philippine airlines, inc. vs. nlrc

1/29/2016 SUPREMECOURTREPORTSANNOTATEDVOLUME225

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VOL. 225, AUGUST 13, 1993 301Philippine Airlines, Inc. vs. NLRC

G.R. No. 85985. August 13, 1993.*

PHILIPPINE AIRLINES, INC. (PAL), petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, LABORARBITER ISABEL P. ORTIGUERRA, and PHILIPPINEAIRLINES EMPLOYEES ASSOCIATION (PALEA),respondents.

Labor Laws Company rules on discipline Managementprerogative not boundless.PAL asserts that when it revised itsCode on March 15, 1985, there was no law which mandated thesharing of responsibility therefor between employer andemployee. Indeed, it was only on

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* THIRD DIVISION.

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302 SUPREME COURT REPORTS ANNOTATED

Philippine Airlines, Inc. vs. NLRC

March 2, 1989, with the approval of Republic Act No. 6715,amending Article 211 of the Labor Code, that the law explicitlyconsidered it a State policy (t)o ensure the participation ofworkers in decision and policymaking processes affecting theirrights, duties and welfare. However, even in the absence of saidclear provision of law, the exercise of management prerogativeswas never considered boundless. Thus, in Cruz vs. Medina (177SCRA 565 [1989]), it was held that managements prerogativesmust be without abuse of discretion.

Same Same Same Line drawn between policies which arepurely businessoriented and those which affect rights of



employees.A close scrutiny of the objectionable provisions of theCode reveals that they are not purely businessoriented nor dothey concern the management aspect of the business of thecompany as in the San Miguel case. The provisions of the Codeclearly have repercusions on the employees right to security oftenure. The implementation of the provisions may result in thedeprivation of an employees means of livelihood which, ascorrectly pointed out by the NLRC, is a property right (Callantavs. Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view ofthese aspects of the case which border on infringement ofconstitutional rights, we must uphold the constitutionalrequirements for the protection of labor and the promotion ofsocial justice, for these factors, according to Justice Isagani Cruz,tilt the scales of justice when there is doubt, in favor of theworker (Employees Association of the Philippine American LifeInsurance Company vs. NLRC, 199 SCRA 628 [1991] 635). Verily,a line must be drawn between management prerogativesregarding business operations per se and those which affect therights of the employees. In treating the latter, managementshould see to it that its employees are at least properly informedof its decisions or modes of action. xxx xxx.

Same Same Same Employees right to participate inpolicymaking upheld.Indeed, industrial peace cannot beachieved if the employees are denied their just participation inthe discussion of matters affecting their rights. Thus, even beforeArticle 211 of the Labor Code (P.D. 442) was amended by RepublicAct No. 6715, it was already declared a policy of the State: (d) Topromote the enlightenment of workers concerning their rights andobligations . . . as employees. This was, of course, amplified byRepublic Act No. 6715 when it decreed the participation ofworkers in decision and policy making processes affecting theirrights, duties and welfare. PALs position that it cannot besaddled with the obligation of sharing management prerogativesas during the formulation of the Code, Republic Act No. 6715 hadnot yet been enacted (Petitioners Memorandum, p. 44 Rollo,

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p. 212), cannot thus be sustained. While such obligation was notyet founded in law when the Code was formulated, the attainmentof a harmonious labormanagement relationship and the thenalready existing state policy of enlightening workers concerningtheir rights as employees demand no less than the observance of



transparency in managerial moves affecting employees rights.

PETITION for certiorari to review the decision of theNational Labor Relations Commission.

The facts are stated in the opinion of the Court.Solon Garcia for petitioner.Adolpho M. Guerzon for respondent PALEA.

MELO, J.:

In the instant petition for certiorari, the Court is presentedthe issue of whether or not the formulation of a Code ofDiscipline among employees is a shared responsibility ofthe employer and the employees.

On March 15, 1985, the Philippine Airlines, Inc. (PAL)completely revised its 1966 Code of Discipline. The Codewas circulated among the employees and was immediatelyimplemented, and some employees were forthwithsubjected to the disciplinary measures embodied therein.

Thus, on August 20, 1985, the Philippine AirlinesEmployees Association (PALEA) filed a complaint beforethe National Labor Relations Commission (NLRC) forunfair labor practice (Case No. NCR7205185) with thefollowing remarks: ULP with arbitrary implementation ofPALs Code of Discipline without notice and priordiscussion with Union by Management (Rollo, p. 41). In itsposition paper, PALEA contended that PAL, by itsunilateral implementation of the Code, was guilty of unfairlabor practice, specifically Paragraphs E and G of Article249 and Article 253 of the Labor Code. PALEA alleged thatcopies of the Code had been circulated in limited numbersthat being penal in nature the Code must conform with therequirements of sufficient publication, and that the Codewas arbitrary, oppressive, and prejudicial to the rights ofthe employees. It prayed that implementation of the Codebe held in abeyance that PAL should discuss the substanceof the Code with PALEA that

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304 SUPREME COURT REPORTS ANNOTATEDPhilippine Airlines, Inc. vs. NLRC

employees dismissed under the Code be reinstated andtheir cases subjected to further hearing and that PAL bedeclared guilty of unfair labor practice and be ordered topay damages (pp. 714, Record.)

PAL filed a motion to dismiss the complaint, asserting



its prerogative as an employer to prescribe rules andregulations regarding employees conduct in carrying outtheir duties and functions, and alleging that byimplementing the Code, it had not violated the collectivebargaining agreement (CBA) or any provision of the LaborCode. Assailing the complaint as unsupported by evidence,PAL maintained that Article 253 of the Labor Code cited byPALEA referred to the requirements for negotiating a CBAwhich was inapplicable as indeed the current CBA hadbeen negotiated.

In its reply to PALs position paper, PALEA maintainedthat Article 249 (E) of the Labor Code was violated whenPAL unilaterally implemented the Code, and citedprovisions of Articles IV and I of Chapter II of the Code asdefective for, respectively, running counter to theconstruction of penal laws and making punishable anyoffense within PALs contemplation. These provisions arethe following:

Section 2. Nonexclusivity.This Code does not contain theentirety of the rules and regulations of the company. Everyemployee is bound to comply with all applicable rules,regulations, policies, procedures and standards, includingstandards of quality, productivity, and behavior, as issued andpromulgated by the company through its duly authorized officials.Any violations thereof shall be punishable with a penalty to bedetermined by the gravity and/or frequency the offense.

Section 7. Cumulative Record.An employees record ofoffenses shall be cumulative. The penalty for an offense shall bedetermined on the basis of his past record of offenses of anynature or the absence thereof. The more habitual an offender hasbeen, the greater shall be the penalty for the latest offense. Thus,an employee may be dismissed if the number of his past offenseswarrants such penalty in the judgment of management even ifeach offense considered separately may not warrant dismissal.Habitual offenders or recidivists have no place in PAL. On theother hand, due regard shall be given to the length of timebetween commission of individual offenses to determine whetherthe employees conduct may indicate occasional lapses (which maynevertheless require sterner disciplinary action) or a pattern ofincorrigibility.

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Labor Arbiter Isabel P. Ortiguerra handling the case called



1.2.

3.

the parties to a conference but they failed to appear at thescheduled date. Interpreting such failure as a waiver of theparties right to present evidence, the labor arbiterconsidered the case submitted for decision. On November 7,1986, a decision was rendered finding no bad faith on thepart of PAL in adopting the Code and ruling that no unfairlabor practice had been committed. However, the arbiterheld that PAL was not totally fault free considering thatwhile the issuance of rules and regulations governing theconduct of employees is a legitimate managementprerogative such rules and regulations must meet the testof reasonableness, propriety and fairness. She foundSection 1 of the Code aforequoted as an all embracing andall encompassing provision that makes punishable anyoffense one can think of in the company while Section 7,likewise quoted above, is objectionable for it violates therule against double jeopardy thereby ushering in two ormore punishment for the same misdemeanor. (pp. 3839,Rollo.)

The labor arbiter also found that PAL failed to provethat the new Code was amply circulated. Noting thatPALs assertion that it had furnished all its employeescopies of the Code is unsupported by documentaryevidence, she stated that such failure on the part of PALresulted in the imposition of penalties on employees whothought all the while that the 1966 Code was still beingfollowed. Thus, the arbiter concluded that (t)he phraseignorance of the law excuses no one from compliance . . .finds application only after it has been conclusively shownthat the law was circulated to all the parties concerned andefforts to disseminate information regarding the new lawhave been exerted. (p. 39, Rollo.) She thereupon disposed:

WHEREFORE, premises considered, respondent PAL is herebyordered as follows:

Furnish all employees with the new Code of DisciplineReconsider the cases of employees meted with penaltiesunder the New Code of Discipline and remand the samefor further hearing andDiscuss with PALEA the objectionable provisionsspecifically tackled in the body of the decision.

All other claims of the complainant union (is) [are] herebydismissed for lack of merit.

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SO ORDERED. (p. 40, Rollo.)

PAL appealed to the NLRC. On August 19, 1988, the NLRCthrough Commissioner Encarnacion, with PresidingCommissioner BontoPerez and Commissioner Maglayaconcurring, found no evidence of unfair labor practicecommitted by PAL and affirmed the dismissal of PALEAscharge. Nonetheless, the NLRC made the followingobservations:

Indeed, failure of management to discuss the provisions of acontemplated code of discipline which shall govern the conduct ofits employees would result in the erosion and deterioration of anotherwise harmonious and smooth relationship between them asdid happen in the instant case. There is no dispute that adoptionof rules of conduct or discipline is a prerogative of managementand is imperative and essential if an industry has to survive in acompetitive world. But labor climate has progressed, too. In thePhilippine scene, at no time in our contemporary history is theneed for a cooperative, supportive and smooth relationshipbetween labor and management more keenly felt if we are tosurvive economically. Management can no longer exclude labor inthe deliberation and adoption of rules and regulations that willaffect them.

The complainant union in this case has the right to feelisolated in the adoption of the New Code of Discipline. The Codeof Discipline involves security of tenure and loss of employmenta property right! It is time that management realizes that toattain effectiveness in its conduct rules, there should becandidness and openness by Management and participation bythe union, representing its members. In fact, our Constitution hasrecognized the principle of shared responsibility betweenemployers and workers and has likewise recognized the right ofworkers to participate in policy and decisionmaking processaffecting their rights . . . The latter provision was interpreted bythe Constitutional Commissioners to mean participation inmanagement (Record of the Constitutional Commission, Vol. II).

In a sense, participation by the union in the adoption of thecode of conduct could have accelerated and enhanced theirfeelings of belonging and would have resulted in cooperationrather than resistance to the Code. In fact, labormanagementcooperation is now the thing. (pp. 34, NLRC Decision ff. p. 149,Original Record.)

Respondent Commission thereupon disposed:

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WHEREFORE, premises considered, we modify the appealeddecision in the sense that the New Code of Discipline should bereviewed and discussed with complainant union, particularly thedisputed provisions [.] [T]hereafter, respondent is directed tofurnish each employee with a copy of the appealed Code ofDiscipline. The pending cases adverted to in the appealed decisionif still in the arbitral level, should be reconsidered by therespondent Philippine Air Lines. Other dispositions of the LaborArbiter are sustained.

SO ORDERED. (p. 5, NLRC Decision.)

PAL then filed the instant petition for certiorari chargingpublic respondents with grave abuse of discretion in: (a)directing PAL to share its management prerogative offormulating a Code of Discipline (b) engaging in quasijudicial legislation in ordering PAL to share saidprerogative with the union (c) deciding beyond the issue ofunfair labor practice, and (d) requiring PAL to reconsiderpending cases still in the arbitral level (p. 7, Petition p. 8,Rollo.)

As stated above, the principal issue submitted forresolution in the instant petition is whether managementmay be compelled to share with the union or its employeesits prerogative of formulating a code of discipline.

PAL asserts that when it revised its Code on March 15,1985, there was no law which mandated the sharing ofresponsibility therefor between employer and employee.

Indeed, it was only on March 2, 1989, with the approvalof Republic Act No. 6715, amending Article 211 of theLabor Code, that the law explicitly considered it a Statepolicy (t)o ensure the participation of workers in decisionand policymaking processes affecting their rights, dutiesand welfare. However, even in the absence of said clearprovision of law, the exercise of management prerogativeswas never considered boundless. Thus, in Cruz vs. Medina(177 SCRA 565 [1989]), it was held that managementsprerogatives must be without abuse of discretion.

In San Miguel Brewery Sales Force Union (PTGWO) vs.Ople (170 SCRA 25 [1989]), we upheld the companys rightto implement a new system of distributing its products, butgave the following caveat:

So long as a companys management prerogatives are exercised ingood faith for the advancement of the employers interest and notfor



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the purpose of defeating or circumventing the rights of theemployees under special laws or under valid agreements, thisCourt will uphold them. (at p. 28.)

All this points to the conclusion that the exercise ofmanagerial prerogatives is not unlimited. It iscircumscribed by limitations found in law, a collectivebargaining agreement, or the general principles of fair playand justice (University of Sto. Tomas vs. NLRC, 190 SCRA758 [1990]). Moreover, as enunciated in AbbottLaboratories (Phil.), Inc. vs. NLRC (154 SCRA 713 [1987]),it must be duly established that the prerogative beinginvoked is clearly a managerial one.

A close scrutiny of the objectionable provisions of theCode reveals that they are not purely businessoriented nordo they concern the management aspect of the business ofthe company as in the San Miguel case. The provisions ofthe Code clearly have repercusions on the employees rightto security of tenure. The implementation of the provisionsmay result in the deprivation of an employees means oflivelihood which, as correctly pointed out by the NLRC, is aproperty right (Callanta vs. Carnation Philippines, Inc.,145 SCRA 268 [1986]). In view of these aspects of the casewhich border on infringement of constitutional rights, wemust uphold the constitutional requirements for theprotection of labor and the promotion of social justice, forthese factors, according to Justice Isagani Cruz, tilt thescales of justice when there is doubt, in favor of the worker(Employees Association of the Philippine American LifeInsurance Company vs. NLRC, 199 SCRA 628 [1991] 635).

Verily, a line must be drawn between managementprerogatives regarding business operations per se and thosewhich affect the rights of the employees. In treating thelatter, management should see to it that its employees areat least properly informed of its decisions or modes ofaction. PAL asserts that all its employees have beenfurnished copies of the Code. Public respondents found tothe contrary, which finding, to say the least is entitled togreat respect.

PAL posits the view that by signing the 19891991collective bargaining agreement, on June 27, 1990, PALEAin effect recognized PALs exclusive right to make andenforce company rules and regulations to carry out the



functions of management with

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out having to discuss the same with PALEA and much less,obtain the latters conformity thereto (pp. 1112,Petitioners Memorandum pp. 180181, Rollo.) Petitionersview is based on the following provision of the agreement:

The Association recognizes the right of the Company to determinematters of management policy and Company operations and todirect its manpower. Management of the Company includes theright to organize, plan, direct and control operations, to hire,assign employees to work, transfer employees from onedepartment to another, to promote, demote, discipline, suspend ordischarge employees for just cause to layoff employees for validand legal causes, to introduce new or improved methods orfacilities or to change existing methods or facilities and the rightto make and enforce Company rules and regulations to carry outthe functions of management.

The exercise by management of its prerogative shall be done ina just, reasonable, humane and/or lawful manner.

Such provision in the collective bargaining agreement maynot be interpreted as cession of employees rights toparticipate in the deliberation of matters which may affecttheir rights and the formulation of policies relative thereto.And one such matter is the formulation of a code ofdiscipline.

Indeed, industrial peace cannot be achieved if theemployees are denied their just participation in thediscussion of matters affecting their rights. Thus, evenbefore Article 211 of the Labor Code (P.D. 442) wasamended by Republic Act No. 6715, it was already declareda policy of the State: (d) To promote the enlightenment ofworkers concerning their rights and obligations . . . asemployees. This was, of course, amplified by Republic ActNo. 6715 when it decreed the participation of workers indecision and policy making processes affecting their rights,duties and welfare. PALs position that it cannot besaddled with the obligation of sharing managementprerogatives as during the formulation of the Code,Republic Act No. 6715 had not yet been enacted(Petitioners Memorandum, p. 44 Rollo, p. 212), cannotthus be sustained. While such obligation was not yet



founded in law when the Code was formulated, theattainment of a harmonious labormanagementrelationship and the then already existing state policy ofenlightening workers concerning their rights as employeesdemand no less than the observance of

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transparency in managerial moves affecting employeesrights.

Petitioners assertion that it needed the implementationof a new Code of Discipline considering the nature of itsbusiness cannot be overemphasized. In fact, its being alocal monopoly in the business demands the most stringentof measures to attain safe travel for its patrons.Nonetheless, whatever disciplinary measures are adoptedcannot be properly implemented in the absence of fullcooperation of the employees. Such cooperation cannot beattained if the employees are restive on account of theirbeing left out in the determination of cardinal andfundamental matters affecting their employment.

WHEREFORE, the petition is DISMISSED and thequestioned decision AFFIRMED. No specialpronouncement is made as to costs.

SO ORDERED.

Feliciano (Chairman), Bidin, Romero and Vitug,JJ., concur.

Petition dismissed. Questioned decision affirmed.

Note.The employers prerogative to dismiss anemployee must not be exercised arbitrarily and withoutjust cause, otherwise, the constitutional guarantee ofsecurity of tenure would be rendered nugatory (LlosaTanv. Silahis International Hotel, 181 SCRA 738).

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philippine airlines, inc. vs. nlrc

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