anita Leyson were the President, Treasurer and Secretary, respectively, of the PLMFO. At the time of complainants separation, the union had just secured its public sector union registration. All 16 complainants had temporary employment contracts that were renewed on a yearly basis. Half of

the complainants had been with the PLM for a long time, ranging from four (4) to six and one-half (6 1/2) years.

It appears that the Faculty had many long-standing issues with the PLM Management, which complainants claim motivated the organization of the PLMFO. As gathered from the evidence, the following are some of the more salient issues:

1. Failure to appoint a true faculty representative to the Board of Regents as provided in the PLM Charter;

2 No faculty participation in areas where normally the faculty input is sought. i.e.

a. revision of the student curriculum

b. the development of criteria/policies regarding faculty development and promotion

3. While PLM has identified the academic qualifications and teaching experience required for each level of hierarchy in the faculty, the actual mechanics of promotion are vague. The faculty remains in the dark as to whether they have already qualified and therefore can apply for the next faculty rank as a matter of right. The PLMFO maintains that this vagueness in the procedure/policies for promotion is a deliberate scheme to enable PLM management to establish the faculty according to its whim;

4. On the matter of promotion scheme, the faculty is not given the complete results of their performance evaluation;

5. The faculty is kept guessing about the official salary scale according to rank, so that the implementation of such official salary scale can be arbitrary and discriminatory . . .;

6. Management refuses to allow the concerned faculty to participate in choosing the Chairperson in their respective departments;

7. PLM's existing practice in the promotion of faculty members either for permanent status or to the next higher rank as undermined the university's standard of excellence. Out of the 223, close to 30% of the faculty had no previous teaching experience before joining PLM. There are only 29 assistant professors and 6 with the rank of professor. The teachers holding temporary appointments comprise, almost half of the faculty.

After securing its union registration, PLMFO began asserting its rights.

xxx xxx xxx

In its complaint, PLMFO alleged that their actions and determination to see changes in the management of PLM angered PLM which prompted its decision to terminate the services of the complainants.

xxx xxx xxx

Ordinarily, there is merit to respondent's argument that employees who hold temporary contracts of employment may not expect renewal of appointment as a matter of right, the decision being a management prerogative. However, when the exercise of this privilege is alleged to be the means by which management hinders unionism or outrightly bust unions and such allegation is supported by evidence, the act needs to be examined and studied. It then becomes incumbent upon Management to show that its intentions are otherwise. Records of the case, however, reveal that despite numerous opportunities to do so, PLM makes little attempt to rebut the specific charges and instead rests its defense largely on the argument that since complainants possess only temporary contracts of employment, PLM has the right not to renew their contracts without any need for justification.

There is sufficient evidence to show that the management of PLM is not particularly enthusiastic about faculty participation in the formulation of policies concerning the University and the Faculty itself, as shown from the very nature of the majority of the complaints of the faculty against the administration and the response/reaction of the management to earlier attempts by the faculty to bring about changes. . . .

. . . . The facts on record show that management did not respond to any of the faculty issues. One accurate example is the matter of the teachers' performance evaluation ratings which were the basis for "renewal of appointment and recommendation for permanent status." It was discussed in the dialogue that the over-all rating score of the faculty would include the Peer's evaluation. However, as can be seen from the ratings of the complainants who were accused of having poor performance, the Peer's evaluation was not included as one of the factors for their evaluation.

xxx xxx xxx

. . . . In its position paper and other subsequent pleadings, PLM has however, abandoned all efforts to pursue its line of defense. It would appear therefore that the charges are false and untenable. If this is so, why was PLM so bold as to present them as grounds for the separation of complainants in the first place?

Perhaps, it was confident that because complainants possessed temporary contracts of employment, no serious attempt would be made to examine PLMFO's complaint. Whatever other reasons PLM may have, the circumstances obtaining in the instant case show that these charges were created as an attempt to confuse/mislead PLM's real motivations on the matter. 9

In agreeing with the PSLMC, the CSC, in its own resolution of 25 June 1992, stated:

In the arbitration proceedings, the PSLMC found that PLM committed unfair labor practice when it terminated the services of the complainants. It is undisputed that the PLM Management did not renew the appointments of these members of the faculty with temporary contracts but those who were hired as replacements possess even lesser qualifications than the 16 complainants. Further, the PLM Management refused and still refuses to produce the results of their evaluation of the performance of the complainants which can be an indication that presentation of such evidence would be detrimental to its case. Hence, this issue before us.

Had complainants not been among those active officers and/or members of the PLMFO, and had their qualifications, training, experience and performance rating not been impressive, the Commission would have agreed that the termination or non-renewal of the contracts of complainants does not constitute unfair labor practice. But the records reveal otherwise. Hence, there is indeed no reason for PLM Management to terminate the services of these employees except to bust their organization. The Commission finds no reason to disagree with the findings of facts by the PSLMC that PLM Management committed an unfair labor practice.

xxx xxx xxx

Even temporary employees enjoy that basic right to form organization or association for purposes not contrary to law. PLMFO is that organization. Thus, its members cannot be separated from the service for the simple reason of membership in the said organization. And when the appointment status of these members happens to be temporary in nature, such becomes merely incidental and the doctrine that temporary employees have no security of tenure must yield or is not applicable. When the clear intent therefore of PLM Management in terminating the services of these employees is to abridge their constitutional right to self-organization, the Commission has the duty to give them protection and uphold their basic right. This constitutional right of employees is superior to the right of management not to renew the temporary appointment of its employees. When the exercise of discretion by the management is calculated to bust the union as what PLM Management had done, the Commission has no choice but to declare it as a grave abuse of discretion. 10

Petitioner insists that when CSC has ruled on the matter of illegal dismissal without conducting any further hearing of its own, relying, instead, on PSLMC's finding of unfair labor practice on the part of petitioner, the latter has thereby been denied due process. Unfortunately for petitioner, however, the two supposed independent issues,i.e., the unfair labor practice charge and the complaint for illegal dismissal both filed by private respondents, are, in fact, here unavoidably interlinked. The non-renewal of an employment contract with a term, it is true, is ordinarily a valid mode of removal at the end of each period. 11 This rule, however, must yield to the superior constitutional right of employees, permanent or temporary, to self-organization. While, a temporary employment may be ended with or without cause, it certainly may not, however, be terminated for an illegal cause.

Petitioner claims that it was denied "due process." It itself admitted, however, that "it manifested (before the PSLMC) its intention to submit evidence (that it had other valid grounds for not renewing private respondents' temporary contracts of employment) which, inadvertently or otherwise, it failed to present . . . 12 This supposed evidence, if true and being material to substantiate its defense against the unfair labor charge, should have been duly presented, but it did not. Petitioner should not now be heard to complain that it was denied due process. We ruled, time and again, that "due process" was designed to afford an opportunity to be heard, 13 not that an actual hearing should always and indispensably be held.

In any case, in its reply to public respondents' comment, PLM enumerates the alleged causes for the non-renewal of the contracts, to wit:

Name Cause

1. Zamora, Virgilio Failure to finish MA after 2 years

2. Benagale, Vicente Poor over-all performance

3. Mejia, Jose Worked with DAR while with PLM

4. Amores, Roberto Failure to complete MA

5. Reyes, Zelda Poor Performance

6. Santos, Belinda Tardiness in class, says negative

comments during faculty meeting

7. Poquiz, Lorredo Seldom returns test papers, taught in another university

8. Austria, Rolando Taught in another school for 2nd Semester of 1989-1990

9. Manzano, Jonathan Taught in another university

10. Hina, Manalo Poor class performance

11. Cabatuando, Nemensio Poor class performance, taught in another university

12. Rodriguez, Salvacion none given

13. Razon, Alfredo none given

14. Jimenez, Eleanor Tardiness during 2nd sem. in school

15. Leyson, Anita Enrolled in another law school

16. Pineda, Estelita Unbecoming conduct, tardiness 14

The PSLMC has noted, however, that the charges are either false or untenable; hence, its following findings:

. . . In the case of complainants Zelda Reyes, Hina Manalo and Nemencio Cabatuando, PLM alleged that they scored poorly in their performance evaluation ratings. However, check with their actual performance scores (see pp. 252-264, records)   shows   that   their   grades  are  near  perfect. PLMFO's President Vicente Benagale was accused of having poor class performance scores. His evaluation forms were, however, not available for scrutiny.

On two occasions, PLM was directed to produce the evaluation results of the 16 complainants, the first, through an Order of Director Salvador Fernandez dated May 28, 1990 (see p. 148 records) and the second, in the conference of January 24, 1990 (see p. 278, records). PLM failed to comply on both occasions. This Council can only deduce that the presentation of such evidence would be detrimental to its case.

Roberto Amores and Virgilio Zamora were separated on the ground that they failed to complete their MA degrees. A glance at their number of years of service makes PLM's charge spurious. In the case of Roberto Amores, records show that he has been with PLM for 6 1/2 years and was still on a temporary appointment basis. Under Board Resolution 1025, he should be considered as a permanent employee, his contract of employment having been renewed after the interim period. If PLM were sincere in applying the rule that all permanent faculty must have a Masters Degree, it should have disqualified Mr. Amores after his interim period of appointment. It therefore appears that PLM sought to enforce this rule only after Mr. Amores was elected union treasurer. On the other hand, PLM's objection as regards Virgilio Zamora is premature. Mr. Zamora was only in

his 4th year at the university. Based on the concept of interim appointment, he is given up to the fifth year to complete his Masters.

The cause for termination of Leyson's services was her enrollment in another school without allegedly asking permission from PLM management. On record (p. 507, records) is a letter dated January 7, 1989 of Anita Leyson to the University, asking permission to continue her studies at the Arellano Law School for the 2nd semester of 1989. PLM challenges complainant to show proof that her request had been granted. Even if complainant, however, cannot produce any document showing that she was granted permission, in like manner, neither can PLM present any document expressly prohibiting her to enroll at the Arellano University. PLM's non-response, if this is indeed the case, must be construed as consent. Complainant's request was for continuance of her studies. If this act was truly objectionable, PLM should have questioned about her previous enrollment at the Arellano University.

Moreover, this Council cannot help but comment that as part of every person's basic human right, there is nothing to prevent nor prohibit Ms. Leyson to enroll in the law school of her choice. As borne out by her excellent performance ratings, complainant has rendered an exemplary service. Penalizing   complainant   for seeking to further improve herself is bordering on oppression.

In the same conference of January 24, 1991, PLM was directed to further substantiate the validity of its charges against complainants. In its position paper and other subsequent pleadings, PLM has however, abandoned all efforts to pursue its line of defense. It would appear therefore that the charges are false and untenable. If this is so, why was PLM so bold as to present them as grounds for the separation of complainants in the first place? Perhaps, it was confident that because complainants possessed, temporary contracts of employment, no serious attempt would be made to examine PLMFO's complaint. Whatever other reasons PLM may have, the circumstances obtaining in the instant case show that these charges were created as an attempt to confuse/mislead PLM's real motivations on the matter. 15

The finding of the PSLMC that the non-renewal by petitioner of the questioned contracts of employment had been motivated by private respondents' union activities is conclusive on the parties. Indeed, this Court's resolution in G.R. No. 105157 (PLM vs. PSLMC et al.) which has long become final and executory should now render that matter a fait accompli.

When the case was thus referred to the CSC by the PSLMC to take "appropriate action" it understandably meant that the CSC should take the necessary steps of reinstating the illegally dismissed employees.

WHEREFORE, the petition for certiorari is DISMISSED and the appealed resolutions of the Civil Service Commission are AFFIRMED. The temporary restraining order issued by this Court on 18 May 1993, is LIFTED. No costs.

SO ORDERED.

Narvasa,  Feliciano,  Padilla,  Bidin,  Regalado,  Davide,   Jr.,  Romero,  Bellosillo,  Melo,  Quiason, Puno, Kapunan, Mendoza and Francisco, JJ., concur.

FIRST DIVISION[G.R. No. 108855. February 28, 1996]METROLAB INDUSTRIES, INC., petitioner, vs. HONORABLE MA. NIEVES ROLDAN-CONFESOR, in her capacity as Secretary of the Department of Labor and Employment

and METRO DRUG CORPORATION EMPLOYEES ASSOCIATION-FEDERATION OF FREE WORKERS, respondents.

SYLLABUS

1. REMEDIAL LAW; EVIDENCE; FINDINGS OF FACT OF ADMINISTRATIVE AGENCIES; RULE; CASE AT BAR. - We reaffirm the doctrine that considering their expertise in their respective fields, factual findings of administrative agencies supported by substantial evidence are accorded great respect and binds this Court. The Secretary of Labor ruled, thus: x x x Any act committed during the pendency of the dispute that tends to give rise to further contentious issues or increase the tensions between the parties should be considered an act of exacerbation. One must look at the act itself, not on speculative reactions. A misplaced recourse is not needed to prove that a dispute has been exacerbated. For instance, the Union could not be expected to file another notice of strike. For this would depart from its theory of the case that the layoff is subsumed under the instant dispute, for which a notice of strike had already been filed. On the other hand, to expect violent reactions, unruly behavior, and any other chaotic or drastic action from the Union is to expect it to commit acts disruptive of public order or acts that may be illegal. Under a regime of laws, legal remedies take the place of violent ones. x xx Protest against the subject layoffs need not be in the form of violent action or any other drastic measure. In the instant case the Union registered their dissent by swiftly filing a motion for a cease and desist order. Contrary to petitioner’s allegations, the Union strongly condemned the layoffs and threatened mass action if the Secretary of Labor fails to timely intervene: x x x 3. This unilateral action of management is a blatant violation of the injunction of this Office against committing acts which would exacerbate the dispute. Unless such act is enjoined the Union will be compelled to resort to its legal right to mass actions and concerted activities to protest and stop the said management action. This mass layoff is clearly one which would result in a very serious dispute unless this Office swiftly intervenes. x x x Metrolab and the Union were still in the process of resolving their CBA deadlock when petitioner implemented the subject layoffs. As a result, motions and oppositions were filed diverting the parties’ attention, delaying resolution of the bargaining deadlock and postponing the signing of their new CBA, thereby aggravating the whole conflict.

2. LABOR AND SOCIAL LEGISLATION; TERMINATION OF EMPLOYMENT; EXERCISE OF MANAGEMENT PREROGATIVES; NOT ABSOLUTE; SUBJECT TO EXCEPTIONS IMPOSED BY LAW. - This Court recognizes the exercise of management prerogatives and often declines to interfere with the legitimate business decisions of the employer. However, this privilege is not absolute but subject to limitations imposed by law. In PAL   vs.   NLRC, (225 SCRA 301 [1993]), we issued this reminder: ... the exercise of management prerogatives was never considered boundless. Thus, in Cruz   vs.   Medina (177 SCRA 565 [1989]), it was held that management’s prerogatives must be without abuse of discretion ...All this points to the conclusion that the exercise of managerial prerogatives is not   unlimited.  It   is   circumscribed   by   limi(ations   found   in   law,   a   collective   bargaining agreement, or the general principles of fair play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]).

3. ID.; ID.; ID.; ID.; ID.; CASE AT BAR AN EXCEPTION. - The case at bench constitutes one of the exceptions. The Secretary of Labor is expressly given the power under the Labor Code to assume jurisdiction and resolve labor disputes involving industries indispensable to national interest. The disputed injunction is subsumed under this special grant of authority. Art. 263 (g) of the Labor Code specifically provides that: x x x (g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same. . . . That Metrolab’s business is of national interest is not disputed. Metrolab is one of the leading manufacturers and suppliers of medical and pharmaceutical products to the country. Metrolab’s management prerogatives, therefore, are not being unjustly curtailed but duly balanced with and tempered by the limitations set by law, taking into account its special character and the particular circumstances in the case at bench.

4. ID.; LABOR RELATIONS; INELIGIBILITY OF MANAGERIAL EMPLOYEES TO JOIN, FORM AND ASSIST ANY LABOR ORGANIZATION; PROHIBITION EXTENDED TO CONFIDENTIAL EMPLOYEES. - Although Article 245 of the Labor Code limits the ineligibility to join, form and assist any labor organization to managerial employees, jurisprudence has extended this prohibition to confidential employees or those who by reason of their positions or nature of work are required to assist or act in a fiduciary manner to managerial employees and hence, are likewise privy to sensitive and highly confidential records.

5. ID.; ID.; EXCLUSION OF CONFIDENTIAL EMPLOYEES FROM THE RANK AND FILE BARGAINING UNIT; NOT TANTAMOUNT TO DISCRIMINATION. - Confidential employees cannot be classified as rank and file. As previously discussed, the nature of employment of confidential employees is quite distinct from the rank and file, thus, warranting a separate category. Excluding confidential employees from the rank and file bargaining unit, therefore, is not tantamount to discrimination.

APPEARANCES OF COUNSEL

Bautista Picazo Buyco Tan & Fider for petitioner.The Solicitor General for public respondent.Perfecto   V.   Fernandez,   Jose   P.   Fernandez   &   Cristobal   P.   Fernandez for Metro Drug Corporation.

D E C I S I O N

KAPUNAN, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court seeking the annulment of the Resolution and Omnibus Resolution of the Secretary of Labor and Employment dated 14 April 1992 and 25 January 1993, respectively, in OS-AJ-04491-11 (NCMB-NCR-NS-08-595-9 1; NCMB-NCR-NS-09-678-91) on grounds that these were issued with grave abuse of discretion and in excess of jurisdiction.

Private respondent Metro Drug Corporation Employees Association-Federation of Free Workers (hereinafter referred to as the Union) is a labor organization representing the rank and file employees of petitioner Metrolab Industries, Inc. (hereinafter referred to as Metrolab/MII) and also of Metro Drug, Inc.

On 31 December 1990, the Collective Bargaining Agreement (CBA) between Metrolab and the Union expired. The negotiations for a new CBA, however, ended in a deadlock.

Consequently, on 23 August 1991, the Union filed a notice of strike against Metrolab and Metro Drug Inc. The parties failed to settle their dispute despite the conciliation efforts of the National Conciliation and Mediation Board.

To contain the escalating dispute, the then Secretary of Labor and Employment, Ruben D. Torres, issued an assumption order dated 20 September 1991, the dispositive portion of which reads, thus:

WHEREFORE, PREMISES CONSIDERED, and pursuant to Article 263 (g) of the Labor Code, as amended, this Office hereby assumes jurisdiction over the entire labor dispute at Metro Drug, Inc. - Metro Drug Distribution Division and Metrolab Industries Inc.

Accordingly, any strike or lockout is hereby strictly enjoined. The Companies and the Metro Drug   Corp.   Employees   Association   -   FFW  are   likewise   directed   to   cease   and   desist   from committing any and all acts that might exacerbate the situation.

Finally, the parties are directed to submit their position papers and evidence on the aforequoted deadlocked issues to this office within twenty (20) days from receipt hereof.

SO ORDERED.[1] (Italics ours.)

On 27 December 1991, then Labor Secretary Torres issued an order resolving all the disputed items in the CBA and ordered the parties involved to execute a new CBA.

Thereafter, the Union filed a motion for reconsideration.

On 27 January 1992, during the pendency of the abovementioned motion for reconsideration, Metrolab laid off 94 of its rank and file employees.

On the same date, the Union filed a motion for a cease and desist order to enjoin Metrolab from implementing the mass layoff, alleging that such act violated the prohibition against committing acts that would exacerbate the dispute as specifically directed in the assumption order.[2]

On the other hand, Metrolab contended that the layoff was temporary and in the exercise of its management prerogative. It maintained that the company would suffer a yearly gross revenue loss of approximately sixty-six (66) million pesos due to the withdrawal of its principals in the Toll and Contract Manufacturing Department. Metrolab further asserted that with the automation of the manufacture of its product “Eskinol,” the number of workers required its production is significantly reduced.[3]

Thereafter, on various dates, Metrolab recalled some of the laid off workers on a temporary basis due to availability of work in the production lines.

On 14 April 1992, Acting Labor Secretary Nieves Confesor issued a resolution declaring the layoff of Metrolab’s 94 rank and file workers illegal and ordered their reinstatement with full backwages. The dispositive portion reads as follows:

WHEREFORE, the Union’s motion for reconsideration is granted in part, and our order of 28 December 1991 is affirmed subject to the modifications in allowances and in the close shop provision. The layoff of the 94 employees at MII is hereby declared illegal for the failure of the latter to comply with our injunction against committing any act which may exacerbate the dispute and with the 30-day notice requirement. Accordingly, MII is hereby ordered to reinstate the 94 employees, except those who have already been recalled, to their former positions or substantially equivalent, positions with full backwages from the date they were illegally laid off on 27 January 1992 until actually reinstated without loss of seniority rights and other benefits. Issues relative to the CBA agreed upon by the parties and not embodied in our earlier order are hereby ordered adopted for incorporation in the CBA. Further, the

dispositions and directives contained in all previous orders and resolutions relative to the instant dispute, insofar as not inconsistent herein, are reiterated. Finally, the parties are enjoined to cease and desist from committing any act which may tend to circumvent this resolution.

SO RESOLVED.[4]

On 6 March 1992, Metrolab filed a Partial Motion for Reconsideration alleging that the layoff did not aggravate the dispute since no untoward incident occurred as a result thereof. It, likewise, filed a motion for clarification regarding the constitution of the bargaining unit covered by the CBA.

On 29 June 1992, after exhaustive negotiations, the parties entered into a new CBA. The execution, however, was without prejudice to the outcome of the issues raised in the reconsideration and clarification motions submitted for decision to the Secretary of Labor.[5]

Pending the resolution of the aforestated motions, on 2 October 1992, Metrolab laid off 73 of its employees on grounds of redundancy due to lack of work which the Union again promptly opposed on 5 October 1992.

On 15 October 1992, Labor Secretary Confesor again issued a cease and desist order. Metrolab moved for a reconsideration.[6]

On 25 January 1993, Labor Secretary Confesor issued the assailed Omnibus Resolution containing the following orders:

xxx xxx xxx.

1. MII’s motion for partial reconsideration of our 14 April 1992 resolution specifically that portion thereof assailing our ruling that the layoff of the 94 employees is illegal, is hereby denied. MII is hereby ordered to pay such employees their full backwages computed from the time of actual layoff to the time of actual recall;

2. For the parties to incorporate in their respective collective bargaining agreements the clarifications herein contained; and

3. MII’s motion for reconsideration with respect to the consequences of the second wave of layoff affecting 73 employees, to the extent of assailing our ruling that such layoff tended to exacerbate the dispute, is hereby denied. But inasmuch as the legality of the layoff was not submitted for our resolution and no evidence had been adduced upon which a categorical finding thereon can be based, the same is hereby referred to the NLRC for its appropriate action.

Finally, all prohibitory injunctions issued as a result of our assumption of jurisdiction over this dispute are hereby lifted.

SO RESOLVED.[7]

Labor Secretary Confesor also ruled that executive secretaries are excluded from the closed-shop provision of the CBA, not from the bargaining unit.

On 4 February 1993, the Union filed a motion for execution. Metrolab opposed. Hence, the present petition for certiorari with application for issuance of a Temporary Restraining Order.

On 4 March 1993, we issued a Temporary Restraining Order enjoining the Secretary of Labor from enforcing and implementing the assailed Resolution and Omnibus Resolution dated 14 April 1992 and 25 January 1993, respectively.

In its petition, Metrolab assigns the following errors:

A

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT COMMITTED GRAVE ABUSE OF DISCRETION AND EXCEEDED HER JURISDICTION IN DECLARING THE TEMPORARY LAYOFF ILLEGAL AND ORDERING THE REINSTATEMENT AND PAYMENT OF BACKWAGES TO THE AFFECTED EMPLOYEES.*

B

THE PUBLIC RESPONDENT HON. SECRETARY OF LABOR AND EMPLOYMENT GRAVELY ABUSED HER DISCRETION IN INCLUDING EXECUTIVE SECRETARIES AS PART OF THE BARGAINING UNIT OF RANK AND FILE EMPLOYEES.[8]

Anent the first issue, we are asked to determine whether or not public respondent Labor Secretary committed grave abuse of discretion and exceeded her jurisdiction in declaring the subject layoffs instituted by Metrolab illegal on grounds that these unilateral actions aggravated the conflict between Metrolab and the Union who were, then, locked in a stalemate in CBA negotiations.

Metrolab argues that the Labor Secretary’s order enjoining the parties from committing any act that might exacerbate the dispute is overly broad, sweeping and vague and should not be used to curtail the employer’s right to manage his business and ensure its viability.

We cannot give credence to Metrolab’s contention.

This Court recognizes the exercise of management prerogatives and often declines to interfere with the legitimate business decisions of the employer. However, this privilege is not absolute but subject to limitations imposed by law.[9]

In PAL v. NLRC,[10] we issued this reminder:

xxx xxx xxx

. . .the exercise of management prerogatives was never considered boundless. Thus, in Cruz vs. Medina ( 177 SCRA 565 [1989]), it was held that management’s prerogatives must be without abuse of discretion....

xxx xxx xxx

All this points to the conclusion that the exercise of managerial prerogatives is not unlimited.  It is circumscribed by limitations found in law, a collective bargaining agreement, or the general principles of fair play and justice (University of Sto. Tomas v. NLRC, 190 SCRA 758 [1990]). . . . (Italics ours.)

xxx xxx xxx.

The case at bench constitutes one of the exceptions. The Secretary of Labor is expressly given the power under the Labor Code to assume jurisdiction and resolve labor disputes involving industries indispensable to national interest. The disputed injunction is subsumed under this special grant of authority. Art. 263 (g) of the Labor Code specifically provides that:

xxx xxx xxx

(g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same. . . (Italics ours.)

xxx xxx xxx.

That Metrolab’s business is of national interest is not disputed. Metrolab is one of the leading manufacturers and suppliers of medical and pharmaceutical products to the country.

Metro lab’s management prerogatives, therefore, are not being unjustly curtailed but duly balanced with and tempered by the limitations set by law, taking into account its special character and the particular circumstances in the case at bench.

As aptly declared by public respondent Secretary of Labor in its assailed resolution:

xxx xxx xxx.

MII is right to the extent that as a rule, we may not interfere with the legitimate exercise of management prerogatives such as layoffs. But it may nevertheless be appropriate to mention here that one of the substantive evils which Article 263 (g) of the Labor Code seeks to curb is the exacerbation of a labor dispute to the further detriment of the national interest. When a labor dispute has in fact occurred and a general injunction has been issued restraining the commission of disruptive acts, management prerogatives must always be exercised consistently with the statutory objective.[11]

xxx xxx xxx.

Metrolab insists that the subject layoffs did not exacerbate their dispute with the Union since no untoward incident occurred after the layoffs were implemented. There were no work disruptions or stoppages and no mass actions were threatened or undertaken. Instead, petitioner asserts, the affected employees calmly accepted their fate “as this was a matter which they had been previously advised would be inevitable.”[12]

After a judicious review of the record, we find no compelling reason to overturn the findings of the Secretary of Labor.

We reaffirm the doctrine that considering their expertise in their respective fields, factual findings of administrative agencies supported by substantial evidence are accorded great respect and binds this Court.[13]

The Secretary of Labor ruled, thus:

xxx xxx xxx.

Any act committed during the pendency of the dispute that tends to give rise to further contentious issues or increase the tensions between the parties should be considered an act’ of exacerbation. One must look at the act itself, not on speculative reactions. A misplaced recourse is not needed to prove that a dispute has been exacerbated. For instance, the Union could not be expected to file another notice of strike. For this would depart from its theory of the case that the layoff is subsumed under the instant dispute, for which a notice of strike had already been filed. On the other hand, to expect violent reactions, unruly behavior, and any other chaotic or drastic action from the Union is to expect it to commit acts disruptive of public order or acts that may be illegal. Under a regime of laws, legal remedies take the place of violent ones.[14]

xxx xxx xxx.

Protest against the subject layoffs need not be in the form of violent action or any other drastic measure. In the instant case the Union registered their dissent by swiftly filing a motion for a cease and desist order. Contrary to petitioner’s allegations, the Union strongly condemned the layoffs and threatened mass action if the Secretary of Labor fails to timely intervene:

xxx xxx xxx.

3. This unilateral action of management is a blatant violation of the injunction of this Office against committing acts which would exacerbate the dispute. Unless such act is enjoined the Union will be compelled to resort to its legal right to mass actions and concerted activities to protest and stop the said management action. This mass layoff is clearly one which would result in a very serious labor dispute unless this Office swiftly intervenes.[15]

xxx xxx xxx.

Metrolab and the Union were still in the process of resolving their CBA deadlock when petitioner implemented the subject layoffs. As a result, motions and oppositions were filed diverting the parties’ attention, delaying resolution of the bargaining deadlock and postponing the signing of their new CBA, thereby aggravating the whole conflict.

We, likewise, find untenable Metrolab’s contention that the layoff of the 94 rank-and-file employees was temporary, despite the recall of some of the laid off workers.

If Metrolab intended the layoff of the 94 workers to be temporary, it should have plainly stated so in the notices it sent to the affected employees and the Department of Labor and Employment. Consider the tenor of the pertinent portions of the layoff notice to the affected employees:

xxx xxx xxx.

Dahil sa mga bagay na ito, napilitan ang ating kumpanya na magsagawa ng “lay-off” ng mga empleyado sa Rank & File dahil nabawasan ang trabaho at puwesto para sa kanila. Marami sa atin ang kasama sa “lay-off”dahil wala nang trabaho para sa kanila.  Mahirap tanggapin ang mga bagay na ito subalit kailangan nating gawin dahil hindi kaya ng kumpanya ang magbayad ng suweldo kung ang empleyado ay walang trabaho. Kung tayo ay patuloy na magbabayad ng suweldo, mas hihina ang ating kumpanya at mas marami ang máaaring maapektuhan.

Sa pagpapatupad ng “lay-off” susundin natin ang LAST IN-FIRST OUT policy. Ang mga empleyadong may pinakamaikling serbisyo sa kumpanya ang unang maaapektuhan. Ito ay batay na rin sa nakasaad sa ating CBA na ang mga huling pumasok sa kumpanya ang unang masasama sa “lay-off” kapag nagkaroon ng ganitong mga kalagayan.

Ang mga empleyado na kasama sa “lay-off” ay nakalista sa sulat na ito. Ang umpisa ng lay-off ay sa Lunes, Enero 27. Hindi na muna sila papasok sa kumpanya. Makukuha nila ang suweldo nila sa Enero 30, 1992.

Hindi   po   natin  matitiyak   kung   gaano   katagal   ang   “lay-off”   ngunit   ang   aming   tingin   ay matatagalan bago magkaroon ng dagdag na trabaho.  Dahil  dito,  sinimulan na namin ang isang   “Redundancy  Program”   sa  mga   supervisors.  Nabawasan  ang  mga  puwesto  para   sa kanila, kaya sila ay mawawalan ng trabaho at bibigyan na ng redundancy pay.[16] (Italics ours.)

xxx xxx xxx.

We agree with the ruling of the Secretary of Labor, thus:

xxx xxx xxx.

. . .MII insists that the layoff in question is temporary not permanent. It then cites International Hardware,   Inc.  vs.  NLRC, 176 SCRA 256, in which the Supreme Court held that the 30-day notice required under Article 283 of the Labor Code need not be complied with if the employer has no intention to permanently severe (sic) the employment relationship.

We are not convinced by this argument. International Hardware involves a case where there had been a reduction of workload. Precisely to avoid laying off the employees, the employer therein opted to give them work on a rotating basis. Though on a limited scale, work was available. This was the Supreme Court’s basis for holding that there was no intention to permanently severe (sic) the employment relationship.

Here, there is no circumstance at all from which we can infer an intention from MII not to sever the employment relationship permanently. If there was such an intention, MII could have made it very clear in the notices of layoff. But as it were, the notices are couched in a language so uncertain that the only conclusion possible is the permanent termination, not the continuation, of the employment relationship.

MII also seeks to excuse itself from compliance with the 30-day notice with a tautology. While insisting that there is really no best time to announce a bad news, (sic) it also claims that it broke the bad news only on 27 January 1992 because had it complied with the 30-day notice, it could have broken the bad news on 02 January 1992, the first working day of the year. If there is really no best time to announce a bad news (sic), it wouldn’t have mattered if the same was announced at the first working day of the year. That way, MII could have at least complied with the requirement of the law.[17]

The second issue raised by petitioner merits our consideration.

In the assailed Omnibus Resolution, Labor Secretary Confesor clarified the CBA provisions on closed-shop and the scope of the bargaining unit in this wise:

xxx xxx xxx.

Appropriateness of the bargaining unit.

xxx xxx xxx.

Exclusions.  In our 14 April 1992 resolution, we ruled on the issue of exclusion as follows:

These aside, we reconsider our denial of the modifications which the Union proposes to introduce on the close shop provision. While we note that the provision as presently worded has served’ the relationship of the parties well under previous CBA’s, the shift in constitutional 

policy toward expanding the right of all workers to self-organization should now be formally recognized by the parties, subject to the following exclusions only:

1. Managerial employees; and

2. The executive secretaries of the President, Executive Vice-President, Vice-President, Vice President for Sales, Personnel Manager, and Director for Corporate Planning who may have access to vital labor relations information or who may otherwise act in a confidential capacity to persons who determine or formulate management policies.

The provisions of Article I (b) and Attachment I of the 1988-1990 CBA shall thus be modified consistently with the foregoing.

Article I (b) of the 1988-1990 CBA provides:

b)Close Shop. - All Qualified Employees must join the Association immediately upon regularization as a condition for continued employment. This provision shall not apply to: (i) managerial employees who are excluded from the scope of the bargaining unit; (ii) the auditors and executive secretaries of senior executive officers, such as, the President, Executive Vice-President, Vice-President for Finance, Head of Legal, Vice-President for Sales, who are excluded   from membership   in   the  Association; and (iii) those employees who are referred to in Attachment I hereof, subject, however, to the application of the provision of Article II, par. (b) hereof. Consequently, the above-specified employees are not required to join the Association as a condition for their continued employment.

On the other hand, Attachment I provides:

Exclusion from the Scope of the Close Shop Provision

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

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

2. Executive Secretary of the Personnel Manager, or equivalent positions.

3. Executive Secretary of the Director for Corporate Planning, or equivalent positions.

4. Some personnel in the Personnel Department, EDP Staff at Head Office, Payroll Staff at Head Office, Accounting Department at Head Office, and Budget Staff, who because of the nature of their duties and responsibilities need not join the Association as a condition for their employment.

5. Newly-hired secretaries of Branch Managers and Regional Managers.

Both MDD and MII read the exclusion of managerial employees and executive secretaries in our 14 April 1992 resolution as exclusion from the bargaining unit. They point out that managerial employees are lumped under one classification with executive secretaries, so that since the former are excluded from the bargaining unit, so must the latter be likewise excluded.

This reading is obviously contrary to the intent of our 14 April 1992 resolution. By recognizing the expanded scope of the right to self-organization, our intent was to delimit the types of employees excluded from the close shop provision, not from the bargaining unit, to executive secretaries only. Otherwise, the conversion of the exclusionary provision to one that refers to the bargaining unit from one that merely refers to the close shop provision would effectively curtail all the organizational rights of executive secretaries.

The exclusion of managerial employees, in accordance with law, must therefore still carry the qualifying phrase “from the bargaining unit” in Article I (b)(i) of the 1988-1990 CBA. In the same manner, the exclusion of executive secretaries should be read together with the qualifying phrase “are excluded from membership in the Association” of the same Article and with the heading of Attachment I. The latter refers to “Exclusions from Scope of Close Shop Provision” and provides that “[t]he following positions in Bargaining Unit are not covered by the close shop provision of the CBA.”

The issue of exclusion has different dimension in the case of MII. In an earlier motion for clarification, MII points out that it has done away with the positions of Executive Vice-President, Vice-President for Sales, and Director for Corporate Planning. Thus, the foregoing group of exclusions is no longer appropriate in its present organizational structure. Nevertheless, there remain MII officer positions for which there may be executive secretaries. These include the General Manager and members of the Management Committee, specifically i) the Quality Assurance Manager; ii) the Product Development Manager; iii) the Finance Director; iv) the Management System Manager;’ v) the Human Resources Manager; vi) the Marketing Director; vii) the Engineering Manager; viii) the Materials Manager; and ix) the Production Manager.

xxx xxx xxx

The basis for the questioned exclusions, it should be noted, is no other than the previous CBA between MII and the Union. If MII had undergone an organizational restructuring since then, this is a fact to which we have never been made privy. In any event, had this been otherwise the result would have been the same. To repeat, we limited the exclusions to recognize the expanded scope of the right to self-organization as embodied in the Constitution.[18]

Metrolab, however, maintains that executive secretaries of the General Manager and the executive secretaries of the Quality Assurance Manager, Product Development Manager, Finance Director, Management System Manager, Human Resources Manager, Marketing Director, Engineering Manager, Materials Manager and Production Manager, who are all

members of the company’s Management Committee should not only be exempted from the closed-shop provision but should be excluded from membership in the bargaining unit of the rank and file employees as well on grounds that their executive secretaries are confidential employees, having access to “vital labor information.”[19]

We concur with Metrolab.

Although Article 245 of the Labor Code[20] limits the ineligibility to join, form and assist any labor organization to managerial employees, jurisprudence has extended this prohibition to confidential employees or those who by reason of their positions or nature of work are required to assist or act in a fiduciary manner to managerial employees and hence, are likewise privy to sensitive and highly confidential records.

The rationale behind the exclusion of confidential employees from the bargaining unit of the rank and file employees and their disqualification to join any labor organization was succinctly discussed in Philips Industrial Development v. NLRC:[21]

        xxx xxx xxx.

On the main issue raised before Us, it is quite obvious that respondent NLRC committed grave abuse of discretion in reversing the decision of the Executive Labor Arbiter and in decreeing that PIDI’s “Service Engineers, Sales Force, division secretaries, all Staff of General Management, Personnel and Industrial Relations Department, Secretaries of Audit, EDP and Financial Systems are included within the rank and file bargaining unit.”

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

In Bulletin Publishing  Co.,   Inc.  vs.  Hon.  Augusto  Sanchez, this Court elaborated on this rationale, thus:

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

In Golden Farms, Inc. vs. Ferrer-Calleja, this Court explicitly made this rationale applicable to confidential employees:

This rationale holds true also for confidential employees such as accounting personnel, radio and telegraph operators, who having access to confidential information, may become the source of undue advantage. Said employee(s) may act as a spy or spies of either party to a collective bargaining agreement. This is specially true in the present case where the petitioning Union is already the bargaining agent of the rank-and-file employees in the establishment. To allow the confidential employees to join the existing Union of the rank-and-file would be in violation of the terms of the Collective Bargaining Agreement wherein this kind of employees by the nature of their functions/positions are expressly excluded.”

xxx xxx xxx.

Similarly, in National Association of Trade Union - Republic   Planters   Bank   Supervisors Chapter v. Torres[22] we declared:

xxx xxx xxx.

. . . As regards the other claim of respondent Bank that Branch Managers/OICs, Cashiers and Controllers are confidential employees, having control, custody and/ or access to confidential matters, e.g., the branch’s cash position, statements of financial condition, vault combination, cash codes for telegraphic transfers, demand drafts and other negotiable instruments, pursuant to Sec. 1166.4 of the Central Bank Manual regarding joint custody, this claim is not even disputed by petitioner. A confidential employee is one entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer’s property. While Art. 245 of the Labor Code singles out managerial employees as ineligible to join, assist or form any labor organization, under the doctrine of necessary, implication, confidential employees are similarly disqualified. . . .

xxx xxx xxx.

. . .(I)n the collective bargaining process, managerial employees are supposed to be on the side of the employer, to act as its representatives, and to see to it that its interest are well protected. The employer is not assured of such protection if these employees themselves are union members. Collective bargaining in such a situation can become one-sided. It is the same reason that impelled this Court to consider the position of confidential employees as included in the disqualification found in Art. 245 as if the disqualification of confidential employees were written in the provision. If confidential employees could unionize in order to bargain for advantages for themselves, then they could be governed by their own motives rather than the interest of the employers. Moreover, unionization of confidential employees for the purpose of collective bargaining would mean the extension of the law to persons or individuals who are supposed to act “in the interest of the employers. It is not farfetched that in the course of collective bargaining, they might jeopardize that interest which they are duty-bound to protect. . . .

xxx xxx xxx.

And in the latest case of Pier 8 Arrastre & Stevedoring Services, Inc. vs. Roldan-Confesor,[23] we ruled that:

xxx xxx xxx.

Upon the other hand, legal secretaries are neither managers nor supervisors. Their work is basically routinary and clerical. However, they should be differentiated from rank-and-file employees because they are tasked with, among others, the typing of legal documents, memoranda and correspondence, the keeping of records and files, the giving of and receiving notices, and such other duties as required by the legal personnel of the corporation. Legal secretaries therefore fall under the category of confidential employees. . . .

xxx xxx xxx.

We thus hold that public respondent acted with grave abuse of discretion in not excluding the four foremen and legal secretary from the bargaining unit composed of rank-and-file employees.

xxx xxx xxx.

In the case at bench, the Union does not disagree with petitioner that the executive secretaries are confidential employees. It however, makes the following contentions:

xxx xxx xxx.

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

Neither would there be a danger of espionage since the confidential employees would not have any conflict of interest, not being members of the Union. In any case, there is always the danger that any employee would leak management secrets to the Union out of sympathy for his fellow rank and filer even if he were not a member of the union nor the bargaining unit.

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

xxx xxx xxx.

The Union’s assurances fail to convince. The dangers sought to be prevented, particularly the threat of conflict of interest and espionage, are not eliminated by non-membership of Metrolab’s executive secretaries or confidential employees in the Union. Forming part of the bargaining unit, the executive secretaries stand to benefit from any agreement executed

between the Union and Metrolab. Such a scenario, thus, gives rise to a potential conflict between personal interests and their duty as confidential employees to act for and in behalf of Metrolab. They do not have to be union members to affect or influence either side.

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

WHEREFORE, premises considered, the petition is partially GRANTED. The resolutions of public respondent Secretary of Labor dated 14 April 1992 and 25 January 1993 are hereby MODIFIED to the extent that executive secretaries of petitioner Metrolab’s General Manager and the executive secretaries of the members of its Management Committee are excluded from the bargaining unit of petitioner’s rank and file employees.

SO ORDERED.

Padilla, Bellosillo, Vitug, and Hermosisima, Jr., JJ., concur.

THIRD DIVISION COASTAL SUBIC BAY TERMINAL, INC., Petitioner,

G.R. No. 157117

- versus -

Present: QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.

DEPARTMENT OF LABOR and EMPLOYMENT – OFFICE OF THE SECRETARY, COASTAL SUBIC BAY TERMINAL, INC. SUPERVISORY UNION-APSOTEU, and COASTAL SUBIC BAY TERMINAL, INC. RANK-AND-FILE UNION-ALU-TUCP, Respondents.

Promulgated: November 20, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x DECISION

QUISUMBING, J.:

For review on certiorari is the Court of Appeals’ Decision[1] dated August 31, 2001, in CA-G.R. SP No. 54128 and the Resolution[2] dated February 5, 2003, denying petitioner’s motion for reconsideration. The Court of Appeals had affirmed the Decision [3] dated March 15, 1999 of the Secretary of the Department of Labor and Employment (DOLE) reversing the Mediator Arbiter’s dismissal of private respondents’ petitions for certification election.

The facts are as follows: On July 8, 1998, private respondents Coastal Subic Bay Terminal, Inc. Rank-and-

File Union (CSBTI-RFU) and Coastal Subic Bay Terminal, Inc. Supervisory Union (CSBTI-SU) filed separate petitions for certification election before Med-Arbiter Eladio de Jesus of the Regional Office No. III. The rank-and-file union insists that it is a legitimate labor organization having been issued a charter certificate by the Associated Labor Union (ALU), and the supervisory union by the Associated Professional, Supervisory, Office and Technical Employees Union (APSOTEU). Private respondents also alleged that the establishment in which they sought to operate was unorganized.

Petitioner Coastal Subic Bay Terminal, Inc. (CSBTI) opposed both petitions for

certification election alleging that the rank-and-file union and supervisory union were not legitimate labor organizations, and that the proposed bargaining units were not particularly described.

Without ruling on the legitimacy of the respondent unions, the Med-Arbiter dismissed,

without prejudice to refiling, both petitions which had been consolidated. The Med-Arbiter held that the ALU and APSOTEU are one and the same federation having a common set of officers. Thus, the supervisory and the rank-and-file unions were in effect affiliated with only one federation.[4]

The Med-Arbiter ruled as follows:

Viewed in the light of all the foregoing, this Office finds the simultaneous filing of the instant petitions to be invalid and unwarranted. Consequently, this Office has no recourse but to dismiss both petitions without prejudice to the refiling of either.

WHEREFORE, PREMISES CONSIDERED, let the instant petitions be, as they are hereby DISMISSED.

SO ORDERED.[5]

Both parties appealed to the Secretary of Labor and Employment, who reversed the decision of the Med-Arbiter. The Secretary thru Undersecretary R. Baldoz, ruled that CSBTI-SU and CSBTI-RFU have separate legal personalities to file their separate petitions for certification election. The Secretary held that APSOTEU is a legitimate labor organization because it was properly registered pursuant to the 1989 Revised Rules and Regulations implementing Republic Act No. 6715, the rule applicable at the time of its registration. It further ruled that ALU and APSOTEU are separate and distinct labor unions having separate certificates of registration from the DOLE. They also have different sets of locals. The Secretary declared CSBTI-RFU and CSBTI-SU as legitimate labor organizations having been chartered respectively by ALU and APSOTEU after submitting all the requirements with the Bureau of Labor Relations (BLR). Accordingly, the Secretary ordered the holding of separate certification election, viz:

WHEREFORE, the decision of the Med-Arbiter, Regional Office No. III is hereby REVERSED. Let separate certification elections be conducted immediately among the appropriate employees of CSBTI, after the usual pre-election conference, with the following choices:

I. For all rank and file employees of CSBTI:

1. COASTAL SUBIC BAY TERMINAL, INC. RANK-AND-FILE UNION-ALU-TUCP; and

2. NO UNION.

II. For all supervisory employees of CSBTI:

1. COASTAL SUBIC BAY TERMINAL, INC. SUPERVISORY EMPLOYEES UNION-APSOTEU; and

2. NO UNION.

The latest payroll of the employer, including its payrolls for the last three months immediately preceding the issuance of this decision, shall be the basis for determining the qualified list of voters.

SO DECIDED.[6]

The motion for reconsideration was also denied.[7]

On appeal, the Court of Appeals affirmed the decision of the Secretary. [8] It held that there was no grave abuse of discretion on the part of the Secretary; its findings are supported by evidence on record; and thus should be accorded with respect and finality.[9] 

The motion for reconsideration was likewise denied.[10] Hence, the instant petition by the company anchored on the following grounds:

I

THE HONORABLE COURT OF APPEALS ERRED IN RELYING ON THE “1989 REVISED RULES AND REGULATIONS IMPLEMENTING RA 6715” AS BASIS TO RECOGNIZE PRIVATE RESPONDENT APSOTEU’S REGISTRATION BY THE DOLE REGIONAL DIRECTOR.

II

THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED PUBLIC RESPONDENT’S APPLICATION OF THE PRINCIPLE OF STARE  DECISIS TO HASTILY DISPOSE OF THE LEGAL PERSONALITY ISSUE OF APSOTEU.

III

THE HONORABLE COURT OF APPEALS DID NOT DECIDE IN ACCORD WITH LAW AND JURISPRUDENCE WHEN IT AFFIRMED PUBLIC RESPONDENT’S APPLICATION OF THE “UNION AUTONOMY” THEORY.

IV

IN AFFIRMING PUBLIC RESPONDENT’S FINDING THAT PRIVATE RESPONDENTS ARE “SEPARATE FEDERATIONS,” THE HONORABLE COURT OF APPEALS:

(1) IGNORED JURISPRUDENCE RECOGNIZING THE BINDING NATURE OF A MED-ARBITER’S FACTUAL FINDINGS; AND

(2) DISREGARDED EVIDENCE ON RECORD OF “ILLEGAL COMMINGLING.”[11]

Plainly, the issues are (1) Can the supervisory and the rank-and-file unions file separate petitions for certification election?; (2) Was the Secretary’s decision based on staredecisis correct?; and (3) Were private respondents engaged in commingling? The issue on the status of the supervisory union CSBTI-SU depends on the status of APSOTEU, its mother federation.

Petitioner argues that APSOTEU improperly secured its registration from the DOLE

Regional Director and not from the BLR; that it is the BLR that is authorized to process applications and issue certificates of registration in accordance with our ruling in Phil. 

Association of Free Labor Unions v. Secretary of Labor;[12] that the certificates of registration issued by the DOLE Regional Director pursuant to the rules are questionable, and possibly even void ab initio for being ultra vires; and that the Court of Appeals erred when it ruled that the law applicable at the time of APSOTEU’s registration was the 1989 Revised Implementing Rules and Regulations of Rep. Act No. 6715.

Petitioner insists that APSOTEU lacks legal personality, and its chartered affiliate CSBTI-

SU cannot attain the status of a legitimate labor organization to file a petition for certification election. It relies on Villar v. Inciong,[13] where we held therein that Amigo Employees Union was not a duly registered independent union absent any record of its registration with the Bureau.

Pertinent is Article 235[14] of the Labor Code which provides that applications for

registration shall be acted upon by the Bureau. “Bureau” as defined under the Labor Code means the BLR and/or the Labor Relations Division in the Regional Offices of the Department of Labor.[15] Further, Section 2, Rule II, Book V of the 1989 Revised Implementing Rules of the Labor Code (Implementing Rules) provides that:

Section 2. Where   to   file   application;   procedure – Any national labor organization or labor federation or local union may file an application for registration with the Bureau or the Regional Office where the applicant’s principal offices is located. The Bureau or the Regional Office shall immediately process and approve or deny the application. In case of approval, the Bureau or the Regional Office shall issue the registration certificate within thirty (30) calendar days from receipt of the application, together with all the requirements for registration as hereinafter provided. [16]

The Implementing Rules specifically Section 1, Rule III of Book V, as amended by Department Order No. 9, thus:

SECTION 1. Where to file applications. – The application for registration of any federation, national or industry union or trade union center shall be filed with the Bureau. Where the application is filed with the Regional Office, the same shall be immediately forwarded to the Bureau within forty-eight (48) hours from filing thereof, together with all the documents supporting the registration.

The applications for registration of an independent union shall be filed with and acted upon by the Regional Office where the applicant’s principal office is located ….

x x x x

The DOLE issued Department Order No. 40-03, which took effect on March 15, 2003, further amending Book V of the above implementing rules. The new implementing rules explicitly provide that applications for registration of labor organizations shall be filed either with the Regional Office or with the BLR.[17]

Even after the amendments, the rules did not divest the Regional Office and the BLR of

their jurisdiction over applications for registration by labor organizations. The amendments to the implementing rules merely specified that when the application was filed with the Regional Office, the application would be acted upon by the BLR.

The records in this case showed that APSOTEU was registered on March 1, 1991.

Accordingly, the law applicable at that time was Section 2, Rule II, Book V of the Implementing Rules, and not Department Order No. 9 which took effect only on June 21, 1997. Thus, considering further that APSOTEU’s principal office is located in Diliman,Quezon City, and its registration was filed with the NCR Regional Office, the certificate of registration is valid.

The petitioner misapplied Villar v. Inciong.[18]  In said case, there was no record in the

BLR that Amigo Employees Union was registered.[19] Did the Court of Appeals err in its application of stare decisis when it upheld the

Secretary’s ruling that APSOTEU is a legitimate labor organization and its personality cannot be assailed unless in an independent action for cancellation of registration certificate?[20]

We think not. Section 5, Rule V, Book V of the Implementing Rules states:

Section 5. Effect   of   registration – The labor organization or workers’ association shall be deemed registered and vested with legal personality on the date of issuance of its certificate of registration. Such legal personality cannot thereafter be subject to collateral attack, but maybe questioned only in an independent petition for cancellation in accordance with these Rules.[21]

Thus, APSOTEU is a legitimate labor organization and has authority to issue charter to its

affiliates.[22] It may issue a local charter certificate to CSBTI-SU and correspondingly, CSBTI-SU is legitimate.

Are ALU, a rank-and-file union and APSOTEU, a supervisory union one and the same because of the commonalities between them? Are they commingled?

The petitioner contends that applying by analogy, the doctrine of piercing the veil of corporate fiction, APSOTEU and ALU are the same federation. Private respondents disagree.

First, as earlier discoursed, once a labor union attains the status of a legitimate labor organization, it continues as such until its certificate of registration is cancelled or revoked in an independent action for cancellation.[23] In addition, the legal personality of a labor organization cannot be collaterally attacked.[24] Thus, when the personality of the labor organization is questioned in the same manner the veil of corporate fiction is pierced, the action partakes the nature of a collateral attack. Hence, in the absence of any independent action for cancellation of registration against either APSOTEU or ALU, and unless and until their registrations are cancelled, each continues to possess a separate legal personality. The CSBTI-RFU and CSBTI-SU are therefore affiliated with distinct and separate federations, despite the commonalities of APSOTEU and ALU.

Under the rules implementing the Labor Code, a chartered local union acquires legal personality through the charter certificate issued by a duly registered federation or national union, and reported to the Regional Office in accordance with the rules implementing the Labor Code.[25] A local union does not owe its existence to the federation with which it is affiliated. It is a separate and distinct voluntary association owing its creation to the will of its members. Mere affiliation does not divest the local union of its own personality, neither does it give the mother federation the license to act independently of the local union. It only gives rise to a contract of agency, where the former acts in representation of the latter. [26] Hence, local unions are considered principals while the federation is deemed to be merely their agent.[27] As such principals, the unions are entitled to exercise the rights and privileges of a legitimate labor organization, including the right to seek certification as the sole and exclusive bargaining agent in the appropriate employer unit.

A word of caution though, under Article 245 of the Labor Code, [28] supervisory

employees are not eligible for membership in a labor union of rank-and-file employees. The supervisory employees are allowed to form their own union but they are not allowed to join the rank-and-file union because of potential conflicts of interest.[29] Further, to avoid a situation where supervisors would merge with the rank-and-file or where the supervisors’ labor union would represent conflicting interests, a local supervisors’ union should not be allowed to affiliate with the national federation of unions of rank-and-file employees where that federation actively participates in the union activity within the company.[30] Thus, the limitation is not confined to a case of supervisors wanting to join a rank-and-file union. The prohibition extends to a supervisors’ local union applying for membership in a national federation the members of which include local unions of rank-and-file employees. [31] In De La Salle University Medical Center and College of Medicine v. Laguesma, we reiterated the rule

that for the prohibition to apply, it is not enough that the supervisory union and the rank-and-file union are affiliated with a single federation. In addition, the supervisors must have direct authority over the rank-and-file employees.[32]

In the instant case, the national federations that exist as separate entities to which the

rank-and-file and supervisory unions are separately affiliated with, do have a common set of officers. In addition, APSOTEU, the supervisory federation, actively participates in the CSBTI-SU while ALU, the rank-and-file federation, actively participates in the CSBTI-RFU, giving occasion to possible conflicts of interest among the common officers of the federation of rank-and-file and the federation of supervisory unions. For as long as they are affiliated with the APSOTEU and ALU, the supervisory and rank-and-file unions both do not meet the criteria to attain the status of legitimate labor organizations, and thus could not separately petition for certification elections.

The purpose of affiliation of the local unions into a common enterprise is to increase the

collective bargaining power in respect of the terms and conditions of labor.[33]When there is commingling of officers of a rank-and-file union with a supervisory union, the constitutional policy on labor is circumvented. Labor organizations should ensure the freedom of employees to organize themselves for the purpose of leveling the bargaining process but also to ensure the freedom of workingmen and to keep open the corridor of opportunity to enable them to do it for themselves. WHEREFORE, the petition is GRANTED. The Court of Appeals’ Decision dated August 31, 2001, in CA-G.R. SP No. 54128 and the Resolution dated February 5, 2003 are SET ASIDE. The decision of the Med-Arbiter is hereby AFFIRMED. SO ORDERED.

Republic of the PhilippinesSUPREME COURTManilaSECOND DIVISION G.R. No. 90519 March 23, 1992UNION OF FILIPINO WORKERS (UFW), petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, SIMEX INTERNATIONAL INC., LILIA SANTANDER, GEORGE SANTANDER and JOSEPH SANTANDER, respondents.

MELENCIO-HERRERA, J.:

This Petition for Certiorari seeks to set aside the Decision of public respondent National Labor Relations Commission (NLRC), dated 26 August 1989, which reversed the Decision of the Labor Arbiter, dated 27 June 1988, and sustained the closure of private respondent company, SIMEX International Inc., as valid.

On 4 September 1987, a Petition for Direct Certification among the rank-and-file workers of SIMEX was filed before the Med Arbiter, docketed as Case No. 00-09-634-87 (Petition for Direct Certification), with the hearing thereof set for 18 September 1987. These workers subsequently affiliated with petitioner Union of Filipino Workers (UFW).

On 19 September 1987, thirty-six (36) workers of the "lumpia" department were not given their usual working materials and equipment for that day and, instead, were asked to clean their respective working areas. Since these workers were employed on a "pakiao" basis, they refused. Nevertheless, they still reported for work on 21 September 1987 but to their surprise, they found out that SIMEX had removed all materials and equipments from their workplaces. The Union claims that its members were, therefore, effectively locked out.

From 1 October 1987 to 7 October 1987, sixteen (16) more workers from the other departments were similarly refused employment. As a consequence, these workers, through UFW, instituted a Complaint for Unfair Labor Practices and violation of labor standard laws against SIMEX and its principal officers and stockholders, namely private respondents Lilia, George and Joseph, all surnamed SANTANDER, docketed as NLRC-NCR-00-09-03329-87 (for Illegal Dismissal/Lockout of 36 "lumpia" department workers and 16 others, etc.).

On 9 October 1987, however, SIMEX had filed a Notice of "Permanent Shutdown/Total Closure of All Units of Operation in the Establishment" with the Department of Labor and Employment to take effect on 9 November 1987, allegedly due to business reverses brought about by the enormous rejection of their products for export to the United States. This notice of closure rendered the Petition for Direct Certification moot and academic. Notices of Closure were placed in conspicuous places around the company premises.

Meanwhile, in sympathy with their fifty-two (52) co-workers who were allegedly illegally dismissed by SIMEX and in "protest to the continued acts of unfair labor practices committed" by SIMEX, thirty-nine (39) other workers staged a picket outside the company premises from

10 October 1987 to 27 October 1987. By reason thereof, SIMEX's supposed offer of separation pay totalling P280,000.00 was withdrawn. When these workers lifted their picket on 27 October 1987 and voluntarily reported for work, SIMEX refused to give them their usual work. They were dismissed effective 1 November 1987.

Another Complaint for Unfair Labor Practice was, therefore, filed against the same respondents, this time involving the thirty-nine (39) workers who picketed the company premises in sympathy with their other co-workers, docketed as NLRC-NCR-11-03887-87 (for Unfair Labor Practice, Illegal Dismissal/Lockout of thirty-nine [39]workers). It is this case that is the subject of this Petition for Certiorari.

On 27 June 1988, the Labor Arbiter rendered his verdict declaring that the closure of SIMEX was a mere subterfuge in order to discourage the formation of the union. The respondents, SIMEX and the SANTANDERs, were found guilty of unfair labor practice and were ordered, jointly and solidarily, to reinstate the 39 workers without loss of seniority rights, benefits and privileges, with full backwages from 1 November 1987 until such time that these workers are actually reinstated. They were also ordered to pay ten per cent (10%) of the total awards as attorney's fees.

On appeal, the NLRC, in a Decision dated 28 August 1989, set aside the Labor Arbiter's Decision when it held that the "determination of the wisdom or expediency to close a department in a corporation, e.g., the 'lumpia' department in this case, due to financial reverses, is the sole prerogative of the corporation." It ruled that since SIMEX had filed a Notice of Closure on 9 October 1987 and had complied with the requirements of the applicable rules and regulations when it posted in their main gate the aforesaid Notice, its failure to accept the workers of UFW did not constitute unfair labor practice considering that SIMEX had already closed the "lumpia" department. Hence, SIMEX was merely ordered to pay the workers affected a separation pay equivalent to one (1) month's salary for every year of service rendered.

Petitioner UFW has thus elevated its cause before us in this Petition for Certiorari, seeking the reversal of the NLRC Decision, for having been rendered with grave abuse of discretion, and the reinstatement instead of the Decision of the Labor Arbiter and its affirmance in toto.

The public and private respondents in this case were required to file their respective Comments. Since the Solicitor General adopted a position contrary to that of the NLRC, the Court required the latter to file its own Comment, which it has done.

After the Comments, Reply, Rejoinders and the parties' respective Memoranda were submitted, private respondents SIMEX and the SANTANDERs filed a Manifestation, dated 10 December 1990 (p. 212, Rollo), signed by Atty. Julio F. Andres, Jr., stating that after they had manifested to the Court on 9 December 1990 that they were adopting their Memorandum, they discovered that an "Acknowledgment Receipt and Undertaking," dated 9 June 1989, had

already been signed between private respondent George SANTANDER and petitioner's former counsel, Atty. Modesto S. Mendoza, whereby this case as well as two (2) others had already been settled and compromised. Thereby, this controversy has become moot and academic. Said Undertaking reads:

I, MODESTO S. MENDOZA, . . ., have today RECEIVED FROM SIMEX INTERNATIONAL, INC., through its Vice-President, MR. GEORGE SANTANDER, the following amounts:

P500,000.00 in cash andP50,000.00 PCIB check No. 496869 dated Sept. 9, 1989P50,000.00 PCIB check No. 496870 dated Dec. 9, 1989P50,000.00 PCIB check No. 496871 dated March. 9, 1990P50,000.00 PCIB check No. 496872 dated June 9, 1990

in full and complete settlement of NLRC-NCR-CASE NOS. 00-09-03329-87, 00-11-3887-87 and 00-01-00255-88.

I undertake to take charge of obtaining the signatures of the proper officers of the union to sign the Motion to Dismiss in order to implement the full and final settlement of said cases between complainant and respondents.

I further undertake and warrant that with this payment by the respondents, the complainant Union and each of their members, hereby RELEASE AND DISCHARGE the SIMEX INTERNATIONAL INC., each (sic) Officers, agents and representative (sic) fro any demands, claims and liabilities from any cause whatsoever, arising out of their employment with the said respondents (sic) corporation.

UFW maintains, however, that the settlement did not materialize because of its objections as shown by the fact that it had not filed a Motion to Dismiss and Quitclaim in this case.

The issues for determination then are: 1) whether or not a compromise had been reached by the parties; and 2) whether or not there was a valid closure of SIMEX that entitled it to terminate the employment of its thirty-nine (39) employees. A plea is also made that the individual private respondents SANTANDERs be dropped from the suit since they only acted within the scope of their authority.

We incline to the view that no valid compromise agreement was arrived at in this case.

The alleged settlement involved three (3) cases, one of which charges alleged violation of labor standards. Compromise agreements involving labor standards cases must be reduced to writing and signed in the presence of the Regional Director or his duly authorized representative (Atilano v. De la Cruz, G.R. No. 82488, 28 February 1990, 182 SCRA 886).

Section 8, Rule II of the Rules on the Disposition of Labor Standards Cases in the Regional Offices provides:

Sec. 8. Compromise Agreement. — Should the party arrive at an agreement as to the whole or part of the dispute, said agreement shall be reduced [to] writing and signed by the parties in the presence of the regional director or his duly authorized representative.

The questioned "Acknowledgment Receipt and Undertaking" did not comply with this requisite. It was not, therefore, duly executed.

Even assuming arguendo that it was, Atty. Modesto Mendoza, counsel for petitioner UFW, whose services were subsequently terminated, was not duly authorized to enter into a compromise with SIMEX and the SANTANDERs. As aptly pointed out by the Solicitor General, Article 1878 of the Civil Code provides that a Special Power of Authority is required before an agent can be authorized to enter into a compromise. It reads:

Art. 1878. Special powers of attorney are necessary in the following cases:

xxx xxx xxx

(3) To compromise, to submit questions to arbitration, to renounce the right to appeal from a judgment, to waive objections to the venue of an action or to abandon a prescription already acquired. (Emphasis ours).

No evidence was adduced that would show that the aforementioned counsel for UFW was authorized to enter into a compromise. Correspondingly, he cannot release and discharge SIMEX and the SANTANDERs from their obligation. A perusal of the "Acknowledgment Receipt and Undertaking" reveals that no representative of UFW signed the alleged settlement.

The fact that said counsel undertook to obtain the signatures of the proper officers of UFW shows that his action was still subject to ratification by the union members. This confirmation was never secured as shown by the fact that no motion for the dismissal of the case at bar had been filed by UFW or on its behalf "in order to implement the full and final settlement of said case," unlike in NLRC-NCR Case No. 00-01-00255-88 where such a Motion had been filed. In an Affidavit, dated 6 May 1991 (p. 258, Rollo), Atty. Mendoza also declared that respondent George Santander had stopped the payment of the three (3) postdated checks, which statement has not been refuted by private respondents.

We now shift to the issue bearing on the legality of the closure of SIMEX. Article 283 (then Article 284) of the Labor Code provides:

Art. 283. Closure   of   the   establishment   and   reduction   of   personnel.   — The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the  closing   is   for   the  purpose  of   circumventing   the  provisions  of   this  Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment and undertaking not due to serious business losses or financial losses, the separation pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis in text supplied).

Under this provision, the closure of a business establishment is a ground for the termination of the services of any employee unless the closing is for the purpose of circumventing the provisions of law. But, while business reverses can be a just cause for terminating employees, they must be sufficiently proven by the employer (Indino v. NLRC, G.R. No. 80352, 29 September 1989, 178 SCRA 168).

In the case at bar, SIMEX alleged that it suffered export rejections amounting to $78,959.54 for 1985, $1,654.00 for 1986 and $28,414.11 for 1987, respectively. It alleged that these export rejections resulted in huge financial losses to the company (Rollo, p. 96) so much so that remedial measures were instituted as suppliers hesitated to given the company their usual credit terms (ibid, p. 97).

The audited financial statement of SIMEX, however, clearly depicted that for 1985 and 1986, the company actually derived retained earnings of P35,593.21 and P73, 241.25, respectively. The private respondents never refuted this fact. Instead, they merely insisted that these export rejections resulted in heavy losses for the company. These export rejections may have, indeed, contributed to a reduction of SIMEX's earnings. The company, however, was not suffering from business losses, as claimed, at the time of application for closure.

Indeed, there is no question that an employer may reduce its work force to prevent losses. However, these losses must be serious, actual and real (Lopez Sugar Corporation v. Federation of Free Workers, G.R. No. 75000-01, 30 August 1990, 189 SCRA 179). Otherwise, this "ground for termination would be susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their business ventures in order to ease out employees (Garcia v. NLRC, G.R. No. L-67825, 4 September 1987, 153 SCRA 639).

In this regard, then, SIMEX failed to prove its claim. What were submitted as evidence were mere receipts of export rejections, nothing more. SIMEX never adduced evidence that would reflect the extent of losses suffered as a result of the export rejections, which failure is fatal to its cause.

The Notice of Closure filed by SIMEX had indicated that it will have a permanent shutdown and/or total closure of all its units of operation. This was not so. Workers belonging to the Marketing and Export Divisions were never laid off. A SEC Certification, dated 4 February 1988, shows that SIMEX never applied for dissolution. The Labor Arbiter also found as a fact that SIMEX continued to export its products, including "eggroll wrap," long after its target date of closure.

In explaining this discrepancy, SIMEX merely alleged that not all its operations were closed. Even on this score alone, therefore, private respondents' position must be rejected.

These factors strongly give more credence to the Solicitor General and UFW's contention that the alleged closure of business of SIMEX was "but a subterfuge to discourage formation of a union" and that SIMEX was guilty of union busting. To all appearances, the company had filed a Notice of Closure simply to pre-empt the employees from forming a union within the company.

The SANTANDERs' prayer that they be dropped from this case must also be rejected. They should have adopted that recourse during the earlier stages. Moreover, UFW has adequately shown that the individual private respondents were not only officers of the company but its major stockholders as well (see Carmelcraft Corporation v. NLRC, G.R. Nos. 90634-35, 6 June 1990, 186 SCRA 393).

Lastly, if SIMEX has not yet recovered the balance of the compromise money given to then counsel for petitioner, its recourse is to file the appropriate civil or criminal case against the latter. After all, in said counsel's Affidavit, he has stated that he is ready to return the balance of what he had received after payment of the amount due in NLRC-NCR Case No. 00-01-00255-88.

WHEREFORE, the Petition for Certiorari is GRANTED. The Decision of respondent NLRC, dated 26 August 1989, is hereby SET ASIDE and the Decision of the Labor Arbiter, dated 27 June 1988, is hereby REINSTATED and AFFIRMED in toto.

Costs against private respondents.

SO ORDERED.

Paras, Padilla, Regalado and Nocon, JJ., concur.

Republic of the PhilippinesSUPREME COURTManilaTHIRD DIVISIONG.R. No. 194352 January 30, 2013MAXICARE PCIB CIGNA HEALTHCARE (now MAXICARE HEALTHCARE CORPORATION), ERIC S. NUBLA, JR. M.D. and RUTH A. ASIS, M.D., Petitioners, vs.MARIAN BRIGITTE A. CONTRERAS, M.D., Respondent.D E C I S I O N

MENDOZA, J.:

Challenged in this petition are the January 28, 2010 Decision1 of the Court of Appeals (CA) and its October 27, 2010 Resolution,2 in CA-G.R. SP No. 101066, which affirmed the March 16, 2007 Decision3 and June 29, 2007 Resolution4 of the National Labor Relations Com;nission (NLRC), reversing the decision5 of the Labor Arbiter (LA) in this illegal dismissal case, entitled "Marian Brigitte Contreras v. A1axiCare PCJB CJGNA Health Care, et. al."

The Facts

Sometime in March 2003, Maxicare Healthcare Corporation (Maxicare) hired Dr. Marian Brigitte A. Contreras (Dr. Contreras) as a retainer doctor at the Philippine National Bank (PNB) Head Office, Macapagal Avenue, Roxas Boulevard, Manila. Under their verbal agreement, Dr. Contreras would render medical services for one year atP250.00 per hour. Her retainer fee would be paid every 15th and 30th of each month based on her work schedule which was every Tuesday, Thursday and Friday from 6:00 o’clock in the morning to 5:00 o’clock in the afternoon.6

The controversy started when, on July 3, 2003, Dr. Ruth A. Asis, Maxicare’s medical specialist on Corporate Accounts, informed Dr. Contreras that she was going to be transferred to another account after a month. On August 4, 2003, the Service Agreement between Dr. Contreras and Dr. Eric S. Nubla, Maxicare’s Vice-President for Medical Services, was executed, effecting the transfer of the former to Maybank Philippines (Maybank) for a period of four (4) months, from August 5, 2003 to November 29, 2003, with a retainer fee of P168.00 per hour.

Dr. Contreras reported to Maybank for one (1) day only. On August 8, 2003, she filed a complaint before the LA claiming that she was constructively dismissed. Maxicare, on the other hand, insisted that there was no constructive dismissal.

Ruling of the Labor Arbiter

On November 29, 2005, the LA rendered a decision dismissing the complaint of Dr. Contreras for lack of merit. The pertinent portions of the LA’s ruling read:

If indeed complainant was forced to sign the contract of August 4, 2003, she could not have reported to that assignment under it in the first place. In reporting so, she not only ratified the

contract of service she signed but also waived all her rights under their previous agreement she is supposed to be entitled to enforce. It may be that there present under the circumstance of a breach of contractual obligation under the previous undertaking which partakes the nature of constructive dismissal based on evidence at hand. At that then, complainant should have at such point ventilated the matter before this forum. She did not. Instead, she proceeded to sign or execute the questioned Service Agreement with the respondent under the terms and conditions therein stated. To a professional like her, a Doctor, complainant should have refused as she is at liberty, in refusing to sign even if what she claimed there appears a threat of dismissal. In this case, she even confirmed what she signed by reporting to duty thereafter. And only after examining what she signed that she realized she thought of initiating the present complaint. In this regard, absent any showing that she was forced to execute the disputed service agreement of August 4, 2003, complainant’s complaint for constructive dismissal can hardly be sustained by a later change of heart.

Finding substantial basis to support the validity of the Service Agreement of August 4, 2003 entered into by the parties, the present complaint for constructive dismissal must necessarily fail. Consequent claim as relief therefor has no basis.7

Ruling of the NLRC

On March 16, 2007, upon appeal, the NLRC rendered a decision8 reversing and setting aside the LA’s decision. It declared that Dr. Contreras was illegally dismissed and ordered her reinstatement to her former or substantially equivalent position and the payment of her backwages.

The NLRC explained that the "execution of a Service Agreement for another retainership with lower salary does not negate constructive dismissal arising from the termination of complainant’s PNB retainership without either just or authorized cause but simply is anchored on alleged complaints which even Dr. Eric Nubla recognize to be fictitious."9 Dr. Contreras signed the Service Agreement on August 4, 2003, and later repudiated it with a notice to Maxicare that she could not go on serving under such a disadvantageous situation. The disadvantage she was referring to was the disparity in remuneration between the PNB retainership with ₱250.00 per hour and that of Maybank with ₱168.00 per hour. The clear economic prejudice validated her claim of having reservation on the Service Agreement prior to her signature. She signed the new agreement because it, being a contract of adhesion, gave her no realistic chance to haggle for her job. Thus, the NLRC disposed:

WHEREFORE, premises considered, the Decision appealed from is hereby REVERSED and SET ASIDE and a new one entered declaring complainant was illegally dismissed. Accordingly, respondents are hereby ordered to reinstate complainant to her former or substantially equivalent position and to pay her backwages from the time her PNB retainership was terminated until the finality of this Decision.

SO ORDERED.10

Ruling of the Court of Appeals

On January 28, 2010, the CA affirmed the conclusions reached by the NLRC.

On the issue regarding the existence or non-existence of an employer-employee relationship, the CA ruled that Maxicare could not raise the said issue for the first time on appeal. Nonetheless, the CA ruled that the records showed that there existed an employer-employee relationship between Maxicare and Dr. Contreras for the following reasons: 1] Maxicare exercised significant control in her hiring and the conduct of her work; 2] Maxicare was the one who engaged her services; 3] Maxicare determined and prepared her work assignments, like attending to PNB members needing medical consultation and performing such other duties as may be assigned by

Maxicare to her from time to time; 4] Maxicare determined her specific work schedules, which was for her to render services from 1:00 to 5:00 o’clock in the afternoon "every Tuesday and Thursday;"11 and 5] Maxicare prescribed the conditions of work for her, which were a) that she had to abide by the company rules and regulations, b) that she would keep inviolate all company records, documents, and properties and from disclosing or reproducing these records and documents to anyone without proper authority, c) that she had to surrender upon request for, or upon termination of her services, such records, documents, and properties to Maxicare; d) that Maxicare, through its Customer Care coordinator, Ms. Cecile Samonte, would monitor her work; and e) that she was compensated not according to the result of her efforts, but according to the amount of time she spent at the PNB clinic.12

The CA added that Maxicare impliedly admitted that an employer-employee relationship existed between both parties by arguing that she was not constructively dismissed. Hence, Maxicare was estopped from questioning her status as its employee.13

On the issue of whether or not Dr. Contreras was constructively dismissed, the CA ruled that her transfer to Maybank, which resulted in a diminution of her salary, was prejudicial to her interest and amounted to a constructive dismissal. It stated that Maxicare, as employer, had the burden of proving that not only was her transfer made for valid or legitimate grounds, such as genuine business necessity, but also that such transfer was not unreasonable, inconvenient, or prejudicial to her.14

Maxicare filed a motion for reconsideration but it was denied by the CA in its Resolution,15 dated October 27, 2010.

Not in conformity with the adverse decision, Maxicare filed this petition anchored on the following

GROUNDS

I

THE COURT OF APPEALS, IN RENDERING THE ASSAILED DECISION, ERRONEOUSLY SET ASIDE, EVEN CONTRADICTED, A PLETHORA OF JURISPRUDENCE THAT LACK OR ABSENCE OF JURISDICTION MAY BE RAISED FOR THE FIRST TIME EVEN ON APPEAL.

II

THE COURT OF APPEALS MISAPPLIED THE 4-TIERED TEST TO DETERMINE THE EXISTENCE OF EMPLOYER-EMPLOYEE RELATIONSHIP WITHOUT CONCRETE BASIS.16

Maxicare’s position

Maxicare argues that questions on jurisdiction "may be raised at any stage of the proceedings, even on appeal, and the right to do so is not lost by waiver or by estoppel." Maxicare likewise asserts that "if the issue on jurisdiction may be resolved by an appellate tribunal motu propio when the same has not been raised in the courts below, with more reason that the same should be allowed to be considered and decided upon by the appellate court when, as in the present petition, the said issue has been raised in the pleadings before the appellate court."17

Considering that Dr. Contreras submitted evidence to support not only her claim of constructive dismissal but also the existence of an employer-employee relationship, its act of raising said issue should be sufficient ground for the CA to consider and rule on the issue of jurisdiction.18

Maxicare claims that there could have been no employer-employee relationship arising from the oral medical retainership agreement between the parties. It contends that it could not have effectively exercised control over the means and method adopted by Dr. Contreras in accomplishing her work as a medical retainer; that it did not determine the manner in which she conducted physical examination, immunized, diagnosed, or treated her patients; that Dr. Contreras confirmed that it paid her retainer fees and deducted only 10% "withholding tax payable-expanded;" that she was not in the list of Maxicare’s payroll; and that Maxicare did not deduct SSS contributions from the retainer fees that Dr. Contreras received. Hence, the above circumstances disprove the presence of employer-employee relationship. On the contrary, they strongly indicate a case of an independent contractor.19

Maxicare went on further by stating that Dr. Contreras was an independent contractor because she rendered services for a few hours a week, giving her free time to pursue her private practice as a physician and that upon the terms of their agreement, either party could terminate the arrangement upon one month’s advance notice.20

Finally, Maxicare contends that Dr. Contreras is a highly educated person who freely, willingly and voluntarily signed the new Medical Retainership Agreement.21 Therefore, there is no truth to her claim that she was forced to sign said agreement.22

Dr. Contreras’s position

On the other hand, Dr. Contreras basically counters that Maxicare did not raise the issue of the existence of an employer-employee relationship before the LA. It also did not question such point in the NLRC. Maxicare brought up the matter for the first time only in the CA.

The Court’s Ruling

The petition has no merit at all.

As a rule, a party who deliberately adopts a certain theory upon which the case is tried and decided by the lower court, will not be permitted to change theory on appeal. Points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time at such late stage. It would be unfair to the adverse party who would have no opportunity to present further evidence material to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court. To permit Maxicare in this case to change its theory on appeal would thus be unfair to Dr. Contreras, and would offend the basic rules of fair play, justice and due process.

Indeed, Maxicare is already estopped from belatedly raising the issue of lack of jurisdiction considering that it has actively participated in the proceedings before the LA and the NLRC. The Court has consistently held that "while jurisdiction may be assailed at any stage, a party’s active participation in the proceedings before a court without jurisdiction will estop such party from assailing the lack of it." It is an undesirable practice of a party to participate in the proceedings, submit his case for decision and then accept the judgment, if favorable, but attack it for lack of jurisdiction, when adverse.23

In the case at bench, it may be recalled that Dr. Contreras filed a complaint for illegal dismissal against Maxicare before the LA. Maxicare was given the chance to defend its case before the LA. In fact, the LA decision favored Maxicare when it ruled that there was no illegal dismissal. On appeal, however, the NLRC reversed and set aside the LA’s decision and ordered Dr. Contreras’s reinstatement with payment of backwages. Upon the denial of its motion for reconsideration, Maxicare elevated its case to the CA raising the issue of jurisdiction for the first time.

Undeniably, Maxicare never questioned the LA’s jurisdiction from the very beginning and never raised the issue of employer-employee relationship throughout the LA proceedings. Surely, Maxicare is not unaware of Article 217 of the Labor Code which enumerates the cases

where the LA has exclusive and original jurisdiction. Maxicare definitely knows the basic rule that the LA can exercise jurisdiction over cases only when there is an employer-employee relationship between the parties in dispute.

If Maxicare was of the position that there was no employer-employee relationship existing between Maxicare and Dr. Contreras, it should have questioned the jurisdiction of the LA right away. Surprisingly, it never did. Instead, it actively participated in the LA proceedings without bringing to the LA’s attention the issue of employer-employee relationship.

On appeal before the NLRC, the subject issue was never raised either. Maxicare only raised the subject issue for the first time when it filed a petition in the CA challenging the adverse decision of the NLRC. It is, therefore, estopped from assailing the jurisdiction of the LA and the NLRC.

It is true that questions of jurisdiction may be raised at any stage. It is also true, however, that in the interest of fairness, questions challenging the jurisdiction of courts will not be tolerated if the party questioning such jurisdiction actively participates in the court proceedings and allows the court to pass judgment on the case, and then questions the propriety of said judgment after getting an unfavorable decision. It must be noted that Maxicare had two (2) chances of raising the issue of jurisdiction: first, in the LA level and second, in the NLRC level. Unfortunately, it remained silent on the issue of jurisdiction while actively participating in both tribunals. It was definitely too late for Maxicare to open up the issue of jurisdiction in the CA.

The Court cannot tolerate this kind of procedural strategy on Maxicare’s part because it would be unfair to Dr. Contreras who would no longer be able to present further evidence material to the new issue raised on appeal. Maxicare’s lapse in procedure has proved fatal to its cause and therefore, it should suffer the consequences. The Court has been consistent in its ruling in a long line of cases, the latest of which is Duty Free Philippines Services, Inc., v. Manolito Q. Tria,24 where it was written:

It was only in petitioner’s Petition for Certiorari before the CA did it impute liability on DFP as respondent’s direct employer and as the entity who conducted the investigation and initiated respondent’s termination proceedings. Obviously, petitioner changed its theory when it elevated the NLRC decision to the CA. The appellate court, therefore, aptly refused to consider the new theory offered by petitioner in its petition. As the object of the pleadings is to draw the lines of battle, so to speak, between the litigants, and to indicate fairly the nature of the claims or defenses of both parties, a party cannot subsequently take a position contrary to, or inconsistent, with its pleadings. It is a matter of law that when a party adopts a particular theory and the case is tried and decided upon that theory in the court below, he will not be permitted to change his theory on appeal. The case will be reviewed and decided on that theory and not approached and resolved from a different point of view.

The review of labor cases is confined to questions of jurisdiction or grave abuse of discretion. The alleged absence of employer-employee relationship cannot be raised for the first time on appeal. The resolution of this issue requires the admission and calibration of evidence and the LA and the NLRC did not pass upon it in their decisions. We cannot permit petitioner to change its theory on appeal. It would be unfair to the adverse party who would have no more opportunity to present further evidence, material to the new theory, which it could have done had it been aware earlier of the new theory before the LA and the NLRC. More so in this case as the supposed employer of respondent which is DFP was not and is not a party to the present case.

In Pamplona Plantation Company v. Acosta, petitioner therein raised for the first time in its appeal to the NLRC that respondents therein were not its employees but of another company. In brushing aside this defense, the Court held:

x x x Petitioner is estopped from denying that respondents worked for it.1âwphi1 In the first place, it never raised this defense in the proceedings before the Labor Arbiter. Notably, the defense it raised pertained to the nature of respondents' employment, i.e., whether they are seasonal employees, contractors, or worked under the pakyaw system. Thus, in its Position Paper, petitioner alleged that some of the respondents are coconut filers and copra hookers or sakadors; some are seasonal employees who worked as scoopers or lugiteros; some are contractors; and some worked under the pakyaw system. In support of these allegations, petitioner even presented the company's payroll which will allegedly prove its allegations.

By setting forth these defenses, petitioner, in effect, admitted that respondents worked for it, albeit in different capacities. Such allegations are negative pregnant - denials pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied, and amounts to an acknowledgment that respondents were indeed employed by petitioner.

Also in Telephone Engineering & Service Co., Inc. v. WCC, et al., the Court held that the lack of employer-employee relationship is a matter of defense that the employer should properly raise in the proceedings below. The determination of this relationship involves a finding of fact, which is conclusive and binding and not subject to review by this Court.

In this case, petitioner insisted that respondent was dismissed from employment for cause and after the observance of the proper procedure for termination. Consequently, petitioner cannot now deny that respondent is its employee. While indeed, jurisdiction cannot be conferred by acts or omission of the parties, petitioner's belated denial that it is the employer of respondent is obviously an afterthought, a devise to defeat the law and evade its obligations.

It is a fundamental rule of procedure that higher courts are precluded from entertaining matters neither alleged in the pleadings nor raised during the proceedings below, but ventilated for the first time only in a motion for reconsideration or on appeal. Petitioner is

bound by its submissions that respondent is its employee and it should not be permitted to change its theory. Such change of theory cannot be tolerated on appeal, not due to the strict application of procedural rules, but as a matter of fairness. [Emphases supplied]

WHEREFORE, the petition is DENIED.

SO ORDERED.

JOSE CATRAL MENDOZAAssociate Justice

WE CNOCUR: